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Ulrika Hallengren: Welcome to the presentation of Wihlborgs' 9-Month Report 2025. There's an old saying when you think you can see the light at the end of the tunnel, beware, it could be an oncoming train. We never know what will happen ahead, and we try to be prepared for whatever we can think of. But let us be clear, we see some glimmer here and there, maybe not the full ray of light yet, but nice glitters in the horizon. It's a very busy report week for all of you, so I will try to be short and precise. That means standard procedure about the last results of our continued growth and some new records, but also some figures regarding loyalty among our customers, how we can calculate retention rates and not at least our view on future occupancy. We start with a summary of the quarter, July to September. Rental income up 6%, a new record at SEK 1.101 billion; income from property management, plus 11%; net letting positive at SEK 6 million; net EBIT to EBITDA at 10.3x, good access to financing. And as said many times before, but this still stands, demand remains for good quality in good location, and we are proud to be able to continue with the project investment that gives continued good potential for growth. Looking at the whole period, first 9 months, rental income up to SEK 3.243 billion, plus 4%. The operating surplus increased to SEK 2.334 billion and income from property management increased by 12% to SEK 1.482 billion. The result for the period amounts to SEK 1.370 billion, corresponding to SEK 4.46 per share and EPRA NRV has increased by 10% to SEK 96.23 per share adjusted for paid dividend. A comparison of the rental income first 9 months '24 and first 9 months '25. Indexation gives plus SEK 30 million; acquisition, plus SEK 90 million; currency effect, minus SEK 21 million; additional charges, plus SEK 21 million; and completed projects, new leases and renegotiation plus SEK 8 million. And here is also a new higher property tax of approximately SEK 15 million included. So higher vacancy today than a year ago, but small improvement since last report and during 2026, the improvement from new leases will show. And the streak of positive net letting continues, plus SEK 6 million in the quarter, plus SEK 65 million for the period and in total, new leases at a yearly value of SEK 300 million signed in the period. For the third quarter, the volume of new leases of SEK 66 million is good. And maybe I expected the net letting to be a bit better than SEK 6 million, but we got a late termination of SEK 16 million from a tenant who I'm not sure if they really want to move or just renegotiate. Discussions are ongoing, but the total termination is registered. So a possible upside ahead, 42 quarters in a row with positive net letting. Here are some of the tenants that we have signed during Q3, a combination of expanding tenants and new tenants from many industries, health care, insurance, biomaterials and a company that manufactures equipment for land-based fish farms as examples. And here, we have the net letting in a historical perspective, lettings in green, termination in light blue and dark blue stacks are the net letting. And as mentioned, quite high volume of new leases for being a third quarter. And the list of our 10 largest tenants in alphabetic order, strong customers, and they contribute with 20% of our rental income. 7 out of 10 are governmental tenants and the public sector contributes with 23% of total rental income. Rental value as of 1st of October is SEK 4.889 billion per year, plus 7.2% and rental income, SEK 4.379 billion, plus 4.6%. Effects from acquisition, indexation and higher willingness to pay for the right quality. Looking at like-for-like figures, all the properties we owned a year ago, excluding projects compared with updated figures, we can see that rental value is up 2.4% and rental income is down 0.8%. The growth in the rental market is supported by indexation of 1.6% in Sweden and approximately 1% in Denmark last year. Indexation ahead in Denmark expects to be a bit higher, and that will be reflected in the rental levels for 2026. I think the September number was 2.3% or something. Lower rental income in like-for-like is an effect of higher vacancy than a year ago. And at least, it's encouraging to see that vacancy appears to have bottomed out in several areas. More on that topic later. Changes in the market value of our properties. We started the year with SEK 59.168 billion in accordance with the external valuation of 100% of our portfolio. We have made acquisition, which adds on SEK 2.552 billion; in investment, SEK 1.911 billion; divestment, minus SEK 114 million; changes in valuation, plus SEK 450 million. And together with currency translations of minus SEK 500 million, that summarizes to a value of SEK 63.457 billion. The valuation this quarter have no changes in valuation yields, indexation or other underlying parameters. Expectation ahead is more likely to be positive, if I may guess. These figures, the running yield show how we actually perform in relation to the valuation, so not the valuation yield. For the whole portfolio, the occupancy rate is 90%, excluding projects and land and with an operating surplus of SEK 3.326 billion, that gives a running yield of 5.6%. Fully let, the portfolio would give a running yield of 6.4%. Good earnings capacity in relation to the value of the portfolio and good cash flow generation is the foundation also ahead. Occupancy is slightly up looking at the decimals since the last quarter and at least that is in the right direction. In the office portfolio, the market value is SEK 50.394 billion with an occupancy rate of 91%, 92% in Malmö, improved to 90% in Helsingborg, 90% in Lund and 92% in Copenhagen. The improvement has started and will be clearer during 2026. Operating surplus from offices summarized to SEK 2.755 billion and running yield of 5.5%, 6.2% fully let. The demand for logistics and production continues to be good in Malmö with an occupancy of 93%, lower occupancy in Helsingborg at 83%, 91% in Lund with a small portfolio and 96% in Copenhagen. 87% occupancy rate as a whole with a running yield of 6.4%, 7.5% fully let at a total value of SEK 8.988 billion. As mentioned before, we continue to see harder competition in the third-party Logistics segment with very quick changes in needs. That also means that occupancy can improve quickly when the market changes. But I assume that vacancy in the southern parts of Helsingborg will be a bit sticky since the area will go through a makeover that would take a number of years. But as mentioned before, still a decent running yield of 6.4% even with the high vacancy and the market as such continues to be interesting. The development of our total portfolio running yield, 5.6% brings stability, not least since the portfolio overall has a high quality and good location. As noticed before, a high increase of the running yield since 2021. Some sustainability highlights from Q3. We have been appointed as Global Sector Leader by GRESB, completed a battery storage in Lund and actually one in Helsingborg as well. We have signed more sustainable -- sustainability-linked loans, also including Scope 3 carbon dioxide performance, and we continue to reduce our energy consumption. As a new example, we have reduced the electricity used for heating and cooling by 50% at Ideon Gateway in Lund, including both offices and hotel. New cooling technology and of course, the Janne solution is the answer. And something about what our customers think about us. Our latest customer satisfaction index from now in September shows an index of 79 and a loyalty score of 82, very high numbers. Tenants are especially happy with our personal service with 88% satisfaction, our competence scoring 86 and accessibility score 85. Let me just say that I totally agree with our customers. I'm also very satisfied with my competent and service-minded colleagues. I give them 100 out of 100. A catalog of our value and properties in our 4 cities in Q3, 39% of the value in Malmö, 23% in Helsingborg, 17% in Lund and 20% in Copenhagen. The region and especially these 4 cities continues to be of high interest for future growth, both in population growth forecast, which will otherwise be a challenge in many places and in a number of new workplaces. And time for financials. Over to you, Arvid. Arvid Liepe: Thank you very much, Ulrika. Looking at the income statement for the third quarter isolated. Are we on the right slide? There we are. Thanks. Rental income grew by 6% to SEK 1.101 billion, and operating surplus increased by 4% to SEK 790 million. There are a couple of things to bear in mind looking at those 2 numbers. First of all, we've been through a new property taxation, and we got the new taxation values this summer. The taxation values are higher, which means that the property tax also is higher. The property tax -- the new property tax is applicable from 1st of January. So we have, you could say, a catch-up effect. So we -- the changes for all 3 quarters are accounted for in the third quarter numbers. That means that on the rental income line, as Ulrika mentioned, that has been affected with plus SEK 15 million from increased property tax, and on the operating cost side, our operating surplus has been affected with minus SEK 20 million from the increased property tax for the first 3 quarters during this year. So the ongoing -- or the future effect of the increased property tax will be smaller on a quarterly basis than you can see in the Q3 numbers. It's also important to bear in mind that on the rental income line, we've had a negative effect from currencies of minus SEK 7 million, and that same currency effect on the operating surplus line has been minus SEK 5 million. The income from property management amounted to SEK 495 million. We've had a small positive impact there from FX since we borrow a lot in Danish kroner as well. Income from property management up 11% versus the same quarter in 2024. We had positive value changes in the quarter of SEK 103 million. And all in all, a profit for the period of SEK 487 million. Looking at the balance sheet. The value of our property portfolio is now SEK 63.5 billion, up SEK 5.6 billion versus 12 months previously. Equity stands at SEK 23.5 billion, up SEK 1.2 billion versus 12 months previously. And during that time, we have, as you know, also paid approximately SEK 1 billion in dividends to our shareholders. And our borrowings are SEK 33.2 billion, SEK 3.5 billion higher than 12 months previously. Translating that into key numbers, our equity assets ratio now stands at 36.2%. The LTV has gone down from the last quarter to 52.3% and the interest cover ratio for the period stands at 2.8x. Looking at some per share numbers, I'd just like to highlight the EPRA NRV value at SEK 96.23 per share, which is up 10% adjusted for dividends versus 12 months previously. On the next slide, you can see the historic development of EPRA NRV, a stable growth over many years and the average annual growth adjusted for dividend is actually 15%. Moving on to the historical development of our financial ratios. The equity assets ratio at 36.2%, as you can see, is well above the 30% that we have set as the minimum level for ourselves and also on decent levels in a long-term historical perspective. The loan-to-value in the perspective of approximately 10 years has come down from around 60% now to 52.3%. And the interest cover ratio, as we've talked about before, has been very variable, especially during the special period when we had almost 0 interest rates when we had an extremely strong interest cover ratio. The rate is now stabilized and 2.8x is a quite decent level to be at. On the next slide, you see the net debt in relation to EBITDA, also that's in a long-term historical perspective. The ratio stands at 10.3x. It varies with a couple of decimals up and down, but being at 10.3x is a comfortable level for us. Looking at our sources of financing, we still have approximately half of our loans from bilateral bank agreements with Nordic banks, about 1/3 from the Danish rail mortgage system and 17% from the bond market. I would say that the banks are definitely more proactive in their lending efforts than they have been for many years actually. And we do see bank margins gradually moving downwards. The bond market has also -- as we noted already in the Q2 report, the bond market is a lot stronger than it was a year ago, and we can issue unsecured bonds at quite attractive levels in this market. The structure of our interest rate portfolio, you can see on this slide. The average interest rate is 3.29%, 3.33% if you include costs for unutilized credit facilities. We have both in the past quarter, but also if you look over the coming couple of years, we will have some effects of attractive interest rate swaps expiring, but we also see an effect of the margins that we pay to banks and in the bond market coming down somewhat. So overall, over the coming few quarters, I would expect the average interest rate to be reasonably flat. And yes, we can move to the next slide and see the development of the fixed interest period, which has gone up a touch in the quarter. It's now 2.7 years. And the average loan maturity in the loan portfolio is 4.8 years. And lastly, from my side, looking at available funds, we have unutilized credit facilities plus liquid funds of SEK 2.9 billion at the end of the third quarter, which gives us, in our view, enough financial flexibility to manage operations and seize opportunities in a good way. With that, I hand the word back to you, Ulrika. Ulrika Hallengren: Thank you. And an update on our investment in progress and a quick overview of our largest project. During the period, we have invested SEK 1.911 billion, and it remains SEK 2.730 billion to invest in approved projects, good volume in all our cities, a reasonable yield on cost with 6% or a bit above 6% for new build offices and 7% or a bit above that for industrial and a good mix of refurbishment and new build in the portfolio. Let's start in Copenhagen with our project at Ejby Industrivej 41 in the beginning, planned as and decided for a multi-tenant transformation, but with a 15-year lease with Per Aarsleff turned into a single-tenant building. 24,000 square meters, investment SEK 231 million and yield on cost a bit above 6%. Completion is planned to February 2026. The large project at Amphitrite 1 in Malmö has started off really well, a bit about 20,000 square meters for Malmö University at a 10-year lease. We have started at site with deconstruction. And during September, we got the building permission from the municipality. Completion is planned to Q4 '27 and procurement will be completed shortly. In Malmö and Hyllie, we continue with Bläckhornet 1 VISTA, an SEK 884 million investment. The mobility hub has already been completed and the office will be completed in Q1 '26 and during '26. Yield on cost, 6.2% and today, approximately 40% pre-let. The best possible product and low competition from new build in the area, but we still need more activity and more decisiveness from our customers before we are satisfied. An example of top-level refurbishment in Malmö is Börshuset 1. This is an almost iconic building right beside the train station, 6,000 square meters, offices, restaurant and co-working and absolutely top rents in a Malmö perspective. Completion in Q1 '26 and moving in will continue during '26. Pre-let, 95%. At Kranen 7 in Malmö, we will invest approximately SEK 136 million in a preschool for the municipality, 2,900 square meter zoning plan approved and completion is expected to Q3 '27. Public procurement act starts now. And at Sunnanå 12:54, 17,000 square meter logistics, 100% pre-let in a 15-year lease will be completed 1st of December '25, SEK 280 million investment and yield on cost close to 7%. In Lund, we are building a new modern office right beside the Central Station, Posthornet, phase 2, 10,100 square meter, yield on cost, 6.5% and completion Q2 '26. Pre-let, a bit above 40% today. But together with ongoing discussions, I believe we can reach approximately 70% before year-end, keep our fingers crossed, and very attractive product. And at Vätet 1, also in Lund, we continue with refurbishment and adding on areas for our new tenant, Arm, 5,700 square meters and a 7-year lease, investment SEK 145 million, excluding value of the land, and yield on cost a bit above 10% and over 6.6% yield on cost, including ingoing property value. In the southern part of Lund, we continue to develop of Tomaten. This product for BPC, completion Q2 '26 and investment SEK 79 million, 3,600 square meters and yield on cost 7%. Next to that, at former Stora Råby 32:22, now named as Surkålen 1, we have been able to improve since the project started. Tenants will be both Note and Lund University. So well-used land area and long leases. In total, 14,500 square meter completion in Q2 for Note and Q4 '26 for Lund University. Investment, SEK 260 million and yield on cost 9.2%. In Hörsholm, Copenhagen, we invest in a new school for NGG, 25-year lease, 11,600 square meter and investment SEK 390 million. Completion in Q1 '26. And at Giroströget in Höje Taastrup, the refurbishment for Novo continues, 62,000 square meters. Our investment is limited to SEK 423 million and completion is expected in Q1 '26, but Novo also pays rent during the refurbishment period. That was some of the ongoing project and just to touch on future possibilities as a repetition. 4 possible projects in Lund and Helsingborg, where we can develop some 70,000 square meters in the future. Zoning plans are approved for the first few projects and ongoing at Västerbro in Lund and some of the office possibilities in Malmö in the area of Nyhamnen and Dockan. High interest for the future, of course. If you should ask me which projects of these will be the next one, my best guess today is that will be none of these. The Ideon site in Lund is developing very well, and we have building rights there that might be of high interest for the growing defense and tech industries. Early volume studies have started, but nothing I can show yet. And the summary of Q3 again. Rental income up 6%; income from property management, plus 11%; net letting positive, net debt to EBITDA at 10.3x and good access to financing. And we will continue with a focus on cash earnings and future growth. We have been able to grow every year during different economic environment since 2005. We know how to adapt, find new ways and we will continue with this knowledge and ambition. Growth and cash flow is our passion and the compound interest effect of stable growth is hard to beat from SEK 7 billion to SEK 63.5 billion without any new equity from our shareholders. We have been able to grow, thanks to continued investments. They contribute to upgraded attractiveness and new demands and what comes first, higher rents or investments, have no answer, but these factors have a relation. Here is a graph showing the market rents for prime offices in Malmö and our quarterly investments during the same period from 2010 to present. The green bars represent our investment and the green line represent rent levels. And finally, a market outlook. Employment growth in our region continues. Office rents show long-term growth. Wihlborgs' project investment increase over time. Tenants on average, stay in the premises for 14 years, which support the strong customer satisfaction score. And if we just take the largest leases we have signed, we have a volume of some SEK 320 million moving in from now until end '27 and during the same period, terminations of some SEK 190 million, a good gap. So possibilities for growth is in sight. And with that, we are open for questions. Operator: [Operator Instructions] The next question comes from Oscar Lindquist from ABG Sundal Collier. Oscar Lindquist: So firstly, on projects. The 2 projects completed in the quarter, Galoppen and Kranen, how much did they contribute in the quarter? And how much should we expect into Q4? Ulrika Hallengren: They didn't contribute in the quarter, but will contribute for the full Q4. Oscar Lindquist: And then on the Sunnanå project, from when should we expect contribution from that project? Ulrika Hallengren: Also from 1st of October. No, 1st of December, sorry. Oscar Lindquist: 1st of December. Okay. And then the Börshuset project was moved to Q1. What's the reasoning? Ulrika Hallengren: The tenant will start moving in there. So there's no delay in the project, but it's a difference between when the building is completed and when tenants moving in. So I think the -- we will have a ceremony there in February, but the rent will be started to pay in Q1. Arvid Liepe: However, everybody does not move in Q1 of the signed leases. Ulrika Hallengren: Correct. we have moving in during the whole '26. Oscar Lindquist: Yes. And then if we move over to net letting, you mentioned a late termination of SEK 16 million in the quarter. When do you think you will know if they terminate or extend their contract? Ulrika Hallengren: We have calculated as terminated and discussions are ongoing. So I guess now during Q4, there will be a decision if they stay or... Oscar Lindquist: Yes. And if they terminate the impact would be in 9 to 12 months or what's fair to expect there? Ulrika Hallengren: Just a minute. 2027, from 1st of January 2027. Oscar Lindquist: Okay. And then -- so if we adjust for that termination, net letting was positive SEK 22 million. What's the mix here between projects and existing properties? Ulrika Hallengren: In the quarter, I don't have that figure right away. But I think actually that the existing portfolio contributed very well this year and also in the quarter and also good contribution from all our cities, at least for the 9-month period. So I would say that we see positive signals in all our 4 cities. Oscar Lindquist: Okay. So effectively [indiscernible] Arvid Liepe: It's -- in the quarter, I would say, without -- I don't have the exact figure either, but I would say that more existing properties than projects during this quarter in the net lettings. Oscar Lindquist: Okay. Perfect. And then if we look on the Bläckhornet project and the Posthornet project, how is discussions going there? You improved the occupancy slightly in Bläckhornet now in the quarter. What's your sort of ambitions closing in on completion? Ulrika Hallengren: Our ambition is to improve, of course. It's a very good product. And -- but the volume is quite large. So something tends to take longer time when you can choose of good things in many levels, so to speak. So I can't give a figure when I think it's -- but I think we will continue with the work for letting also during 2026. That's reasonable to think that. But let me also mention that we see a good -- we have signed new leases in [indiscernible] in the same area. And also, actually, we -- the portfolio we bought 1st of April, there was some vacancy at [indiscernible], for example. And that is now, I think, 20%, 30% vacancy, and that is now fully let. So there is definitely activity out there. Oscar Lindquist: And would you say sort of the outlook or discussions with the tenants has improved in the quarter and going into Q4 or... Ulrika Hallengren: Yes, I think so. But it depends. One day, you think it's slow and one day you think it's very active. So -- but overall, I would say that there's more positivism out there. Oscar Lindquist: Yes. And then on occupancy, it's essentially flat Q-on-Q, and you sort of alluded or guided to improving occupancy in the second half. Could you quantify what you expect in -- or what we could expect in Q4? Ulrika Hallengren: I especially guided on occupancy in offices in Helsingborg, and that have improved 2% during the year. And otherwise, I think that we will continue to have some improvements, but not quick improvements since we also have -- I mean, for example, SAAB will move out the 1st of January '26, and that will take some time before we have entering new tenants there. But a very good example of that is that we have already signed new leases for that building with new tenant moving in a year. So only 9 months for refurbishment. And I... Arvid Liepe: For part of the building. Ulrika Hallengren: Yes, for part of the building. So they take -- yes, [ they'll likely ] take one part of the building, and we also have good discussions for more areas there which might also end up in moving in, yes, I mean, October next year or so. So quite quick period between moving out and new tenants moving in. And not for the total volume, but at a good part of it. So... Operator: The next question comes from Eleanor Frew from Barclays. Eleanor Frew: Just one question from me. So on rental growth, your chart clearly shows there's prime rental growth, but can you comment on the more secondary assets? What's the rental growth you're seeing there? And is there any negative re-leasing on those poorer-quality assets? Ulrika Hallengren: I mean, of course, when you look into the absolutely best location and top rent levels, that is one area. If you just take a small step from that and still good location and good quality, the rent levels continue to develop well. If you go to more poorer area, we have not a large amount of equity there. So I can't really give a good guidance. But of course, it's harder to find higher levels of rents in poorer area. There will be a larger difference there in the market as it is today. Operator: The next question comes from Lars Norrby from SEB. Lars Norrby: I'm a bit late into the call. So cut me off if I ask a question that somebody else has already asked. But I have a follow-up on a question I heard, and that was about the occupancy rate, once again, flat in the quarter. Just to be clear, I mean, you have some 6 projects or so being completed in the first quarter of '26 and then you talked about that SAAB moving out. But based on what you know today, has the occupancy rate bottomed out? And at what point in time do you expect it to improve, at what stage in '26? Ulrika Hallengren: I would say that for the whole portfolio, I think the vacancy has bottomed out, but we can see for a shorter time or period, higher vacancy in some areas, for example, when SAAB moves out and before we have new tenants in place. But we meet that well with new rental agreements. So yes, I think we have bottomed out and will improve, but the improvement isn't a quick shift. It will take some time. And especially during 2026 and end of 2026, as mentioned before, we have a quite large volume coming in. But also now in Q4, we have good volumes coming in from Galoppen and Sunnanå, for example. So yes. Of course, we want the occupancy to be even higher, but still, it's good to see that we have flattened out and are on the up-going way on the occupancy again. Lars Norrby: Second and final question. 2025 has been a year where you're growing through projects, but also through a quite substantial acquisition. Looking ahead, '26, '27, is it very much all about projects? Or are you considering adding additional size of any magnitude through acquisition as well? Ulrika Hallengren: I expect that we will see a combination. It's good with the project volume because you can manage that and plan for that. And acquisition is harder to plan for. But we continue to be active and trying to find the best premises for us. And of course, it's an interesting period we're in. Lars Norrby: And just a quick follow-up on that. In what geographic area? Are we talking primarily about Copenhagen then? Or is it more likely to be in Sweden? Ulrika Hallengren: I think there is interesting things going on both in Sweden and Denmark. So we try to be active on both places, both countries. And as mentioned, I mean, you can't plan for transaction if you want them to be the best things for you. So of course, you can be aggressive and try to buy whatever, but we will continue to be picky on what we want to go into, of course. Lars Norrby: Sounds good. I hope you don't buy whatever. Ulrika Hallengren: We will not. Operator: The next question comes from Oscar Lindquist from ABG Sundal Collier. Oscar Lindquist: So I just had a follow-up question on the property tax you mentioned weighing on the NOI margin. So the effect in this quarter was SEK 5 million, as I understand it. Is that correct? Arvid Liepe: On the operating surplus line, yes. A negative effect of SEK 5 million. Oscar Lindquist: Yes. But going forward, will you be able to sort of pass on the full increase in property tax to tenants? Arvid Liepe: Not 100%, but the very largest part. I mean, we do have some vacancies, for example, and we have a very small proportion, but still a few inclusive contracts, so to speak. Oscar Lindquist: But then significantly lower than the SEK 5 million we saw this quarter? Arvid Liepe: Yes. Operator: [Operator Instructions] There are no more phone questions at this time. So I hand the conference back to the speakers for any written questions and closing comments. Ulrika Hallengren: Perfect. Thank you. Have we got any written questions as you can... Arvid Liepe: Let me double check. Not that I can find. No. Ulrika Hallengren: No? okay. So of course, you're welcome to come back to us whenever with whatever asked questions. Thank you for this. Arvid Liepe: Maybe we should conclude. This may actually have been a record quick presentation. Ulrika Hallengren: Definitely, 42 minutes. It's our quickest [ version ] , I think. We try to be precise and quick, but that was part of it. Arvid Liepe: Thank you, everyone, for listening in. Ulrika Hallengren: Thank you.
Operator: Welcome, everyone, to Telia Company's Q3 2025 Results Presentation. And with that, I will now hand it over to Telia Company's Head of Investor Relations, Erik Strandin Pers. Please go ahead. The floor is yours. Erik Pers Berglund: Thank you, Jen. Welcome, everyone, to the call. We have our CEO, Patrik Hofbauer; and our CFO, Eric Hageman, in the room, and I hand over the word to Patrik. Please go ahead. Patrik Hofbauer: Thank you, Erik, and good morning. Q3 was, in many ways, an important quarter as it confirms that we are doing the right things for our customers. Our group-wide NPS, so Net Promoter Score, continued to improve and has trended positively all quarters this year. Telia Sweden again won a clear majority of awards in the customer satisfaction survey by SKI. And in both Finland and Norway, we had strong outcomes in the EPSI surveys on our customer satisfaction. We also continue to deliver on the value creation plan that we laid out in Q3 last year with EBITDA growth supported by profitable growth in service revenues as well as cost efficiencies. This helped drive an increase in free cash flow, which again more than covered our SEK 2 billion dividend for the quarter. And as we talked about already 3 months ago, it was an eventful M&A quarter. The closing of TV and Media transaction strengthened our balance sheet further. In July, we also signed a memorandum of understanding with our partner in Latvia, and we are now working hard to ensure that both parties fulfill the commitment to sign a share purchase agreement before year-end. We have also launched a formal offer to buy Bredband2, which will strengthen our consumer business in Sweden. And finally, we are upgrading our full year outlook for the free cash flow to around SEK 8 billion from SEK 7.5 billion before, reflecting, among other things, strong CapEx discipline. And we are also now changing our full year outlook for booked CapEx from SEK 14 billion to around SEK 13 billion. Now let's go into the financial highlights. Service revenue growth continued to be good in Sweden and the Baltics, but partly offset by decline in Norway, meaning overall growth of 1%. EBITDA growth of 4.4% was as expected, a bit below the ambition for the full year, but not too much, and with both Sweden and Finland continued to perform well. CapEx continued to be well below our SEK 14 billion limit. And even though we expect a seasonal pickup in Q4, we are already comfortable -- we are very comfortable, sorry, to lower the full year outlook to around SEK 13 billion. Free cash flow will continue to be strong, driven by higher EBITDA, lower interest payments and positive working capital movements. This, together with growth in EBITDA and proceeds from the TV and Media divestment resulted in a lower leverage, and we ended the quarter at 1.93x. Moving now to Sweden that is performing well on customer metrics. We had a strong outcome in the 2025 SKI survey. For example, Telia won the award for most satisfied enterprise mobile customers. And in consumer, Telia again had the happiest customers among the mobile main brands and fellow came out well among sub-brands. Telia's TV service also had the most satisfied TV customers. More importantly, new customers signing up across mobile, broadband and TV, as you can see here, the broadband intake stands out as it actually is a result of 2 good quarters rather than one since around 10,000 new customers in Q2 were registered in Q3. The late registration was related to our transition into a new system. In Enterprise, we signed a long-term partnership with Sweden's largest train operator, SJ, to deliver high-quality communication for the entire train fleet. Financially, Sweden is well on track to reach the full year plan with service revenue growth at 2%, driven mainly by broadband and TV. As a reminder, revenue growth on a quarterly basis is affected by project-based revenues, which is lumpier than subscription-based revenues. In Q4, we expect more project-based revenues than we had in Q3. And EBITDA growth was again strong on the back of profitable growth and cost savings driven by the Change Program. Let's now move east to Finland. That came out as the #1 in the EPSI's survey on customer satisfaction in both Consumer and Enterprise. This is promising and shows that we have good foundation in Finland to build on. Mobile net adds improved, and we did not lose any mobile handset customer this quarter. The net loss was due to mobile broadband, where the market is declining. Our SME base grew as did the number of consumer handset customers for the first time in a very, very long time. ARPU grew at the same time by 4%. On fiber, we are also adding customers not least from being a service provider in our Valokuitunen JV network. Financially, we saw a slight improvement in service revenue trends with growth in Consumer and a decline in Enterprise, driven in part by our choices to discontinue noncore activities and in part by a weak market. And finally, the strong execution of the Change Program continued to give tangible savings and resulted in EBITDA growth at high single digits with a margin climbing to 34.6% versus 32.5% one year ago. So in summary, we are making progress on all 3 of our midterm ambitions for Finland that we presented 1 year ago, stabilization of the mobile market share, improvement in SME and improved profitability. Now moving west to Norway, which is, as expected, saw another challenging quarter with both service revenue and EBITDA growth clearly in negative territory due to lower mobile wholesale revenue and headwinds in the broadband and TV. Like for Sweden and Finland, Norway came out well in customer satisfaction surveys with Phonero winning the EPSI survey for the fourth consecutive year in the B2B category. We expect to have reached the low point when it comes to service revenue, although not yet when it comes to EBITDA because of the timing of OpEx. So EBITDA decline in Q4 is currently expected to remain similar to the levels we have seen in Q2 and Q3. The reason for headwinds in Norway are well known, and the mobile wholesale decline is expected to be around SEK 95 million in the fourth quarter. The other part, a weak performance in our fixed business is something we are addressing very actively. And on the next slide, I want to share some more information about this development. So we have now launched a new value proposition in all segments, modernized our TV platform, modernized our installed base of CPEs, signed future-proof new content agreements and created a dedicated organization for fixed consumer services. Network quality has improved. And as you saw, we added TV and broadband customers in this quarter. At our investor update 1 year ago, we talked about our backbone of our network being already fully fiberized and around 50% of our broadband customers were on fiber or fixed wireless access connections. Today, the share is around 55%. And as we have said before, this is too slow. And from next year, we will see a clear acceleration in the coax to fiber upgrades, in line with the commitment we made last year to invest more. This will be done within our existing CapEx frame. Now moving on to Lithuania, which had a solid quarter with healthy service revenue growth supported by both mobile and fixed, something that together with continued efficiencies resulted in an EBITDA growth of 9% and EBITDA minus CapEx that remained at a record high level of SEK 1.6 billion on a rolling 12-month basis. At the end of the quarter, Lithuania successfully launched Telia Safe, a security add-on, and it's also completed an IT transformation within B2C, 2 achievements which will help our growth journey going forward. Now let's move to Estonia. That saw both service revenue and EBITDA growth accelerating following great momentum in especially the public sector and good work on generating efficiencies. And like for Lithuania, cash conversion remained at record levels. And with that, I hand over to Eric before I come back to summarize the quarter. Eric Hageman: Thank you, Patrik. Let me now go through the financial development of the quarter, starting as usual with service revenue and EBITDA. In the quarter, service revenue growth remained at 1% as stable or improved performance in Sweden, Finland and the Baltics was offset by pressure in Norway, predominantly driven by lower wholesale revenue. In Finland, we also continue to simplify our product portfolio, and we are now getting close to the end of the ramp down of the e-invoicing business. Year-to-date, we are at 1.3% service revenue growth. And looking into the last quarter of 2025, we expect an improvement related to pricing, growth in Enterprise and public sector contracts and less revenue decline in Norway. Moving to EBITDA. Growth in Q3 was somewhat below the 5% ambition for the year as we flagged 3 months ago, with all markets except Norway growing on the back of higher service revenue growth and efficiencies created by the Change Program. We're also encouraged to see that our EBITDA margin was 140 basis points higher than in the same quarter last year, in line with our margin expansion promise at the investor update September last year. As mentioned, we expect improvement in service revenue growth in Q4. For EBITDA, we currently expect growth in Q4 to be approximately similar to the growth rate we saw in Q3, penciling in a modest increase in sales and marketing costs, both in Norway and Finland. Moving now to OpEx and CapEx. As we can see on the left-hand side of this page, continued cost discipline and the positive impact of our Change Program continues to drive down resource costs. Our operating expenses declined by 2.9%. This more than compensated for an increased level of marketing spend across the Nordic markets as well as higher pricing from IT vendors. OpEx as a percentage of service revenue continued to trend down this quarter, this time by 120 basis points to 28.4%. We increasingly managed to do more with less and have only just started on this journey to become more efficient. We also remain very committed to being disciplined on our capital expenditures. As you can see from the middle graph, we ended the quarter with CapEx of SEK 12.5 billion on a 12-month rolling basis, more than SEK 2 billion less than 24 months ago. This shows how being focused and having clear priorities can be translated into better capital efficiencies. CapEx spend is expected to increase somewhat in the last quarter of the year, in line with normal telco seasonality. But overall, we don't expect the current run rate to change much, which is why we today lowered our expectations for the full year to around SEK 13 billion. Finally, as you can see on the right-hand side, growing EBITDA and lowering CapEx resulted in EBITDA minus CapEx comfortably above the SEK 19 billion on a 12-month basis. This equals a step-up of 9% versus a year ago and also resulted in a much improved cash conversion, which is now 61% on a rolling 12-month basis, up from 58% a year ago. Let's now have a look at the free cash flow for the quarter. Free cash flow improved by SEK 1.5 billion compared to the corresponding quarter last year. And as for several quarters now, the key building block is our profitable growth. Cash CapEx increased by SEK 300 million, which was driven by phasing in payments and a rebalancing of the vendor financing program, the latter, however, having an equal positive contribution to working capital. Interest payments declined by SEK 300 million due to lower debt and partly also because last year's number was rather unusual high due to phasing of interest between Q2 and Q3. Working capital was, as you can see, marginally positive, which was a significant improvement versus last year as the number then was impacted by the rightsizing we did of our vendor financing program. Finally, we saw a SEK 200 million higher outflow of minority dividends in Q3 related to a catch-up dividend paid to our co-owner of our mobile business in Latvia. Overall, with SEK 6.9 billion free cash flow delivered in the first 9 months of the year and the clear belief that the cash flow generation will remain strong also in Q4, we raised the outlook today for the full year from around SEK 7.5 billion to now around SEK 8 billion. Let's now briefly look at our net debt and leverage development. As you can see on the right-hand side, our net debt decreased by SEK 7.1 billion in the quarter as free cash flow more than covered our quarterly dividend payment, and we also received the proceeds from the divestment of TV and Media. The combination of lower debt and growing EBITDA reduced leverage to 1.93x compared to 2.09x at the end of last quarter. Looking at the longer-term trend on the bottom of the left of this page, we can clearly see that leverage has come down over the last 2 years as we have grown EBITDA and used the cash proceeds from our divestments to improve our balance sheet. This now puts us in a very good position to further strengthen our business, like, for example, the last quarter, we announced SEK 3 billion acquisition of Bredband2 in Sweden. The phase 2 investigation of Bredband2 has now started. And as said before, we expect to close the transaction in Q1 next year. Finally, before I hand over to Patrik, I would like to say a few words on some of the milestones we have achieved in the third quarter and how that resonates with our value creation agenda laid out at the investor update about a year ago. As you may remember, we laid out a clear agenda at the investor update on how we aim to create shareholder value. And I believe we continue to make good progress on it. Firstly, free cash flow has covered our dividends for the first 9 months of the year. And as you have seen in our updated outlook, we expect that also to be the case for the full year. 2025 is the first time in quite a number of years where our free cash flow generation covers our dividend commitment without the recourse to growing vendor financing. Largely, this free cash flow uplift is driven by our profitable growth trajectory and CapEx discipline, the latter which we also upgraded today. Secondly, on active portfolio management, we closed the TV and Media transaction this quarter and are making a bolt-on acquisition to further strengthen our core business in Sweden, while we are working hard on securing the full exit for Latvia. Thirdly, our balance sheet continues to strengthen. Liquidity is strong. And after closing the TV and Media divestment, we are below the 2 to 2.5x net debt-to-EBITDA range. Fourthly, we paid another quarterly dividend to our shareholders, and we remain committed to deliver on a progressive dividend policy. And finally, at the CMD last year, we set out a plan to return to an all-in free cash flow covering our dividend commitment. Our free cash flow guidance upgrade today means we will be covering the dividend despite the absence of the free cash flow from our TV and Media business. See this as another proof point that we are very serious about delivering on our commitment to shareholders. With that, I hand back to you, Patrik. Patrik Hofbauer: Thank you, Eric. Before I summarize the quarter, I want to reflect on what has taken place since we launched our change program last year and how we are taking steps toward a simpler, faster and more efficient Telia. The number of employees and resource consultants in Telia is now almost 25% fewer than it was in the start -- or at the start of 2024 after our Change Program and the exit from TV and Media. Central resources are down by half. We also have half as many products and half as many IT systems managed centrally compared to the start of last year. Many have been moved and are now managed by the country organizations who are closer to the customers and some have been closed down. We are encouraged by the results so far. Network incidents have continued to become fewer and so has incoming calls from customers who are contacting us with issues and questions. This means both better customer satisfaction and material monetary savings. Meanwhile, employee engagement is up and our people see that barriers to execution are being removed, collaboration and decision-making is improving and of course, EBITDA growth has improved. This is a promising start of first few steps, but we intend to do more on all parts of our agenda. We can still become much simpler, faster and more efficient than we are today. And then on the summary of the quarter, which was overall in line with our own internal expectations, we continued a healthy group EBITDA development, supported by profitable growth and efficiencies from the Change Program. And we continue to see clear signs that customers appreciate our high-quality services and see the benefit from how those improve their everyday lives. We continue to execute on our agenda, and we can now upgrade our free cash flow from outlook to fully cover our dividend, as Eric said, which is a key milestone for us. And with that, I will open up for questions. Thank you. Operator: [Operator Instructions] Our first question comes from Owen McGiveron with Bank of America. Owen McGiveron: It's Owen McGiveron from Bank of America. So on your upgraded guidance, how should we think about 2026 and 2027 CapEx within the frame of your medium-term ambitions? Should we expect similar levels versus 2025 or more moderation? And how does the additional investment in Norway play into this? Just wanted a few more details on the moving parts. Patrik Hofbauer: I can start. It's Patrik here. First of all, we are not guiding yet on '26 and '27. We will come back to that in January. But I can say we have worked hard and actively to improve, I would say, the discipline when it comes to cost and also how we use the capital. That discipline will not be less next year or the coming year. So we continue to see how we can use the capital much more efficient than we are today, and that will continue. But we will come back in January with the guidance or update or whatever in January -- in that call. So Eric, do you want to add something? Eric Hageman: Yes. I mean that would -- just my simple observation that it doesn't change so much from one moment to the next. And with regards to Norway, it's part of that. So the slide that Patrik talked about where we say we want to accelerate the rollout of fiber. That part is at the SEK 1 billion that we already talked about in the investor update last year. Part of that money is being invested this year. Part of it will be invested in the coming couple of years, but it's firmly part of that CapEx guidance that we have just talked about. Operator: Our next question comes from Andreas Joelsson with DNB Carnegie. Andreas Joelsson: Just to follow up on your comment on further efficiency gains. Could you perhaps describe how you view the cost base currently and what else you can do? From the last slide, it seems like you have been able to do this Change Program without any basic negative effects. So are you encouraged to do more? Do you think you can do more on the cost side in order to get these efficiency gains? Blurry question, but I hope you understand. Patrik Hofbauer: Andreas, I understand your question very well. It was not blurry at all. So first of all, the Change Program went obviously very well. We have delivered on basically all parameters, and we see that the operations is really much more stable, which we had, of course, the concerns about when we do this big change that we did last year. But so far, everything is running very well. Then remember, last year, we had this investor update, we gave out a 3-year plan with a CAGR on service revenues around 2%, EBITDA at 4% and then a free cash flow above SEK 10 billion in -- or at least SEK 10 billion in 2027. And that requires to continuously work with efficiency to deliver on that plan. And we are fully committed to deliver on the plan that we have put in place, which means that we will actively, of course, to improve the operations from year-to-year. So I think that is a clear answer on your question where we are heading. Well, I hope at least. Andreas Joelsson: Yes, absolutely. Less blurrier than the question. Patrik Hofbauer: Thank you. Operator: Our next question comes from Andrew Lee from Goldman Sachs. Andrew Lee: So I have a question each on Finland and Norway, which are 2 of the areas where investors had a bit less certainty recently. Just on Finland, there's some improving -- slightly improving service revenue growth trend today and also sub-trends. Could you just talk about how you're achieving that? And also how you're thinking about the balance of not disrupting the market too much, given we've had one of your competitors basically disappointed fairly materially on their mobile service revenue growth outlook in the near term. Just comments around kind of how you're improving and how you don't disrupt the market too much would be helpful. And then secondly, on Norway, there are quite a few tailwinds or easier comps as we go into Q4. One of the ones that's harder for us to judge is the price rises that have been put through in Norway in September. I wonder if you could just talk about how you see the competitive environment and price rises boosting growth from Q4 onwards. Patrik Hofbauer: Andrew, thanks for the questions. I can start with Finland. I think, Eric, you can take Norway then, so we divide a little bit here. Starting off with Finland first. I mean, the most important part is actually the customer satisfaction, which we have been invested quite heavily in. So we have upgraded our network and then several activities that we're now seeing is paying off. Then on top, we also had some good execution here, especially in the consumer side to turn these trends around. And we are not at all disrupting the market. I don't know what that is coming from. We are very disciplined, but we have good offers in the market together with a good network and good services overall. And then we have also a consumer operation that is more efficient every day. And remember, we have said clearly that we are accepted to lose market shares in Finland for too many years now. And we said clearly, we want to stabilize that, and that is what we're doing. So we see good development in Finland when it comes to the consumer business. Still, we have a lot more to do. And then also on the SME side, on the small and medium enterprise segment, where we have a clear underrepresentation versus our total market share, where we are focused on and having good also development on. So I think this is not -- I think it's a healthy operation. We are improving, and we will continue to improve during 2026 as well actually to defend and stabilize our market share. That's actually what we're doing. So I think good done by the whole team in Finland. Eric Hageman: Yes. With regards to Norway, so very encouraged by preliminary results of those price rises. Obviously, the market is, as per your Finland question, is never to disrupt, but certainly to defend our position. So let's see what that does to our churn numbers. I think the main thing when it comes to Norway is, as we said last quarter, it will take some time for this to turn around. One, we haven't quite lapsed the wholesale loss, that ICE revenue was an impact of SEK 150 million on our revenue in the quarter. So we're working on that. We've made some management changes in the organization. We're fixing fixed, as Patrik just talked to in this slide, and that will take a bit of time. So we guided again for what is likely to be another soft EBITDA quarter for Norway, but hopefully slightly better on the service revenue because they are slightly easier comps. Operator: Our next question comes from Fredrik Lithell with SHAB. Fredrik Lithell: I have two of them. You have, on earlier calls, talked about that service revenue should be a bit slower, both in Q2 and Q3 and then to reaccelerate a little bit in Q4. And I think, Eric, you alluded to that in your part of the presentation. If you could sort of stack up and rank the important part for the improved service revenue growth in Q4, that would be interesting to hear. And then also the CapEx, the lower CapEx from SEK 14 billion to SEK 13 billion on a booked level versus your raised free cash flow of SEK 1 billion down and SEK 0.5 billion up. Could you sort of walk us through a little bit what movements you have that support your free cash flow raised guidance would be interesting. Patrik Hofbauer: I can start with a comment on the service revenue. And right, you said that we said that Q2 and Q3 will be a bit softer, but then we'll see an improved situation in Q4. And we do expect better growth in Q4 than in Q3 with especially Sweden to continue to look solid, and we expect more project-based revenues to step up here in Q4, and that is the main reason. Erik Pers Berglund: It's mission-critical, as I said a few times. Eric Hageman: Yes, on CapEx, it's very simple. We sort of never felt we're going to do the SEK 14 billion, right, when we guided for less. We're very happy with the progress that we've made as an organization on a profitable growth, which ultimately drives our free cash flow growth. And then when you go through 9 months of the year, where you then feel is this the moment where we have that visibility. It's pretty clear when you do almost SEK 7 billion of free cash flow that an upgrade was necessary. And on the CapEx, yes, we have good visibility for where we will land for the year and also where that will trend going forward as per the first question we got. So very happy with how that goes through. And yes, let's see where we land for the full year when it comes to free cash flow. Patrik Hofbauer: If I may add a clarification, Fredrik. We never plan to invest SEK 14 billion. It was always below, right? So it's not a SEK 1 billion downgrade as such, but yes. Operator: Our next question comes from Erik Lindholm with SEB. Erik Lindholm-Rojestal: So maybe a follow-up to Andreas' very clearly worded question. Just thinking of the current trends here, it looks like you will exit the year at about 4.5% perhaps EBITDA growth rate approximately and the comparisons seem to get a lot tougher from Q1 and onwards. I'm just thinking of the outlook here for '26 and beyond. I mean, do you think you need to clearly accelerate cost savings to reach your targeted EBITDA CAGR of 4% between '25 and '27? Patrik Hofbauer: I think the answer will be pretty much in line with Andreas' question. So we -- I mean, when we set the plan, the 3-year plan of the 2% and the 4% then related to EBITDA, as you know, we were clear on that, okay, this is a rightsizing that we did with Project Sprint. It was an internal name on it that we did last year, the minus 3,000, and we executed on them. And then we need to continue to take out cost, and that will be in every aspect and every area of the cost base. So this is work ongoing. So I don't -- and I don't want to be more specific on how we'll do that, but we will show you quarter-by-quarter that we are able to take out cost to defend because we want to -- we are fully committed again to deliver on the 4% CAGR growth on EBITDA. Then we need to -- because that's a combination of service revenue growth and cost out to be more efficient. Eric Hageman: Yes. Maybe to add from my perspective is, as time goes on, now having done 9 months, SEK 7 billion of free cash flow, the upgrade that you've seen, it gives us more confidence as a management team that we are on the right path to deliver what we promised, not just the 2% service revenue and the 4% EBITDA in the coming years, but also the free cash flow that we've promised for 2027 of at least SEK 10 billion, right? The combination of profitable growth, good CapEx discipline leads to better free cash flow. The visibility that we have gives us confidence that we're on the right path to deliver on that promise of SEK 10 billion plus by 2027. Operator: Our next question comes from Maurice Patrick with Barclays. Maurice Patrick: For me, just a question on Sweden, please. So yesterday, it was interesting to hear Tele2 talking strongly about the increase in pricing or cost of the open fiber networks, the dissatisfaction about delays on regulation. Just curious for your insights in terms of these kind of key trends, the increase in wholesale pricing on open networks, upcoming regulatory changes and delays and how that impacts you. I was intrigued that Tele2 sort of talked about how they were going to push fixed wireless access more, which sounds probably more like grabbing headlines than reality. But again, curious for your insights in terms of how you see that in the context also of you delivering a pretty solid broadband number this quarter and last. Patrik Hofbauer: Yes. I mean, coming back then to the access cost for local networks. I mean, we have seen the high cost for the local networks access for several years. It's nothing new. So -- and that is driven basically by ourselves growing service provider in these local networks and then also higher access prices. So we haven't seen any recently that increase. This has been going on for a while. So I don't know exactly what happened there. And so yes, and also on our own networks, we have made very modest increase in our [indiscernible] business, a couple of percentage points only. So I'm not -- I don't recognize really the whole situation from a new thing. This has been going on for many years. So that, yes, around regulation... Erik Pers Berglund: Yes, regulation has been postponed as you know again -- so we'll see what happens when we eventually get there. But I think you're right, that's probably what brought the topic up this quarter. Eric Hageman: But maybe overall on Sweden, we are incredibly happy with the performance there. As you saw, very good service revenue growth, perspective of even more service revenue in Q4, as we indicated, very strong cost control leading to good EBITDA growth. So yes, we hear what others are saying, but we are very happy with our developments in the Swedish market. Erik Pers Berglund: And I think you also mentioned the broadband intake, Maurice. It's a good work over a couple of quarters. As we mentioned, this is some delayed registrations from last quarter as well. Good anti-churn measures after the price increases we did in the beginning of the year. So that's working. And so overall, we're happy with that. Patrik Hofbauer: And continues to perform -- TV continues to perform well and not a surprise. I mean, we have the best product in the market. And obviously, customers are appreciating it. And for the fourth year now, we have got the best feedback from the customer surveys on TV. So all in all, happy with the performance. And again, remember that we have seen a more household perspective on the consumer market in Sweden rather than looking each for the products because our easiest win here is actually to sell more products to existing customers, and that is actually paying off in the strategy. Operator: Our next question comes from Ajay Soni with JPMorgan. Ajay Soni: My one is just around leverage and shareholder returns. So obviously, you're below your target at the moment. We have some acquisitions coming maybe in the next few months. But it feels like you'll still end up below your target range of 2 to 2.5x. Do you see an opportunity to maybe distribute some of the proceeds from the TV and Media sale as buybacks or extraordinary returns? And if so, when would this -- when would you approach this decision with the Board? Eric Hageman: Thank you. Good question. We're very happy with the direction of travel. As a team, we've worked very hard because it's one of the building blocks of the value creation plan is having a healthier balance sheet, one, because we pay less interest than on the debt that we have outstanding, which helps our free cash flow growth, which is the other pillar of our value creation. So that's a benefit from that. Secondly, we are a simpler organization to run based on all these divestments. We're very happy with the progress that we're making. We have that final building block, which is doing, as I said earlier today, coming right on progressively growing dividend, next year is when we'll come back to that. And the beginning of the year is when we will set out our store with regards to the guidance is when we have our conversations with the Board. So we will come back to that. Maybe the last point is, we obviously also use our balance sheet to strengthen our business. We've done the announcement of Bredband [indiscernible]. So it's important for us that we have the flexibility to be able to do that as well. So -- but we know it's an important pillar of our value creation plan, and we'll come back to that at the beginning of next year. Operator: Our next question comes from [indiscernible] from BNP Paribas. Unknown Analyst: I had a question, please, on Finland, where you've delivered strong EBITDA improvement over the last sort of 3 to 4 quarters. You're now talking about how you're seeing underlying improvements in your commercial trends as well. Could you maybe share some thoughts on how you see your Finnish profitability evolving over the next couple of years, say? And then just a quick clarification around the Norway CapEx, I'm sorry if I missed this. Does this at all change your thinking around the FY '27 free cash flow target of SEK 10 billion plus? Or is that reflected in this? Patrik Hofbauer: So I can start with the later one with the CapEx. No, it's reflected in the figures and will not impact our 2027 target. So to be super clear, it's in the envelope of that. And then Finland? Eric Hageman: Yes, with Finland, maybe a step back, a big part, and we talked about it today in the voice over as well of the analyst presentation, which is margin expansion was a very important part of what we talked about in the investor update last year for all countries. If you look at the Q3 results, you see that apart from Norway because of the loss of the wholesale contract, but all other countries, you see the margin expansion coming through. And what is that? It is our discipline around the programs of doing more with fewer people, but also the ancillary costs that we have. We have a very, very clear plan, and that underpins that delta between the 2% service revenue and the 4% EBITDA growth that Patrik mentioned earlier in his answer to the first question. That is still very, very high on the agenda. So you should expect more margin expansion, including in a market like Finland in the coming years. Patrik Hofbauer: Can I just add also Finland? And don't -- to build on what Eric said, don't also forget to look into the ARPU development that we have in Finland, which is 4% up on the mobile postpaid, which is also very positive. And that has been driving the agenda to run price increases, but also a better mix in the portfolio. So all these activities are actually paying off at the moment. But we're still a way to go to be where we want to be in Finland, to be clear. Operator: Our next question comes from Keval Khiroya with Deutsche Bank. Keval Khiroya: I've got two questions, please. So at the CMD, you showed a target for mission-critical revenues to more than double from '23 to '27. You've been quite clear on this as a source of support for Q4. But can you comment on how we should think about the mission-critical growth in '26 compared to the growth in '25? It's obviously a bit difficult for us to model. And then secondly, on Norway, you've talked quite clearly about the moving parts. But can you comment on when you actually expect Norway to stabilize EBITDA? Patrik Hofbauer: Yes. I'm not sure I understood the first question on mission critical. But I can give you -- I mean, we have a clear -- I mean, we said it will double rightly, as you said, for the coming years, and we see that it's coming into now to our books and orders and also that's the reason why we will see a comfortable increase in Q4 in Sweden. So that's part of it. And this will continue, but they are a bit more lumpier, these revenues. So we will see it continue in the coming years as well. But we have not been explicit more than say that we will double from where we came from. And we will still stand with that. We are delivering on what we have said and on the expectations. So no surprises coming in. Eric Hageman: Yes. With regard to Norway and sort of the negative EBITDA that we've seen, we've guided already for that for Q4, as you heard earlier today, that will take a couple of quarters. We're still not quite out of the impact of the wholesale revenue. We've seen some increase in energy costs there. We typically have salary inflation in our countries as well that we have to work with. So we do see great opportunities to turn around that business, fixing fixed, making sure we stem the losses we have on mobile. TV is back on after the outage that we had, but it takes us a couple of quarters. So as we said last -- at the half year results, we need a bit of patience before we also, from an EBITDA perspective, turn around this business. Operator: Our next question comes from Viktor Hogberg with Danske Bank. Viktor Högberg: So just a question on the new free cash flow guide. Just a clarification maybe. Given the assumption of SEK 650 million in spectrum CapEx annually included in the guide for this year, would you say that you still expect the real free cash flow that is including the higher spectrum CapEx to still cover the dividend this year as we're getting close to the FY results? Just want to make sure that we're all speaking the same language. That's the first question. Erik Pers Berglund: Thanks, Viktor. It's Erik here at IR. We don't guide for free cash flow, including the real spectrum cost as you might understand, simply because we're not able or allowed to speak about spectrum CapEx ahead of the auction. So we have to stick to the normalized spectrum when we talk about free cash flow guidance. But maybe it's worthwhile to add a comment to that. So SEK 650 million is kind of a rough average for what it's been over a decade. Last year was lower than SEK 650 million. This year, we know it will be higher because we have already the SEK 780 million from the 2023 auction to pay plus, let's see about the SEK 1,800 million in Sweden. Next year, we don't have any big auctions coming up. So it goes up and down. But yes, that's where we are. Viktor Högberg: Okay. Fair enough. On the second question, just another clarification, maybe if you were talking about the group or just Norway on Q4 group EBITDA growth, the trend being in line with Q3. Was that for the group or for Norway, so below 5% that is for Q4. Patrik Hofbauer: So Eric said in his presentation that the EBITDA growth for the group is expected to be roughly the same in Q4 as in Q3. So that's for the group. And for Norway, we expect EBITDA improvement to take a couple of quarters, as Eric said. So we need some more patience for Norway specifically. Operator: Our final question comes from Siyi He with Citigroup. Siyi He: I have two actually. And my first question is on Finland. I mean, the ARPU development is quite encouraging. I'm just wondering if you can share with us how you think about your price increase strategy because I think you so far haven't really followed the security added tariff changes that put through by 2 of your competitors in Finland. And my second question is on service revenue growth in Sweden. And I just want to ask about how we think about 2026 and '27, given that the price is still doing quite well and have lower legacy drags and mission-critical revenues should also come through. Do you think it's fair to assume that the top line trend is next year and year after could be better than what we have witnessed this year so far? Patrik Hofbauer: So I can take the first question on Finland. I'm a bit surprised that we get the question all over and over again regarding the package, the security package. Look back in Finland, we have been driving the price increase raise there and the value creation agenda for many, many years. And remember, our position, we are the #3 mobile operator in the market. And if we look at the ARPU levels, they are very similar to each other. And we should be the challenger in the market, not the responsible leader in the market. So look at our position, I think, we are looking into different ways of driving price increases, i.e., ARPU increases. And we don't need to follow what our competitors are doing all the time. We have our own agenda that we are running and that we're looking into to make sure that we continue to grow and defend the position that we have in the market. And that you will see going forward as well. And I don't want to go into commenting on every package and price, et cetera. So we have our agenda. We are running that. We are #3 in the market. We should be the challenger. We have been too much more -- too responsible as a #3 player and acting like we were the incumbent almost in Finland or the leader. So I think we are well positioned. We have done a good quarter and good improvement during the year, and that will continue. I expect that will continue in the next year as well. Erik Pers Berglund: And to add a little bit, I think that our main way to drive ARPU is probably not that different from the competition. We look at the subscriber base cohort by cohort as certain cohorts exit a certain tariff or contract, then we can move them up to a higher value, higher price level, and that's how you work through the subscriber base with different prices. And that's giving the results. You can see there. I think the 4% is roughly in line with the competition. So even though we don't do exactly the same thing on security add-ons. Eric Hageman: Yes. With regards to Sweden or specifically service revenue in Sweden, very encouraged by what we saw in Q3, the first 9 months performance and what we're expecting for the full year. A little bit like our answer on CapEx, that's not something that changes overnight, right, when you have certain momentum. And clearly, we're guiding for a stronger Q4, driven by what we're doing in mission-critical, particularly, but also just the underlying business in broadband, in TV, the convergence play is really working well for us. And on top of that, some price increases. So we expect that momentum to continue. Said in a slightly different way, if you think about a medium-term guidance, the 2% and the 4%, that would not be possible without Sweden delivering that, right, because it's roughly half of our business. So again, we feel comfortable with that medium-term guidance, and we're very encouraged by the performance that we're seeing in Sweden. Operator: There are no further questions. Erik Pers Berglund: All right. Thank you very much, everybody, for calling in. Many good questions, and we look forward to continuing the discussions over the next quarter. Thank you, and goodbye.
Operator: Good morning, and welcome to Nexans' 9 Months 2025 Financial Information Conference Call. My name is Laura, and I will be your coordinator on today's event. [Operator Instructions] And now I'd like to hand the call over to Mr. Julien Hueber, Nexans' CEO. Please go ahead, sir. Julien Hueber: So good morning, everyone, and thank you for joining us today on the Nexans conference call. It's a special moment for me to be speaking with you for the first time as the CEO of Nexans. With me today, I have [ Christine Preolevi ], our Interim CFO; and Audrey Bourgeois, our VP, Investor Relations. I would like to begin by thanking the Board of Directors for their confidence. It's an honor to take this role and to lead a strong, high-performing company with a clear vision for the future. I also want to express my appreciation to Christopher Guerin for his leadership and the remarkable transformation he has led, a transformation I was proud to help drive as part of the Executive Committee. Chris leaves behind a strong company built on solid foundation that we will keep strengthening. I spent more than 2 decades at Nexans always close to operations and transformation. From my early years in manufacturing to leading our activities in China, South Korea or globally for the Industry & Solutions project, I've seen how performance is built on operational excellence, flawless execution and a deep understanding of our customers. As a member of the Executive Committee since 2018, I helped shape the group strategy on the capital markets road map. Leading our EUR 2.6 billion of PWR-Grid and Connect in Europe business reinforce my conviction that agility, execution and industrial excellence are the levers that will be key to Nexans's next chapter. Our strategy remains unchanged, and the megatrends behind it never been so strong. Electrification is accelerating and the need for secure, modern infrastructure keeps growing. These dynamics reinforce Nexans' positioning and long-term strategy. As a new CEO, I want to be very clear, we will continue to execute the road map presented at the last Capital Market Day, and we confirm our 2025 guidance and 2028 objective as well. The direction is right and the foundation are solid and all megatrends are continuing. The environment, however, has grown more complex since our last Capital Market Day, from geopolitics, supply chains disruption or shifting policy environment around energy and renewable. This makes one thing clear. It is the right time to make Nexans even stronger, stronger in execution, stronger in competitiveness and stronger in agility. I will continue to fuel our model of value creation that delivers results, combining our SHIFT program, complexity reduction, innovation deployment and vertical development. But building on that, I will also move forward and I will emphasize even more on the further complexity reduction of the organization, efficiency optimization of our industrial operations, both in terms of productivity and cost competitiveness, further mutualization of our industrial footprint and of course, keeping absolute discipline on cost and cash. All these priorities will further enhance the resilience of Nexans model. Our ambition is clear, to consolidate Nexans' competitiveness while amplifying selective profitable growth in Electrification, powered by digital acceleration and the smart use of new technologies and artificial intelligence. Nexans is entering this new phase from a position of real strength. We have a clear road map, robust financial foundations and teams that are talented, dedicated and united and proud of what we do. Together, we will deliver with strong discipline and focus, the long-term value creation for all our stakeholders. So after this introduction, let me now turn to the group's performance in Q3 on the first 9 months of 2025 on Page 4. In the third quarter, the group delivered a plus 7.7% organic growth, including a strong 12.6% in Electrification. Over the first 9 months of 2025, the group standard sales reached EUR 5.3 billion, representing a plus 5.8% organic growth compared to last year. Over the same period, Electrification, which remains the core of Nexans growth, recorded a plus 9.4% organic growth, confirming our disciplined execution across our 3 segments, which are Transmission, Grid and Connect. Our Transmission adjusted backlog reached EUR 7.9 billion at the end of September, providing for Nexans a strong visibility for the coming years. And no later than today, I am pleased to announce the acquisition of Electro Cables in Canada that will be reinforcing Nexans' position in PWR-Connect in a highly dynamic market and with approximately EUR 125 million current sales on a yearly basis. And I will come back on that on the next slide. In short, the first 9 months confirm the solid and disciplined growth of our Electrification businesses. This performance reflects our sharp focus on high added value solution and our selective approach to capture the strong underlying trends in Electrification. So before we move to our segment in details, I wanted to highlight something that is important to me. So I will move to Slide 5. Our Innovation Summit in Toronto that took place 2 weeks ago was a great platform for exchange with our platinum customers, our technology experts and our partners. Nexans becoming a pure player of Electrification. So I believe that our role is to bring together the key stakeholders of the electrification ecosystem to imagine and to build collectively the next level of electrification that is critical to our societies from powering homes and hospitals to supporting education and many other essential services. The choice of holding this event in Canada reflects our strong interest in North America. Canada is a powerful growth platform for Nexans, both for the Grid and the robustness of this construction industry in our Connect segment. So talking about Canada, I will now move to Page 6, where I will present the acquisition of Electro Cables that was signed today, this morning, in fact. Electro Cables is a Canadian player in low-voltage cable system, delivering a high performance and service-focused solution. This company represents a strong strategic complement to Nexans Canadian portfolio, offering an attractive growth perspective and a robust profitability profile. This acquisition also allows Nexans to further strengthen and complement its portfolio in Canada, enhancing its position in a very dynamic market while optimizing local supply chain efficiency. It also paves the way for valuable synergies driven by Nexans' expanded local presence and the rollout of its proven proprietary SHIFT program while enhancing innovation. This acquisition will be fully financed in cash, leveraging Nexans' strong balance sheet and is expected to be EPS accretive from day 1 and from year 1. Now moving to Page 7. Let me now comment the overall group performance over the first 9 months of 2025. Standard sales reached EUR 5.3 billion, representing a plus 5.8% of organic growth, confirming a solid trajectory for the group. The growth continues to be driven by Electrification business, which make up the core of Nexans strategy. It delivered a plus 9.4% organic growth over the period. Let me remind you that this is well above our Capital Market Day organic growth that we have announced last November of a CAGR between plus 3% and plus 5%. This performance reflects the disciplined execution in Transmission and in Grid as well as the recovery in Connect during this third quarter. Other Activities, mainly Metallurgy, a strategic segment for Nexans, posted a plus 4.1% organic growth over the first 9 months of this year. And as you know, we observed unusually high level of external sales in H1 that was driven by customer bringing forward orders ahead of the U.S. tariff. As expected, this overstocking subsequently led to correction in Q3 2025. The Non-electrification activity declined by minus 6% as expected, given the challenging automotive market. We remain very active to make this disposal of autoelectric, the last remaining activity to finalize our portfolio rotation. So overall, the group growth is at a high level and fueled by healthy growth drivers in Electrification, which remains our main engine of value creation. So let's now take a closer look at our different segments, starting with Transmission on Page 8. Performance was particularly strong over the first 9 months of 2025 with standard sales above EUR 1 billion, which is up by 25% organically versus last year and with a very strong Q3, up by 33%. This strong performance reflects solid execution, a favorable production mix and a more installation campaign carried out in Q3 compared with last year. Now regarding GSI projects, let me confirm once again that we keep working hand-in-hand with our customers. We have a very collaborative approach with them on this ongoing project that is on track as per schedule and milestones. Last but not least, Transmission pipeline of activity remained robust, supported by sustained demand for interconnection and offshore projects across our key markets. Our adjusted backlog stands at EUR 7.9 billion, which is up by 27% compared to last year, providing a strong visibility until 2028. So in short, the PWR-Transmission segment continues to deliver, thanks to the quality of the execution. I will now move to Page 9 on the following slide regarding PWR-Grid. So PWR-Grid sales reached EUR 989 million, which represents a plus 6.7% organic growth for the first 9 months, which also represents a plus 9% in Q3. This reflects solid structural trends coming from replacement of offset grids and the connection of renewables to the Grid, coming from Electrification needs in verticals such as electrical mobility and data center. And it also comes from the high development of our low carbon offers, and I will be able to comment or answer any of the questions regarding this element. Also, our Accessories business continued to be very well oriented over the period. Overall, projects in Europe and North America ramp up under the new frame agreements with major utilities. So now turning to our PWR-Connect business on Page 10. The net sales of the Connect amounted to EUR 1.7 billion for the first 9 months of 2025 compared to EUR 1.5 billion in the same period last year, representing a plus 1.4% organic growth. You know how contrasted is this segment. We have indeed some strong performing regions with a double-digit organic growth. It's the case for Canada, South America, Middle East and Africa. And so here again, our acquisition of today in Canada will further leverage on wind trend. We continue also to actively grow our tech product as fire safety product with sales growth progressions, which are higher than the market average. That was a key element that we communicated during our last Capital Market Day last year in November. In contrast, and as you know, some region remains more challenging. That's the case of Nordics in Europe or Asia Pacific, specifically Oceania in Australia, specifically on the residential market. Countries like France, Italy and Spain were quite resilient. And let me deep dive on Italy, where, as you know, we have started our SHIFT complexity reduction program on the new LTC business that we acquired last year. This SHIFT complexity program is completely part of the integration process. So we are currently exiting from low-margin products and low-margin market as per schedule. And I can tell you that the integration process of LTC is going very well. Moving on now to Page 11. And before we move to the Q&A, let me confirm our full year 2025 guidance, which was upgraded in July. We continue to execute with discipline and focus and remain on track to deliver an adjusted EBITDA between EUR 810 million and EUR 860 million, and a free cash flow between EUR 275 million and EUR 375 million. Let me remind you that this annual guidance upgraded in July is confirmed and does include only 6 months of Lynxeo. Now entering the final quarter of 2025, we look ahead with confidence. Electrification keeps powering the group performance and Nexans is well positioned to capture this growth with resilience, efficiency and focus. Also, I would like to thank all our teams in Nexans for their commitment and hard work. They are the driving force behind our success on the journey that lies ahead. I am now happy to take on the questions. Operator: [Operator Instructions] We will now take our first question from Daniela Costa of Goldman Sachs. Daniela Costa: I want to ask one sort of like more medium term and one a bit more shorter term. So I'll do them one at a time. But given the deal you've just done now in Canada, and I think in your commentary remarks on the press release, you're mentioning that you're moving from -- or Nexans moving from execution to expansion. Can you talk a little bit about how you view the balance sheet? What's an ideal positioning? Should we see this deal has sort of more of a start of a wave of deals in Electrification perhaps? And then I'll ask the second one. Julien Hueber: Okay. Thank you, Daniela. So clearly, the capital allocation is not changing. My priority will remain the same. I will focus and accelerate the M&A as per -- based on the same logic as in terms of thesis, basically, which is prioritizing M&As in countries where we are already located in order to reinforce our positions and in order to scale our innovations. And also second thesis is to focus on M&As in countries where we are not. So basically, we'll be looking for bigger acquisitions in these countries. And then the third thesis is also to grow in adjacent to cable, could be around Accessories or any other elements. Daniela Costa: And then just -- it sounded like in Q2 that the commentary was very strong regarding the outlook for 3Q on Connect. And I think sort of the market in general had interpreted that maybe more like high single digits or maybe above that, and you ended up with some growth, but relatively modest. Was it something in those countries that were weaker that deteriorated further? Or maybe people just got overexcited with the growth rates after the Q2 call? Sort of what's your interpretation of the deviation there? Julien Hueber: Yes, of course. So first of all, Connect is a very contrasted market. We have indeed meet the double-digit growth in South America, Canada, Middle East. That was completely in line with our expectation. For Europe, we were expecting a recovery in the Nordic part that did not happen. So what we have been doing is to accelerate the launch of innovation products. We are launching our more than 10 innovations both in Norway, in Finland and Sweden in order to compensate this. So we will not have any impact in terms of profitability in this area of Europe. On the rest of Europe, we start to see some -- in Q3, we started to see some signals of recovery, specifically in France, Belgium, Italy and Spain. Daniela Costa: But -- so it was as strong as you expected at the same dynamics you expected at Q2 or... Julien Hueber: So basically, you see the recovery in Q3 in Connect, it's a plus 3.6% compared to -- it's better, it's an improvement compared to Q2. And I expect that Q4 will be on the similar trend in Connect. Operator: And we'll now take our next question from Lucas Ferhani of Jefferies. Lucas Ferhani: I just wanted to have a bit more information on the North America business. So you said it's about 20% of group revenues. Can you say how much it is in Connect and Grid specifically? And also, do we still have that same split between kind of Canada versus the U.S.? And how would you characterize the EBITDA margins there? Would you say that they're higher kind of than group average? And the last point on that North America business, do you see any risk related to copper tariff in the U.S. that might redirect some volumes towards Canada? Julien Hueber: Thank you, Lucas, for this question. So I just want to remind that when we talk about North America, we are not in the U.S., we are in Canada. We are well positioned in Canada, and this acquisition will strengthen our position there. The split between Connect and Grid, it's mostly a Connect business, and we are in both, of course, markets, but it's mostly Connect business. And this Connect business in Canada is very accretive to the group. We have an extremely high level of first growth, but as well as profitability, hence, our choice to accelerate this M&A in Canada. Regarding -- sorry, your last part of the question, the copper tariff. We -- basically, we see that there is no impact for us in terms of copper tariff because we are our own brand in Canada, delivering the market in Canada. So we have no impact for that. on the H1 and the H2 will be as expected. So there will be no specific impact there in this part of the world for the tariff. Operator: And we'll now move on to our next question from Chris Leonard of UBS. Christopher Leonard: So maybe 2, if I can. And focusing on the Transmission business, obviously, a very good quarter in Q3. Can you update us on the contracts that you're still looking at in terms of the pipeline and saying that there's good growth potential here? Is there anything we should expect for 2025 so that you can reach that book-to-bill level of 1x? And within that, could you also help to give us some color on the U.K. National Grid contract again and just give us a flavor for why I believe you decided not to bid and move into the tender on those contracts. Because so far, the pricing looks very strong on those contracts for Prysmian and as a preferred supplier and NKT, it would be helpful to get any color there. And then a second follow-up question would be on your comments for GSI saying that the contract with IPTO is going well, very collaborative and on track with schedules and milestones. Is there anything more you can give on visibility of a plan B that you spoke to or your previous management team, I suppose, spoke to at first half results? That would be super helpful. Julien Hueber: Okay. Thank you for your questions. I will start and then I will hand over to Vincent Dessale, who is with me in the room today. So basically, indeed, you've seen this strong performance Transmission in Q3 and year-to-date as well. In terms of backlog, you have noticed that we are a book-to-bill of 1 in Q3, and we expect to have a similar approach during the year-end. We are active in terms of -- in the quotation at this moment. We are -- of course, I cannot disclose the number of projects, but we are quite active, and we are positive to do some quotation in Q3, hopefully, with some award in H1 next year. So that's basically the situation. And regarding the GSI project. As I said, the project is ongoing, extremely good relationship and collative work with IPTO, our customer. And for us, there is no plan B. There is only one plan A, which is keep going and working with our customers to deliver this project. And I will not -- leave Vincent to continue. Vincent Dessale: Yes. Maybe to give some color and to complement Julien answer regarding the backlog, indeed, we have a great improvement compared to last year, plus 27%. You know it. It has been mentioned with some press release, typically the award of the RTE frame agreement in March and more recently, the Malta-Sicily Project. The pipeline remains active. We have indeed -- and just to give an example because it's public recently this week, Terna has announced a new tender for a major interconnection in Italy. So it just gives an example of the robustness of the pipeline. And indeed, we are quite active on what I would call medium-sized projects and large projects, which are going to be awarded in the next 12 months. So quite active backlog and quite active pipeline in the coming months. Christopher Leonard: And is there any comment on the National Grid contracts that you guys weren't a part of? Vincent Dessale: Yes. Sorry, I forgot this point. I will answer to it, of course. But the story for Nexans has not changed. We are -- we have the SHIFT approach in the project, which means that we are very selective in the way we choose the project that we want to target. We have commented this in the past. It's a mix of technical fit, terms and condition fit, how it fits with the other projects that we have already in the backlog. And indeed, when we look at this frame agreement, it was not answering from our perspective to the different criteria. And as I said, we have other opportunity in the pipeline that we consider from our perspective, more interesting for Nexans. Operator: And we'll now take our next question from Jean-Francois Granjon of ODDO BHF. Jean-Francois Granjon: Yes. Two questions from my side. The first one concerns the acquisition of Electro Cables. Could you give us some more details regarding the current profitability of this company compared to the profit of the Connect division? And what do you expect? You mentioned an accretive impact, but could you give us some more details? And can you give us the EV and the multiple for the transaction? And the second question, I will come back on the GSI project. So you confirm the continue of the operations. Could you give us the contribution expected from GSI this year in 2025? And when do you expect next year? And I understood that probably there will ramp-up, and we expect a higher contribution in '26 compared to 2025. Could you give us some more color about that? Julien Hueber: Okay. So first question regarding the new acquisition, Electro Cables. So this is -- this business is relative to Nexans. It's on Canada for us as well. So both our business in Canada and as well as this Electro Cables is in the upper range of the -- above 20% of EBITDA. So it's extremely relative to Nexans. This business is extremely well positioned in market segments which are for us priorities and fully in line with our Capital Market Day. So the -- for example, the data center elements, the infrastructures, gigafactories and so on. So it's completely aligned with what we want to do. We also see some very interesting synergies from a supply chain standpoint between Nexans Canada and Electro Cables. So basically, that's why we decided to move on and to finalize this deal. So that's element -- first positive element. Regarding GSI, your second question. Well, you know that we have received EUR 250 million of payments the past months in different parts. So this year, we will do approximately EUR 150 million as part of the -- that was what we have communicated. So we will stay on this type of ratio. And maybe, Vincent, you want to comment for... Vincent Dessale: Yes. I think Jean-Francois, I think we will not comment in details, of course, the coming revenue for GSI. But as a matter of fact, this is -- you know the amount of this project is EUR 1.4 billion, basically. We have started in '23, so a smooth ramp-up. And after you can consider that you have a kind of linear activity in the first year and with a kind of acceleration in the last 2 years of the project, '28 and '29 due to the installation, which is usually compact in terms of activity versus the production, which is split basically during 5 years. So that's basically the profile of what you can expect in terms of activity. Jean-Francois Granjon: Okay. And just the additional question regarding that, you expect you confirm an improvement for the EBIT margin for the Transmission division next year compared to 2025? Julien Hueber: I think, yes, we will come back on you on this when we'll publish our results in February with a new guidance. But what I can tell you is that we are extremely satisfied with the execution of this -- of the different project ongoing and very proud of what the team is doing at this moment in this Transmission stream. Operator: And we'll now move on to our next question from Scott Humphreys of Berenberg. Scott Humphreys: I just have 2. The first is a very quick follow-up on the tariff topic. So one of your peers has been speaking recently about kind of increasing their purchases of scrap in the U.S. or in North America. From a kind of European perspective, has the reduction in the amount of scrap that China is importing from kind of North America. Is that having any impact on the cost of your scrap in Europe? Or was the Chinese buyer not as significant in Europe in the first place? So that's the first question. But I can -- carry on, please. Julien Hueber: No. So very clear here. So no impact at all in our scrap recycling activities in Europe, no incidents, nothing. Scott Humphreys: Okay. And the second one, just kind of a broader one on medium voltage. If you could maybe kind of remind us where you are in terms of the process of adding capacity in the medium voltage business in terms of, I guess, Morocco and then you mentioned briefly the low carbon production in France as well. So kind of how are you seeing that the level of capacity in medium voltage given how strong the Grid segment continues to be? And how does that kind of tie in with this additional layer of kind of a focus on production efficiency that you've talked about in addition to the CMD strategy? Julien Hueber: So thank you. This is a very interesting and important question. So you can imagine when we grow your business by 9% year-on-year, of course, it has an impact on manufacturing. So here, first of all, I want to remind you that what the job we have done in the past year was to increase the capacity because we anticipate this large increase in the Grid to come. I just want to remind you the acquisition we did in Reka, Finland 2 years ago with 2 civil lines, the announcement of the additional CapEx in Bourg-en-Bresse, an additional civil lines as well as the [ Safi ], which is Morocco new plant that is going to come. So in terms of capacity increase, I mean, we are completely in line with our plans to sustain this growth. Now regarding the existing footprint as well, we are -- and that's -- and you've seen in terms of communication that we have done in the past last week, basically, that in order to basically deliver our commitments and objective for 2028, industrial excellence will be key. And that's why we are really accelerating today, the efficiency, the productivity and as well as the competitiveness of our plant in Grid. So we have a full program on that, and that's extremely important to continue on this. And maybe one word because Grid is, of course, cable, but as well Accessories, and I will let Elyette to comment on the Accessories as well. Elyette Roux: Thank you, Julien. So what we can say is that we are accelerating even further away in Accessories. And indeed, as presented in our CMD, we mentioned that we had anticipated the investment in the plants with automation and robotization. So we are basically delivering at the scale that we announced in the CMD. Operator: And we'll now move on to our next question from Nabil Najeeb of Deutsche Bank. Nabil Najeeb: The first one is on GSI. I think you guys said -- you just said you had received EUR 250 million of cash for GSI so far, and that's the same amount as what you indicated at the H1 stage, which you said should keep you going until early September on GSI execution. So I'm just wondering if you have received any more cash recently? Or are you executing on GSI while waiting for a payment? And then the second question, given, Julien, you've been in charge of the Grid and Connect business for Europe, I was hoping to get your thoughts on how you see the margin potential for these 2 divisions. I think previously, your predecessor alluded to a longer-term range of around 15% to 16.5% for Grid. Is that a view you share? And what about for Connect? Julien Hueber: Okay. So I will start, of course, by the GSI. So indeed, you know the amount of cash we received, EUR 250 million. We have been completely transparent on this. Once again, what I can tell you is that we are working very closely with IPTO in a very, let's say, collaborative way. And we are in discussion at this moment in terms of the next steps of this project on the milestone and payment is part of it. So I cannot disclose anything, but that's, of course, as you can imagine, a part of our discussion. There's also ongoing discussion on political as well regarding the GSI. But on the cash payments, we are close discussion with IPTO on the -- and that's where we stand today. Now regarding your second question, indeed, the European business, there are 2 streams, Grid and Connect. So Grid, you are right with more than 15% EBITDA in terms of profitability. Here, you need to understand that in Grid, there is basically 3 parts, 3 elements. First one being the long-term agreement with utilities. And here, we are extremely satisfied with relationship with platinum customers that we're having. We have signed long-term agreement with them. In the past, it used to be 2 years contract agreement. Today, we are talking about 4, 5, 6 years contract. So we give us a very good visibility about the long term. The second part is project base of Grid, which are renewable solar or wind. Here, it's more, let's say, a project for a few months. And this business is extremely dynamic as well in Europe. I mean, Italy is one of them, Greece, or the other parts of the countries. Here, the profitability of this project are also at the right level of what we are looking for and what is in line with our Capital Market Day. And then you have the third activity, which is Accessories managed by Elyette, which is -- and we have communicated that a few times that is extremely lucrative as a business growing very fast because you know that the accessories part is, let's say, the critical element of the Grid. And our customers, platinum customers are replacing that regularly due to the climate change. And that's also giving us the reason why this business of accessories is growing even faster than the cable. So that's basically for the Grid part. Now talking about Connect. So Connect contrasted, as I said, businesses. The -- let's say, the profitability in Europe is around 13% EBITDA. And we will be growing this step by step with -- because we have growth patterns in our strategy where we will be growing in the sectors in the verticals for us, which matter the most, data center, critical building, injecting new technology of products, injecting new innovation of products. On that point, I think just for you to understand, we are -- in the past 2 months, we have launched Klaro, new innovation in Italy market with LTC. We are launching in September, ULTIMO innovations in Benelux, MOBIWAY in Norway. All these innovations are comforting the profitability of this business and are providing us also some resiliency because we try to avoid being too much exposed to residential and much more, let's say, focused to the market segments, which are going better. Vincent Dessale: And maybe to add on Julien's comment, just to remind that we have improved significantly over the last year, the performance of the Connect business, thanks exactly to what Julien comment, the SHIFT program deployment plus innovation, which are really the 2 pillars. And if you remember in the last call, we have not given any guidance on the percentage of EBITDA for Connect for very simple reason is that we have an ambition in terms of acquisition and the acquisitions that we do usually are slightly below the average of Nexans. And we have after the deployment of our integration program in order to bring them at least to the average and sometimes above the average. And indeed, we have -- we know that in the coming years, we'll continue to do this acquisition. So this is basically why we -- how we drive the evolution of the performance of Connect. But as mentioned by Julien, we are confident. Julien Hueber: And one more comment, I think what is very important to understand, in the Connect, you can grow very fast and you can take any type of business. But remember, the strategy of Nexans is to be selective. And for instance, in the Nordic in Q3, I asked the team to be extremely selective in the type of project because we don't want to consume cash for projects which are not accretive to our EBITDA. So we took always the decision to select the type of project and choose the one that really bring both cash and profitability to Nexans. Operator: And we'll now take our next question from Akash Gupta of JPMorgan. Akash Gupta: My first one is on outlook. So when you raised full year guidance in July, you were guiding double-digit growth in Grid and Connect in Q3, but we saw Grid growth in Q3 was slightly below double digit and Connect was not below double-digit level. And then we also saw some losing momentum in Metallurgy business, which was pretty strong in first half. So my question is that today, you are reiterating the guidance. But when we look at this guidance corridor and giving consensus is towards the bottom end of the range, where do you expect to end up in the year? Like how much confidence do you have in the midpoint? And how much confidence do you have on the upper end of the range? So that's the first one. Julien Hueber: Okay. Thank you, Akash, for your question. So basically, the Metallurgy tariff impact was none at the moment where we upgraded the guidance. So I think this one is -- there's no, let's say, negative impact whatsoever in terms of the guidance for the year-end 2025. Regarding the Grid and Connect, so our strategy is not always to go for volume. It's also to go for profitable growth. And typically, as I mentioned, for Connect parts, even though, as you say, the volume has been slightly below the expectation of the market. I can tell you that the quality of the growth of the 3.6% based on innovation we are doing, secure our guidance for the year-end. So I can tell you, that's why we will be securing our guidance by year-end. And I will not now comment where we'll be landing because we are still working on it. Of course, you can imagine. But the quality of the growth we have both in Grid and Connect secure our guidance. Akash Gupta: And my follow-up question is on Transmission growth. So when we look at the comps in absolute term, I think you will have a toughest comp in Q4. So maybe if you can comment about what sort of growth rates do we expect in Q4? And then when we move from '26 to '25, again, is there any unutilized capacity where utilization can be driver for growth? Or will the growth in 2026 will be mostly coming from project mix? Julien Hueber: Okay. So in Transmission growth, you have seen that -- so basically, we will be -- so you may have some spike from one quarter to another. You see a very strong Q3 numbers, 33%. I would say that our growth for the year-end will be first very well oriented and in line with the average of what we have announced in H1, this type of growth level. Now regarding the vision for 2026, maybe Vincent, you want to comment on this one? Vincent Dessale: Yes. Akash, Vincent speaking. I think you know the story very well. I mean the significant increase of this year is the result of our decision some years ago to make several investments in terms of manufacturing, testing and installation. So it's a kind of expected, I wouldn't say mechanic, but at least expected growth. Now we have a backlog, as mentioned by Julien before, for the next 4 years. So we will be in line in terms of volume with this year because now all the capacity that we have added over the last 3 years are now running and they are fully loaded for the next 4 years. So that's basically the profile of activity for the next 4 years. And as mentioned by Julien, depending on the different, I would say, planning of the execution, you can have from one quarter to another one, some differences in terms of volumes because you will have more installation, less installation. You know that we do more installation during summertime than during winter time, the usual approach of this business. Operator: And we'll now take our next question from Uma Samlin of Bank of America. Uma Samlin: So my first question is on -- a follow-up on GSI. I was wondering if you could help us -- how should we think about the progress of GSI so far in relation to your full year guidance? I think in the previous calls, you had mentioned that even if the project does not go ahead, the EUR 250 million that you have received so far would still contribute enough for the guidance to be hit in the mid-range of the guidance. Just wondering if you can confirm if that still is the case. My second question is on the PWR-Grid market. I guess we've seen a fair share of capacity expansion there. How should we think about pricing versus capacity expansion in PWR-Grid going forward? Julien Hueber: Okay. So GSI, I think I will repeat what I just explained. So basically, yes, indeed, when we -- when the guidance has been raised last July and confirmed today, we completely integrate the GSI elements of the milestone we have with customers. So having no change for that, I can [ contain ] this point. Now regarding the PWR-Grid, your second question. So it is also a very interesting question. So the growth is there. We demonstrated 9%. The capacity in Nexans -- manufacturing capacity in Nexans is also ready to sustain the growth. And we do not see any change, any pressure on price. Why? Because, first of all, we are -- we have launching low carbon innovations, which are extremely let's say, in line with the expectation of our customers, platinum customers that -- because you may know that the type of medium voltage low carbon offer that we are providing and selling to the market today, they are reducing by 50% the CO2 emission. So you can imagine the importance it has for our customer utilities. That's why we are able to differentiate from our competitors that are not offering the same thing. And as well as the strong, let's say, no pressure on price in Grid is also linked to the growth we are making in Accessories. Here again, I think you have seen last communication where we are launching innovations on new type of accessories, new joints that are also accelerating the installation phase from our electricians on the field. Operator: And we'll now take our next question from Miguel Borrega of BNP Paribas Exane. Miguel Nabeiro Ensinas Serra Borrega: Sorry to come back to GSI, which you say is on track, and there is no plan B. But it seems you're now more at risk than where you were in the first half. If the project is really canceled, what are the remedies? How can you replace the production reserves for next year? And do you think there are other projects out there with such a margin? I'm just trying to understand if the previous 17% margin for Transmission as a whole is still possible without GSI. Julien Hueber: Okay. So first of all, the project is not canceled. We are still working on it. They are extremely close discussion on relationship with our customers. There are ongoing discussion on the political side and supported by the European Commission. So I mean this is -- we do not see that as a risk. And we'll come back on that, of course, when we'll have some more, let's say, information to share. But this project is not canceled so far. Regarding now the -- we have enough pipeline of projects ongoing. Some of them already secured. Some of them are also under quotation. So here, we have so far -- we have no -- let's say, we don't forecast any problem for next year on this part. So basically, on -- maybe Vincent, if you want to add. Vincent Dessale: Yes, maybe to give you some color, I mean, just keep in mind that this project is what we call a mass impregnated project with deepwater installation. And let's be clear, on the previous projects with this type of technological content, we have been only 2 players to be qualified. So you don't have so many players able to deliver so far this technology. And basically, when you look to all the coming projects in Med Sea, for example, they will all request this type of activity. And today, both players are fully loaded for the next 4 years. So you can imagine that the other projects coming in the pipe are just waiting the available capacity. So as mentioned by Julien, there is no plan B. Today, we are working with our customers in very good collaboration. And we are already working with some potential projects after GSI, which will be '28, '29, basically. Miguel Nabeiro Ensinas Serra Borrega: Okay. And then just a high-level question as you were previously Head of PWR-Connect and Grid, what can you tell us about recent performance in terms of growth and profitability? And maybe some insights on what will be the #1 priority from here on? Is it accelerating top line growth? Is it continuing to expand margins or accelerate M&A? And then if I just can squeeze one more on Industry & Solutions. I think there's only Auto-harnesses left to be disposed. Is that still the plan? And do you see other areas potentially up for sale? Julien Hueber: Okay. So I will start by your last comment with autoelectric. So the answer is yes, it is -- there are still ongoing discussions with potential buyers. And this discussion are progressing. So that we will be able to come back to you as soon as something is a bit more concrete on that. But that's something that is part of our strategy to dispose and to become 100% electrical pure play electrification. Now regarding the -- you like, let's say, what would be the priorities. But basically, capital allocation is clear because we want to accelerate the M&A. That's really my objectives. I think the announcement of today for Canada can demonstrate it. And we have -- the team, M&A teams of Nexans is also very active with different pipeline. So we will review that very quickly to move on these elements. Growth, yes, but profitable growth, selective growth like we have demonstrated since several years. I think we will continue to do this. And also, we will be extremely -- and we explained that in the Capital Market Day in terms of innovations. We have a pipeline of innovations. There was recently a big event with one of our customers, platinum customers in France. We have seen a lot of electricians understand talking about innovation. There's a big appetite for innovations. And last but not least is the SHIFT and SHIFT AI that maybe we can also explain to you. That's one of our priority. We really want to grow in this segment. And I will give the floor here of Guillaume in charge of strategy and AI for Nexans that maybe can give some color on that. Guillaume Eymery: Thank you, Julien. Indeed, SHIFT AI is a hot topic for us. Basically, it's the platform from which we develop the Nexans AI solutions. And the choice we made is to amplify and accelerate the SHIFT program that has been very successful for Nexans. We focus on 4 axis: costing, complexity reduction, dynamic pricing, client advanced segmentation. And basically, the idea of SHIFT AI is that when a normal manager uses 5% of the data available, we moved to 20% with SHIFT. And with SHIFT AI, we will move to 90%. So at the moment, we are really in the topic of building up this platform, and we will tell you more in '26. Julien Hueber: And maybe just to finish on your question, maybe one of my other priorities, which is for me extremely important, is to work on the industrial excellence, generate mutualization of industrial footprints, both in Grid and Connect because we have here a room of improvement, productivity and competitiveness. So that will be also a key element of my priorities in the coming weeks with the team. Operator: And we'll now take our next question from Eric Lemarie of CIC. Eric Lemarié: I've got 2, the first one on GSI. I appreciate your various comments on this project, but could you confirm maybe that you're on time with the initial schedule on GSI and that the project has not been somewhat delayed as it is sometimes mentioned by the press? And could you maybe say when you expect to receive the final notice to proceed for GSI? And I got a second question on the backlog. The backlog on Transmission is flattish, is up year-on-year. I can see that, but it's flattish sequentially this year, around EUR 8 billion. Could you perhaps remind us your strategy here? Is it to properly execute and renew the backlog in good condition? Or is it more to expand the backlog to make it grow further? Julien Hueber: Thank you for your question. Maybe, Vincent, you want to comment? Vincent Dessale: Yes. I can take the backlog, if you wish, Julien. I think what we must have in mind, you have to take a kind of step back, I think. Why the backlog has increased significantly is that, if you remember, in '23, there has been this big move on the market with the Tenet frame agreement, which was basically the largest award of the history of the subsea business, which has basically catch a big part of the capacity on the market. And as a consequence of this major move from Tenet, you have seen plenty of other players placing their tender in order also to avoid a lack of capacity on the market. So '23 was indeed a peak of order intake. So I think now we are more in a normal process because basically, all the key players, we have 4 to 6 years of backlog. So it's quite logical, I will say, that you have a lower activity of tender right now, even if, as we say, it's still very active and very robust. You have the different players have announced award around this year. But if you follow my logic, you should expect potentially a new peak of order when there will be much more free capacity, which means basically probably more in '27 or '28. And that's why we have said previously that we think that the book-to-bill will be around 1 this year and probably next year due to this -- not due to us, but due to the cycle of the business. So we are focusing to answer to your question to 2 points. First, to execute properly the backlog because we have a good backlog to execute. And indeed, we are looking to the pipeline in order to on time, prepare the next generation of order, which will start basically from '29 onwards. And this means probably, as usual in this business, tendering 2 years in advance before the available capacity. Julien Hueber: And just -- thank you, Vincent. Just to answer your first question regarding GSI, yes, I do confirm we are in time with initial schedule, and we are in close discussion with our customers about the next steps. And so that's where we are standing today. Operator: And we'll now take our next question from Xin Wang of Barclays. Xin Wang: A quick follow-up on GSI, given we can't see your financial statements. Can you confirm for the volumes produced since September, are these sitting as contract assets or trade receivables on your balance sheet, please? Vincent Dessale: Just maybe a clarification because you speak a lot about the production. And I think just as a reminder, a project is not only production. I will not give you in details the detail of the scheduling of the project. But when we -- all what we have done since the beginning of this project is, of course, engineering, testing, production and so on. So when we say that we are on track, as mentioned by Julien, it means that we are on track not only with manufacturing, but also with jointing activities, with testing activities, with engineering activities, and this is basically what we are doing. So we have produced, I think, probably around 240 kilometers more or less. And indeed, we are continuing with both production and jointing and testing. That's the normal life of a project from a pure -- to give some color on the -- what does it mean from an operational perspective. It's not only production. If not, the project will not progress as planned. Xin Wang: Okay. I think my question was more on for the work you did since September, are you able to invoice them? Julien Hueber: So yes, we have been -- of course, we have been invoicing the customer as per normal, as per the ongoing project as per the milestone. So -- but that's nothing exceptional to report as usual, yes. Unknown Executive: [indiscernible] is limited so far. Xin Wang: Sorry, I didn't quite get the last bit. Julien Hueber: So it's Christine, our interim CFO, which was saying that our exposure is completely aligned with -- there's nothing special to report yet. Xin Wang: Okay. Great. And then my second one is, do you think there is a temporary regional oversupply in Canada since the introduction of U.S. tariffs? Because in H1, it was very obvious that you were exporting a lot more copper to the U.S., which was reflected in very high other activity numbers as you also commented in Q3, this was negative 6.3% year-on-year. Julien Hueber: So I don't think so for Canada. We have a very strong growth in Canada, close to 20% growth year-on-year, extremely dynamic. You know that we have 2 type of business, Grid and Connect. The Grid, it's fueled by long-term projects, long-term agreement with customers, utilities. So here, we are very well secured on the visibility. And in terms of Connect, we are -- what the team is doing is to really focus the activity on the specific verticals, data center, critical buildings. And here, again, there is no -- we don't see any specific additional competition from outside the Canada or from any other country. So basically, we are very well secured in this market, very dynamic with very long capability to grow in terms of construction infrastructure. Xin Wang: Okay. Good to know. And then final one, is the 9% Grid growth margin diluting? Because I think previously, management commented on sensitivity table between organic growth and margin. Is there a shift on how you think about the market? Julien Hueber: I can tell you that it's not diluted. This Grid business is extremely profitable. And so no dilution at all. It's -- we are completely aligned. Once again, we are aligned with the target we have communicated in Capital Market Day, both in terms of profitability and in terms of growth. Operator: Thank you. There are no further questions in queue. I will now hand it back to Julien for final remarks. Julien Hueber: So thank you, operator. So let me just finish by saying that I believe the solid performance delivered in our trading update today confirm the robustness of Nexans model and discipline with which we execute it. Now we enter into a final quarter with confidence, and we reiterate you have seen and you understood today our 2025 guidance. I'm very pleased to go now on the roadshows and to meet investors in the coming weeks. Thank you again for joining today. Operator: Thank you. This concludes today's call. Thank you for your participation. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the SEB Financial Results Q3 2025 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Johan Torgeby. CEO. Please go ahead. Johan Torgeby: Good morning, and I'd like to extend a warm welcome to all of you today for SEB's Q3 financial results. Going to our first page with highlights. We today post a solid financial result in a quarter which is seasonally slower but we've also experienced less volatile and stable financial markets. Noteworthy is that investment banking activity has held up and showed resilience and we saw an increase in capital markets activity to the later half of the quarter. Customer satisfaction and employee engagement continue to show relative strength and it has been decided to continue the SEK 2.5 billion share buyback program per quarter by the Board as we announced today. Flipping to the next page, we have some recent events. And the first one is the infrastructure of payments which is now being disrupted to some degree by new technology coming from blockchain. We have, together with 8 other European banks launched a consortium with an initiative to see if we can launch a euro-denominated stablecoin on the chain and targeting the first half of 2027. Also, AirPlus has now been used as the new brand for our previous Eurocard. And this is an example of the marketing campaign, particularly towards the Scandinavian countries where Eurocard has been a long prevailing brand within the Corporate Card segment. It has now been rebranded under the headline green is the new gold. And if you haven't already, you will soon get an AirPlus instead of your Eurocard in the color scheme represented here on the slide. Turning to Page 4. We have, over the last couple of quarters, updated you on our progress within AI. We have shown you the internal projects that we're running, about 130, which is funneling in, in different categories of areas we think we can improve. But also gone through the recent investment that we've done together with a consortium to get compute capabilities available to us. Today, I'd like to introduce the third corner of this triangle, which is actually SEB not only working with offering better products, integrating it in the products, not only running the bank using AI, but actually enabling banking in the AI community, which is the core business we do. We speak a lot about different business units in the bank, but this is probably one of the lesser known ones. In 2022, we created a business unit called SEB Growth, where we now have an offering tailored for fast-growing companies with high innovative content and companies that plan to raise capital and/or lift or sell themselves in the future. This is an attempt to combine corporate banking with investment banking, with private banking, force entrepreneurs and these fairly young companies as they begin their journey. We've also included a few of the logos which we have recently supported such as Lovable, Sana, Modal and Legora. All these are well-known fast-growing companies in the AI space in Scandinavia. The next page, we can then look at the development of our credit and lending portfolio. As all of you are aware, we've had a little bit of a sideline movement in recent years. However, both last quarter and this quarter, we have some growth, albeit modest. Lending year-on-year for the corporate book is up 4% FX adjusted and the total lending portfolio is up 3% FX adjusted with households and Swedish mortgages just shy with half of that growth in the third quarter year. Looking on the next page on the jaws slide. We can see that the costs -- the trajectory of costs is tailing off. And we are roughly back to trend that we had prior to the elevated profits generated by the interest increase with a CAGR here represented from the time 2016 to 2021. And with that, I'd like to end this part and hand over to the CFO, Christoffer Malmer. Christoffer Malmer: Thank you, Johan. I would now like to turn to financials on the next slide. Operating income for the third quarter declined from the previous quarter, reflecting typical seasonal patterns, notably within net fee and commission income, where the second quarter performance was particularly strong. Net financial income was impacted by market valuations of our strategic holdings during the quarter, which had a positive contribution in the second quarter. This valuation effect accounts to around SEK 500 million of the delta in net financial income between the quarters. Net interest income increased slightly despite continuously downward trending interest rates explained in part by the higher day count in the quarter, some positive effects from FX, slightly lower deposit insurance guarantee fee and a lower short-term funding cost. Operating expenses declined slightly from the previous quarter, also following the usual seasonality. As the Swedish krona has continued to strengthen in the quarter, we are providing an updated FX adjusted cost target for the full year of SEK 32.6 billion compared to the original cost target of SEK 33 billion. We maintain our range of plus/minus SEK 300 million around the cost target level which is primarily related to the ongoing integration of AirPlus. Here, we see some potential scope for possibly accelerating that implementation program a little bit further. As mentioned at the start of this year and reiterated also here in the second quarter, we're now in a phase of consolidating recent years of investment, which is resulting in a lower cost growth. We also maintain our external hiring pause for nonbusiness-critical positions to facilitate this consolidation and to make room for continued investments in selected areas, notably within technology and AI. The full year cost target does imply that there are some effects to expect in the final quarter of the year. Net expected credit losses of around SEK 200 million or 3 basis points reflecting underlying stable asset quality as also reflected in the continuous decline of Stage 3 assets. We added around SEK 100 million to the portfolio overlays in the quarter, and we also had some sizable reversals. Imposed levies came down in the quarter as expected, reflecting the development of our Baltics levies and our full year guidance for imposed levies now also including Riksbank's introduction of the interest-free deposit now amounts to SEK 3.6 billion. So that's up from the SEK 3.5 billion communicated in the second quarter. Tax rate of 21%, in line with guidance. Net profit for the quarter of SEK 7.7 billion and a return on equity at 14%, and we ended the quarter with a CET1 ratio of 18.2%. On the next slide, we turn to the development of the net interest income. On a divisional basis, the NII in Corporate and Investment Banking declined by around SEK 200 million, primarily reflecting a lower net interest income within Investor Services, which was elevated during the second quarter, and that was a dividend season as we mentioned at the time. NII also within our markets business was a little bit lower as customer activity came down for the season. From a volume perspective, lending within CIB declined in the quarter as some of the event-driven financing volumes generated earlier in the year rolled off. And that, together with FX effects, explained the majority of the move in the loan book compared to the second quarter. Now year-on-year, lending to corporates within CIB increased by 3% on an FX-adjusted basis. Within Business & Retail Banking, NII declined by around SEK 100 million compared to the previous quarter, and that's primarily reflecting the impact from lower interest rates on deposit margins. Lending volumes were largely unchanged in the quarter and following 2 strong quarters of market share gains in the Swedish mortgage market, Q3 volumes grew a little bit less than the market. Now year-to-date, our net sales of mortgages represent a market share of around 13% which is in line with our share of the stock. Competition in the market remains firm and mortgage margins moved largely sideways in the quarter, remaining at historically low levels. Within our Baltic banks, net interest income was largely unchanged as the impact from lower interest rates was partly offset by higher lending and deposit volumes across both private and corporate customers. Loan growth in the Baltics remained robust with mortgage growth of around 9% and corporate loan growth at around 8% compared to last year. Within treasury, NII was positively impacted by the yield curve as well as favorable funding conditions within short-term funding. Looking forward, we continue to expect our net interest income to bottom out some 3 to 6 months after the latest or the last rate cut. Bear in mind that, that is based on how our balance sheet looks today. So volume growth and any proactive repricing could impact those dynamics. If we turn to the next slide, and we look at the fee and commission income in the quarter. Total fees and commissions declined by around SEK 400 million compared to the previous quarter. And if we look on a divisional basis, we effectively see 3 developments behind this. Firstly, within Corporate and Investment Banking, fees are seasonally softer in Q3 across most capital markets-related businesses, including issuance of securities and advisory, which was also particularly strong in the second quarter. This is also true for lending fees and combined, these effects accounted for around SEK 400 million in CIB. Nonetheless, CIB generated the highest net commission income on record for a third quarter. The second factor related to card and payment fees within Business & Retail Banking and again, seasonal patterns impacting activity levels primarily within corporate cards and AirPlus and this affects around SEK 100 million compared to the previous quarter. And thirdly, going in the other direction, we saw about SEK 100 million increase in fees and commissions in wealth and asset management as a result of higher assets under management and continued business momentum. Net new money across the group amounted to SEK 8 billion in the quarter. And on fees and commissions, when we close the second quarter, we refer to a more constructive fee environment. And while Q3 will see or should see some usual seasonal patterns, which we've seen, we said that if the market backdrop doesn't change dramatically, Q4 should see a continuation of this more constructive trend. And this comment, we think remains valid, which is encouraging going into the last quarter of the year. If we turn to the next slide, we set out the development of net financial income this quarter, NFI from the divisions was largely unchanged from the previous quarter at SEK 1.9 billion. The decline in the headline, NFI versus the previous quarter is, as I mentioned, largely explained by valuation effects related to our strategic holdings and that's primarily in Euroclear, which also paid a dividend during the second quarter. affecting that comparability. These effects were partly offset by XVA going the other way, and we continue to look at the long-term average of around SEK 2.5 billion per quarter. Turning to the next slide. We'll look at the development of the CET1 ratio in the quarter. We closed the second quarter with a management buffer at 290 basis points. And during the quarter from left to right, as usual, we received an updated SREP, update from our supervisor. And as you will have seen in our separate disclosure on that topic. This resulted in a lower Pillar 2 requirement related to lower capital impact from IRRBB, interest rate risk in the banking book. Then we had 41 basis points, reflecting the net profit in the quarter after deducting our dividend accrual while lower risk REA contributes about 14 basis points reflecting positive risk migration in the book during the quarter. Under REA other, you will find a combination of other developments on the balance sheet. So the FX effect, the overall REA size market risk REA and also a positive impact from us applying the SME factor to some of our CRE exposures. These factors in total added 22 basis points and largely evenly distributed between them. Finally, the decline of 18 basis points reflects the phasing in of the REA increase in the Baltic banks that we announced in the second quarter, and that is related to the ongoing work with our Baltic IRB models. This takes the CET1 buffer to 360 basis points at the end of September. And we also highlight that the remaining impact from the Baltic REA increase is around 70 basis points, so in line with the communication at the time of the second quarter. And we expect to phase this in over the coming 3 quarters. So that means that our buffers in effect on a pro forma basis stands at 290 basis points with the Baltic REA fully phased in. Other effects to bear in mind as we go into the end of the year is the impact from operational risk REA in the fourth quarter when we do review that level. On the next slide, we summarize our capital and liquidity position at the end of the third quarter. Our capital as well as our liquidity measures have all strengthened during the quarter, reflected in rising LCR from 130% to 136% and a higher NSFR from 112% to 116% and the CET ratio, as we just discussed on the previous slide. Finally, I would like to conclude with our financial targets, which remain unchanged, including a 50% payout ratio, a management capital buffer target of 100 to 300 basis points above the regulatory minimum and a return on equity competitive with peers with a long-term aspiration of 15%. Return on equity year-to-date stands at 14.1%. So with that, I hand the word back to you, Johan. Johan Torgeby: Thank you, Christoffer. That ends our prepared remarks, and I'll hand over to you, operator, for the Q&A. Thank you. Operator: [Operator Instructions] We will now take the first question from the line of Namita Samtani from Barclays. Namita Samtani: My first question, what should we think of funding costs related to net interest income going forward because surely, if rate is still coming down or they have come down, which is yet to be factored into our net interest income, this will continue to be a tailwind. And secondly, I just wondered, do you lend to private credit and what percentage of that is part of your book? Christoffer Malmer: Thanks for your question, Christoffer here. I'll take your first question on the net interest income. And you're right to say that we've had a positive effect from funding costs in the quarter, and you saw that also in the breakdown of the NII in treasury. And we estimate that effect to be positive for the quarter of around SEK 100 million or so. Now going forward, we'll continue to reiterate the message on 3- to 6-month lag from the last rate cut for the dynamics to work their way through the balance sheet before the net interest income would trough. So we should expect the net interest income to come down again in the fourth quarter. And then in the first quarter, and then we'll see again what happens to rates, of course, as we go into 2026. Those are broadly the effects that I would bear in mind. Johan, you want to comment on the private credit? Johan Torgeby: Yes, sure. Thank you, Namita. We have no meaningful noticeable exposure direct to any private credit. We do have a very, very small group of private equity firms that also have a private debt arm, but no direct exposure. So it is so small that it's not really noticeable. Operator: We will now take the next question from the line of Magnus Andersson from ABGSC. Magnus Andersson: Two questions, please. First of all, on corporate lending. Last quarter, you said you had an elevated level of activity-based lending. And it comes down a bit now quarter-on-quarter FX adjusted. Could you please tell us how you see the outlook for activity-based lending as transaction activity is undoubtedly picking up now? And also what you think about the more lending for general purposes when you think that will pick up? That's the first question. Secondly, on capital and risk-weighted assets. The level was significantly lower than at least I thought in this quarter, and I see that your -- I mean, risk weight comes down in corporate IRB, for example. Is this -- with the exception of the op risk coming in into Q4, is there anything else here that could be volatile? Or is this a reasonable run rate to use? Because I think you even included SEK 10 billion of the Article 3 announcement as well here. And related to capital, do you know already now if you will continue with the share buyback approval for the full year in the Q4 '25 report? Or if you would consider doing it as you did previously with half in -- half year approvals? Johan Torgeby: Thanks, Magnus. I'll start with the corporate lending. So first, I just note that you did accurately depict what we said and what happened last quarter. Those temporary elevated levels for transaction-based exposures, they have not fallen off. So this quarter with its 4% year-on-year does not have those, let's call it, temporary bridges on as there was very little transactions done into the summer. So this is a much more steady as we go. When it looks going forward, so the pipeline looks unusually strong. That doesn't mean that they naturally materialize for events and the event-driven lending that might come with it. But we did see a pickup in investment banking and also capital markets transactions towards the later half of the third quarter, which is an encouraging sign. And we, of course, always keep a close look as a leading indicator of what the Americans do. And you could see some similar signs or even more pronounced there. But I also want to say that the lending fees this quarter, even though it's a very, very quiet one is still 24% up year-to-date, the lending fees, which is, of course, what you typically -- the majority of what you earn on leases is not NII when it comes to transaction is up 9%, the first 3 quarters this year compared to last. So there is some underlying event-driven momentum, but it's -- I still want to be cautious because a lot of things need to happen, and we don't want any of the risks that have been identified to materialize in Q3 that would create volatility. So if I'm a little bit constructive and hopeful, I think general corporate purposes, that's a longer transition. So we are not seeing this broad-based, let's invest in increased capacity, then you need to borrow to invest further because the first investments, they're always done with the operational capital or cash at hand to meet the demand. So in my mind, I often come back in this discussion around the lack of demand in the economy. Retail sales and consumption in GDP. And that's kind of the last leg that we are looking for really to change the picture. And of course, looking at the economists they are looking pretty constructive for '26 and '27 on this topic, but let's wait and see. Malmer? Christoffer Malmer: Thank you. So Magnus, on the REA. If we look into the fourth quarter, you're right that we expect the op risk effect. We estimate that to around 15 basis point negative impact. The other moving parts that are subject to movements during any quarter is the FX effect, of course, you see that is positive in the quarter. That remains, of course, unknown. It's a REA size, which in this quarter is again positive contribution. And coming to your previous question, of course, I hope that we will see that be moving in the other direction. And the third one is REA asset quality, which, again, in this quarter due to upgrades of risk classes of a number of counterparts also contributed positively. So these are the moving parts and then you go to op risk REA. So when it comes to the buffer, the 360 basis points, and we look at the pro forma effectively the 290, assuming the remaining phasing of the Baltic REA, last year, at this point, we were around 470 basis points. So of course, the situation was very different. But still, there are, to your question, a number of moving parts in the REA that will play out in the fourth quarter. I will come back at that time with comments on future buybacks. Operator: We will now take the next question from the line of Markus Sandgren from Kepler Cheuvreux. Markus Sandgren: I was thinking about -- there is some growth in the Baltic lending business. So I was thinking your ambitions going forward? Do you expect to grow in line with the market given your size? Or is there any reason to believe that you can capture more market shares there? Johan Torgeby: Okay. yes, we are growing clearly higher, and it's not only this quarter, it's been going on for a while. So we are actually accelerating a bit. So we're now looking to 8%, 9% growth in this quarter year-on-year compared to -- if I remember correctly, it was about 6% last quarter. We are maintaining our market share as -- the long-term picture is that it's quite concentrated as you probably know to 2 large institutions, Swedish banks in the Baltics. And there has been, of course, increased demand for higher competition from everyone in the marketplace. But right now, we have an ambition to maintain this position. I wouldn't commit as it is a very high market share we start with. So this is a little bit defend and protect, but we are not going to give it up easily. So be careful in increasing market share, but definitely it's a fast-growing market. I'd also like to point out that it is a higher inflationary market. So in real terms, it is not as impressive as these headline numbers are, and you need to also take that into account because the loan book unless you relever the economy will grow with nominal inflation plus whatever you do. Operator: We will now take the next question from the line of Martin Ekstedt from Handelsbanken. Martin Ekstedt: I wanted to focus a bit on your retail business. Looking at statistics, Sweden data on mortgage lending during first half of '25, you saw quite strong market share of net new lending. I think you took like 16% on new lending against the back book market share of 13%. But as we enter the second half of the year, this trend kind of evaporated, and you took just 1% in July and 3% in August despite similar volumes in the market overall. Is there a story behind this that you could share with us perhaps? And then secondly, on that same topic, with Sven Eggefalk now joining you as a new head of the business line, should we keep hopes up for higher volumes share -- volumes of market shares to return? Christoffer Malmer: Christoffer here, I can comment on this. I think, as I mentioned in the remarks, if we look at our market share year-to-date in net sales and mortgages, that stands around 13%, and that is in line with our historical stock level. So there is, as you point to some movement between the quarters. I think when I look at the focus that we have for winning the mortgage market share business, we think all 3 components, it's the speed, it's the availability and it's the pricing. And it's about us continuously evaluating and making sure that we are competitive along all those 3. And as you will see that we haven't moved pricing much in the last quarter, but we're continuously working around speed and availability. But I would also mention that there is a volume effect into this as well, volumes are still relatively small, which can impact movements in between individual quarters. But year-to-date, broadly in line with the stock market share. Martin Ekstedt: Understood. And then a second question, if I may, and just picking up on Namita's earlier question on private credit. I wanted to just pose this question to you a bit more broadly. I mean, the main focus around the private credit discussion has been centered on the U.S., right? And you said you don't do this yourselves currently to any large extent. But I mean, generally, you stand perhaps as the leading Swedish lender to nonbank financial institutions. So I just wanted to check with you for a Swedish take on this. How widespread is this concept in Sweden? And what are your views on the viability of the model in Sweden and also a bit on the risks perhaps. I mean if you don't do this, who should be doing it or shouldn't we be doing it at all in Sweden, and why not. Johan Torgeby: Okay. Yes, this is a little bit of reasoning. Don't take this as a fact. So first of all, this has been a development very much driven by the U.S. I hear numbers like USD 2,000 billion. It's actually surpassing bank lending if you extrapolate the current trends. It is a very, very significant deep source of debt capital for the American economy. Europe is much, much smaller as a whole. And even the things that are growing fast in Europe is typically more American firms, replicating what they've done in the U.S. rather than European firms. Then you go to the Nordics, it's even more pronounced. So private debt is not a large funding source for the Nordic where we operate. And this is, of course, very much if you look at the classic private debt, private equity firms of Scandinavia, which is our home market, that it looks very, very different in terms of the balance between equities, infrastructure, alternatives versus private debt lending. So my take on this is that, first, the leverage buyout market is very well functioning in Nordics. This means that there's much less of a free lunch to be had sourcing the money that you then refund and redeploy into a leverage buyout type of financing because this is almost like a game between the 2 different products. They are slightly different, but they achieve the same thing for a private equity firm. One is you borrow from a private debt with typically 7% to 9% yield expectations or you borrow from a bank, which in the Nordics, we are very efficient, and we've been able to price the LBOs quite differently. But if you look at the overall market of LBOs, how they're financed, it's clearly in favor of private debt funds. But from the banking system, as far as I know, Nordic is very little -- has very little exposure in the Nordic banks to this. It's other capital providers that have put the money in. Operator: We will now take the next question from the line of Shrey Srivastava from Citi. Shrey Srivastava: My first one is your comments around the pickup towards the end of the quarter in capital markets activity. Of course, this quarter was affected somewhat by sort of lower episodic transactions debt than you'd expect. So I just want to talk about what the pipeline for the fourth quarter, what you've already seen in the fourth quarter and going forward, please? And my second question is going back to your comments on the scope for accelerating the implementation of AirPlus. You've previously, if I'm not mistaken, commented qualitatively about when you expect it to be accretive, excluding and including restructuring costs. Is there anything further you can now provide on that, given you've obviously had an extra quarter seeing the business and integrating it. Johan Torgeby: Sure. I'll start with the pickup. So the circumstances around capital markets and primary deals, M&A and IPOs is quite -- it's very, I would argue, benign. It's a good market. Markets are strong. They're not over -- they might be an all-time high on the stock market, all-time tight on credit -- recent tights in credit markets, lower interest rates and a little bit of European spurring optimism for what is going to come. It's not particularly strong here and now, but it's definitely more optimism around where Europe could go, not at least in Scandinavia and the Baltics, if you look at GDP protect -- projection, consumption, et cetera. And also, I would argue that Germany has had the biggest delta from 1 year ago, where they were very much not in favor. And now it's a little bit of, let's say, interest at least on what could Germany do with all these announcements around fiscal, stimulus, defense, security and resilience. The uptick is exactly what we would have expected. We've actually been a little bit disappointed, I would say, if you compare 1.5 years ago when we saw that the interest rate has peaked, then we had a very quiet couple of years behind us after the record years of the early 2020s. And now it looks quite constructive. And you saw that -- before summer, we did an unusually amount large deals in the Nordics, then, of course, summer dies. And I would say that the pipeline and the amount of discussions for the fall and next year, still indicates that there is a higher level of potential than there was before. Now don't take that too much, but I'll just look at issuance of securities and secondary market and derivatives, which is, of course, it's cut in, in the financial result today, we're up 29% year-to-date compared to last year on issuance and securities and services, M&A and equities. And we have 14% in secondary markets year-to-date. So there is something clearly better already happening compared to last year. And we are just saying that we feel quite constructive. We're not saying that this seems -- there are no indications right now that this would implode tomorrow, rather being quite supported of this could probably continue. Christoffer Malmer: On your second question around AirPlus, a reminder of where we are there. So as we highlighted in the second quarter, the first critical milestones around IT migration, the discontinuation of noncore markets and the rightsizing of the organization has been completed, and this process is on track. The next phase now is to increase pace of implementation between AirPlus and the rest of the SEB Group business. So what we are now reviewing is if there is reasons to try and accelerate that phase. As you will remember, we gave a range around the cost target for 2025 of plus/minus SEK 300 million as we said, largely attributable to the pace of implementation of AirPlus. So it was in that context, I made those comments. Operator: Thank you. We will now take the next question from the line of Johan Ekblom from UBS. Johan Ekblom: Just to come back on some of the comments you made earlier around AI. I guess trying to figure out what AI could mean for your business longer term. There's 2 aspects to it, I guess, that I'm interested in. One is, how do you think about the cost of AI? So we hear a lot of stories about the cost of AI being heavily discounted today and that we should expect cost to increase materially as you get on to kind of normal rate cards for what you're paying. And I guess when do you expect to see concrete benefits in terms of efficiency or revenue opportunities that will be kind of obviously visible in the financials. So that would be the first question. And then secondly, just a bit of a detailed one on asset quality. I mean we had a big green project that went belly up in Sweden earlier this year, and there's another one that's in the press now. Your corporate loan book tends to be very much focused on investment grade. How do you view this potentially higher credit risk project? And how do you manage risk around those? I realize you probably can't comment on individual exposures. But just from a more kind of top-down view. Johan Torgeby: If I start with the last and I'll hand the -- I think you asked mostly for the financial impact, I'll ask Christoffer to reason around on AI. The traditional loan book is investment grade. The really minimum rule of thumb is that you have to have 3 years of good cash flow, that has proven resilient business model, et cetera. So that's what we do. But there are, of course, also a very, very small part of the balance sheet that also gets dedicated to starting up of firms. These -- the ones you mentioned, the larger green ones, they have been unusually very unique that they are of that magnitude, but we have had very, very modest, if I say it that way, exposure that you won't really have seen even though there have been a little bit of actually blowouts in the whole green and clean tech sector as we speak, and it's continuing. The other thing is to see that the capital stack of all these projects, if they are large, are very different from the past. They are namely predominantly government guaranteed, and there are risk and offsets. So the nominal values often, if not always, exaggerate heavily what the banks actually are exposed to. But -- so there are 2 mitigating factors to any worry. And that is that the amount is very small, and it's often guaranteed somewhere between 60% to 85% by a government. Christoffer Malmer: If I reason a little bit around the AI and the financial impact, and you're right that we are at an early stage and trying to assess and quantify the ultimate impact is still difficult. But I'll make a few comments. I think in terms of the benefits that we can already see is there are certainly some areas where we do see tangible efficiency gains and productivity enhancements One is in software development, where we see the use of Copilot increasing developer productivity and output and deploys. Another area is in Wealth and Asset Management, where we can see an increase in the number of outbound customer calls as a result of AI support in documentation. So we see those productivity gains. Now how does that translate into P&L? Well, one of the comments that we made around the hiring pause that we're having consistently asked the question when we do replacement hires, if there is a technology or an AI solution that could be levered for that same activity. So we will see this gradually coming through. In terms of the cost of the actual AI. One of the reasons we decided to team up with a couple of other companies in the Wallenberg sphere to invest in the compute power from NVIDIA here in Sweden is partly to get access to sovereign access to compute, but also to ensure the cost. And to your point, we're buying compute power from the large compute providers around the world is, of course, an exposure that anyone would have if you want to grow and expand in AI. And that is also for us a level of comfort to have that cost under our own control. So those are some comments. But as you point out, it is still early days. But we are following it very closely. And the early signs that we're seeing is constructive productivity enhancements. Operator: We will now take the next question from the line of Sofie Peterzens from Goldman Sachs. Sofie Caroline Peterzens: This is Sofie from Goldman Sachs. So my first question would be on the fee line. The softness that we saw in fees this quarter, was that reflecting margin pressure? Or was it just less volumes than expected. So if you could kind of just discuss a little bit margin pressure compared to the volumes on the fee side? And then my second question would be around kind of capital. What we're seeing is that the fiscal outlook or fiscal spending next year is quite good for Sweden, macro-outlook is improving. Should loan growth pick up for SEB. How do you think about kind of prioritizing growth over shareholder returns. And what kind of takes priority if you look at like growth versus dividends versus share buybacks versus any potential M&A? Christoffer Malmer: Thank you, Sofie. So if I'll start with the fees, the sequential development there is really in 3 areas where we see this. First, within CIB and as Johan alluded to, a little bit, even though activity level is benign in the third quarter, it was very strong in the second quarter. So you see the drop in fees and commissions sequentially of about SEK 400 million being partly attributable to activity levels and fees in CIB. The second component you see is card fees in BRB, particularly on the corporate side. And as you know, we are in our BRB card business more exposed to corporate activity than private activity. And that being slower during the summer month is a second explanation. And the positive effect and partly offsetting this is an increase in fees and commissions on AUM-related fees in wealth and asset management. So there's no margin development impacting sequentially in the quarter, but more how the fees have fallen between Q2 and Q3. Johan Torgeby: Yes. Sofie, and nice to hear that you're back in a different role. So welcome. I would say that the reason for the more optimistic outlook, as you also pointed to, is partly driven by the monetary stimulus that we have already seen, let that bite in the economy monetary policy, typically works with 12- to 18-month lag. But also, as you pointed out, the fiscal stimulus that is expected to come. So those 2, I think, are quite important pillars for economists when they do look at it. Will this increase loan demand? Well, that's the purpose of it, both the monetary policy want the economy to pick up in pace and particularly focused on consumption. Fiscal policy tends to be quite effective on consumption. But the pattern right now is because uncertainties, high risks are very mitigated in my book, but uncertainty is still around. It means that households have been quite keen to save rather than consume. So all this is kind of part of that package to become a little bit more constructive for the future, and it should be supportive of growth. But that prediction I'm not making. I'm just reasoning around it. So it's definitely a part of it. When it comes to priority between growth and shareholder return. I assume you mean shareholder repatriation and not just total shareholder return because I think growth in SEB, having more clients doing more with them is very much aligned with total shareholder return, that's the same thing. But of course, it's not -- you might want to save more capital for the business rather than repatriating it. And there, it's pretty easy. We always try to develop the bank first. I would love to use the capital that we generate to do more business to generate even more, so that's typically not a big conflict. Otherwise, as we've had for many years now, we generate more than we can redeploy and then we'll pay it out to shareholders. Sofie Caroline Peterzens: Okay. That's very clear. And maybe just on the fee side, one follow-up. So in terms of DNB Carnegie, you haven't seen any business opportunities kind of getting any -- being able to take any market share from them? Johan Torgeby: I would say no, but I also want to acknowledge that it's a formidable competitor, and they're very good, and this is not an easy market to win in. And it's getting -- it's tough out there. Operator: We will now take the next question from the line of Tarik El Mejjad from Bank of America. Tarik El Mejjad: I just wanted to come back on Johan Ekblom's question as well on AI from a different angle. The scalability of use of AI and the benefits also, I think, is based on how your core systems can actually be plugged to these AI tools. How do you consider today your IT system ready for this, I would say, evolution in terms of using for AI, especially in your triangle on the parts on integration into the products. And also, I mean, there is a perception that the cost to achieve is actually much lower using AI versus the traditional kind of cost savings measures in the past. Do you -- would you confirm that perception? And just very quickly on the capital part, I mean, Sofie, I think addressed that partly, but the -- I think you commented in the past that to go below the 300 basis point buffer or the high end of the range, that will be used for growth rather than special distribution or buyback. Given the headwinds on CET1 coming -- on RWAs coming in the next quarters from the add-ons on Baltics, should we assume that our priorities for volume growth and the buyback would probably be secondary here? Christoffer Malmer: So if I start with the question on AI, you're right that there is a broader upgrade of core systems in general required to some extent, this reflects our ongoing work with our technology road map that has been in place for some time. But there are also opportunities in multiple areas where AI can be applied without necessarily completing all those upgrades. And there are also ways where we can work with compartmentalizing certain parts of our legacy technology and making APIs available for new applications. And the third option that is also interesting to explore is actually to have some of that legacy code rewritten with the help of AI. So there are ways both in which we can address the challenges with traditional legacy systems, but also where we can proceed without necessarily completing those investments. Now when it comes to the triangle, I think you're right to say that from a product perspective, it's probably where progress has been the least thus far in terms of introducing and implementing AI capabilities in the product. Where we have thus far seen the best impact and the greatest achievements thus far has been in running. And what we're highlighting in this quarter as well is, of course, an interesting opportunity working with a growing and exciting AI community in Sweden and the Nordics. So we'll continue to, of course, monitor this closely, but there are certainly areas where we can accelerate with AI implementation in parallel with legacy upgrades. Johan Torgeby: Yes. And if I just may add, it's interesting, we have the IMF, IAF trip to Washington, where all bankers met last week that it is a clear distinction, the one selling AI capabilities between the ones buying them and selling them and how much value has been created lately. So this third point that Christoffer made, the third leg is actually us banking the AI community, which is doing very, very well. On the capital repatriation preferences, so let's say that if we are above 300 as we have stated target board mandate to be in the range of 100 to 300, we have one type of dialogue, and that is how to best come back to the range where the 300 is the upper end. That's the discussion we've had for 2 -- 3 years when we -- from the day we had to cancel the dividends post COVID. And of course, that's kind of the new now. If we're in the range, we have a more forward-looking discussion in the Board in December, where we typically have room for both. So don't assume that you cannot do a share buyback only because you're in the range. However, there is a different discussion. It's more about lending and if we want to retain it to improve business of over and beyond 15% return on equity. If there is a reasonable degree of probability, we know how to do that in the coming years. We'd like to be able to capitalize on that. If not, then, of course, it becomes more of a question of how to repatriate capital to the shareholders with a base, 50% of profits go in the form of dividend. And as you can see in history, we've used both extra dividend in combination with share buybacks to look at, but that's the forward-looking, and I also would say, just the numbers, you need pretty significant loan growth numbers for this not to be -- for SEB not to be able to do capital repatriation in the combination of 2 or 3 types. So it would be lovely if that would happen, but that's a luxury problem. Operator: We will now take the next question from the line of Nicolas McBeath from DNB Carnegie. Nicolas McBeath: My first question was on the NFI line, which came in a bit below in recent quarters in Q3. So I was wondering how you think about the -- how the lower interest rate environment is impacting this revenue line. With your current macro outlook for 2026, how confident are you that your previous indication of the past 16 quarters average is a good indication where the normalized NFI line should be? And how do you think about that given the ultimate macro outlook for next year with, yes, maybe lower interest rates and possibly also lower volatility than what we've seen in the past few years? Christoffer Malmer: Thank you, Nicolas. I think the -- within that number that you have in the NFI, for us, these are, to a large extent, customer-related income. So taking aside the strategic stakes in the mark-to-market and the valuation gains that we present separately in the XVAs, we have a significant proportion of our FICC business booked within NFI. And within the FICC, we have the fixed income, currencies and commodities. And if I look at the third quarter, we had after the very high level of volatility in the second quarter, a lower level of volatility in the third quarter in FX, which resulted to a somewhat slower activity related to our customer demand. Now within fixed income, on the other hand, activity levels remained high with credit spreads at very low levels, issuance continues, and there was a clear demand to prefund during those favorable conditions. Within commodities, we are, as you know, the one Nordic bank that does offer this, and we have seen that contribution growing. But of course, there's an element of volatility, but we think that the underlying structural development there is also constructed. So as we look forward, there are effects driving this. The volatility in FX space and the demand for FX products will be impacting that part of the FICC booked in NFI. We also have the steepness of the yield curve, which impacts the treatment of the inventory and the mark-to-market of the inventory within the fixed income in NFI as well. But at this point in time, we have our range and I think that remains our best prediction for the future. Nicolas McBeath: And then I had a question on like if you have any general remarks or thoughts how you're reasoning regarding the cost growth into 2026. I mean on one hand, you have lower rates, which are a drag on return on equity. But on the other hand, as you've alluded to in the call, potentially higher activity loan growth, economic recovery during next year. So do you think 2026 is a year to expand and invest more or keep the hiring freeze and try and defend the profitability? Johan Torgeby: I'll start and ask Christoffer to add. So the current, let's call it, plan of attack on cost control is the one that we, I think, launched last quarter or 2 quarters ago, and that is to change the pathway that we've been on for some years now of increasing investments in the bank and to tail that increase off. And as you can see this quarter, it looks to be supportive of actually happening. We are in a different place now where we have a different trajectory. The purpose is to sit when we do our business plan in December and hopefully be in a position where we have freed up some operational costs that we can discuss with the Board and the management team how to redeploy. So it is still a different type of forward outlook now than we've had in the last years, and that is more cost control, be cautious and handle resources a little bit more until we have a clearer look on the income outlook because we really need to have a high return on equity and a low marginal cost of income, so profitability secure if we were to start investing more. And then there are many other things must do investments in banks. So there's no lack of holes to put all this money in order to maintain a good and solid and robust infrastructure. But it is the same tonality we've used now for a couple of quarters. There's no change in that, and that goes beyond year-end. It's actually to have a little bit of extra flexibility going forward. That doesn't mean that the decision in December where we set the cost frame for '26 will be up, flat or down. It just means that there will be a discussion to be had and we'll communicate it as always in conjunction with the Q4 report. Nicolas McBeath: And then just a detailed follow-up question. Could you please give us the AirPlus implementation costs for Q3 and how you think about the implementation costs in 2026? Christoffer Malmer: Yes. The AirPlus implementation cost in the third quarter was around SEK 120 million, which means that we, year-to-date, have taken a little bit less as a run rate, which leaves a little bit more in the fourth quarter. And we have guided to around SEK 700 million in implementation costs for the full year. Nicolas McBeath: And for next year, how do you think about those costs developing? Christoffer Malmer: Well, as I referred to earlier, we are now reviewing whether there are parts of the implementation program that should be accelerated. So we'll be coming back to that together with the cost outlook for 2026 together with our fourth quarter results, Nicolas. Operator: We will now take the next question from the line of Riccardo Rovere from Mediobanca. Riccardo Rovere: Thanks a lot for taking my questions. I have 3, if possible. The first one is on the NII indication, Christoffer, that you provided early in the call, meaning NII to bottom out 3 to 6 months after the last half. Now raising in Euro area should be done, Riksbank has cut 25, okay, I understand the impact on the equity side, but the federal reserve should cut much more aggressively and you have a much larger amount of U.S.-denominated liabilities than assets is SEK 300 billion larger amount of liabilities in dollars. So I was wondering why the rate cuts by the Federal Reserve should not have a mitigating impact or the only 25 basis point rate cut by the Riksbank. And by the way, also this quarter, what you -- this indication should have happened and did not materialize, NIIs is actually up quarter-on-quarter. So I was wondering why you keep reiterating that given the Federal Reserve cut expected in the coming quarters? The second question I have is, on the 290 basis point buffer, if I'm not mistaken, this includes the whole SEK 50 billion of RWA done -- imposed by ECB on your Baltic operations. Just to confirm my understanding correctly. And if I understand it correctly, 290 is already at the top of your range in terms of management buffer. But you are expecting to go back to that level in only 3 months. And because if that is the way I understand, it's just a matter of how you want to return excess capital rather than if you can keep the current capital return. So what is your thinking about that? And then I have a question, a curiosity that's more a curiosity. Overlays go up by SEK 100 million if I'm not mistaken. Some of the Nordic banks have actually reduced them or brought it to 0. They're using it progressively, releasing those. Why are you keep accumulating those overlays? And when do you expect this to come to an end or this to be used at some point or released or allocated. Christoffer Malmer: Thank you for your questions. I'll start, and I'll let Johan contribute as well, and we're just going to make sure we have the questions correctly. So if I start with the overlay, that is an assessment that we do every quarter. And we take into account geopolitical developments, sometimes we change our macro outlook and assumptions and it's a continuous evaluation of our various exposures across our portfolios. And you have also seen in quarters that we have released some of those overlays and in this quarter, we're adding. And it's hard for us, of course, to comment on how other banks are proceeding with this, but that is our process. For the net interest income, you're right, we are reiterating the expectation of a 3- to 6-month lag from the last rate cut until we see the trough. What happened in this quarter were a couple of technicalities that led to an increase in net interest income sequentially. One is the number of days. We also referred to the deposit insurance fee that is booked over the year. That happened to tilt a little bit more favorably for NII in this quarter. We had a positive FX effect. And we also saw some beneficial treasury contributions, partly from the funding cost and what we have been referring to as repricing effects or timing effects. So as we then look forward, we continue to see pressure on deposit margins as the rate cuts will make their way through the balance sheet. And also bearing in mind that some of our transaction accounts both for corporates and households are down to 0, which means that, of course, the further down we come in the rate cycle, the more any incremental cut will have as an impact. And finally, to your comment around the U.S. denominated deposits, those are primarily wholesale deposits. So those are priced off of market rates, and that's effectively a margin that moves with market rates rather than having an impact as they are being discretionary priced, but they are market rate linked. On your question... Riccardo Rovere: This will go down. The Fed will cut, this stuff will go down, the cost of this stuff will go down. If they does, when they cut. Of the wholesale fund -- this wholesale funding, and it's SEK 400 billion. Christoffer Malmer: Correct. And then, of course, the impact will then be on the asset side when Feds are being cut when we have U.S.-denominated loans that they are funded by. Riccardo Rovere: Sure, but it's smaller the amount. The delta is smaller. The liabilities are much, much larger than the assets in dollar, much larger. SEK 300 billion. Christoffer Malmer: Right. And I think what we have also mentioned when it comes to the U.S. denominated deposits is the fund that we're also placing with the Fed. And that is effectively us operating in the U.S. with our balance sheet, and we will collect deposits from U.S. financial institutions and placing with the Fed. And that is effectively a relatively opportunistic business that we have been running there, and that goes to an element of lumpiness between quarters, but that accounts for a sizable part of the U.S.-denominated deposits as well. Riccardo Rovere: But what I see is longer than SEK 188 billion cash at the Federal Reserve, I guess, and you have SEK 409 billion deposits, which you say is wholesale is going to go down. This one number is more than twice the other. So I don't understand how this cannot be positive regardless FX and all the other stuff, calendar days, whatever. Christoffer Malmer: No, I think this is one of many moving parts in the balance sheet. So when we are looking at the impact in totality from rate cuts, there are various dimensions moving in different directions. And this is one impact that we get from the development of the Fed funds. We have other parts of the balance sheet that's impacted by the ECB rate and others from the Riksbank. So it's taking all these into consideration together where we conclude that running this through our balance sheet as it looks today, we expect the trough. It doesn't mean that all the variables go in the same direction. Some, to your point, might be contributing positively, but the net of it all, we expect to result in a trough 3 to 6 months after the last cut. Riccardo Rovere: And on the SEK 290 billion. Johan Torgeby: Yes. Sorry, can you repeat that question, Riccardo? Riccardo Rovere: The question is that SEK 290 billion is already the top of your rating, the top of your management buffer. And that 290 includes the whole SEK 50 billion, which should be, despite, as I remember, phased progressively, not if I'm not mistaken, you got SEK 10 billion this quarter, maybe you will land another SEK 10 billion next quarter, I don't know. But the real number is the SEK 290 billion. So that is already at the top of your buffer. So how do you see this? Is this -- were you expecting it to be already basically at the top of your buffer only with the whole impact of the ECB imposed add-on after only 3 months. Because there has been, let's say, some discussions around the impact of this stuff into -- mostly 2026 is affecting your capital return blah, blah, blah. How do you see that? Johan Torgeby: Yes, I think we understand that. Christoffer Malmer: I can just start, Riccardo, with confirming that we have taken in this quarter the equivalent of 18 basis points or SEK 10 billion phase-in of REA in the Baltics, and we're showing that the remaining, what we estimate to be another 70 basis point impact would take our pro forma buffer to 290 basis points, where we have booked so far in this quarter, SEK 10 billion of that. Johan Torgeby: So just to be clear, that is pro forma today. So I think you're absolutely right. It's the 290 if we would technically have deducted all of it and it would have been over. But as we -- for accounting reasons and other things, couldn't or wouldn't do that. So we just showed it pro forma. Then you have, as I think you alluded to, now capital generation, in the dynamic analysis going forward, we'll, of course, continue to increase this number, everything else being equal. And therefore, I think we will have a better position when we get to Q4, and we will have to look at the current capital position then in a quarter to then for the board deliberations on repatriation. Was that an answer? Riccardo Rovere: Yes, yes, yes, definitely, that's an answer. So 290 before, then you start accruing the dividend, 50% payout or whatever it is. And then the rest, we'll see. But the starting point is 290. Johan Torgeby: Correct. Operator: We will now take the next question, question from Bettina Thurner from BNP Paribas Exane. Bettina Thurner: I would just have 2 clarification questions, please. The first one on NII. So you have been quite helpful over the past 2 quarters to try and isolate the temporary effect on the net interest income base. For this quarter, should we look at the effects in treasury that you mentioned before, of repricing quicker. Is that the SEK 100 million? Or would there be other parts of the NII that you would also expect to get out again or reverse partially in the last quarter of this year or first quarter of next year? And then the second question would be on the dividend. At the start of this year, you said you had the intention to pay out a semi-annual dividend next or in the next year. Is that still the plan? Or are you still deciding on that? If you could just give us more update on that, please? Christoffer Malmer: Thank you, Bettina. So on your first question on net interest income, I think the number that you're referring to, the SEK 100 million or so as a positive impact in Q3 from those timing effects is the number that you should have in mind for that effect going forward. And for the semi-annual dividend, you're right, that is something that we mentioned at the start of the year, and we have ongoing dialogues with our shareholders, and that's something we'll come back to when we report our fourth quarter results and come back to the capital question. Bettina Thurner: If I can just double check. So it's not set in stone yet, let's say, on the semi-annual dividend? Christoffer Malmer: Correct. That's correct. Operator: Thank you. That's all the time we have for questions today. I would like to hand back to Johan Torgeby for closing remarks. Johan Torgeby: I'd just say thank you, everyone, for your participation and your interest in SEB and look forward to seeing you soon. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Welcome to the Icade 9-month Trading Update Conference Call. [Operator Instructions] Now I will hand the conference over to Nicolas Joly, CEO. Please go ahead. Nicolas Joly: Good morning, Nicolas Joly speaking. Thank you all for being here today on this call. Along with Bruno Valentin, we are delighted to present this morning Icade 2025 9-month update. This presentation will be, of course, followed by a Q&A session. Let's move to Slide 5 for an overview of the main messages. To date, Icade has completed or signed preliminary agreements for EUR 430 million in disposals. This includes a reduction of the group exposure to healthcare activities by circa EUR 210 million and the sale of mature or non-strategic assets for EUR 220 million. The investment division reported a very good rental activity with circa 166,000 square meters signed or renewed to date. This volume was boosted in October by the renewal of 41,000 square meter in EQHO Building with KPMG. For several months, the financial occupancy rate has improved, notably for well-positioned offices and light industrial assets. On the property development front, H1 trends are continuing into H2. By the end of September, Icade recorded stable order volumes with a total value decrease of minus 5%. Lastly, we reaffirm today our 2025 group net current cash flow guidance between EUR 3.40 and EUR 3.60 per share. On Slides 6 and 7, we focus on the good progress made on disposals. Early August, Icade signed an agreement with BNPP REIM to sell its stake in a diversified portfolio of 23 health care assets, accounting for circa 15% of its exposure to the healthcare real estate sector. This transaction with one of France's leading real estate investment management firms confirms the quality of healthcare portfolio in Italy. These sales represent circa EUR 173 million for Icade, in line with the asset values included in the group NAV as of June 30, 2025. The proceeds from the sale will repay the shareholder loan from Icade to Icade Healthcare Europe almost in full. The deal is scheduled to close at the end of the year. In addition, year-to-date, Icade reduced its exposure to Praemia Healthcare by EUR 36 million through 2 smaller transactions completed in the first half of 2025. The property investment division also secured EUR 220 million in disposal of nonstrategic or mature assets. Since the last year results, preliminary agreements were signed on additional assets for EUR 115 million, namely an office asset covering 1,800 square meters on Charles de Gaulle for EUR 17 million, the remainder of the B&B Hotel portfolio for circa EUR 30 million and the entire Mauvin business park in the north of Paris, representing 21,000 square meters for EUR 69 million. This successful transaction is the direct result of the hard work of our asset management teams who managed to bring the occupancy rate of this park up to 100% by the end of June. All of these transactions represented an average yield of about 6.1% and were completed at prices above the net asset value as of the end of December 2024. Let's look now at the performance of investment division on Slide 9. Over the first 9 months of the year, the rental market remained challenging with take-up in the Greater of Paris region down 8% year-on-year. The subdued economic environment and French political instability continue to weigh on corporate real estate decisions. As we observed in the previous month, there has been still in Q3 2025, a lack of new leases signed for spaces over 5,000 square meters. In this environment, Icade teams delivered a very solid performance with around 125,000 square meters signed or renewed by the end of September. These agreements represent an annual rental income of EUR 29 million with a WALB of 6.8 years. This achievement demonstrates our ability to secure large leases over 5,000 square meters and to support our clients over many years like Club Méd, who has been our tenant within Pont de Flandre for 30 years. It also shows our expertise in creating spaces tailored to our client needs as we have done with Sopra Steria in the Orly-Rungis business park. The total financial occupancy rate stood at 84% as of September 30, 2025. In the well-positioned office segment, the financial occupancy rate stood at 88.8%, up plus 0.8 points compared to the end of December 2024, following, in particular, the leases signed for more than 3,000 square meters in the Hyfive building and nearly 2,000 square meters in the EQHO Tower. After including the [indiscernible] in the first building scheduled to start in Q4 2025, the financial occupancy rate of well-positioned offices stood at over 90%. In the light industrial segment, the occupancy rate stood at 90.4%, plus 1.5 points versus December 2024, thanks to leases signed in November, Port de Paris business park. In addition to the 125,000 square meter, we are very pleased to announce that we renewed in October the lease with KPMG for approximately 41,000 square meters. This lease has a firm commitment until 2031. In total, Icade has signed or renewed more than 60,000 square meters since the beginning of 2025 in the La Défense and Péri-Défense area, which offers significantly lower rents than Paris CBD, while still being very well served by public transport. Let's now move on to the operational performance of the development business line on Slide 11. The trends have remained consistent with the first half of the year. The development division recorded a stable orders volume with 2,815 units totaling EUR 722 million, down by 5%. Activity in the individual segment declined by 11% in volume, in line with the overall market. This decline occurred in an unfavorable tax environment marked by the end of the P&L tax scheme, which led to a sharp contraction in individual investor activity, i.e., minus 43% year-on-year. The momentum was more positive for our owner-occupier orders, which increased by 14%, supported by favorable measures promoting homeownership. Bulk orders showed an 11% increase in volume, but a 6% decrease in value. This discrepancy between volume and value changes is explained by a temporary shift in the product mix. Institutional investors continue to support business activity as they accounted for 51% of orders in volume terms year-to-date. It is also worth noting that institutional investor activity has historically been stronger in the second half of the year with circa 60% of bulk orders made in Q4 in both 2023 and 2024. I'll now turn the floor over to Bruno to present the change in revenues. Bruno Valentin: Thank you, Nicolas. Let's move to Slide 13, which we present the trend in consolidated revenue as of September 13, 2025. Icade's total IFRS revenue is down by 9% due to lower revenue from both the property investment and the development divisions. Let's dive into the financial performance and property investment division in Slide 14. In line with the figures reported in the first half of the year, gross income decreased by 6% to EUR 253 million, mainly due to tenant departures last year and the gradual crystallization of negative reversion of renewals. These effects were partially offset by the positive impact of indexation, which has gradually moderated but still contributed plus 3.2% and by early termination fees mainly related to the to-be repositioned offices. Move to Slide 15. On property development side, economic revenue amounted to EUR 729 million as of September 13, 2025, down by 12% year-on-year. This decline results firstly, from a drop in commercial segment with revenue down by 42% year-on-year due to the completion of major projects at the end of 2024, coupled with the low volume of new contracts signed in 2025. And secondly, from the progressive decline in residential backlog. I will hand over to Nicolas for the conclusion. Nicolas Joly: Many thanks, Bruno. So, let's move on Slide 17 for the 2025 guidance. We reaffirm our 2025 guidance of a group net current cash flow of between EUR 3.40 and EUR 3.60 per share. This includes net current cash flow from nonstrategic operations of approximately EUR 0.67 per share, excluding the impact of disposals. As of September 2025, the income already recorded by Icade represented 92% of annual net current cash flow from nonstrategic activities. Let me remind you that the contribution from nonstrategic activities does not include the payment of a potential interim dividend from Praemia Healthcare in 2025. Well, to conclude, in an environment that remains complex and uncertain, Icade teams achieved a number of successes during the quarter as illustrated by the continued execution of our disposal plan and a very strong leasing performance. We remain focused on implementing our strategy with priorities that include improving the occupancy rate of our assets, diversifying our portfolio and rigorously managing our balance sheet. And with that, let's start the question-and-answer session. Operator: [Operator Instructions] The next question comes from Florent Laroche-Joubert from ODDO BHF. Florent Laroche-Joubert: So 3 questions for me, if I can. So, my first question would be in offices. So, you have said that improving the occupancy rate is a high priority. So maybe could we say some words on your next challenges in offices for notably for the end of 2025 and 2026. So, what shall we expect? Maybe second question on healthcare assets. So, have you any comments to make for the other assets to be still sold in healthcare? And maybe last question on the 2933 Charles de Gaulle comment on your intention to dispose or not at the end of this asset? Nicolas Joly: Thanks for your question. Well, maybe start with the financial occupancy rate. Well, you saw that there were some recent improvements indeed in the occupancy rate for well-positioned and light industrial segment. As I said, including the positive effect of Pulse by the end of 2025, the occupancy rate will be above 90% for the well-positioned. Light industrial 90.4%. Well, of course, there will be a slight negative impact to be expected post disposal of the Mauvin business Park, but thing is getting better month after month. Once again, this remains and shall remain the first priority for the teams as for the Investment division. Maybe to give you a bit some visibility on the -- what to expect in 2026 regarding the expiries. I would say it's globally the same trend as in 2025, of course, with some expiries to be expected concerning the to-be repositioned assets. As more than half of the expiries will occur in H1 2026, we shall be in a position to give you some good visibility for the full year 2025 result presentation. And on the second question on the healthcare portfolio, well, clearly, given the political environment in France, which does not help and could discourage some international investors, our first priority is to focus on the international side. We've shared some good news with the Italian portfolio that shall be closed at the end of the year. We are also focusing a lot on the Portuguese assets, which are, as you know, high-quality assets that can attract unsolicited interest. And we are also marketing the small remaining part of the Italian portfolio, which constitutes of 5 assets, representing roughly EUR 20 million. On France, once again, on [indiscernible], there's no major news to share given the French context, but we are still exploring some additional routes, sale of noncore assets, additional swaps as we've done during the H1. And on the Charles de Gaulle asset, of course, we won't comment specifically on the asset or the process, but will keep being consistent with our DNA, which is to capture the maximum of the value creation. And once again, for this asset, in our view, a large part of the value has been already created through the eviction of tenants and the obtaining of the permit. And there's a good window because they have very strong liquidity on the investment market for core plus and value-add assets in Paris CBD. We saw a lot of transaction there with loads of cash. So clearly, with those 2, an opportunistic approach in our view shall be considered. Once again, the key decision will be made on value creation. Operator: The next question comes from Stéphane Afonso from Jefferies. Stéphane Afonso: First, on the EQHO Tower, could you please share the reversion rate reflected in this renewal? Second, on Icade's promotion, should we expect additional provisions or impairments since market parameters have changed? And finally, on asset values, market data points to further yield expansion. So, what should we expect in terms of asset value decline in H2? Or at least what assumptions are you using in your business plan? Nicolas Joly: Thanks for your question. Well, starting on the EQHO Tower, maybe just before sharing thoughts on the economics, let's take a minute to celebrate, which is really good news rewarding the hard work of the team that have been working on this for several months now. As we shared with you, we try to anticipate as much as possible the large break options we are facing and we have some strong relationship with our major tenants. So, we were really happy to succeed in that. Of course, we cannot share the detailed figure but maybe highlight the one thing is that as put in the PR, the signature rent is in line with the RV as we usually do. Of course, this crystallized a significant negative reversion. It was the highest negative reversion potential in the portfolio. That shall be captured after the end of the actual lease from October 2027. But I'm sure that if you put some raw figures, you can be able to estimate this roughly. As for the incentive, they are slightly above the market trend, but in my view, remain fully consistent with the very large surface that is considered. We are talking here about circa 41,000 square meters. So, this to conclude on the EQHO Tower is, in my view, an emblematic transaction, testifying once again the good dynamics of the area in La Défense district and the strong relationship we have with our tenants. Stéphane Afonso: Maybe jump in on your -- I have in mind that the reversionary potential was minus 11%. So, taking into account this renewal, where does it stand now? Nicolas Joly: Yes. This accounts for roughly 2 points out of those 11 on the average portfolio. Yes. But this once again will be captured at the end of the actual lease in 2027, because until then we are still on the current rate, okay? Is that clear? Stéphane Afonso: Okay. Yes. Thank you. Nicolas Joly: Jumping on your second question on Icade promotion. Of course, the market trend is still very tough. As you saw on the residential business, we've been deeply impacted by the end of the P&L tax scheme that had a negative impact on orders of individual investors were roughly minus 43%. As shared, there's better dynamic for owner occupier. The bulk sales still represent more than half of the total orders with a historical volume very strong in the Q4 and of course, very low activity in the commercial division, and that shall be the case in the years to come. So, we are still very selective in our operations. There may be 1 or 2 operations identified will be more difficult than expected. We've done the job on the whole portfolio in June 2024. So, there is no thing that is expected once again on that. And I would say that for the global activity, there are no recovery, in my view, expected before 2027, especially due to the political agenda. As you know, next year will be the local election on the town. So, this is usually years with very low level of building permits. Stéphane Afonso: So in your view, the provision and impairment that you recorded maybe 2 years ago are conservative enough at this stage? Nicolas Joly: Yes, we went through the whole portfolio on that. As I said, given the context, there still can be some operation selectively that can have some issues. But once again, on the whole portfolio, the job has been done. And on the last question on the evolution of the asset value, where you saw in H1 that there was a small deceleration of the asset value decline of minus 2.8%, if I remember well, in like-for-like, both from negative impact of residual yield decompression and to a lesser extent, lower expectation for indexation, clearly. Light industrial were more resilient, of course. But if we focus on offices, while it's still difficult to confirm the timing of value stabilization as there are still very few transactions on the market to assess properly the target cap rate. And on top of that, there are still some persistently high sovereign yields. But nevertheless, as you saw, we had a strong divestment activity during the first 9 months of the year and the sale of core assets completed year-to-date confirm the level of our actual NAV. Operator: The next question comes from Celine Soo-Huynh from Barclays. Unknown Analyst: I got 2 questions, please. The first one is about the guidance. In the press release, you said that the disposal of the Italian healthcare portfolio could impact the NCCF depending on the closing date. So, could you please give us a number around this? And the second one is around your outlook. You sound very cautious. I would almost say quite negative on your outlook for 2026. And we know your S&P credit rating currently is negative. Are you expecting a credit downgrade coming? Nicolas Joly: Maybe quickly on the first one, well, globally, the impact of the disposal of the Italian portfolio will be nonsignificant on the cash flows because it's expected to occur at the very end of the Q4, so not significant. On the outlook, well, cautious clearly because 2026 globally will remain very tough, in my view, on market conditions. Well, you get this political agenda in France that will definitely have an impact on the pace of recovery. We are facing persistently high sovereign yields that won't help. And thirdly, there's a lower positive indexation to be expected in 2026. On top of those macro effects, more specifically on Icade side, well, as I said, on the property development, given the political agenda, there is no expectation in our view of recovery in 2026. And on the investment side, I was mentioning a lower positive impact on indexation that we expect roughly at 1%, so much lower than expected some months ago. And as you know, there are still some negative reversions to be crystallized in the cash flow. Of course, this is already, as you know, in the NAV, but still to be crystallized lease after lease in the cash flows. And there are still some departures, mainly on the to-be repositioned assets that will still while on the like-for-like clearly. So not negative, but clearly, cautiousness in our view on both businesses and the macro is necessary. And maybe Bruno, you want to. Bruno Valentin: Yes. So, we remain highly focused on SAP, of course, the 3 points. First one, the disposal achieved over the last 9 months helped to keep the LTV ratio under control. Secondly, we have a limited committed level of CapEx in the pipeline. But nevertheless, we remain subject to variation in asset valuation. Nicolas Joly: And Celine, you were mentioning, I though the outlook, but the current outlook is stable. Bruno Valentin: It's not negative. Unknown Analyst: Sorry, I thought your outlook was negative. Nicolas Joly: No, no. This is stable. BBB stable. Operator: The next question comes from Michael Finn from Green Street. Michael Finn: Yes. I was just curious given the change in the sources of funds. Since it seems slightly better than it was, I'm curious if there is any change in the uses of those funds as well. Should I assume that the strategy is in line with the Investor Day from Feb of '24? Nicolas Joly: Yes, Michael. Well, we are still bang in line with ReShapE. As I shared in my conclusion, we are focused on our existing portfolio and the occupancy rate. We are also focusing on diversifying our exposure to additional asset classes such as PBSA or data centers, for example. There were no major news to be shared during this Q3. But clearly, we intend to reallocate into relative developments, the cash that comes from the divestment, but we are still bang in line with the main guidelines of the ReShapE strategic plan that we've shared in February 2024. Operator: The next question comes from Samuel King from BNP Paribas Exane. Samuel King: Just one clarification question on earnings guidance, please, and specifically on the contribution from nonstrategic operations. I understand that it excludes a potential interim dividend from Praemia Healthcare. But am I right in thinking it also excludes a potential dividend from IHE, which last year was around EUR 10 million? And if so, what is the decision made if IHE pays a dividend? Because in theory, the disposal and repayment of shareholder loans should improve the financial position of IHE and therefore, its ability to pay a dividend this year? Nicolas Joly: Yes. Thanks, Samuel for your question. Well, indeed, there was no assumption of an interim dividend on Praemia Healthcare and no dividend on IHE, but we don't expect dividend on IHE, most of the cash flows were drawn through the shareholder loan. So, nothing to expect on this regarding IHE. And as for Praemia Healthcare, we'll see there is an interim dividend before the year-end. And if this is the case, of course, we will be telling the market that it's the case. But indeed, you were right on the current guidance, the EUR 0.67 does not include any interim dividend on Praemia or any dividend on IHE. Operator: The next question comes from Valerie Jacob from Bernstein. Valerie Jacob Guezi: I just wanted to ask a follow-up question on your rating with S&P. My understanding was that S&P had assumed approximately EUR 700 million in order for your outlook not to be downgraded. I mean I know your outlook is stable, but I'm talking about an outlook downgrade. So, I was wondering you've only done EUR 400 million so far. If you don't sell Charles de Gaulle in 2025, is there a risk that your outlook can be downgraded? Or maybe if you can share some discussion you're having with S&P. Nicolas Joly: Well, today, once again, we are consistent with the trajectory we've shared. We've demonstrated our ability to sell assets, even sell assets at the right price. We said it was above NAV. There is a few opportunities in the pipeline that make us confident in being able to secure the debt on debt plus equity threshold at 50%. So, at this stage, nothing specific to worth sharing. Valerie Jacob Guezi: So if you don't sell anything until the end of the year, there is no risk in your view that your outlook is going to be downgraded. Is it what you're saying or? Nicolas Joly: Well, it's not for me to say. I mean it's S&P to say. But clearly, today, we've demonstrated that we are able to secure our debt on debt plus equity trajectory. And on top of that, the additional 2 KPIs are very comfortable headroom regarding the guidelines set by S&P. Operator: There are no more questions at this time. So, I hand the conference back to the speakers for any closing comments. Nicolas Joly: Okay. Thank you very much. Happy to share this part of the morning with you. Looking forward to talking to you. Have a nice day. Bye-bye.
Martin Carlesund: Good morning, everyone. Welcome to the presentation of Evolution's report for the third quarter of 2025. My name is Martin Carlesund, and I'm the CEO of Evolution. With me, I have our CFO, Joakim Andersson. As always, we will start with some comments on our performance in the quarter and then I will hand over to Joakim for a closer look at our financials. After that, I will conclude with an outlook and then we will open up for your questions. Next slide, please. So let's start with the financial and operational highlights in the quarter. And I would like to start by taking the bull by the horns and address the bad performance in Asia. This has been a recurring theme over the past quarters. But unfortunately, this time, it looks a bit worse. We were, as you remember, very cautiously optimistic about the remainder of the year in the last report. And there's really nothing that doesn't say that Q4 could be better. However, we are experiencing a lot of volatility, which makes the near-term performance hard to predict. At this stage, we want to be realistic and keep expectations low. So what are the main reasons behind the Asian development. First is the cybercrime activity that continues to hurt us. Every day and around the clock, we do everything that we can to mitigate the issues. However, some measures do impact also the end users, and this is what makes it tricky. At the point in time, within the quarter, we did too much, causing loss in revenue. On the other hand, if we do too little, we lose to the pilots. Towards the end of the quarter, we found a better balance, but it's still volatile. And we are -- we do constant security updates to our core to increase protection. We will continue to adapt the changes that are working, and to fine-tune the methods that are working well and explore completely new actions as well. I ask for continued patience on this, but rest assured that is a top priority. Additionally, in Asia, the newly regulated markets, Philippines is volatile, which often is the case when operators and players adapt to the new framework. There are also other markets, such as India, that show signs of moving towards regulation, which creates a higher level of uncertainty than before. And to clarify, with showing signs, I mean that the current heated debate and quick and not widely acknowledged political decisions is something that we often see in the very beginning of potential regulation. Over a longer period of time, it will likely not be noticeable, but on a quarterly basis, it will cause variations like the one we see now. With the context of Asia in mind, let's look at the overall numbers. Net revenue came in at EUR 507.1 million, corresponding to a year-on-year decline of 2.4%. EBITDA amounted to EUR 336.9 million, and the EBITDA margin came in at 66.4%, which is within the range of our full year margin target of 66% to 68%. What stands out as positive in the quarter is the performance in Europe, which is back to growth quarter-on-quarter compared to the first half of the year. We saw the full effect of our protective ring fencing measures in the second quarter, and this provided a new foundation for growth. Worth mentioning is also that we got recognition for our ring fencing from one of the largest regulators in Europe, where we were pointed out as one of the best B2B suppliers. I'm happy with the progress in Europe in this quarter. North America also performed decently, and Latin America is stronger than what we have seen earlier this year. Our Live revenue declined by 3.4% to EUR 431.7 million, while RNG increased by [ 4.2% ] to EUR 75.5 million. It is actually the first time that RNG outperformed Live in terms of growth. Our studios have worked hard and especially Nolimit City has performed great in this quarter. To further strengthen our portfolio, we have launched a completely new brand, Sneaky Slots from scratch, and it will be very exciting to follow that progress going forward. On Live, growth is held back by Asia, but we continue to see good growth in the rest of the world. In both North America and Latin America, Live is still in early days and gains considerable attention from operators and players alike. The opening of our new studio in Brazil has been a true success. On the game side, our highly anticipated Ice Fishing title has finally seen the light, and reception has been great across our market. It is mirroring the trend of faster and shorter forms of entertainment that are widely consumer channels like TikTok and Reels. And it is needed -- is indeed a much faster experience than, for example, Crazy Time. Another great thing is that expansion of Ice Fishing to other studios will be fast compared to the more massive games like Lightning Storm. With its success, we will definitely explore more opportunities in the speed game show arena going forward. To conclude the quarter, overall revenue is not where I want it to be. But when opening the lead, it's clear that the development comes from 1 out of 4 regions. The development in Europe, North America and Latin America is overall good and also supports the margin together with our clear focus on cost efficiency. Next slide, please. If we then move to our operational KPIs, consisting of head count and game round index. On head count, we are growing 4.2% on a year-on-year basis, but we have actually decreased 2.7% quarter-on-quarter. The slowdown is, to some extent, reflected in the revenue. We don't hire unless we grow, but looking at recruitment base within full year, there are sometimes fluctuation based on temporarily slower high pace in recruitment. As we plan for more studio expansion over the next years, the long-term trend is that we will see continued increase in the number of Evolutioneers. The game round index can be seen as a general indicator of activity throughout the network over time, as you know. And for an individual quarter, it can be -- can vary quite a lot and does not always correlate with the revenue development. However, as you also can see this quarter, this actually shows a decrease. Next slide, please. Innovation and quality will always be our signature when it comes to our game portfolio. And I am ever so proud of the continued delivery on our product road map for 2025. During the quarter, we released Ice Fishing, which I have already talked about, and also Dragon Tiger Phoenix, SuperSpeed Dragon Tiger, both the latter are based on a popular Dragon Tiger, a straightforward car game that now has been elevated with the new excitement. Rules are simple and gameplay is quick. In Dragon Tiger Phoenix, the Phoenix is introduced as the third legendary car and the players simply bet on which car that will win or if it will be a tie. Another very exciting release is the Sneaky Slots brand, which joins our portfolio that already includes Nolimit City, Red Tiger, NetEnt, and Big Time Gaming. We have created Sneaky Slots from scratch, leveraging all our know-how that we have within RNG and using our one-stop shop and global sales network to further boost its launch. Sneaky Slots will fill a gap between Nolimit City and NetEnt in terms of game style. And selected releases will use ex mechanics from Nolimit City that we know that the players love. First title was released -- was NetEnt, which will be followed by the new title every month until year-end. Among upcoming releases, we have Red Baron, a mix of Live and RNG where the goal is to cash out before the Red Baron flies away. The longer you wait, the higher the potential. Another release is Insurance Baccarat, which is an exciting variation of the classic Baccarat that adds a unique insurance feature to protect the space. While summarizing the year, we look back at over 110 releases, which is a truly great achievement. And as time flies, there's now only 3 months left until [ Ice ] where we, as always, will showcase the most exciting titles for 2026. I can promise that Todd and his team are ready to take entertainment to yet another level. Next slide, please. Okay. Let's look at the geographical breakdown. As already highlighted, I'm pleased to see that Europe growth quarter-on-quarter, with revenue amounted to EUR 182.2 million. We have talked a lot about ring fencing this year, and you probably remember that the effects on revenues were a bit larger than we had anticipated. It is a price that we have to pay to stay ahead of the regulatory curve. But with that said, we have a new base to grow from. And despite the summer without any major sports event, development has been overall good. I should also mention the dialogue with the U.K. Gaming Commission, which continued, and we are yet to receive the conclusion of its review. What I believe is important to note is that we have been very cooperative and also responsive to various requirements that the Gaming Commission has put upon us. We still have to wait for the outcome, but I truly believe that we have the most sophisticated compliance framework among all providers targeting the U.K. Moving on to Asia, where I have already provided the context for the bad development and revenue decline of 9.6% quarter-on-quarter. Even though the market in Philippines has been volatile, our newly opened studio has been off to a great start. A while ago, there were some media noise on our studio partner losing its B2C license, but it has nothing to do with us or our studio. Everything is working as it should. We did, however, suffer some building damage in the 6.9 magnitude earthquake that struck Cebu in the beginning of October, but to our great relief, no employee was hurt and operations continued, even though that is secondary when people's lives are on the line. Next slide, please. On the contrary from Asia, North America is, thanks to its regulation, more predictable and stable. Quarter-on-quarter growth is modest, but on the positive side, it is -- on the positive side, the operators continue to invest heavily in Live casino solutions and environment. Year-on-year growth is 14.5%. To meet the demand, we have launched our second Live studio brand, Ezugi, just around the end of the quarter, and we are planning to open a second studio in Michigan during the first half of 2026. I would also like to highlight that we, after the quarter, have launched Crazy Time in Connecticut. Great. Very, very good. Also, while speaking on North America, I would like to mention something on Sweepstakes as it has been a topic of discussion during the quarter. Sweepstakes is a popular product in the U.S., and we offer it in states where it's not prohibited or in any way under regulatory scrutiny. Sweepstakes is a very small part of our total revenue, but we believe it has some potential. And as you know, as the market leader, we'll want to offer a great variety of content. In the quarter, a city attorney in Los Angeles made a personal interpretation of the California law, and as our strategy is that we don't offer Sweepstakes where there are regulatory uncertainties, we pulled it from the market, simple as that. I'm also quite certain that you will ask us about the completion of the Galaxy Gaming acquisition. We are still awaiting some regulatory approvals, but believe me, we will be able to -- but we believe we'll be able to close the transaction before year-end. However, it's a regulatory process. It's not completely in our hands. Moving on to Latin America, where growth is picking up with 6.4% year-on-year and 5.9% quarter-on-quarter. The new regulation in Brazil seems to be done with its initial [ teething ] problems, and operator and players are becoming more active. Our new studio in Sao Paulo, Brazil has developed nicely during the quarter and will expand as we move forward. Now I will hand over to Joakim for a closer look at our financials. Next slide, please. Joakim Andersson: Great. Thank you, Martin, and good morning. As usual, I will now zoom in on some of the financial highlights this quarter. Let's start on Slide 7, where we have the financial development of the last 14 quarters. For the ones that are following us and are used to our format, you will note that we have added the revenue split by regulated and unregulated on this slide. Let's start there. As you can see on the line, regulated revenue is up to 46% of the total this quarter. And even if this will fluctuate between quarters as revenue mix shifts, the longer trend is clear. The portion of regulated revenue will continue to go up. To the left, as mentioned by Martin earlier, we had net revenue of EUR 507.1 million this quarter, and EBITDA margin of 66.4%. What is not shown on this graph is that we, now year-to-date, are at 66.7% in EBITDA margin, making it within the expected range of 66% to 68% for the full year. As you can see from the chart, our growth has clearly tapered off and even become negative, and this is not something we are happy about, and we can assure you that we are doing whatever we can to reverse that trend. Let's go to the next slide. And here, we had our profit and loss statement. A lot of numbers on this slide, so I have highlighted the key takeaways, and I will comment on them one by one. So firstly, again, we had net revenues of EUR 507.1 million, which is down 2.4% year-on-year and down by 3.3% quarter-on-quarter. Secondly, total operating expenses amounted to EUR 210.5 million, which is 5% higher than last -- higher than Q3 last year, but more importantly, down 3.4% from last quarter, which is good evidence of our efforts adjusting the cost base to the weaker revenue momentum. We are not only trying to work smarter and be more efficient optimizing how we use our studios and tables, but we are also taking some broad-based cost-cutting measures, which will continue for the rest of the year and into 2026. Thirdly, our operating profit amounted to EUR 296.6 million in the third quarter. And finally, EPS after dilution amounted to EUR 1.25. To be noted, the profit for 2024 includes EUR 59.7 million of other operating revenue related to reversal of earn-out liability. And so to make it comparable with this year, you should probably adjust for that. Let's move on to the next slide, where I'm going to show you the development of our cash flow. First, to the right, our capital expenditures. And as can be seen in the graph, we are down quarter-on-quarter, the total CapEx related to tangible and intangible assets of EUR 29.8 million. With that, we are likely going to be slightly lower than the full year forecast of EUR 140 million that we announced in the beginning of the year. If we then look left, our operating cash flow after investments amounted to EUR 342.1 million in the quarter, which corresponds to a cash conversion of 83%. With that, we are back on track after a seasonally and unusually weak second quarter. The change in working capital was positive EUR 35.2 million this quarter, meaning a swing back from the weaker number last quarter, which is good and in line with our expectations. Then finally for me, some brief comments on our financial position on the next page. On this page, you will find our summary of the balance sheet for the third quarter compared to what it looked like at the end of last year. The main items that I usually highlight, which are all signs of our financial strength, are the value of the bond portfolio of EUR 103.2 million, our total cash balance that amounted to EUR 656.4 million and the equity position at the end of the quarter, which amounts to EUR 3.8 billion. We have continued with the buybacks in the third quarter. And in total, we invested EUR 187 million and bought back 2.5 million shares. In total, we have now used EUR 406.5 million of this year's mandate from the Board of EUR 500 million. And following the release of the Q3 report today, we'll be back in the market with an aim to use the full mandate before the year ends. With that, I will hand back to Martin for his closing remarks. Martin Carlesund: Thank you, Joakim. So let's summarize the quarter and then move to the Q&A. Performance in Asia was bad and left a negative impact on the group revenues as a total. But with that said, the rest of the world is doing decent to good, and we are determined to get Asia back on track. I understand that it causes some frustration, especially since we actually saw some signs of improvement in the second quarter. And believe me, I'm frustrated, too. I can only repeat that it requires patience while being a top priority. I'm happy to see that the margin has improved compared to the first half of the year, and we don't see any reason why -- for it not to stay within our target range of 66% to 68% for the remainder of the year. Cost efficiency is something that I feel strong about as it's part of our roots as an entrepreneurial company. We never spend a penny unless it provides value to the business in terms of growth. This presentation is about the financial performance in Q3. We don't have a separate slide on the movement in the ongoing deformation litigation in the U.S. We have -- where we have for 4 years finally received information on who was behind the [ false ] report. This process will continue in court, and I will not make any comments about its future development. What I can say is that we believe in fair competition, where innovation and excellent operations count. When a competitor decides not to play by these rules, it hurts not -- it hurts not only us, but the industry as a whole. With that said, with a little bit more than 2 months left of 2025, we will continue to run, adapt and improve. When we summarize the year from a financial perspective, it will have been a bumpy ride, but from an operational perspective, a very strong and important period for Evolution. With that, we'll open up for questions. Next slide. Operator: [Operator Instructions] The next question comes from Martin Arnell from DNB Carnegie. Martin Arnell: My first question is on -- if we could discuss the Asia situation just a little bit more. I think you mentioned it remains volatile and you, of course, the ambition is to get it back on track. And my question would be, are there any signs that it has bottomed out because the counter measurements, that's in your control, right? So if you have been too stringent, you can adapt. But the regulatory situation and the effect from that is more -- is not in your hands. Is that a correct interpretation? Martin Carlesund: We are doing everything we can with the countermeasures. And as I said, we did a little bit too much, and we have to do a little bit less, and we'll find the balance. And I think that we are on to it and we're doing the right things. And it's also natural that there will be a situation where you do a little bit too much because otherwise, you won't know where the borders are. When it comes to the dynamic and the regulatory situation in the region, there's a lot of countries. And right now, there's volatility in some of the regions, some of the countries and that affects us as well. I can't predict much more than that. Martin Arnell: And my second question would be, first on Europe, return to growth quarter-on-quarter there. Is that because players finding their way back after the ring fencing through regulated alternatives, do you think? Martin Carlesund: That's a very good question. And I -- yes, I believe that players in some markets find their way back and want to play a regulated and good compound. So that's probably part of it. And we see good development in total. And I'm actually happy with the development in Europe. Martin Arnell: Okay. And final question is just on investments. I mean is there any investment that you could accelerate to improve this current situation in Asia? You've always commented that you will prio growth over margins. Martin Carlesund: It's -- there is no -- it's not -- if I could throw more money at the problem and I would get a quicker solution, I would do that. I don't see that it's a money issue. We invest and we put the resources -- topnotch resources in the world to do whatever we can. And there is actually -- but don't quote me on that, please, but there is no limitation when it comes to that money. We put revenue and market share before cost, but we also need to adapt to the situation we have. So that's what we're doing right now. Operator: The next question comes from Ed Young from Morgan Stanley. Edward Young: My first question is on North America. It's showing the best growth across your geographies, but it's still behind market growth. Could you give us an update on the drivers there? What's going well? What's going less well? And do you expect any material change in the growth rate into next year? The second is on Asia. It sounds like it's a reasonable conclusion from your comments around countermeasures, Martin, you may never be able to fully deal with these issues. So put another way, should we be rebasing fundamentally our Asia revenue and growth expectations? Or on what sort of time line do you have optimism over market growth and market share gains in Asia? And then finally, I'll ask it. I appreciate giving your very final comment. You may not want to answer, but what are you looking for as an outcome from your legal action? Are you seeking maximum financial damages? You expecting regulators to review your competitors' license suitability? What are you looking for? And what sort of time line do you expect this to play out? Martin Carlesund: Thanks. I got it. So when it comes to growth in U.S., Live is doing really well. We have a couple of fluctuations, maybe we didn't have the best quarter when it comes to RNG. There are a little bit fluctuations over the quarters, I'm happy with the development. I look forward to the future in U.S. That's the situation in the U.S. When it comes to Asia, to address this problem, it's technically difficult. It's very advanced, and we're doing it. And we're tuning and we're finding. My belief is over time, that we will find the right balance and the right solutions and continuously enhance and protect our product to make it even better. So in the longer perspective, I look at a very good situation in the Asian market. Now I don't have any -- I can't share any sort of time frame on that right now. I'm a bit more cautious with that. When it comes to the outcome of the litigation process in U.S., I mean I look for fairness, justice. I think that it's horrible to do what has happened to us. Someone is hiding between layers of companies and hiding the true identity and writing false -- a number of false statements in the report to us. It's unfair. We are protecting the shareholder value of Evolution. The company, as such, defending ourselves from our employees. And the first thing that we look for is some kind of justice, I would say. Operator: The next question comes from Ben Shelley from UBS. Benjamin Shelley: I've just -- I've got 3, if that's okay. On Asia, could you talk a bit more about the developments in India in more detail? What exactly is happening on the ground? And how should we expect this to develop over the coming quarters? My second question is on North America. Could you talk more about your Sweepstake exposure in the U.S. and how meaningful that is versus your North American revenues? And three, I was wondering if you could -- if you had any early thoughts on capital allocation for 2026? Do you think EUR 500 million is the right starting point for share buyback expectations for next year? Martin Carlesund: So the situation on the market in Asia, is a lot of different countries. We point out, Philippines is very volatile right now. There's things happening in India, but there's also other countries that are fluctuating and things are happening there as well. India is a large country. There are regions that have portions regulated when it comes to sports. There's a desire in some regions to regulate. Now there are suggestions on a sort of federal level to take a few steps towards blocking online gaming. These type of movements we often see, when there is talks and happenings about regulation, it opens up for different routes forward. It could go into regulation, it could settle down or it could go to somewhere else. We can't speculate on that. We just see that it's affecting us to a certain level right now. North America, I think that you asked about Sweepstakes, and Sweepstakes is -- we provide to the Sweepstakes market, where there are no regulatory problems or any legal problems. And we are very lean. We talked to regulators. And if there would be a letter or someone, a regulator or an authority stating, don't do it here, we would immediately go away. U.S. had the history of river boats that, from the beginning, travel on the river, down to only shore and they have to have the engine running and then they didn't have them, and then it was [indiscernible]. These type of movements have been -- prediction gaming could be one of these. But these type of movements have been there. And we want to supply to them as long as there is no regulatory or authorities saying no. So we did that. In the case of California, it's a state attorney in Los Angeles that made a personal lawsuit, and that's okay. And immediately when that happen, we withdraw from that. So that we -- okay, if that's what you want, then we will withdraw from that. So that's the Sweepstakes situation. Capital allocation, I don't want to comment on that. It's, in the end of the day, an AGM decision and a Board proposal. We are acting on the capital allocation that we have. And you also have the capital policy that we published last year, and I'm sure that the Board will continue following that. Operator: The next question comes from Pravin Gondhale from Barclays. Pravin Gondhale: Firstly, on Asia cyber attacks, so yes, we are seeing that. It sort of continues to be a drag on your performance. But do you see any risk of spreading these cyber attacks to your other markets like Latin America, where black market continues to be big? And then in Europe, can you just give us a sense that between Live and RNG, which have been the key drivers of your European growth on a sequential basis, and any sort of steer on how do you expect European revenues to grow from here? Martin Carlesund: The protection measures that we add to our core is valid for the whole core, meaning supply to all parts of the world. So one of the upsides in doing what we're doing now with advanced technology and AI and everything is that it also protects our core in other markets and all over the world. So I would almost say that it becomes a competitive advantage where we increase the gap to competition. And eventually, we make it so hard to steal our products. So if you want to steal the product, you have to go to someone else. So it's protecting everything. So any measure we take in Asia will be accommodated in all of the core. So that's that. And when it comes to the split in the growth, I mean, we're doing very well right now, momentarily very well, maybe not even showing in the figures in the right way. But when it comes to RNG, we're happy with the development. Nolimit City is delivering great games. And of course, it's contributing in a good way to the total revenue in Europe. Now it's still a smaller part. So Live is the big part. So don't forget that. I mean, it doesn't matter if it does tremendously well. It doesn't affect the figures that much. Operator: The next question comes from Monique Pollard from Citi. Monique Pollard: Three from me, if I can, as well. The first was just on the regulated revenue increase we saw in the quarter. And you talk about the sort of direction of travel. Just trying to understand whether that increase in the regulated revenues is driven by the fact that North America and regulated territories performing better than Asia or whether there were some new markets that regulated in the quarter that also added to that progression? The second question was just on the U.K. Gambling Commission review. You mentioned in the presentation that there's no new news, but also in the report, you say you're expecting a conclusion by the end of the year. So I just wondered what gives you confidence in that time line of end of year, please? And then the final question is in relation to the news we had a couple of days ago on Playtech Black Cube. I appreciate you don't want to get into the details of the types of damages being sought, et cetera. But it would be really helpful if you could give us some indication of how you look to assess the damages. So is the starting point for assessing damages based on market cap movement on the day that these bits of news became public? Or are there other sort of processes you use when you're thinking about the damages that have been caused by these reports? Martin Carlesund: The regulatory percentage, 46% in the quarter, good development. We're moving in that direction. That's nice. That comes out of, of course, that the regulated markets are outperforming the nonregulated, and it's affected, of course, by the situation in Asia. So more and more gets to be regulated. And I might remind you that as soon as it tips over to 50% and if the revenue grows equally, it will continue to increase more and more. So we're in a good position with that. When it comes to the U.K. Gaming Commission time line, unfortunately, I don't have any other information than what -- it's in the hands of the regulator, and we have been -- our estimation is that it will be by the end of this year. I have no further information. That's what it is. For me, when it comes to the Playtech situation, I mean -- I will say about the same things all over again, but -- when someone behaves in that way, [ hypes ] in -- during 4 years doing this type of action with that type of company that the Black Cube using, Juda as a PR company, it takes a bit away from my belief in humanity and fair play and in ethics and moral. Exactly how we will assess the damages, that's a later question, but it's a severe amount. Operator: The next question comes from Adrien de Saint Hilaire from Bank of America. Adrien de Saint Hilaire: So first of all, on Asia, again, it's been a volatile region now for a while. I'm just curious, high level, if there is a point where you might draw a line in your commitment towards that region and refocus towards other markets? Secondly, you touched on this, but cost of employee was down quarter-on-quarter. Can you explain a bit what's going on there and the sustainability of that? And then, sorry, this is a bit like technical perhaps, but there's been quite a switch between current liabilities and other noncurrent liabilities in the quarter. Can you explain a bit what's going on there, please? Martin Carlesund: Okay. I will start with the first 2, and then I will, with warmth, hand over the last one to Joakim. So we look forward and we are engaged, and we actually think it's intriguing, even if it's tough, to find a solution to protect our product in Asia. But I think it will become more and more important also for other markets if we look in a longer time perspective. So we don't have any line that we will draw against Asia. We'll continue to fight that. And as I stated before, it's not about money. It's not a cost that is the problem. It's to find real good solutions on the level for that. When it comes to cost per employee and the cost base, we have talked about all since actually July 2024, where we have the strike in Georgia in that situation and the cost mix and we had to shift a little bit. So we had an unfavorable cost mix. Now we're starting to be able to shift that, which is what we have talked about during the quarters that we need to have a better and favorable cost mix. It's not like we're cutting delivery right now. It's -- we are putting the delivery in the studios, which are good. So that's the reason why we come to that. And then I will hand over to you, Joakim. Joakim Andersson: Of course, the balance sheet question. It's simply a reclassification of earn-out bilities that we have moved from long -- being long term to short term in this quarter as they indeed are shorter than a year. I think that's the one that you are referring to. Well spotted, by the way. Operator: The next question comes from Raymond Ke from Nordea. Raymond Ke: A couple of questions from me. I'll take them one by one, starting with no surprise maybe at Asia as well. Compared to, say, Q2, how much of the decline here that we saw in Q3, which is due to cyber attacks, and how much is from regulations and changes in geographies like Philippines and India, would you estimate? Martin Carlesund: I don't split that out. There are sort of 3 components in the situation. One is cyber attacks, and the cyber attacks is, of course, the constant level of it, but also our action that was a little bit too tough and then we had to retract. And then there is unstability in the region when it comes to regulatory situation. And here, we point out India and Philippines as 2 of those, but there are also others. So unfortunately, I don't want to go into exactly where in detail, and it's also very hard to see that. Raymond Ke: Got it. And then regarding sort of the regulatory situation in not just Philippines and India, I understand it. But how many months of impact would you estimate that we have seen here in Q3? If we compare it sort of to ring fencing back in Q1, do we have the full effect? How much should we expect ahead? It would be really helpful to understand. Martin Carlesund: No, I understand. I assume that you're talking about Asia, right? Raymond Ke: Yes, that's right. Martin Carlesund: So I think that there is a difference between the situation in Europe and Asia, so to speak, but the ring fencing has a little bit of a tail. I think that in Asia, the situation is more momentarily, okay, this is where we are right now, and we need to take it from there. And then we need to see that we do the right things in the coming quarter and see to find the balance. Raymond Ke: Got it. And then on North America, your sequential sales growth was flat here in Q3. You had momentum going into Q2 where it added EUR 2 million on top line. How much of the trend here in Q3 would you say is due to withdrawing from California stake? Is it the majority here? Or is there other explanations? Martin Carlesund: I wouldn't say that, that affects significantly. Raymond Ke: And finally, just one more, if I may. Could you maybe help us get a better understanding of how you intend to reach your margin target with the revenue we see here in Q2? How much should come from, say, revenue growth? How much should come from additional cost savings? Is it sort of equal, equal? Or how should we think about that? Joakim Andersson: No. If I jump in and take that. I mean in Q3, clearly, we are within, right? It has a separate quarter, 66.4% this quarter. And also, as we said, year-to-date, 66.0%. So if we just repeat what we now delivered in Q3, we are there, right? So it doesn't take a lot to make it for the full year, and we are quite confident that we will make it for the full year. Operator: The next question comes from Rasmus Engberg from Kepler Cheuvreux. Rasmus Engberg: Cheuvreux that is. Do you anticipate that India could potentially have an impact also in the fourth quarter? So that's the first question. Martin Carlesund: I can't comment on that. I don't -- I look at Asia right now, and I'm cautious when I make any predictions due to the situation that it's so volatile. Rasmus Engberg: Fair enough. Can you explain the next step in your legal battle with regards to Playtech? What happens next? And could you also perhaps give us an indication of what the run rate of costs that you're incurring, if possible? Martin Carlesund: The first question I can answer. It's like -- the thing that happened this week is actually a non -- it's not an action that affects Evolution in any way. When we initiated the litigation, it was with a fake name, [ Joe Roe ], and that was Playtech, but we just didn't know that it was Playtech. So right now, that is just exchanged for Playtech because we finally got the name. So that's what happened. That's -- and then we gave you, to the market, all the information we had relating to that, and that's it. So from our perspective, and the next thing is that there are a number of depositions and potential information that should be shared, and the legal process will continue just like it had been. When it is -- when it relates to the cost, it's naturally very expensive to do this type of exercises. We do it to protect the shareholders. We do the value for the shareholders. We do to protect the company. We think it's unfair. It's unheard of. It's a behavior that we just don't understand. Now we won't split it out right now, maybe in the future to come, we will look into it. But right now, we don't comment on the exact cost. Operator: The next question comes from Jack Cummings from Berenberg. Jack Cummings: Two questions, please. The first is just on the ring fencing in Europe. Is there any more that you still have to do? Or is all of the European ring fencing now completed? And then just on my second question, I appreciate it's a little bit early than when you normally talk about full year '26. Based upon your comments on cost shift and cost mix, would you expect to see EBITDA margins expand in full year '26 or full year '25? Martin Carlesund: When I look at ring fencing, I think that we are in a very good position right now in Europe. Things can happen in both directions, but I don't know any other actions that are ahead of us right now. When it comes to EBITDA margin, we have full focus on 2025 to deliver the 66% to 68%. And we look forward to do that. And then I assume somewhere on a release to Q1 report -- the Q4 report, sorry for that, I'm a little bit ahead of the curve, then we will guide you for 2026. [indiscernible] is positive. Operator: The next question comes from Karan Puri from JPMorgan. Karan Puri: Most of my questions are actually answered. Just one on Europe, I guess, wondering how should we be thinking about a more normalized growth profile in '26 onwards once you sort of lapped the ring fencing adjustments. If you could share a bit on that, would be great. Martin Carlesund: The answer to that -- I don't guide on the future, but historically, over the time, Europe is the most mature market, and we had a pace of growing 9%, 10%, quite consistently over a number of years. That's the best knowledge we have of the situation. And right now, we are ring-fenced, and we are starting to see a little bit of growth from that. Operator: The next question comes from Andrew Tam from Rothschild & Co Redburn. Andrew Tam: Just one question from me. Can I just clarify just your position on India. You talk about the regulatory volatility there. I just wanted to just fully understand what that means. Obviously, you've seen in recent weeks, one of your largest customers globally, decide to exit that market entirely with the real money gambling band. Are you saying that, that is a market that you would look to ring fence as well, should you get some more regulatory clarity going the other way against you? Martin Carlesund: Ring fencing has to be done in relation to regulation and what is there. We are watching it closely right now, and there are volatility in India, as you understand. At the time, if there would be a ring fencing, that will be later down the road. Andrew Tam: Okay. So no plans to ring fence in future in India? Martin Carlesund: We're watching it carefully right now and see what will be there. Operator: The next question comes from Martin Arnell from DNB Carnegie. Martin Arnell: Yes, I just had a follow-up question on RNG, actually because I saw that you had growth improvement there. And could you just say, is it because Nolimit City has a strong edge in the market? Or do you see the market for RNG has improved? Martin Carlesund: We are doing better and better, slowly, bit by bit when it comes to our RNG offering. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Martin Carlesund: Thank you very much for participating, listening to us. I really look forward to seeing you in a quarter. Thank you.
Maria Caneman: Good morning, and thank you for dialing in this morning. I am Maria Caneman, Head of Investor Relations here at Swedbank. Welcome to our third quarter results presentation. With me today is our CEO, Jens Henriksson; and our CFO, Jon Lidefelt. Jens and Jon will start with the presentation, and then there will be an opportunity to ask questions. Jens, I hand over to you. Jens Henriksson: Thank you, Maria. Swedbank has once again delivered a strong result in uncertain times. The geopolitical situation, continued uncertainty about tariffs and trade and the increasing concerns about weak public finances across the world are slowing down global growth. Twice a year, the world's economic policy decision-makers meet at the IMF. The starting point for their discussions is the world economic outlook, which was published a week ago with the headline, "Global economy in flux, prospects remain dim." With that said, our four home markets have healthy fundamentals, strong public finances, low government debt, innovative companies, profitable banks and low interest rates. In Sweden, we see signs of improvement. Our economists forecast growth of 2% next year, while the Swedish government is more optimistic and projects 3%. In Estonia, economic development is still subdued, and we are seeing some recovery in Latvia and the development in Lithuania continues to be strong. In these uncertain times, Swedbank stands strong and is well positioned for sustainable growth and profitability. We can today report a return on equity of 16% and earnings per share of SEK 7.53 for the third quarter. During the quarter, income increased while cost decreased. Our cost-to-income ratio was 0.35. Strict cost control is producing results. We have a conservative and thorough lending process and, during the quarter, we saw credit impairment reversals. We have a robust ability to generate capital, and we have a very strong capital and liquidity position. During the quarter, Standard & Poor's upgraded Swedbank's credit rating. In their decision, they highlight the bank's improved governance, regulatory compliance and risk management. Furthermore, during the quarter, the U.S. authority, SEC, ended its investigation into the bank's historical shortcomings without enforcement. We are delivering according to our plan, Swedbank 15/27. And as you know, it focuses on three areas: strengthen customer interactions, grow volumes and increase efficiency. Our customer focus is producing results. We have further improved our availability during the quarter, and now 70% of incoming calls in Sweden are answered within 3 minutes, and we are thereby getting closer to our target of at least 80%. We consistently work to improve our digital offerings, and we see that more and more customers do their everyday banking through our app or the Internet bank. We have also increased our efficiency. Our employees can spend more time meeting customers and less time on administration using new AI tools, and the number of advisory sessions per employee has increased. During the quarter, we lowered mortgage rates due to lower policy and market rates. Mortgage loans increased by SEK 5.2 billion, and mortgages in Sweden distributed through our own channels accounted for SEK 4.2 billion. Deposits from private customers are stable, and we continue to be close to our customers and give them advice. Strengthening their financial health is an important task for the bank. Savings and pensions continued to develop positively. Swedbank Robur saw a net inflow of SEK 9 billion in our four home markets. As announced in August, we want to acquire the remaining part of Entercard, thereby, Swedbank will have the largest card business in the Nordic-Baltic region. This will develop our business and strengthen our customer offering. In Lithuania, the business climate remains strong. In Sweden, Estonia and Latvia, economic activity is improving, but from low levels. During the quarter, corporate lending increased by SEK 7 billion. Our customers are showing a high demand for sustainable investments. 36% of the bonds arranged by Swedbank during the quarter were classified as sustainable, and our Sustainable Asset Register has now surpassed SEK 150 billion. We now own 20% of the investment bank, SB1 Markets. And during the quarter, they started up in Sweden. It's an important step in further developing our offering to corporate customers. In addition, our customers will get access to an expanded range of equity research. In the Baltic market, we launched the card payment feature, Click to Pay, a secure and convenient service that simplify payments. Jon, it's your turn now to deep dive into the financials. Jon Lidefelt: Thank you, Jens. We delivered a strong result in the third quarter with volume growth across markets and increasing income. We have continued our work with focus on long-term shareholder value through business growth and cost efficiency. Cost-to-income ratio was 35% and return on equity, 16%. Lending volumes grew in the quarter and the increase came mainly from Baltic Banking, where we continue to see solid growth on both the private and corporate side. Mortgage volumes in Sweden sold through our own channels increased by SEK 4.2 billion, while the savings banks reduced their mortgage volumes on our balance sheet by SEK 1.6 billion. We see continued result of our increased efforts on customer interactions and availability as we're capturing a larger share of the market. In August, our front book market share through owned channels was 16.4%, still below the back book market share of 17.8%, but the development continued in the right direction. Also for the corporate business in Sweden, the positive development continued with increasing volumes, though somewhat offset by repayments related to a couple of larger exposures. Customer deposit volumes were stable in the quarter. In Sweden, private deposits decreased somewhat from a high level as the second quarter was impacted by seasonal inflow of tax returns. In Baltic Banking, deposit volumes were overall stable. Net interest income decreased by 0.9% compared to the previous quarter, driven mainly by lower mortgage rates. Lower deposit rates impacted NII in Q3 with a full quarter effect, while lower rates on the lending side were gradually rolled in during the quarter. Higher business volumes had a positive impact of SEK 94 million in the quarter. Wholesale funding costs continued to decrease in the quarter. Liquidity was, however, reallocated from the markets business increasing liability volumes, but also positively impacted Central Bank placements. and, hence, had an overall neutral NII effect. Day count and FX effects impacted NII positively in the quarter. The Swedish Central Bank cut policy rates effective as of the 1st of October and ECB cut rates effectively as of the 11th of June. Hence, there are further repricing dynamics in play. Reminding you that the positive effect on the funding side materialized ahead of the negative effect on the asset side, furthermore, that it takes approximately 3 months in Sweden for a rate cut to roll in and 6 months in the Baltics. We will continue with our pricing strategy on both sides of the balance sheet and maintain focus on the balance between volumes and long-term profitability. Net commission income increased in the quarter, driven mainly by strong asset management commissions. Mutual funds had a net inflow of SEK 9 billion and combined with the positive stock market performance, increased asset under management to SEK 2,471 billion. Card commissions were seasonally higher in the quarter following higher spending abroad during the summer months, while brokerage and corporate finance commissions were seasonally lower. In addition, we saw positive development in commissions from insurance products. Net gains and losses remained at a high level in the quarter and amounted to SEK 847 million. Income was strong, driven by high business activity, mainly within fixed income. Positive revaluations supported the treasury result. Other income increased by 2.7%. Net insurance decreased driven by both normalized levels of claims compared to the low levels we saw in the second quarter and the effects from revaluations of future cash flows. One-off transfer, in connection with the establishment of SB1 Markets on the 1st of September, also contributed. The results from partly owned companies supported as well as increased income from services to the savings banks. As a reminder, our collaboration with the savings banks include cost sharing for IT development and administrative services. The savings banks' share of the cost is included in Swedbank's total cost, and you can see the corresponding income as services to the savings banks here under other income. Total expenses were 1.4% lower. Fewer employees, together with seasonally lower staff costs, IT maintenance and consultancy costs contributed. As announced in conjunction to the Q2 presentation, a VAT recovery of SEK 197 million related to the year 2016 was received in the beginning of the third quarter. In line with previous patterns, costs will be seasonally higher towards the end of the year. Costs for the full year 2025 is expected to be around SEK 25.3 billion at current exchange rates. This includes the already received VAT recoveries related to the year 2016, '17 and '18 amounting to SEK 576 million. It also includes SEK 200 million lower temporary investments this year and an estimated SEK 300 million lower costs due to FX. Asset quality is solid. During the quarter, there were reversals of credit impairments amounting to SEK 398 million, which corresponds to an impairment ratio of minus 8 basis points. The reversals are mainly driven by improved macro scenarios, and we have continued to reduce the post-model adjustment, which now stand at SEK 364 million. Individual assessments resulted in a SEK 568 million increase, driven by a few larger corporate exposures. At the same time, repayments and reversals of previously written-off exposures resulted in a release of SEK 451 million. I feel comfortable with our strict origination standards and the solid collaterals that secure our lending. Our CET1 capital ratio was stable at 19.7%. In the 2025 SREP, our Pillar 2 requirement was lowered by 40 basis points, and our CET1 capital requirement now stands at 14.8%, meaning we have a buffer of around 480 basis points above the requirement. The reduction by the Swedish FSA stems from two parts. Firstly, 20 basis points are related to the new CRR3 risk weights for standardized credit risks. This has an impact on the Pillar 2 add-on that we shall hold until the new Swedish IRB models are approved. Thereby, approximately 20 basis points of the expected capital relief of at least 50 basis points from the new IRB models has now materialized. We continue to expect most of the remaining impact from the IRB model updates to materialize during next year. The Swedish FSA also approved parts of our nonmaturing deposit model, resulting in 20 basis points lower capital requirement for interest rate risk in the banking book. To conclude, we continue to focus on growth and efficiency. We deliver strong profitability while maintaining prudent underwriting standards, strong liquidity and capital positions. Back to you, Jens. Jens Henriksson: So let me now sum up the quarter. Swedbank once again delivered a strong result in uncertain times. Income increased, cost decreased, and we saw credit impairment reversals. Return on equity for the third quarter amounts to 16%, cost-to-income to 0.35. Our credit quality is solid and our capital buffer is very strong at 4.8 percentage points. Swedbank is well positioned for continued sustainable growth and profitability, and we continue to deliver according to our plan, Swedbank 15/27, with a focus on strengthening customer interactions, growing volumes and increasing efficiency. We create value for our customers and our shareholders, and our customers' future is our focus. With that said, back to you, Maria. Maria Caneman: Thank you both very much. We will now begin the Q&A session. A kind reminder to please limit yourself to two questions per turn. Operator, please go ahead. Operator: [Operator Instructions] We have the first question from Martin Ekstedt, Handelsbanken. Martin Ekstedt: Can you hear me? Jens Henriksson: Yes, we can. Martin Ekstedt: Excellent. So could you just give us a bit more on the SB1 Markets initiative? You mentioned it launched in Sweden in the quarter. Is it now fully staffed up on the Swedish side? And are all the business lines up and running? That's the first one. Jens Henriksson: To be honest, I don't know if it's really fully staffed up. A lot of persons have gone over and I think they're doing some great jobs. So I think they're fully running. And the key point is that this is a partnership that offer our corporate customers a strength and offer through access to a larger set of investment banking services and sector expertise. And both corporate and private customers can also benefit from access to a broader range of equity research. So this is great. Martin Ekstedt: Okay, okay. And then second question, if I may then. I'm looking at your NII sensitivity on Page 20 of the presentation deck. So in the past, the NII elasticity, so to speak, or rate shifts have been balanced around plus/minus side. But your calculation example is now tilted towards seeing a larger impact if rates come down than if they go up. And I just wanted to confirm, this is due to some deposit rates now having reached 0 and therefore, are not able -- at least commercially able to go any lower, right, i.e., it's the floor of 0% rates that you mentioned on the page coming into effect. Is that correct? Jon Lidefelt: You're perfectly correct, Martin. That is the reason. Operator: The next question from Magnus Andersson, ABG. Magnus Andersson: My first question is how you view the prospects of potentially being able to increase the thin household mortgage margins in Sweden now that short-term rates are no longer expected to fall? And related to that, what market growth rate you think is necessary for this household mortgage margin pressure to ease? And secondly, just how -- you have lending growth now 4% quarter-on-quarter in the Baltics FX adjusted. How you view the sustainability of lending growth in the Baltics now that the deleveraging that's been going on for nearly 20 years finally seems to be over? And related to that, how you tame the inflationary tendencies, the impact on the cost base there? Jens Henriksson: Thank you for that. Two good questions. First one is, let me say a few words of the overall situation in the mortgage market, and reminding you that we are the market leader in all four home markets. And first, just me repeat that in the Baltics, we see continued strong growth in mortgage volumes. In Sweden, we've seen that the housing market remains muted, although we see some gradual increasing mortgage market growth during 2025 and you see that we're now picking up some momentum. And the reason for that is that we are more active. We have shorter waiting times and quicker to resolve questions. There is a strong competition out there, and we want to grow. And when that competition abates, we do not know. I don't think the competition will go down. I think it will be continued competition there. Then when you move over to the Baltics, we have seen quite a large volume growth in that. Reminding you that these are steady and stable economies, and we now expect Estonia and Latvia to pick off as well, while Lithuania has been doing very good. Magnus Andersson: Okay. So are you saying that you think the household mortgage margins we have in Sweden currently are here to stay? My question was whether you think there will be a potential to increase them going forward and what the trigger would be able to drive how you would be able to achieve that. Because I think it's a concern to all of us. Jens Henriksson: Well, I won't do any forecast on that. There is a tough competition. But I think when you see higher volumes, I think that we can grow in that environment. Magnus Andersson: Okay. And the inflationary impact on costs, in the Baltics? Jon Lidefelt: Magnus, I think as we've talked about before, I mean, in the Baltic Banking, we have lived with higher inflation for many, many years, even before the inflationary shock. So that is something that we are constantly working with to make sure that we can increase our efficiency to mitigate that. If you look at the societies as a whole, then I mean, our concern, as we have been talking about, generally, it's very stable and healthy. But of course, if the salary inflation continues, then that will eventually lead to a problem since it's going to be hard to pick up on the productivity in line with the current salary levels', increased levels. Operator: The next question from Andreas Hakansson, SEB. Andreas Hakansson: So first question on costs. You mentioned the three VAT refunds you had during this year. Could you tell us how many years have we got outstanding? And just to confirm that you don't assume one of those reversals to appear in the fourth quarter. Jon Lidefelt: You're correct. We have assumed no VAT recovery in the SEK 25.3 billion guidance that I gave you. If that will come, it will come as a one-off extraordinary thing that we will not take into account when we run our ordinary business. So no further VAT in the SEK 25.3 billion. We have, as I think I mentioned in the previous quarterly presentation, requested VAT return recovery for year 2019 up until 2023. It's in the hands of the tax authorities, and I have no visibility in the numbers, and we'll not speculate if and when we would get anything more back there. Andreas Hakansson: Are the cases similar? Or I mean, it seems like you won three cases. So are the other cases different? Or wouldn't the outcome be likely to be the same or... Jon Lidefelt: Sorry, I said '19 to '23. I should have said '19 to '24. But it depends a lot on the interest rate levels since this is sort of depending on the turnover that we have in the parts of our business that is non-VAT related and the one that there is VAT, i.e., mainly the leasing business. So it depends a lot on the interest rate levels for the years, and that's why I don't want to speculate in any numbers or if we would get it back before we have the answer from the tax authorities. Andreas Hakansson: All right. That's fine. Then on the Baltic NII, I mean, you talked about the 6 months' time lag. But could you just confirm that when you talk about that NII should trough 6 months after the loss rate cut, that's with a static balance sheet. And we saw already that NII grew Q3 with Q2 on the back of very strong volume. So if volumes continue at the current pace and, if anything, it seems to be picking up. Is there any reason why the NII shouldn't continue to grow even though you have that underlying pressure driven by interest rates? Jon Lidefelt: First of all, yes, you're correct. When I talk about the 3 and 6 months, then I mean the same margins, the same volumes, and then you'll have to make your own assumptions on that as well as some further central bank rate cuts. When it comes to the NII development in the Baltics, it's impacted by FX in this quarter. So underlying, the NII in the Baltics is stable quarter-over-quarter. Andreas Hakansson: With 3% volume growth, right? So those are the two components there, margin pressure and the volume growth. That's up to 0 in this quarter. Jon Lidefelt: Yes. Operator: The next question is from Gulnara Saitkulova, Morgan Stanley. Gulnara Saitkulova: So on capital, given your solid capital buffer, could you remind us of your latest thinking on how to deploy the excess capital between ordinary dividends, special dividends, buybacks or potential M&A? And how should we think about your approach to excess capital in a theoretical scenario where the AML resolution is still delayed by several years? Would you still aim to be around the midpoint of your targeted management buffer range? Or would you adopt a more cautious stance in that case? And if you were to pursue M&A opportunities, which areas or markets would be of the greatest strategic interest for you for potential acquisitions? Jens Henriksson: Well, thank you for that question. Let me be very short here. And that is that we have a capital buffer range between 100 and 300 basis points. In our 15/27 plan, we target the middle of it, i.e., 200 basis points. We now have a buffer of 480 basis points with a dividend policy of 60% to 70%. And the timing of further capital release continues to be a judgment call depending on the many uncertainties, where the long-running U.S. investigations is the largest one. And we have no intention to hold more capital than necessary. When you look into M&A activity, reminding you that we've had seen quite a lot of M&A activity during the last quarter. We want to acquire Stabelo. We want to acquire the remaining part of Entercard, and both those two are still subject to approvals. And then we've gone into SB1 Markets, which was the first question. As a CEO, I always need to look out for new opportunities. Operator: The next question is from Markus Sandgren, Kepler. Markus Sandgren: I was just going to follow up on Gulnara's question when it comes to Entercard. Can you just give some more flavor of your thinking about the acquisition? And what do you think or what's your planning in terms of asset quality for that company? Jens Henriksson: Well, straightforward, we've had a business cooperation with Barclays, and we own roughly 50-50 each. And they wanted to sell it, and we wanted to acquire it. It's that simple. And the reason we want to do that is that we want to become the largest card business in the Nordic-Baltic region with scale benefits and, of course, benefits also from increased efficiency. And I think Jon will get back later when we have more information when that's fulfilled and tell you the effects on the bank at large. What we will do is we'll do a strategic overview. And when we look on Entercard, we've seen that we think that the risk level is a bit too high, and we wanted to reduce it a bit more to a more appropriate level for Swedbank. Markus Sandgren: And what does that reduction mean? Is it getting rid of loans? Or how do you plan to do it? Jens Henriksson: We -- let us get back to that when hopefully, this goes through all the sort of processes. Operator: The next question from Shrey Srivastava, Citi. Shrey Srivastava: It's actually on the 20 basis points benefit to your sort of capital requirements that you've got from being able to model the contractual maturity of nonmaturing deposits. My question is twofold. The first is, is this all we can expect to see in terms of benefit? And secondly, does this open up the possibility of you sort of investing these nonmaturing deposits in potentially sort of high-yielding, long-dated assets going forward? Jon Lidefelt: Thank you, Shrey. First of all, we have gotten a partial approval for our modeling of nonmaturing deposits. So all things equal, if we would get the full approval, that would be a little bit more to come. When it comes to our NII -- or sorry, non-NMD hedging, I have said in previous quarters on questions from you and your colleagues that we have had some hedges. It's been an important tool for us to have in the toolbox. So we wanted to test it and try it out. But it is and has been immaterial from an NII perspective so that you can discard the impact of the hedges that we have in place when you forecast our NII. The approval that we have gotten, it still means, to make it simple, that our liability side is still shorter than our asset side. So if we would add further hedges to prolong our asset side, which is what we want to do in order to smoothen out NII when the timing is right, it would still mean that our capital for IRRBB, our Pillar 2 charge, will go up even with this approval. It might go up a bit smaller than before, but there still will be an increase. We will come back should we do more or should our hedges be material to make sure that we are transparent should that be in the future. Shrey Srivastava: And a very brief follow-up. You said you received partial approval. Should you receive full approval, what sort of capital benefit can we expect there? Jon Lidefelt: Unfortunately, as long as the Swedish FSA do not change their view on this, even a full approval will lead to the same thing, that if we prolong our asset side, our capital charge will still go up. There is a difference between the Swedish FSA's view and the view that banks under ECB supervision have. They can do this hedging much more efficiently than we can do. Shrey Srivastava: And a final one for me. Have you noticed a sort of softening of the Swedish FSA's view? Because it seems sort of that way, looking at the partial approval you received. Or is that inaccurate? Jon Lidefelt: No, I have not. Operator: The next question from Namita Samtani, Barclays. Namita Samtani: My first one, I just wondered what measures you're taking in the Baltics to bulletproof your ROE of above 20%. I saw an announcement that Revolut is now offering mortgage loans or something similar to that in Lithuania. And in time, that will probably become a full offering. And clearly, the deposit rates they offer better than banks. So what initiatives is Swedbank taking to protect itself from competitive threats? And then secondly, I appreciate the 2025 updated cost guidance. But we're almost through 2025. Could you please qualitatively talk us through the main moving parts of costs going forward or what we should think about going into 2026? Jens Henriksson: Well, the key thing about Estonia, Latvia, Lithuania, these are growing economies, and when compared to Sweden, they will grow with, let's say, 1%, 1.5% more. So it's a very attractive market. And it's also a market that doesn't have the same financial inclusion as there is in Sweden. So that means that we see many possibilities. And I think we went through very much this when we had Swedbank 15/27. In the end, it's about being close to our customers. We are the most loved brand in the Baltic region for the seventh year in a row. We want to grow volumes, continue to grow with the countries. We want to increase financial inclusion. We want to be -- have more customer interactions and want to make sure that we keep costs contained and work in an efficient way. So in that sense, it's not different from the other markets. Is the competition tough? Yes, it is tough. Will it be tougher? Yes. But that's life. Keep on and be close to your customers. Do you want to say a few things about the costs? Jon Lidefelt: I think your question was about 2026 costs, and we will come back in conjunction to the Q4 presentation on that. But principally, we tried to explain how we work with cost efficiency with the headwind and investment and so forth when we had the 15/25 presentation. But more details, I'll come back with when we present the Q4 results. Operator: The next question is from Tarik El Mejjad, Bank of America. Tarik El Mejjad: Just quick two questions, please. First, on costs. I mean you had quite impressive, good cost control here with cost/income really at very low levels. I just questioning the strategy of sustained hiring freeze, which -- how long that you can be sustained and especially in the context of potentially a recovery of growth. But also, we just had a call with one of your competitors and the approach is this hiring freeze or control could be sustained as long as we invest in AI and technology and be able to question each time, can we replace or hire or invest in some technologies that would be more cost efficient? Where are you in this thinking and these investments in AI and technology? And the second question is on the U.S. on money laundering litigation. I mean I've been following those with the German, French banks and so on in the past with the OFAC. How the conclusion from the SEC, you think are correlated to what would come for DOJ? Or is it -- because usually it's bundled within one decision. How do you read that? Are you more optimistic about the outcome? Jens Henriksson: Well, thank you. Two important questions. The first one when it comes to the personnel, we steer the bank on costs, not on FTEs. But what happened a year ago was that we saw that FTEs increased too much due to change of churn. And what we did then was that we implemented an external hiring freeze but sort of possibility for people to make exceptions. I gave quite a few exceptions but it worked. And then last quarter, we decided to take that away. And we now have a process where Jon take that sort of those kind of decisions together with the Head of HR. So we do not have a hiring freeze anymore. That's the first thing to say. The other thing is to say that we see quite a lot of use of AI. We work it both on the individual level and on a structure level. We work with AI for a very long time. And what we want to do is we want to decrease administration so that we can see more time with our customers. So to give you an example is that right now, we are seeing that the waiting lines or sort of the time waiting, if you call into a Swedish customer center, it's much shorter than before. So we've reached 70% of the call answered within 3 minutes. Why? New technology. And then we can use call summary, so that means you can have more time to meet the customers rather to do the administration, and we can do more things like that. When it comes to the U.S. investigation, first thing to say is that when it came to OFAC, that was closed quite a while ago. And as I said in my introduction, during the quarter, SEC decided to close their investigation without any further actions. That said, still have two other investigations by U.S. authorities. And now I need to sort of repeat myself. But I've told you many times when I was new as CEO, I met and called around and talked with colleagues that have been in similar circumstances. And they told me that a process like this usually takes 3 to 5 years. Now more than 6 years have passed, but the time line is fully owned by the U.S. authorities. I can just repeat what I say, and that is I still do not know whether we will get any fines. And if we do get the fines, I cannot estimate the size of those. And we've been as transparent as possible during this long-running process. And when something material happens, we'll continue to adhere to that principle. Thank you. Operator: The next question is from Nicolas McBeath, DNB Carnegie. Nicolas McBeath: I had a question on the deposit volumes. So after the most recent rate cut in Sweden, your deposit rates on some of your most popular savings account like eSavings have been cut to 0. So I was wondering how are deposit volumes behaving on these accounts. Have you seen any increased tendency of withdrawals since the rates were introduced, either to your own Swedbank players or migrations to competitors' deposits with above 0 rates? That's my first question. Jon Lidefelt: Well, thank you, Nicolas. The volume or the mix has been stable in that sense. So we have not seen any mix shift. And over time, the deposit beta has been around 1 on accounts with interest rate and where the sort of distance to 0 has been enough to reduce it. So then as we have talked about before, sometimes, we have for business reasons, taking a little bit of time lag between doing different rate changes. But over time, it has been one, and we have not seen mix shifts lately. Nicolas McBeath: All right. And then I had a question on levies for next year. What's your expectation there? And could you confirm whether the cost for interest-free deposits at Riksbank, will those be taken on the levies line or reduced NII? Jens Henriksson: Well, let me start with saying that if you see overall loan demand in Sweden from both corporate and private customers is subdued. In the Baltic, demand is stronger. And just to be blunt here, but we have an appetite for healthy loan growth while sticking to our conservative lending standards and focusing on profitability. You want to follow up, Jon? Jon Lidefelt: On your question on the Swedish Riksbank, we will have to deposit SEK 6 billion for which we will not get an interest rate for now for 9 months, I think it is. I think the jury is still somewhat out on exactly how to account for that. But my assumption or belief is that, yes, it will be under the bank tax row. And then the discussion is will it be a one-off now in Q4 or will it be spread out for the period? But most likely under the bank tax rule. Yes, I think that was the answer, right? Nicolas McBeath: Yes. And then just also if you could comment what your expectations for bank taxes are for 2026? Jens Henriksson: Bank taxes, don't get me started. But let me say a few words. And then as always, I want you to remind you that banks are an important part of our societies. What we do is we channel our customers' hard-earned deposits to lending, thus empowering people and businesses to create a sustainable future. And to do that, we need to be profitable. And a sustainable bank is a profitable bank. And we are proud taxpayers that contribute to the financing of welfare and security in our home markets. What we do not like are sector-specific taxes, retroactive measures and an unpredictable regulatory environment. What we do like is equal treatment, a rule-based system and an investment climate that fosters growth, financial stability and sustainable transformation. With that said, I need to say that. Then let me do a quick tour across our four home markets. First, Estonia, general corporate taxes are increasing as we see, but there is a political debate on that. In Lithuania, corporate taxes are also up. And then remind you that on top of this, since 2020, there is a 5% extra tax on banks, and the extra investor tax on NII further on top will be phased out during the year. In Latvia, we will have 3 years with a similar investor tax. There are some discussions on excluding new lending from the tax. If that would materialize, it would be positive for the Latvian economy. In Sweden, the government has proposed a base deduction to the bank tax while delivering the same tax revenues. And the tax rate is therefore proposed to be raised from 6 to 7 basis points in 2026. And now there is a government inquiry of some kind that will look into the specifics. And then as Jon talked about, let's call it what it is, it's another tax on the banking system, is that the Riksbank has decided that credit institutions from the end of October this year will need to place an interest-free deposit with them. And as Jon said, it amounts to around SEK 6 billion that will earn 0 interest. Operator: The next question from Sofie Peterzens, Goldman Sachs. Sofie Caroline Peterzens: Here is Sofie from Goldman Sachs. So my first question would be on net interest income. When do you expect net interest income to trough? One of your competitors this morning said that it will be 3 to 6 months after the last rate cut? Do you think that's kind of fair? Or do you have a different view to this? And then my second question would be on the VAT refund that you continue to get. It was SEK 197 million now in third quarter and SEK 174 million, sorry, in the previous quarter. Like when should we expect these VAT refunds to come to an end? Or should we expect still some VAT recoveries in 2026? Jon Lidefelt: Thank you, Sofie. If I start with the NII, then if we assume no further rate cuts, to make it a bit simple, then ECB did their last one. It was effective on the 11th of June; and the Swedish Riksbank, it was effective as of 1st of October. And then if you take 3 months roughly in Sweden and 6 months roughly in the Baltics, that means that around year-end these rate cuts will be priced in, and the first quarter next year then will be the first quarter where you have a full quarter effect. Then as I've said before, you'll have to add your own assumptions on potential further rate cuts from the central banks, volume growth and margin development. When it comes to the VAT, then I don't know. There is a discussion from the Swedish government to change the VAT legislation. And everything around the VAT recoveries is due to that there has been a clash between the Swedish VAT law and the European regulation around that. So I would expect in a couple of years that there will be a new Swedish law in place. I don't know how fast or when it will come or what it will mean. So I don't -- we don't know. We'll have to see what happens. But we have so far then asked back for '19 to '23. Now it's clear '23, I've been a bit back and forth on it. But '19 to '23, we have asked recoveries for. And then let's see for the years after how things play out. Operator: [Operator Instructions] The next question from Riccardo Rovere, Mediobanca. Riccardo Rovere: Just a quick follow-up, again, on NII. Do you think that the pickup in lending volumes in general, and also deposits could somehow offset the last leg of pricing that you've just mentioned, 3 months in Sweden, 6 months in the Baltics. It should be visible by the end of the year, the same volumes can offset that? Jens Henriksson: We lost you. But thank you, Riccardo. Riccardo Rovere: Can you hear me? Jens Henriksson: Okay. Sorry. Now we can. Do you want to... Riccardo Rovere: Can you hear me now? Jon Lidefelt: Yes. Jens Henriksson: Yes. We hear you. Okay, please repeat. Riccardo Rovere: Okay, fine. Just wondering whether you think the volume growth, deposits and loans could somehow offset the last legacy repricing that you've just mentioned, 3 months in Sweden, 6 months in the Baltics, so to say that the last cuts done should be visible by the end of the year because that is the margin part of the equation in NII. I was wondering whether the volume side of the equation can somehow offset it. Jon Lidefelt: Thank you, Riccardo. Yes, I mean you're perfectly right, but I do not sort of forecast the NII. So I can leave that to you to do your own assumptions on volume growth, margin development and so forth. But of course, there is an offsetting effect on this. I said that in this quarter, higher volumes has had a positive impact of SEK 94 million on the NII. So of course, growth do offset. But I'll leave you to do your own assumptions on how that will develop going further. Operator: This was the last question. I would like to turn the conference back over to Maria Caneman for any closing remarks. Jens Henriksson: Well, I'll take that, Maria, if it's okay with you. So thank you for calling in, and thank you for always asking tough and knowledgeable questions. I now look forward to meeting you and many of your colleagues in our dialogue on Swedbank. Thank you for calling in. Bye.
Operator: Welcome, everyone, to Telia Company's Q3 2025 Results Presentation. And with that, I will now hand it over to Telia Company's Head of Investor Relations, Erik Strandin Pers. Please go ahead. The floor is yours. Erik Pers Berglund: Thank you, Jen. Welcome, everyone, to the call. We have our CEO, Patrik Hofbauer; and our CFO, Eric Hageman, in the room, and I hand over the word to Patrik. Please go ahead. Patrik Hofbauer: Thank you, Erik, and good morning. Q3 was, in many ways, an important quarter as it confirms that we are doing the right things for our customers. Our group-wide NPS, so Net Promoter Score, continued to improve and has trended positively all quarters this year. Telia Sweden again won a clear majority of awards in the customer satisfaction survey by SKI. And in both Finland and Norway, we had strong outcomes in the EPSI surveys on our customer satisfaction. We also continue to deliver on the value creation plan that we laid out in Q3 last year with EBITDA growth supported by profitable growth in service revenues as well as cost efficiencies. This helped drive an increase in free cash flow, which again more than covered our SEK 2 billion dividend for the quarter. And as we talked about already 3 months ago, it was an eventful M&A quarter. The closing of TV and Media transaction strengthened our balance sheet further. In July, we also signed a memorandum of understanding with our partner in Latvia, and we are now working hard to ensure that both parties fulfill the commitment to sign a share purchase agreement before year-end. We have also launched a formal offer to buy Bredband2, which will strengthen our consumer business in Sweden. And finally, we are upgrading our full year outlook for the free cash flow to around SEK 8 billion from SEK 7.5 billion before, reflecting, among other things, strong CapEx discipline. And we are also now changing our full year outlook for booked CapEx from SEK 14 billion to around SEK 13 billion. Now let's go into the financial highlights. Service revenue growth continued to be good in Sweden and the Baltics, but partly offset by decline in Norway, meaning overall growth of 1%. EBITDA growth of 4.4% was as expected, a bit below the ambition for the full year, but not too much, and with both Sweden and Finland continued to perform well. CapEx continued to be well below our SEK 14 billion limit. And even though we expect a seasonal pickup in Q4, we are already comfortable -- we are very comfortable, sorry, to lower the full year outlook to around SEK 13 billion. Free cash flow will continue to be strong, driven by higher EBITDA, lower interest payments and positive working capital movements. This, together with growth in EBITDA and proceeds from the TV and Media divestment resulted in a lower leverage, and we ended the quarter at 1.93x. Moving now to Sweden that is performing well on customer metrics. We had a strong outcome in the 2025 SKI survey. For example, Telia won the award for most satisfied enterprise mobile customers. And in consumer, Telia again had the happiest customers among the mobile main brands and fellow came out well among sub-brands. Telia's TV service also had the most satisfied TV customers. More importantly, new customers signing up across mobile, broadband and TV, as you can see here, the broadband intake stands out as it actually is a result of 2 good quarters rather than one since around 10,000 new customers in Q2 were registered in Q3. The late registration was related to our transition into a new system. In Enterprise, we signed a long-term partnership with Sweden's largest train operator, SJ, to deliver high-quality communication for the entire train fleet. Financially, Sweden is well on track to reach the full year plan with service revenue growth at 2%, driven mainly by broadband and TV. As a reminder, revenue growth on a quarterly basis is affected by project-based revenues, which is lumpier than subscription-based revenues. In Q4, we expect more project-based revenues than we had in Q3. And EBITDA growth was again strong on the back of profitable growth and cost savings driven by the Change Program. Let's now move east to Finland. That came out as the #1 in the EPSI's survey on customer satisfaction in both Consumer and Enterprise. This is promising and shows that we have good foundation in Finland to build on. Mobile net adds improved, and we did not lose any mobile handset customer this quarter. The net loss was due to mobile broadband, where the market is declining. Our SME base grew as did the number of consumer handset customers for the first time in a very, very long time. ARPU grew at the same time by 4%. On fiber, we are also adding customers not least from being a service provider in our Valokuitunen JV network. Financially, we saw a slight improvement in service revenue trends with growth in Consumer and a decline in Enterprise, driven in part by our choices to discontinue noncore activities and in part by a weak market. And finally, the strong execution of the Change Program continued to give tangible savings and resulted in EBITDA growth at high single digits with a margin climbing to 34.6% versus 32.5% one year ago. So in summary, we are making progress on all 3 of our midterm ambitions for Finland that we presented 1 year ago, stabilization of the mobile market share, improvement in SME and improved profitability. Now moving west to Norway, which is, as expected, saw another challenging quarter with both service revenue and EBITDA growth clearly in negative territory due to lower mobile wholesale revenue and headwinds in the broadband and TV. Like for Sweden and Finland, Norway came out well in customer satisfaction surveys with Phonero winning the EPSI survey for the fourth consecutive year in the B2B category. We expect to have reached the low point when it comes to service revenue, although not yet when it comes to EBITDA because of the timing of OpEx. So EBITDA decline in Q4 is currently expected to remain similar to the levels we have seen in Q2 and Q3. The reason for headwinds in Norway are well known, and the mobile wholesale decline is expected to be around SEK 95 million in the fourth quarter. The other part, a weak performance in our fixed business is something we are addressing very actively. And on the next slide, I want to share some more information about this development. So we have now launched a new value proposition in all segments, modernized our TV platform, modernized our installed base of CPEs, signed future-proof new content agreements and created a dedicated organization for fixed consumer services. Network quality has improved. And as you saw, we added TV and broadband customers in this quarter. At our investor update 1 year ago, we talked about our backbone of our network being already fully fiberized and around 50% of our broadband customers were on fiber or fixed wireless access connections. Today, the share is around 55%. And as we have said before, this is too slow. And from next year, we will see a clear acceleration in the coax to fiber upgrades, in line with the commitment we made last year to invest more. This will be done within our existing CapEx frame. Now moving on to Lithuania, which had a solid quarter with healthy service revenue growth supported by both mobile and fixed, something that together with continued efficiencies resulted in an EBITDA growth of 9% and EBITDA minus CapEx that remained at a record high level of SEK 1.6 billion on a rolling 12-month basis. At the end of the quarter, Lithuania successfully launched Telia Safe, a security add-on, and it's also completed an IT transformation within B2C, 2 achievements which will help our growth journey going forward. Now let's move to Estonia. That saw both service revenue and EBITDA growth accelerating following great momentum in especially the public sector and good work on generating efficiencies. And like for Lithuania, cash conversion remained at record levels. And with that, I hand over to Eric before I come back to summarize the quarter. Eric Hageman: Thank you, Patrik. Let me now go through the financial development of the quarter, starting as usual with service revenue and EBITDA. In the quarter, service revenue growth remained at 1% as stable or improved performance in Sweden, Finland and the Baltics was offset by pressure in Norway, predominantly driven by lower wholesale revenue. In Finland, we also continue to simplify our product portfolio, and we are now getting close to the end of the ramp down of the e-invoicing business. Year-to-date, we are at 1.3% service revenue growth. And looking into the last quarter of 2025, we expect an improvement related to pricing, growth in Enterprise and public sector contracts and less revenue decline in Norway. Moving to EBITDA. Growth in Q3 was somewhat below the 5% ambition for the year as we flagged 3 months ago, with all markets except Norway growing on the back of higher service revenue growth and efficiencies created by the Change Program. We're also encouraged to see that our EBITDA margin was 140 basis points higher than in the same quarter last year, in line with our margin expansion promise at the investor update September last year. As mentioned, we expect improvement in service revenue growth in Q4. For EBITDA, we currently expect growth in Q4 to be approximately similar to the growth rate we saw in Q3, penciling in a modest increase in sales and marketing costs, both in Norway and Finland. Moving now to OpEx and CapEx. As we can see on the left-hand side of this page, continued cost discipline and the positive impact of our Change Program continues to drive down resource costs. Our operating expenses declined by 2.9%. This more than compensated for an increased level of marketing spend across the Nordic markets as well as higher pricing from IT vendors. OpEx as a percentage of service revenue continued to trend down this quarter, this time by 120 basis points to 28.4%. We increasingly managed to do more with less and have only just started on this journey to become more efficient. We also remain very committed to being disciplined on our capital expenditures. As you can see from the middle graph, we ended the quarter with CapEx of SEK 12.5 billion on a 12-month rolling basis, more than SEK 2 billion less than 24 months ago. This shows how being focused and having clear priorities can be translated into better capital efficiencies. CapEx spend is expected to increase somewhat in the last quarter of the year, in line with normal telco seasonality. But overall, we don't expect the current run rate to change much, which is why we today lowered our expectations for the full year to around SEK 13 billion. Finally, as you can see on the right-hand side, growing EBITDA and lowering CapEx resulted in EBITDA minus CapEx comfortably above the SEK 19 billion on a 12-month basis. This equals a step-up of 9% versus a year ago and also resulted in a much improved cash conversion, which is now 61% on a rolling 12-month basis, up from 58% a year ago. Let's now have a look at the free cash flow for the quarter. Free cash flow improved by SEK 1.5 billion compared to the corresponding quarter last year. And as for several quarters now, the key building block is our profitable growth. Cash CapEx increased by SEK 300 million, which was driven by phasing in payments and a rebalancing of the vendor financing program, the latter, however, having an equal positive contribution to working capital. Interest payments declined by SEK 300 million due to lower debt and partly also because last year's number was rather unusual high due to phasing of interest between Q2 and Q3. Working capital was, as you can see, marginally positive, which was a significant improvement versus last year as the number then was impacted by the rightsizing we did of our vendor financing program. Finally, we saw a SEK 200 million higher outflow of minority dividends in Q3 related to a catch-up dividend paid to our co-owner of our mobile business in Latvia. Overall, with SEK 6.9 billion free cash flow delivered in the first 9 months of the year and the clear belief that the cash flow generation will remain strong also in Q4, we raised the outlook today for the full year from around SEK 7.5 billion to now around SEK 8 billion. Let's now briefly look at our net debt and leverage development. As you can see on the right-hand side, our net debt decreased by SEK 7.1 billion in the quarter as free cash flow more than covered our quarterly dividend payment, and we also received the proceeds from the divestment of TV and Media. The combination of lower debt and growing EBITDA reduced leverage to 1.93x compared to 2.09x at the end of last quarter. Looking at the longer-term trend on the bottom of the left of this page, we can clearly see that leverage has come down over the last 2 years as we have grown EBITDA and used the cash proceeds from our divestments to improve our balance sheet. This now puts us in a very good position to further strengthen our business, like, for example, the last quarter, we announced SEK 3 billion acquisition of Bredband2 in Sweden. The phase 2 investigation of Bredband2 has now started. And as said before, we expect to close the transaction in Q1 next year. Finally, before I hand over to Patrik, I would like to say a few words on some of the milestones we have achieved in the third quarter and how that resonates with our value creation agenda laid out at the investor update about a year ago. As you may remember, we laid out a clear agenda at the investor update on how we aim to create shareholder value. And I believe we continue to make good progress on it. Firstly, free cash flow has covered our dividends for the first 9 months of the year. And as you have seen in our updated outlook, we expect that also to be the case for the full year. 2025 is the first time in quite a number of years where our free cash flow generation covers our dividend commitment without the recourse to growing vendor financing. Largely, this free cash flow uplift is driven by our profitable growth trajectory and CapEx discipline, the latter which we also upgraded today. Secondly, on active portfolio management, we closed the TV and Media transaction this quarter and are making a bolt-on acquisition to further strengthen our core business in Sweden, while we are working hard on securing the full exit for Latvia. Thirdly, our balance sheet continues to strengthen. Liquidity is strong. And after closing the TV and Media divestment, we are below the 2 to 2.5x net debt-to-EBITDA range. Fourthly, we paid another quarterly dividend to our shareholders, and we remain committed to deliver on a progressive dividend policy. And finally, at the CMD last year, we set out a plan to return to an all-in free cash flow covering our dividend commitment. Our free cash flow guidance upgrade today means we will be covering the dividend despite the absence of the free cash flow from our TV and Media business. See this as another proof point that we are very serious about delivering on our commitment to shareholders. With that, I hand back to you, Patrik. Patrik Hofbauer: Thank you, Eric. Before I summarize the quarter, I want to reflect on what has taken place since we launched our change program last year and how we are taking steps toward a simpler, faster and more efficient Telia. The number of employees and resource consultants in Telia is now almost 25% fewer than it was in the start -- or at the start of 2024 after our Change Program and the exit from TV and Media. Central resources are down by half. We also have half as many products and half as many IT systems managed centrally compared to the start of last year. Many have been moved and are now managed by the country organizations who are closer to the customers and some have been closed down. We are encouraged by the results so far. Network incidents have continued to become fewer and so has incoming calls from customers who are contacting us with issues and questions. This means both better customer satisfaction and material monetary savings. Meanwhile, employee engagement is up and our people see that barriers to execution are being removed, collaboration and decision-making is improving and of course, EBITDA growth has improved. This is a promising start of first few steps, but we intend to do more on all parts of our agenda. We can still become much simpler, faster and more efficient than we are today. And then on the summary of the quarter, which was overall in line with our own internal expectations, we continued a healthy group EBITDA development, supported by profitable growth and efficiencies from the Change Program. And we continue to see clear signs that customers appreciate our high-quality services and see the benefit from how those improve their everyday lives. We continue to execute on our agenda, and we can now upgrade our free cash flow from outlook to fully cover our dividend, as Eric said, which is a key milestone for us. And with that, I will open up for questions. Thank you. Operator: [Operator Instructions] Our first question comes from Owen McGiveron with Bank of America. Owen McGiveron: It's Owen McGiveron from Bank of America. So on your upgraded guidance, how should we think about 2026 and 2027 CapEx within the frame of your medium-term ambitions? Should we expect similar levels versus 2025 or more moderation? And how does the additional investment in Norway play into this? Just wanted a few more details on the moving parts. Patrik Hofbauer: I can start. It's Patrik here. First of all, we are not guiding yet on '26 and '27. We will come back to that in January. But I can say we have worked hard and actively to improve, I would say, the discipline when it comes to cost and also how we use the capital. That discipline will not be less next year or the coming year. So we continue to see how we can use the capital much more efficient than we are today, and that will continue. But we will come back in January with the guidance or update or whatever in January -- in that call. So Eric, do you want to add something? Eric Hageman: Yes. I mean that would -- just my simple observation that it doesn't change so much from one moment to the next. And with regards to Norway, it's part of that. So the slide that Patrik talked about where we say we want to accelerate the rollout of fiber. That part is at the SEK 1 billion that we already talked about in the investor update last year. Part of that money is being invested this year. Part of it will be invested in the coming couple of years, but it's firmly part of that CapEx guidance that we have just talked about. Operator: Our next question comes from Andreas Joelsson with DNB Carnegie. Andreas Joelsson: Just to follow up on your comment on further efficiency gains. Could you perhaps describe how you view the cost base currently and what else you can do? From the last slide, it seems like you have been able to do this Change Program without any basic negative effects. So are you encouraged to do more? Do you think you can do more on the cost side in order to get these efficiency gains? Blurry question, but I hope you understand. Patrik Hofbauer: Andreas, I understand your question very well. It was not blurry at all. So first of all, the Change Program went obviously very well. We have delivered on basically all parameters, and we see that the operations is really much more stable, which we had, of course, the concerns about when we do this big change that we did last year. But so far, everything is running very well. Then remember, last year, we had this investor update, we gave out a 3-year plan with a CAGR on service revenues around 2%, EBITDA at 4% and then a free cash flow above SEK 10 billion in -- or at least SEK 10 billion in 2027. And that requires to continuously work with efficiency to deliver on that plan. And we are fully committed to deliver on the plan that we have put in place, which means that we will actively, of course, to improve the operations from year-to-year. So I think that is a clear answer on your question where we are heading. Well, I hope at least. Andreas Joelsson: Yes, absolutely. Less blurrier than the question. Patrik Hofbauer: Thank you. Operator: Our next question comes from Andrew Lee from Goldman Sachs. Andrew Lee: So I have a question each on Finland and Norway, which are 2 of the areas where investors had a bit less certainty recently. Just on Finland, there's some improving -- slightly improving service revenue growth trend today and also sub-trends. Could you just talk about how you're achieving that? And also how you're thinking about the balance of not disrupting the market too much, given we've had one of your competitors basically disappointed fairly materially on their mobile service revenue growth outlook in the near term. Just comments around kind of how you're improving and how you don't disrupt the market too much would be helpful. And then secondly, on Norway, there are quite a few tailwinds or easier comps as we go into Q4. One of the ones that's harder for us to judge is the price rises that have been put through in Norway in September. I wonder if you could just talk about how you see the competitive environment and price rises boosting growth from Q4 onwards. Patrik Hofbauer: Andrew, thanks for the questions. I can start with Finland. I think, Eric, you can take Norway then, so we divide a little bit here. Starting off with Finland first. I mean, the most important part is actually the customer satisfaction, which we have been invested quite heavily in. So we have upgraded our network and then several activities that we're now seeing is paying off. Then on top, we also had some good execution here, especially in the consumer side to turn these trends around. And we are not at all disrupting the market. I don't know what that is coming from. We are very disciplined, but we have good offers in the market together with a good network and good services overall. And then we have also a consumer operation that is more efficient every day. And remember, we have said clearly that we are accepted to lose market shares in Finland for too many years now. And we said clearly, we want to stabilize that, and that is what we're doing. So we see good development in Finland when it comes to the consumer business. Still, we have a lot more to do. And then also on the SME side, on the small and medium enterprise segment, where we have a clear underrepresentation versus our total market share, where we are focused on and having good also development on. So I think this is not -- I think it's a healthy operation. We are improving, and we will continue to improve during 2026 as well actually to defend and stabilize our market share. That's actually what we're doing. So I think good done by the whole team in Finland. Eric Hageman: Yes. With regards to Norway, so very encouraged by preliminary results of those price rises. Obviously, the market is, as per your Finland question, is never to disrupt, but certainly to defend our position. So let's see what that does to our churn numbers. I think the main thing when it comes to Norway is, as we said last quarter, it will take some time for this to turn around. One, we haven't quite lapsed the wholesale loss, that ICE revenue was an impact of SEK 150 million on our revenue in the quarter. So we're working on that. We've made some management changes in the organization. We're fixing fixed, as Patrik just talked to in this slide, and that will take a bit of time. So we guided again for what is likely to be another soft EBITDA quarter for Norway, but hopefully slightly better on the service revenue because they are slightly easier comps. Operator: Our next question comes from Fredrik Lithell with SHAB. Fredrik Lithell: I have two of them. You have, on earlier calls, talked about that service revenue should be a bit slower, both in Q2 and Q3 and then to reaccelerate a little bit in Q4. And I think, Eric, you alluded to that in your part of the presentation. If you could sort of stack up and rank the important part for the improved service revenue growth in Q4, that would be interesting to hear. And then also the CapEx, the lower CapEx from SEK 14 billion to SEK 13 billion on a booked level versus your raised free cash flow of SEK 1 billion down and SEK 0.5 billion up. Could you sort of walk us through a little bit what movements you have that support your free cash flow raised guidance would be interesting. Patrik Hofbauer: I can start with a comment on the service revenue. And right, you said that we said that Q2 and Q3 will be a bit softer, but then we'll see an improved situation in Q4. And we do expect better growth in Q4 than in Q3 with especially Sweden to continue to look solid, and we expect more project-based revenues to step up here in Q4, and that is the main reason. Erik Pers Berglund: It's mission-critical, as I said a few times. Eric Hageman: Yes, on CapEx, it's very simple. We sort of never felt we're going to do the SEK 14 billion, right, when we guided for less. We're very happy with the progress that we've made as an organization on a profitable growth, which ultimately drives our free cash flow growth. And then when you go through 9 months of the year, where you then feel is this the moment where we have that visibility. It's pretty clear when you do almost SEK 7 billion of free cash flow that an upgrade was necessary. And on the CapEx, yes, we have good visibility for where we will land for the year and also where that will trend going forward as per the first question we got. So very happy with how that goes through. And yes, let's see where we land for the full year when it comes to free cash flow. Patrik Hofbauer: If I may add a clarification, Fredrik. We never plan to invest SEK 14 billion. It was always below, right? So it's not a SEK 1 billion downgrade as such, but yes. Operator: Our next question comes from Erik Lindholm with SEB. Erik Lindholm-Rojestal: So maybe a follow-up to Andreas' very clearly worded question. Just thinking of the current trends here, it looks like you will exit the year at about 4.5% perhaps EBITDA growth rate approximately and the comparisons seem to get a lot tougher from Q1 and onwards. I'm just thinking of the outlook here for '26 and beyond. I mean, do you think you need to clearly accelerate cost savings to reach your targeted EBITDA CAGR of 4% between '25 and '27? Patrik Hofbauer: I think the answer will be pretty much in line with Andreas' question. So we -- I mean, when we set the plan, the 3-year plan of the 2% and the 4% then related to EBITDA, as you know, we were clear on that, okay, this is a rightsizing that we did with Project Sprint. It was an internal name on it that we did last year, the minus 3,000, and we executed on them. And then we need to continue to take out cost, and that will be in every aspect and every area of the cost base. So this is work ongoing. So I don't -- and I don't want to be more specific on how we'll do that, but we will show you quarter-by-quarter that we are able to take out cost to defend because we want to -- we are fully committed again to deliver on the 4% CAGR growth on EBITDA. Then we need to -- because that's a combination of service revenue growth and cost out to be more efficient. Eric Hageman: Yes. Maybe to add from my perspective is, as time goes on, now having done 9 months, SEK 7 billion of free cash flow, the upgrade that you've seen, it gives us more confidence as a management team that we are on the right path to deliver what we promised, not just the 2% service revenue and the 4% EBITDA in the coming years, but also the free cash flow that we've promised for 2027 of at least SEK 10 billion, right? The combination of profitable growth, good CapEx discipline leads to better free cash flow. The visibility that we have gives us confidence that we're on the right path to deliver on that promise of SEK 10 billion plus by 2027. Operator: Our next question comes from Maurice Patrick with Barclays. Maurice Patrick: For me, just a question on Sweden, please. So yesterday, it was interesting to hear Tele2 talking strongly about the increase in pricing or cost of the open fiber networks, the dissatisfaction about delays on regulation. Just curious for your insights in terms of these kind of key trends, the increase in wholesale pricing on open networks, upcoming regulatory changes and delays and how that impacts you. I was intrigued that Tele2 sort of talked about how they were going to push fixed wireless access more, which sounds probably more like grabbing headlines than reality. But again, curious for your insights in terms of how you see that in the context also of you delivering a pretty solid broadband number this quarter and last. Patrik Hofbauer: Yes. I mean, coming back then to the access cost for local networks. I mean, we have seen the high cost for the local networks access for several years. It's nothing new. So -- and that is driven basically by ourselves growing service provider in these local networks and then also higher access prices. So we haven't seen any recently that increase. This has been going on for a while. So I don't know exactly what happened there. And so yes, and also on our own networks, we have made very modest increase in our [indiscernible] business, a couple of percentage points only. So I'm not -- I don't recognize really the whole situation from a new thing. This has been going on for many years. So that, yes, around regulation... Erik Pers Berglund: Yes, regulation has been postponed as you know again -- so we'll see what happens when we eventually get there. But I think you're right, that's probably what brought the topic up this quarter. Eric Hageman: But maybe overall on Sweden, we are incredibly happy with the performance there. As you saw, very good service revenue growth, perspective of even more service revenue in Q4, as we indicated, very strong cost control leading to good EBITDA growth. So yes, we hear what others are saying, but we are very happy with our developments in the Swedish market. Erik Pers Berglund: And I think you also mentioned the broadband intake, Maurice. It's a good work over a couple of quarters. As we mentioned, this is some delayed registrations from last quarter as well. Good anti-churn measures after the price increases we did in the beginning of the year. So that's working. And so overall, we're happy with that. Patrik Hofbauer: And continues to perform -- TV continues to perform well and not a surprise. I mean, we have the best product in the market. And obviously, customers are appreciating it. And for the fourth year now, we have got the best feedback from the customer surveys on TV. So all in all, happy with the performance. And again, remember that we have seen a more household perspective on the consumer market in Sweden rather than looking each for the products because our easiest win here is actually to sell more products to existing customers, and that is actually paying off in the strategy. Operator: Our next question comes from Ajay Soni with JPMorgan. Ajay Soni: My one is just around leverage and shareholder returns. So obviously, you're below your target at the moment. We have some acquisitions coming maybe in the next few months. But it feels like you'll still end up below your target range of 2 to 2.5x. Do you see an opportunity to maybe distribute some of the proceeds from the TV and Media sale as buybacks or extraordinary returns? And if so, when would this -- when would you approach this decision with the Board? Eric Hageman: Thank you. Good question. We're very happy with the direction of travel. As a team, we've worked very hard because it's one of the building blocks of the value creation plan is having a healthier balance sheet, one, because we pay less interest than on the debt that we have outstanding, which helps our free cash flow growth, which is the other pillar of our value creation. So that's a benefit from that. Secondly, we are a simpler organization to run based on all these divestments. We're very happy with the progress that we're making. We have that final building block, which is doing, as I said earlier today, coming right on progressively growing dividend, next year is when we'll come back to that. And the beginning of the year is when we will set out our store with regards to the guidance is when we have our conversations with the Board. So we will come back to that. Maybe the last point is, we obviously also use our balance sheet to strengthen our business. We've done the announcement of Bredband [indiscernible]. So it's important for us that we have the flexibility to be able to do that as well. So -- but we know it's an important pillar of our value creation plan, and we'll come back to that at the beginning of next year. Operator: Our next question comes from [indiscernible] from BNP Paribas. Unknown Analyst: I had a question, please, on Finland, where you've delivered strong EBITDA improvement over the last sort of 3 to 4 quarters. You're now talking about how you're seeing underlying improvements in your commercial trends as well. Could you maybe share some thoughts on how you see your Finnish profitability evolving over the next couple of years, say? And then just a quick clarification around the Norway CapEx, I'm sorry if I missed this. Does this at all change your thinking around the FY '27 free cash flow target of SEK 10 billion plus? Or is that reflected in this? Patrik Hofbauer: So I can start with the later one with the CapEx. No, it's reflected in the figures and will not impact our 2027 target. So to be super clear, it's in the envelope of that. And then Finland? Eric Hageman: Yes, with Finland, maybe a step back, a big part, and we talked about it today in the voice over as well of the analyst presentation, which is margin expansion was a very important part of what we talked about in the investor update last year for all countries. If you look at the Q3 results, you see that apart from Norway because of the loss of the wholesale contract, but all other countries, you see the margin expansion coming through. And what is that? It is our discipline around the programs of doing more with fewer people, but also the ancillary costs that we have. We have a very, very clear plan, and that underpins that delta between the 2% service revenue and the 4% EBITDA growth that Patrik mentioned earlier in his answer to the first question. That is still very, very high on the agenda. So you should expect more margin expansion, including in a market like Finland in the coming years. Patrik Hofbauer: Can I just add also Finland? And don't -- to build on what Eric said, don't also forget to look into the ARPU development that we have in Finland, which is 4% up on the mobile postpaid, which is also very positive. And that has been driving the agenda to run price increases, but also a better mix in the portfolio. So all these activities are actually paying off at the moment. But we're still a way to go to be where we want to be in Finland, to be clear. Operator: Our next question comes from Keval Khiroya with Deutsche Bank. Keval Khiroya: I've got two questions, please. So at the CMD, you showed a target for mission-critical revenues to more than double from '23 to '27. You've been quite clear on this as a source of support for Q4. But can you comment on how we should think about the mission-critical growth in '26 compared to the growth in '25? It's obviously a bit difficult for us to model. And then secondly, on Norway, you've talked quite clearly about the moving parts. But can you comment on when you actually expect Norway to stabilize EBITDA? Patrik Hofbauer: Yes. I'm not sure I understood the first question on mission critical. But I can give you -- I mean, we have a clear -- I mean, we said it will double rightly, as you said, for the coming years, and we see that it's coming into now to our books and orders and also that's the reason why we will see a comfortable increase in Q4 in Sweden. So that's part of it. And this will continue, but they are a bit more lumpier, these revenues. So we will see it continue in the coming years as well. But we have not been explicit more than say that we will double from where we came from. And we will still stand with that. We are delivering on what we have said and on the expectations. So no surprises coming in. Eric Hageman: Yes. With regard to Norway and sort of the negative EBITDA that we've seen, we've guided already for that for Q4, as you heard earlier today, that will take a couple of quarters. We're still not quite out of the impact of the wholesale revenue. We've seen some increase in energy costs there. We typically have salary inflation in our countries as well that we have to work with. So we do see great opportunities to turn around that business, fixing fixed, making sure we stem the losses we have on mobile. TV is back on after the outage that we had, but it takes us a couple of quarters. So as we said last -- at the half year results, we need a bit of patience before we also, from an EBITDA perspective, turn around this business. Operator: Our next question comes from Viktor Hogberg with Danske Bank. Viktor Högberg: So just a question on the new free cash flow guide. Just a clarification maybe. Given the assumption of SEK 650 million in spectrum CapEx annually included in the guide for this year, would you say that you still expect the real free cash flow that is including the higher spectrum CapEx to still cover the dividend this year as we're getting close to the FY results? Just want to make sure that we're all speaking the same language. That's the first question. Erik Pers Berglund: Thanks, Viktor. It's Erik here at IR. We don't guide for free cash flow, including the real spectrum cost as you might understand, simply because we're not able or allowed to speak about spectrum CapEx ahead of the auction. So we have to stick to the normalized spectrum when we talk about free cash flow guidance. But maybe it's worthwhile to add a comment to that. So SEK 650 million is kind of a rough average for what it's been over a decade. Last year was lower than SEK 650 million. This year, we know it will be higher because we have already the SEK 780 million from the 2023 auction to pay plus, let's see about the SEK 1,800 million in Sweden. Next year, we don't have any big auctions coming up. So it goes up and down. But yes, that's where we are. Viktor Högberg: Okay. Fair enough. On the second question, just another clarification, maybe if you were talking about the group or just Norway on Q4 group EBITDA growth, the trend being in line with Q3. Was that for the group or for Norway, so below 5% that is for Q4. Patrik Hofbauer: So Eric said in his presentation that the EBITDA growth for the group is expected to be roughly the same in Q4 as in Q3. So that's for the group. And for Norway, we expect EBITDA improvement to take a couple of quarters, as Eric said. So we need some more patience for Norway specifically. Operator: Our final question comes from Siyi He with Citigroup. Siyi He: I have two actually. And my first question is on Finland. I mean, the ARPU development is quite encouraging. I'm just wondering if you can share with us how you think about your price increase strategy because I think you so far haven't really followed the security added tariff changes that put through by 2 of your competitors in Finland. And my second question is on service revenue growth in Sweden. And I just want to ask about how we think about 2026 and '27, given that the price is still doing quite well and have lower legacy drags and mission-critical revenues should also come through. Do you think it's fair to assume that the top line trend is next year and year after could be better than what we have witnessed this year so far? Patrik Hofbauer: So I can take the first question on Finland. I'm a bit surprised that we get the question all over and over again regarding the package, the security package. Look back in Finland, we have been driving the price increase raise there and the value creation agenda for many, many years. And remember, our position, we are the #3 mobile operator in the market. And if we look at the ARPU levels, they are very similar to each other. And we should be the challenger in the market, not the responsible leader in the market. So look at our position, I think, we are looking into different ways of driving price increases, i.e., ARPU increases. And we don't need to follow what our competitors are doing all the time. We have our own agenda that we are running and that we're looking into to make sure that we continue to grow and defend the position that we have in the market. And that you will see going forward as well. And I don't want to go into commenting on every package and price, et cetera. So we have our agenda. We are running that. We are #3 in the market. We should be the challenger. We have been too much more -- too responsible as a #3 player and acting like we were the incumbent almost in Finland or the leader. So I think we are well positioned. We have done a good quarter and good improvement during the year, and that will continue. I expect that will continue in the next year as well. Erik Pers Berglund: And to add a little bit, I think that our main way to drive ARPU is probably not that different from the competition. We look at the subscriber base cohort by cohort as certain cohorts exit a certain tariff or contract, then we can move them up to a higher value, higher price level, and that's how you work through the subscriber base with different prices. And that's giving the results. You can see there. I think the 4% is roughly in line with the competition. So even though we don't do exactly the same thing on security add-ons. Eric Hageman: Yes. With regards to Sweden or specifically service revenue in Sweden, very encouraged by what we saw in Q3, the first 9 months performance and what we're expecting for the full year. A little bit like our answer on CapEx, that's not something that changes overnight, right, when you have certain momentum. And clearly, we're guiding for a stronger Q4, driven by what we're doing in mission-critical, particularly, but also just the underlying business in broadband, in TV, the convergence play is really working well for us. And on top of that, some price increases. So we expect that momentum to continue. Said in a slightly different way, if you think about a medium-term guidance, the 2% and the 4%, that would not be possible without Sweden delivering that, right, because it's roughly half of our business. So again, we feel comfortable with that medium-term guidance, and we're very encouraged by the performance that we're seeing in Sweden. Operator: There are no further questions. Erik Pers Berglund: All right. Thank you very much, everybody, for calling in. Many good questions, and we look forward to continuing the discussions over the next quarter. Thank you, and goodbye.
Odd-Geir Lyngstad: Hello, and good morning, and a very warm welcome to Elkem's Third Quarter Results Presentation. My name is Odd-Geir Lyngstad, and I'm responsible for Investor Relations here in Elkem. In today's presentation, we will go through the highlights for the quarter and give an update on the markets before we go through the outlook for the fourth quarter. CEO, Helge Aasen, will take us through this first part of the presentation before CFO, Morten Viga, will present the third quarter results in more detail. We will open for Q&A after Helge and Morten's presentations. So with that, I give the word to CEO, Helge Aasen. Helge Aasen: Thank you, Odd-Geir, and good morning, everyone. Very nice to see the turn up today. Yes, we seem to be repeating ourselves when it comes to describing the markets we operate in. The story about weak and challenging conditions doesn't seem to go away. And the market does actually remain much the same as it has been for a while now. However, despite challenging macroeconomic environment, Elkem's results are relatively good, but of course, below our financial targets. The EBITDA for the third, I'm sorry, the EBITDA for the third quarter ended at NOK 829 million, which gave an EBITDA margin of 11% for the group. If you exclude silicones, the operating income ended at NOK 4.1 billion with an EBITDA of NOK 586 million, which then represents a margin of 14%. This result is to a great extent, explained by good operational performance and ongoing cost improvements. Silicon Products was impacted by low silicon and ferrosilicon prices in the third quarter. But Specialty segment as Foundry alloys and Microsilica, which is a silica powder, delivered improved results. Carbon Solutions continued to deliver good margins, but the operating income and the following EBITDA is impacted by the lower sales. Silicones has improved on cost and market positions and delivered a higher EBITDA compared to the same period last year. The strategic review is ongoing. We gave an announcement some weeks ago, and I can just confirm that this is moving ahead as planned with an exclusive sales process, and we are still aiming for closing this transaction within the first half of next year. So before we go on to the market update and the results, I'd like to say a few words about our ESG work. It's built on two main pillars: reduce CO2 emissions and to supply the green transition with critical materials. Our aim is to reduce and ultimately remove fossil CO2 emissions from the smelting processes. Elkem supports the green transition through the supply of critical raw materials, and we work systematically to cut emissions and reduce waste throughout the entire value chain. Circularity is also playing an increasingly important role in this world. And we have introduced a new, actually a breakthrough method for recycling silicones through a mechanical recycling. And this then goes back into what used to be waste now is going back into new formulations. Our efforts within ESG are also recognized with strong ratings from EcoVadis and CDP. And in the third quarter, we received a gold rating from EcoVadis, and this puts us among the top 5% of all the companies they are assessing globally. And over the past years, Elkem has consistently received either gold or platinum ratings from EcoVadis, which places us among the top of the companies they are rating. Here, we show a couple of examples from Silicon Products and Carbon Solutions, illustrating some of our strong cost and market positions. I mentioned Microsilica initially. It's SiO2 silica powder, a byproduct from the ferrosilicon and silicon metal smelting processes. And over decades, we have developed this into a portfolio of specialty products, which go into quite a wide range of end applications. To mention some of them, construction, well drilling, cementing, refractories and also polymers. Over the past years, this product area has consistently grown and shown stable high margins. And I think it's a very good excellent example of how we are able to specialize on the basis of commodity production capacity. We're also a leading producer of electrode paste, electrodes and refractory materials coming from Elkem Carbon. This goes into the metallurgical industry. And these products are probably not very familiar to you, but they are critical consumables and lining materials, which are very important for stable operations and lifetime in furnaces and electrolyser cells in the aluminum industry. Also here, we are focusing on product development, and we have developed a more environmentally friendly product. With bio-based binders, which greatly improves working conditions. This solution has a proven performance record, and we have installed the product in more than 15,000 aluminum electrolytic cells. And we are gaining market share. Competitive cost position can, of course, be explained by many factors, operational knowledge, operational excellence, economies of scale, upstream integration, et cetera. However, electric power is another, of course, very important cost factor in the production of most metals. We have long-term supply agreements for renewable hydropower in Norway, Iceland, Canada, Paraguay. And access to long-term competitive energy contracts is a prerequisite for achieving competitiveness and also, of course, predictability in order to plan investments, et cetera. And renewable sourcing of energy also gives us a low carbon footprint, which clearly is, if not gaining or achieving premiums on end products, it gives us a preferential supplier status. CRU, a global business intelligence company, have published their analysis of the 2025 cost curve, which is illustrated on the graph here. This is for silicon 99, silicon metal. And as you can see from the chart, this puts our Salten and Thamshavn plants in Norway among the lowest cost producers in the western part of the world. Then coming to another important frame condition, which is trade barriers. That's affecting several markets and industries these days. And as you know, a highly dynamic and quite unpredictable environment. We are affected by this directly and indirectly. Two relevant examples are EU's ongoing safeguard assessment on silicon and on ferrosilicon and potentially silicon metal and also a U.S. countervailing duties assessment on silicon metal imports. EU safeguard measures could come into effect from November 19th. It's so far unclear how this is going to affect Elkem and how it will be structured. The potential measures will be aimed at raising prices, obviously, and protecting internal production within the EU, but we don't know how Norway and Iceland will be positioned in it. The regulations appear to focus on ferrosilicon and foundry alloys in this round, and there's no clear indication if silicon will be included. But most likely, silicon will be subject to another process at a later stage. The U.S. has imposed countervailing duties on silicon imported from several countries, including Norway with a preliminary rate of 16.87%. The basis for these duties are the CO2 compensation and CO2 quotas that the Norwegian companies receive under EU's carbon schemes. And our position on this is that these policies are a compensation for CO2 tax and do not constitute countervailable subsidies harming the U.S. domestic industry. We have had similar cases in the past. And each time we have been able to document that there was no injury to U.S. industry. So, we don't know the outcome of this round. It's now introduced as a preliminary measure, and then it will be followed by a permanent decision later on. Unclear when, partly because of the shutdown of the U.S. government at the moment. A few more words on the strategic review process. It's underway, as I mentioned, and it is going according to plan. We cannot say much more about the process beyond the status update that we gave during the third quarter. We are in an exclusive sales process with a major industrial player with a significant presence in the global chemical industry. The process is well aligned with the strategic review and represents an important milestone. And in a challenging market environment. But we are confident that the potential transaction will represent the best possible outcome for the silicones division in Elkem. And we're also confident that this process will be the best outcome for the rest of Elkem and as such, benefit to all stakeholders.Subject to further negotiations, final agreement and necessary approvals, the closing of the transaction is, as mentioned, expected to happen during the first half of next year. Now let's have a look at the markets. Automotive continues to be an important sector for Elkem, driving demand for many of our products. The growth in this sector remains weak with the exception of China, where the production is up in 2025. This is mainly the case for electrical vehicles. During the first half of 2025, the overall production in the EU is characterized by weak order intake and consequently low number of new registrations. Forward-looking forecasts have been revised upwards as markets adapt to ongoing trade and structural changes. Europe's outlook is up, supported by improved expected demand in Germany, France, Austria and Turkey. China's forecast has increased due to incentives and export growth. But overcapacity and price competition clearly persist, especially for electrical vehicles. North America is also seeing upgrades driven by tariff relief and higher production. In South America, the gains are so far limited by very high import pressure. So, any improvement in the automotive sector will definitely have a positive impact for Elkem. Several markets have been impacted by weak demand and various trade regulations and governmental initiatives. In the EU, the silicon reference price dropped by approximately 20% in late June. This was mainly due to low import prices from China, which suffer from, I would say, a severe oversupply. Prices in the EU then recovered modestly again in September due to improved market balance. This was a result of capacity being taken out in Europe as well as higher prices in China. U.S. silicon prices have increased in the third quarter. This is expected to continue to rise due to trade regulations. And in China, we have seen some price recovery from very low levels, mainly due to signals that the government will launch initiatives to curb overcapacity. Discussions are ongoing there regarding new energy consumption standards for the industry, which seems to be aimed at reducing overproduction. The ferrosilicon markets have many of the same drivers as silicon. Also here, we have a market impacted by trade regulations and possible safeguard measures in the EU, which have resulted in price fluctuations. The market sentiment is still characterized by weak demand and downward price pressure. However, based on the expected safeguard measures in the EU in August, we saw ferrosilicon prices jump up. This didn't last very long. It dropped back down again when it became clear that no preliminary measures would be announced. Prices in the U.S. increased towards the end of the third quarter. This was mainly driven by trade regulations. And in China, we've also seen some recovery from very low levels, partly due to this government focus on reducing excess production capacity. It's also somewhat linked to higher raw material costs in China. The market for carbon products is much smaller than silicon and ferrosilicon. We don't have reference prices to compare with here. Quite a big difference between regions when it comes to demand. But obviously, the underlying driver is the production of steel, which again triggers ferroalloy demand and then, of course, the aluminum industry. Global steel production in the third quarter remained quite stable compared to the same quarter last year. Europe experienced a 3% decline, whereas North America saw a 3% increase, largely due to tariffs again.The steel and ferroalloys markets continue to face challenges. Carbon Solutions specialized product offering and wide geographic presence is, however, proving to be resilient and creating a stability in earnings. Then moving on to silicones. Also like in silicon metal, overcapacity is significantly hampering any meaningful price recovery in the commodity part of the business. Producers are actively trying to increase the prices, and we've seen quite a lot of fluctuations in China, in particular, during the quarter. DMC prices first rose from a level of around RMB 10,400 per tonne to up to RMB 12,250. This was a result of a fire at one of the bigger players. But due to the overcapacity, that was a very short-lived price uptick and prices subsequently lowered again because other producers are ready to fill the gap quite quickly. So, the current price level is around RMB 11,050 per tonne and quite sensitive to changes in raw material costs, where silicon metal obviously is one of the big input factors. Demand in China continues to be weak, especially in construction. Demand for commodity silicones in the EU and the U.S. is also negatively impacted by changing tariff policies. But I would say, in general, there's quite good and stable demand for specialties. So, coming to the outlook. Silicon Products are still going to face quite challenging conditions and low demand on a historical basis. But as mentioned in the presentation, our leading cost position and good performance in more specialized part of the business are mitigating the negative impact. Carbon Solutions benefits from good cost positions and geographical diversity, and continued weak demand will have some impact on the results. Silicone producers are actively trying to increase prices. But as mentioned, the markets are still hampered by overcapacity. Potential trade regulations and protective measures are expected to impact our markets going forward. And of course, we are very eager to see the safeguard measures in the EU and how that's going to play out. It's not yet concluded, and very hard to say the overall impact on Elkem from this. So I think with that, I'll give the word to you, Morten, and take us through the financials. Morten Viga: Thank you very much, Helge, and good morning, everybody. So it's a pleasure to go through the financial numbers for Q3. Our operating income for the quarter amounted to NOK 7.5 billion, and that's down 7% compared to the third quarter last year. All divisions had a decline in operating income this quarter, mainly explained by lower sales prices. Elkem's EBITDA for the quarter was NOK 829 million. This was also well below the third quarter last year, but it's slightly higher than Q2 this year. The reported group EBITDA margin for the quarter amounted to 11%, which is somewhat below our long-term target of 15% to 20% EBITDA margin. Having said that, we should also emphasize that the EBITDA margin for the continuous operations, i.e., excluding silicone's was 14%. And it is important to bear in mind that these margins are generated in a situation where sales prices in key markets are at or close to historical low levels. And as such, the EBITDA is not supported by market conditions, but it's held up by good operational performance and a very strong underlying cost position. There were no particular one-offs affecting the EBITDA in the third quarter. As usual, we provide an overview of some of the main financial numbers and ratios. I will not go into detail on all of them, but it's important to note that the Silicones division has been reclassified as discontinued operations and assets held for sale. In this presentation, we mainly focus on the financial numbers, which include silicones. However, the regular financial statements, including the profit and loss statements, reflects Elkem's results excluding silicones. And in the table to the right, you can see the comparable figures for Elkem with and without silicones. Including silicones, the group EBITDA amounted to NOK 829 million. The realized effects from the currency hedging program was minus NOK 16 million reported in the segment Other. Other items amounted to NOK 78 million and the main [Technical Difficulty] of minus NOK 17 million. Net finance expenses were minus NOK 34 million. And here, the main items related to net interest expenses of minus NOK 114 million, which was largely offset by currency gains on NOK 96 million, mainly related to translation effects on our external loans. The income tax was minus NOK 96 million, and this gives a very high effective tax rate of 65%. And the reason for that is that the Silicones division had a loss before income tax, which is rather high, and there is no tax in a major part of that division. Let's then take a look at the divisions and start with the Silicon Products division. So, the silicon and ferrosilicon markets remained difficult, but the division's EBITDA for the third quarter was supported by good operating performance. Total operating income amounted to NOK 3.4 billion, representing an 8% decrease compared to the same quarter in 2024. And the decline in operating income is mainly driven by lower sales prices for the commodity segments in silicon and ferrosilicon. EBITDA amounted to NOK 389 million, representing an EBITDA margin of 12%. The EBITDA is higher than the previous quarter, but significantly lower than Q3 '24, and this is explained by significantly lower sales prices, particularly for silicon. This is partly countered by good and stable results from the specialty segments, particularly foundry alloys. And as I said, in addition, the EBITDA is supported by strong operations and good cost improvements. Sales volume increased by 13% compared to the third quarter last year, mainly due to improved sales of specialty products. So, if we look at the Carbon Solutions, this division is once again presenting a good margin, and it reached an EBITDA margin of 28% in the third quarter despite very challenging market conditions. Total operating income amounted to NOK 822 million, which was down 7% from the third quarter last year. And this decline here is mainly explained by lower sales prices. The EBITDA was NOK 231 million, which represents an EBITDA margin of 28%. The EBITDA margin is in line with the previous quarter, but it's somewhat lower than Q3 '24, mainly explained by lower sales prices and somewhat higher raw material costs. The sales volume for the third quarter was in line with the previous quarter, but is negatively affected by low steel production, particularly in the EU. As mentioned, and very well known, the Silicones division is under strategic review. The division has a good portfolio of specialty products, which provides to a large extent, stable sales and margins. But also, the division's exposure to the commodity market is still very significant. And particularly in China, we have seen strong price pressure hampering our margins. The division has, however, been able to compensate for lower commodity sales prices in the quarter through higher sales volumes and good cost improvements. Total operating income amounted to NOK 3.6 billion, which was down 6% from the third quarter last year. Higher sales volume in the third quarter was more than offset by lower commodity sales prices. The EBITDA amounted to NOK 248 million, representing an EBITDA margin of 7%, and this is in line with the previous quarter, but it is significantly 23% higher than the third quarter last year, mainly driven by cost improvements and better sales volume. Sales volume was up 10% compared to the third quarter last year, mainly due to higher sales volumes in the Asia Pacific region, where we also have introduced a new production line, higher capacity, and significantly stronger underlying cost position. Let's now take a closer look at some of Elkem's key financial ratios. The earnings per share, EPS were quite low also in the third quarter with NOK 0.05 per share, and that brings the EPS year-to-date to minus NOK 0.77 per share. And we are, of course, not satisfied with this, and we are working on further cost reductions and other improvements to mitigate the market situation. The EPS was also this quarter negatively impacted by net losses from the Silicones division, which is under strategic review. And if you exclude the Silicones division, the EPS for the third quarter would have been NOK 0.34 per share plus, and it would have been a positive NOK 0.40 per share year-to-date.The balance sheet remains very solid. Total equity amounts to NOK 24 billion by the end of third quarter, which equals an equity ratio of 50%, very stable level. Elkem's financing position is well managed, and we have a very good and robust maturity profile. However, as you can see, the interest-bearing debt has continued to increase, and the current leverage is above our target level of 1 to 2x EBITDA last 12 months. By the end of the third quarter, our net interest-bearing debt amounted to NOK 11.7 billion, and that's up by NOK 0.3 billion from the previous quarter. And based on the last 12 months EBITDA, the debt leverage ratio is now 3.1. Our target is clearly to bring down the leverage, and Elkem has a plan to deleverage the company after the strategic review process has been concluded, which we plan to achieve during the first half of next year. By the end of the third quarter, Elkem's interest coverage ratio was 6x, which is well within the covenant of 4x, which is the covenant in our loan agreements. The cash flow from operation was NOK 526 million in the third quarter. We have a high emphasis on preserving and generating a good cash flow despite underlying market weaknesses. And this was a clear improvement from the previous quarters. It's explained by lower reinvestments and also positive working capital changes. As already mentioned, the markets are weak, and we will definitely continue to focus on a very disciplined capital spending as long as the weak market conditions prevail. In the third quarter, total investments were down to NOK 312 million and reinvestments were NOK 244 million, which amounted to 39% of depreciation. Strategic investments are very much down and amounted only to NOK 68 million as we have completed all major strategic CapEx projects previously. So let me take the opportunity to wrap up this presentation by summarizing the main headlines and takeaways from the quarter. We will continue to focus on cash generation and a very disciplined capital spending in response to the challenging market conditions. We're very happy to see that Silicon Products has leading cost positions and strong performance within the specialty segments. And I think this is very important to bear in mind when the markets are really, really, really tough out there. Also, Carbon Solutions is in a very good position, and we benefit from good cost positions and a very geographically diverse customer base. Silicones, also a very tough market, but we have improved our cost and market positions based on specialization and also based on new and more modern production lines, both in China and in France. The safeguard measures for ferrosilicon and ferroalloys in the EU and a new trade defense regime for steel in the EU could lead to improved market conditions if these measures are successfully supporting increased industry production in the EU, which is the intention. The strategic review process is progressing as planned with an exclusive sales process ongoing. And as we said, we expect to have the transaction closed within the first half of 2026. So I think that summarizes the presentation, and then I hand back the word toOdd-Geir for the Q&A session. Odd-Geir Lyngstad: Thank you, Helge, and Thank you, Morten. We have a good audience here today. So I think we will start and see if there are any questions from the audience. There is Marcus? Marcus Gavelli: Marcus Gavelli, Pareto Securities. So you talked about the safeguard measures, and clearly, we have no visibility right now. But could you try to provide some color on how you think about potentially worst-case scenario with higher tariffs and with Elkem potentially not being as competitive in the EU market. What sort of flexibility do you see having to redirect volumes and do other sort of measures to fight that? Helge Aasen: I think if we are left on the outside of this and have to compete on the same basis as everybody else, EU is a big net importer of ferrosilicon. And I would claim that Norway and Iceland are among the best position to continue to supply that market. So I don't think we will have to redirect volumes. Obviously, we are very uncertain about how the price protection mechanism will be constructed or put together. But that could, of course, I would say, I don't see a big downside, but there is quite a significant upside if this is done in a way that favors us. Marcus Gavelli: And also just to follow up on the, you mentioned the cost reductions that you're currently looking at. Could you also provide some color on what sort of measures that is? Is it, we've seen some ferrosilicon production now being curtailed? Is it more trying to optimize the production? Or is it actual larger reductions you're looking at? Helge Aasen: This is a wide range of different measures. Obviously focusing on fixed cost reductions continuously, but it's also linked to a lot of optimization in production, producing campaigns where we have the best cost position in different plants and furnaces, and yield improvements. And yes, there's no one particular program that's yielding this, but a very big effort ongoing, and it's giving results over time. Magnus Rasmussen: Magnus Rasmussen, SEB. You have an improvement in the Silicon Products EBITDA Q-on-Q despite lower silicon metal prices, as you said in Q2. Our understanding is that after the decision that you were to be allocated more CO2 quotas, which you reported in early July, you have to purchase less CO2 quotas on a running basis to cover what was previously a deficit. Has that been a positive driver this quarter, and by how much? Helge Aasen: Sounds like a CFO question. Morten Viga: Yes. You're absolutely right. We have got the ruling from the Norwegian Ministry, securing equal treatment with our European competitors. And that's very important. We have not yet received any additional quotas. Such things takes a bit of time, but we are very sure that we will receive a good amount of new quotas. And of course, that will put us in a much better position. There are no particular significant, let's say, CO2 quota P&L elements in our Q3 results. Magnus Rasmussen: When you, on a running basis, start to receive quotas on equal terms as your peers in Europe, then I assume you will not have to purchase quotas to cover that deficit as you've done in the past. Doesn't that imply that you will get a cost saving? Morten Viga: That is correct that in the future, there are 2 important things about this. First of all, equal treatment that's very important as a principle. And certainly, we will have significantly lower CO2 quota costs in the future when we receive those quotas, either late this year or early next year, we assume. So for our long-term competitiveness, it's good news, very good news. Magnus Rasmussen: And also, I see that your net interest-bearing debt in silicones is increasing by about NOK 375 million quarter-on-quarter. And it seems to me like more or less half of that is driven by you repaying what you label as bills payable in your balance sheet, and bills payable has come down by more than half over the past year. So, I'm just wondering why you are repaying that working capital financing ahead of the sale of the division? Morten Viga: No, that is kind of a working capital management done by the Chinese operation. So, I'm not able to give a precise answer to that. But they're managing this position. And as you rightly say, they have decided to repay some of that and reduce some of the bills outstanding. Magnus Rasmussen: Should we expect bills payable to be repaid ahead of the sale? And/or should we look at bills payable as interest-bearing debt when the sales price? Morten Viga: You should not look at bills payable as interest-bearing debt. So, it's part of the working capital management done locally in China. Odd-Geir Lyngstad: Are there any further questions among the audience? If not, I think the questions are quite well covered from what I see here, but one additional question maybe that could, and that is how long you expect curtailments at Rana in Iceland to last, and also if any of our competitors are reducing capacity to the same extent? Helge Aasen: Yes. We had an idle furnace in Rana, and we decided to postpone starting it up again. We are closely monitoring what's happening now. It's obviously inventory management, but it's also in anticipation of what will be the outcome of the safeguard decision in November. And then we have, we're going to stop one furnace in Iceland in mid-November, and that will be idle for 2 months, approximately, and what was the other part of the question? Odd-Geir Lyngstad: Competition. Helge Aasen: Yes, competition. Interestingly enough, Ferroglobe, which is our biggest competitor in silicon products in the conference, I think a couple of weeks ago, announced that they are now stopping all production in Europe. So, it says something about Elkem's competitive position. Odd-Geir Lyngstad: Very good. Thank you very much. And that also concludes our presentation here today. So, thank you very much for attending. Helge Aasen: Thank you.
Danny Younis: Good afternoon, and welcome to the Weebit First Quarter 2026 Investor Update. My name is Danny Younis, and I handle Investor Relations for Weebit. With me today, we have the CEO of Weebit, Coby Hanoch; and for the first time, the VP of Marketing and Business Development, Eran Briman. Before I hand over to Coby, just a reminder, we will be having a Q&A session today. If you have any questions, if you're in the room, just put your hand up or if you're online, just type them into the Q&A box that you see at the bottom of your screen. We're expecting a lot of questions, but we've provided enough time, I think, to go through most of those questions. We've got roughly an hour, but we can run a little bit over if we need to. I would now like to hand the webinar over to Coby. Jacob Hanoch: Hi, everyone. To me, so good to be here, as always. I guess we came here because of the Semiconductor Australia conference that was yesterday. I think it was a very good conference. It was well attended. I don't know if anyone here -- was anyone at the conference? It was really -- I think there were like roughly 300 people or so. This time, we had a booth there. So you see the sign from Semiconductor Australia up here where we're using it kind of and show the demo. I guess we'll be bringing the demo to the AGM, and we'll be showing it there as well. So we'll be back -- I'll be back in a month. And yes, I guess, let me share the screen again with this. So just a few slides, not really much. I think everyone knows, knows Weebit and knows what's going on. So, okay. So we'll just go through the slides like this. So I just thought I'd show you an update. I found this very interesting how just a year ago, the prediction of the size of the semiconductor market was the blue line here and people were saying, yes, it's going to hit USD 1 trillion by 2030 or a little bit later and stuff. And now with AI just going wild in just one year, we see analysts already updating their predictions and the size of semiconductor crossing the $1 trillion mark already in 2028 and so on. So it's -- again, every time I come to Australia, I have this challenge of trying to explain to people how big this market is, how important it is. You guys know, but like yesterday at the conference, even though a lot of people knew what semiconductors are, we still had to emphasize it and of course, with other institutions and other people that we meet here. So I think this really shows you what's going on. It's crazy, the level of investments in this market, I always repeat it because the numbers are just mind-boggling. Every time you see it more investments and more strategic deals, Intel now -- on the one hand, Intel is struggling. On the other hand, they have a new CEO who's really a magician. He's amazing. I know the guy, and he's just capable of doing amazing things. And now he's managing to get investments from the U.S. government, from NVIDIA stuff. India now is starting to invest a lot. They're setting up foundries in India. In terms -- I'm sorry. I need to do this. In terms of the ReRAM market itself, that every once in a while, I refer to the old slides, and it's interesting to see how year after year, the numbers evolve. I think the interesting thing here is to see they are talking about ReRAM being today about 27% of the market. And I think this is already what we've been talking about for a long time. ReRAM is being accepted now as the new standard. And you can see how the ReRAM market share is growing quite a bit, actually more than doubling or just about doubling in just a few years. But also look at the size of the market, it's like 20x. So not only is the market share growing double, but it's 20x the market. So it's actually ReRAM section is 40x in just four years. And that's a huge growth. That's a huge growth. Right now, the companies who are addressing this are basically TSMC and Weebit. The companies that are commercializing the ReRAM that actually have customers that people are buying it, it's TSMC and Weebit. UMC has a ReRAM that's been qualified, but it's been qualified for years, and it's only at 105 degrees, which is really not accepted in the industry as high enough. And to the best of our knowledge, they don't have any customers. Even the owner of the ReRAM actually, Nuvoton is using TSMC. And there's a new entrant. We all knew that GF is looking for ReRAM. We were trying to be the ones who get in there. Their internal R&D has been pushing strongly that they make it happen and the management gave them a chance. So they announced that they have a ReRAM. I think the good news is you can see that people see ReRAM is really needed. They haven't qualified it yet in their announcement, mentioned automotive. I think they still have some way to go. I personally think they made a big mistake because they just don't have the resources to maintain this. At a certain point, it will have to collapse. That's my personal belief. And so I think both UMC and GlobalFoundries are definitely high on my potential customer list still. I still believe TSMC is going to be a challenge even though they are on my customer list, and I believe eventually we can get there. But this is kind of showing you the market. Notice. You can see, by the way, the split between different markets, analog, MCU and ASIC. And you can see that the initial users are the analog guys. I think you guys already know, we started talking more and more about analog. onsemi is basically an analog company. Even with DB HiTek, it's a BCD process, which is mostly for analog companies. And you can see the adoption. It's no surprise that Weebit's first fab customers are analog. But then after that, the MCU market starts going up. And then after that, you have the ASIC and SoC margins going up. So this really shows you, by the way, that it's reflecting also what Weebit is doing. The fact that we signed up with analog companies. I think that's part of the thing that Yole has been looking at and saying, okay, we can see the money coming in. I mean, you already saw the revenue number for the fiscal year, the $4.4 million. And I guess now we're very happy with the recent announcement of the quarterly that -- this quarter, we got $7.3 million from customers. Now I think it's important for me because I know some people were really getting excited and oh my God, it's already cash positive and look at these numbers and everything. It's important for me, and I like to be honest with things. We're getting paid based on achieving milestones. And sometimes some quarters have more milestones, some quarters have less or whatever. And some of the milestones are bigger and bigger payments and some milestones are smaller. So I want people to understand it's great, and we're obviously very proud and very happy of the money that came in. I just don't want people to think, okay, now that's how it's going to keep growing, and we're going to see record quarters every quarter and whatever and extrapolate stuff. So we need to keep it in proportion. It's good. I mean you can obviously see from these numbers that the revenue numbers, I guess, for this year are going to also grow somewhat. And we're not giving any guidance, of course. But that's -- I think this is a good map of what is happening, and you can see how the Yole numbers are changing and growing. And Yole is finally accepting. Yole is close to STMicro, which is which is the only PCM provider actually. And they always -- at least in our mind, they kind of tend to grow the PCM market just because of that influence from STMicro. It's the only supplier of PCM. But anyway, that's kind of -- again, I need to click on this thing. So, recent highlights. You guys know everything here, the AEC-Q100, that's already old news for you guys. Record revenue for the fiscal year, then taped out at onsemi. That was a -- you can see onsemi has a team of I estimate at least 30 people, almost full time working with us. It's a big team. It's a big effort. They are really focused on pushing this forward as fast as possible. It is strategic for them, and it's great -- it's just a great cooperation. It's -- you can see with IDMs, it's really great because they really want to get this out and they want to get their products already moving and they want to. So it's really been a great partnership and this tape-out, and we now have to sit and wait for the wafers, and we'll see how long that goes. We, obviously, we just talked about the record quarterly customer payments. And obviously, that's nice to see there. And by the way, I want to point out, I mean, people are looking also at, oh, this was a positive quarter and stuff. You need to note that there was also the yearly refund payment from the French government that they gave us. So I'd just like to be as transparent and as clear as possible on things. And then you know that we have a target of three fabs and three product companies to sign up this year. I'm very glad that we actually achieved the three product companies already, and that was really nice. We started announcing the first one, and then we have two more now that are -- so there are three products that are already being designed with our ReRAM in them, embedded in them. Obviously, again, the design takes time and they need to manufacture the prototype wafers and test and see and qualify their products. But the clock starts ticking towards revenues eventually. So that's kind of the update. I always like to point to why Weebit is actually managing to make this progress. What is the difference between Weebit and all these other companies that are trying to build ReRAM or work in this nonvolatile domain. And I really think it's this combination of we have the company that is -- I think we're strong. By the way, the cash position is obviously something that is very important. We have $91 million in the bank, and that really enables totally focused on let's improve the technology, let's get the business, let's close these deals. I'm not worrying or spending time on how am I going to raise money now, and that's very important for us. We have money. Again, you start doing extrapolation in fiscal year '25, the spend was about $25 million roughly. So you can see we're feeling good about it for several years now and that we can totally be focused on getting the business, closing deals and in parallel, growing -- improving the technology. The people, you guys know our Board, which I'm extremely proud of each and every one of them. But beyond that, the company now is about 50 people already. We've grown. Obviously, we need to start supporting more projects and these things. We do have roughly 1/3 of the R&D is PhDs in physics and chemistry. I mean we really have a very strong team. You look at the VPs, I think the average experience is over 30 years in this industry, very experienced, very well-known people in the industry worldwide. I'm not talking about just in Israel and even the levels below, I mean, the average age in Weebit is much higher than you see in normal high-tech companies. And it reflects that you need that level of experience. You need that level of know-how of these things. So, really, that's very important. And Leti, of course, is supporting us. So I think it's great to have that. Obviously, we have a very good technology. It's part of it is all of this R&D that is going in with very smart people. We managed to make the technology work and I can tell you, we've hit endless obstacles along the way, but what's important is that you have the team that knows how to overcome them and move forward and fix things. And so really amazing technology, AEC-Q100 and all and so on. And we're providing the solutions now for the customers. And there's actually -- you have onsemi and the analog guys, and we're working a lot with analog guys. There's quite a bit of activity going on now with companies that want edge AI and want to see how we bring in ReRAM there, and there's activity around there and all these other things. And then it's really the customers. We have a very good relationship with the customers. Yes, some of them are just still hesitant. There still is that perceived risk. They still haven't seen this in mass production and so on. So each one at their own pace, but we are pushing forward. We are -- we still have to sign two more agreements. We're working hard on this, trying to get them in this year, and we don't have a lot of time. I remember last year, at this time, I was sitting and people were saying, you don't have time left. You said you're going to have a deal, you don't have time left, and we got it done at the last minute. We're pushing as hard as we can to get this done this year. We are engaged with a lot of companies with a lot of fabs, okay? I mean it's just fabs. I think it's definitely more than 10 that we're engaged right now in discussions, in evaluations in all of this stuff and each one of them with their own story, why and whatever. And -- but there is a very good -- we're in a good place there. And onsemi definitely helped having that deal. And I believe that when we sign another one or two, it's really going to start -- I don't want to say, opening the floodgates, but it's going to get us moving forward. So, and the customers, by the way, the product companies, they -- we have a huge advantage. We have a huge advantage in the design side. People don't realize. We talk about the PhDs and physics and chemistry and stuff. But we have an amazing design team, which is recognized in the industry to the point where sometimes people who try to develop ReRAM ask us, can you guys take our ReRAM bit and do the design around it because we don't know how to do that. And so we have an amazing design team. Customers realize and these product companies, obviously, our goal is to eventually have enough standard modules that people will just come and use them, and we won't need to do manual work there. I mean the goal is to have high margins and then not be doing services. But it's -- the customers know that if they need that support, if they need that design service, we can give it to them. And that's a critical thing. And especially the first customers, they always need some more handholding and stuff. So we have that team. I strongly believe that when you build the brand name that with Weebit, you're going to be successful. That's what really gets the market going. If you look -- if anyone checks my history and the different companies that I was in, almost all my life, I've been competing with companies that gave competing technology for free, literally for free. They were big players. The customers would buy these huge packages from them and then they would tag on, on top of that for free, the competing product. And I had to go and compete with that. And the only way I could do it was just give good service. The customers knew. And I would meet the CEO and I would look him in the eye and I would say with the companies that I was at Verisity or whatever, we're going to -- I'm telling you, no matter what happens, you have a problem, you call me up, I'm bringing in the cavalry. We're coming in, you will be successful with our product. And I was -- we were selling Verisity was selling more than $100 million per year when Synopsys gave its competing technology, which was good for free. And we got more than $100 million a year because people value good service. And that's really what we're doing here. I go and I look at the CEOs in the eye and I tell them, with Weebit, our team will make you successful. We are there. We have a very experienced team, and they are there for you, and we will make sure that your product won't fail because of us. It might fail because of you, but it's not going to fail because of us. And that's a key thing. So that's really just to give you guys where we are, what the status is, if I'll stop sharing, and we can probably go to Q&A side. Danny Younis: Yes. Thank you, Coby. So we will now move to the Q&A part of the session. Once again, for all those online, and there's quite a few of you, if you have any questions, please type it into the Q&A box at the bottom of your screen. I can see they're starting to come through. But I think just to start off with, we might start in the room. Are there any questions from any of the attendees in the room. Unknown Analyst: Question on next year. We obviously -- I mean, you're too early into the commercialization journey to be giving earnings guidance, as you said. This year, I think it was really helpful for the investor community when you issued those targets around the product customers and the fabs. Is it relevant to have a similar target or goal that the investor community can look at and measure against next year, given we don't have that earnings guidance status, if you like, yet? Is that something you've considered? Jacob Hanoch: This guy is on my case saying, what are you going to announce on the AGM? I mean during this trip, how many times have you asked me that question, we're thinking about what we can do. It's very difficult to actually -- I mean, the targets that we set for this year were, a, very aggressive; and b, I mean there's a big risk on achieving these kinds of targets. And it's very hard, especially when you start growing to keep saying how many customers do you expect to have. And I think it's going to be hard for us to talk about number of customers, but we know you guys need some sort of targets or guideline or whatever, and we trying to figure out what would be the most meaningful goal for you and to keep going. So we're discussing this, and I guess we have a month until the AGM, and we'll figure out what we want to present there. By the way, can you mention the names? I'd like to get to -- David, I know. Unknown Analyst: Just regarding these -- the deals that you've made with the product companies, can you give me an indication of the scope what one may entail? Is it just particularly one particular model of chip that they're looking at? And if it is one, how much extra negotiation or whatever that has to go on if they decide to do another one or expand what's existing? Jacob Hanoch: I think we have you here. Eran Briman: Well, I think in the quarterly activity report, we mentioned also the specific markets that these guys are targeting. Battery management was one of those and then some security-related applications and products. These deals, they differ from one another. It's not one deal that fits all of them. In most cases, they get a license to use the technology in a specific product, while others would like to have this in a complete product line. So, entire products. But I think at this stage, we won't be able to give any specific details about these. Jacob Hanoch: I guess what I can say is right now, they're mostly coming with one product. They want to test the waters, right? I mean nobody jumps head first to the deep end without knowing enough. So the deals that we have now, I guess, basically are, again, I can't talk about all of them. But in general, let me talk generality a bit. Most of the companies that we talked to and we're already engaged, obviously, with more product companies. Most of them are basically thinking of one first product. And we have that negotiation. Some of them want some NRE work and stuff, others are actually willing to use the more standard module. Now obviously, once they do one product and they feel comfortable, they'll want to do more. So it's -- we look at it as we're opening the door to that customer, and now we want to go and expand. So now once you sign the first license agreement, normally, you can just add addendums and it becomes much easier. And that's -- again, that as you grow, the overheads start shrinking because a lot of things you did already and now you can. So the customers you already have agreements with, you normally just add an addendum and you specify the new product. And I mean, if it's a different manufacturing node, there are a lot of parameters, by the way, in these license agreements that you define. And the license fee to give everyone a feel for this thing, the license fee varies by 1 million different parameters, by the size of the memory, by the node that they're using, if it's 130 or 65 or if in the future, it will be smaller nodes, it kind of changes. So there are a lot of parameters. It's hard to give a guidance on, okay, this is what it's going to look like. But the key thing is once the company starts working with normally, they will -- they get to know your technology, their designers get to know it. And then they can just start using it more and more and more products in parallel and you start having a lot of addendums to that license. Unknown Analyst: In November last year, you indicated that once you felt once you had two or three customers that FOMO would sit in. And you've also talked about in the past, crossing the chaser. So, on those metrics, where do you consider you are now? Jacob Hanoch: So we were just talking about it this morning. We're right now in that crossing the chasm bowling. We're at the point where DB HiTek helped us drop the pin of onsemi, onsemi definitely now got others moving. I think we're getting closer to that tornado. I think that, I don't know, one, two more agreements, we'll see it going. So it's -- we're sensing it. We're sensing the fact that, I mean, we're talking to all of these foundries, IDMs, et cetera, and people know they need ReRAM. I mean, by now, TSMC has it in mass production. They need to compete. Now that GlobalFoundries announced it, it got more attention. The market is moving. It's moving at semiconductor pace, but it's definitely moving. Unknown Analyst: Yes. Last one for me. I was just interested in understanding the difference between the fab and the IDM. Obviously, with DB HiTek, we know you've got to go through the tape-out, the wafer production, qualification, et cetera, and then start talking maybe some in parallel, but then start talking to customers about their design and then going through that process to get to a customer chip. With the IDM because they are their own customer, is it safe for us to assume that, therefore, the time to a product and market is shorter with the IDM because you don't have that secondary design, test, qualify process? Jacob Hanoch: The answer is yes. The answer is yes because the thing is when you're working with two independent companies, there's that trust level that I mean the product company, the issue is how much they trust the fab or the foundry in this case, that everything will go well and it will be ready and whatever. So they tend to want to wait until qualification. Now sometimes, and you can obviously see companies actually end up signing up before qualification because they can already see the qualification happening and stuff. But it still takes time. I mean there is still -- it's two different companies, and they need that trust level. The thing in an IDM is it's one company. When it decides to sign up to manufacture, it's because it knows that it wants it for its own products, okay? So there's -- you kind of skip that phase of convincing because the only reason why they sign a manufacturing license is because they know they want it for their end products. I mean, otherwise, why would they sign up with you. So, in that sense, that doesn't exist and you can parallelize more. Now where and how and what's happening onsemi has been very strict with us on don't talk about anything. So we can't go into specific what's happening with onsemi. But in general, you're absolutely right. Unknown Analyst: What's your confidence? I'm sorry, my name is [indiscernible] Jacob Hanoch: Okay. I just -- normally I meet you every time, so I need to know. Unknown Analyst: What's your confidence level in achieving or in signing the two remaining IDM fabs and the qualification of the South Korean company, DB HiTek? Jacob Hanoch: So, qualification is actually moving. We had some.... Unknown Analyst: Sorry, if I may just add by 31st December. Jacob Hanoch: 31st of December, yes, of course. That I understood very well. So, with DB HiTek, we had some hiccups on the way. I mean, always expected that you have some issues, but we are continuing. We believe that the qualification will be done by December 31. Right now, whatever big surprise happens. But in general, we're on that path. With the fabs, we are in advanced stages with one, with others. We're also moving forward. We're really trying to get more done by the end of the year. I guess I can say some might slip into 2026. I can't -- the 31st -- the problem is it takes two to tango, right? And these guys sometimes drag things. So we believe we can definitely close -- one of them we can definitely close. The second one, we are really pushing hard. And actually, there's, again, we're engaged with a lot of them. I don't even know who -- sometimes who it will be because we're talking to several. But the goal is really to push as much as we can to have these things done by the end of the year, and we'll see. It's work in progress. Unknown Analyst: The equity incentives of the other directors are hang on. Jacob Hanoch: Well, my equity incentive, believe me, I'm thinking about that a lot. Believe me, I'm thinking about that a lot, mine and his. We all -- our equity is tied to this, and we're really pushing as hard as we can to get it done. You can imagine. Unknown Analyst: Wishing you the best. Danny Younis: Are there any questions still inside the room? We can revert back to you at the end, okay? So if you think of any more. We've got quite a few online questions. I'll also try and pull them where possible, Coby. The first one is actually from an e-mail from Stuart that we got. It's in regard to the pipeline. Would you mind talking a bit more about the pipeline as part of your presentation? Specifically, you have mentioned previously potential signings are being held as no one wants to go first. Is that a comment in relation to fabs, IDMs or product companies? And now that customers are signing, is that helping discussions with others? Jacob Hanoch: So, first of all, human nature is such that we don't like change. And people like to -- what they're comfortable in to stay in their home, in their environment. So whenever change come, people resist it. And that's true for everyone, right, and in any domain. Specifically in this domain, it's true for the fabs, for the product companies. We had a situation where I can tell you with one of the fabs, I thought we were going to sign a long time ago. And then they were already convinced and wanted to go forward and then their product customer told them, hey, we're still not comfortable with this new stuff and whatever, and we want to do flash for another project and stuff. And suddenly, the whole thing comes to us screeching halt and they focus on flash and they come back to us almost a year later. So that's part of the challenge that we have in giving these guidelines and things. You never know how it will work even when the fab is already telling you, we're totally convinced we want to run with ReRAM. Suddenly, their product company tells them, "no, no, no, no. We really prefer flash first. Let's let someone else do that product. We'll do ReRAM the next one, right? So it happens. And -- but I think, again, and this is also true. The more people you see around you starting to use something, the more at ease you are with using it. And that's what's happening. onsemi really helped us. I mean it's -- there's before onsemi and after onsemi. And after onsemi, when people see such an important player in the market, that's signing up with this technology, they say, okay, they're talking. They're talking. Now again, some of them are dragging their feet and saying, oh, until we don't see DB HiTek with a product in mass production, we're just not going to move forward. We want to see it in mass production. And there are several like that. Others are saying, okay, we understand that if onsemi analyzed it and took that risk, we can feel more at ease and they still do evaluations and they still go through all of this stuff, but we're progressing. These negotiations, by the way, are just -- they take so long and their lawyers. I can tell you, let me go back to onsemi. If we go back more than a year ago, I was sure onsemi was going to close before September. It was literally ready for closure. And then suddenly, they tell me, oh, the lawyer is busy now. We're doing an M&A. I think they announced some acquisition in November or something like that. The lawyer just disappeared, and we were so close and the lawyer disappeared. And that's why it ended up closing in December. Now you asked me December 31, it could have been that the lawyer would have been busy two more weeks, and we couldn't have closed onsemi on time. So it's that kind of thing. It's -- we're doing our best on these things to push these forward. Danny Younis: Okay. There's a few questions on DB Hi-Tek. Two or three investors online have asked about an update on the quarter. You've already answered that, so we don't need to answer that again. But Stuart's got another question in terms of DB Hi-Tek. Are there still a lot of fabs, IDMs and/or product companies waiting for DB qualification? That is. Will that be the dam wall bursting when that's completed? Jacob Hanoch: It's going to be definitely an important milestone. There are some companies that are telling us, we just want to see that happen. We just want to see that you actually close that qual. So I don't want to say it will open the wall, but it's going to be another crack in the wall. I think that the big thing will be some more major players signing up and we're pushing on that. I mean that's the big push, but it's definitely going to help us push forward. Danny Younis: All right. There's a few questions onsemi. Can you provide a little bit more detail on the final qualification with onsemi? Jacob Hanoch: I guess onsemi, we can't really talk -- what we can say is we taped out, okay? Now this is now being manufactured, guess where, in onsemi, okay? And you can understand that they consider it a high priority. So now I don't control their priorities in the fab. I mean it takes many months to manufacture. They can give it higher priority. I don't know what other stuff is running through their fab line right now and where they're putting these wafers relative to products that they manufacture for their customers to actually get revenue. So, but they're manufacturing them, and we'll get them back. Once we get them back, as you know, we start doing all the testing and verifying and then seeing that everything is in a good shape. And hopefully, at that point, we can start qualification. The good news is because it's, again, it's the fab that is also the customer and so on, when we want to run more lots, if you remember, we need to do qualification on 3 separate lots that run independently. So, I mean, those kind of things, I imagine. Again, I'm not committing to anything, but I imagine they will probably give priority to get these lots through so that we can do the qualification and they can get their products out. Danny Younis: Some of the investors are pushing a little hard at it, Coby. I know you probably can't answer this, but given onsemi was talked out in early October, is there a chance you could be receiving royalties from onsemi in full year 2026 fiscal year? Jacob Hanoch: I guess Unfortunately, again, they will -- you can assume that they'll want to have this in their products and they'll want to push this forward. But their schedules, we know some of them. By the way, we don't know a lot. They keep it secret from us as well. And even what we do know, they made it very clear that it's under NDA, and we shouldn't be talking to anyone about it. Danny Younis: Maybe to rephrase it as Warren does here, once qualification is finalized, how soon will you have products ready-for-sale potentially? Jacob Hanoch: I really try -- I try to be as transparent as I can with you guys, but onsemi was very clear, don't talk about these things. Eran Briman: Maybe we can just say in general, it takes between 18 months to 24 months for. Jacob Hanoch: Yes. From the day they start doing a design of a product, it's -- the rough schedule in general, again, talking generalities, it's I would say, between 18 and 24 or 30 months. It depends on the product and the complexity and whatever. But that's kind of the time scale to get product out to mass production. Danny Younis: Okay. Maybe a final one on onsemi before we go into other matters. The current tape-out with onsemi, is that the end design final product that's taped out in order to reduce the time? Jacob Hanoch: No, no. No, it's the test chip. You need to remember, this is the first ever tape-out of ReRAM. So it's a test chip that we designed. I think I presented it a while back. It's a complete test chip. It has a processor. It has SRAM on it. It has a bus and everything. I mean it's a complete basically, it's a complete SoC, okay? We did a complete system on a chip, which has our ReRAM in it where you can really load programs in and run them. And so it's a real system that is going out, but it is our design for test purposes at this point. Danny Younis: Okay. We'll move on to other topics. So, from Chris, Coby, firstly, congratulations on a great quarter. How are things progressing with automotive companies? Will this be a slow burn in terms of them putting pen to paper? Jacob Hanoch: You can answer that one also, right? Eran Briman: Well, I want to say automotive is definitely one of the key markets and a lot of interest in that domain. We get -- in modern vehicles today, you get thousands of chips in there and they are more advanced than what you might find in other IoT devices. There's the push over there, we feel it very clearly. I think onsemi is a very good application. onsemi is all about automotive applications. So I feel very confident with these prospects over there. Jacob Hanoch: I would add just the thing about automotive is human lives depend on. And that's something you need to remember, the regulation that you have in different countries related to it, the standards that you need to meet. It's not just AEC-Q100 that you need to meet. There's ASIL and there's ISO 26262, and there's 1 million different qualifications, if you want to call it, that they need to pass and they need to show that people won't die because, right? So it's very, very critical automotive projects normally take much longer than an average SoC. And that's something that people need to understand. They will engage with us now, and they see the potential. And I mean, a lot of these automotives are actually analog. Remember that graph there, a lot like onsemi. So a lot of these automotive guys are analog and they will engage with us now. They can already see the AEC-Q100, they can already see the potential. But how long will it take until it's actually in mass production, automotive projects take longer. Eran Briman: Maybe just to add on that, it's also stickier. Jacob Hanoch: Yes. I mean once they work with you, the cars -- the same model of car, and it's not just the same model of car. The subsystem is used in many future generations of that car. So once you're in, you're in for decades. I mean those are the type of projects that you sign up and you know royalty is now going to come in for a long time, you're going to have that royalty stream. Danny Younis: Okay. The next question from Jason is around the security product. Can we get a sense of what a security product means in terms of the use of a Weebit chip? Eran Briman: Well, secured products mean one of the advantages that ReRAM has is the security. The fact that the NVM is integrated with the main SoC means it's much more difficult to hack the products. You get secured products in payments, secure payment. You get this in your NFC products in your smartphone. Also secured products in automotive, right? It's extremely important to make sure that there's no way to hack into your autonomous vehicle or whatever it is. So these are the types of products that we're seeing over there. And the NVM is a critical part there, right? It's one of those. Jacob Hanoch: The NVM also -- I mean, ReRAM has some unique characteristics about no two ReRAMs are identical. And so people use that, for example, for security keys or things like that. So it's used in many different security applications. But that variability that you have between ReRAMs and the fact that no two ReRAMs are the same is something that a lot of people like and use that in the security. Danny Younis: Okay. The next question is around the architectural agreement. So is the architectural agreement still alive? And if yes, can you comment on what nodes would be part of the architectural agreement? Jacob Hanoch: So is it alive? Yes. One of those fabs that we were talking to is, again, an architectural agreement is also much more complex than a regular agreement, and that's one of the things that's causing it to drag forever. But yes, I never -- if you would have asked me in 2023, do I think I'll be sitting here at the end of '25 and still saying, yes, it's alive, and we haven't signed it yet. I would have said you're crazy. How long will it take? But unfortunately, it's definitely alive. It's definitely alive, and we are working with those guys. But once we announce it -- yes, I mean, once it's done, we'll announce it. I can't talk about it before that. Danny Younis: Maybe on GlobalFoundries, there' a question here. Maybe can you provide an update on if the GF chips were qualified? Jacob Hanoch: The best of our knowledge. I mean, in their announcement, they didn't mention qualification. If it were qualified, I imagine they would want to say that. So they didn't mention it. They also didn't mention the word automotive anywhere in that announcement. So, two things that we didn't see in their announcement. Now they started much later. They are putting a lot of emphasis. I know that they are putting a lot of emphasis to push this fast through. But still, it's a lot of work, and we don't really know beyond that where they stand. But we're relying on their announcement. If I were them and it were qualified, I would say it's qualified. I want the customers. Danny Younis: Christian is pretty keen to know, are you working with any mobile phone product companies? Jacob Hanoch: Also, our... Eran Briman: Among enough. Jacob Hanoch: Among, among, yes, we're talking to so many different product companies, and there's also those. Eran Briman: Yes, smartphones, they have tens of different chips inside from the big SoC that runs the application processor that's usually much more advanced in terms of process node to a lot of power management devices that you have there and smart payments and all these things. So, I'm sure eventually, we'll find ourselves in one of those smartphones, yes. Danny Younis: Okay. Turning to SkyWater. Maybe just an update there on the current relationship status. Jacob Hanoch: I think right now, it's pretty obvious they are totally focused on their R&D services, and we're a customer there. So, I mean, we definitely -- we're a customer right now of SkyWater. The fact that we're qualified there is great because now R&D can actually do a lot of testing there, and they are faster and cheaper than Leti. So a lot of things we're actually running through them to save money and to do things faster. In terms of working with them, to be honest, right now, they've disappointed me so much that even they acquired a new big fab in... Eran Briman: In Texas. Jacob Hanoch: In Texas. I don't know what they're doing there. I don't see I don't want to bash whatever. But right now, there's no real discussion about that. And by the way, we're talking to such bigger fabs right now. To me, they are lower priority. I mean I'd rather close agreements with some of the big guys than with SkyWater anyway, so. Danny Younis: There's a couple of questions around discrete. So the first one is, do we risk our competition beating us to discrete ReRAM while we focus wholly on embedded? Jacob Hanoch: So, first of all, we're not focused wholly on embedded. There is work in the background. It is low priority, admittedly, but there is work going on all the time. I mean just in September, I was at Leti with the R&D team, and we were talking about discrete and how we push this forward and looking at the different options and so on. So it's definitely not dead. It's definitely something that we know is important and we want to push forward. I personally believe we -- I am not aware of any other company that is working on discrete ReRAM right now. So I don't think we're risking someone beating us to it. I haven't seen anything anywhere about a company that's trying to do discrete ReRAM right now. So it's something that people would love to have, but it's a big challenge. I think that's -- again, going back to Weebit's differentiation, it I'm hesitating to say this, but I really can't think of another company in the world right now that has the combination of team, technology, resources, management focus that can actually do discrete ReRAM. I really can't think of that. Eran Briman: We had the Fujitsu that was doing some ReRAM for some time. Jacob Hanoch: Yes, they were trying to do, but that was it. Yes. So there's -- I think we're definitely -- I don't think anyone is going to bypass us. It's true. It's not a high priority right now, but it's still working all the time in the background. Danny Younis: And given it's not high priority, the next question sort of alludes to this. So can you give an indication of the time line to discrete? And have you yet identified a preferred selector architecture? Jacob Hanoch: I can't give any time line. It's still a lot of work. It's really a lot of work to do, and it's going to require R&D and we are exploring all kinds of talking about architectures. We're still at the phase of -- we're trying one and then we're thinking maybe there's another potential. And so there's different options that we're looking at. And yes, so it's still work in progress, and it will take time. Danny Younis: Stephen's got an interesting question here. So are there any restrictions on Chinese companies obtaining or manufacturing ReRAM? Jacob Hanoch: The U.S. has a black list of companies that you can talk to. So those are definitely off of our target list. But beyond that, we don't have a real restriction. I can tell you that I'm just giving preference to anyone who's not Chinese right now because of the risk. I mean you don't know if a company that you're working with might end up on the black list later on or things like that. We've already seen situations where companies that we were considering working with that actually kind of ended up in the black list. So I'm very cautious. We have so much potential right now in the rest of the world. And China is a huge market, and you can't really ignore it. But at the same time, Weebit is just entering this huge vacuum. There's an unbelievable vacuum out there that we can fill. And there's no -- I mean, why take the risk of trying to work with a company where there might be an issue when you have so many others. Danny Younis: There's a couple of questions from Jason and Serena on EMASS. So maybe just to make the generic. Has the EMASS collab progressed? And can you maybe just talk to the talk that they're progressing towards a 16-nanometer form factor, which seems to be beyond Weebit's announced capabilities. Maybe just comment on that. Eran Briman: Yes. Well, we worked with EMASS, it was earlier in the year towards this demonstration that we have. It's a beautiful demonstration. I think recently, we also uploaded a video that shows this demo. I think it's very nice. It has great potential. They were using a 22-nanometer process node, and they have the option to continue and work with us. We're in discussions, but there's nothing much to actually report at this stage. So, let's see how this progresses. Danny Younis: Okay. We'll go to more market general questions. So anything happening on the AI front? Eran Briman: A lot. Jacob Hanoch: This guy and his team are -- I think that's the biggest activity. Eran Briman: There's a lot going on, on AI. AI is divided into multiple steps. We're seeing a lot of interest in integrating our ReRAM into an AI SoC, just to get the memory closer to the processing elements and reduce the amount of data movements. And at the same time, we're seeing increased interest also in what's called in-memory compute -- this is where the computation is done within the memory element themselves. We're seeing a lot of interest from research institutes. I would say that for the past five, six years, maybe five years ago, this in-memory compute was just a concept that people were talking about. Nowadays, this is in real research, but not just within universities and research centers, but also large corporations and companies are investing heavily in this domain. I think it's still not ready for production, but we're getting there. We're getting there every year. It's getting closer and closer. I wouldn't put any time line on this, but it's there and the interest that we get from customers and from such partners is very high. Jacob Hanoch: And I guess I would just add, Edge AI, I talked about it, I think, in the previous period time that I was here in Australia. ReRAM is really a natural fit for Edge AI, and that's a domain that's really growing rapidly and the demand there is growing. The challenge is a lot of these guys want to work at 22 and below. And right now, we actually don't have that to offer them. But some of them are working in larger geometries, and we are relevant. So, but in general, there are a lot of calls even from big name companies who say, hey, we saw you were working with ReRAM. You have ReRAM. We're looking at it for Edge AI and what do you think? So I mean, it's definitely something that a lot of people are looking at ReRAM for Edge AI. Danny Younis: Speaking of Edge AI, I've got a question here from Jason on Edge AI. So can you maybe just clarify, has this been signed as a product company or in negotiations? Jacob Hanoch: So, unfortunately, we gave all the information we could on the product companies in the quarterly. Companies are still trying to be more -- I mean, eventually, they will be announcing their products. And I think these things will become public. Hopefully, they'll let us start talking about it more. I guess, beyond the fact that right now, the three product companies, what we mentioned are U.S.-based, I can't really talk about which application -- I think we -- for the first one, we mentioned they were a security company. The others right now we need to be really careful with them. So that's what we can say. Danny Younis: Maybe touching on Samsung. So what's Samsung's focus these days with regarding NVM? Are they MRAM focused? Jacob Hanoch: So, Samsung, I mean, what they have in mass production right now is MRAM. And what they're offering their customers is MRAM, I guess. Eran Briman: I think it was public that they had some ReRAM. Jacob Hanoch: They had a big ReRAM project, which they ended up shutting down because it just -- they couldn't get it off the -- working. Beyond that, I don't think we can comment. Danny Younis: Michael's got a technical question here. How are you going in terms of reducing the process node to 10 nanometers? Jacob Hanoch: Well, I said we're talking to a lot of fabs. And obviously, that's the direction we want to go, and we want to get fabs that work in the smaller nodes. So, eventually, we'll be there, right? It's a matter of pushing. And you can see -- again, that's part of that "perceived risk thing that in the beginning for the companies, the smaller the geometry, the higher the perceived risk. And so that's why you've seen that we started with 130. Now we're at 65 and then we're trying to push down, and we'll be getting there. Danny Younis: Okay. The next question is around your technology. So once it's in a customer product, will the performance results help sell that Weebit technology to other possible customers? Eran Briman: Definitely. Jacob Hanoch: I mean the ReRAM has big advantages over flash and people will see it and people will see the competitive advantage of the products that have ReRAM in them. I'm sure that, that will help us. Danny Younis: Yes. And when are you looking at reducing the smaller nodes? Jacob Hanoch: Well, as soon as these guys will sign that damn paper. Eran Briman: But we're confident there's no technical barrier to a 1x geometry, knock-knock. Jacob Hanoch: At the 1x, definitely not. Below that, there's more work to be done. But at the 1x, we've already done quite a few -- yes, I mean, I'll even say we have PDKs. We did simulations. We've seen that there's no issue. Danny Younis: Is ReRAM a good fit with the new generations of humanoid robots under development? Jacob Hanoch: Definitely. Definitely. Eran Briman: Definitely. For multiple functions. Jacob Hanoch: Yes, for exactly. I'm thinking for a lot of different functions there. We talked about AI, which is part of it. It's really for many different functions. Eran Briman: AI, it's the motor control that you need to run, which is it's a power management. There's many different functions within this. Danny Younis: Maybe a question on one of your competitors. What are the key differentiators between Weebit's ReRAM and TSMCs? Jacob Hanoch: From what we know, and again, we don't know enough about TSMC from what we know. I would say, first of all, it's the company focus. It's not the actual technology. We -- I don't think we can really comment on speed or performance or power or whatever. We don't know enough, and I don't want to go into that. But I think the real difference is the company focus. Weebit has the design team that is there to help -- and we know because we had customers who actually called us up and said, we talked to TSMC, we wanted to use their ReRAM, but we wanted them to do some modifications for us, and they wouldn't do it. They said, God help, basically. TSMC is a fab. They want to manufacture. They don't want to start dealing with modifying. I mean this whole ReRAM is just an enabler for them to sell wafers. So they have several versions. It's a good ReRAM. First of all, let's make it clear. TSMC is TSMC, and they have a good ReRAM and people are using it. And I'm not going to say it's anything bad about the ReRAM. But Weebit, the advantage is that we have everything around, and we will work with the customers to give them what they need to tailor it to give them a better solution. I believe that the investment that we're making in R&D, and we are working on new concepts in manufacturing ReRAM and on improving the whole manufacturing process. I don't know how much TSMC is continually investing in it. Again, it's not their core competence. It's not something that they plan to make a lot of money off of. I mean it's -- right now, they are making a lot of money off of it because they're the only ones who have ReRAM. So they put this big margin on there. We tell people ReRAM doesn't add more than whatever, 7%, 8% to the cost of a silicon wafer, they say, but TSMC is asking for 40% like, well, because they can, right? So, but in reality, they're not -- this isn't what they're going to make money off of. And at a certain point, there's a limit to how much they'll invest in this R&D. So I believe that over the years, we will continually improve the technology. And at a certain point, and it's not going to be immediate, but at a certain point, I believe we have a good chance of having a better ReRAM that some customers will want and will push TSMC to license the ReRAM from us. Danny Younis: We're on the last four questions online, and then I'll throw back to the room for any final questions. Very general questions. So are we going to see any takeover offers in the near future? Jacob Hanoch: I guess everyone knows what my answer to that. Danny Younis: And on the topic of cap raises, any cap raises in the future? Jacob Hanoch: With $91 million in the bank, I'm focused on getting the deals done. I really don't think I need to think of cap raises. Danny Younis: There's maybe more of a comment here rather than a question in terms of maybe getting other directors like Atiq to join these webinars maybe once a year. It's good having Eran on, maybe introducing other directors as well maybe. Jacob Hanoch: Honestly, I never thought -- I mean, we have Dadi coming every year to the AGM, and he's there. The others are nonexecutives, so I normally don't think about getting them involved, but that's -- let me think about. Danny Younis: A couple of more have come in at the last minute. Outside of the foundry deals and partnerships you've already talked about, is there any other area, potentially a new market or application that you think could quietly become a big growth driver for Weebit over the next few years, something that's not really on the radar at the moment? Jacob Hanoch: We look around. I mean that's this guy's job, right? Business development is his title, right? And we're always looking around at how -- first of all, how ReRAM can be used in different places. And then every once in a while, there are ideas of complementary things. I mean this is the type of thing that I think any company is always looking at, at what's happening in the market happening around. And I mean, when things happen, they happen, right? Eran Briman: I think one interesting market that we're seeing that we get a lot of questions about data centers, AI, but data center side, right? So very focused on Edge AI, and we're doing a lot of stuff there, and I hope soon we'll be able to talk more. But on the data center front, what we're seeing is not necessarily the NVIDIA chips, which run at a much more advanced process node, but the power management, which is a critical issue when it comes to data centers, right? The amount of power and the air conditioning that runs in there and all that. So power management is critical. And one of the markets, for example, for semi is data centers, power management for data centers. So this is definitely an interesting way into those data centers for resistance. Danny Younis: Okay. We've probably only got time for two more questions, maybe one from the room. Eran Briman: All right. Danny Younis: Okay. So the third last question. From your perspective, how should shareholders best interpret the information that you shared? And what are some of those indicators that you can suggest that investors should focus on to understand your future momentum? Jacob Hanoch: I think Yes. I -- honestly, it's hard to talk about yourself and whatever. But I think Weebit is a very conservative company, which is just focused on doing the job. We basically try -- I think you can see -- first of all, I try to be as transparent as I can. Second, you can see the targets and how we progress from year-to-year and slowly. It's -- actually, in semiconductor terms, we're really moving fast. So I know it looks like forever and -- but we are moving, and it's really steady as she goes, right? So I think that more than anything, I hope that shareholders are looking at how things evolved and are seeing that we went -- I remember when I joined the company, we had just the first bit cell and then the array and then we got to the full chip and we qualified and we went to SkyWater and we went to DBH and we got to onsemi. And so I hope you can see that trajectory. Now you can also see the cash. I mean, fiscal year '24 was $1 million revenue, fiscal '25 was $4.4 million. Now just this quarter, you can see already how much cash is coming in. So you can start understanding where it's heading. I really just hope that people see that we're serious. We're doing the work. I don't like to blow things out of proportion. I don't like to go -- when things don't work well, we don't go into, oh my God, everything is falling apart. We're -- it's a very experienced team. We've been through endless hurdles in our lives. And at Weebit, believe me, we've gone through quite a few. And we just -- we hit the hurdle, okay, what do we need to do? We fix it, we move on, and we continue to progress. So I just think people need to look at that and see how every quarter things advance. Danny Younis: And this is a good one to finish off from the online questions at least, 10 years, with your crystal ball, where do you see the company in terms of scale or size versus your peers? Eran Briman: Or the market. Jacob Hanoch: Yes, I'm not giving any guidance because this -- in Hebrew, we say prophecy was given to the falls. I mean that's what's written in the Bible, prophecy was given to the falls. So -- and I don't consider myself such of it. So -- but I mean, obviously, I believe Weebit will be growing. My goal. I can say what my goal is. My goal is to be the leader, the #1 ReRAM company. And I think in 10 years, it's going to be not just ReRAM. We will expand beyond ReRAM. There is a lot more out there. I mean, who knows -- again, people asked about M&A. Things happen when they happen and when you have opportunities. But over 10 years, who knows, you can assume that there might be some opportunities. the whole market, AI, we don't have a clue where it's going to head. ReRAM is a natural solution for AI. So I believe you're going to see a big AI market and you're going to see Weebit as a big player there. That's, again, my belief and my goal, what I would like to do, no guidance or any commitments or whatever. Danny Younis: Do we have a final question in the room? Unknown Analyst: Just regarding the test chip that's been manufactured and in some cases, qualified. Is there any commercial viability to sell that as it is since it's already gone through the full process? Jacob Hanoch: It's a very simple system on a chip. I mean some people might want to actually use it. I don't know. Eran Briman: There is a possibility, I think. For certain applications, some IoT applications, it could be a good fit. But I definitely believe that for a true product, you would need at least to add some kind of interfaces and real-world interfaces into the chip or... Unknown Analyst: I thought that actually was the idea that was made quite generic and versatile for people to test out. Eran Briman: Yes. It's very generic and versatile. I agree. Jacob Hanoch: But for commercial purposes, they'll probably want to tag on some more. And to be honest, I haven't really thought much about it. But if a customer comes and say, "Hey, your test chip is really interesting. I just want to tag on some things. We have no problem to license the full test chip. Unknown Analyst: A quick question about patents. Could you tell me or tell us roughly how many patents you would have covering ReRAM compared to your main competitors like TSMC? Eran Briman: So we're not following up on specific patents from competitors. I think... Unknown Analyst: Just numbers. Eran Briman: Yes. So I think in the last quarter, we announced six new patent applications were made and we were at more than 90 patents for us. With regards to competition, I don't have the answer. Jacob Hanoch: Yes, we actually -- it's -- in the industry, people try to avoid researching the patents of others because you can only get into trouble. So... Unknown Analyst: We took get someone else to do it for you. Jacob Hanoch: I guess it was less interesting for us. As long as we know that to the best of our knowledge, we're not infringing on anything, and that's what we care about. That's what's important. Danny Younis: Unfortunately, we've run out of time. So that concludes the Q&A session. I'll now hand back to Coby for any closing remarks. Jacob Hanoch: Well, I guess, first of all, I'm always glad to meet you guys and the people that are out there. as I said before, Weebit is moving forward, progressing, making good progress. You can see it. We definitely plan to close more deals this year. We -- that's the big focus right now next year to already get into that tornado and really get this thing moving. We have an amazing team, and we have amazing shareholders that stick with us in the ups and downs and all. And yes, I mean, the numbers, again, what happened this quarter, I'm repeating, don't expect every quarter to be like this and going up, but it's good, and we are going to continue to get money from customers and the numbers will grow over time. So, it's good, and we're moving forward. Danny Younis: Okay. Thank you, Coby. Thank you, Eran. Thank you to all the people who attended in person, and thank you to all those online who can now disconnect. Thank you. Eran Briman: Thank you everyone. Jacob Hanoch: Thank you.
Operator: Hello everyone, and thank you for joining us today for the Southern Missouri Bancorp Earnings Conference Call. My name is Sammy and I'll be coordinating your call today. [Operator Instructions]. I would now like to hand over to your host, Stefan Chkautovich, Executive Vice President and CFO, to begin. Please go ahead, Stefan. Stefan Chkautovich: Thank you, Sammy. Good morning, everyone. This is Stefan Chkautovich, CFO of Southern Missouri Bancorp. Thank you for joining us today. The purpose of this call is to review the information and data presented in our quarterly earnings release dated Wednesday, October 22, 2025 and to take your questions. We may make certain forward-looking statements during today's call, and we refer you to our cautionary statement regarding forward-looking statements contained in the press release. I'm joined on the call today by Greg Steffens, our Chairman and CEO; and Matt Funke, President and Chief Administrative Officer. Matt will lead off our conversation today with some highlights from our most recent quarter. Matthew Funke: Thanks, Stefan. Good morning, everyone. This is Matt Funke. I'll start off with some highlights on our financial results for the September quarter, which is the first quarter of our fiscal year. Compared to the June linked quarter, we had relatively stable earnings and profitability with solid growth in net interest income, which stemmed from loan growth and further net interest margin expansion and the decline in operating expenses. These improvements were offset by a larger provision for credit losses and a decrease in fee income. The larger provision was attributable to the evolving economic environment, additions to individually renewed loans and loan growth. We feel we have good momentum on pre-provision net revenue to start the year, and we're optimistic about how we'll perform in the new fiscal year. The diluted EPS figure for the current quarter was $1.38, down $0.01 from the linked June '25 quarter but up $0.28 from the September quarter a year ago. During the quarter, we continued working with the consultant to complete the renegotiation of a significant contract. We have recognized some expenses on this renegotiation in the linked quarter. But because this was on a contingency basis and because the renegotiation worked out well for us, we had additional expense to recognize in the current quarter. These totaled $572,000, reducing after-tax net income by $444,000 or $0.04 per fully diluted common share. Between the linked quarter and the current quarter, we have recognized right at $1 million in consulting expenses related to the contract renegotiation. But with the expected increase in revenues, which will flow through bank card interchange income, we estimate a less than 18-month earn back of the expense. Reported noninterest income was down by 9.7% or $707,000 compared to the linked quarter, but was more than offset by lower noninterest expense of $925,000 or a 3.6% decrease quarter-over-quarter. Stefan will give some more color on these drivers in a bit. Net interest margin for the quarter was 3.57%, up from 3.47% and for the fourth quarter of fiscal '25, the linked quarter and from 3.34% in the year ago quarter. Net interest income was up 5.2% quarter-over-quarter due to the NIM expansion and loan growth. As we indicated last quarter, we have updated our quarterly NIM calculation to annualized results for the actual day count, which should reduce volatility in the reported NIM due to differences in quarterly day counts. Under the old methodology, the current quarter's NIM would have been reported at 3.60%, but we're reporting at 3.57% due to the September quarter having 92 days. By contrast, the June quarter is reported at 347 under the new methodology, but under the old methodology was 91 days, it was originally reported at $346 and we've carried this updated annualization method over to all our profitability ratios for the current and historical periods in the earnings release. On the balance sheet, gross loan balances increased by $91 million or 2.2% during this first quarter, which would be 8.8% annualized. Loan balances increased by $225 million or 5.7% over the last 12 months. Growth in the quarter was led by nonowner-occupied CRE, 1-4 family residential, C&I and multifamily loans. We experienced strong growth in our East region where we have much of our ag activity and our South region was just behind with good growth in those markets. Even with solid loan growth for the last 2 quarters, our loan pipeline anticipated to fund in the next 90 days remain strong, totaling about $195 million at September 30. The September quarter is historically our strongest period of loan growth, and we would expect to see this pace slow next quarter as we start receiving ag line paydowns and a general slowing in new projects in the winter months. That said, we had a great quarter of loan growth and feel optimistic about achieving mid-single-digit loan growth in the fiscal year. Deposit balances were relatively flat compared to the linked quarter, but up $240 million or 5.9% over the last 12 months. Due to good deposit growth over the last year, we've been able to be less aggressive on promotional deposit pricing, and we've called some higher-priced brokered CDs prior to maturity. Looking at our core deposit base, excluding broker, we had an increase of about $14 million this quarter, driven mainly by savings account growth. We have $20 million in additional brokerage CDs maturing by the end of the calendar year and about $18 million in brokered money market deposits expected to move out in October at the beginning of this new quarter. We'd expect to replace that with seasonal inflow of funds from ag customers and public units in the second quarter. Tangible book value was $43.35 per share and increased by $5.9 or 13.3% over the last 12 months. This was mostly attributed to earnings retention, while improvement in the bank's unrealized loss in the investment portfolio from the decrease in market interest rates contributed a little less than $0.20 of that year-over-year improvement. Additionally, in the current quarter, we've repurchased just over 8,000 shares at an average price of just under $55 for a total of $447,000. The average purchase price was 127% of tangible book value at September 30. I'll hand it over now to Greg for some additional discussion. Greg Steffens: Thank you, Matt, and good morning, everyone. I'm going to start off with credit quality. Overall, problem asset levels have increased slightly since last quarter but remain at modest levels with adversely classified loans at $55 million or 1.3% of total loans, up $5 million or 0.1% since last quarter. Nonperforming loans were $26 million at September 30 and totaled 0.62% of gross loans, an increase of $3 million or 6 basis points compared to last quarter. This was primarily attributed to 1 commercial relationship consisting of 2 loans collateralized by owner-occupied commercial real estate and equipment as well as 3 unrelated loans secured by 1 to 4 family residential properties, all of which were placed on nonaccrual status during the first quarter of our fiscal year. Nonperforming assets were about $27 million and increased about $3.4 million quarter-over-quarter, which most of the increase due to the increase in nonperforming loans. As reported last quarter, we are continuing to work with the borrowers on the 2 specific purpose, nonowner-occupied CRE properties in different states with guarantors and common and originally leased to a single tenant who has since become installed. As of June 30, the balances on those loans totaled $6.2 million, but are now down to $2.8 million at September 30 after charging off the collateral shortfall with the appraisal on the other parcel of CRE this quarter. As we indicated last quarter, we had provisioned for these anticipated charge-offs on the relationship. And during this quarter, they accounted for roughly 75% of our total of $3.7 million in net charge-offs. Another item of note is one of these properties was recently leased at a higher rate than what was assumed in the appraise loans past due 30 to 89 days were about $12 million, up $6 million from June and 30 basis points on gross loans. This is an increase of 15 basis points compared to the linked quarter. Overall, total delinquent loans were $29 million, up $4 million from the June quarter. The increase in the 30- to 89-day past due bucket was due to an increase in past due loans under 60 days, primarily in our owner-occupied CRE and C&I loan segments. In the owner-occupied segment, the largest loan, 30 to 59 days totals $3.6 million. And then C&I, the largest is $2.1 million. These 2 loans are the relationship discussed earlier that went to nonperforming status during the quarter. Despite the increase in problem loans experienced over the last 2 quarters, these issues remain at modest levels, and our asset quality has moved to be more in line with industry averages. In combination with strong underwriting and adequate reserves, we feel comfortable with our ability to work through our problem credits and any potential wider deterioration that could occur as a byproduct from the general economic conditions. So I don't want to give the impression that we're accepting of these trends, and we have been focusing on improving our credit quality. Our agricultural update, from June 30, our ag real estate balances were up about $11 million over the quarter and up $16 million compared to the same quarter a year ago. While production loan balances increased $23 million for the quarter and are up $29 million year-over-year, we have seen a general increase in ag production line utilization due to increased input cost. Our agricultural customers experienced a mixed growing season in 2025. Early planting was possible as a result of favorable weather but heavy rains in several markets delayed progress on crops such as cotton and soybeans. As the summer turned dry, growing conditions improved for early planted crops, though irrigation costs rose adding to an already expensive production year. Harvest has progressed well with most corn and rice acres complete and significant progress on soybeans and cotton. Yields have generally been above to -- have been average to above average on most of our ground, especially on the irrigated ground. The dryer fall has allowed our farmers to begin field work early in preparation for the 2026 crop season. Our overall crop mix for consisted of roughly 30% soybeans, 30% corn, 20% cotton, 15% rice and 5% specialty crops. Commodity prices, however, remained a headwind across most sectors. Lower future pricing for soybeans, corn, rice and cotton, combined with elevated input and interest costs, has pressured producers' margins despite generally strong yields. Many farmers are relying on storage strategies, which could lead to some reduction in what might have normally been paid down in the current quarter on credit lines and USDA programs such as CCC loans to bridge cash flow gaps, make required payments on credit lines. At present, we are hoping for government support payments to help provide needed relief later in the year. Land values are currently stable while equipment values have softened slightly as producers scale back on capital purchases. Our ag lenders are working proactively with borrowers to assess their current positions, plan for restructuring where necessary and utilize FSA and USDA programs to mitigate risk and maintain strong long-term relationships with our farm customers as they plan for '26. Due to our stringent underwriting, including stress commodity pricing and assumed higher operating costs. We anticipate that our borrowers were generally be able to navigate this challenging year and should ensure satisfactory performance of these credits over the near term. In addition, due to prolonged weakness in the agricultural segment, we started to increase reserves for watch list ag borrowers in the March '25 quarter in our calculation for our allowance for credit losses. I'll pass things on to Stefan to add more color on our results. Stefan Chkautovich: Thanks, Greg. Going into a little more detail on the income statement. Looking at this quarter's net interest margin of 3.57%, that's up 10 basis points quarter-over-quarter and included about 7 basis points of fair value discount accretion on acquired loan portfolios and premium amortization on assumed liabilities. That impact is up compared to the linked June quarter of 5 basis points and down from 9 basis points in the prior year September quarter. As stated in prior quarters, we would expect to see the level of fair value accretion decline over time. The current quarter's bump resulted from a payoff of a relationship that had a larger amount of accretable yield. The net interest margin expanded over the linked quarter as the yield on interest-earning assets increased 8 basis points, primarily due to loan yield expansion, while the cost of interest-bearing liabilities declined 1 basis point. In addition, the net interest margin benefited from an increase in the loan-to-deposit ratio. Although our spread has improved meaningfully over the last 2 years, we still see some room for incremental improvement as over the next 12 months, we have about $550 million of fixed rate loans maturing with an average rate of about 6.5% compared to our origination rates for the month of about 70%. On the deposit side, we have almost 1.2 billion CDs maturing next 12 months with an average rate of $4.10 compared to our average new and renewed CD rate of about $3.90. With the improvement in the margin, growth of our earning asset base and the market outlook for further rate cuts, we expect to see continued net interest income growth through the year. That said, I do want to remind our audience that starting in the December quarter and peaking in the March quarter, we historically see a slowdown in loan growth and an increase in deposits that will weigh on the margin, but we still expect to see positive improvement in net interest income overall. Our average loan-to-deposit ratio for the March 2025 quarter was 94.2% for some perspective. Also with this, our balance sheet becomes more neutral from an interest rate risk perspective in these quarters due to the increase in interest-bearing cash. But overall, through the seasonal cycle, we expect to remain liability sensitive and a net beneficiary of rate cuts over a full year period. Noninterest income was down $707,000 or 9.7% compared to the linked quarter, driven by lower other loan fees and bank card interchange income. The prior quarter included $537,000 of annual card network [indiscernible]. Excluding that item, noninterest income would have been down about 2.5%. Other loan fees declined $723,000, primarily reflecting a refinement in our fee recognition under ASC 310-20 with a greater portion of loan fees now recognized in interest income over the life of loan. In total, for the first quarter of fiscal 2026, about $1.6 million of additional fee income is being deferred, but is more than offset by $1.9 million of deferred expenses, which drove a decline in compensation and benefits. Overall, we saw a decrease of $925,000 or 3.6% in noninterest expense quarter-over-quarter. The net expense that was deferred had a negative impact in interest income of $176,000 or a 1 basis point drag on the net interest margin. In total, these changes had a limited impact of recognizing 55,000 in additional net income in the quarter as we deferred more expenses than fee income, which will be realized through interest income over the life of a loan. With these changes, year-over-year comparisons are not truly comparable, but our first quarter results should serve as a baseline starting point for noninterest income and expenses. The allowance for credit losses at September 30, 2025, totaled $52.1 million, representing 124 gross loans and 200% of nonperforming loans, as compared to an ACL of $51.6 million, which represented $126 million of gross loans and 224% of nonperforming loans at our June 30, 2025 fiscal year-end. Net charge-offs in the first quarter were 36 basis points annualized compared to the linked quarter of 53 basis points. Both quarters experienced elevated net charge-offs, primarily due to the special purpose CRE relationship mentioned previously. The current quarter's charge-off on this relationship was previously reserved for in the prior fiscal year with no additional provision for credit loss attributed to it in the first quarter of fiscal 2026. Our provision for credit loss was $4.5 million in the quarter ended September 30, 2025, as compared to a PCL of $2.2 million in the same period of the prior fiscal year and $2.5 million in the linked June quarter. The increase in the provision this quarter, as Matt mentioned earlier, was due to our outlook on the current macro environment, as well as to provide for individually reserved loans, loan growth and a slightly higher reserve required for pool loans. Due to the charge-offs realized on a special purpose CRE relationship attributable to individually reviewed loans decreased compared to the linked quarter. Our non-owner CRE concentration at the bank level as defined by regulatory guidance decreased by just over 6 percentage points quarter-over-quarter to $2.96 of our regulatory capital. Although our CRE balances grew compared to the linked quarter and was surpassed by greater growth of Tier 1 capital reserves. On a consolidated basis, our CRE ratio was 285% at September 30. To wrap up, despite some carryover cleanup of problem loan relationship from the prior fiscal year, our strong pre-provision earnings led by expanding net interest margin and disciplined expense management have driven improved core profitability and we remain optimistic about sustaining this positive momentum and delivering earnings growth through the remainder of fiscal year 2026. Greg, any closing thoughts? Greg Steffens: Thanks, Stefan. I would like to highlight that we delivered another strong quarter of earnings, reflecting the strength and consistency of our core operations. While charge-offs and nonperforming loans have remained elevated over the last 2 quarters off of very low levels. Our level of nonperforming loans remains comparable to national averages for banks under $10 million. Our underlying earnings momentum remains solid and that strength has allowed us to prudently reserve for potential problems in the future quarters. We will remain diligent in monitoring and measuring risk, ensuring sound underwriting practices across the portfolio to support strong risk adjusted returns for our shareholders. Also, since last quarter, we've seen a modest uptick in M&A discussions, while market conditions have stabilized somewhat. We remain optimistic about the potential for attractive opportunities and with our solid capital base and proven financial performance, I believe we are well positioned to act when the right partner is ready. Notably, there are approximately 50 banks headquartered in Missouri and 24 in Arkansas with assets between $500 million and $2 billion, along with another meaningful number of others in adjacent markets, providing a broad landscape for potential partnerships. Lastly, with the profitability and earnings improvement over the last 2 years, we have continued to build capital in the absence of M&A activity. We were able to repurchase a modest number of shares in the first quarter of our fiscal year with a reasonable earn-back period. And with the recent market sell-off in bank stock prices, it has created a positive environment for us to potentially be able to repurchase additional shares. Thanks. Stefan Chkautovich: Thanks, Greg. At this time, Sammy, we're ready to take questions from our participants. So if you would, please remind folks how they may queue for questions at this time. Operator: [Operator Instructions]. Our first question comes from Matt Olney from Stephens. Matt Olney: I want to start on credit. And we saw some migration this quarter that you noted and that, of course, comes after some migration the previous quarter. So when you take a step back on credit, it feels like we're just seeing some broader deterioration. What color would you give us as far as an outlook for provision expense charge-offs from here? Should we just anticipate these metrics could remain a little higher the next few quarters, likely what we saw in the last 2 quarters? Any color would be appreciated. Greg Steffens: We would be surprised if charge-off activity remained at the level of the last 2 quarters. We would expect that to drop. We have seen rising trends in delinquent loans back to our current delinquency levels are running similar to what they did in 2018, 2019. And so I think we've basically trended back to more of a historical range on delinquencies. Charge-offs are just hard to totally predict. Would expect them to be down from what they were in the last 2 quarters Economically, we're just -- we're not certain what holds in the future. But we definitely hope for better charge-off ratios and would not anticipate based on what we know today, charge-off or provisioning to be as high as it was this quarter. Matt Olney: Okay. I appreciate that, Greg. And then I guess, shifting over towards the margin, Stefan, some really nice expansion that you noted this quarter. It sounds like there's a tailwind there from the repricing dynamics that you mentioned. Any other color you can provide as far as the bank's rate sensitivity. It sounds like you're still liability-sensitive, but can be volatile quarter-to-quarter. Just we're trying to size what the impact of additional Fed cuts, what that could mean for the margin at the bank. Stefan Chkautovich: Yes. Overall, as I stated earlier, we should still be overall liability sensitive. That could change a little bit with the positioning of our balance sheet. So given the influx that we're expecting in deposits, which will add to our Fed funds essentially. That will make us a little bit more neutral for a quarter or 2. But overall, we'll still be a net beneficiary of, call it, 1% to 3% net interest income per 100 basis points of rate cuts. Matt Olney: Okay. Perfect. So it sounds like for the margin, there's still the repricing dynamic tailwinds with flat rates. And if we want to assume additional rate cuts, that would be I guess, incremental from that dynamic? Stefan Chkautovich: Yes, sir. Matt Olney: Okay. And then I guess just lastly, Stefan, you hit on expenses briefly, really good just overall cost controls this quarter. And it sounds like this is a good run rate to go off of. Any more color on just what the drivers of the cost controls were in the third quarter? Stefan Chkautovich: Yes. The ASC 310-20 changes that we made were the main driver there for expenses. So this is a good baseline to use. We will see a little bit of a step-up come our 3Q with merit increases, but this is a good baseline to start from. Operator: Our next question comes from Nathan Race from Piper Sandler. Nathan Race: Curious just to get an update, and I apologize if you already touched on this as I hopped on late, but just an update just in terms of where the pipeline stands coming out of the quarter and just how you're thinking about kind of net loan growth and if you have any visibility if you're expecting any increase in payoffs as rates continue to come down in the short end at least over the next handful of quarters? Matthew Funke: Pay down? Yes, Nathan, we've got a pretty consistent pipeline September compared to where we've been in the last few quarters. We would expect things to slow down just seasonally into the December quarter, probably trailing into the March quarter as well, but still feeling good at that mid-single-digit growth for the fiscal year. And then as far as any payoff potential due to additional rate cuts, I wouldn't really see anything material on that generally, the stuff that we have that at a lower rate not as eager to pay us off. It's not going to be affected by 25, 50 basis points. Greg Steffens: The biggest unknown we have in potential payoff activity would be from the ag portfolio. We really don't know what's going to happen with ag prices and how soon farmers will market their crops. So that could have a $10 million, $20 million impact on loan growth one way or the other. Nathan Race: Got you. Okay. And then just given loan deposit ratio around 96%, 97% coming out of the quarter. Matt, is the expectation that deposit gathering can largely keep pace with that kind of mid-single-digit loan growth outlook for this fiscal year? Just curious to maybe get your thoughts on kind of opportunities to increase on the right side of the balance sheet from a deposit gathering perspective. Matthew Funke: Yes, I think we feel pretty good about our opportunity to maintain loan-to-deposit ratios where they've been over the last couple of years, seasonally adjusted, but we do look to reduce our broker reliance a little bit. We've worked on that so far, and we expect that to continue into the new year. Nathan Race: Okay. Great. And then is there any additional appetite on the buyback front, at least over the near term, it sounds like you're having a nice pickup in M&A discussions but just curious how you're thinking about allocating excess capital. Obviously, organic growth remains a priority, but I would love to just hear any updated thoughts on how you're thinking about the buyback over the next quarter or 2? And Greg, I would appreciate any commentary in terms of the size of potential deals you're considering and what that potential timing looks like. Greg Steffens: Buyback activity, we would anticipate to be more active given current pricing. We kind of target earnback on buying shares back of around that 3-year horizon, with current pricing, we would be within that 3-year earn-back period or a little less than that. So I would anticipate us being more aggressive buying shares back. We still have -- Stefan? Stefan Chkautovich: 200,000. Greg Steffens: 200,000 roughly of shares authorized for repurchase. So we would anticipate buying back some of those shares based on current pricing and earn back. Generally, on the M&A front, our ideal size would be more in that $1 billion asset range. And that's where we're most interested. And we are talking with some people, but I'm not anticipating anything to be immediately forthcoming. Nathan Race: And then I apologize if I could ask one more. I appreciate you guys cleaned up some of the commercial real estate loans that have been discussed over the last handful of quarters. So are those loans marked at a level coming out of the quarter where you don't see additional charge-offs? I believe you had mentioned earlier that you're expecting charge-offs to decline going forward, closer to your historical well below average levels, but just want to make sure I'm thinking about the future charge-off trajectory early in light of those 2 commercial loans. Greg Steffens: I mean we expect that the trajectory on charge-offs to move lower, absent any unforeseen circumstances. And we don't have -- we don't have anything that we know that's a problem coming up, but you never know. Matthew Funke: And specifically with those 2 loans, Nathan, those charge-offs have been fully realized as far as we know. Operator: We currently have no further questions. So at this time, I'd like to hand back to Matt for some closing remarks. Matthew Funke: Thanks, Sammy. Thank you all for joining us. I appreciate your interest, and we'll speak again in about 3 months. Have a good day. Operator: This concludes today's call. We thank everyone for joining. You may now disconnect your lines.
Fredrik Wester: Hello, everyone, and welcome to the Paradox Interactive Quarter 3 of 2025 live stream. With me, my name is Fred and... Alexander Bricca: I'm Alex. I'm the CFO. Welcome, everyone. Fredrik Wester: Great. So as you can see, I'm not in the office today, so I'm on the road, but we will get this going anyways. And I hope you'll enjoy what you see. So let's start with the first slide. I can't control the slides. That's my name, so you know who I am or to direct the questions. So it's been -- it's been an intense period for Paradox. So a lot of the Q3 has been actually focused on preparing for Q4, which is the most intense and busy quarter in the history of Paradox with 2 new base game releases, one remaster of Surviving Mars. We have 7 DLCs, 4 ports and 7 content creator packs. So as you can imagine, our release team is put to the test as we speak. But Q3, speaking of that, it's a bit of a slower quarter as we come to see them, fewer releases. And also, you can see that the stronger kroner has worked in our disadvantage to a certain extent, which was expected because previously, we've seen a historically high dollar, also some temporary cost increases stemming from different sources of more of the onetime nature. On a positive note, we can see that Age of Wonders 4 and Victoria 3, both have shown very positive player numbers, very positive retention numbers and very positive sales numbers when it comes to DLC -- is an attachment rate on the DLCs. So we -- they continue what we call the path to endlessness. So we can continue to develop on these games for many years to come. And we continue to build capability in the Management Game segment with a couple of games coming out already next year, as you know. So very busy over here or maybe not where I am right now, but at least in Paradox office. So a couple of small releases in the quarter. You see on the strategy gains we had some releases for Stellaris, Age of Wonders 4, Victoria 3 and Crusader Kings III as well. And on the Management Games segment, there was a couple of smaller releases, content creator packs for Cities: Skylines. So overall, quite calm, good reception on what was released, but no big dent in any curve to be had right here. And you've all been waiting for and wondering about Vampire: The Masquerade - Bloodlines 2. It's a long awaited game, and we're super happy to release it. And those who play the game are really happy with what they see. And that's great. We're not going to comment on anything more than that because it's only been 48 hours since release. But we focus currently on giving us good post-launch support as we can. But we're going to comment more on this game before year's end, is at least our promise to you guys. A couple of the release, as I said, it was like 16 or 17 releases, I counted on the previous slide. So the big one, obviously, being Europa Universalis V, followed by Surviving Mars - Remastered and then big expansion packs and DLCs for basically all our key franchises, starting with Cities: Skylines 2, Crusader Kings III, Hearts of Iron IV, Age of Wonders 4 and Stellaris. So you have a lot to look forward to those who play our games. It's a fantastic quarter to be a Paradox Interactive gamer. And with that, I think I'm leaving the word to Alex, who is going to lead us through the numbers as per usual. Alexander Bricca: Thank you very much, Fred. And let's do exactly that. Let's go through the numbers a bit more in detail. So revenues in the third quarter came in at SEK 395 million. Last year, same quarter was SEK 434 million. So it's a decrease by 9%. And as often for Paradox, there are 2 main drivers of our revenue development, what we release and how the currency is moving. And if we compare the big currencies for us, which is dollars and the euros, compared to the same quarter last year, I think the dollar is down 9% and the euro is down 3%. So that in combination lowers our revenue. Looking at the releases, Q3 tends to be a slow quarter for us at Paradox, 2 summer months, July and August, where we don't normally release much. Same this quarter and the same last year's Q3, similar amounts of releases slightly higher last year because then we had a big release on Crusader Kings III: Roads to Power, which we didn't have this year. So that also explains why we are slightly down in revenues compared to last year. Top revenue contributors, no surprises there. It's Cities: Skylines 1 and 2, Crusader Kings III, Hearts of Iron IV, Stellaris, Victoria 3 and Age of Wonders 4. Very good to see that Age of Wonders and Victoria is up there and yet another quarter where they show that they have established themselves as long-term providers of substantial revenues and strong profit margins. So that is very good to see. Operating profit came in at SEK 112 million. This year's Q3 compared to SEK 143 million Q3 of last year. Revenues is the main difference. And that flows through the entire P&L. So profit after financial items, SEK 116 million this year compared to [indiscernible] ] last year and profit after tax, SEK 93 million this year compared to SEK 120 million last year. Profit after financial items margin, 29% this year compared to 35% last year. If we look at the last 12 months combined, we are at a profit margin of 40%. Equity through asset ratio has come down a little bit from 80% to 78%. That has to do with the fact that -- I think on the very last day of the quarter or the day before, we prolonged our office lease contract here for the headquarter in Stockholm. So we added 5 years to the contract, which means that the contractual value of those 5 years comes up on the balance sheet both as an asset and as a debt. So therefore, the equity through asset ratio goes down a little bit, but still very strong and solid. Employees. Average number of employees during the quarter was 654 million this year, compared to 584 million last year. So we have increased some 70 colleagues. The main reason is the addition of Haemimont that we were happy to see in Q1 this year. I think that added some 55, 60 colleagues to us. On top of that, it's mainly the studios abroad from Swedish terms spoken that have increased. So we have Tinto in Barcelona that has increased a little bit and Triumph and Iceflake. Let's move on and look at the costs. Revenues we've already discussed, but what this chart shows is that the revenues are very volatile with the releases. And the ones of you that have followed us during the last quarters now that in Q2 and Q1 as well, we haven't released that much. So this is a very Q4-heavy year for us. We tend to be more spread out with every second quarter. Q2 tends to be big for us. But this year, we have a lot of concentration into Q4. Fred mentioned 2 new games -- 2.5 new games with Surviving Mars 1.5 and content releases, DLCs and expansions are on pretty much all the big franchises for us. So -- but Q3 was slow. So therefore, you see the green line dipping down in Q3. Cost-wise. So biggest cost, as always, is cost of goods sold, SEK 204 million this Q3, compared to SEK 217 million last year. It's built up of a few different items. So let's go through the main of them. Amortizations of capitalized game development is a big one. So SEK 71 million in Q3 this year compared to SEK 96 million in Q3 last year. The amortization level has to do is correlating with what we are releasing in the quarter, especially, but also the quarters leading up to the quarter we are in. And last year, we released a big expansion for CK III, which we didn't this year. So that explains a big reason why amortization has gone from SEK 96 million Q3 last year to SEK 71 million this year. Also, a year ago, we had released Millennia, I think we did it in March or April, but that also came with significant amortizations in the third quarter last year, which it did this year. Let's move on to the second kind of sub-row within COGS, write-downs, 0 write-downs this Q3 and 0 write-downs last year's Q3, so no difference. Then we have amortizations of acquired businesses and assets. So we have SEK 9 million there today for Q3 this year, which is down from SEK 14 million last year. So amortizations of acquired businesses and assets is exactly that. When we acquire companies or games or IPs, we put them on the balance sheet, and we tend to depreciate them over 5 years. It's a bit different. But in general, you could say we'll do it over 5 years. So it went up, you might remember in Q2 from Q1 because in Q1, we added Haemimont, which increases our depreciation. And in Q2, we added Stranded: Alien Dawn, the game, which we also amortized over 5 years. So that also pushed up the depreciation. But it's down compared to last year, and that's because Plerion, the mobile studio we acquired a little more than 5 years ago, that has been fully depreciated in our book. So we have taken the full acquisition value. We have taken that as cost over 5 years. Now that is done. So in our consolidated accounts, the book value is 0, and therefore, we don't have any more depreciation. So therefore, Q3 has come down. We have other amortizations as well in the COGS line, which is mainly -- it's SEK 7 million. That's no change. It was SEK 7 million in Q3 last year as well, that's mainly how the rent for our studios is accounted for. Royalty is another main item in COGS, SEK 23 million in Q3 this year compared to SEK 20 million in Q3 last year, so very similar. The main change -- difference is that we released an expansion on Age of Wonders IV, this year's Q3, which added to the revenues, and therefore, it also added to the royalty costs. Noncapitalized development and tech costs in our Publishing business, that went up from SEK 80 million last year's Q3 to SEK 93 million this year. Two things that have changed. One is development costs for games that are in early stages or high-risk stages has gone up a little bit. That fluctuates from quarter-to-quarter, but that is one of the explanations. The other is that back in Q4 last year, we changed -- we did a reorganization here in Stockholm, where we changed or moved some functions that were within the Stockholm-based Studio Organization to our publishing best tech organization, still at the very same offices, but the difference is that it's not capitalized anymore, but it's taken us cost directly. So I think that pushed up the direct cost and decreased the capitalizations with some SEK 6 million per quarter. So that we see the effect in this year's Q3, if we compare it to last year's Q3. So that is it about COGS. Selling expenses went up from SEK 44 million to SEK 50 million. Similar expense costs for games that have been live during the quarter. But the main difference is that this year's Q3, we started to have costs for games that are being released in Q4. So it's Europa Universalis V Bloodlines 2. So therefore, you see increased cost for selling expenses. Administrative expenses stays normally flat and they are often around SEK 22 million, SEK 23 million. This year's Q3, it went up SEK 29 million. We have had a few different cost items of onetime nature. One was that we we gathered the whole 600 staff plus here in Stockholm for a very nice staff conference. So we don't expect that one to be at SEK 29 million going forward. Then we have other income and other expenses. There you have movement in currencies. And during -- or its movement within the quarter, especially of the dollar. And so it doesn't move that much this year. Last year's Q3, it had a much more negative movement. So it's minus SEK 1 million this year compared to minus SEK 8 million last year, if you add income and expenses together. Financial items below that is mainly the interest we have -- we get from the banks on our excess cash holdings. And that has gone down from SEK 8 million to SEK 4.5 million, mainly because the interest has come down, but also because we have slightly less excess cash on our bank accounts compared to last year. All right. This chart shows the 4 quarters group together to show a bit more of a trend line. You can see that up and down, but the trend both for revenues in the green bars and profit in the yellow line, this drives upwards, which we like to see. All right. Let's talk about cash flow. We had a positive of SEK 195 million positive cash flow from our operating activities in Q3, and it fluctuates a bit. It's, of course, mainly driven by our operating profit, but then it can shift between quarters a bit. So if you compare it to last year's Q3, we are actually up. It was SEK 154 million then, now it's SEK 195 million. Even though we had better profit last year. And one of the reasons is timing on -- I think it was a large VAT tax payment we did this or last year's Q3 that we didn't have this year. Cash from investing activities, SEK 182 million, compared to SEK 115 million last year is Q3. So this is game development, investments in game development, live games that we do expansions and DLCs for but also new games. This has gone up quite significantly compared to Q1 and Q2. And the main reason is that we got a substantial invoice for Bloodlines 2 in Q3 this year. We had almost had no invoices earlier this year. So pretty much everything came now, when the game was completed by our partners at the Chinese room. Finally, I think of the slides No, that's it. Those were all -- very good. Fredrik Wester: That's very quick and efficient. And to the point, I think we'll have more to talk about in the quarter that's coming that is more busy as well. So we'll move over to the Q&A. I guess, then. Alexander Bricca: Yes. Fredrik Wester: And we do it per usual that one will read the question and the other one will try to answer as good as they can. Alexander Bricca: Yes, and I'm not sure whether you can see the questions. So Fred, I can read all the questions and we can answer every second one. Fredrik Wester: Sure. Sure, we can do it that way. Alexander Bricca: I'll do the first one that goes to you, Fred. What effect do mods have on the success of your games? Fredrik Wester: That's a very good question. And I would say that mods is an integral part of our gaming ecosystem, and it plays a big role in keeping the games up and running, keeping the retention high and the creativity among our gamers are helping other gamers as well to come into our universe. So modding is absolutely an important and integral part of what we do with our games, and we welcome -- we also try to support our modders as much as we can to -- well, by making the pilot structure to our games quite accessible. And we'll see, maybe we'll develop more tools to make it even easier to moding in the future because it is important. That's right. Alexander Bricca: Good. All right. I'll take the next question then. Which quarters or sales seasons have historically been the most or least successful for Paradox? And how does that inform future release planning? I mentioned it a bit. We tend to have very strong Q2s and Q4s. Q3s are, as you can see this year and last year, normally slower because we have July and August, so 2 months with a lot of vacations in them. So game releases tend to be pushed either earlier to be released in Q2 or later to be released in Q4 from that reason. But then we also have more marketing activities in the second and fourth quarters. So we tend to have our Steam Publisher Weekend in Q2, at least the last 4 or 5 years, I think it has been in the second quarter. We also have the start of the summer sale in the second quarter. And similar for Q4, we have the Autumn Sale with the Steam and the Winter Sale start in Q4 as well. So -- and quite often it can be good to release not only new games, but DLCs and expansions in relation at the same time as we have these quarterly marketing activities. So that is the reason why we tend to release more in Q2 and Q4. It's not always optimal for how we plan and how we do the publishing. But the focus is to release the games when they are done and when we have a good marketing bid to accompanying them. All right. Question to you, Fred. Will Paradox future strategy place greater focus on internal development through Paradox Development Studios, or will publishing external titles remain a key pillar of the business? Fredrik Wester: Good question again. We foresee that the majority of our projects in development work will be done by fully owned studios within the Paradox Group. And we are taking steps to ensure that we have a strong capability within both strategy and management games. Recently, the acquisition of Haemimont Games in the Management Game side. So we feel that we we want to own and control most of the things that we do. We do not totally walk away from publishing third-party either, but we will do it in kind of a different way than we previously have done, placing smaller bets and scaling up when we see that the concept works. So yes. So we will do both, but I would say the vast majority of the revenue -- or the cost will come from our internal studios going forward. Alexander Bricca: Okay. I can take the next one. How do you judge the success of Victoria 3 as of right now? From the outside, it looked like the 1.9 Update and Charters of Commerce was quite a success. Is this true from your perspective as well? And do you think that this access will have a longer-lasting effect on Victor 3 success as a whole? Yes. So we are very happy with what Victoria 3 has turned out to be. Charters of Commerce was a milestone for sure. But also in this third quarter, we released content that was appreciated by the players, and we can see the player activity is high. But there was also quite a lot of work going into the base game before Charters of Commerce as well, which we think has had a very positive impact to the game. Victoria 3 is a project that if you look at the whole project up until now, it has had the kind of poor financial performance, everything accumulated or aggregated. But as of now, the financial performance is quite strong. And so it has been quite a long investment for us that we are now finally seeing the benefits from. So it is very good. And I think Victoria 3 will continue to be successful for us for many years. But I don't think it's -- Charters of Commerce has helped us to take it to a certain level, but if it's going to continue to be successful, we need to continuously come out with qualitative content that the players want and with a good pace as well. And I'm confident that the team will be able to do that. Fredrik Wester: Yes. I mean, the Victoria team has done a tremendous job in turning the tide on the game and from all perspectives, I mean quality-wise, gameplay wise, retention, if you look at it from who are playing the game and how much. So we're super happy with the trajectory of the game at the moment, for sure. Alexander Bricca: So one more question to you, Fred. What are Paradox plans for Paradox Arc? The labels announced schedule is currently limited, should we expect adjustments to its release cadence or portfolio approach? Fredrik Wester: Right. So Arc is working in a bit of a different way. So -- which means that they start more projects, but they also kill off more projects along the way. And if it's one thing that we learned at Paradox, sometimes the hard way is not to announce any projects too early. So we will announce the Arc projects when they're ready to be announced. So they have a really promising catalog of new games, but we will not announce any of them until we are 100% sure it's going to reach the market at the quality level we expect on release as well. So expect more, but we're not trying to hype anything. We're not -- we're just -- it's a lot of experiments and some of them look really promising. Alexander Bricca: Great. Are there more questions? Yes. This is one, I think, for me, maybe. What is the historical correlation between Steam Wishlist numbers and actual sales for your major franchises? Have you ever considered communicating to the market an expected conversion range from Wishlist to sales as some independent publishers do? No, we don't because our experience is that the correlation is quite spread out. So it's very difficult for us at least and probably for you too, to use Steam Wishlist numbers projecting sales. And that's the reason -- I mean, we don't provide forecast at all. And this is the main reason, it's very uncertain. And then projecting or releasing forecast on projected sales is something that we avoid. And Bloodlines, for example, I think we've had record high Wishlist numbers for Paradox game. But taking that as an example, I think the Wishlist opened back in 2019. So that means that, that Wishlist is very old. So that also makes it very difficult to compare one Wishlist to another. Do we have more questions? Here's one for you, Fred. Is Paradox exploring opportunities to expand its games into physical formats or other types of consumer experiences? Fredrik Wester: I'm sure what you mean physical formats, but I guess it means different media formats -- sorry about that -- different media formats like television series or movies or other forms of entertainment and licensing. And of course, we have explored for many of our brands, where I would say that the World of Darkness portfolio is one that lends itself the best to external licensing, but we're doing smaller licensing deals right now, but we're exploring opportunities all the time. And it's a great way to strengthen our brands. It's financially safe and sound. The upside is limited, but it's a great way to expand small steps with a low risk. So we're currently working with a small-scale licensing operation, and we'll see if we scale that up over time. But nothing that we have that is worth mentioning at the moment, might pop up in the future. Alexander Bricca: All right. Thanks, Fred. Was that the last one? No, we have one more. Yes, we have few ones. How should we view selling expenses in Q4? Have most of the marketing costs for new games and expansion release has been recognized in this quarter? I can take this one. No, we have most of the selling expenses we have in the quarter when we release the game. So for Bloodlines 2, for Europa Universalis V, we have had costs in Q3, but they will most likely be bigger in Q4. And especially for the live games where we have expansions and DLCs, then the kind of allocation of expenses to the release quarter is much higher. So Q4 should be a big spending quarter in terms of marketing costs. Fred, what is your confidence on the pipeline beyond Q4? Fredrik Wester: That's a good question. Beyond Q4, we're so into Q4 operationally right now, it's hard to sometimes hard to think beyond it. But if I put it this way, without being banging our own drum too much, I think we are one of the best positioned gaming companies in the world right now. We have a strong cash flow. We have money in the bank. We have very strong games within certain niches that we're dominating. I think we have a strong customer base. So I think there are very few companies that have the huge opportunities that we have right now. And what it's all about is taking advantage of these opportunities. If you speak about the pipeline specifically, I think we have a strong pipeline with a healthy mix of smaller, more experimental titles through Arc with some games like Prison Architect 2, that is fully developed externally, to some super heavy hitters that comes from the internal [indiscernible] . So I say 2026 just bring it on. We're ready. So that's going to be great. Alexander Bricca: Sounds good. And I think those were all the questions that we have got so far. If we haven't answered -- if we missed the question, we will make sure to find them in the e-mails and the form post and also send them separately. If you come up with questions after this stream, feel free to contact us, and we will try to answer them. But that's it for this stream. So we have the next one coming up. That will be for the fourth quarter, much more action full quarter compared to this third quarter for sure. I think it's at the very beginning of February next year, so quite some time until then. Fredrik Wester: Up until then it will be even colder and more unhospitable than ever, but we look forward to it anyways. And thank you very much for watching and hope to see you next time as well. Alexander Bricca: Thank you for watching.
Operator: Good day, and welcome to the Packaging Corporation of America Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Mark Kowlzan. Please go ahead. Mark Kowlzan: Thank you, Elissa. Good morning, everyone, and thank you for all of you for participating in Packaging Corporation of America's Third Quarter 2025 Earnings Release Conference Call. Again, I'm Mark Kowlzan, Chairman and CEO of PCA. And with me on the call today is Thomas Hassfurther, President; and Kent Pflederer, our Chief Financial Officer. I'll begin the call, as usual, with an overview of our third quarter results, and then I'll turn the call over to Tom and Kent, who will provide further details. And then after that, I'll wrap things up, and we'd be glad to take any questions. Yesterday, we reported third quarter net income of $227 million or $2.51 per share. Excluding the special items, third quarter 2025 net income was $247 million or $2.73 per share compared to the third quarter of 2024 net income of $239 million or $2.65 per share. Third quarter net sales were $2.3 billion in 2025 and $2.2 billion in 2024. Total company EBITDA for the third quarter, excluding special items, was $503 million in 2025 and $461 million in 2024. The third quarter net income included special items expense of $0.22 per share. The $0.22 were costs related to the acquisition of the Greif Containerboard business, including step-up of the acquired inventory, integration-related expenses and transaction expenses. Details of the special items for both the third quarter of 2025 and 2024 were included in the schedules that accompanied our earnings press release. We completed the acquisition of the Greif Containerboard business on September 2. Our results included 1 month of the acquired operations from Greif, which impacted earnings per share by $0.11 after special items. These include depreciation and amortization after preliminary purchase accounting and additional interest on new borrowing to finance the acquisition. Excluding the special items and the impact of the acquisition, our earnings increased by $0.19 per share compared to the third quarter of 2024. This increase was driven primarily by higher prices and mix in the Packaging segment for $0.73, lower fiber costs of $0.16, higher prices and mix in the Paper segment, $0.02 and a lower maintenance outage expense of $0.01. Partially offsetting the improvements were higher operating costs, $0.33; lower production and sales volume in the Packaging segment, $0.16; higher depreciation expense, $0.07; higher freight expense, $0.07; higher fixed and other expenses of $0.07 and higher interest expense, excluding the Greif acquisition debt of $0.02 and lower production volume in the Paper segment for $0.01. Because of the uncertainties of the Greif closing date, our third quarter guidance did not forecast any impact from the acquisition. Excluding special items and acquisition impact, the results were $0.04 above the third quarter guidance of $2.80 per share, primarily due to favorable price and mix in the Packaging segment and lower freight costs. Looking at our Packaging business and including the acquired business, EBITDA, excluding special items in the third quarter of 2025 of $492 million with sales of $2.1 billion resulted in a margin of 23.1% versus last year's EBITDA of $446 million and sales of $2 billion or a 22.2% margin. Corrugated volume was largely on plan and continued to reflect the cautious ordering patterns we've seen most of the year. We ran to demand during the quarter and produced 38,000 fewer tons of containerboard than the third quarter of 2024 and 59,000 more tons of containerboard than the second quarter of 2025. Our containerboard inventory in the legacy system increased by 15,000 tons during the quarter in preparation for the fourth quarter DeRidder outage. From the operational standpoint, we ran very well the entire quarter and with strong performance in terms of cost and production efficiency across the entire mill and corrugated system, which is a testament once again to the successful investments across our business. We continue to look every day at opportunities to take out cost and optimize production capabilities with the support of our considerable in-house technical and capital execution expertise. The acquired mills produced 47,000 tons during the month. Having closed the acquisition on September 2, we used the initial month of ownership to our advantage. While our activities impacted the September results, they will improve long-term productivity and efficiency. Massillon had a scheduled annual outage -- maintenance outage, which we extended to 5 weeks and completed earlier in October. We did a comprehensive refurbishment of the mill, including reliability improvements on the paper machines, the OCC plant and the power plant. All mill infrastructure and unit operations were cleaned and inspected. We took the 2 paper machines at the larger Riverville facility down for 5 days a piece to implement the first phase of our reliability improvements. We'll have additional work to do to implement our efforts and expect to have achieved the first phase by the end of the fourth quarter. We're already seeing the benefits of improved performance and quality with both mills running at higher performance. We'll continue to manage and invest in these facilities to achieve operating performance in line with the legacy PCA system. I'll now turn it over to Tom, who'll provide more details on the containerboard sales and corrugated business. Thomas Hassfurther: Thank you, Mark. The performance of the Packaging business was largely as we expected, and it was another strong quarter. Domestic containerboard and corrugated products prices and mix were $0.72 per share above the third quarter of 2024 and down $0.02 per share compared to the second quarter of 2025, which was all attributable to containerboard mix. Export containerboard prices were up $0.01 per share versus last year's third quarter and flat with the second quarter of 2025. As Mark mentioned, while customer ordering patterns have continued to reflect market conditions that have persisted throughout most of the year, corrugated demand improved as the quarter progressed. In the legacy business, shipments per day in our corrugated products plants were down 2.7% versus last year's record third quarter when per day shipments were up more than 11% over 2023. We will continue to see tough comparisons going into the first quarter of 2026. Total shipments were down 1.1% in the third quarter of 2025 versus last year, reflecting 1 more workday this year. For a little context, on a per workday basis, July shipments were about 6% down from last year, while August was less than 1% down and September was less than 2% down. Margin performance was very strong again with Packaging segment EBITDA margins improving to 23.1% versus 22.6% in the second quarter and 22.2% last year. Including the acquisition, shipments were up 3.7% over last year per day and 5.3% overall. The acquired plants had a strong September with volume growth and good price realization. We're working very hard to integrate the operations into the PCA corrugated system, and we like what we see so far. The culture is highly compatible with PCAs, and our new colleagues have gone beyond the call of duty to continue to develop strong customer relationships and serve those customers. Greif has historically carried relatively more inventory in its corrugated system than we do. With the acquired plants being part of a much larger integrated system, we can more efficiently and nimbly supply them now that they are part of PCA. We have the opportunity to bring inventory down to lower levels, and we'll manage our operations to do so over the next couple of quarters. As expected, export sales volume of containerboard was down 8,000 tons from the second quarter of 2025 and down 32,000 tons from the third quarter of 2024. I'll now turn it back to Mark. Mark Kowlzan: Thanks, Tom. Looking at the Paper segment, EBITDA, excluding special items in the third quarter was $40 million, with sales of $161 million or a 24.9% margin compared to the third quarter of 2024 EBITDA of $43 million and sales of $159 million or 27.1% margin. Sales volume was 1% below the third quarter of 2024 and 10% above the second quarter of 2025. Prices and mix were up 2.1% from the third quarter of 2024 and 0.5% from the second quarter of 2025. Performance reflected the seasonally stronger third quarter and sales volume was higher than expected. I'm now going to turn it over to Kent. Kent Pflederer: Thanks, Mark. Cash provided by operations was an all-time quarterly record of $469 million. And after $192 million of CapEx during the quarter, free cash flow was a record $277 million. In addition to CapEx and funding the Greif purchase price, the primary payments of cash during the quarter included dividends of $113 million and cash tax payments of $19 million. Our quarter end cash balance, including marketable securities, was $806 million with liquidity of approximately $1.4 billion. To update you on annual shutdown expenses, we now expect $0.45 in the fourth quarter for the legacy PCA system and $0.02 for the acquired business. The legacy system expense is expected to be $0.29 higher than the third quarter of '25 and $0.17 higher than the fourth quarter of '24. We are revising our capital forecast for the year to be approximately $800 million from our previous forecast of $840 million to $870 million. This is primarily as a result of timing of expenditures, and we have not changed our overall capital plan. This revision includes incremental expenditures for the acquired business. As part of the Greif acquisition purchase accounting, we are required to record the acquired assets on our books at fair value. Our valuation is preliminary and is subject to change over the 1-year period after the acquisition. Our preliminary evaluation in addition to working capital includes approximately $870 million of property, plant and equipment, $530 million of intangibles and $280 million of goodwill. We recorded $12 million of depreciation and amortization of the acquired assets during the third quarter, and we expect an annual run rate going forward of approximately $130 million. As a reminder, annual net interest expense is expected to increase by $95 million, and we recorded $8 million in additional interest during the third quarter. We were a significant containerboard supplier to Greif before the acquisition and shipments of containerboard that were recorded as third-party sales in the past are now integrated. This affects the timing of recognition as shipments are now recorded as inventory with sales and profit being recorded when that inventory is converted and sold to a customer. We estimate that this affected results by about $0.03 in the third quarter, which will not recur going forward. I will now turn it back over to Mark. Mark Kowlzan: Thanks, Kent. For the fourth quarter, we expect per day corrugated shipments to be higher than the third quarter with 3 less shipping days. Export containerboard sales will be higher than the third quarter, but relatively low when compared to traditional fourth quarter volume. Containerboard production in the legacy system will be slightly lower than the third quarter with the maintenance outage at the DeRidder mill, and we expect inventory levels in the legacy system at year-end to be similar to levels entering the fourth quarter. Outage expenses will be $0.29 higher than the third quarter. We expect prices and mix in the Packaging segment to be lower as a result of seasonally less rich mix. In the Paper segment, we expect seasonally lower production and sales volume and flat pricing. We also expect seasonally higher energy and fiber costs as well as slightly higher freight and other operating costs. We expect significant improvement in the results of operations from the acquired business. We will be impacted by lower production and higher maintenance expenses from the Massillon mill outage that did continue into October and seasonally lower volume and mix in the corrugated business. We will benefit from a full quarter of improved operations at the Riverville mill. We will be managing production to achieve lower inventories, as Tom mentioned. Considering these items, we expect fourth quarter earnings of $2.40 per share, excluding special items. And with that, we'd be happy to entertain any questions, but I must remind you that some of the statements we've made on the call constituted forward-looking statements. The statements were based on current estimates, expectations and projections of the company and do involve inherent risks and uncertainties, including the direction of the economy and those identified as risk factors in our annual report on Form 10-K on file with the SEC. Actual results could differ materially from those expressed in the forward-looking statements. And with that, Elissa, I'd like to open the call up for any questions, please. Thank you. Operator: [Operator Instructions] First question is from George Staphos, Bank of America. George Staphos: I guess maybe the first question as it normally comes up during Q&A. Can you talk about bookings and billings as we're starting fourth quarter? Obviously, you have fewer shipping days, but what are you seeing on a per workday basis or however you want to frame it? And then we had some other questions. Thomas Hassfurther: George, this is Tom. Right now, kind of the blend of bookings and billings that we see so far is a little over 1% up. And again, I'll remind you, very tough comps. Okay? George Staphos: Got it. And you said the tough comps just factually will be difficult through 1Q, that was part of your script where we're done by the end of this quarter in terms of what you think tough comps are? And is any -- or [indiscernible] strength in any of the end markets that you would point us to or anything that's particularly challenging right now? Thomas Hassfurther: Actually, George, outside of a couple of end markets, our business has been very, very good. Those couple of markets that were -- that we've struggled -- it's not we've struggled. They've struggled in the marketplace. I mean, everybody has read about beef. That's a big segment for us. And the cattle herds are down to a 70-year low. So there's a lot of struggles going on there, and we even have the administration looking at other ways to solve that problem. And then the other area is the building materials. We all know what's happened with housing starts and where that stands. So those 2 segments have been a drag on us. Other than that, we've been very pleased with the results in all of our other sales segments. George Staphos: As regards to Greif, I know we'll get more color over time, but any big picture, any large sort of boulders you could tell us about in terms of what you're finding with Greif relative to the deal model? And is there any way at this juncture you can give us a view on what the maintenance might look like? So in that regard, again, is $300 million of EBITDA reasonable for the combined business? What does maintenance look like? And then I had 1 or 2 last follow-ons. That will be quick. Mark Kowlzan: Well, again, I think as we talked about this, the CorrChoice side of the business that we acquired, the converting side was very well capitalized in very good condition. The 2 mills, we've had -- from September 2, that day, we've had upwards of -- on any given day, 100 of our PCA personnel in the mills at Massillon and the same number of people in the mill at Riverville, assisting in doing what we do, and that's operational expertise. Tom, do you want to comment about the corrugated? Thomas Hassfurther: Yes. Let me just say in total, what we've -- I think the best way to summarize this, George, is probably that it is an organization that is very customer focused. And as I mentioned, the culture of the business fits very well with ours. That's a great bolt-on. Operationally, not nearly as strong as PCA and because we've had many, many more resources, and we've got this great team to address those issues. But in typical PCA fashion, we get on it right away, right upfront, not trying to manage to a quarter or anything like that. We're looking at the long haul. And I think given that organization and their focus on the customer and the end markets that they supply, this is going to be very, very accretive to our earnings going forward. Mark Kowlzan: One note, George. We took the machines down at Riverville for basically about a 5-day period, each machine in September. But during the time we ran in September, we improved operations. We were running like 97.2% for the month of September in Riverville, and that's up dramatically from prior to the acquisition. And so we've seen immediate improvements in both efficiency and quality. But the good news is we'll continue to see a lot more benefits as we work through things. And as far as your question about some of the accretive value, I think, Kent, you and I are talking this morning. Kent Pflederer: Yes. So George, going into the acquisition, historical Greif performance, $240 million was about a good annual run rate for the EBITDA -- our projection for synergies on a run rate basis after the second year was about $60 million. We're well on target for that. We're looking probably in about the 20-ish range by the second quarter of next year to give you a little bit more clarity on that on a run rate basis. George Staphos: Quickly, $0.20, maybe a sequential increase in D&A as part of the $2.40 is kind of rough math. And any way -- I know it's kind of tough on live mike, but any way to talk about what the inventory strategy quantify what the tons coming down might mean in the Greif system relative to where you've been? Mark Kowlzan: The comment about inventory, again, it was mentioned, we've got 10 mills now in the system. We've got incredible opportunity to take care of all of our box plants nationwide. So we will quickly incorporate that strategy into the CorrChoice operation. And it will take some time to work the inventory down. We've already started that. Thomas Hassfurther: Yes. Also, George, I'd just add that mix is a part of that equation also. So we've got to do both at the same time, but very good opportunities there. Mark Kowlzan: All right. With that, next question, please. Operator: [Operator Instructions] Next question is from Mike Roxland, Truist. Michael Roxland: Congrats on closing the acquisition. I just wanted to follow up, Kent, with you, one, on the numbers that you just mentioned in relation to George's question, the $240 million of EBITDA and the $60 million of synergies. Now that you've owned the assets for roughly 6 weeks, can you talk about any potential upside to those numbers that you foresee from those assets? Mark Kowlzan: Right now, again, I'd rather just let you know that we're -- every day, we're seeing positive results from the work we're doing. So again, I think a lot is going to depend on the marketplace in the future and what we can do to take advantage of the footprint on the converting side. The mills will continue to be improved upon and continue to deliver in much the same way that the Boise assets delivered over the last 10 years. So again, I think I'd rather just be conservative and say we're going to stick with the with the numbers that we've already given you and just say that there's always upside, but it does depend on what the market does. Michael Roxland: Got it, Mark. Any comments you can make in terms of the improvements, whether in terms of efficiency costs went out with respect to Massillon, you extended -- you mentioned in your comments and also in the press release that you extended the maintenance outage to 5 weeks. So can you talk about maybe some of the benefits that you're receiving from that extra work that you put into the mill? Mark Kowlzan: Yes. I mean it's quite remarkable that with the capability we have in PCA, we've got upwards of 200 people in our technology engineering organization. And again, from September 2 that morning at both mills, we were working simultaneously, and we had for at least a 6-week straight period of time at least 100 PCA personnel in Massillon working full time to assist the mill in improving their capability. I don't think there's anything in that mill that hasn't been touched. We undertook the first week of just cleaning the mills, inspecting, taking apart major equipment bearing changes all the way down to lubrication systems, hydraulic systems, role changes, power equipment, boilers, turbine generators. So I feel very good that comprehensively, we understand the opportunities we need to take advantage of going forward. Massillon as an example, we understand the limitations. We understand the upside. So some of it's going to be dependent on ordering some equipment and getting it delivered. The good news, I still feel though what we told you is that it's -- when we converted some of the Boise acquisition, we're spending $0.5 billion, i.e., DeRidder, Jackson, Wallula for these conversions. But I told you before, we expect to be -- the work at Massillon, the work at Riverville, it will be the tens of millions of dollars. So over the next couple of years, $10 million here, $10 million there for system improvements, upgrades and technology and capability. But the bones of the mills are good. We just need to update them and then, like I say, run these mills the way PCA looks at the business and takes care of the business. So I'm feeling very bullish on what we've seen just in 1.5 months. As an example, both mills, we saw -- we started at Massillon the week before last, and we saw at least a 50% improvement just in the quality of the profiles, moisture profiles, basis weight profiles, physical test profiles. So huge improvement there, and that translates into customer experience with the product through CorrChoice. So again, feeling very good about it. Michael Roxland: Got you. I appreciate the color there. And one last question before turning it over. Greif EBITDA for the 1 month you owned the assets came in a little lower than we expected given recent performance prior to your ownership. Was that all due to the outages, these will get Massillon and Riverville? Or was there any economic downtime that you took due to choppy backdrop or as you manage elevated inventories? And then any initial thoughts on 2026 CapEx? Kent Pflederer: Mike, I'll take that one. It was largely from the outages and the timing effects of the revenue and profit recognition that hit us by about $12 million during the quarter. So it was those. In terms of economic downtime, no, we didn't factor that in, the Greif results for September. No. Mark Kowlzan: The other part of your question about CapEx into next year, we'll update you in January for the plan for next year. But I think we're on track with taking advantage of our opportunities. I would like to say that just to remind everybody, the biggest pieces of capital spending this year right now are a couple of big projects on the converting side. We've got one big project going on in Ohio right now, and that's a new facility. And then in upstate New York, we're totally upgrading one of our facilities as a big CapEx project that will -- both those projects will finish into next year. But we're always taking advantage of these capabilities to insert new converting lines and upgrade converting operations. But we'll give you a better feel in January what we're looking at. We do have some very interesting energy opportunities that we'll give you more detail with next year in the January call. Operator: Next question is from Gabe Hajde, Wells Fargo. Gabe Hajde: I wanted to ask, I see this number, and I think you kind of strip out input costs. So it's -- I'm going to call it the frictional inflation treadmill, but running kind of around $1 year-to-date. So I think in this quarter, it was $0.33. So if I annualize that, we're looking at kind of $170 million. Is that something that's particularly elevated this year or kind of post pandemic when we think about labor inflation and insurance costs, things like that, that's a good run rate on a go-forward basis for maybe the combined entity or maybe legacy PCA? Mark Kowlzan: Let me -- one good piece of that, that we're dealing with, but everybody is dealing with it even at your household is energy costs, electricity rates. Just in the last year or 2, we've seen some of our facilities, electricity rates are up 50% to 75%. So that's one good example of what the world is dealing with, and we're part of that world. That's why I was alluding to the fact that we've got 3 significant projects that we're going to introduce into early next year that will take 3 of our mills essentially electricity independent within the next 2.5 years. Kent Pflederer: And then, Gabe, on the others, it's the usual. It's the labor inflation. It's chemicals. It's any kind of supplies, insurance, rent, those sorts of things that have been going up at a fairly healthy clip in the last few years. Gabe Hajde: Okay. But is that -- is it particularly elevated this year? Or is that something that sort of… Mark Kowlzan: Well, again, it's just I think the biggest factor was electricity rate increases nationwide. If I take one element of cost, it would be electricity. Gabe Hajde: All right, Mark. But when you're planning for next year and you're looking at that number, maybe it's down a little bit because we don't expect more energy price increases and maybe we do because we've got to build data centers. Mark Kowlzan: On the contrary, I don't see energy -- electricity cost flattening out with the demand from all of the data centers that's ongoing. The electricity rate increases, I just don't see that it's going to abate anytime soon. That's why we've taken upon ourselves that we've got the plans to -- I would say, 3 more of our mills. We've got a couple of our mills are in very good shape right now with electricity independence. But within 2.5 years, we'll take 3 more of our mills and essentially get them off the grid, and we'll be in good shape. Gabe Hajde: Mark, I feel like you've got me on the hook, so I have to ask. Are you referencing maybe some biogenic carbon capture opportunities? And I think we've read in some outside articles that, that could contribute up to $85 a ton that you produce. Mark Kowlzan: No, that's a separate issue. We're talking about essentially gas turbine technology. We've moved ahead, and we've got some great projects that we're going to be executing. We've got some facility -- I mean without getting into the details, Gabe, we've got some facilities that already burned a lot of natural gas and power boilers, but we're not getting the advantage of the downstream electricity generation. So on a combined cycle through efficiency, you're not getting all of the upside opportunity for each therm of gas that you burn. The gas turbines will give us that complete efficiency on the combined cycle from steam generation and electricity generation. -- and these will be projects, again, we'll introduce to you early next year. A lot of discussion on the January call, will give you a lot more details. Gabe Hajde: Yes, sir. Tom, one, we've read recently about, I'll call it, price elasticity on corrugate. I'm just curious in your conversations with customers, broadly speaking, how sensitive are customers in terms of potential price increases or trying to do more with less, whether it's lightweighting and how that's showing up maybe in your own volumes, not necessarily specific to price increases, but more thinking about lightweighting on that front? Thomas Hassfurther: Gabe, obviously, we don't talk about any forward pricing at all. So I'm going to pass on that one. But I will tell you that the -- again, you hear Mark talk about, as I indicated, that we expect our mills and acquired mills to run at a tremendously efficient rate, and we expect them to meet some very stringent specifications. And those specifications relate to a lot of the technology that we have put into our boards, proprietary technology that gives us lightweighting capabilities that we believe is unique to the marketplace. Those are solutions that we take to our customers. And given this inflationary environment we're in, given the fact that costs are constantly going up, we're doing everything we can to help ourselves and our customers to fight those. However, at the end of the day, I mean, it is an inflationary environment. But I think that's a real competitive advantage we have in terms of our offerings to the marketplace. Operator: Next question is from Mark Adam Weintraub, Seaport Research Partners. Mark Weintraub: First, I just wanted to just follow up on Greif, the big increase in D&A from purchase accounting. Just want to reconfirm in terms of CapEx related to those assets, I think you in the past talked about $50 million to $60 million. And with that type of spend, you can get them up to Packaging Corp efficiencies, et cetera. Is that still a reasonable number, which obviously would be a lot lower than the $130 million D&A you had talked about? Mark Kowlzan: Yes. I mean, after what we've seen with the efforts at Massillon and then the work at Riverville, it's that type of capital that we're going to spend. It's very similar to what we did at International Falls over the last 14 years. We did not have to spend massive amounts at [indiscernible]. We just had to improve the capability on a lot of little systems and taking care of some of the technology, but we're well on our way, but it is in that tens of millions of dollars, and it will happen over the next year or 2. So I'm really confident that, that number is still good. Thomas Hassfurther: Mark, this is Tom. I would also add that, as we indicated before, the sheet feeders and corrugated box plants are very well capitalized, and we're very pleased with that. And although we've got some maintenance costs and some other things that will take place there, we're not going to invest huge amounts of capital in those facilities. Mark Weintraub: Right. So obviously, cash earnings from Greif are much stronger than what the book earnings are going to be. But I'm also kind of curious whether or not -- is there much in the way of tax shield benefit that you're getting through accelerated depreciation? Or is that sort of not something to call out specifically? Kent Pflederer: Well, I think you saw it in our cash tax payment for the third quarter that we called out in the script. The allocation that we had to PP&E, we were able to take bonus depreciation on and reduce our cash taxes out pretty significantly this year. So yes, I think you see that in our cash for the third quarter. Mark Weintraub: Okay. And presumably, you'd see that next year as well. But -- so kind of shifting gears, if I could. Obviously, it's sort of been a pretty difficult environment industry-wise, box shipments, et cetera. In the past, you've been able to, through business wins, grow a lot faster than the industry and fill out these new box plants, et cetera, that you are building. Have you had business wins of late that you have visibility on that can give us confidence that you can continue to outperform on the volume side? Thomas Hassfurther: Mark, this is Tom. We haven't changed anything that we typically would do. Absolutely nothing. We've been -- as I mentioned, we've been hurt in our numbers from a couple of big segments of ours that we can do very little about. However, we continue to grow within existing accounts in a big way. And yes, we continue to have wins, but these are wins that we earn. They're not -- these aren't wins that you just go out and have something to offer that nobody else is doing necessarily, but we have to earn these wins. And we're just continuing to do the things we're doing. We're just not getting -- we're not getting a lot of lift, obviously, from the economy and the starts and stops that we've seen consistently go on throughout the year relative to tariffs and a bunch of other things certainly are impacting the business. Mark Weintraub: Great. And then lastly, we've had this extraordinary year in terms of magnitude of capacity closures in the North American containerboard business. And box demand hasn't been good. But are you actually feeling any more tightness because of the closures of containerboard capacity? Any color you could give would be appreciated there. Thomas Hassfurther: I think the containerboard capacity, I think you're seeing a consistent trend in this industry that it right sizes to demand and we run to demand. We do. That's what PCA does. And I think in addition, even on the corrugated side, we've closed some facilities. We've rationalized some poor assets, things like that, and we'll continue to do so. And again, it's -- we will run to the demand that we see out there. Mark Weintraub: Okay. Tom, just since you mentioned it, I apologize, I know I'm going a little long here. But I think you have 2 box plants, which not -- which you're going to be closing in the fourth quarter. Can you give us a little color around the decision to do that? Thomas Hassfurther: Well, they just happen to be box plants that are not -- that we can't -- capitalization isn't going to be the answer for those box plants, and they have to be in markets where we have other facilities and bigger facilities and better equipped facilities to handle those customers. It's not as if we're abandoning any of those customers. We're keeping all those customers, but it's just a matter of rightsizing to the demand we see in a particular market. Mark Kowlzan: I think people tend to forget, Mark, if you think about the last 16 years, we probably made 25 acquisitions. And during that period of time, we probably shut 20-some-odd plants. Thomas Hassfurther: 20-some-odd plants, yes. Mark Kowlzan: During that period of time, and we've built a number of new plants and essentially recapitalized the rest of our footprint. But as Tom said, we run to demand and we -- but people lose sight of the fact that we have gone ahead and closed a number of our older plants that just don't fit our needs anymore. Operator: Next question is from Anthony Pettinari, Citi. Anthony Pettinari: With Greif, your mix into recycled will increase. And I'm wondering if it's possible to say how many tons of OCC PCA might buy kind of with the Greif assets. And as you look at your end markets and talk to your customers, as you think about the next 3 to 5 years, is there any reason to think recycled demand will grow faster or maybe slower than kraftliner? Or do you not necessarily think about it that way? Mark Kowlzan: I look at it as an opportunity. Quite frankly, I look at Massillon and Riverville as an opportunity to make more medium, which we need. And our plans run very well on the recycled medium, but combining that with our high-performance liner grades, we get the best of both worlds. And so it's not on a total percentage basis. It's really just taking advantage of the opportunity, and we'll play into that in the marketplace. But the recycled medium work very well with us. Thomas Hassfurther: Yes, Mark, the key is that we do need the medium and 100% recycled medium is a good run rate in our facilities and stuff. And so trade for some of that and those sorts of things. But as far as end markets go, we attack every end market with whatever the best solution is. Anthony Pettinari: Okay. And any quantification of like OCC consumption tons or I'm not sure if you disclosed, but... Kent Pflederer: Anthony, we were flexible beforehand. We could flex the system a little bit, but we typically ran around 20 -- low 20 percentage furnish OCC. That's going to move up about 10% on the whole to 30-ish going forward, if that helps. Anthony Pettinari: Got it. Got it. That's very helpful. And then just a couple of quick questions on CapEx. I mean, understanding you'll give us more detail in February. But the box plant projects that you referenced, does the CapEx spend for that from '25 to '26, is it sort of directionally similar? Or does it sort of ramp down modestly or maybe ramp down more sharply? And then I guess second question, Mark, you've got us really interested in these energy projects. Are there currently PCA mills that are selling meaningful amounts of electricity back to the outside utility company? And could that be potentially an opportunity or part of the projects that you'll tell us more about next year? Mark Kowlzan: First part on your CapEx, we would expect as we finish up the 2 bigger projects, the one in Ohio and the one in New York State next year, CapEx will continue to be kind of flat in that range. We would probably take advantage of that opportunity. The good news is, and Tom has mentioned this and I've mentioned it, Greif gave us the opportunity with the CorrChoice converting side of their business. It's going to help us minimize what we have to do in some of these regions. We will avoid having to spend some major pieces of capital on any new plants for the next couple of years. So in that regard, we'll continue to do some converting installations as far as EO, [indiscernible] rotary die cutter type stuff, some corrugator opportunities. But as far as major plant projects, that will mitigate itself. And then I see the next couple of years, the big projects are going to be some of these energy projects. We'll take advantage of that. It's probably a 2.5-year process. We'll get into the details in January and the first part of next year. But these are projects that have 1.5 years payback type projects, very, very high-return projects. But as far as the level of CapEx, we'll be in a very comfortable range, the amount of cash we're generating. I think, quite frankly, people are going to be asking us, what are you doing with all the cash on hand? That's going to be the high-class problem we get into. And so I'm not worried about the CapEx. All of our capital that we've been spending over the years -- we've got a very good track record of return on our investment with this CapEx spending. So as far as what you're modeling, just I would just continue to model what our trend has been, and we'll update you next year. There was one part -- your part of the question on electricity. No, we're not wheeling power into the grid at any of our facilities. We are -- we do have one facility in particular that's essentially 100% independent, but we're not wheeling power into the grid. Operator: Next question is from Philip Ng, Jefferies. Philip Ng: Appreciate all the great color. So Mark, you talked about potentially some of these energy projects in the next few years. And then obviously, you're going to do some great work at these Greif mills kind of get it up to PKG levels. And then you called out some of the inventory where it's a bit more elevated at Greif. So curious, when we think about '26, does that translate to more downtime than we should kind of be appreciative, which could potentially mute some of the EBITDA contribution from Greif. I think Kent gave a number in that $240 million range plus synergies. So I just want to be mindful just because it was extra noise in the back half of this year. Is there a friction that we need to be thoughtful of that could be impactful next year? Mark Kowlzan: I think, again, the work we just did at Massillon for approximately 6 weeks really gave us a comprehensive look at the mill because we literally touched everything in that mill from the ceilings down to the U-drain sewers, everything was clean, touched, inspected, new lighting. And so in doing so, we understand what it is in terms of components, motors, pumps, rolls, systems on paper machines that we want to upgrade to the PCA standards. So we've already got our plan in place. But these changes will take place on monthly outages. It's not the 3-week outages required. It's the 24-hour outage and the annual outage for 5 or 6 days a week type of thing. So no, we'll be in good shape next year. Riverville is in a similar situation. We've got to just continue to take care of the mills, and we'll invest appropriately. And -- but no, I'm bullish on the -- what we've got facing us for the next few years. No major -- we went through a 40-some-odd day outage at Jackson a few years ago, and we don't see any of that type of situation. So we'll be in good shape. Philip Ng: So it sounds like you would largely be able to do the work that you want to do, whether it's energy projects and then, I guess, even taking down the inventory at Greif within the scope of your normal managed outage. It shouldn't be an outside year next year. Mark Kowlzan: Yes. No, I mean the inventory management, that will happen over the next couple of quarters as we work our way down. And like I say, that's just future upside for the business. Philip Ng: Okay. Helpful. And then a question for Tom. You called out building math and beef being more problematic. Tom, can you size up how much of that of your box business is tied to those end markets? Are trends in those end markets getting worse, it's kind of bouncing along the bottom in the other categories, are you seeing order patterns pick up a bit? And how do you kind of envision your customers managing inventory to kind of close out the year? Thomas Hassfurther: Okay. Philip, number one is, I'm not going to give you what -- how much these segments are. I'm just -- I just told you they're relatively large segments for us, and those are the ones that are impacting us the most in beef and building products being down. But beef is more of a long-term thing. So it's going to take a little while. As I told you, the herds are down to 70-year lows, and these things take 2 to 3 years to rebuild, and we're only a year into the process. So that's going to take a little while. Building products, very reliant on what happens with interest rates and they're coming down and what the cost of materials are and how quickly things can be approved and those sorts of things in the nation. And the remodeling bottoming has begun to go the other way. So that's a good thing. The other segments that we're in have been pretty steady and steadily growing. And the -- our customers are pretty bullish on things going forward. So I think overall, I mean, our portfolio is in really good shape. Philip Ng: I mean I'm hearing from many of your customers that they have desires to kind of work down inventory to close out the year... Thomas Hassfurther: Yes. Yes, Philip, I forgot that part of your question. But our customers are already operating at very low inventory levels, and I think they would tell you that across the board. So that inventory is about -- is peeled down about as far as they can do it because, again, it goes back to all these things that have taken place during the year and the bumpy road we've been on with tariffs and all these other sorts of things. So I think our customers have been very cautious. Operator: [Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Mark Kowlzan for any closing remarks. Mark Kowlzan: I'd like to thank everybody for joining us today and appreciate it and look forward to talking with you all at the end of January. We're very, very pleased with where we are today with the acquisition and looking forward to having a good conversation with you in January. With that, have a good day, and have a great holiday period. Take care. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning, and welcome to Getty Realty's 3Q '25 Earnings Call. This call is being recorded. [Operator Instructions] Prior to starting the call, Joshua Dicker, Executive Vice President, General Counsel and Secretary of the company, will read a safe harbor statement and provide information about non-GAAP financial measures. Please go ahead, Mr. Dicker. Joshua Dicker: Thank you, operator. I would like to thank everyone for joining us for Getty Realty's Third Quarter Earnings Conference Call. Yesterday afternoon, the company released its financial and operating results for the quarter ended September 30, 2025. The Form 8-K and our earnings release are available in the Investor Relations section of our website at gettyrealty.com. Certain statements made during this call are not based on historical information and may constitute forward-looking statements. These statements reflect management's current expectations and beliefs and are subject to trends, events and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Examples of forward-looking statements include our 2025 guidance and may include statements made by management, including those regarding the company's future operations, future financial performance or investment plans and opportunities. We caution you that such statements reflect our best judgment based on factors currently known to us and that actual events or results could differ materially. I refer you to the company's annual report on Form 10-K for the year ended December 31, 2024, as well as our subsequent filings with the SEC for a more detailed discussion of the risks and other factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. You should not place undue reliance on forward-looking statements which reflect our view only as of today. The company undertakes no duty to update any forward-looking statements that may be made during this call. Also, please refer to our earnings release for a discussion of our use of non-GAAP financial measures, including our definition of adjusted funds from operations, or AFFO, and our reconciliation of those measures to net earnings. With that, let me turn the call over to Christopher Constant, our Chief Executive Officer. Christopher Constant: Thank you, Josh. Good morning, everyone, and welcome to our earnings call for the third quarter of 2025. Joining us on the call today are Mark Olear, our Chief Operating Officer; and Brian Dickman, our Chief Financial Officer. I will lead off today's call by highlighting our quarterly financial results, tenant performance and recent investment activity. Mark will then discuss our portfolio investments, and Brian will provide additional details on our earnings, balance sheet and the increase in our 2025 AFFO per share guidance. Getty had another productive quarter, resulting in more than 10% year-over-year growth in our annualized base rent and a 5.1% increase in our quarterly AFFO per share. This performance was supported by the continued health of our in-place portfolio of convenience and automotive retail properties, which is essentially fully occupied and producing both durable rental income and stable rent coverage. For the trailing 12 months, rent coverage for our tenants that report site level financials was consistent at 2.6x. This reflects steady performance from our convenience store portfolio and a third consecutive quarter of increased rent coverage from our Express tunnel car wash assets. The latter is being driven by the maturation of new-to-industry sites and our operators' continued focus on profitability. Turning to our growth initiatives. We are pleased with our year-to-date investment activity and the platform's ability to source relationship-based sale leasebacks at accretive investment spreads. Notably, year-to-date highlights include investing more than $235 million, which exceeds our full year activity in 2024, expanding the breadth of our investment activity, in particular, by gaining traction in the drive-thru QSR segment, where we have acquired more than 25 properties across multiple transactions. We've also diversified our tenant base by transacting with 10 new tenants in 2025, and we continue to backfill our committed investment pipeline, which currently stands at more than $75 million under contract and can be funded without having to raise additional capital. In early October, we announced a $100 million 12-unit sale-leaseback transaction in the Houston market with regional community store operator now and forever. This transaction is representative of how our platform capitalizes on our knowledge of the convenience store sector to identify established growth-oriented operators and enter into long-term unitary net leases that provide strong reliable returns. Now & Forever is a privately owned regional community store chain with a cohesive network of sites located in densely populated Houston submarkets. Houston, as an aside, is a unique market, which is largely dominated by regional convenience store operators who have established best-in-class locations. While there are some national players, none have established a significant presence or a major share of the market. As part of this transaction, we worked with Now & Forever to select a portfolio of approximately half of their locations. These stores average more than 8,500 square feet and include substantial food offerings, many featuring drive-through food and beverage windows. The Now & Forever portfolio also includes a large-format convenience store also referred to as a travel center. As we've mentioned previously, certain of our tenants have been exploring these large-format stores that have all the consumer-facing attributes that we value, including a large selection of grocery and household items, multiple fresh and prepared food offerings, branded QSRs, large coffee and beverage presentations seating inside the store and drive-through lanes and also generate additional visits and income from commercial drivers and the services they use. We've evaluated several travel center opportunities in 2025 and including the Now & Forever property, have acquired 3 assets year-to-date at an average purchase price of $11 million at yields consistent with our overall investment activity. We continue to enhance our knowledge of this growing subsector of the convenience store space while cultivating relationships with operators to partner with on future transactions. We expect to selectively add travel centers that meet our underwriting criteria to the portfolio going forward. In general, our acquisitions team continues to do an excellent job of identifying new investment opportunities that fit our portfolio and strategy. We have effectively broadened our investable universe while maintaining the distinctive advantages of our platform, including our broad network of operators, thorough underwriting process and unmatched knowledge of the convenience and automotive retail sectors. As we think about the current state of our business, we continue to be excited about the platform we've been building here at Getty over the last several years. We've evolved significantly from our days as a Northeast gas station REIT by expanding our investment thesis, adding resources to our investment team, improving our access to capital and demonstrating that we can consistently deliver strong financial results while maintaining an investment-grade credit profile. And we've achieved this during a period of market disruption, uncertainty and volatility in both the transaction and capital markets. Looking ahead, we remain focused on acquiring well-located convenience and automotive retail properties leased to growing regional and national operators and leveraging our underwriting expertise, real estate selection and lease structuring capabilities to support our investment decisions and mitigate credit risks. Finally, I am pleased that our Board approved an increase of 3.2% in our recurring quarterly dividend to $0.485 per share. This represents the 12th straight year we've grown the dividend alongside our earnings. With that, I will let Mark discuss our portfolio and investment activities. Mark Olear: Thank you, Chris. At quarter end, our leased portfolio included 1,156 net lease properties and 2 active redevelopment sites. Excluding the active redevelopments, occupancy was 99.8% and our weighted average lease term was 9.9 years. Our portfolio spans 44 states plus Washington, D.C., with 61% of our annualized base rent coming from the top 50 MSAs and 77% coming from the top 100 MSAs. We received site level financial reporting from tenants representing 73% of our ABR and have additional visibility into 21.5% of ABR that is derived from publicly reporting companies. For rents, our rents for sites where we received site level reporting continue to be well covered with a trailing 12-month tenant rent coverage ratio of 2.6x. Turning to our investment activities for the quarter. We invested $56.3 million at an initial cash yield of 8%. The weighted average lease term on acquired assets for the quarter was 18.2 years. Highlights of this quarter's investments include the acquisition of 15 drive-thru QSRs for $18.4 million, 5 convenience stores for $19.4 million and 2 express tunnel car washes for $11.1 million. We also advanced incremental development funding in the amount of $4.5 million for the construction of 2 auto service centers and 3 express tunnel car washes. These assets are either already owned by the company and are under construction or will be acquired via sale-leaseback transactions at the end of the project's respective construction periods. Subsequent to quarter end, we invested an additional $103.4 million, including the 12-site now travel sale leaseback transaction that Chris discussed, bringing our year-to-date total investment $236.8 million at a 7.9% initial cash yield. Beyond our disclosed pipeline of more than $75 million of investments under contract, the majority of which we expect to fund over the next 9 to 12 months and average initial cash yields in the high 7% area, we continue to source opportunities that are priced at accretive spreads and will be added to our portfolio as we look to further scale and diversify our business. Moving to our redevelopment platform. During the third quarter, rent commenced on one redevelopment property located in the Philadelphia metro area that is now leased to a Take 5 Oil franchisee. We invested $1.2 million in this project and expect to generate a return on invested capital of 11.6%. At quarter end, we had 3 signed leases for new-to-industry oil change locations, one of which is currently under construction and additional projects in various stages in our pipeline. Continuing with our asset management efforts. During the quarter, we sold 1 property for gross proceeds of $1.8 million. And year-to-date, we have sold 6 properties for gross proceeds of $5.5 million. With that, I'll turn the call over to Brian. Brian Dickman: Thanks, Mark. Good morning, everyone. Yesterday, we reported AFFO per share of $0.62 for Q3 2025, an increase of 5.1% over Q3 2024. For the 9 months ended September 30, AFFO per share was $1.80, an increase of 3.5% compared to the prior year period. A more detailed description of our quarterly and year-to-date results can be found in last night's earnings release, and our corporate presentation contains additional information regarding Getty's strong earnings and dividend per share growth over the last several years. Looking at G&A expenses, management focuses on the ratio of G&A, excluding stock-based compensation and nonrecurring retirement costs to cash rental and interest income. That ratio was 8.8% for the quarter ended September 30, a 30 basis point improvement over the prior year period and 9.7% for the 9 months ended September 30, a 10 basis point improvement over 2024. For the full year 2025, we expect to see an improvement over full year 2024 and anticipate this ratio will improve further as we benefit from continuing to scale the company. Moving to the balance sheet and liquidity. At quarter end, net debt-to-EBITDA was 5.1x or 4.6x, taking into account unsettled forward equity. We continue to target leverage of 4.5 to 5.5x net debt to EBITDA and are well positioned to maintain these levels going forward. Fixed charge coverage for the quarter was 3.8x. As of September 30, the company's weighted average debt maturity was 4.8 years, and the weighted average cost of our debt was 4.5%. As a result of our financing activity earlier this year, we have no debt maturities until 2028. During the third quarter, we settled approximately 1.2 million shares of common stock subject to forward sale agreements for net proceeds of $32.5 million and entered into new forward sale agreements to sell approximately 1 million shares of common stock for anticipated gross proceeds of $29 million. At quarter end, we had approximately 3.7 million shares of common stock subject to forward sale agreements, which upon settlement are anticipated to raise gross proceeds of $113 million. We continue to be in a strong capital position with more than $375 million of total liquidity at quarter end, including unsettled forward equity, availability on our revolver and cash on the balance sheet. We have capacity to fund our committed investment pipeline and incremental investment activity as we head into next year. We also remain focused on balancing the return of capital to our shareholders through our growing dividend and retaining free cash flow to support continued growth and long-term value creation. With respect to our earnings outlook, as a result of year-to-date investment activity, we are increasing our full year 2025 AFFO per share guidance to a range of $2.42 to $2.43 from the prior guidance of $2.40 to $2.41. As a reminder, our outlook includes completed transaction activity at the date of our earnings release, but does not include assumptions for any prospective acquisitions, dispositions or capital markets activities, including the settlement of outstanding forward sale agreements. Primary factors impacting our 2025 guidance include variability with respect to certain operating expenses, certain transaction-related costs and the timing of our anticipated demolition costs for redevelopment projects, which run through property costs on our P&L. With that, and with a moment for some of the background noise to clear, we will ask the operator to open the call for questions. Operator: [Operator Instructions] Our first questions come from the line of [ Daniel Behan ] with Bank of America. Unknown Executive: 15 out of 24 acquisitions were drive through QSRs. Could you provide your thoughts around the business as it relates to the health of middle to lower end consumer? Mark Olear: Yes. So we've been gaining momentum in the quick service restaurant as evidenced by the number of properties acquired over this last quarter. We have broadened our reach into that industry, developed a lot of relationships. We feel that the quick service restaurant concept is right in with the -- some of the macroeconomic pressures across the country, the price points that they offer, the quality of food, the convenience factor that we like and the automotive experience kind of all just fit our model. And we're going to continue to press hard to grow that as part of our efforts to diversify the portfolio. Unknown Executive: And then just separately, can we get more color behind the 3Q environmental expense adjustments? Should we expect additional adjustments going forward? Brian Dickman: It's Brian. For those that may remember, about 3 years ago, I think in 2022, we had similar activity at a much larger magnitude. I think it ended up being $23 million, $24 million, $25 million. But effectively, what's happened there is we determined that whatever risk we may have previously had available for environmental contamination at some of our legacy sites that, that risk has been alleviated and that falls squarely on our tenants at this point. And so as a result, we removed certain reserves that we had on the balance sheet around those environmental potential unknown environmental liabilities. And that's really the story behind those and very similar with activity we've had over the last couple of years. Operator: Our next questions come from the line of Mitch Germain with Citizens JMP. Mitch Germain: When -- how long does the engagement with now and forever, how long did that begin? And then basically the process ending with an acquisition? Is it a several year process to learn about their business and talk about the merits of your financing options? Christopher Constant: Yes. I think each transaction, the time line can be a little bit different. If you recall the last year, we spent some time down in Houston and did another portfolio transaction down there. So we spent actually a lot of time in that market. So we've got to know them as an operator. And this particular transaction, I think, was probably less than 6 months start to finish. But again, we've had certain opportunities, Mitch, just to be honest with you, where it's been years of getting to know somebody and underwriting potential deals, and we finally get one done and others that can be maybe faster like than now and forever team. So it really is a range. Mitch Germain: Great. That's helpful. And then maybe, Brian, if you could talk about for the back part of the year, obviously, you've got this $100 million transaction, another $75 million behind that. Maybe -- and I know you've got liquidity, but maybe discuss the funding plan in terms of maybe for 4Q and then as you approach growing that pipeline into 2026? Brian Dickman: Yes, absolutely. I mean you hit on the major sources there, Mitch. In the immediate term, as we do each quarter, we're typically funding investment activity on the line and then settling forward equity towards the end of the quarter to manage leverage and revolver availability. That's the same process and cadence we follow every quarter, so that won't be any different here. And then as you pointed out, we have additional equity beyond that. We have capacity on the revolver. We are generating more free cash flow each year as we continue to grow the platform and expand the company. And looking into certainly the early part of next year, looking into our pipeline, looking into the timing of when we think capital needs to be deployed, we feel very well positioned. And we'll assess additional capital sources as the pipeline further materializes and we time passes as we move into next year. Operator: Our next questions come from the line of Rob Stevenson with Janney Montgomery Scott. Robert Stevenson: Just to follow up on Mitch's question. Brian, no near-term debt maturities, but if you do more deals and want to move some debt off the line, what's your best source of debt today? And where is that pricing versus the line? Brian Dickman: Yes. It's a great question, Rob, because I think it is reasonable to assume, given the constructive debt markets that there may be an opportunity to term out some of that revolver balance. As a reminder, $150 million of that is fixed at 6.1%, the balance close with the line. We've been very active in the private placement market for well over 10 years. some great relationships there. So that would be the likely route. I would put forth that right now, on a new 10-year, we're probably in the high 5s all in, given where treasuries are and where spreads are. So call that 5.9% area, plus or minus is where we see new tenure today. Robert Stevenson: Okay. And then, Chris, the Board has been increasing the annual dividend by about $0.02 a share since late 2019. This year, they decided to do $0.015. Can you talk about the thought process they went through here to retain more cash internally? And arguably, the dividend yield was already high enough, how you guys sort of went through that process on the evaluation of the dividend this year? Christopher Constant: Sure. Yes. I think it's representative of the Board's view that retaining capital to help us grow and scale the business is critical right now. And we're cognizant of the fact that we've grown earnings and the dividend should follow that. But again, if we look to grow at scale, that's an attractive cost for us to be able to redeploy that capital. Operator: Our next questions come from the line of Upal Rana with KeyBanc Capital Markets. Upal Rana: Would you like to provide some details on how you're able to source the Now & Forever acquisition? And how do you plan to source even more of some of these travel center transactions in the future? Christopher Constant: Yes. I'll take maybe the first part, Mark, you can talk about travel center. But again, I think very similar to how we've grown in other markets over the years, Upal. Yes, we did a couple of transactions down in the Texas market at the end of last year in Q4. We are constantly trying to establish new relationships and build on our network, particularly in the C-store space. It is -- it's a large market, I'd say, just given the breadth of the Houston market, there's -- these sites happen to be in the western and southern areas of Houston. So they didn't really overlap with the deals we did last year, but really just relationship building. We're down there driving the market and got to know the Now & Forever management team and are happy to get that deal done. You can touch on travel center. Mark Olear: Yes. As far as continue to source travel centers, there's a number of opportunities. One is many of our current relationships and tenants that operate traditional convenience stores are branching out into the travel center sector and exploring ways to grow their business. So we have that had a built-in relationship to kind of grow that relationship. Secondly, there's the old fashioned business development, the trade shows, dedicated brokerage networks, deal advisers that are dedicated to the space. And lastly, what I'd say is there's about 5,000 in -- what we call in our profile travel centers in United States. The top 3 operators own about 30% of those units. So it's still a very highly fragmented industry, which typically is good for sale leaseback or those type of aggregators and consolidators use sale leaseback to help grow that business. We're making a lot of great inroads with those consolidators. We've got great early returns from kind of expanding our strategy early this year, putting a few deals in the close category. So we think there's a lot of opportunity for us to be active in that space. Upal Rana: Okay. Great. That was helpful. And then, Brian, maybe you could provide us with an update on the bad debt so far this year and what you currently have baked into your updated guidance? Brian Dickman: Yes, absolutely. As you can see from the collections and I guess, the lack of any other commentary beyond the Zips situation from the first quarter, which we had fully resolved by the end of the second quarter. There has been no rent collection issues this year. In terms of what's in that number, it's the typical kind of 15 basis points or so that we roll through down the quarterly number there. So that's really just math, but nothing specific and nothing has risen to any level of concern since Zips earlier this year. Operator: Our next questions come from the line of Wes Golladay with Baird. Wesley Golladay: Sticking with the tenant health, are you seeing any more an uptick in request to substitute assets in your master leases? Christopher Constant: Well, the short answer is not at this time, Wes. We do have a few larger unitary leases that are set to expire in '27. Each of those has different notice periods. Probably a little too early for us to assess or comment on the specifics there. But again, those are profitable leases. And I'd say we expect the vast majority of those properties to remain on our portfolio for the long term. Wesley Golladay: Okay. And then when you look to go to like a new segment like the larger format centers, are you comfortable taking that exposure up to 5%, 10% of the portfolio? Or do you have a sort of governor in the first few years where you want to just monitor what you buy? Christopher Constant: Yes. And I think I said we bought 3 of these are slightly larger purchase prices than maybe a typical 5,000 square foot C-stores for us. We really view this as an extension of the C-store space, particularly as some of our tenants that we know really well are getting into them. I think we'll -- we're getting ourselves a lot smarter on some of the dynamics on the commercial side as opposed to the consumer that we feel very comfortable with. I don't think we've established a specific target at this point in time, but I think there is a bit of a learning curve before we would significantly expand the portfolio, the concentration in our portfolio. Operator: Our next questions come from the line of Brad Heffern with RBC. Brad Heffern: On the travel centers, can you talk about maybe how the underwriting is different there? I would think a traditional small format store is a little easier to re-tenant than a large one with branded food and beverage, but they probably cover better as well. I guess, is that right? Or is there anything else that you would call out about the differences in the risk profile? Mark Olear: Yes, it's Mark. So certainly, as you said, the land component of the overall value of these centers is a little smaller in relationship to the total investment than we would have in a traditional C-store. That said, though, we're developing the model underwriting as we learn more and more about these businesses to be specifically a total value approach to any acquisition. But with the risk mitigants that you highlighted there on the travel centers, these tend to be anywhere from 2 to 4 acres upwards of 10 acres versus the 1 to 2 acres we have been acquiring. The store size is anywhere from 2 to 3x the size. But that said, the breadth of the services that these operations offer. And again, think of it less about being just a stop for the professional driver. These operations attract the recreational driver, families on vacations, commuters. So the investments we'll make will be with operators that offer goods and services to all of us, not only the typical retail customer, but the professional driver. They're going to be more focused about maybe on the fringes of the MSAs because they need to leverage the high traffic count of the interstate system, so less around internal or community type centers. But yes, I think all of that being considered, -- we are -- we have developed and we'll continue to perfect our underwriting model for a total value approach to get comfortable with the higher value per unit investments. Brad Heffern: Okay. Got it. And then, Brian, can you walk through the puts and takes on the new guide? Obviously, you have a lot of deal activity that probably wasn't in the old guide, but it's also pretty late in the year for that to move AFFO much. So just wondering if there was anything else that contributed. Brian Dickman: No. I mean I think you hit it, right? We're still a relatively small company, small denominator, $100 million deal at the beginning of a quarter that wouldn't have been in our prior guidance, right? That alone could actually have that kind of impact even in only a quarter, just given the relative sizing. We also had a fairly active third quarter overall. So I think if you look there's probably upwards of $140 million plus or minus of acquisition activity that's in this guidance that wouldn't have been in our guidance 1 quarter ago. That's the big driver. And then obviously, just crystallizing any expenses, right, that had estimates around them, had ranges around them coming in at the mid or lower end of what those estimates have been. But really acquisition activity driving earnings growth given the magnitude of it relative to the size of the whole. Operator: [Operator Instructions] Our next questions come from the line of Michael Goldsmith with UBS. Michael Goldsmith: First, just given the moderating tenure in the last couple of weeks, is that impacting the cap rate discussion in any way? And do you think there's been enough of a move that it may shake some sellers loose and want to come to the table to deal? Christopher Constant: We haven't seen a big move in cap rates, I'd say, over the last several quarters. And my initial reaction, Michael, is that this move is a little too quick to say it's going to have a Q4 impact on cap rates. I think, a longer-term shift. And you're correct, you may start to see some different asks. Michael Goldsmith: Got it. And then another question we had is just how do you think about transacting in volume versus acquisition cap rates and just trying to think about the trade-offs between how much -- how accretive a deal is versus kind of the volume of transaction activity that you're completing? Christopher Constant: Yes. I'd say our mandate has always been about selecting the right assets for this portfolio in the sectors that we like. I don't think I would categorize Getty as a "volume shop. And to the extent that we do close more volume, we're certainly looking to grow and scale the business, but it's got to be transactions that are priced accretively for Getty. So I think we'll continue to be focused on the sectors that we like on the sale leasebacks where we can drive a little bit of incremental price, and you'll continue to see us deploy capital in around the same range that we indicated for our pipeline and that should produce future earnings growth. Michael Goldsmith: And maybe one more for me. We've gotten this far we haven't talked too much about Car Wash, which I presume is a good thing. But can you just talk -- I think in the prepared remarks, you talked a little bit about some of the newer car washes and they've kind of stabilized as they've ramped up. So maybe you can provide a little bit more color about what you're seeing in the car wash industry more recently. Christopher Constant: Yes, sure. We feel good about the increase in rent coverage in Car Wash this quarter. Many of the sites that we've acquired were new builds, which requires a ramping period, right, to get up to what we'll call a stabilized level of profitability. We generally underwrote those on a 3-year basis where we say it would take the operator 3 years to get to a fully mature site. And what we've seen to date is they're kind of trending ahead of schedule as they reach stabilization. But to the extent these assets continue to come online, we're always going to be monitoring the trend, right, in terms of whether it's visits, memberships and how much time it's taking them to stabilize. But again, for the last several quarters, what we've seen is a very healthy ramp for those new builds that are coming online. And obviously, that's good for our portfolio, and it's great for the health of our tenant as well. Brian Dickman: And Michael, I'll just add one thing or perhaps clarify. The operators project 3-year stabilization period. As Chris just said, we underwrite a 3-year stabilization period, but we do put them in our reporting after 12 months. And so to some degree, the car washes can act depending on the particular point in time as a little bit of a drag on coverage. But what we've seen over the last 3 quarters, in particular, and that's what we're really emphasizing is as these car washes have been ramping up, as they've been stabilizing, many of them not at that 3-year period yet. right, you're starting to see that impact in a more material way to the point where the car wash side of the business is actually covering greater than the C-store side of the business, although it is a much smaller weight on the whole. So even as we go forward and we continue to bring more properties into the coverage calculation into the presentation that we put out there, you'll continue to see that dynamic. If there's things that are open a year that are on the lower end, that will come into coverage that way. We'll disclose that as it comes in. But the expectation even for those assets to the extent there are any, is that as they move into year 2 and 3 and beyond, that it will match the performance we've been seeing from the other facilities and closer to where we're underwriting them. Operator: I'm showing no further questions at this time. I would now like to hand the call back over to Christopher Constant for closing remarks. Christopher Constant: Great. Thank you, operator. I just want to thank everybody for joining us this morning, and we look forward to speaking with everybody when we get on the phone in February and report our fourth quarter and full year earnings for 2025. Operator: Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.
Torbjorn Skold: Welcome, everyone, to BONESUPPORT's Q3 2025 Results Call. My name is Torbjorn Skold, and since September 1, I'm the CEO of BONESUPPORT. With me here today is our CFO, Hakan Johansson. And together, the 2 of us will use the next 25 minutes to guide you through the Q2 report and then open the line for any questions. Before starting the presentation, I would like to draw your attention to the disclaimers covering any forward-looking statements that we will make today. Next slide, please. So let's look at the financial and operational highlights from the quarter. Q3 was another strong quarter with solid execution across the business. Net sales came in at SEK 294 million, corresponding to a growth of 24% versus Q3 2024. Sales growth at constant exchange rate was 34%, showing that there is continued strong currency impact on our figures for the quarter. Our operating results, excluding incentive program effects, was SEK 79 million, corresponding to an adjusted operating margin of 27%. Reported operating results was SEK 65 million, and we saw strong cash generation with operating cash flow reaching SEK 71 million, leading to a cash position at the end of the quarter of SEK 379 million. One highlight in the quarter was the publication of the long-awaited CeraHip study, which now kicks off our market penetration efforts in this market segment, revision arthroplasty. We will look deeper into this later in the presentation. We continue to see strong traction for CERAMENT G in the U.S., where both new accounts and increased use among current users contributed to the strong progress. CERAMENT G sales in the U.S. reached SEK 192 million for the quarter. Furthermore, the proposed NTAP for CERAMENT G in open trauma has now been decided upon as well as a 6% general increase in CERAMENT relevant DRG codes by CMS for orthopedics. So all in all, an eventful and successful quarter. As I've transitioned into my new role and reflect on the business, I find our strategy sound and that the business develops very well. What really stands out is the solid evidence base supporting the CERAMENT platform and the significant long-term opportunity of CERAMENT globally in several clinical segments. This spring, we're planning to host a Capital Markets Day, where we'll share a structured overview of our key initiatives and our path forward. We'll follow up with more details on the official dates later. Operator: This is the moderator speaking. We are having some technical issues, but we are going to try to get the speakers back as soon as possible. [Technical Difficulty] Håkan Johansson: So the speakers have connected again. Can the moderator please confirm whether the sound and technology is up again. Operator: Yes, everything is great. Håkan Johansson: Thank you very much. Torbjorn Skold: Thank you, moderator. Moderator, can you please inform us how long did you listen to us? Operator: We came to -- you were at like the third slide in the third quarter report. Torbjorn Skold: Okay. I assume that we have gone through Slide 3, and we move over to the sales development. This chart shows the last 12-month sales in Swedish krona by quarter since 2019 in stacked bars by region, by product category. As you can see, the launch momentum for CERAMENT G in the U.S. is exceptionally strong. However, in the last 2 quarters, we've seen strong influence from the U.S. dollar to Swedish krona depreciation. Last 12 months growth in Q3 of 37% in the graph corresponds to an even stronger 41% at constant exchange rates. So most of this quarter-over-quarter slowdown in last 12 months' sales is due to the strong currency impact. CERAMENT BVF last 12 months dropped 2% year-over-year in constant currency. In total, antibiotic eluting CERAMENT grew with 59% last 12 months in the quarter in constant currency. Next slide, please. In U.S., sales amounted to SEK 246 million, representing a growth of 40% at constant exchange rates. There was some general variability during the quarter due to the usual stop and go dynamics, a reflection of the strong pace of new customer recruitment over the past 6 to 8 months. As part of our mission to modernize an outdated standard of care in the U.S., we have successfully opened one market segment after another. We started with foot and ankle, then we followed with trauma, and now we're moving into revision arthroplasty. Revision arthroplasty and the subsegment of periprosthetic joint infections are areas we have not specifically focused on in the past. Each year, approximately 1.5 million primary joint replacements are performed in the U.S. with just over 70,000 revision procedures requiring bone graft. The CeraHip results are groundbreaking. Although the study is not very large, patients have been followed for an average of 3.3 years with no infections reported. I'll speak more about CeraHip on the next slide. We have expanded our U.S. organization, and we plan to recruit additional team members with specialized expertise in revision arthroplasty to support the market entry and the medical education programs. We are expanding our presence in the market to introduce CERAMENT BVF for use in spinal procedures in Q4 2025. Several distributors are now in place to begin engaging with spine surgeons. Some of these distributors are already our partners today on the extremity side, while others represent new collaborations. The spine segment is new for us, and we will begin generating clinical data during 2026 to establish a foundation for further market penetration. We have also made strong progress in evaluating and preparing the regulatory pathway for introducing CERAMENT G into the spine segment. We have reached a stage where guidance from the FDA on the regulatory path is required. We plan to meet with the FDA at the beginning of 2026. The path forward will be shared and communicated at the Capital Markets Day this spring in 2026. The team have been working diligently with assembling data in reply to FDA's question on CERAMENT V, and we expect to send in the supplementary data pack in November. The material relates mostly to clarifications and making sure that the evidence is presented in the way that FDA wants to have it. Being a pioneer technology, there is no template as how to bring forward the evidence. The thoroughness of the process testifies to the rigor of solid data required to qualify a product into the unique category of antibiotic eluting bone graft. And we should remember that this category is defined by another CERAMENT product, namely CERAMENT G. So let's turn to Europe. Next slide, please. Sales performance in Europe continues to be influenced by the same dynamics observed in Q2. The third quarter typically shows some volatility due to seasonal factors. Additionally, the contraction and disruption in Germany have persisted as anticipated. Sales in EUROW came in at SEK 48 million, representing 5% year-over-year growth and 7% at constant exchange rates. Hybrid markets in Southern Europe, Australia and Canada are performing strongly. We're beginning to see positive traction from the investments made during the first half of 2025, reflected in improved sales performance. In the U.K., the previously announced prioritization of hip and knee surgeries is gradually restoring procedure volumes, which bodes well for the future of BONESUPPORT in U.K. However, the pace of recovery varies by region and is largely dependent on staffing levels. During the quarter, the European Bone and Joint Infection Society held its annual meeting. Several podium presentations and posters highlighted the efficacy of CERAMENT G and CERAMENT V in single-stage procedures and demonstrated improvements in patient outcomes. A poster presentation by Dr. Meller from Charite showcasing results from the CeraHip study attracted significant interest and a large audience. We'll review the detailed findings from the now published study on the next slide. Also, Professor Ferreira from University Hospital, Stellenbosch presented results from his study involving 103 trauma patients with bone infections. These patients were treated with a single-stage procedure using CERAMENT G or CERAMENT V. After an average follow-up of 11 months, 96% remained infection-free and no amputations done. [Technical Difficulty] Operator: Sorry for having some technical issues again. The speakers will be back as soon as possible. Torbjorn Skold: Annual Meeting of the American Association of Hip and Knee Surgeons, AAHKS in Texas, which last year attracted over 5,100 participants. In fact, our U.S. team is actively preparing for the event at this very moment as it kicks off today. Now I'll leave a deep dive into the numbers to Hakan. Hakan, please. Håkan Johansson: Thank you, Torbjorn. And again, sorry for what seems to be a day of technical disruptions and hopefully, now the -- everything stabilizes. So into the financials. Well, net sales improved from SEK 237 million to SEK 294 million, equaling a growth of 24% reported sales growth of 34% in constant exchange rate. Torbjorn has already spoken about the solid performance in especially the U.S. and the major drivers behind the sales growth, but as the weak U.S. dollar somewhat hides a continued strong trajectory in the U.S., I would like to share the U.S. sales performance in U.S. dollar. This slide shows the quarterly sales in the U.S. and U.S. dollar with continued solid performance quarter-to-quarter. The growth in dollar in the quarter of 40% should be viewed in perspective of volatility on BVF sales being 1.7% below same quarter last year, whilst CERAMENT G continued to show solid performance with a growth of 59.2%. The contribution from the U.S. segment improved with SEK 31.9 million and amounted to SEK 111.2 million. The improved contribution relates to increased sales after the effect from increased costs. Sales and marketing expenses during the quarter amounted to SEK 123.6 million compared with SEK 102.6 million previous year, of which sales commissions to distributors and fees amounted to SEK 84.2 million compared with SEK 65 million in the same quarter last year. From the lower graph showing net sales as bars and gross margin as the orange marker, it can be noted that the gross margin remained stable and strong around 95%. In Europe and Rest of World, a contribution of SEK 12.5 million was reported to be compared with SEK 15.6 million previous year. Sales and marketing expenses increased with SEK 4.6 million, including SEK 2 million related to the previously communicated commercial investment in the EUROW booster program. From the lower graph and orange marker, the minor drop in gross margin is noted mainly impacted by market mix. The flat selling expenses compared with the same quarter previous year is due to a depreciated U.S. dollar, but also an effect of seasonality. As mentioned previously, the quarter also included SEK 2 million related to the EUROW booster program. R&D remained focused on the execution of strategic initiatives such as the application studies in spine procedures and the market authorization submission for CERAMENT V in the U.S. These initiatives have been progressing well during the quarter and, among others, leading up to the launch of our product, CERAMENT BVF in spine later this year. And administration expenses, excluding the effects from the long-term incentive programs, remain on a stable level. The reported operating result amounted to SEK 65.4 million despite unfavorable currency effects totaling SEK 5.7 million, and I will come back to this in a following slide. The newly introduced tariffs in the United States are not expected to have a material impact on cost in 2025 due to high safety inventories. The full effect of the current 15% tariff equals a 0.8% impact on U.S. gross margins and will come gradually with full effect from 2027. The difference between adjusted and reported operating results are costs regarding the long-term incentive programs amounting to an expense of SEK 13.2 million in the quarter compared with SEK 7.3 million previous year, as you could see from the previous slide. Cash conversion remains solid with a fifth consecutive quarter with strong cash flow and an increase in cash during the period with SEK 69.3 million. Despite unfavorable currency effect with this report with a strong adjusted operating result and a solid cash flow, we continue to confirm a strong operating leverage and the business scalability. During the period, the Swedish krona has continued to strengthen against the U.S. dollar. Other operating income and expenses, therefore, contain foreign exchange gains and losses from the translation of the group's assets and liabilities in foreign currency, amounting to a negative SEK 5.7 million. Simply put, the negative SEK 5.7 million is mainly driven by the operating assets in the U.S. such as inventories and trade receivables. These are originally valued in U.S. dollars and at quarter end translated into a much stronger Swedish currency versus last quarter. The graph on this slide shows with the gray bars how the relationship between the U.S. dollar closing rate and the Swedish krona has varied over time. This is read out on the right Y-axis. The blue dotted line read out to the left axis shows reported adjusted operating results. The adjusted operating result, excluding translation exchange effects is the orange line. To explain this, in Q4 2024, the U.S. dollar to SEK was above SEK 11, which gave a positive effect of SEK 20 million in the quarter. And therefore, the blue dotted line is above the orange line. In Q1 2025, the U.S. dollar to SEK rate was SEK 10.02, creating a negative impact of SEK 30 million. In Q2, the U.S. dropped down to SEK 9.49, creating a negative impact of SEK 11 million and in Q3, continuing down to SEK 9.41 with a negative impact of SEK 5.7 million, meaning that the blue dotted line dropped below the orange line for these 3 quarters. The orange line eliminates the translation exchange effects and gives a more comparable view of the underlying trend in operating profit. In the table below the graph, you can see the FX adjusted operating margin of close to 29% in the period compared with 23% in the same quarter last year. And with this, I hand back to you, Torbjorn. Torbjorn Skold: Thank you, Hakan. And if we take the last slide, so to summarize Q3 2025 for BONESUPPORT, sales grew 34% in constant currency, reflecting steady and consistent progress. Adjusted operating margin reached 27%. Cash flow remains robust, underscoring the health of the business and its scalability. With the publication of the CeraHip study, strong endorsement from leading surgeons at Charite and detailed procedural guidance for using CERAMENT in revision arthroplasty, we're unlocking a new avenue for market expansion. This marks a significant step forward in our ongoing mission to transform the standard of care. We maintain our guidance on sales growth above 40% in constant exchange rates for full year 2025. And to conclude, my first period at BONESUPPORT has been as rewarding as it has been intense. I'm convinced that the most exciting part of our journey still lies ahead. And as I said, to provide a clearer view of what that journey will look like, we will host a Capital Markets Day in the spring of 2026. Lastly, again, apologies for the technical issues that we've had during the call, but now we're happy to open the line for any questions that you might have. Thank you. Operator: [Operator Instructions] The next question comes from Erik Cassel from Danske Bank. Erik Cassel: Yes. So India has probably cut out 70% of what you said. So you have to excuse us if we repeat some stuff. But first, I just want to confirm the sales level for CERAMENT G in the U.S. Was that USD 19.9 million in, 59% organic growth? Or is it a completely different figure? Håkan Johansson: Again, as commented, CERAMENT G reported a 59% growth. Erik Cassel: Okay. Good. First, I then want to ask, what are you seeing for trauma now during the initial 3 weeks of NTAP for CERAMENT G in the U.S. Håkan Johansson: Again, as communicated previously, what we see is a slightly different market dynamics than what we experienced launching into when there is a bone infection. So when there is a bone infection, the surgeon was looking for treatment options and CERAMENT G fitted very well. With trauma surgeons, it's a bit of a timing issue. We meet the trauma surgeon and the trauma surgeon haven't had a patient coming back with a bone infection during the latest weeks or months, et cetera. It's a harder call to convince the surgeon to try a new product. However, if the surgeon had had a bone infection lately, it's an easier call to convince the surgeon to start trying. So what we see confirms what's been previously communicated. It's a big market potential in trauma, but market penetration to start with will be somewhat slower than when there is a bone infection. Erik Cassel: Okay. But just specifically on the NTAP, you haven't seen that in and of itself accelerate uptake anything? Håkan Johansson: Again, the NTAP, Erik, is valid from 1st of October. So it's too early to see whether this has any impact in the penetration of the trauma segment. Erik Cassel: Okay. And then U.K. down 5.5% year-over-year. Germany, you said was worse. Is it possible to give any sort of more specific numbers on how bad Germany is doing and sort of how much that represents of the European sales? Håkan Johansson: Again, we have always been precautious to disclose exact numbers on geographic level. But again, if there are structural challenges... Operator: Speakers have been disconnected again, but if you have to stay on the line, I hope they will. Erik Cassel: The speakers was not disconnected. We heard them. Håkan Johansson: So do you hear us now, Erik? Erik Cassel: Yes, I hear you loud and clear. Håkan Johansson: Thank you. So again, some of the challenges [Technical Difficulty] Erik Cassel: Okay. Now I don't hear the speakers. Operator: Yes, a second, we're trying to fix the connection problems. Håkan Johansson: So dear moderator, where are we now in terms of technology? Because it feels like things are going silent. Operator: Yes. Now you came back. So maybe, Erik, can you repeat your last question, so we can go back from there. Erik Cassel: Yes, sure. It was on Germany. U.K. down 5.5%. You said Germany was worse. And I asked for if we could add any more color on Germany. How much is it down? And how big is Germany in terms of Europe sales? Håkan Johansson: Well, Germany is our second biggest market. So of course, when we have a setting in a market like Germany, it impacts on the totals. Erik Cassel: Okay. And then just lastly, do you have any visibility on U.K. and Germany coming back? You're saying that you're seeing a gradual, say, recovery in the U.K., but when can you be back to sort of normal levels or normal growth rates in those markets, do you think? Håkan Johansson: Again, what is impacting in the U.K. is that U.K. is a market where a substantial health care backlog is impacting hospital priorities. Already before the pandemic, there was patients -- 5.5 million patients in queue that has increased to 8 million patients. And the political priorities has started to recruit or reduce that queue, but still from a very high level. So again, we will be fighting against hospital priorities from time to time. But in the environment, we start to see that patients that have been waiting for surgeries where CERAMENT G is a good fit are gradually coming back. But as Torbjorn said in the call, it will probably be a slow process for the market to return into a normal and steady situation. Operator: The next question comes from Viktor Sundberg from Nordea. Viktor Sundberg: I have 2. So I guess it's not your main product in the U.S., but I just wanted to dig into the BVF product in the U.S. a bit. We've seen a negative trend in the U.S. for that product here for a couple of quarters. I just wanted to understand a bit more what is driving that and how to extrapolate that negative growth we see at the moment into the coming quarters and into 2026. And then I have another question. Håkan Johansson: Again, I think that it's 2. Again, as you said, we've seen that the BVF has been soft in the latest quarters, but also then showing volatility with a few quarters where we have good BVF sales. And we see that when we look at sales and hospital levels that there is an underlying volatility in the volumes. What we also see, and this is important for the longer term is that with the extending customer base and with surgeons recruited thanks to CERAMENT V, we also see these surgeons starting to use BVF in such cases where there is a controlled infection risk, et cetera. So we remain with a belief that all the time, BVF will stabilize and BVF will, like we've seen in Europe, deliver a small organic growth, but the main driver will be our antibiotic eluting products. Viktor Sundberg: Okay. And just looking into 2026, if we see substantial cuts to Medicaid as part of the One Big Beautiful Bill Act, even if you're not particularly relying on Medicaid directly, I guess, hospitals could see an increase in uncompensated care and maybe strained overall budgets due to this. What's your thinking around how hospitals will look at CERAMENT G as it carries a bigger upfront costs? Our feedback just by speaking to some orthopedic surgeons is that price is the main barrier for wider adoption of CERAMENT G in the U.S. And I'm just thinking that if major cuts to Medicaid will materialize in 2026, hospitals might focus even more on price next year. But I just wanted to understand how you plan to mitigate some of those budget headwinds, I guess, for next year. Torbjorn Skold: Yes. No, I'll start and then Hakan can fill in. So I think the plan to mitigate that is just to follow the BONESUPPORT strategy where we focus on evidence. And I think it was very interesting to listen in on what was discussed and presented at European Bone and Joint Infection Society. And it's very clear from those presentations and the discussions that are ongoing, and it's similar also at OTA that happened last week, which is a big trauma meeting in the U.S. is that it's very clear that there is a paradigm shift in the market in orthopedics going from long systemic antibiotic regimes in orthopedic surgeries to move to shorter, if any, systemic antibiotic regimes and combining that with local antibiotics with, for example, CERAMENT. So that paradigm shift is happening. There is clear evidence already now on the market. The topic is clearly highlighted. And more evidence will come in the future, partly by BONESUPPORT and CERAMENT and partly because the market moves in this direction. So I think it's nothing new really. It's something that has been happening. It will continue and our plan to address this is just to focus on the strategy, continue to build really, really strong clinical and health economic evidence and make sure that, that evidence is right and center, not just in front of orthopedic surgeons, but also the other decision-makers that play a role in those conversations. Anything to add, Hakan? Håkan Johansson: No, I think you covered it quite well. And again, the pricing is something we meet as part of the dynamics that we have referred to. And we have hospitals that are becoming frequent users and hospital administration noticing that this drives a certain level of costs. But so far in those discussions, when we come with strong clinical evidence and health economic evidence, this is discussions that we're able to handle through. So we're confident in the evidence around the technology and the difference to standard of care it represents. Operator: The next question comes from Mattias Vadsten from SEB. Mattias Vadsten: I have 3 questions. I think I'll take them one by one. First, I think quite confident wording around Q4, if I read it correctly. You also reiterate guidance of at least 40% sales growth. This require a quite strong finish to the year, I guess, very close to 40% organic sales growth at least and an acceleration quarter-over-quarter. So just what brings this confidence? And yes, if you have any further color on sort of how the start of Q4 have looked for you? That's the first question. Torbjorn Skold: Sure. I'll start with that more from a, let's say, tactical operational side and then Hakan can hopefully back it up in the numbers. So as we reviewed both the U.S. business and as we've reviewed the EUROW business in detail and the outlook for the quarter, the fundamentals look very strong from my view in terms of the number of accounts that we have, the penetration in the accounts whether we are increasing penetration or losing penetration. So I feel very confident in the numbers on an account level and regional level that we've gone through. I think also very high level, and Hakan will speak to this also, if you look at the comparables Q3 versus Q4, that also gives me more comfort in the numbers. So yes, I feel pretty confident in hitting that guidance that we've provided with 40% sales growth above prior year on a full year basis in constant currencies. Hakan? Håkan Johansson: Again, I think you covered this quite well, Torbjorn. And again, to bear in mind that if we look at the U.S. dollar -- sales in U.S. dollars, for instance, in the U.S. Q3 to Q4 last year, Q4 was a bit soft after a strong Q3 and then followed by a strong Q1, et cetera. And with the momentum that we have and again, we believe that Q3 somehow gives us a lot of confirmation in that underlying momentum, we are confident that we [Technical Difficulty] Mattias Vadsten: I can't hear Torbjorn or Hakan anymore. Operator: Yes, just a second. We're trying to fix the issue here. I hope they will be back at us soon. Håkan Johansson: Moderator, do you hear us now over a mobile line instead of over the Internet? Operator: Yes, now I can hear you. Mattias Vadsten: I can hear you, Hakan. I heard the full answer from Torbjorn and I heard, I don't know, the first sentences from you, Hakan. Håkan Johansson: Okay. So what I said is that when we look at, for instance, the U.S. in U.S. dollars, last year, Q3 was strong and Q4 was a bit soft. And with the underlying momentum we see in the U.S., we see good opportunities to be well in line with the target we have set for the full year. Mattias Vadsten: Okay. That's perfectly clear. Then I have 2 more. So the next one is the revision arthroplasty segment. I mean, as you said, quite supportive data to say the least. Sort of what are the sales volumes of CERAMENT in this segment today? And could you talk about what you think is required to sort of achieve a meaningful uptake in this segment? Torbjorn Skold: Sure. So I think it's fair to say that currently, this is a segment that where CERAMENT, we've had -- it's been on label. It's been on label in the U.S., and it's been on label in Europe. But at the same time, without clinical evidence, very few orthopedic surgeons will pick it up. That's just how orthopedics works. Now over the last couple of years, the team has worked with Charite, which is, I would argue, top 3, top 5 hospitals in the world when it comes to revision arthroplasty. They've done a study and to be frank, the results could not have been better. So that's the first important step. But to answer your question, our sales in this segment, I would argue it is very, very limited. There is some, but very limited. And I think the potential, if we look at the number of procedures that are done in revision arthroplasty in general and specifically in periprosthetic joint infection, which is going to be our primary focus area. Those are pretty considerable volume numbers that we have at hand. And what is required is, of course, that we have a sales force that is in front of the customers that are in the ORs talking about this and that we promote the evidence and the application techniques that we already have today. But also, let's be frank, we will continue to invest in education. We will continue to invest in further evidence in this space. And this is work that we've kicked off, and that's something that I foresee will continue for several years ahead because this is such an interesting and important segment for us strategically for many years. Mattias Vadsten: Very clear. Then I have a final one. I think it will be quite quick. If you take away the effects of incentive program and sales commission costs, the OpEx look a bit low, I would say. I know quite substantial FX effects year-on-year, but I think down SEK 5 million versus Q2. So question is, is this just usual seasonality? Or is it anything you would mention here, Hakan? Håkan Johansson: It's primarily that relates to normal seasonality in outside the U.S., people tend to have vacation and during vacation period, there's a lower level of activities, et cetera. So just normal seasonality. Operator: The next question comes from Kristofer Liljeberg from Carnegie. Kristofer Liljeberg-Svensson: Three questions. First, just a follow-up on the previous one on implant revision. Is this something you think will start to generate revenues for you already in 2026? Or will that be later? Torbjorn Skold: On revision arthroplasty? Kristofer Liljeberg-Svensson: Yes. Torbjorn Skold: Yes. I mean it will generate revenue in Q4 this year. And it will, for sure, generate revenue in 2026. If it doesn't, then we do something fundamentally wrong. Kristofer Liljeberg-Svensson: Okay. So -- but do you think you could see a faster uptake in this indication than for open fracture trauma, for example? Torbjorn Skold: So really good question. And I don't have any solid data points on that because of my somewhat limited history in BONESUPPORT. But if you think about the segments and how surgeons generally work and how they take decisions and you compare revision arthroplasty, which is an elective procedure and trauma and especially open trauma, which is acute trauma. So it's not an elective procedure. It's always easier to sell into a segment where you have elective procedures. So only looking at those sort of characteristics, you could argue that, well, it should be easier and faster to enter revision arthroplasty than it is trauma. So I think there's something in that, that you're absolutely right on, but I have a hard time quantifying it, to be perfectly honest. Kristofer Liljeberg-Svensson: Okay. And then I don't know whether we missed that due to the technical problems, but did you say anything about expected launch timing for CERAMENT V in the U.S. Torbjorn Skold: So CERAMENT V in the U.S., we follow the plans. So we deliver on the plans and the plans that were previously communicated was that we submit additional data to the FDA in November, that is according to plan. And then we feel comfortable that we have the right data in place and expect a positive outcome of that review with the FDA. Exactly when FDA will come with an answer, it's hard for us to predict. But typically, historically, what we've seen is that there's a 90-day period following the submission of the supplemental data until an FDA decision is taken. So that's typically the guidance that we give on the CERAMENT G for the U.S. Kristofer Liljeberg-Svensson: Great. And then finally, just on R&D costs, should we expect that to be more stable now quarter-over-quarter or year-over-year before you start the CERAMENT G spine study? Håkan Johansson: Yes. I think that's a fair comment. And again, you've seen quite a solid stable level over the last year, et cetera. And it's a fair estimate to assume that, that level continues. High activity level remains, but there is no true acceleration until we would start a clinical study preparing for getting CERAMENT G approvals. Operator: The next question comes from Sten Gustafsson from ABG Sundal Collier. Sten Gustafsson: I think most of it has been covered already, even though there were some technical issues here. So I just want to confirm that I heard it correctly. Did you say that you had CERAMENT G sales in the U.S. of -- was it $19.9 million in the quarter? Håkan Johansson: We did not confirm the dollar amount, but we say that we confirm that the growth in constant exchange rate was 59%. Sten Gustafsson: Okay. That's good. And then the number of procedures in the U.S. related to this hip joint infection category. Did I hear it right, 70,000 or... Torbjorn Skold: So what we say is that the number of primary hip and knee arthroplasty as per previously communicated data from BONESUPPORT is estimated to 1.5 million. So that's the number of primary arthroplasty. Revision arthroplasty is a smaller number, of course. But the initial focus that we have on revision arthroplasty is the subsegment that is called periprosthetic joint infection. The previous numbers from BONESUPPORT that has been communicated related to the size of that segment is 70,000 for U.S. only. So those were the numbers that we refer to. So we're not communicating any new numbers on this call compared to what's been communicated earlier. Sten Gustafsson: And that was 17, 1-7? Torbjorn Skold: No, 70. And the 70,000, just for absolute clarity, those are revision arthroplasties with bone infection where a bone graft is needed. Sten Gustafsson: Okay. Excellent. And then on NTAP finally, and I heard it, I think correctly that you expect the trauma NTAP will be more challenging than when you got it initially on osteomyelitis, which makes perfect sense. But do you think that the net impact here short term with the sort of -- will be then a negative driver? Or do you expect the underlying osteomyelitis procedures to carry on even though you don't have the NTAP on those particular procedures? Håkan Johansson: Well, sorry, I think that to clarify, I think we were talking about what the market dynamics and the differences between there is a bone infection and in trauma. When we talk the value of the NTAP specifically, I think that it showed to not have so much impact when penetrating the market when there is a bone infection, et cetera. But when we are talking trauma, open trauma and the surgeon has the patient in front of him, there's always a consideration between risks and costs. And here, the NTAP is taking away the cost aspect. So potentially, the NTAP for open trauma has a bigger value. But again, it remains to be seen over time. So it's been valid from 1st of October, so that after Q3, and we don't have the data to back that up. But we honestly believe that it has the potential of having a bigger impact than for bone infection. Operator: The next question comes from Maria Vara from Stifel. Maria Vara Fernandez: Just a couple of them. I think we, of course, see extremities as the near-term opportunity, what's going to be driving growth for the company for many years. But of course, I think we haven't dedicated much time to the opportunity in spine during the Q&A session. So I just wanted to maybe get some thoughts on how this recruitment of sales reps is going? And any kind of guidance on contribution we could see from the first quarter launch as well as from 2026? Torbjorn Skold: Yes. No, good question. And I think to put spine in perspective, spine is clearly a very interesting area for BONESUPPORT for the long term, but we also want to be realistic in the short term, we will likely see much bigger uptake from revision arthroplasty than we will see in spine. But spine is an important strategically and large opportunity for us. The approach that we take is that we first launched spine with CERAMENT BVF to build the market. So we are going to have a relatively focused launch. So we're not going to go fully and nationwide to all the accounts everywhere at the same time. We want to take a focused approach with certain distributors that we already work with, some new distributors that are specialized in spine. And we want to make sure that we build the right clinical evidence and the right and validated surgical techniques over time. And then, of course, the big strategic play for us is to go into spine with CERAMENT G. But that, of course, requires a market approval. But we see a couple of good scenarios ahead of us. So the question is not if, it's about how and when. And that's why we engage with a discussion with FDA in the near term to make sure that we feel comfortable on the right way to market and that we are also able to execute on that. Maria Vara Fernandez: Okay. That's helpful. And then if we think about the profile of the sales commissions in the U.S. we see a little bit of an increase with respect to the U.S. revenue for Q3, if I'm not wrong, 35% with respect to the U.S. sales. How should we think about this percentage changing over time, especially as of the U.S. launch in spine? I mean, there's not much of an investment there, but still with something. So if you can guide whether we could think about the same range with respect to revenue or any major changes here will be appreciated. Håkan Johansson: Well, thank you, Maria. And again, in the short to midterm, you can expect the increase in Q3 is mainly related to short-term volatility, the commission level remains stable. There is no change in commission levels. There are a few performance-related aspects in the commission structure, and that's why it can be some volatility between quarters. But in general, it should keep itself the commissions plus other fees that is involved around -- I mean, between 34% and 35% over time. And we don't see the inroads into spine with BVF changing that structure. Operator: The next question comes from Oscar Bergman from Redeye. Oscar Bergman: Torbjorn and Hakan, I know you've answered a lot of questions, but I only have a few more to you guys. So first off, on your current base of U.S. CERAMENT G users, is there any noteworthy crossover to spine surgery among these? Håkan Johansson: Very limited type of sales. Of course, when we have hospital accounts where ultimately you have both surgeons on the extremity side and on the spine side. Torbjorn Skold: Yes, but it's very... Håkan Johansson: Yes. And again, coming back to as we communicated, our strategy of launching into spine will be very focused. We have a list of hospitals and list or surgeons that we are addressing so that we reach the right surgeons to build additional clinical data and validation, et cetera, before we go wider. So with that, we also work very focused with what distributors and what sales reps we're contracting. Oscar Bergman: Okay. And just wondering if you can elaborate a bit more on the situation on eventual pushback on price, both for customers in the bone infection segment and in trauma. Has this been sort of a driver of customers either not signing up or perhaps even signing off during this quarter? Håkan Johansson: Well, Oscar, price is always a discussion. We're living in a commercial environment and so on. And -- but so far, it has had no impact in terms of listing and continued growth of listed hospitals. We meet that also, as I mentioned in the call, as part of go stop go, we have hospitals where we have surgeons becoming frequent and high users and not seldom, there is a reaction from hospital administration where we have them to involve with our med and health economic specialists to help explaining the data that is backing up the price level and the savings that is enabled by the clinical and health economic benefits by using CERAMENT G. So of course, that's part of daily life. But so far, we don't see a general pushback on price. Oscar Bergman: Okay. So those efforts in training and education on the health economic benefits, they are holding back customers from perhaps signing off them essentially? Håkan Johansson: As for now, and again, that's also the reason why we're confident with the approach that we're using, and that's why we also will continue to invest in additional med and health economic resources. Oscar Bergman: All right. And what do you say in terms of user rate at the existing customers? Are they at desirable levels in bone infection? Or is there still plenty of room to grow in the existing number of CERAMENT G surgeons? Torbjorn Skold: From my perspective, what I see is that there's plenty of room to grow in current markets, in current products, in current clinical indications. Now I might be wrong on that, but all the data that I've seen so far after a couple of weeks indicate that we're just scratching the surface on these 3 main segments that we prioritize short term, which is foot and ankle, trauma and revision arthroplasty. And then, of course, longer term, we're entering spine. So I think there's plenty of room to grow going forward. Oscar Bergman: All right. Just 2 more quick questions. I suspect you're in a hurry. The geographic reach in the U.S., are you at a good capacity already in the different key regions? Or are there any initiatives that you will accelerate on? Torbjorn Skold: I mean the U.S., as you well know, that's our most important market, both from a growth and profitability point of view. So it has priority #1. I think we have good coverage, but that doesn't mean that we will not continue to invest. We're investing in Q3. We will continue to invest because if we're not investing, we're not taking advantage of the potential that we have. So I don't think it's a coverage issue. It's about making sure we invest to address the potential we have in terms of increasing the penetration. Oscar Bergman: Okay. So there's no specific region in the U.S. where you feel like, okay, we should really focus on this specific region. Torbjorn Skold: I mean, when we look at the map, of course, we have certain regions where we think our penetration/market share is lower, but that's not something that we disclose on this call. But on a high level, we will continue to invest to make sure that we increase the penetration in the U.S. and certain regions have higher priority than others. Oscar Bergman: Okay. This is my final question. You are quickly accumulating a lot of cash over SEK 220 million since Q3 last year. Will you perhaps present some sort of plan on how you aim to deploy this growing amount of cash in your CMD in the spring? Håkan Johansson: Oscar, I think that, as Torbjorn mentioned during the call, and sorry for all the technical breakout is that, that's an area where we own the market, some clearer communication and the Capital Markets Day in spring time is a good opportunity to do that. In the shorter term, again, this gives us the comfort of continue to investing in the business. We believe in the business. We think we do the right things. We see strong confirmations also in the Q3 report on the work that we're doing and the cash just helps us to continue investing in this. Torbjorn Skold: And gives us the freedom to operate in a way to take advantage of all of the opportunities that we see in the 3 priority segments plus spine as well as on more longer-term strategic initiatives and scenarios that we, of course, also work on. But more on that in the Capital Markets Day this spring. So unfortunately, now we have to close this call. We're coming to an end. Again, thank you all for attending. And also from our side, we apologize for the technical issues that you guys have experienced, and we thank you for your patience with us. Thank you.
Fredrik Ruben: Okay. Good morning, and welcome to this earnings call, where we will cover the third quarter, summarizing our business from July, August and September of this year. And I'm Fredrik Ruben, I am the CEO of Dynavox Group. Linda Tybring: Hello. I'm Linda Tybring. I'm the CFO of Dynavox, and I will cover the financials later on. Fredrik Ruben: Great. So for those of you who have been participating in these calls before, you will be familiar with that. We will start by a quick recap about what Dynavox Group is about. And then we will summarize the main takeaways from the quarter. We will then dive deeper into the financials, and thereafter, there will be a Q&A session. And you can submit your questions during this call in the function here, in Teams, in the chat function. Or you can ask them live if you have asked -- or if you've been given prior notice to our team. We, of course, always welcome offline questions sent over e-mail to the above e-mail address linda.tybring@dynavoxgroup.com. But a brief overview of Dynavox Group. First and foremost, it's important to reiterate our mission and our vision, which I know is very dear to not only our over 1,000 colleagues around the world, but also to our ecosystem of partners and investors. And our vision is a world where everyone can communicate, and we contribute to this via focusing on our mission, which reads: To empower people with disabilities to do what they once did or never thought possible. And this also summarizes 2 of our main user stories. The first one, the do what you once did, that may refer to a person who led a normal life until a diagnosis such as ALS, which rendered her then unable to control the body and communicate like before. And the other, the never thought possible can refer to the child diagnosed at an early age with a condition such as autism, cerebral palsy or so where thanks to our solutions, he can now do much more than the world around him ever thought possible. On the picture here to the right, we see [ Lyn ] from Lawrenceburg in Kentucky. She is one of our amazing users diagnosed with cerebral palsy and is a great example of this. The market that we serve is hugely underserved. Some 50 million people have a condition so grave that they simply cannot communicate unless they have a solution like ours. And every year, we estimate some 2 million people are being diagnosed and yet only some 2% of those are actually being helped and the rest remain silent. And the main reason for this spells lack of awareness and also among the professionals and the prescribers who are tasked to assist these users and a poor health care reimbursement system. We operate this with a global footprint. Today, some 3/4 of our business stems out of the U.S., and that's largely because of a reasonably well-functioning funding system established some 20, 30 years ago. But our products are sold in some 65 markets around the world, of which the U.S., Canada, U.K., Ireland, Denmark, Sweden, Norway, Australia, New Zealand and France; most recently, Germany, are markets where we sell directly; while the others are served by a network of some 100-plus resellers. Our staff is distributed in a similar way as the revenue. That means some 60% of our staff are based in North America with our U.S. headquarters in Pittsburgh, Pennsylvania. And our second largest office is here, our headquarters in Stockholm, but we have branch offices in several European countries as well as in Suzhou, China, Adelaide, Australia. As of today, we are about 1,000 employees in total. We provide a comprehensive portfolio of solutions that ranges from -- if you start from the left, the content and the language system, such as the world's leading library of communication symbols called PCS and the leading solutions of off-the-shelf or custom-made synthetic voices of the highest quality and with a large diversity in terms of languages, ages, ethnicities. We then offer highly sophisticated communication software, which is tailored to the type of user, which can vary greatly based on the needs. We then develop and design devices with cutting-edge technology and medically certified durability, and that includes communication aids controlled via eye tracking and accessories such as the Rehadapt mounts. We have a services portfolio to help our users through the complexity of obtaining and getting funding for the solutions. And last but not least, we're there to help our users, the therapists and the caregivers through our global teams and support resources. We operate this model globally, and it's important to note that each piece here is critically important and also a significant differentiator for us, making us absolutely unique. Our go-to-market model is predominantly as prescribed aids, and that means that some 90% of our revenue comes from public or private insurance providers. And this also means that we have solid paying customers and have always been resilient towards changes in the overall economic climate. But now I will go back at focusing on the main topic of today, namely the earnings report for the third quarter 2025. So, if I look at the highlights, we had another strong quarter when it comes to revenue growth. The growth compared to the same quarter previous year sums up to over 35% after adjusting for currency effects. And this marks a further acceleration of the already strong trajectory over the past 3 years. The demand for our solutions remains high, proving the solidity of our underlying business, and we see robust growth across all markets. In this quarter, a particular highlight is the outstanding performance in our direct presence markets outside of North America. We continue seeing increased growth in our touch control product portfolio, and they are typically serving younger users with autism. However, in this quarter, we also saw very good traction in the eye-gaze controlled solution area, serving users with more complex needs. Our investments in systems, infrastructure and organization to support our long-term ambitions continue according to plan, and I will come back to that shortly. EBIT came in at SEK 64 million in the quarter, but this includes nonrecurring costs of some SEK 26 million in this quarter and implying then a strong underlying profitability. And on September 1, we completed the previously announced acquisition of our long-standing German reselling partner, RehaMedia. Coming back to our investments. So strategic investments are an important part of our growth strategy and a way for us to scale and build an efficient and resilient company. So in 2025, we expect to invest some -- approximately SEK 100 million in total in of nonrecurring nature in 2 main projects that are progressing well and according to plan. The first one is the rollout of a new ERP system in North America and an establishment and a consolidated product and development hub here in Stockholm. The ERP successfully launched on July 1. And despite almost a week long freeze period, we have been able to keep up deliveries and even deliver more voices to our customers than in Q2. And during Q3, the nonrecurring spend totaled some SEK 9 million or SEK 40 million spent year-to-date on that. The second topic, the consolidation of our product and development organization into a central hub in Stockholm continues according to plan. All managers are in place since a while back and the majority of all functions have been recruited and have started. And since April of this year, all new product releases have been handled from the Stockholm hub. During Q3, the nonrecurring spend totaled SEK 14 million on this with a SEK 33 million spent year-to-date. But now I will hand it over to you, Linda, to take us deeper into the financials. Linda Tybring: Thank you, Fredrik. So let's talk Q3 financials. Revenue for the third quarter came in at SEK 606 million, a 35% year-on-year growth after adjusting for currency effects. Recent acquisition contributed with 3% and the organic growth was a solid 33%. This marks another chapter in our 3-year strike of robust growth and consistent execution. Currency fluctuations had 10% negative impact on our revenue. Sales continued to grow across all markets. However, this quarter, our direct market outside North America delivered outstanding performance, exceeding already high expectations. As we have talked about in prior quarters, we continue to see growth among younger users with autism. At the same time, there is a good traction in eye-gaze control solutions, serving users with more complex needs. The gross margin ended up at 70%, an increase of 0.8 percentage points. The margin was improved by increased sales, also by further strengths in addition to having more direct market contributed to an extra layer of gross margin. Gross margin also had slightly help from currency this quarter. We had some negative impact of increased cost of freight, and this is mainly related to using air freight, which has been driven by strong sales momentum, and we wanted to ensure that we are delivering on time. EBIT for the quarter was SEK 64 million, and the EBIT margin was 10.6%. It was negatively affected by nonrecurring costs totaling some SEK 26 million in the quarter, lowering the profit margin temporarily by 4.3 percentage points. Our OpEx increased by 30% organically. The OpEx increase was affected by factors such as continued investment in staff, increases in the sales and marketing. In total, we added more than 200 FTE, including M&A, of course, also adding normal salary adjustments. During the quarter, we continued to invest in new systems ands tools to strengthen scalability. The total nonrecurring spend related to this in the quarter was SEK 9 million. As of July 1, we are live with our new ERP in our largest market, North America. Operating expenses was also affected by nonrecurring costs related to our restructuring cost in the product and development organization. The total nonrecurring spend in the quarter was SEK 14 million. Both these 2 investments are according to our strategic plan. The recent strong development of the Dynavox Group share price has rendered an increased cost for employee long-term incentive program of SEK 3 million compared to the third quarter last year. All in all, nonrecurring costs in the quarter sums up to SEK 26 million. In addition, EBIT was negatively impacted by currency of SEK 6 million in the quarter. Net R&D costs increased by SEK 23 million, SEK 10 million of this relates to nonrecurring restructuring costs within the research and development organization. If we look at the basic earnings per share, it totaled to SEK 0.36 per share to compared with last year's SEK 0.43 per share. For the quarter, cash flow after continuous investment was positive with SEK 20 million. Cash at the end of the quarter was SEK 172 million and net debt was SEK 924 million. The total used credit facility and term loan at the end of the quarter was SEK 900 million. The net debt after last 12 months EBITDA was SEK 2.0x. And also note that during the quarter, Dynavox signed a new refinance agreement with Swedbank totaling to SEK 1.2 billion. And this is classified as a social loan as our prior agreement. And this agreement reflects our continued commitment to advancing sustainable social initiatives that a positive impact on society. The credit facility includes a SEK 900 million term loan and a SEK 300 million revolving credit facility, which means -- which can be used for both working capital and strategic acquisitions. The facility has a 3-year term with 2 optional 1-year extensions. For end of September, we have unused revolving credit facility of SEK 300 million. So back to you, Fredrik, to conclude the earnings call. Fredrik Ruben: Thank you, Linda. So before we open up for questions, I'd like to reiterate the main takeaways from the third quarter. So first of all, we continue our strong growth trajectory, a trend that started in the early spring of 2022 and just keeps accelerating. We grew revenue by 35% adjusted for currency. Sales continue to grow across all markets, but with direct presence markets outside of North America exceeding expectations in this quarter. We continue to see growing adoption among younger users with autism, but at the same time, we also see really good traction in the eye-gaze control solutions area that serves users with more complex needs. Our profitability was negatively affected by nonrecurring costs totaling some SEK 26 million or 4.3 percentage points related to these long-term investments focused on building a more robust company. The current uncertainties in the macroeconomic climate or policy changes has not had any direct effects on our business, but we experienced some indirect effects through elevated freight costs in the aftermath of various tariffs announcements. The currently ongoing U.S. government shutdown poses no immediate execution risk, but we are monitoring the development here closely. Given the continued and sustainable growth, we continue to grow in term -- the team, while investing in systems and tools to enable future business growth that is much bigger than today. Our financial targets are expressed where -- and they were communicated in February 2024 with a time horizon of 3 to 4 years. And the first target was to, on average, grow revenue by 20% per year adjusted for currency effects, and that includes contributions from acquisitions. And in local currencies, the third quarter growth was 35%, which means that we have found a revenue growth momentum to build on. The market we serve remains hugely underserved. And with the example of growth levers such as sales teams expansion, adding direct markets and operational excellence, we continue to build on our growth journey. The second target is to deliver an annual EBIT margin that reaches and exceeds 15%. We feel that we have proven to build a strong growth with incremental improvements in profitability. We need to continue to invest in future growth with improvements in scale, but the recipe is rather simple. We want to maintain continued revenue growth, high and stable gross margins and then total operating expenses that increase at a lower pace than our revenue growth. And as a consequence, we see good opportunity to further leverage how revenue growth translates to reaching and exceeding an EBIT margin of 15%. Lastly, we have a dividend policy. We feel that we have an attractive cash flow profile. And given the growth opportunities, we need to maintain a capital structure that enables strategic flexibility to pursue growth investments, including then acquisitions. But it's still expected to, over time, generate excess cash, and our policy is, therefore, to distribute at least 40% of the available net profits to shareholders via dividends, share repurchases or similar programs when time so allows and it's deemed the right prioritization for us. With that said, I am taking a step to the left, and I invite Elisabeth Manzi, our Corporate Communications Director, who will help to moderate and enable us to take questions from the audience. Elisabeth? Elisabeth Manzi: Yes. Well, thank you. We have a lot of questions here today. So I will start with a question from Daniel Djurberg, who is asking about the nonrecurring outlook for ERP and R&D for 2026. Linda Tybring: So I mean our goal, when it comes to our product and development organization is that it should be completed by the end of the year and that we are geared for starting to execute in 2026. When it comes to ERP, we are still in the transition of getting all our legal entity over into the new ERP. And our goal is that we will be completed somewhere during next year. Fredrik Ruben: Yes. But -- and to the last point, I mean, we, North America represents some 3/4 of our business, and that's what we started with. It's obviously the most complex area and also by far the most costly area. So, we definitely see that's going to… Linda Tybring: It will gradually, yes, decrease over the next year. Elisabeth Manzi: So, following up on the North America and the U.S. situation, Daniel is also asking if there are any hiccups to the funding systems or to Medicare organizations due to this shutdown? And also, is the Nairobi Protocol still valid? Fredrik Ruben: The short answer to your first question, Daniel, is no. We have no current impact on our ability to get paid basically in North America. That might change, and we don't know exactly what's going to happen in the future. But as of today, no. Our assessment on the Nairobi Protocol is that there are no suggestions or paths where the tariff-free import on our types of products will be changed just because of recent announcements. So, we -- the best guess right now is that it will remain in force. Elisabeth Manzi: Good. And then I do believe that we also have someone calling in. So, let's see if we have Ramil on the line. Ramil Koria: I have a bunch of questions actually. I'll try to contain myself. But maybe if we start on like the progression you've made throughout 2025 with younger users within autism. It sounds very much like a TD Navio type of sort of use case. So, do you think that the launch of TD Navio in mid/late 2024 was sort of the driving element behind sort of the organic growth acceleration in this year? Fredrik Ruben: It's a good question. And the answer is yes and no. What is actually the main product that is benefiting that customer group is a software called TD Snap, and that's a software we had in our portfolio for quite some year, but it's obviously been refined over time. That software is the software that you run on TD Navio. So, with the launch of the TD Navio, which is simply a better version of a very similar product that we had prior to that, that was what we can see that has sparked a really strong growth momentum. But as such, it's the software that actually makes the bigger difference. TD Navio is the can that holds a very good soup, if I would use that analogy. Ramil Koria: Yes. Makes sense, Fredrik. And then on the topic of direct sales outside of North America improving, could you -- because you've acquired several distributors in the last say, 2 years. Could you elaborate a little bit on what markets you are seeing the pick up in? And if that pertains to the new acquisitions, France, Germany or older ones? Fredrik Ruben: It's actually quite a strong growth across the board. So, there isn't one country that kind of stands for the majority of the growth. It's a very strong growth across many markets. But one clear trend that we see is the markets where we have no middle layer, no middleman, where we go directly. And those obviously includes the markets that we recently acquired. But we should also remember that we were already direct in a number of other markets prior to that. But those - if we see some sort of trend of the kind of across-the-board growth, it's definitely those markets that are in the lid. Ramil Koria: Okay. Makes sense. And then I mean, I can see the notion of like margin expansion being visible ahead as per your financial targets. But if you take Q3 isolated, organic growth in OpEx is 31%, so just 1 percentage point lower than organic growth on top line. The phasing of margin expansion, how should we think of that, say, for Q4 and into 2026, perhaps? Fredrik Ruben: Do you want to address that? Linda Tybring: Yes. First of all, you need to consider the significant investments that we are doing this year. Both the restructuring cost is impacting our organic OpEx increase and that we will not see next year. Over time, that means also our R&D spend will go down in relation to revenue over time. So, you will have that kind of improvement. We will also start to see gross margin. You will slightly see some improvement when we go direct in more markets. And then over time, the more efficient we will get with the systems that we are now implementing, we will not -- we don't need to invest as significant to actually continue our growth journey. So, you talk about the crocodile sometimes. So, we will gradually see an improvement of OpEx slowing down growth and revenue continue. Fredrik Ruben: We want to spend as much money as we see reasonable in sales and marketing because that really drives growth, whereas we want to see a very moderate increase in all other OpEx areas. Ramil Koria: And just one final one perhaps on like outlook as well. I mean, in connection with Q2, you said that the first and the last week of Q2 were really strong. Could you shed any light on how Q3 progressed throughout the quarter? Fredrik Ruben: Yes. I think you're absolutely right. So just to reiterate, we said both in Q1 and Q2 that the first week of Q1 or Q2 was as good as the last week of Q1 and Q2. That was actually not the case in this quarter because we had a planned -- how should I put it, standstill in the very first week or so in North America due to the ERP change. So, there was a little bit more of a catch-up effect, which could argue that we had an accelerating growth throughout this quarter. But on the other hand, that was a little bit kind of artificial because we kind of -- we created that problem, I should say, ourselves. So good momentum is probably the short answer. Elisabeth Manzi: And actually, both Jessica and Daniel also had questions relating to the Q4 and if we could see any seasonality outlook for Q4? Fredrik Ruben: Without being too detailed, we should just remember that we have a fairly consistent seasonality effect in our business, where Q1 is the weakest; Q2, a little bit better; Q3, a little bit better; and Q4 is our best quarter, both in terms of absolute top line revenue, but obviously, spreading out the larger top line over almost the same OpEx will hopefully have a bigger kind of drop-through. We see no difference here. The reason for this is that the -- a lot of our clients and customers have a big incentive to get their orders shipped and delivered before New Year's Eve before the so-called co-pays or deductibles in insurance systems resets on January 1. So, no change. Elisabeth Manzi: Good. So, let's continue with some questions -- more questions from Jessica Grunewald at Redeye. She's asking if we could walk us through the working capital buildup and how you see it developing going forward, particularly with the increased share of direct sales. Linda Tybring: Yes. So, what happened when we get more direct sales is, of course, then that we need to build up more inventory because we get an extra additional layer of inventory. So now we've seen in the last couple of quarters, one is related to Tobii that we have increased inventory, but also the second part is that we go direct in more markets, which means that we are building up more inventory. But over time, we will balance this and we'll be able to get more release also part of us that we have grown this year, we needed to adjust because making sure it's more important for us at the moment to make sure that we deliver on time than to build up slightly higher inventory. But over time, we will see the evidence of that. Also in this quarter, we should also know what Fredrik mentioned that we also saw some of the sales coming in, in the later part of the quarter, which means we build up some of the accounts receivable as well. Elisabeth Manzi: And a last question from Jessica here. She's asking, what are your expectations regarding the RehaMedia acquisition and the market dynamics in Germany? Fredrik Ruben: We should just remember that these acquisitions, when we acquire our research, they're quite small in the grand scheme of things. With that said, Germany is one of the most exciting and interesting markets, not just in terms of share size or funding system. It's also a market where we believe that there is a lot of growth potential. So having our own feet on the ground in Germany is going to be instrumental for the slightly longer run, and we feel it's off to a very good start. Linda Tybring: And Germany is actually very -- Germany funding is actually very similar to the U.S. Fredrik Ruben: Right. Elisabeth Manzi: Good. So Oscar from SEB is asking if you can elaborate on the increased freight cost and how many basis points that would be a pressure on the gross margin? Linda Tybring: It's very small effect on the gross margin, but that is, of course, related to that we needed to get inventory in the warehouse as soon as possible because we saw the need from a sales perspective. Over time, that will go down, and we will be able to ship much more with both because we are able to balance the sales momentum that we'll have. Fredrik Ruben: Yes. I would say it's more of an opportunity of actually improving it going forward when we are -- when we can plan a little bit more ahead. I think it's fair to say that this announcements of tariffs and the new policies that come out specifically from the U.S., have an actually profound effect on supply chains and freight chains across the world because it's quite bumpy. Elisabeth Manzi: Good. And a follow-up question on the performance and North America. We said that markets outside of North America was performing very well. So what about North America? Did they underperform the expectations in Q3? Any color would be helpful. Fredrik Ruben: Okay. I will provide color. North America did fantastic. And some of those markets outside of North America did amazing. That's the amount of color I can provide. It's hard when everybody is performing personal best to say that someone didn't perform. It was very strong across the board, but simply even better out in those direct markets outside of North America. Linda Tybring: But I think it's also a strength from us that it's not one country or one product. We are actually across the board growing our company. Elisabeth Manzi: And this was actually the same question as Mikael at DNB Carnegie had. So, we will move on to bringing in another voice. So, I'll ask [ Philip from SB ] to join. Unknown Analyst: So, you mentioned in the report that you witnessed good traction in touch control devices during the quarter. What is the sales split between touch control and eye-gaze devices? Fredrik Ruben: The split. Linda Tybring: It's around, I would say, touch is today probably slightly over 50 and eye tracking slightly below, but we should also remember the ASP. So, from a quantity perspective, touch is significantly higher than eye track. Fredrik Ruben: It's almost -- it's an ASP difference of 2. So, an eye tracking device costs twice as much as a touch device. Unknown Analyst: Yes. And do you anticipate it to be kind of the similar split going forward? Fredrik Ruben: I think past performance is a good predictor of future performance. That's how much we can say right now. Unknown Analyst: And I remember you mentioning -- I don't know if it was at the end of last year or beginning of this year that around 10,000 prescribers have ever prescribed a Dynavox device. Has that number increased during the year? Or how should we think about that? Fredrik Ruben: I don't have that number. It's my honest answer, but we can definitely look into it. My gut feeling says that it's increased slightly. But what I do believe is that the prescribers that prescribe 4 or more that has a little bit more traction, that group has grown -- yes, quite strong. Unknown Analyst: And what measures do you use to increase like the revenue per prescriber for those people. Fredrik Ruben: So, what kind of measures we take to increase that? Unknown Analyst: Yes. Why do you see that the people that prescribe several devices increase their prescribing rates? Fredrik Ruben: The simple answer is because it's one of our focus areas. We believe that it's better to spend our time on taking the ones who have done something and make them become more self-sufficient and better at the jobs rather than just trying to pull more new prescribers into the loop. But it's a balancing act. Elisabeth Manzi: And a follow-up on that last conversation here then on the eye-gaze controlled solutions. Could you describe what's driving that momentum? Fredrik Ruben: And I believe it's Daniel or was it Mikael Laseen. Elisabeth Manzi: Yes. Fredrik Ruben: It's a very good question, Mikael. I think that there is a combination of where the market had focused quite a lot on what was then a year ago a new device, the touch devices from the Navio device. That is -- that's now yesterday's news, and we could potentially see that it's normalizing a little bit. So, it might be almost like an internal effect, but it's hard to say. Elisabeth Manzi: Good. And then let's see if we have another one here from [ Matt ]. Does your strategic investment currently holding back reported margins then into 2026? The market seems to focus on the lower-than-expected U.S. sales. Any worries for 2026 U.S. organic development? Fredrik Ruben: No. Linda Tybring: No. Elisabeth Manzi: That was short. Good. So let me just double check here. There was a little bit of a follow-up from Daniel as well on the freight cost and the impact on gross margin in Q3 and if this will turn substantially tougher ahead? Fredrik Ruben: Quite the contrary. Linda Tybring: Yes. Fredrik Ruben: I think we are in a position now where there is less interruption, less uncertainty, and we obviously feel quite confident with the momentum, which will enable us to not necessarily get lower freight costs. We can choose freight by sea, for example, which is significantly cheaper. We have a better ability to plan right now. Elisabeth Manzi: Good. I believe that was everything. Fredrik Ruben: All right. Fantastic. I'm happy to see that the technology work with some of the call ins, that's great. But also thank you, everybody, who participated and submitted questions in the chat. We are looking forward to seeing you all back again on February 5. So next year, when we will summarize the business for the full year of 2025. Thank you very much. Linda Tybring: Thank you.
Kati Kaksone: Good morning, everybody, and welcome to Terveystalo's Q3 Results Call and Webcast. My name is Kati Kaksonen. I'm responsible for Investor Relations and Sustainability here at Terveystalo. As usual, we'll go through the result highlights with our CEO, Ville Iho; and our CFO, Juuso Pajunen. And after the presentation, you will have a chance to ask questions. I will take the questions from the phone lines, as well as through the webcast, after the presentation. Without further ado, over to you, Ville. Ville Iho: Thank you, Kati, and good morning from my behalf. Let's dive directly into Q3 highlights. As you can see from the numbers, this quarter 3 was a quarter of margin improvement amid a revenue headwind. So the EBIT -- adjusted EBIT margin developed positively; very strong operating cash flow; EPS developing positively as expected; very high NPS, taking all-time highs all the time; but then with a decline of some 5% top line, adjusted EBIT in absolute terms slightly down. Double-clicking into different P&Ls and their role in the business, how they are contributing and continue contributing in the future, starting from Sweden. Just as a reminder, Sweden is in a phase still of turnaround. We have been adamant in the fact that we continue focusing only on turnaround and profitability improvement. Sweden is getting -- our Sweden team is getting the results. The underlying efficiency is continuously improving. The results continue to improve. The market being fairly muted at this stage still, we are not making proper profits yet. But looking at next year, volume development looks positive, and we start making results, and then it's time to focus on growth. Portfolio Businesses, quite the same story. The profitability turnaround has for large parts happened. Some minor fixes in smaller businesses, but the bigger businesses are doing fine and developing positively. Now, it's time to grow, and we are eyeing specifically in 2 different segments, as we have said before, dental and then opening public market. Healthcare Services, our biggest business, margin on a very, very high level, really strong, starting from a very strong position. Now, our eyes and focus turn into volume growth, and we continue to boost that one with selective specialties-driven M&A, and then investments in digital delivery and capabilities. Further double-clicking into the strategic agenda, as I said, Sweden profitability improvement program, [ Gamma ], almost done and dusted. Efficiency in all-time high level. Now, looking at organic and potentially inorganic growth there on a solid base. Portfolio Businesses, as I said, profitability improvement done and dusted. Now, organic growth in dental and also inorganic growth in dental and public partnership being relevant in the opening market when health care counties are actually starting buying, where we have seen positive signs already. Inside Healthcare Services, we are seeing very strong development in our consumer-driven businesses. We continue boosting that one, Kela 65 being a prime example of sort of a positive drive. Also in insurance business, our position continues to be strong and developing nicely; out-of-pocket in good place and developing positively against the low morbidity. We have reorganized our operations and our delivery model so that there's clearly separate brick-and-mortar delivery through our health care services or hospital network, and then, now, forcefully and decisively scaling up the digital health 10x, where we are eyeing at major leaps in efficiency, in transactions, more intellect in our patient and customer steering, and then finally, truly scaling up truly digital health care services, tech-based services, nurse services and in very near future also, AI-supported health services. Among all the positive developments, the challenge currently, which we'll further discuss is in occupational health care. We know exactly where we are. We know how to turn around the negative development. There we have a program called [indiscernible], led by new SVP, Occupational Health care or Corporate Health, Laura Karotie, and that one will be discussed in more detail. So, all in all, agenda, very clear, sort of 9 out of 10 moving very fast to the positive territory, more focus needed for occupational health care, which will be fixed. Looking at the volume development and our sort of view on markets in near term, next 12 months, starting from the smallest, Sweden, as we have communicated many times, the market has been very soft. Swedish economy has driven the demand for occupational health care services very low. Now, looking forward, both the market seems to be picking up. Sweden economy is doing better next year. But more importantly, looking at our internal view on the sales funnel, commercial activities, sales funnel looks positive. And when we are able to do, in next year, more volume on higher operating leverage, of course, then we'll start making money. Portfolio Businesses, public business, as all know, has been very, very slow in buying. Health care counties are only sort of picking up the buying activities. What we see in large tenders and also in smaller tenders is increased activity. And looking at the next 12 months, we see the market developing positively. Same goes with the consumer business. It has been fairly muted due to low confidence of consumers. We have seen already some positive signs, specifically in the dental services, which typically is the most sensitive for consumer behavior, and we expect the positive drive and vibe to continue for next 12 months. In public business, when we jump over to Healthcare Services, in public services produced by health care services units, it has come down and it has brought -- or contributed to lower volumes in Healthcare Services. We see that one bottoming out, and next 12 months should be more positive. Consumer business, even though our own position has been strengthening, has been fairly flat due to low morbidity. But with the sort of normalized view on that one, our strong drive in Kela 65 and insurance business, we see that one developing positively also going forward. Insurance business, equally, it has actually been the growth driver inside Healthcare Services, continues to be so. Number of insured persons in Finland continues to slowly pick up, and use of services is on a high level. Occupational health care, finally, so we'll double-click on the development, what has contributed to lower volumes in Q3, but very shortly, it's number of connected employees, sort of thinner scopes in the agreements by the corporate clients, and then inside those agreement scopes, lower use of services. All of these are slightly negative from our business point of view. It's been negative. It's going to stabilize. But specifically, number of connected employees will not be sort of turned around in 1 quarter. We'll turn that one around, but it will take a couple of quarters to get to -- again to all-time highs. If we dive deeper into this phenomena, as you can see, and it's good to remember the phases that we have seen in the development over the last couple of years and quarters. In '22 and '23, in the number of connected employees, we were pushing all-time highs. At the same time, as you remember, the profitability of this business was really, really low. And we struggled with the low contribution to rest of the business and hence, the Alpha program. With the Alpha program, we totally turned around the profitability of not only occupational health care, but the company. With that one, of course, the -- some of the less profitable agreements went out. And now, we see also some unintended tail effects of the Alpha period. Now what we are doing is, of course, we are rebalancing products, pricing, offering, and it's not going to be either or. It's going to be both, so both profitability and volumes. Occupational health care, as I said, is the biggest focus area in our agenda currently. It will be turned around with our program. It's a comprehensive exercise of renewing, partly even transforming sales and account management, our product offering to become more relevant and according to expectations by ever-demanding customers. And then, finally, digital front renewal, which we now can accelerate and fast track with our MedHelp joint venture. And our customers will see tangible results already from Q1 onwards on this area. Positive thing -- a very, very positive thing in our portfolio is consumer side, so combined insurance, Kela 65, out-of-pocket area. Our brand is doing fine. And that's, of course, one of the basic building blocks for boosting this business. We are the most preferred brand when we look at the brand preference development. We have been so. But now, we are all-time high. Also in top of mind, the company, health care services company that Finnish consumers think about them when they wake up in the morning, that's now Terveystalo for the first time. And that itself gives a very solid base for further improvement in this business. We have invested heavily in services. We invested heavily in digital engagement with our consumer customers. We have invested in Kela 65. And in that particular new segment, we are a clear leader in that developing market. Finally, Juuso will explain in detail the strength of our finances, the profitability, cash flow and balance sheet. We continue increasing our investments in our digital capabilities. It's an ever-increasing value driver in our business model. And we have some key focus points and developments in that digital ecosystem. For the professionals, we have launched the Ella user interface and digital front door and continue scaling that one up. And that's going to bring tangible efficiency improvements during next year in our sort of traditional brick-and-mortar appointment activities. For individual care, looking at -- looking from a customer's point of view, as I said, it's very much in the core of our 10x agenda. We are making leaps in efficiency, in transactions related to our incoming traffic and customer contacts. We are going to further improve the leading capabilities that we today already have in patient steering and customer steering. And then, finally, we'll make efficiency leaps in text-based appointments, text-based digital appointments, nurse services and introduce first AI-supported health services in very near future. In occupational health, as I said already, we are now in a very good position to migrate our occupational health capabilities, digital capabilities into new MedHelp environment. It's best-in-class in Europe. And our customers, as I said, they will see tangible results and fully a new view and sort of better control on their own people, own organization, sick leaves, workability, starting from Q1 next year when we start deploying new system to first customers. All in all, we are, in this digital journey, in very strong, very good place. Our architecture is where it should be. Our initiatives, projects create value, not in years, but rather in months, and we are confident in investing more and getting more yield out of the digital engine. With that one, over to you, Juuso. Juuso Pajunen: Thank you, Ville. So good morning all. I'm Juuso Pajunen, CFO of Terveystalo, and let's talk about the financial performance in the third quarter. So first of all, if we look at the whole group, we have the positive margin development continued despite the revenue headwinds. This was, in relative terms, the second best Q3 during the group's history, and the best one was during the COVID times. So what I want to highlight is that our efficiency is in place, our machine is [ ticking ]. But also having said that one, we do know that we can't be happy on the growth and especially the revenue development when it comes to occupational health care. So if we look at the big picture, portfolios in Sweden improved both in relative and absolute profitability, while they are still facing anticipated negative growth. So portfolios in the outsourcing businesses in Sweden, we are still coming from the efficiency hunt and now going for the growth mode. And then, with Healthcare Services, we have the strong margin, but the headwinds in the occupational health and the morbidity have been pushing the growth negative, like Ville also explained a bit on the occupational health part. So then, if we look first on the Healthcare Services, I will double-click in the next slide on the growth, especially what comes to visit growth. So let's park that question. But all in all, the performance, what comes to the relative profitability, it was really solid. We had the decline in revenues, headwind in the markets. And despite those ones, we were able, through solid cost control and our flexible operating model, to keep our profitability in a good place, especially remembering that this is the low season Q3. And for the growth, we have a strong plan. And in the longer perspective, I still remind you that the megatrends will continue to support our long-term outlook [ what ] comes to the growth. So then, let's see the visits. Let's address the elephant in the room. So basically, we can split our visits growth. So now, we are talking about the volume. We can split it into different type of buckets. First of all, we have the morbidity. So, that one is basically seasonal. We have no control over that one. And we had plenty fewer visits compared to previous year. And this is part of normal seasonal variation, and it changes annually. We have -- then if we go into the occupational health care, we have different factors behind the decline. We have basically macro-driven components. So the general employment in Finland is lower than earlier, and we have a sluggish economy, and that one also then impacts on the employers' behavior. So basically, they are implementing cost reduction initiatives due to own economic pressures and push, and that one impacts on our demand also. So, a concrete example on that one would be narrowing down the contract scopes on what they offer to their employees. Then we have the third component, which goes into more on what we have done ourselves. As Ville explained, how our profit improvement program has been progressing and how the -- despite having very high amount of connected employees, our occupational health business was not super profitable. Now, we have very efficient machine, profitable business, and we need to load further volume on that one and get then the benefit of the operating leverage. And for that part, we have a solid strong program ongoing, like Ville mentioned. The name is [indiscernible]. And we are confident that by implementing that program, we will address the weaknesses we have had, and we would expect to see growth in the number of connected employees in the coming year. In public sector, especially the capacity sales, which is a minor part in the Healthcare Services segment, but it is in a very low level due to the wellbeing county setups and all of that one. But now we have seen that the sales pipeline is opening up and the market is little by little finding its form. And then, we have the positive momentum, Kela 65 consumer insurance market where we have been growing and we have been able to capture positive momentum. And that one, we will obviously continue pushing. The experiences from Kela 65 are very positive from the patient perspective and also from our perspective. So with all of this one, there are various factors impacting our growth, and we will address especially the occupational health part decisively when going forward. Then if we go into the Portfolio Businesses, we have clear improvement in profitability. We have been able to improve the EBIT margins continuously, 2.2 percentage points up compared to previous year. And then, we have the momentum in especially public sector business. Outsourcing, we have been guiding you that it will most likely decline EUR 30 million this year, and we are on that trend, on that pattern and continuing on that one. On staffing, we started to have revenue headwinds during roughly a year ago, and now those ones are stabilizing out. And part of that one was also our own selection on how we address the market. But now little by little, the positives are coming, markets are opening up. Wellbeing counties are more and more capable of also buying and willing to buy. So this market momentum is little by little turning. And then, we have the consumer part that is growing. It is performing positively, and we will obviously continue to push on that part. So solid performance improvement in the portfolios when it comes to profitability. Then in Sweden, we are also improving both absolute EBIT and relative EBIT. We are still showing heftily negative numbers in a very seasonally low quarter. So Q3 is always difficult and weak in Sweden due to how the offering behaves during vacation period. In here, what I'm really proud is that our efficiency continues to ramp up. We have -- we continuously see, on our KPIs, positive development what comes to occupancy rates, but also we start to see that one on a monthly gross margin levels going up. So we are now getting into an efficiency place, and we will load further volumes on top of that one. We have a solid sales pipeline that supports us getting back on track and on heftily numbers. So program is in plan. Improvements are now continuously more visible also in the backward-looking income statement, and we will push forward. However, there is a weak market environment still in Sweden as a totality. So the macro has not recovered yet to the full extent. But despite macro, we are able to push Sweden back to good numbers in the coming year. Then, if we look at our investments, we've been continuously investing in technology. We have been stating since the Capital Markets Day last year that we will land somewhere between 4% to 5% of revenues in the longer perspective on the investments. Now, we are at 3.4%. We are heavy in digital. We have been talking about Ella, our professional user interface and related flows. You have seen, during the quarter, investments in MedHelp, the joint venture, which will be the digital front door in our occupational health. And then, some may have seen that we have deepening our collaboration with Gosta in the artificial intelligence and ambient scribing, further improving our tools. We have a good momentum. We have solid technology road map, and we have capability to invest. So we will continue on doing on that one. And then, in inorganic growth, the market is there, and we are evaluating different type of opportunities. And for those opportunities, we had a solid quarter for cash flow. We are now in the green bucket again. As was the [ negative part ] normal seasonality, so is this one. Our cash profile has not materially changed, and there is no reason to believe it materially changes either, so normal volatility. We are the Swiss clock we have been. We tick, tick, tick cash. And then, our leverage ratios, 2.1 at the moment, so we have powder to continue investing. So positive financial position, and we can definitely do organic and inorganic investments. Then, if we look for our guidance, basically this is unchanged. So despite some market headwinds, we reiterate our guidance after the second best third quarter ever. So we are expecting our adjusted EBIT to be between EUR 155 million and EUR 165 million. These are based on the current demand environment, employment levels and morbidity rates. So normal disclaimers, nothing new on that one. What is good to note maybe that the implied range for Q4 seems highish compared to previous year Q4. But then, you need to look back on your notes and remember that in previous year Q4, we had especially personnel-related items that we don't have this quarter -- this year in Q4. So the baseline adjusting needs to be a bit taken to understand our Q4 performance. So all in all, I'm happy to reiterate our guidance, EUR 155 million to EUR 165 million in total. With these words, let's invite Kati on stage and let's have a Q&A. Kati Kaksone: Thanks, Juuso. I think we are ready to take questions from the phone lines. Operator: [Operator Instructions] The next question comes from Anssi Raussi from SEB. Anssi Raussi: Maybe I'll start with your guidance as you mentioned that as the last item here. So you already said that there were some special items in your comparison period. But how should we think about underlying assumptions here? Like, does it require any improvement in the market sentiment or something you are not seeing yet to reach your lower end of the guidance range? Juuso Pajunen: I think that's a very relevant question. So, at the moment, the guidance is based on the current market environment and the current morbidity rates. So it already factors in, like always when issuing the guidance, everything we know up to yesterday evening. So the current guidance assumes lowish morbidity rates and the occupational health market in the conditions we know at the moment. Anssi Raussi: Got it. That's clear then. And maybe the second question about your occupational health care. So I think you said that maybe you lost some connected employees due to your profit improvement program. So do you think that it's possible to increase the number of employees or connected employees without sacrificing some of your profitability gains in this program? Ville Iho: Yes. Again, a good question. So, as I said during the presentation, it is not going to be either or, so either volume or profitability. It's going to be both going forward. It requires some balancing in our sort of offering and pricing, but we are not going to sacrifice the profitability just for the sake of absolute volume. Anssi Raussi: Okay. So maybe continuing on that one. So when we look at your -- of course, you showed your appointment volumes and the impact of prices. So how should we think about the pricing going forward in the coming quarters or years? Ville Iho: So, of course, the cycle is very much different than it was, let's say, 2, 3 years ago. The pressure on the -- contracts pressure on prices is, of course, higher post inflation cycle. And we should not -- or you should not expect as sort of a rapid price development going forward. Now, it's more on the how we package our products, what is the mix in our sort of agreement portfolio, and how efficient are we under the hood in delivering those services. And then, final component is the volume. So the growth cannot be, for example, next year, driven so much by the price increases as we have seen during last -- or past 2 years. Operator: There are no more questions at this time. So I hand the conference back to the speakers. Kati Kaksone: All right. It's a busy results day today. I think there are some 30 companies today. There's one question in the webcast currently from DNB Carnegie from Iiris; two parts. Regarding the plan to address the revenue headwind, can we talk about when do we actually expect to see these measures to become visible in the top line and whether we plan to provide any financial estimates of the sales or earnings impact of those actions? Juuso Pajunen: If I start, like I actually hinted a bit, or not even hinted, written out loud in the bridge that we would expect the connected employees' impact to be visible in '26. And that's obviously coming from the nature that if you today win something before it's visible and the connected employees are part of our portfolio, that, especially in the big cases, is a matter of months rather than anything else. So we would expect on '26 the impact. And at the moment, obviously, our financial guidance relates to Q4 and full year '25, and we will come back for the total guidance for '26 along with Q4 publication. Ville Iho: Yes. Again, the only caveat is sort of with what Juuso said, this is that -- as I said before, we are not hunting the volume with the price of profitability. So it is going to be both profitability and revenue and also volumes. So we are not repeating the mistakes that the company did some 6, 7 -- or 5, 6, 7 years ago. Kati Kaksone: Maybe then, continuing on that one, a follow-up question from Iiris. We talked about an update to our product offering in the occupational health to make it more relevant for our customers. Can we give some examples on what that means in practical terms and where we expect to see the largest positive impact? Ville Iho: It's down to the segmentation of different needs amongst our customers. Of course, we are serving 30,000 -- roughly 30,000 different companies in Finland. And there's a wide spectrum of different type of needs and appetites also to pay for the services. Now, when we are talking about sort of transforming or renewing the products, typically, it concerns the sort of customers who are more sort of keen on looking at the price and value for money type of sort of comparisons. And there, we do have strong means inside the company to steer the services across our vast network. We have not used them to the full extent. So what I mean is that if there's a company whose main focus is to get things to a certain level and then look at the spend after that one, we have means to serve that type of customer. If there's a customer that wants to maximize the services to the employees, then we can serve that type of customer. If there's a product, which is priced with a fixed contract, we have means to control both the profitability, delivery and cost for that type of customers. And that type of steering capabilities will be sort of utilized to full extent now going forward. So we have the flexibility. We have different type of delivery models, and we are also renewing sort of commercial packaging of these type of different models. Kati Kaksone: Yes. And of course, MedHelp is a concrete example of the value increase that we can show to our customers in a relatively short term as well. Ville Iho: Absolutely. It's going to be the next level. Kati Kaksone: Good. Then, a question on the public outsourcing tenders and the outlook there. Besides the tender of Pirkanmaa wellbeing services county, which was won by our peer yesterday, are there any larger tenders opening up at the moment? Ville Iho: Well, there's one other which we know of. And then, I think what's going to happen is that health care counties are watching very closely each other. And when somebody is opening a path, then the rest will follow, specifically if there's a successful implementation of a certain model. So we believe that this is only a first step, this [ Pirka ], and congrats to Pihlajalinna for good competition and a nice win in there. Kati Kaksone: Yes, indeed. Then maybe a question to both of you. Can we talk about the M&A pipeline? How does it look at the moment? Juuso Pajunen: Yes, if I start, so basically, it is fair to say that M&A opportunities are now little by little emerging in different type of segments. And we are, as we have said, happy to do disciplined M&A when we see an opportunity to fill a blank, whether it's a technology bank, offering blank or other blank. So, that market is little by little activating, and we are and we will be active in that one. Ville Iho: Yes. There's -- just looking from sort of a short history perspective, where we have been and where we are now and potentially will be, the activity on our desk is way higher than it has been for 5 years or so -- 5, 6 years, sort of post-COVID or during COVID times. This is sort of an all-time high activity. And there are sort of real potentials out there. Of course, you always need to get to the -- get over the sort of finish line to get something materialized. But the funnel is there, and it's strongest that it has ever been during my term in Terveystalo. Kati Kaksone: Yes, definitely signs of picking up there. Then a couple of questions from Matti Kaurola, OP. We mentioned that the insurance business is growing fast. Are there any possibilities to take more market share from other players in that segment? Ville Iho: Well, I would say, it's not growing fast. It's growing steadily. So it's -- coverage of insurances in Finland has been developing positively, and then use of services have been developing positively. We have gained market share over the 2 last years. And then, further gaining market share, of course, requires also new means and new type of value creation for insurance companies. I think we have a strong plan there, which we continue implementing. The bigger moves, in my view, will happen only in 2027. Next year will be more like a steady progress in this segment. Kati Kaksone: Of course, we have a clear attack plan for 2027 to deepen the cooperation with the insurance companies. Then, maybe continuing on the outsourcing market and the well-being services counties, how do we look at the public outsourcing market in general in the future? Is it attractive? And is it a part of our core offering and our business going forward? Ville Iho: Well, we explicitly said earlier that we are interested in this new type of outsourcing deals. We were part of [ Pirka tender ]. And one can say looking now in hindsight, the competition and the outcome that each and every out of 3 main players were on the ball in sort of pricing and offering the package. So very close margins who won and who did not win. When it comes to profitability, of course, this would have not been sort of the richest agreement, but still value-creating, EPS enhancing, which is the key for our business model. So when this type of tenders come to the market, we are interested. Kati Kaksone: Indeed. At the moment, we don't -- we have one more question from the phone lines. Let's take it now. Operator: The next question comes from Anssi Raussi from SEB. Anssi Raussi: One follow-up from me. So you also mentioned these somewhat extraordinary costs last year in Q4 and that there were some one-offs related to employee expenses. But can you remind us like what kind of amount we are talking about that you consider one-offs in Q4 last year? Juuso Pajunen: Yes. So basically, compared to baseline in last year, if you go into the details, you remember that we paid EUR 500 per employee to all employees an extra bonus. And based on the CLA, there was EUR 500 per employee fall all under CLA. So that's the personnel expenses I referred to. And then, if you go into a bit deeper, you see that there was a bit of accelerated amortizations and depreciations in the income statement in Q4 last year. So, that one you need to put your finger into yourself, but normally, forecasting depreciation and amortization is not super difficult. Kati Kaksone: Thanks. With that, I believe we don't have any further questions on the phone lines or from the webcast. So any closing words? Over to you, Ville. Ville Iho: Well, as discussed earlier, a quarter of improving margins with revenue headwind; strong agenda to further accelerate the areas where we are progressing well and to tackle the headwind in occupational health care; investments with the dry powder provided by [indiscernible], used more and more to digital offering, where the agenda is -- strong architecture is there and delivering tangible results. Kati Kaksone: Great. With that, we thank you for your time, and have a great rest of the week. Juuso Pajunen: Thank you. Ville Iho: Thank you.
Bertina Engelbrecht: Good afternoon and a warm welcome to the webcast of our annual results for the year ended 31 August 2025. I am Bertina Engelbrecht, Chief Executive Officer of the Clicks Group. Joining me here today is Gordon Traill, our Chief Financial Officer. We will be taking you through the presentation of our annual results and respond to your questions after the conclusion of our presentation. This slide sets out the outline we will follow. I will start with a review of our financial year. Gordon will follow with an overview of our financial results. I will take you through the trading performances of our business units; first Clicks, then UPD; and I will then close with the outlook for the group. Please submit any questions that you may have via the webcast platform during and after the conclusion of our presentation. Sue Hemp from our Investor Relations team will read out your questions to which Gordon and I will respond. I will now commence with a review of the year. At the macro environment level, green shoots are starting such as a slight expansion of GDP growth, the easing of domestic inflationary pressures and lower debt servicing costs. Although confidence levels are below historic averages, the latest consumer confidence index reported a modest easing of pessimism. Despite some challenges, particularly the high unemployment rate and fiscal constraints, we maintained performance momentum because of our focused results orientation, resilient business model, brand strength and incredibly loyal ClubCard customers. In the year, we delivered diluted headline earnings per share growth of 14.1%. This is comfortably within our guidance range and an enviable return on equity of 49.2%. We are reaping the benefit of the foresight of past leaders who launched our loyalty program in 1995. In August, our ClubCard celebrated its 30th anniversary with over 12.6 million active members who contributed 82.6% to our sales. Last year, I said I would be disappointed if we did not exceed our store and pharmacy rollout targets. True to form, our teams did not disappoint. We increased our Clicks store count to 990, pharmacy count to 780 and primary care clinics to 225. We are strengthening our relationship with the Department of Health, a key stakeholder. Post the year-end, additional pharmacy licenses are being issued. This supports our pharmacy expansion program. In a subdued trading environment, customers focus on value by switching to lower priced brands, buying on promotion and using loyalty programs. As a value retailer with a respected private label program, we were well positioned to leverage our market-leading shares in defensive retail categories. Customers responded favorably to our product and price offers resulting in market share gains in our core health and beauty categories. I will provide greater detail on the market share and category performances in the retail segments review stabilized and the business is gaining positive traction. Purchasing compliance from both Clicks and the listed private hospital groups have recovered. Expense management, as Gordon will share in more detail, was exceptional. As a group, we embrace inclusive transformation with a strong emphasis on gender diversity and local empowerment, the results of which are reflected in our BBBEE level 3 rating and our top achiever status in the UN Women's Empowerment Principles. I now hand over to Gordon, who will take you through the group's financial results. Gordon Traill: Thank you, Bertina. Good afternoon. As in previous years, we will cover the financial performance of the group starting with the group highlights. If we consider the financial highlights, group turnover increased by 5.3%. Retail turnover grew 6% for the year with half 2 slightly slower due to new stores and pharmacies being opened later in the year and lower inflation. UPD had a slower second half after the recovery from the system implementation in the previous year. Total income margin grew by 90 basis points resulting from strong growth in private label, supply chain efficiency income and lower shrink in the retail business. The group trading margin at 9.8% increased by 60 basis points due to the growth of retail and good cost control from UPD. Diluted headline earnings per share for the group increased to ZAR 13.62 per share, up 14.1% on last year within our guided range of 11% to 16%. The group's operations generated strong cash inflows of ZAR 6.6 billion. During the year, we returned over ZAR 2.7 billion to shareholders in dividends and share buybacks. The group's return on equity at 49.2% increased from 46.4% in the prior year. And the dividend declared for the year has been increased by 14.2% to ZAR 0.886 per share, which is a 65% payout ratio. Retail had a slower second half due to the later opening of stores and pharmacies, inflation remaining muted and a slower flu season. UPD's compliance levels in both its main channels continued improving resulting in good growth in sales to Clicks while positive growth was maintained in the hospital channel. If we exclude the Unicorn disposal in the prior year, retail grew 7% with same stores growing 4.7% excluding the additional trading day in the prior year. New stores and pharmacies added 2.3% to the top line while selling price inflation averaged 2.6% for the year, lower in the second half. Distribution business had a consistent performance in the second half with good compliance from its major sales channels. The business grew despite continuing genericization in the hospital channel and lower inflation. Bertina will cover the detail of each business' performance later in the presentation. This slide reflects our total income earned, which has increased by 8.4% for the year. You can see the total income margin in retail was 70 basis points higher than last year as there was good growth across pharmacy, health and beauty and personal care driven by private label. In addition, the previous investments in systems has allowed us to generate additional supply chain efficiency income. UPD's total income margin was down 10 basis points to 9.9% and this was due to the higher SEP increase granted in the previous year. Overall, the faster growth of the retail business at 8.1% and the growth in UPD has resulted in the group's total income margin being 90 basis points higher than last year. Retail costs grew 7.9%, which was lower than in the first half and remained well controlled. In the second half, cost growth was 7.3%. Store staff bonuses have increased by 9%, which is on top of a 21% increase in the prior year and is well deserved based on this year's performance. In the year, we have added a net 55 Click stores and a net 60 pharmacies. We are looking forward to continue accelerating our pharmacy growth in the next financial year. We would also like to thank the Department of Health for their support in the last year in working with us to close the gap in stores without pharmacies. Comparable retail cost growth, excluding new stores, was up 5% for the year with costs growing at a lower rate in the second half. The IFRS 16 interest charge increased as a result of the increase in number of renewals in the period. The growth has slowed from the prior year. UPD's costs have grown lower than turnover as the systems implementation was completed and efficiencies have been extracted. It is pleasing to note that costs grew 1.6% in the first half and 2.2% in the second half. Employment costs in the second half continued to be well controlled although were ahead of the first half due to the provision of performance bonuses. Other costs fell by 3.9% in the second half as a result of good cost control and lower debtor provisions required. The investments in solar have paid off with electricity, water and generator costs for the year declining by 35% despite the higher electricity tariffs. Our investment in electric vehicles has resulted in further efficiencies with transport costs down 0.2% year-on-year. Further investments have been made to allow delivery with electric vehicles, which will come through in our financial year 2026. This further supports reducing our carbon footprint. Retail grew trading profit by 8.4% with the margin improving by 30 basis points to 10.5%. This has been due to good sales growth, strong other income generation together with efficient cost management. UPD's trading profit increased by 9% with the trading margin increasing by 10 basis points to 3.3% and this was due to consistent sales growth and good cost control. Overall, the group's trading profit increased by 12.1% to ZAR 4.7 billion for the year. This slide reflects the growth in turnover, trading profit and margin of the group over the past 5 years. The company has sustainably grown its performance through various economic cycles. And to note that in last year, inflation has moderated, interest rates have reduced and we have all benefited from the lack of load shedding in the past year. There are some concerns though with the impact of external tariffs further straining the economy. That said, the group has demonstrated its ability to continue to evolve the trading margin over the past 5 years. Inventory levels for the group has increased by 4 days to 78 days. Retail stock days are 1 day higher than last year and inventory remains well controlled although increased due to the later opening of new stores in the year and higher levels of inventory being held ahead of the warehouse management system going live in Cape Town. UPD stock days at 45 days are 3 days higher than last year partially due to higher levels of GLP-1 buy-ins and Unicorn stock held at year-end. Overall, working capital was well managed with net working capital days at 34 days. This slide shows the movement of cash during the year. As you can see, we started the year with cash of ZAR 2.7 billion reflected in dark blue on the left-hand side and ended the year with ZAR 3.3 billion on the right-hand side of the slide. The group has generated cash of ZAR 6.5 billion highlighted in green, working capital inflows of ZAR 73 million, repayment of lease liabilities amounting to ZAR 1.1 billion and tax payments of ZAR 1.2 billion. ZAR 985 million was reinvested in capital expenditure across the group. From this amount: ZAR 599 million was invested in new stores as well as quick store refurbishments, ZAR 152 million was spent in distribution centers including the expansion of our Centurion DC and ZAR 234 million was spent in IT and other retail infrastructure. We returned ZAR 2.7 billion to shareholders this year and this was in the form of dividends of over ZAR 1.9 billion and share buybacks of ZAR 751 million. Final cash dividend of ZAR 1.5 billion will be paid out to shareholders in January. This slide shows our commitment to a disciplined approach to capital allocation. We expect to continue to invest in the business and return capital to our shareholders through dividends. Over and above this, our preference is to return any excess cash through share buybacks, which is demonstrated in this graph. Since 2006, we have bought back 164 million shares at a cost of ZAR 7.8 billion. At the closing share price on 31 August 2025, the value of these shares would have amounted to ZAR 61.2 billion. CapEx of over ZAR 1.2 billion is planned for the year ahead. ZAR 662 million will be invested in our store and pharmacy network and this will include 40 to 50 new Clicks stores and pharmacies and 70 to 80 retail store refurbishments. ZAR 594 million will be spent on IT systems and infrastructure, ZAR 88 million of this amount will be invested in UPD IT and warehouse equipment and we will invest the balance of ZAR 506 million in retail IT systems and infrastructure. This will include the completion of our new pharmacy management system and rollout of the implementation of the new warehouse management systems to our 2 other DCs and further investment in solar. We will continue to grow and invest in the retail footprint. UPD is positioned for growth now that the implementation has been completed and we will continue investment in systems for pharmacy and our distribution centers in the retail business. This slide reflects our medium-term financial targets. We have made good progress against these. Importantly, the group has continuing headroom for growth, particularly in expanding the retail store base. While we have shown good progress, these targets will not be revised at this stage. As indicated earlier, we have increased our investment in the business for growth. In framing these medium-term targets, we continue to seek to optimize the balance sheet, improve working capital efficiency, enhance cash returns to shareholders and maintain the dividend payout ratio between 60% and 65%. This slide demonstrates how the group has sustained its financial performance over the past decade. This is reflected in the 10-year compound annual growth rates achieved in diluted headline earnings per share of 13.5% per annum and dividend per share growth of 14.2% per annum. The compound annual total shareholder return over the past 10 years equates to 17.3% per annum. These excellent growth rates have been driven by strong organic growth, particularly in our health and beauty business, which has been supported by an efficient supply chain. This has in turn translated into strong cash returns, which have not only been reinvested in the business, but also allowed us to progressively increase our dividend. This graph shows the group's share price performance over the last 10 years. This performance is all the more pleasing when compared to the return in the Food and Drug Retailers Index of 4.6% and the Top 40 index of 7.8%. This performance is a testament to the hard work of all our employees throughout the group. Earlier, I noted that bonuses for employees have again increased. It is pleasing to note that our long-term shareholders have also benefited. I will now hand over to Bertina to cover the trading performance. Bertina Engelbrecht: Thank you so much, Gordon. I will now take you through our trading performances starting with Clicks followed by UPD. This is the review of the Clicks business. Despite the subdued trading environment and a muted cold and flu season, the retail business delivered a solid result. Existing stores grew sales by 4.7% excluding the extra trading day in 2024. Inflation slowed down from 6.3% last year to 2.6% this year and we achieved volume growth of 2.1%. I now turn to the 4 categories to provide you with greater detail. Pharmacy sales grew 6.9% despite a soft cold and flu season as well as significant price reductions in key molecules to align with medical scheme formulary compliance requirements. Turnover in our 24-hour UniCare format achieved growth of 8% driven by strong support from doctors, the implementation of our after-hours doctor service and the exceptional performances of wound care, diabetes, primary care and IV clinics. Despite the delay in opening new pharmacies, we accelerated in the second half to open a total of 62 new pharmacies for the year, of which 29 were in the last quarter. ClubCard customers contributed over 87% of pharmacy sales and we continue to be rated as the customer's first choice retail pharmacy. We have increased our primary care clinic count to 225. Clinic sales increased by 10% driven by medical aid funded services and support for our virtual doctor consultation services. Front shop health and baby achieved strong growth with value growth of 8% and volume growth of 10.1%. In the baby category, volumes were up 15.3% compared to value growth of 6.2%. Front shop health growth was driven by the extension of our health care elevation to 138 stores, exceptional performances in sports and slimming which was up 27% and the continuing strong momentum of branded supplements up 29%. Our integrated baby strategy is entrenching our position as the leader in baby. Despite price deflation driven by supplier branded diapers and baby foods as well as supplier infill challenges. This category is continuing to perform well with private label and exclusive ranges the key to our success. Sales in our stand-alone Clicks baby stores were up 23%. Baby store-in-store sales grew by 12.4% and online baby sales grew 27%. Sales growth, as you can see, is gaining momentum and we are evolving margin. Sales in our beauty and personal care category was up 7.4%. Despite a heavily competed beauty market and the disappointing performance of The Body Shop, we grew sales ahead of the market fueled by new launches and the continued rollout of the elevated beauty hall concept in key nodes. The personal care category delivered a strong performance up 9.8% driven by strong private label sales which was up 17.6%, strong promotional sales and innovation in [indiscernible], Being Kind, Dove and Vaseline product ranges. Our exclusive body freshness range was up 42.6% driven by exponential growth in Spritzer, which was up 44%. In May, the new Body Shop owners unveiled their post-acquisition turnaround strategy with new product development launches such as Spa of the World and Passionfruit. These new ranges are in store and the teams are working to improve the infill rate. General merchandise sales performance was disappointing, up just 4.4% due to our underperformance of small household electrical appliances. In the next section, I will provide you with more detail. Despite the increasingly competitive environment, we are continuing to extend our market shares in core beauty and beauty retail categories. Let me take you through these starting with health. It is a relief to report that our intentional efforts at engaging collaboratively with the Department of Health to advance our public health agenda of improving the accessibility and affordability of health care is delivering results. We opened 62 new pharmacies in the year. Although 29 pharmacies only opened in July and August, we gained market share of 20 basis points creating positive momentum for our new financial year. Front shop health declined by 30 basis points despite strong gains across sports and slimming up 140 basis points, first aid up 290 basis points and incontinence up 100 basis points. Our comprehensive baby execution; which integrates our private label and online offering, convenient locations, competitive pricing and Baby ClubCard benefit strategy; drove our market share gain of 80 basis points in baby. Exceptional gains were recorded in diapers up 110 basis points, baby wet wipes up 270 basis points and baby dry foods up 230 basis points. Pleasingly, we have identified even more opportunities to grow our share of baby. We continue to gain market share in beauty and personal care. Skin care gained another 20 basis points fueled by strong share gains in face wash, lip care and moist wipes and we defended our market-leading share in hair care. Personal care continues to gain market share up 60 basis points across every measurement period with strong gains in body freshness, [ sun pro ] and sun care. In general merchandise, we declined by 40 basis points in our legacy category of small household appliances. This was due to significant out of stocks in the first half and an oversupply in the market. What is encouraging though is that over the last quarter, we were once again regaining market share. I now turn to the key drivers that support our growth starting with value. Our brand position of feel good, pay less supported by generous ClubCard rewards, extensive private label and exclusive ranges and convenient locations resonated with consumers. Despite heightened competition, we stayed true to our legacy as a value retailer with great everyday pricing and promotions. In so doing, we maintained our competitive pricing against all major retailers on a volume-weighted price index that excludes our 3 for 2 promotions, bulk offers and ClubCard cashbacks. We grew promotional sales by 12.4% to account for 47% of turnover across all front shop categories. We are committed to delivering on our public health care agenda of extending access to affordable health care for all. The convenience of our pharmacy and clinic network, virtual doctor offering and partnerships with health care funders enable us to deliver on our agenda. In the year, generics grew by 8.8% accounting for 59% of sales by value and 71% of sales by volume. Cash rewards are relevant especially in a tough economic environment. During the year and with the support of our affinity partners, we returned ZAR 855 million to loyal customers in the form of cashback rewards. Our differentiation strategy is premised on responding to changes in consumer demographics, preferences and shopping behaviors within the context of the trading environment we face. Our private label and exclusive ranges are core to offering the consumer choice. Private label and exclusive brands delivered sales of ZAR 9.7 billion as it continues its momentum of growing sales ahead of total retail sales. Customers trust our private label brands because of their proven quality and price positioning. This year, 1 in every 3 products sold in our front shop was a private label or exclusive product. Private label and exclusives contributed 25.9% to total sales, 30.6% to front shop and 12.3% to pharmacy sales. Our private label and commercial teams drive innovation and quality in addition to supporting our sustainability and local empowerment goals. In the year, 6 of the private label products won SA Product of the Year in their respective categories. Sales in our 6 stand-alone baby stores grew 23.7%. We increased our store-in-store executions from 5 last year to 14 this year. This is what enabled our gains in baby market share as we also improved margins in this category. The execution of our elevated beauty halls, which is now in 44 stores is driving increased sales in the big beauty brands and in brands exclusively available in Clicks. Our affinity partnership with and equity investment in ARC, a retail brand focused on the premium beauty market, enables us to extend our access to the premium beauty customer. In this month, ARC opened the largest beauty store in Africa at Sandton City to great acclaim. This year we are celebrating the 30th anniversary of the Clicks ClubCard loyalty program. The nostalgic reflections of loyal customers who shared their ClubCard journey with us and on their social media platforms fill us with pride. 30 years on, we are still growing with an active ClubCard membership base that increased to 12.6 million this year. The contribution of ClubCard members to total sales increased to 82.6% accounting for 80.7% of front shop and 87.4% of pharmacy sales. The 2025 Truth and BrandMapp loyalty white paper confirmed the ClubCard program as the most used loyalty program in South Africa. It continues to provide us with the mechanism to attract, engage and retain customers through personalized experiences that reinforce emotional affiliation to our brand. The use of advanced analytics to drive focused customer segmentation and tailored personalized rewards is critical to the success of the ClubCard loyalty program. This is an area that requires targeted investment in technological enablement as well as in the correct skill sets. Although online sales grew by 15.9%, we can and we will do better. Pharmacy is a key driver of our sustained performance. By November, we will have completed the national deployment phase of our LEAP pharmacy management system. We can now leverage the system to enhance service levels and increase sales. The expansion of our store network is progressing well and we are accelerating our pharmacy and clinic rollout program because of its proven positive impact on front shop growth. Internally, we have invested in people and improved processes to support our growth aspirations. We ended the year on 990 Clicks stores, 1 UniCare specialized 24-hour pharmacy store, 780 Clicks pharmacies and 225 primary care clinics. We remain committed to delivering affordable, accessible health care. 53.2% of the South African population live within a 5-kilometer radius of a Clicks pharmacy. We have increased our primary care clinics to 225. These are profitable due to medical aid funded services such as diabetes and the extension of our virtual doctor consultations. Now that M-Kem has been integrated and the rebranding of the UniCare concept approved, we will be extending our specialized 24-hour UniCare format by 2 greenfield sites and 2 acquisitions by February of next year. As with property, we have invested in the skills required to accelerate the growth of this format and we are accelerating our presence in lower income areas with 247 of our stores located in such areas contributing 23.7% of turnover. That completes the review of the Clicks business. I will now turn to UPD's trading performance. UPD's fine wholesale turnover, which excludes bulk distribution and preferred supplier contracts, was up 5.2% despite the subdued cold and flu season and lower inflation, a pleasing improvement against last year's negative 0.5% performance. This performance is attributable to greatly improved service levels, which has always been a core UPD strength. All operational service metrics are being met and the investments we made in systems, people and processes are bearing results. I will briefly turn to the core customers in this channel. As UPD's largest customer, Clicks contributed 58.4% of the turnover. Sales to Clicks pharmacies grew by 9.5% as purchasing compliance improved to over 98%. Clicks is growing ahead of the market and is accelerating its new pharmacy openings and importantly, actively driving purchasing compliance. This will greatly benefit UPD. Sales to the private hospital channel, which contributed 36.2% of turnover, grew by just 1.4% despite improved purchasing compliance. Volumes were up 8.8% due to increasing genericization and growth in the nonlisted acute hospital space. The continued decline of sales to independent pharmacies and other smaller channels is eroding UPD's market share, which is down to 26.2%. The improved purchasing compliance from both Clicks and the private hospitals as well as the stabilization of UPD's operational and service metrics will sustain its performance. UPD's total managed turnover, which includes fine wholesale sales as well as turnover managed on behalf of bulk distribution clients, was up 2% to ZAR 30.5 billion. In the prior year, UPD's total managed turnover was down 6.7%. So this is a good turnaround. The growing contribution of generics now 75.7% of volume versus 68.8% last year coupled with lower price inflation had a deflationary impact on turnover. The UPD team focused on improving quality and service levels and invested in its key account management principles to drive sales. During the year, UPD stock levels were elevated to improve stock availability for retail pharmacy and hospital formulary lines and to also improve access to GLP-1 medicines for its customers. The termination of excess property leases has been completed. We have, as Gordon pointed out, extracted the surplus costs carried during the wholesale system rollout and we have now also implemented more effective management practices to reduce variable employment costs. The UPD team achieved excellent cost management at a low growth of just 1.9% aided by its early investments in solar, batteries and electric vehicles. The wholesale systems implementation is complete. On the bulk side, the new systems have been rolled out to 7 distribution clients with the rollout to the remaining distribution clients on track to be completed by March next year. In support of our commitment to a sustainable carbon neutral future, we are in the process of ordering another 40 electric vehicles for use nationally. This completes the review of our trading performance for the year. It was a challenging year. Despite positive shifts in macroeconomic indicators, the early promise of an improved trading environment did not fully materialize. The resilience of our business model and our teams was tested. I am incredibly proud of our performance. It was forged by teams with an unrelenting focus on excellence. In retail, the teams delivered superior income growth and margin expansion coupled with truly outstanding shrink and wastage results. The continued growth of private label and exclusive ranges inspires confidence and the contribution of ClubCard to turnover is positive. Our new stores, pharmacies and clinic openings as well as the record number of store revamps exceeded expectations. Bongiwe Ntuli has inherited a healthy business from Vikash Singh. I'm confident that she will lead the team to even greater success. Gwarega Mangozhe and the new Rest of Africa team delivered a stellar performance with sales growth in every territory exceeding target due to strong delivery of the operational and customer service metrics. I'm going to call out Corne Visser and the Namibia team in particular who delivered a consistent exceptional performance. The UPD's team performance in the second half of the year was outstanding. The operational and customer service metrics are aligned to our goals and the work that Trevor McCoy and the team have put into improving the business has created positive momentum for the new financial year. Our group services team under the leadership of my colleague here, Gordon Traill, has been instrumental on delivering and might even say getting very, very close to the upper end of our medium-term financial targets. The IT team under his control has partnered well with the business to progress our IT investments. We still have so many opportunities to increase our scale, to leverage our loyalty and strengthen customer loyalty, to extend our private label offer, to extract efficiencies and to improve on our digitization. What matters most is our people, especially our store, pharmacy teams and our DC teams. Last night, we were privileged to have our Top 10 store managers and our Top 10 pharmacy managers as well as our Clicks and UPD DC general managers join our senior leadership team as we took our teams through our results after close of the market. This provided them with the opportunity to represent their teams and for us to publicly recognize their contributions. In presenting our results here today, Gordon and I acknowledge that we do so on behalf of our people. From our Board and executive teams to all of our people and their extended families, thank you. I will now conclude our presentation with the outlook. Although the macroeconomic indicators are improving, the consumer remains constrained. The consumer is therefore prioritizing value, convenience and rewards from companies that inspire trust. Our retail strategic pillars of value, convenience and differentiation supported by our private label and exclusive program and ClubCard loyalty program is aligned to the consumer needs and positions us for sustained growth. In distribution, our strategic pillars of quality, efficiency and customer excellence is fundamental to profitable growth. We remain well positioned to thrive in this environment due to our competitive advantage in defensive health and beauty sectors, our growing market-leading shares in core retail categories and in pharmaceutical wholesale and distribution, our sustained long-term growth opportunities underpinned by our value proposition and customer service and our increasing scale which enables us to maximize efficiencies and leverage it for effective execution and reach. Over the past 5 years, we invested in systems in both retail and distribution for growth. We have invested in Lee, a modern pharmacy management system to fuel our pharmacy growth. We invested in infrastructure and in the expansion of our store, pharmacy and clinic network to support growth. And we invested in adjacencies in health and beauty to extend our access to market segments in which we are underindexed. We are now poised to fully leverage these investments made to improve service and increase sales in our network. In the 2026 financial year, we will increase the number of UniCare 24-hour specialized pharmacy stores to a total of 5. The Sorbet and ARC customers are our most profitable ClubCard customers. And increasingly, we still have opportunity to increase ClubCard penetration in these businesses. Our first Sorbet master franchises for Botswana and Mauritius will be concluded in 2026 and we are on track to extend the number of Sorbet stores in South Africa. We will deliver on our medium-term target of 1,200 Clicks stores. In 2026, we will open another 40 to 50 stores and 40 to 50 pharmacies and over the medium term, we will open 10 to 15 UniCare stores. Our private label and exclusive program is core to our offering and we are driving towards our goal of achieving a 35% contribution to our front shop sales. The objectives outlined above require investments, which will be supported by our planned CapEx spend of ZAR 1.3 billion per annum over the medium term. The increasing scale of the business and requirement to plan for succession necessitated a review of our executive structure. In September, the group executive was expanded to 6 members to drive focus, create capacity for growth, invest in core capabilities and to prepare for succession in our usual disciplined manner. The expanded group executive portfolios in addition to the CEO and CFO covers Retail South Africa, Rest of Africa Retail, UPD, our investments in health and beauty and people. The complementary diversity profile, broad sector experience and track record of performance of the expanded group executive team significantly strengthens our leadership capability. Earlier, Gordon shared with you our pleasing performance against our medium-term targets. No wonder I remain confident of the group's capability to continue to delight shareholders by delivering on our medium-term targets. Thank you so much for listening. I will now hand over to Sue Hemp, who will assist us with taking your questions. Sue Hemp: The first set of questions I have come from Michael Jacks at Bank of America. Congrats on the solid results. I have 3. One, can you please elaborate a little more on the LEAP system implementation, expected benefits and whether it is a differentiator of Clicks or UPD versus peers? Bertina Engelbrecht: I can take that one. So first of all, Michael, thank you very much for the message that you’ve sent us. Let's talk a little bit. By November, we will have completed the rollout of LEAP to all our pharmacies. In my notes, what I said is now the next step for us post deployment is to really utilize the system in order for us to improve service levels and of course as well to increase sales. How will we do that? It's to ensure that the pharmacists when they are consulting with the customer has the opportunity to now also talk about expanded services, first of all, within our network; but importantly, some of the complementary medicines that the patient ought to be taking. When we take an antibiotic, ideally we should be taking a probiotic as well. So that's what we mean in terms of the expanded benefits. We are of course also because of our ability to service the customer much more quicker, what it means is the pharmacist has more time to consult with a patient that is standing right there with them. Differentiation, all of the pharmacy management systems were built at a time when there was no corporate retail pharmacy. And so what we have done is to acknowledge that retail pharmacy is the bedrock of our performance. And so what we have done is really to ensure that we've got a modern system, which no one else has, that will create for us an incredible advantage going forward. The process to develop a modern pharmacy management system will take years. Gordon, I’m not sure if you wanted to add anything. Gordon Traill: The only other point is probably the last point regarding does it give us a differentiation? Well, bottom line is it does give us a differentiation because there is no other system in the market just now that is modern and web based and our competitors are going to have to find something that they can use. Sue Hemp: His second question, market share trends are positive in many categories, but you lost some share in general merchandise. Has this been due to online or offline competition? Bertina Engelbrecht: The way that we look at the competitor is every competitor not only in South Africa in terms of bricks and mortar, but every online player within South Africa and every online player globally. That's really our competitive set because we had significant out of stocks in the first half of the year and there was a drought of supply in the market itself. And really what we have to take is we look at all of these opportunities and say where can we do better. And I would say we didn't do good enough and so now we are poised to really focus on that in our usual manner. And as I've noted, in the last quarter of the year, we were once again regaining market share in that legacy category of ours. I will not give up on it. Sue Hemp: His third question. You mentioned earlier in the year that you were accelerating on e-commerce. The online store and app looks great, but delivery options and lead times are still limited. What are you doing to address this? Gordon Traill: So I think we recognize that we can do better in this area. So over the next 12 months we are going to be replatforming our online system both on the app and the web and that's going to allow us further delivery options. But not only that, a lot of other functionality that we're going to be able to roll out. So I think the advice is watch this space and in 12 to 18 months, we should be in a very different position. Sue Hemp: Another set of questions from Michael de Nobrega at Avior Capital Markets. Well done on the great set of results. His first question. On the beauty and health care segment, growth has moderate yet Clicks has maintained market share despite increased competition and accelerated rollouts from peers. Could you please elaborate on how you see the competitive landscape evolving and where you view growth to come from in this category? Bertina Engelbrecht: Well, let me talk about the market in terms of 3 segments. First of all, thank you very much, Michael, for the comment. The market really is in 3 sectors. So first is the super high LSM customer, which is super protected against any of the economic indicators in the country and you see that really in the performance of ARC. Now that's the reason 5 years ago we took an investment decision to invest in ARC and so we've got that exposure to that premium beauty customer. And the way in which it works, ARC is an affinity customer. That customer comes and redeems the cashback rewards within the Clicks store. We of course play very, very solidly within the middle and the end of the market and there the things that we have done is of course we use our ClubCard program and of course what we do is as well, we've got private label and exclusive brands. And so that I think is great. We have to grow our market share. We have specifically elevated our execution in beauty and that's the 44 elevated beauty halls that I speak about and we have seen incredible growth in those stores. We are learning from what we've done there and we are improving even more. Our performance and market share in skin care is not by accident. It is because of the way in which we have changed the customer journey by bringing skin care much more to the front of the store itself. And then there's the lower end of the market. Now interestingly, we have got a private label brand actually at the lower end of the market called [ Swatch ], which in the SA Product of the Year actually won the SA Product of the Year award -- 2 actually of the awards. So I think great opportunity for us there. But yes, here we competed and that's the reason why the way which we are preferring to, if you will, respond to the changes in the market and competitive activity is to really stratify the market into these 3 broad sectors and to ensure that we are acting in order to respond to the needs of every one of those segments. Sue Hemp: His second question, could you please expand on the rationale for the WMS rollout across the 3 retail distribution centers? Do you expect any large operational disruption during the implementation and what efficiency or benefits do you anticipate once it's fully deployed? Gordon Traill: So the rationale was to create capacity because the ways of working on the previous warehouse management system limited the amount of product that we could get through these DCs. So in introducing the new warehouse management system, it allows parallel working and just allows throughput through those DCs and extends the life of these without further expansion. Expansion will be necessary at some point and we've been doing that in Centurion over a period of time. Do we expect disruption? I haven't been through our system implementation yet, but there isn't some disruption. But what I am pleased to say is that yesterday, we were actually picking up in the Cape Town DC above levels that we were doing in the prior year. So it's hard work and I really commend our systems implementation partner, our IT teams and especially our DC teams for working with us. I think we've got over the hump in that one and everything is really firing at Cape Town DC now. Sue Hemp: His third question. Clicks Group has built up a strong cash position of ZAR 3.2 billion. How are you thinking about capital allocation priorities going forward? In particular, would you consider accelerating store expansion or increasing share buybacks? Gordon Traill: I think we always look at investing in the business and that we've been doing on a consistent basis for a number of years and reinvesting in our systems and we've also increased the number of stores. We've also done some acquisitions over the past few years. We've set out what our dividend policy is. We’ve given the range of 60% to 65% and where the opportunity has come up, any excess cash has been returned to shareholders through share buybacks. But I don't think any of that is going to change over the next few years. We would consider expanding or accelerating store growth where the opportunity came up and we've done that in the past where in certain years we've grown store expansion by 100 stores where there's been an acquisition. Sue Hemp: Yes. Last question on post period trade is also asked by Sa'ad Chothia from Citi who says well done on the pleasing results. Can you give some color on post period trade? Bertina Engelbrecht: One of the teams actually asked the question last night and I said well, I'm not displeased. Gordon and I certainly am not displeased by the performance since we started the new financial year. Sue Hemp: His second question is what sort of inflation can we expect in FY '26? Gordon Traill: I think since our Reserve Bank is doing such a great job on inflation and it's got to be commended for that, you would probably expect that inflation is going to be remaining on the lower side. Bertina Engelbrecht: And if we could encourage the Reserve Bank to then also look at the interest rates, I think that the consumer would certainly welcome that. Sue Hemp: [ Ander Tyami ] from Invest Securities says please can you provide some color on occupancy costs in retail remaining flat year-on-year despite higher than guided store growth? Gordon Traill: I think the thing to bear in mind with occupancy cost growth is it's not actually rental related or it's not the rents and it’s largely the other aspects of store costs that include parking, et cetera. It does include some turnover rentals, but it's really the lowest element of the cost growth related to stores. Store cost growth sits in our ROU depreciation and our IFRS 16 charge. Bertina Engelbrecht: But it also would be fair to say, Gordon, that we have taken control of that. We put in metering for example, we check all of the bills that are coming through for payment. We don't take it for granted. We've invested in solar. So there are a number of things. We've got automatic switches for example in the stores to switch off electricity at night when it's not trading. So it's also not as a consequence of luck. We have done work to get us to that point. Sue Hemp: And it also asks about post period trade, which we've answered, but say particular store openings, including pharmacies. And I think we've given numbers in the presentation of 40 to 50 stores and 40 to 50 pharmacies. But if we get more opportunities, we will open more. Bertina Engelbrecht: We will. And maybe the point to call out is that the teams have promised me that we will get to number 1,000 by December. Sue Hemp: Jovan Jackson from Fairtree. How should we think about the normalization of intra-group profit on Unicorn stock? Do you recoup this through increased retail margin in FY '26? Gordon Traill: So this is a little bit of an odd year. Because of the Unicorn disposal in the prior year, what we had was we had an intra-group profit related to the Unicorn stock that we had purchased when Unicorn was still our subsidiary. So that's been unwinding during the year, which is where the intra-group profit comes through. That is not a one-off because that does move into retail that will sit in the retail division next year. So this year is an odd year. Sue Hemp: Kgomotso Mokabane from Sanlam Private Wealth says well done on the net 55 new stores. Can you give some color on the execution challenges or constraints that resulted in the bulk of openings being delayed until Q4 of the financial year? Gordon Traill: We would always prefer to open our stores earlier. What impacted us probably more last year was some weather-related challenges that impacted landlords that just pushed store openings later. But it's not something that we plan to do, but it was an unfortunate impact. Sue Hemp: Kgomotso also asks or says commercial and private label sales were both up strongly in double digits. And with internal inflation low, one would have expected a bit more of a pickup in volumes than the 2.1% reported. Can you give some color on what's driving the volume outcome? Gordon Traill: So we did have some really excellent growth in certain categories. Where it was probably a little bit slower in the year was on the pharmacy side and that was due to later opening of pharmacies, both this year and in the previous year when we couldn't open pharmacies. So although we've worked really well with the Department of Health, we still got over 100 applications for new pharmacies that are waiting to be considered there. So as we get these, we're really seeing a very nice volume boost in the pharmacy side and that also impacts the rest of the store as well as those pharmacies are rolled out because we see a real lift in front shop when we drop in the pharmacies. Sue Hemp: Another question from Kgomotso. With the rollout of the new pharmacy management system LEAP, have there been any teething issues or disruptions to operations? Gordon Traill: LEAP was a very different rollout because we could do it on a store-by-store basis so it was in a very controlled manner. So no, we haven't really seen any impact of the store rollout. Bertina Engelbrecht: I was also going to say one of the things that we learned through the UPD system is that we have invested in project management capability. And secondly, understanding the changed management must be integrated into any UPD particular project as well as training. So I think that's the reason probably, Gordon, even if you look at SEP upgraded UPD September last year, looking at the LEAP program, we're looking even WMS; I think they've all gone a whole lot smoother because we've taken the lessons and we have applied those lessons and we are trying to do better. Sue Hemp: Another question from Kgomotso. Can you comment on the performance of the 247 stores located in low income areas relative to convenience and destination formats? What percentage of these stores include a pharmacy component and have there been any unexpected trends or outliers in performance so far? Gordon Traill: Generally, these stores actually ramp up in terms of sales much quicker and have been performing ahead of the rest of the estate. I think the trends that you see are probably in line with what you would expect. You see a very big component of baby in those stores and because we offer such good guarantees in our electrical and electrical is also a favorite destination in these stores. So while it's better, it’s not dissimilar to the performance that we see in the other stores. Sue Hemp: A question from [indiscernible]. If 55% of population that's within 5 kilometers radius to Clicks, would that mean co-mobilization is possible? Bertina Engelbrecht: The way that we look at it is it's 53.2% to a Clicks pharmacy and remember, we've got 780 pharmacies. So not every store currently has a pharmacy because, as Gordon called out, we still have the gap that we're working to close with the Department of Health in terms of the issue of the pharmacy licenses. Sue Hemp: [indiscernible] says well done on the results. You mentioned that the wholesale market share loss is due to decreased sales to independents. Is this a strategic choice? Bertina Engelbrecht: Well, we've always said the reason we acquired the UPD business in the first instance was for it to be the preferred supply chain partner to Clicks in order to fuel Clicks' growth in pharmacy and that it does very well. And if you look over the period how the Clicks market share within UPD's wholesale channel has just grown and that's good for UPD. The second one is that UPD has got strength in terms of the listed private hospital groups where you see that happening. And of course partly it's because UPD up until probably the first half of the year was a little bit hamstrung by the effects of its systems implementation, but that has now recovered. But what is happening within the private hospital space is there's increased genericization. So that's having an impact there. Now are we super concerned about independence? Not necessarily and the reason for that is because we've always said UPD because of its low margins has to always focus on efficiency and profitability. And what we shouldn't be is a place where people use us just to circle through because they are managing their credit risk. Sue Hemp: Warwick Bam from RMB Morgan Stanley asks what are the challenges of The Body Shop? Bertina Engelbrecht: The challenges of the Body Shop is as always when you've got a change of ownership, first of all, there are some transition challenges there. The second bit is that the new owners, as one could expect, focus on the areas that they wanted to turn around first, which was the Body Shop corporate portfolio in both the U.K. and of course within the U.S. And what that meant is that product development and innovation, which is so critical to any beauty brand, was maybe put later on the agenda. Now that's where we are and we can see the new product ranges coming through. So I mean I think we are cautiously optimistic about what the future holds. Sue Hemp: His second question is about what we think about the medium-term prospects for the small electrical appliances sales growth. I don't know if there's anything more you want to add from what you’ve already said. Bertina Engelbrecht: We didn't have sufficient stock in the first half and the market had an oversupply. Sue Hemp: I have a very complicated list of questions here so I'll take them one by one. Given the disinflationary pressure on comparable store sales; volume growth, OpEx control and further total income margin expansion will likely be required to provide earnings support. With this in mind, could you provide a bit of color on, one, the GLP-1 opportunity for Clicks in SA? Gordon Traill: GLP-1s have been growing very, very fast over the past 24 months and we referenced that at the interim. To bear in mind on the high sales, that’s because we maintain a very low dispensing fee, our income that we generate from those GLP-1 is much lower than any sales growth. The opportunity would be as the originators genericize and that is where there would be likely to be some margin that's possible because generally in the generics, you're earning a higher margin than the originators especially on UPD side in terms of distribution. Sue Hemp: Secondly, is there any expected benefit to Clicks following the recent Supreme Court ruling allowing pharmacists to now administer HIV treatment? Bertina Engelbrecht: What we have done is in that particular case, we did provide commentary. Obviously, our public health agenda is how do you extend access to affordable health care. And you're talking here about a vulnerable segment of the population that we could most certainly support both through our pharmacy program. So we are reviewing very carefully the implications of the decision or the judgment and what, if any, how would we respond to that. But we are supportive broadly of the outcome of the judgment. Sue Hemp: Thirdly, the rollout of PCDT or primary care drug therapy pharmacist model and whether you're seeing any consumer traction here? Bertina Engelbrecht: We're probably seeing more traction in terms of the virtual doctor consultations and most certainly an increase in medical aid co-funded services through the clinics itself. So those are probably the 2 areas we'll continue to focus on. Sue Hemp: Four, are there any OpEx levers you can pull to drive positive operating leverage in existing stores? Gordon Traill: I think some of that is going to come out of the systems investment because that was the reason for investing in LEAP so to free up the time of the pharmacist to consult with patients and hopefully to deal with more patients in the same period of time. There are always opportunities that we've got because we can look at the same that we've done with UPD, rolling out smaller electric vehicles within the retail DC network because we saw that UPD managed to slightly reduce the overall transport cost for those. So we're always on the lookout. The big things that we've done, but we've always been able to eke out further efficiencies. Sue Hemp: And I think we've answered his remaining 3 questions which are on Africa inflation, the benefits of LEAP and the WMS possible disruption. [ Lulama Qongqo ] from Mergence Investment Managers says well done on the performance. On UniCare, how are the store economics of the 24-hour store versus a normal Flexicare with the pharmacy in it? What are the opportunities with this kind of format? Bertina Engelbrecht: Obviously it is about ensuring that we in the mind of the customer, in the mind of doctors and the health care profession are seen as a place to go to. So first, I think understand our position in terms of health care. What UniCare does? UniCare offers a comprehensive suite of services. So that's why we talk about the wound care clinic. In fact the catchment area, if your normal catchment area for a Clicks pharmacy is 5 kilometers, for a UniCare store it's actually 50 kilometers. And so you've got a much broader catchment area from which you draw patients. You now find that many of the specialist doctors actually refer their patients to a UniCare store. Thirdly, there is an opportunity for medical aid. So I think that the specific data point is that something like over 50% of medical aid members who go to an ER 24 service should not have gone there first if they could have gone to a doctor. So the fact that we've got a 24-hour doctor service attached to the 24-hour specialized pharmacy means that we can support medical aid scenes in that regard and of course the script flows into that store. There's other things such as for example diabetes management, the IV infusion clinics and the travel clinics. UniCare for example works a lot with corporates to drive vaccination. So very often corporate people that are traveling or local municipalities, the people that work for example in sanitation, they got to have certain vaccinations. And so it's a very, very different format; high, high, high service touch that we have there. Sue Hemp: Junaid Bray from Laurium Capital says congrats on the results. How much of a concern is Sorbet's spa's expansion into pharmacy? And with regards to your market share gains, who are you gaining market share from? Bertina Engelbrecht: I guess we're thinking about that one for a minute. First, I mean my own view always is competition is good because if we weren't doing a good job as a drug store, then no one would be interested in trying to emulate our success. So that's the first I'd take from that. The second is to always remember you mustn't be arrogant and you mustn't be complacent about your success. So that's the second part. Then we look at the competitors coming in and we understand that it's because we've been able to show them that you can do this successfully and profitably. And I think it's always been aware of what it is that they're doing and how do you respond to it. To really, really, really compete with us, you have to have an integrated pharmaceutical distribution, wholesale and retail pharmacy model supported by an independent group such as Clicks. And I think that is probably our single biggest advantage. Our single biggest advantage is that we've got a completely integrated strategy. And then of course the fact that if you spoke only about -- if you ask the customer maybe a pharmacy, well, we come up first consistently. Someone else comes up second not a grocer. And third comes up [ Clicks ] , which is a brand that we own. So I think that we are very well positioned without being arrogant and without being complacent because we are still nowhere as great as we could be. We are only on the path to greatness though. Sue Hemp: [ Junie from AAP ] asks with 47% of sales now promotional, do you see that as a new normal? And how will you protect margins if that level persists? Gordon Traill: I think if we look at the last few years, we have consistently grown promotional sales as a percentage of our total sales, which we've been happy to do because suppliers have worked with us because they wanted higher volumes and have funded the growth in promotions. It's also supported by the growth in our private label, which is at a higher margin and that's also allowed us to evolve margins over the last few years. I don't see that this is going to change. Sue Hemp: Craig Metherell from Denker Capital. Given the trading margin is near the top of the medium-term target range and you've alluded to not updating your targets at this point, could you provide any further detail around the margin profile going forward? Gordon Traill: I think we will always be aiming to evolve our margin, which is one of the graphs showed. However, we have also got to bear in mind that if you take something like the UniCare format, which is profitable and it's much higher turnover and to a certain extent that could result in a little bit of margin dilution, but not profit. So we've just got to bear that in mind over the next 12 to 18 months. But the rest of the business will be evolving the margin. Sue Hemp: I have some more questions from Kgomotso Mokabane from Sanlam Private Wealth. Can you give some color on how Flexicare is performing and whether it's starting to gain real traction or scale within the business? Also, are there deliberate plans in place to accelerate growth of the offering? Bertina Engelbrecht: We are working with the Discovery team. It would be fair I think to say that we are not satisfied with the performance of Flexicare. And so we are working with our partner, which is Discovery, to say what is it that we have to do to improve the performance of the Flexicare product. Sue Hemp: And I think in the interest of time, the last question from Kgomotso. Can you give some color on the rationale behind strengthening and expanding the group executive team? Where did you identify capability gaps or areas needing reinforcement? Bertina Engelbrecht: It's not so much about identifying gaps. It's about what is it that we have to do to ensure that we are positioned for the future. That's really what it is all about. So first South Africa, there can be no doubt South Africa has got tremendous opportunities for us to expand and it therefore made sense that we focus on South Africa and that is why Bongiwe Ntuli was appointed to specifically focus on South Africa. Then when I look at the Rest of Africa Retail and the complete unperformance of it made complete sense to say now what we do need is an executive that can focus specifically on the Rest of Africa because every market is different and we most certainly want to make sure that we get the offer right. So this is about Southern Africa and the areas in which we already are. If you look at Namibia as an example where we have added 2 stores in the last 12-month period, the forecast for Namibia's GDP growth is fantastic. Why would we not be there when it’s about focus on the Rest of Africa. The third one is around people. Are you seeing enough people in corporate affairs? And it was making sure that we do not neglect that in a retail business the people are the difference and that we needed to have a person at this level. And then finally, it's well, of course UPD. And then the final one is that we've made investments in adjacencies such as Sorbet and in M-Kem, which are all health and beauty. What we now need to do is to ensure that we've got dedicated focus on that as well. So that was the reason for expanding the group executive not gaps, but opportunities to do better. There being no further questions. Thank you so much, everyone, for dialing into our webcast. The questions that you asked were really great. It's made me think and I'm sure Gordon as well and we'll leave it at that. Thank you.
Operator: Welcome to Dometic Q3 Report 2025. Today, I am pleased to present CEO, Juan Vargues; CFO, Stefan Fristedt; and Head of Investor Relations, Tobias Norrby. [Operator Instructions] Now I will hand the conference over to the speakers. Please go ahead. Juan Vargues: Good morning, everybody, and welcome to the presentation of this third quarterly report. I would like to thank you all for participating today. We know that this is a very busy morning for many of you. And with that said, let's move rapidly to the highlights. Starting obviously with still tough market conditions where the most effect is really by consumer confidence still staying at pretty low levels all over the world. We see also retailers, dealers, OEMs being keeping to be still today being very, very careful in building up inventories. At the same time, we also see encouraging signs of stabilization in order intake, and we see few quarters. We see improvements already in Q2, clear improvements as well in Q3. Looking at performance, a decline of 6% organically with Service & Aftermarket showing an improvement in comparison to Q2, moving from minus 12% to minus 4%. Distribution declined by 6%, very much driven by Mobile Cooling Solutions, and we will get back to that. There are some aspects or some reasons for that negative decline. And then OEM also showing negative minus 8% organically, which is a good improvement versus first quarters. and where we see Land Vehicle Americas moving in a positive manner as well as Marine after many quarters being positive in the quarter. Strong EBITDA margins landing at 10.4% versus 8.6% for last year, a combination of one side of the margin improvements led by cost reductions. As you all know, we are running a restructuring program that has been kicking in since day 1, and we see very positive effects out of that at the same time as we are working in many different areas. And at the same time, we also see that all segments with exception of Mobile Cooling are improving our margins in comparison to the last quarters as well. And again, we will comment specifically on Mobile Cooling Solutions. And strong cash flow, free cash flow, EUR 527 million and a leverage landing on 3.2% (sic) [ 3.2x ] in comparison to 3% -- to 3x last year. Looking in more detail to the numbers, almost SEK 4.9 billion in revenues with 6% organic decline -- 6% decline driven by FX and then 1% decline led by the portfolio changes that we have been doing, leaving some of the businesses that we have been into before. EBITA, just a little bit over SEK 0.5 billion over an EBITA margin of 10.4%. Looking at adjusted EPS, we ended up at SEK 0.64 and again, a free cash flow of SEK 527 million. And leverage, I already commented, landed at 3.2. Looking at the year-to-date numbers, almost SEK 17 billion in revenues with a decline of 9% organically, 5% led by FX and the same 1% led by portfolio changes. And EBITA just below SEK 2 billion. And good to see, obviously, that we are getting closer as well on the EBITA margin where we landed exactly the same level as 1 year. So we have seen a recovery in recent months in comparison to the first half of the year. Adjusted EPS, SEK 2.90 and a strong free cash flow of SEK 1.4 billion. Looking a little bit deeper into the sales evolution over time, Land Vehicles ended up at minus 9%, which is a clear improvement versus Q2 with Americas showing 3% negative growth, which is a substantial improvement in comparison to the situation we saw in Q2. EMEA showing a degradation as well as APAC in comparison to last quarter, very much led still today by the OEM side. Marine positive, was great to see after many quarters and also showing a positive order intake, which is positive for us, obviously, Mobile Cooling, 8% and then Global Ventures, minus 6%. When looking at the different channels, no major changes in reality, perhaps to point out that the OEM side is for the first time in many, many, many years below 40%, while both Distribution and Service & Aftermarket are moving 100 basis points upwards. And just as a reminder, looking at the RV OEM situation, we are just now -- RV OEM stands for 18% of total business in comparison to the 49% in 2017. So obviously, we are a less sensitive company to the cyclicality that we have seen on the OEM side. Looking a little bit more in depth into the different channels. We see a clear improvement in Service & Aftermarket. Still, we see that -- we see volatility month-to-month, but again, moving in the right direction. Distribution, very much affected by Mobile Cooling Solutions. And the main reason for that is really inefficiency in Katy, Texas since we had to employ above 200 new employees and by that training, a lot of training cost us inefficiencies, we will see this negative effect in Q3. We will also see that in Q4 and then it's going to be gone. And then -- so we will come back to Mobile Cooling, but we have a double effect on one side that had a negative impact on the growth and that had also a negative impact on the margins. Looking at OEM, we see a clear path moving forward, different segments. So we see LVA turning positive in the quarter, and this is the second quarter in a row that OEM in LVA has been positive, and we also see Marine turning positive, while we see still -- LVE and LVC being negative. Positive to see, obviously, when looking at our results, strong margin recovery in comparison to last year. We see strong gross margins, almost 30% compared to 27.3% last year, very much driven by cost reductions. Again, on one side, we have restructuring program, but we also have contingencies driven in all segments simply because we still see negative growth coming in. And we also have a positive impact on the sales mix. When looking at operating expenses, another area where we are working very, very hard. We see a decline of 6% in constant currencies despite the fact that we continue to invest in a number of areas. We see product development, one of the areas where we are investing the most, but also building up our sales organizations in a number of segments where we see a stronger growth moving forward. We see, again, margin improvements in all the segments with the exception of Mobile Cooling in the quarter. When looking at tariffs, not much new here to comment in comparison to last quarter. As you know, we have good protection in the U.S., having 9 of 12 factories that we have in North America based in the U.S. In the short term, obviously, and this is still carrying a lot of uncertainties moving forward. We -- it's very much about passing prices to the market, something that we have done in a pretty good way, and we have compensated for everything, but for a few customers in the Mobile Cooling Solution area. And that's really the impact that we see negative in the quarter of SEK 35 million that will be compensated by the pricing. We implemented prices already twice in all of the areas, by the way. But in the specific case of Mobile Cooling, we had a couple of customers where we prolong the time for kicking in with the new prices. This is going to have also a negative effect in Q4. And from Q1, We will not see any more negative effects. Looking at the different segments, starting with Land Vehicles. Total organic growth, negative organic growth of 9% with soft distribution on sales and aftermarket, while we see as well a double-digit decline in OEM in both EMEA and APAC, but positive growth in Americas. We see also a pretty strong recovery of margins for the entire segment, 6.3% versus 3.7% with clear profitability improvements in EMEA, a decline -- a slight decline in APAC, but still showing very robust margins. And then we see as well reduced losses in Americas. And we will continue, as you know, to drive the recovery on the Americas situation. And as we informed a couple of times during the last quarters, the most of the restructuring program that we are driving, it will have an impact on LVA and LVE. Moving over to Marine. Positive Q3 quarter with organic growth of 1%. We see OEM coming back to growth. We still see a single-digit decline in Service & Aftermarket, but we also see a positive order intake that should help us as well in coming quarters. EBITA recovered as well. We are again over 20% in EBITA margin, 20.8%. And as a consequence of the mix and also the cost reductions that we are driving in the segments. Then Mobile Cooling Solutions, a double hit, I would say. On one side, we didn't manage to see growth due to the labor constraints that we had in the factory that are costing us in efficiency. At the same time, we also saw a negative effect on the margins coming from both the tariffs. Again, that will be gone in Q1 next year at the same time as we have the labor ineffeciencies. And we also have negative wage impact simply. The Mobile Cooling business is highly seasonal. Historically, we always had a couple of hundred of non-immigrant foreigners working on our factories to keep up with the capacity needs. And the U.S. administration did some changes on forcing us to increase the salaries. Again, we are compensating on prices, but we have a time lag. And those negative effects will be gone from Q1, as I commented before. Moving over to Global Ventures, where we see also a negative growth of 6%, with growth in Other Global Verticals, very positive in some of the areas and then still decline in Mobile Power Solutions driven by the soft RV industry. Good margin improvements, 11.5% versus 9.2%, very much driven by Other Global Verticals. Happy to see as well our progress in the sustainability area with injuries well below target, 1.5. We see as well that we are on target in regards to female managers, and we'll keep working hard in that area moving forward as well. We see renewable energy also quite a bit already now above the target for the year. We keep assessing our suppliers, our vendors, and we ended up at 60%, slightly below the target for the year. And of course, we will reach the target at the end of December. and we see also progress in innovation where we landed at 22%, a couple of percentage points above last year. We are talking a lot about sales decline. We are talking a lot about cost reductions, but we keep investing in the product area and product innovation. This is for the first time. It's the first time that as the Dometic brand, we have soft coolers. It's a totally new area for the Dometic brand. We have soft coolers under the Igloo brand, but we're also launching a new series of soft coolers under the Dometic brand for the first time and we have great expectations. Also from a branding perspective to help us to reinforce the Dometic brand among consumers. Then if we move over into the gyro. We have very, very positive reception by customers. We have been introducing the products in a number of different shows around the world. We see order intake kicking in, in many different areas. I'm happy with the results. And on top of that, we are getting a lot of awards, which is always helping us when visiting new customers offering a totally new product area for us as well. And again, we are getting awards, a lot of awards, not just for the gyro in the Marine industry, but also for many other products that we have been launching in the last 12 months. So positive to see that our investments are paying off both in terms of awards and order intake. And then on the restructuring program that we initiated 1 year ago, as you all know, will generate savings of SEK 750 million when it is completed at the end of 2026. We closed down so far 1 factory and 3 distribution centers affecting 250 people altogether. And we are running just now at annual savings of SEK 250 million as the running rates. We had a cash out in the quarter of SEK 35 million and year-to-date a little bit above SEK 100 million. We keep continuing on our portfolio, and we discontinue one of the product areas that we had before. This is leading to a negative organic growth of 1% and we keep investing on -- sorry, keep spending time on the divestments. Still, we have not seen the finalization of any of them, but we keep working and are convinced that we will see the results moving forward. And with that said, Stefan, let's go a little bit deeper into the results. Stefan Fristedt: Okay. Thank you, Juan. Starting off by summarizing the P&L for the third quarter. we are very satisfied how the gross profit margin continues to develop, 29.6% versus 27.3% (sic) [ 27.4% ] last year. And the increase is driven by sales mix. We also have the restructuring program and other efficiency measures that are taking effect. Then we also need to mention here that Juan has mentioned a couple of times of the effects, especially in Mobile Cooling, where we have a time lag between the tariff cost as well as labor cost increases versus the mitigating price increases, and that has had a negative effect in the quarter of approximately 0.7%. And we expect that to continue in Q4, as was mentioned before. But from Q1 next year, we expect that the price increases are done to fully mitigate this development. Moving over to operating expenses. We have reduced operating expenses in constant FX due to the decline in net sales, it has increased somewhat in percentage of net sales. We keep on investing in strategic growth areas, as we have mentioned, and you have seen some of the results of that in terms of product development, Mobile Cooling and Marine are definitely 2 areas where we keep on investing deliberately. Other operating income and expenses, SEK 18 million, a small number in the quarter, and it's mainly related to a part of the FX effect. Net financial expenses is up a little bit in the quarter. However, the net interest on bank loans and financial income is down SEK 197 million versus SEK 214 million, and then we have a negative FX revaluation effects and other items leading towards that. On tax, we have an effective tax rate of 32%, which is equivalent to SEK 54 million in tax in the quarter. Moving over to the summary of our cash flow. Operating cash flow-wise, we see that we are continuing to drive efficiencies in working capital, coming back to that in a second. Then we have cash out related to restructuring of SEK 35 million in the quarter. And then as you can see, we are carefully managing our capital expenditure and where we spend. Free cash flow before M&A, as we mentioned before, paid and received interest is spending down and then we have been paying lower tax. Then cash flow for the period has also been impacted by that we did a bond issue of EUR 300 million in Q3. Coming back to that. At the same time, we also did a tender offer of EUR 100 million, so -- which was then a partial repayment of the bond that is falling due in May 2026. And then I would also like to underline that we are going to see further debt repayments in Q4 and in 2026. Moving over to more of how has the free cash flow developed over time. And as you can see, I mean, SEK 527 million. It's not on the same level as last year, which I did not expect either, but still solid level, I must say. And then you can also compare it to the other periods before that. So satisfied with the level of free cash flow in the quarter. Moving over to the working capital components. You can see that working capital over the last 12 months is starting to come down 26% compared to 30% in relation to net sales. And if we look on the quarter stand-alone, it was down to 21%. So we are moving in the direction that we have been talking about, where the target is to reach around 20% of net sales. And you can see on the inventory balance, we are SEK 4.6 billion now compared to SEK 6.3 billion 1 year ago, and the number of days is down to 124 versus 139. So things are moving in the direction that we have been planning for and expecting. As you can see, accounts payable level is staying stable as well as accounts receivables. Then moving over to CapEx and research and development. We are prioritizing among our CapEx project, and we have been spending a little bit less than SEK 100 million in the quarter. It's 2% of net sales versus 1.7% in the last 12 months, that's equal to 1.3%. If we look on R&D, as I said, we continue to keep up that level very deliberately because we believe in that this is important for the future. And the R&D expense to net sales is now 3% compared to 2.7% 1 year ago and 2.8% last 12 months. And as I mentioned before, it's a strategic important growth areas for us, example being Mobile Cooling and Marine. Next is going to talk about the debt maturity. As I mentioned, we did a EUR 300 million bond on a 5-year maturity with a fixed rate of 5% in the quarter. And the proceeds are going to be used to refinance our debt portfolio. We already did EUR 100 million in connection with this transaction by doing a tender offer on the 2026 bond. So there is EUR 200 million left on that one. And then as I mentioned before, you will see further debt repayments here in Q4 as well as in 2026. We have a USD loan that matures in '28, but it can be prolonged 1 year to 2029. And the average maturity is 2.8 years, which is obviously a longer average maturity compared to last year. Average interest rate is 4.8%, and we still have an undrawn revolving credit facility of EUR 300 million maturing in 2028. So moving over to our leverage. Maybe we can -- I mean, leverage went down 0.1 versus Q2 and which is obviously positive. And you can see in the table down below that it is mainly our cash flow development that has contributed with that development. We are obviously having a high focus across the organization on protecting margin and reducing working capital, as you know. And we just keep on repeating that we are committed on achieving our leverage target of 2.5. That is important to us. and it's -- but it is difficult to give an exact timing of when we will achieve it. So with that one, I hand back to you to give a summary of the quarter. Juan Vargues: Thank you, Stefan. So I mean, in tough times like we are going through and we have been going through now for 4 years, we have to control what we can control. And from that perspective, I feel good that we are improving our margins. We had a tough first half. We saw improvements at the end of the quarter. We have seen more improvements in Q3. And our intention is obviously to keep showing improvements moving forward as well. We see -- even if it's still tough and difficult to predict, we see a market stabilization. I'm happy to see the order intake improving and happy to see the backlog becoming stronger for every month. I have been spending a lot of time on the marketplace. I have been visiting a lot of shows. I have been meeting a lot of customers. And again, it's still tough out there, but the sentiment in the value chain is slightly better than it was 3 months ago and much better than it was half a year ago. So that's kind of sending some positive signals and some faith that we are getting closer and closer to positive territory. I'm happy to see cash flow. We are working extremely hard on our working capital on driving down inventories, but not just on inventories. I think we do an excellent job on receivables and we do an excellent job in payables, trying obviously to improve as much as we can our capacity of releasing cash and improving our leverage. Tariffs situation, lots of uncertainties, of course, but we are dealing with that in a good way. We had a negative effect in the quarter. But again, in comparison to what we expected on the 4th of April, I believe that the organization has done a terrific job landing the situation with our customers and our customers are also keeping faith in what we are doing every single day. Moving forward, difficult to predict, as I said, but the starting point in Q4 from a top line perspective is a little bit better than we had 3 months ago. And hopefully, we will see that even in the future. And then from a strategic perspective, we keep investing despite all the cost reductions that we are doing in a number of areas. There are 2 areas that where we are not cutting. The other way around, we keep investing in product development, innovation, and we keep investing in building up our sales organizations. And of course, we need to finance that, and that's why we are driving a restructuring program, which is clearly paying off. And with that said, I would like to open for a Q&A session. Please. Operator: [Operator Instructions] The next question comes from Agnieszka Vilela from Nordea. Agnieszka Vilela: I will ask them one by one. So on growth, Juan, you sound cautiously optimistic about the OEM business now in Marine and in RV in the U.S. But when I look at some of the peers commenting on the market development such as Malibu Boats or Winnebago, they do point to still flat wholesale volumes in 2026 in RVs and even declining both retail and wholesale in Marine. So can you give us an explanation why you are relatively a bit more optimistic on that? Juan Vargues: I mean everything is relatively in line, right? I mean we are coming from a situation where we have been kind of shrinking 11%, 12% quarter after quarter after quarter. For the first time, we see order intake moving upwards. We see the fact that we delivered 1% organic growth, and we have a different backlog situation that we have seen. I fully agree with you that we are not going to fly. I don't see the market turning back anytime soon, but I see an improvement. I see obviously that we are launching new products. I see that we are taking orders. I still believe that we might be seeing as well what we saw on the American RV industry, growth for a number of quarters and then slowing down for a couple of quarters, stabilizing the market. So that's the expectation. I don't see that we are dropping 11%, 12% again from where we are. So that's on the Marine side, Agnieszka. On the other side, Americas, I think, it's pretty stable, just now. I think that, again, retail is still coming down slightly at the same time as manufacturing is adapting again, as you have seen in the last couple of months and expectation is that it will be balanced between retail and wholesale in Q -- sorry, in 2025 and expectation for 2026 is a growth of some 3% versus 2025. Agnieszka Vilela: Perfect. And then the second question is on EMEA and profitability in the business. When I look what we expected in Q2, you beat our expectations quite significantly. Now in Q3, you missed a bit. So just if you could give us some factors that are affecting profitability right now in EMEA. What are the tailwinds, maybe savings and less logistics costs? And what are the negative impacts in EMEA right now for you? Juan Vargues: So you have a couple of questions. I mean, first of all, we had a better mix in Q2 than we have in Q3. So after OEM, the balance of the aftermarket and OEM was different. Then we have a second issue. We -- as you know, in EMEA, we have also an important business for us, which is the CPV, the Commercial Passenger Vehicles. We have the situation of one of the main customers we have, JLR, did suffer a cyber attack. In that business, we have decent margins and that had a negative impact, both from a sales perspective, but also from a margin perspective. So those are the 2 main differences that we have in EMEA. Stefan Fristedt: So on JLR, I mean, their factories have been closed for a big part of the quarter. Agnieszka Vilela: Okay. Can you quantify the impact on your EBITA in the quarter? Juan Vargues: No, not on EBITA, but it had quite an impact on the EMEA numbers specifically. Stefan Fristedt: On sales. Juan Vargues: On the sales, absolutely. Stefan Fristedt: I mean, CPV is generally a more profitable -- or yes, it's an over-average profitable business. Operator: The next question comes from Daniel Schmidt from Danske. Daniel Schmidt: A couple of questions. And then maybe turning back to Marine. I appreciate that it's quite difficult to exactly know if this is a longer turnaround or not. But I think given that sort of retail is not super strong, but it's also a function of the fact, I guess, that it's been quite hefty underproduction in Marine over the past 4, 5 quarters. So I guess there's some catch-up to be done there. Is that your feeling as well? Juan Vargues: Yes, it is. But at the same time, I need to comment as well, Daniel, that we might be seeing what we saw on the RV side that we had a couple of positive quarters and then might slow down before getting stability. So again, I do believe that we need just now to be super agile, right, on the way up and the way down as we have been on the RV side. I mean, the good news, when I perceive still, Daniel, I mean, again, you can take it from a negative perspective or a positive perspective. The positive perspective is obviously that I don't see the market coming down 12% again, that even the decline in retail is becoming smaller than what we have seen. At the same time, as you are totally right, production has been very, very low in comparison to retail. So there is a catch-up. So my feeling is that some manufacturers, they have started to produce again. But then, of course, if retail doesn't come in Q2 when the high season starts in the U.S. specifically, then we might have a slowdown again. And then you have another factor, which I would like to comment because, obviously, a lot of the questions that we get are always about the U.S. market simply because it's 75% of the market, the world market. But we have positive growth in EMEA that was pretty nice in the quarter, and we had positive growth as well in APAC. So as a matter of fact, for us, the growth in Marine in the quarter was not negative, but we want to fly in Q1. And just again, 75% of the business is in the U.S. So I was telling you that the rest of the world, we performed better. Daniel Schmidt: Okay. And could you say something about the pace? This is very detailed and sorry for that. But given that you are shifting from decline to growth now in Marine after 8 quarters in a row of decline, could you say anything about the pace you saw from July until now basically when it comes to Marine on a year-over-year basis in order intake or in sales or anything? Juan Vargues: It has been pretty stable in sales. We have seen improvements on the order intake. So our intake was positive -- the order intake was more positive than sales in the quarter. Stefan Fristedt: But keep in mind, Dan, that the part of that order intake is obviously for delivery also next year. So not everything is going to be delivered now. Juan Vargues: In the coming weeks. Stefan Fristedt: In the coming weeks or in the coming quarter. Daniel Schmidt: Yes. But even though there's no sort of big meaningful improvement in top line in Q3, it is back to growth, but the margin is up quite a bit, and of course, it comes back to the savings. But is there anything -- has there any impact at all when it comes to the gyro that you've talked about? Is that selling. Has that been delivered in Q3? Is that having an impact? Is that going to have a bigger impact in the coming quarters? Juan Vargues: We are delivering the gyro. It doesn't have any substantial impact on the margins. On the contrary, you have, as I commented, the geographical mix, which is benefiting us just now. Daniel Schmidt: Okay. And then when we -- as you mentioned, if you look at OEM on Americas on the LVE side, it is the second quarter in a row that you are performing better than the market. Is that the function, you think, of the work that you did last year in trying to get back to on certain customers that have been maybe discarding you a little bit and you're back to the model year '25 and '26 now. Is that what we're seeing because the market was -- it looks to be a little bit down on shipments so far in Q3 and the same was -- I think it was flat in Q2, the market and you were up a couple of percent. Is that what we're seeing? Juan Vargues: We have a lot of activities ongoing. We have -- so that's what I can tell you is that we are working very, very close to our customers just now. We're spending a lot of time. I am visiting quite a few of the customers myself, getting the feeling. We see positive -- we get positive comments in the recent shows as well, both in the U.S. as in Europe. So I'm optimistic. I mean we are not there, obviously. As you know, we shrunk more than the market for a couple of years. And of course, our intention is to recover part of what we lost. Daniel Schmidt: Yes. And then on EMEA, if you look into the last quarter of this year, I think there was quite substantial production shutdowns, especially from one of the bigger players. Do you see the same development happening in this year? Or will there be less shutdowns, you think? Juan Vargues: I think that we will see improvements versus last year simply because last year was brutal, right? I mean Q4 last year was very, very, very healthy. So I don't expect -- I mean, as you know, this industry is always kind of correcting by running shortened weeks, still to be seen what's going to happen in connection to Christmas, but I'm not expecting the same negative effect that we saw in Q4 last year. You're reading and you are talking to more or less the same people as I'm talking. I mean the positive is more optimistic today than we had 1 year ago. I mean 1 year ago is really when all these massive shutdowns took place, right? Now we have seen very low production numbers for 9 months basically. Stefan Fristedt: And registrations are bit higher than production. Juan Vargues: Absolutely. I mean registrations, if you look at registrations, registrations after 9 months are down to minus 4% in Germany, minus 2% for Europe, right? So of course, that after 1 year, you will get more and more into balance. Daniel Schmidt: Yes. And then sorry for missing the very early part of this call, but you did refer to labor irregularities impacting Mobile Cooling in the quarter, and you said something about needing to hire 200 people. Is that coming back to immigration policy in the U.S.? Is that -- was that the reason? And what was the impact in terms of impact on profitability? And is that continuing into Q4? Is that ending now? Juan Vargues: It's Q3 and Q4 and then we are going to be done. Stefan Fristedt: Yes. So I mentioned that the impact for Q3 was approximately 0.7% on the profit margin as a whole. And then it will continue into Q4 somewhere 1% to 1.5% units on the margin. And then from Q1, we expect these effects to be fully compensated by price increases. So it's... Daniel Schmidt: And that impact, is that both the tariffs and the labor irregularities combined? Stefan Fristedt: Yes. It is mainly tariffs and the labor efficiency/labor cost. There is also some currency effects in there as well. But the majority is related to the 2 first ones. Daniel Schmidt: Okay. And also, sorry for dwelling here. But Juan, you mentioned at the end of your remarks, I think that the starting point on -- from a top line perspective is a little bit better. Was that referring to the start of Q4 compared to the start of Q3? Or what was that comment relating to? Juan Vargues: Yes. So we have seen order intake improving quarter-by-quarter, right, since Q4 last year. So we had a pretty low Q4. Backlog situation was pretty low at the end of Q4 last year. Then we saw a further deterioration in Q1. We saw a clear improvement in Q2, and we saw an additional improvement in Q3. So our backlog situation at the end of the quarter is much better on the backlog situation than we have had at the beginning of Q3, which is positive. Operator: The next question comes from Gustav Hageus from SEB. Gustav Sandström: If I can ask a question on the organic growth in the quarter down with 6%? You mentioned customers trading down in aftermarket. You mentioned some price increases, but more to come. So it would be very helpful if you could try to sort out the components in organic decline here in respect to price mix and volume and what you expect in terms of prices now, if you can quantify that a bit with your new price hikes going into 2026, that would be helpful. Juan Vargues: I mean the vast majority of the prices is going to take place from a Service & Aftermarket perspective. And then the other one is really on Mobile Cooling, what we have seen. We compensated for the tariffs in both Marine and LVA. We almost compensated for the tariffs in Mobile Cooling. But again, we had a price time lag for a couple of customers, and they are major customers for us. So that's where we have the difference. And then, of course, we are doing minor price adjustments depending on the market, depending on the product and depending obviously on the competitive situation. So I would not expect massive price increases moving forward as far as the market looks as it does. I think we need to be careful just now, and we also need to find the right balance, obviously, between keep improving our margins, but also starting to recover some volume now when the market seems to move into a little bit easier situation. Gustav Sandström: Sure. But the negative organic growth in the quarter, is it fair to assume that the volume growth was bigger than that number? So we had... Juan Vargues: No, but I wouldn't overestimate how much bigger. I think we are a little bit bigger, not much. Gustav Sandström: Do you think single-digit volume decline in the quarter. Is that a fair assumption? Juan Vargues: Yes, it is. Gustav Sandström: Okay. Okay. And you mentioned the order intake improving sequentially. Do you see any trends in terms of mix, what type of products that are sold. And in terms of price versus competitors, if you can have a comment on that given that you have quite a lot of exposure from internal production versus some peers? Juan Vargues: Yes. So we see -- let me say, there were 2 questions. The first 1 was -- the second one is competition. The first 1 was? Gustav Sandström: Sort of did you see any improving mix sequentially? Juan Vargues: Yes. So we have seen very clear improvements on the OEM side. We have seen very clear improvements on the distribution side. And then on the contrary, Service & Aftermarket has been a [ second ] month. Gustav Sandström: And that comment relates to mix, so gradually improving mix in those 2 first? What was that comment on? Juan Vargues: But again, if we think about the 3 channels, we have seen very clear improvements on the Marine side, right, is on the OEM altogether, but especially on the Marine side and LVE, we still see that LVE and LVC are tough still today from an OEM perspective. But again, altogether, the OEM channel is improving quite a bit. We see the distribution channel also improving. And there, we have, as you know, a number of businesses where the biggest one is Mobile Cooling. So as I said, Mobile Cooling order intake is improving quite a bit as well. and then Service & Aftermarket has been pretty flattish in comparison to where we are coming from. So still a negative order intake, less negative, but still negative. Gustav Sandström: Okay. And in terms of pricing in U.S. versus some competitors, I guess, in particular, in Mobile Cooling and so forth, are you following also nondomestic producers in terms of price? Or are you -- yes. Juan Vargues: No, I think the difference -- the main difference is that we were pretty early. I feel some of our competitors were pretty late, but we see that all of them are increasing prices step by step. So I feel the difference, obviously, that most probably they built up a lot of inventories just in case as soon as Mr. Trump was elected, while we implemented the prices in connection to the tariff implementation. Gustav Sandström: Okay. And then final one for me, I guess it's a bit speculative, but on the net debt-to-EBITDA gearing target, what you chances are that you'll come below 3 as we end the year? Stefan Fristedt: I think we are now moving into the part of the year where cash flow is a little bit less strong, right? Q2 and Q3 is the 2 strongest cash flow quarters that we have. So it's -- I would probably say that 3 years would be nice, but I would still feel that I think we are still going to end above. Operator: The next question comes from Fredrik Ivarsson from ABG. Fredrik Ivarsson: Sorry, I got in a bit late, so excuse me if you already discussed this, but I'll try. First one on Mobile Cooling. We've seen sales declining, I guess, for 3 years now, and we've been talking about inventory reductions among retailers for quite some time now. Do you guys have a view on the inventory levels at the moment where you're at, especially Igloo in the U.S.? Juan Vargues: Inventories are not bad on the channel, what we can see, right? I mean then, of course, you have -- we have seen 2 months pretty nice inventories coming down and then you get major orders and then all of a sudden, the sell-through is a little bit worse. So I mean, something that we didn't comment on the report is that the last month, meaning September was pretty rainy in the U.S. And for the Mobile Cooling business, that has a lot of impact. So we cannot say that we perceive inventory levels in the Mobile Cooling channel being high just now. They are gone. I think people on the contrary are very, very, very careful in not building unnecessary inventories. So everybody is placing the orders in the very last minute. And that's a change from where we are coming from pre-pandemic, where people were building up inventories in advance. Now people are -- I don't know if we can talk about Just In Time manufacturing, but retailers are as much Just In Time as they can and putting on us being ready. Fredrik Ivarsson: Very clear. And then staying on Mobile Cooling, it seems to me like the margin is almost set to expand in 2025 despite all the issues you mentioned and then obviously, sales being down 20% organic over the last 3 years. So my question is, where do you see the margin in this business under more, say, normal circumstances? Juan Vargues: I mean we commented from the beginning, right, that we expect Mobile Cooling to be 15-plus EBITA. That's where we -- and that's still below, so to say, what the Dometic brand is coming from, right? But we believe that lifting from where we acquired the company to 15% is a pretty nice achievement. If you look at what we have been delivering during the last year, we have seen an improvement year-by-year, and that's our expectation. Stefan Fristedt: And I mean if you look on the product launches that we have been showing here over the last couple of quarters in Mobile Cooling, I mean, that is products that is certainly going to contribute to that development. Juan Vargues: So I mean this is one of the areas, clearly, where we are investing a lot in product development. We are investing in building up our sales organizations. And despite all the investments that we have, still, we see margin improvements. Now we have a couple of one-offs this quarter, and then we had also the production issues in Q2, right? But apart from that, we see an underlying improvement year-by-year, a clear improvement year-year. Fredrik Ivarsson: Yes. Yes, I appreciate that. And a follow-up just on the one-off you mentioned just now. Juan, did I hear you right? Do you guide for 1% to 1.5% on the group margin impact in Q4? Juan Vargues: Yes, based on both the tariffs and the wages and the labor efficiencies. Fredrik Ivarsson: Okay. So like SEK 40 million to SEK 60 million. Juan Vargues: It will be gone again from Q1. Fredrik Ivarsson: Yes, absolutely. Good. And maybe last one from my side. I saw the Igloo lawsuit trial moved to March from September. Do you have anything to comment on that? Juan Vargues: No. I mean from our side, the sooner, the better since we feel very, very confident that we are going to win the case. So there is not -- we have not provoked that delay. It's not us trying to delay. It's the other way around. We would like to get it done. the discussion beyond us. Operator: The next question comes from Rizk Maidi from Jefferies. Rizk Maidi: Sorry if this has been tackled. So I'll start with tariffs and Section 232 extension in August. Just wondering if this drives you to -- if there's any impact direct or more importantly, indirectly on the business, and I'll start there. Stefan Fristedt: I think that we will have to see where this ends in the bidder end. But I mean, with the price increases and other measures we have taken, we believe that we have -- when the time lag has closed, we believe that we have taken the measures to compensate for the increased tariff cost. Rizk Maidi: Okay. And then secondly, on Service and Aftermarket, I mean, the decline now, as you said, Juan, was less than before. Historically, you talked about this bullwhip effect. Maybe if you could just talk about sort of sell-in versus sell-out here. This market has historically been quite resilient. This is exceptional. Do you actually expect to recoup those big, call it, destocking years sort of -- does that need to reverse at some point in your view? Or that's basically you see it as a post-COVID buildup in inventories that would never go back to? Juan Vargues: No, I think that we are human beings. I think that's going to come back. But in order to get into that point, we need to get consumer confidence. We need to see the traffic and the foot traffic into the stores, the foot traffic, both physically and digitally to increase for the dealers to there to build up more inventories that they are doing today. Just now it's in the very last minute. But again, I'm fully convinced. Remember, if you go back 5 years ago, we -- the flight industry would never come back, right? The carriers would never recover, and you know where they are today, right? I think it's time. Rizk Maidi: Understood. And then perhaps last one on my side, just perhaps an update on divestments of noncore assets. How much has been achieved? How much is left? I don't know if you can communicate on this? And how do you see the appetite from potential buyers at the moment and the valuations you're able to get? Juan Vargues: So you have 2 different areas. One is product areas that we are leaving that we are discontinuing, low margins, we don't see that we can get into a #1, #2 position globally, and then we don't want to be part of that. As you know, we have already left 1% and is more to come. We will see changes over time. And then we have the divestments where we are working extremely hard. We are in discussions with a number of partners. But obviously, we still have a gap between the sell side and the buy side. And as we said, I mean, we want to create value. We don't want to give things away. And if we need to wait until the market looks in a better way, then we will do it. But again, all those discussions keep on going. Operator: The next question comes from Johan Eliason from SB1 Markets. Johan Eliason: Juan and Stefan, just a few questions here at the end, maybe on the cash flow again, you already alluded to where you sort of think net debt will end up to. But are there any particular issues we need to bear in mind when modeling the final quarter cash flow? Or are there any sort of higher charges from the restructuring programs or tariffs being paid out, et cetera, that could potentially impact the fourth quarter cash flow? I guess, otherwise, the pattern this year has been a decent cash flow, but a bit weaker than last year. And I thought that would be the case for Q4, but I just wanted to see if there's anything to bear in mind there. Stefan Fristedt: I think that you should look on the seasonal pattern, right, of our cash flow. That's number one. Then we were talking about that we had SEK 35 million in payout in Q3. I think you should expect that to be a little bit higher in Q4. And that will then, of course, also give you an indication that the cash out has been a little bit lower for 2025 compared to what we did believe in the beginning. But that's more related to the timing of certain activities. So that will be a little bit more that is flowing over to 2026. So -- but I think you should expect the payouts of that to be a little bit higher. So I think that's what I should comment. I mean it's like I've said, I mean, '23 was the best year ever. '24 was the second best year. And then I think 2025 is coming thereafter. So it's probably a good way of thinking about it. Johan Eliason: Good. And then you are leaving some areas where you see are not competitive. You have seen some competitive pressure. I think you talked about the big fridges over in the U.S. previously. Are you seeing any changes in the competitive picture now after tariffs and all what you have out there? Juan Vargues: Not much that far. I mean what we have seen is that we were pretty early increasing prices on the tariffs. Most of our competitors in the U.S. were slower, I guess, that they built up inventories in connection with the election. And -- but we have seen that all of them are increasing prices step by step. So I do believe that we need to wait a little bit longer to see what happens. I think that a lot of people have been living on inventories. Unknown Executive: And we have one question from the webcast audience. Could you please give some color on the inventory situation in the different distribution channels? Juan Vargues: We commented before. We see inventories in both APAC and EMEA coming down stepwise simply because of the difference between retail and manufacturing in the last 12 months. We see the U.S. LVE side. So the RV side in the U.S. is in balance, total in balance. We see Marine still unbalanced. In the marine side, 70% of dealers, American dealers still feel that they are carrying too high inventories. We are talking about distribution, we don't see any inventory buildup. I think that what we see there is that dealers and retailers are carrying as little as they possibly can. They rather lose business than they carry inventories. So everything is in the last minutes. And then on the Service & Aftermarket, it's exactly the same. So wholesalers nowadays, bigger distributors are not carrying inventories. They want manufacturers like us to carry the inventories. And dealers and smaller dealers, they are gone. So I believe we got a question before. Do you think that this kind -- the typical inventory buildups are going to come back? I'm fully convinced that they will. But in order for that to happen, we also need to see consumers starting to spend more money. I think we have been suffering the entire industry or industries. It's not just this industry. I mean we see that everything having to do with consumers with the exception of food is behaving in a very similar way. Unknown Executive: And we have one question remaining in the queue, I believe. Operator: The next question comes from Daniel Schmidt from Danske. Daniel Schmidt: Yes. Just 2 short follow-ups. On the savings program, it sounds like you're quite happy with the progress so far and a run rate of SEK 250 million by the end of Q3. How should we view that going into '26? Because it's quite meaningful steps that are supposed to be taken in terms of savings in '26. I think you've said run rate SEK 750 million as we leave 2026. And of course, it comes back to the actions that you need to take, how are they sort of scheduled for '26? Or how should we view that? Is that back-end loaded or even through -- evenly distributed through the year or... Stefan Fristedt: I would probably say that it's a little bit more back-end loaded because you're obviously going to get the full effect is coming -- going to come gradually after the implementation. But we have some bigger projects, right, that is going to take until like mid next year before they get fully implemented. But on the other hand, we also have some other activities that is going to be completed now in Q4. So -- but I would probably say it a little bit twisted towards the second half. But I mean, we still confirm SEK 300 million run rate saving at the end of this year and SEK 750 million by the end of next year. Daniel Schmidt: Yes. Okay. And then just maybe coming back again to the CPV incident in EMEA, you got the question and you said that it had an impact on sales, sounded meaningful. Would you dare to estimate how much that was in top line impact for you guys? Juan Vargues: It was -- well, in terms of krona, we are doing about SEK 30 billion for EMEA. Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Juan Vargues: Thank you very much to all of you for your attention. As we commented at the beginning, we know that it's a very busy day for many of you. We will keep working hard to protect our margins, but also to keep investing in the areas where we see the growth moving forward. And we are fully convinced that we are going to get down our leverage to the target. We cannot say when, but that's our firm intention, and we will get there. So thank you very much for your attention, and have a great day, all of you. Thank you. Stefan Fristedt: Thank you.
Operator: Good morning. Thank you for standing by, and welcome to the Sodexo Fiscal Year 2025 Results Call. If you -- I advise you that this conference is being recorded today, Thursday, October 23, 2025. I would like to hand the conference over to the Sodexo team. Please go ahead. Juliette Klein: Good morning, everyone. Welcome to our fiscal 2025 results call. I'm here with Sophie Bellon and Sebastien De Tramasure. They'll go through the presentation and then take your questions. [Operator Instructions] The slides and the press release are available on sodexo.com, and you'll be able to access this webcast on our website for the next 12 months. Please get back to the IR team if you have any further questions after the call. I remind you that our Q1 fiscal 2026 revenues announcement will be on Thursday, January 8. With that, I now hand over to Sophie. Sophie Bellon: Good morning, everyone, and thank you for joining us today. We spoke to you a couple of weeks ago regarding our governance changes. And today, we are going to cover our fiscal year '25 results and our priorities and outlook for 2026. Just on the slide here, a brief summary of what we're going to cover today. When I became CEO in 2022, our priorities were clear: reposition Sodexo as a pure-play food and services company and simplify the organization. Over the past 3 years, we've made solid progress, streamlining the portfolio, refocusing on food, accelerating key investments and strengthening client relationships. These were essential steps to build a strong foundation for sustainable growth. In financial year '25, results came in line with revised guidance, reflecting both operational and commercial challenges. We are actively addressing these with targeted action plan in commercial and in U.S. universities. We're also continuing to strengthen our foundation. With this in mind, fiscal year '26 will be a year of transition and the start of a new phase for the group. Thierry Delaporte will soon take over as CEO, bringing the right experience and profile to drive operational execution, accelerate commercial momentum and lead the group forward. But let's now first take a backward perspective on our key achievements from the last 3 years and 2026 priorities before Sebastien walk you through the fiscal year '25 results and the resulting fiscal year '26 guidance. Turning to the next slide. While I won't go into every detail here, this timeline of recent years shows the major steps of our shift to a pure-play food and services company. We have simplified our structure through geography reorganization and the sale of Sofinsod. We have actively managed the portfolio by spinning off Pluxee and making other non-core disposals, while pursuing targeted acquisitions to accelerate in food. So if we look now at the impact of this refocus on core activities, you can see that there has been real progress in the numbers. Let me pick out some highlights. Food now covers more than 2/3 of our portfolio, up from 62% in fiscal year '22. We have modernized the offer based on data-driven insights across culinary, digital and sustainability. Digital engagement has surged almost 6 million active consumers, up from just over 1 million, showing how we're expanding our reach and creating new growth avenues. Our branded food offer now represents over 50% of revenues versus less than 20% 3 years ago, improving client experience, standardization and operational efficiency. Entegra has more than doubled in size, boosting procurement benefits, and we have also advanced catalog compliance, both strengthening our competitive edge. On sustainability, we are hitting the targets we set on workplace safety, carbon and food waste, thanks to close collaboration with our clients and partners, and we are leading by far the industry on those aspects. And all of this is creating tangible value. Our underlying earnings per share has grown at 14% compound annual growth rate, and we have seen a marked improvement in our return on capital employed. Moving on to commercial performance. We have made a solid improvement in retention and development compared to the pre-COVID period. Over the last 3 years, our average retention is 94.5% versus 93.5% between 2017 and 2019. Likewise, on development, we signed around EUR 1.7 billion of new contracts per year, including cross-selling compared with EUR 1.4 billion before the pandemic. This is a result of our ongoing focus on processes, team culture and competence, but also client relationship. However, this does not reflect our full potential with fiscal year '25 presenting some commercial challenges. In fiscal year '25, retention came in at 94% due to the negative impact from the loss of a global account and softer performance in North America, in particular, in Education. Performance is uneven across the business. For example, U.S. Healthcare. In U.S. Healthcare, we delivered retention above 97%. And in France and Australia, we were above 96%. On development, H1 was strong, especially in Europe and Rest of the World, but H2 softened and total new business landed at EUR 1.7 billion. North America, which remains our largest market, is where we need to improve. We have clear actions underway. We are addressing near-term priorities in U.S. Higher Education, and we are strengthening our U.S. sales team through expansion and training. We are also investing and reorganizing to make sure we capture the market's potential. I will now walk you through in more detail how we are addressing the challenges in U.S. Higher Education. We clearly had some performance gap over the past couple of years in this segment, and it's translated into market share losses. Since February, together with Michael Svagdis and his team, we have carried out a comprehensive diagnostic process to fully understand the root causes behind this lack. A few key issues stood out. First, our footprint is still too concentrated in small and midsized institutions. Second, we have not focused enough on mid-plan renegotiation. And third, we've had some resource misalignment. The remedial action plan is already well underway. Michael has put in place a new organization with culinary and digital now reporting directly to him, and he has reenergized the team to drive best practice and greater standardization. Our sales function was clearly subscale, so we have expanded the team by 50% with the newly hired sales executives already in place and operational. We are also targeting more large universities and athletics, working more closely with Sodexo Live!. To strengthen existing relationship, we are growing our account management team and refreshing our broader teams, bringing in new talent where needed to ensure the right capabilities are in place. Execution is a big focus. We are currently renegotiating 75 meal plans for implementation in fall 2026, and we have rebuilt the meal plan team, which had been disbanded during the COVID period. Now we are harnessing data and tech to methodically track what's selling, where and to whom. We are deploying digital platforms like Everyday and Grubhub, and strengthening our own retail brands to streamline the offer. This plan is clear, but it won't be executed overnight. Some levers will take time. And given the timing of the selling season, fiscal year '26 is largely set already. The goal is, therefore, to restore growth momentum and capture new market opportunities progressively from fiscal year '27 onward. Michael and his teams are laser-focused. Michael has visited more than 20 campuses in the last 3 weeks. The feedback is very consistent. Universities are under financial pressure. They are becoming more business-driven, and they are open to change. That creates challenges, but also a lot of opportunities, and we are now in a much better position to seize it. So as you can see, we have set focused priorities in the U.S. for this year, short term very execution-driven, to put us back on a stronger trajectory. With that in mind, fiscal year will very much mark itself as a year of transition. It will still reflect some of the commercial challenges we have just discussed, but also the investments we are making to strengthen our foundation to drive efficiency, accelerate digital and prepare for long-term growth. Sebastien will get back to that. We have a strong foundation to build on, with a solid balance sheet and the flexibility to invest where it matters most. We are the #2 player globally with a balanced portfolio across regions and segments. We have the scale to leverage procurement, technology and operational excellence across the group. Our culture remains a key driver of sustainable performance, purpose-driven, people-focused and deeply engaged with our clients. Retention in our industry drive resilience, and our teams are proud to deliver on our mission every day. And of course, we operate in a large and attractive market, still 50% in-sourced with significant outsourcing opportunities ahead of us. Looking ahead, I'm also very confident in the next phase for Sodexo. On November 10, Thierry Delaporte will join us as Group CEO. He brings over a decade of leadership experience in the U.S., strong digital and AI expertise and proven track record in leading large people-intensive organization. He's operational and execution focused and deeply aligned with our values. He is the right fit to take Sodexo into its next stage of development. And with that, I'll now hand over to Sebastien to take you through the fiscal year '25 financial and fiscal year '26 guidance in more detail. Sebastien De Tramasure: Thank you, Sophie. Turning now to our fiscal '25 performance. Overall, our performance was in line with our revised guidance. Organic growth came in at 3.3%, slightly higher at 3.7%, excluding the base effect from the major sports events and the leap year in fiscal 2024. Underlying operating margin was 4.7%, up 10 basis points at constant currencies, while on a reported basis, it was broadly flat due to the FX headwinds. Free cash flow was EUR 459 million, including the exceptional cash out of circa EUR 160 million related to the finalization of the tax reassessment in France. And excluding that, our cash generation remained robust with an underlying cash conversion of 91%. Underlying EPS reached EUR 5.37, representing a rise of plus 3.7% at constant currencies. And the Board will propose a dividend of EUR 2.7 per share, up 1.9% versus last year and in line with our 50% payout policy. So now let's have a look at our performance by geography. Breaking down our results further, all regions contributed positively to our performance. Our largest region, North America, delivered 2.8% organic growth, reflecting strong results in Sodexo Live! and Business & Administrations, along with solid underlying momentum in Healthcare despite timing impact and partly offset by contract losses in Education. In Europe, organic growth was plus 1.7%, or 2.7%, excluding the base effects from the Olympics and the Rugby World Cup with steady progress across segments, notably in Healthcare & Seniors and Sodexo Live!. Rest of the World delivered strong organic growth of 7.5%, which was mainly driven by strong performance in India, in Australia and Brazil, which remain key countries where we are strengthening our positioning and consolidating our market share. And overall, close to 86% of our revenue in this segment are generated by Business & Administrations services. On margins, North America was stable at constant currencies, while Europe and Rest of the World improved 20 basis points, lifting the overall margin for the group of 10 basis points, to 4.7%. And the margin also reflects procurement efficiencies and benefit from our Global Business Services Program. So now let me guide you through the full P&L picture. Fiscal '25 consolidated revenue reached EUR 24.1 billion, up 1.2% year-over-year. As already mentioned, we faced currency headwinds this year, mainly from the U.S. dollar and several Latin America currencies, which had a minus 1.8% negative impact on revenue. And we also saw a small net impact from acquisition and disposal of minus 0.3%. Underlying operating margin, as we discussed, was stable on the reported basis and improved 10 basis points at constant currencies. Other operating income and expenses reached minus EUR 154 million with minus EUR 97 million of this related to restructuring and efficiency initiatives covering our global business service program, ERP implementation and other organizational optimization. Operating profit came in at close to EUR 1 billion compared with EUR 1.1 billion last year. Net financial expenses were EUR 88 million, lower than expectation due to some one-off gains. The new USD bond issuance had little impact this year as higher coupons were largely offset by cash interest income and gains from tendering existing bonds. However, net financial expense will increase next year as a result. The tax charge was EUR 198 million with an effective rate of 22.2%, reflecting updates on the tax credit and use of previously unrecognized tax losses in France. And looking ahead, our normative tax rate is expected to be around 27%. As a result, group net profit reached EUR 695 million, translating into EUR 785 million of underlying net profit, which was up 3.7% at constant currencies. So let's now turn to cash generation, which remains a key strength for the group. Free cash flow in fiscal '25 was EUR 459 million, compared with EUR 661 million last year. The change in operating cash flow mainly reflects the exceptional tax outflow for around EUR 160 million related to the finalization of the tax audit in France. Working capital remained well contained and net capital expenditure increased by 3%, translating into a CapEx to sales ratio of 2%, broadly in line with last year. Acquisition net of disposal amount to an outflow of EUR 93 million following the acquisition of CRH Catering in the United States and Agap'pro, a GPO in France. Both acquisitions fully aligned with our strategy to strengthen our convenience business in the U.S. and our procurement capabilities. Overall, our free cash flow remains solid, supporting both reinvestment in the business and shareholder returns. Then at the end of the financial year, net debt stood at EUR 2.7 billion, which was slightly higher than last year, while EBITDA increased by 2% over the same period. So this translated into a net debt-to-EBITDA ratio at 1.8x, within our target range of 1 to 2x. During the year, we repaid the EUR 700 million bond maturing in April 2025 and successfully issued a USD 1.1 billion bond. And part of the proceeds was used to repurchase some of our 2026 bonds. Overall, the balance sheet remains solid and give us the flexibility to invest in growth. So now that we have looked at the performance and the financials for the year just ended, I'd like to take a step back and talk about how we are accelerating our investment in foundations that will drive our long-term efficiency and profitable growth. This is really a strategic phase for the group as we are making significant investment into our HR, finance and supply system and our food and FM platform. In short term, this will put some pressure on margin, but it is essential that we position ourselves for improved efficiency and stronger profitable organic growth. We will continue to invest in sales and marketing, especially in North America to ensure more consistent net new business, as Sophie stated earlier. An important part of our investment program is supply chain management with a strong focus on the U.S., where we are optimizing processes, systems and ways of working to improve both cost and agility. The idea is really to bring more sites into a single unified purchasing system, giving us much better visibility on spend and allowing us to track compliance in real time. We are also standardizing our menus and recipes, so that they automatically link to order guides and purchasing system. And that means simpler execution for our site manager, stronger compliance and more leverage from our volume, including greater pooling between our on-site operations and Entegra. All of this is about making compliance and efficiency happen at the site level, and we are now incentivizing our unit manager directly on compliance. Another key area is our digital and IT foundations. Our global ERP rollout is a perfect example. It allows us to standardize end-to-end processes, secure our infrastructure, which is instrumental in all aspects of our operation, obviously, for data and performance management, but also to strengthen client account management by giving teams better visibility and faster insights. We are also investing to enhance our analytics and AI capabilities to support better decision-making, sharper performance tracking and faster execution across the organization. Finally, Global Business Services is another major focus. We are transforming support function into a shared service model with center in Porto, Mumbai and Bogota, now employing over 900 people. And these teams are centralizing finance, HR, other functions like supply and legal. And by doing this, we are driving efficiency, standardization and innovation while also creating talent hubs for the future. And we are already seeing some early benefits. For example, in the U.S., more than 90 positions were moved over to the Bogota center during the summer, improving competitiveness, process harmonization and supporting employee administration, recruitment and tender preparation. So this is really the second leg of our near-term priorities. The first being the U.S. turnaround that Sophie discussed before. And this investment position us to capture growth more effectively in the future and over time, and the margin improvements will follow. It's also about building the right platform today to deliver stronger performance tomorrow. Now moving to the outlook for fiscal year 2026. As we mentioned previously, fiscal 2026 will mark a year of transition as we proactively address the commercial challenges faced in 2025, especially in North America. And at the same time, we are accelerating the investment in our foundation, as just mentioned, to build a stronger platform for future efficiency and profitable growth. With that in mind, our guidance for fiscal year '26 is as follows: We expect organic growth between 1.5% and 2.5%. This includes a minimum plus 2% contribution from pricing, neutral to moderate contribution from both like-for-like volume and net new business and a one-off reclassification triggered by the renewal of a large contract. And this last point relates to a large NorAm contract currently being renegotiated. And under the new terms, we will act as an agent rather than the principal, meaning that revenue will be recognized on a net basis. And this will mechanically reduce reported organic growth by around 70 basis in fiscal year '26 with the new terms of the contract taking effect during the second quarter of the year. And our underlying operating margin should be slightly lower than fiscal year 2025, reflecting mix and timing of growth driver and the targeted investments we are making. In terms of quarterly phasing, we expect a relatively soft start with growth gradually improving over the year. This will be mainly driven by North America, where the impact of last year's Education losses will be most visible early on. And in addition, several contracts existed last year will annualize in the second half. Now I would like to conclude with you on our capital allocation priorities. We remain focused on disciplined execution, and that also applies to how we allocate capital. On capital allocation, framework remains balanced and consistent, designed to support both near-term execution and long-term value creation. First, we continue to focus on organic growth, with acceleration of our investment and CapEx objectives remaining unchanged at 2.5% of revenue. We remain selective on M&A, targeting midsized bolt-on acquisitions that are accretive and aligned with our strategy. On average, we expect to allocate about EUR 300 million per year to M&A, mainly focused on convenience, GPO and food services in our key existing markets. And recent acquisitions fit perfectly within the framework and the closing of the acquisition of Grupo Mediterránea expected to happen by the end of the calendar year. It's also part of the objective to strengthen our food services position in our key markets. And this acquisition will allow us to double our footprint in Spain. Furthermore, we are committed to optimizing returns to shareholders. Our dividend payout ratio is unchanged at 50% of underlying net income, ensuring an attractive and balanced remuneration for shareholders. And finally, we keep a close eye on liquidity and balance sheet strength, with a leverage ratio maintained between 1x and 2x and a commitment to preserving our strong investment-grade ratings. Overall, this framework supports our near-term priorities while providing the flexibility to adapt. With that, we are very happy to take your questions. Operator: [Operator Instructions] First question is from Jamie Rollo, Morgan Stanley. Jamie Rollo: Two questions then. First, could you please quantify the margin guidance? What is slightly lower, please? And also, is that pressure in all the regions? Or is that going to be concentrated in North America? And the second question is, you're describing '26 as a transition year, but you said the other day that the new CEO probably wouldn't announce their review until maybe early summer, which could that not mean that 2027 then is another transition year if there were further changes to be made? Or are you going to be doing all of the implementation in 2026? Sebastien De Tramasure: Thank you, Jamie. So I will take this first question about the guidance. So as I said, the objective is to have an operating margin to be slightly lower than fiscal year '25, reflecting really the mix phasing of our growth driver and also the phasing of the targeted investment we have to do. Then, the reason we did not give a range is that because there are a lot of moving parts. Again, at this stage, we do expect margin to be slightly below fiscal year '25. There are different drivers. Again, the low organic growth with small optimization in terms of volume increase. And then there is a timing of the investment. And also, we do expect also some headwinds from the -- from the exchange rate that will also impact our margin. So a lot of moving parts, the reason why we decided not to quantify this guidance. Sophie Bellon: So thank you, Jamie, for your question. I will take the second question on the transition. So 2026 will be a year of transition in several ways. First and foremost, it's a year marked by a change in leadership with the upcoming arrival of Thierry as the CEO next month, on November 10. It's also a year of investment to continue to lay the foundation for sustainable future growth. We are investing heavily in our HR, in our finance, in our procurement system, in tech and data as well as in our food and FM platform. And in the short term, this weigh on our margin, but I think it is essential to prepare for the future to be more efficient, more agile and to support sustainable growth. So for example, in the supply chain, particularly in the U.S., where we are improving our processes and system to better manage our expenses. And also, we want to increase our compliance in real time. We're also investing in data and analytics and artificial intelligence to better track the performance and execute faster. And -- does it mean another year of transition in '27? No, we are not standing still. We have our near-term priorities, U.S. Education, as an example, the investment in the commercial, and our underlying organic growth is between 2.2% and 3.2%. So we are moving forward, and we are in the actions. Jamie Rollo: If I can -- can I just come back on the margin answer? I appreciate you can't give guidance. There are lots of moving parts. But obviously, with a margin of under 5%, every 10 basis points is quite a big impact. I mean, is slightly lower nearer to 10 basis points or nearer to 30? Sebastien De Tramasure: Again, as I said, Jamie, we are not quantifying the guidance at this stage. We are talking about a slight decrease in terms of margin. And to also answer your question, the pressure on margin will be mostly in the U.S. because, again, as I said, our focus on accelerating investment in sales and marketing and all the supply initiatives will be also focused on strengthening our position in North America. Operator: Next question is from Estelle Weingrod, JPMorgan. Estelle Weingrod: I've got three, please. I mean the first one on U.S. Education and Higher Education more specifically. Could you give us some initial colors on the full-term enrollments? Then on North America, again, you elaborated on the action plan underway in the U.S. When you talked about targeted investment to enhance foundations for profitable growth, is it mostly investment in U.S. Higher Education? And within this, is it mostly about expanding sales higher? You mentioned 50% expansion of sales teams. And last question is just on your -- on modeling details. You've got that slide in the PowerPoint. On other income and expense, you guide for EUR 160 million, which is broadly flat year-on-year despite the step-up in investment this year, being an investment and transition year. So I was a bit surprised there's not more of an increase there. Sophie Bellon: So thank you, Estelle. I will take the first question on U.S. Education and Sebastien can answer on the other two questions. So first, you asked on the enrollment. The early indication from our boarding data show that we are about 0.7% below last year in our comparable base, and it really varies from countries to another. Some are growing, others are slightly down. Geographically, we're seeing softer trends in the Midwest and Northeast, while the Southwest and Southeast are showing increases. And these figures are still preliminary, and we'll have a more definitive year-on-year view once final enrollment numbers are confirmed over the next few weeks. But obviously, we are not standing still looking at that. Let me remind you the measures we are taking, and I told you, to boost volumes, retail and of course, to win new clients in the next selling season. And I explained that earlier in the presentation. Also, if we go specifically on international students, enrollment for the fall 2025 is expected to drop due to visa delay, denial, revocation, post-graduation restriction. So it will mostly be graduate program and will be most affected. We could reduce demand for housing, dining and other campus services. And undergrad services like mandatory meal plans are less affected. And also, what we see is that universities are adapting with, for example, mid-semester starts, which may mitigate some of that decline. And of course, we will monitor those trends closely and be ready to adjust our offering, our financial planning and the support to respond to the potential changes in the campus demand. And also, as I said on the slide, we are really investing in our sales force. We expanded our sales team by 50%. So I think it's -- and also investing in our account management team. So we are in the action. Sebastien De Tramasure: So on the second question regarding the investment and the acceleration of the investment in North America. So we have specific investment as described by Sophie for the Education segment. But we are really targeting investment across the organization. We want to strengthen the sales and marketing organization, not only for Education, but for all the segments. And all the investment regarding supply is not only for Education, it's, again, for all our businesses. And on your third question. So we are guiding other income and expenses at EUR 160 million, flat versus fiscal year '25. But the combination of the different restructuring program is slightly different. We had many regional restructuring program to optimize the structure at the regional level in fiscal year '25. We will have less than in fiscal year '26, and we will increase our investment again in our GBS program. The restructuring costs related to the GBS will increase in fiscal year '26. But if we combine both, yes, it's flat between fiscal year '25 and '26. Operator: Next question is from Jaafar Mestari, BNP Paribas. Jaafar Mestari: I have three questions, if that's okay. First one is in terms of your operating models and services. You mentioned some of the qualitative targets that you've achieved this year: branded offers, more than 50% of revenue; Entegra, more than doubled; carbon emissions, minus 34%; food waste, you didn't quite get to minus 50%, but not far. There was another one on digital and new services, 10% of revenue, you haven't said, but I assume you're not that far. My question is, you've achieved most of your soft qualitative targets and yet the overall financial performance was disappointing. What is your assessment here? Did you take targets that were not the right ones, and they need a complete rework under new management? Or was the delivery not deep enough? I guess you can get to 50% branded by changing a logo on the site. So have the teams delivered on these targets the right way, a way that benefits the business? Or have they delivered sometimes in a cosmetic way that has not really helped cross-sell or cross-fertilize the business? Second question, shorter, just on business development. You said yourself, your average signings pre-pandemic were EUR 1.4 billion each year. In H2 '25, this is where you are, EUR 700 million. What have you seen? Is it the industry? Is outsourcing less dynamic? Or would you say it's entirely market share issues on your side? And lastly, on full year '26, net new business, if I look at the forward-looking retention and signings, it looks like you could be a plus 1%, but you never quite get there. And I think that was one of the issues last year where you had 1.6% forward-looking, but you don't quite get there because you lose more staff, because the contracts take time to ramp up. So in terms of net new, could you help us a little bit more in terms of your assumptions in the guidance? Sophie Bellon: Okay. Thank you, Jaafar, for your question. So first -- on the first question, yes, we have delivered. I think when you talk about the offer and the branded offers and the fact that we have reached our target, I think it's a first step. No, it's not just a logo on -- it's not just a logo in a restaurant saying that we are implementing a new offer. It is much more than a logo. It's a menu. It's a number of SKUs that are linked to that menu, and it's more compliance. So I think it's a first phase. And I agree with you that it's not driving gross profit enough yet. And we are fully aware of that and especially in the U.S. where our compliance, at the site level, is not sufficient. And that's why starting in September, all our managers are incentives, from the site manager and upwards are incentives on the compliance. It's a new -- it is for every member in the organization. I think also when you have -- so it takes more time than just sending the offer. You need to also go -- we need to go deeper now. Second, when we talk about the, for example, the digitalization and the fact that now we have 6 million of people that can have access through -- digital access, it will also drive the revenue because we have seen that. And it will also drive the margin because we will be able to answer better what people want on a daily basis. So on your third question, I will let Sebastien answer, and then I will get back to you on the net development. Sebastien De Tramasure: Yes. So on the net new, you're right. I mean, the net impact, if we take the looking forward KPI, 1.4%, and then the in-year impact expected for '26 will depend obviously of the net new from '26 as well and the in-year impact. It depends on the phasing of the development, phasing of the retention. And it's the reason why we took this year a more cautious approach, I would say, baked into the guidance, as we said that the net new impact in-year expected for fiscal year '26 should be between neutral to moderate contribution. And again, the phasing development retention is explaining this cautious guidance in terms of net new impact for fiscal year '26. Sophie Bellon: And in terms of the -- the last question was about the development, right, and the EUR 1.7 billion. Clearly, this year, as I said it in my introduction, financial year '25 has been a challenging year and on new development, especially in the second half, we had a first -- a good start in H1. And what we see -- and the second half was very disappointed. What we see is that, for example, in the U.S. our hit rate with big contract is not sufficient. I think we are doing well in Healthcare, and we had a good net development. We had, as I said, a good retention in Healthcare in the U.S. this year, but we also had a good development. So a net development above 2% in Healthcare in the U.S. We have invested for a while in those teams. We have teams that are capable of addressing and winning a large contract. And we are in the process also of building and strengthening those teams in the U.S. in the other segment. But that being said, there are countries or geography where -- like France or like Australia, where we are winning market share and where we have a good net development rate. So we need to make it happen everywhere. Jaafar Mestari: And that last qualitative target that you didn't explicitly say, the 10% of revenue from digital and new services. Did you achieve that in '25? Sophie Bellon: I'm not sure I understand your question. Jaafar Mestari: I think in your qualitative target, you had doubling Entegra, and you had reaching 50% branded offers, but you also had a target to reach 10% of group revenue from vending and digital and new services. So I just wanted to check if that one was on track as well. Sebastien De Tramasure: On that one, we are slightly below this 10% objective we defined at the beginning of the... Sophie Bellon: 8%. Sebastien De Tramasure: Yes, we are around 8% in terms of covering of -- from advanced food model. Operator: Next question is from Simon LeChipre, Jefferies. Simon LeChipre: I've got three, please. First of all, on organic growth for next year. Could you clarify the timing of the demobilization of the global accounts and also the timing of the -- impact of the reclassification of the contract? I don't quite get why organic growth should drop from 4% underlying in Q4 to kind of 1.5% in Q1, and then how you would then accelerate in subsequent quarters. Secondly, on this contract reclassification, could you clarify if there is any impact on profit and on margin in percentage terms? And lastly, in terms of the organization, I mean, I noticed that Michael is managing Government Services on top of universities. What is the rationale for this? And does that mean you do not necessarily believe in a strategy focused on sectorization similar to what your closest competitor is doing? Sebastien De Tramasure: I will take the first one. So regarding the timing of demobilization of the global account, if you look at the one we lost in fiscal year '24 and the one we lost in fiscal year '25, basically, the overall impact for fiscal year '26 is minus 50 basis points. And it's -- combining both, it's similar impact between H1 and H2. Regarding the reclassification of a large contract in North America. So here, we are talking about a preemptive renegotiation and to extend, the duration of this contract. As I said, we -- given the new term of the contract, we moved from gross revenue to net revenue. And overall, we are renegotiating the economics of the contract, and we are not expecting any significant impact in terms of margin, in terms of [ UOP ] margin. Sophie Bellon: And on the third question on organization, it -- why is it together? Because it has been historical. The person that used to be in charge of Government then extended his role to University. Yes, of course, we are doing market sectorization. It's the only exception. I want to remind you that for us, Government is not a priority. It only represents 4% of our revenue and with a huge contract that you know, U.S. Marine Corps. And so it has been part of that portfolio. And I don't think it's -- it doesn't affect the bandwidth of -- that Michael has to put on universities. And just for the U.S. Marine Corps, because it's the biggest part of that Government business, it still runs for another 18 months. And we are working proactively to -- we expect the client to launch an RFP , but we are fully engaged in the process and also -- yes, fully engaged in the process. Sebastien De Tramasure: And I will go back to your question -- sorry, I'll go back to your question about Q4 underlying versus the guidance in terms of organic growth. We have to keep in mind that Q4, the mix and the weight of Education is lower. So it means that this had a positive impact in our Q4 organic growth. It will not be the same for the full year '26. And also, we had a very strong Q4 fiscal year '25 in Sodexo Live!, with a more than double-digit organic growth in the U.S. with some specific events. And this will not obviously reproduce the full year '26. We will not have 10%, double-digit organic growth in Sodexo Live! during the full year '26. Simon LeChipre: Okay. Just on this impact of contract reclassification, I mean, can you quantify it? And is it going to impact you as soon as Q1? Or does the impact start later on in the year? Sebastien De Tramasure: Okay. So we are currently, again, under renegotiation of this contract. Again, it's a preemptive extension of the contract. Today, we are expecting to sign the renewal of the contract in Q2. So the impact will start in Q2 fiscal year '26, and it will impact negatively the organic growth by 70 basis points for fiscal year '26. Simon LeChipre: So it means that you need to accelerate organic growth after Q1 to offset this impact on top of the rest, right? Sebastien De Tramasure: Yes. And that is the plan, again, with some ramp-up of development. And again, this phasing of Sodexo Live! will be quite different between fiscal year '25 and fiscal year '26. Operator: Next question is from Leo Carrington, Citi. Leo Carrington: If I could ask just two questions. Firstly, I appreciate he doesn't officially start for 3 weeks, but did Thierry Delaporte have any input into setting this guidance? And then secondly, just on the margin outlook again. In terms of the factors pushing margins down mix phasing investments, is it correct to say these are all headwinds? And in terms of the relative importance of all three of them, is one more important than the other? The investment sounded significant, but I wonder if you can quantify that. Sophie Bellon: So thank you, Leo, for your questions. I will take the first one. So regarding the involvement of Thierry, of course, we had a few preliminary discussions with him. But I remind you that he's only starting on November 10. And however, the financial year '26 guidance reflects the work of the current team. It's also the result of a bottom-up approach based on the visibility we have for the year. Sebastien De Tramasure: Okay. And on the investments, so we are not providing any specific quantification at this stage of each investment. We'll do it in another time, I would say. And again, there are moving parts on this timing of the investment. It's the reason why we said that, again, it will have [ this ] negative impact in terms of margin for next year. Operator: Next question is from Kate Xiao, Bank of America. Kate Xiao: I have a couple. The first one is a follow-up on the previous question on branded offer. You mentioned, Sophie, that now the first step is done, and you need to go deeper now. I wonder if you could elaborate what that means? Do you mean a further, I guess, change of the organization, change of the team so that it's more brand focused, more sectorized? And would this be a big task for the new CEO? That's my first question. And the second question also on just investment. I think, Sophie, you mentioned before for fiscal year 2024, you spent more than EUR 600 million on IT, data, digital. I wonder what that number is for '25? And do you see a step-up in '26? If you could just -- obviously, I appreciate you cannot give us exact numbers, but the level of step-up would be really helpful. And then just number three, specifically on retention. I think you mentioned that you're doing preemptive renegotiations with big contracts. I guess, any progress there? Are you doing more in terms of preemptive retention -- preemptive efforts to help really with retention? If you could elaborate on the efforts there? Sophie Bellon: Okay. So I will take the first question on the branded offers. I think it's a work, as I said, that started a couple of years ago. And when I mean go deeper, it's that -- for example, we are implementing in Education a brand that -- are -- one and all brand, it's close to EUR 1 billion of revenue, thanks to the active conversion of the sites during summer break. Now it's our largest brand globally and regionally. So it means that now the team have adopted the brand, but then we need to make sure that the implementation is happening right, that the right recipes are implemented, that the right menu, the right products. And it's by -- when I mean go deeper, it's making sure that operationally, it happened on each and every site the way it should happen. That's why I explained that, for example, in the U.S., where -- when you implement a brand, like I just said for University, it implies a lot of people. We have also added for every single manager the compliance because that's what will improve the margin and the profitability on those sites. And then about Thierry, of course, he will make his assessment of the situation. But definitely implementing the brands and not just putting names but an offer with -- that matches the client and also especially the consumer needs with price points, more standardization, less SKUs, better leverage on our purchasing powers simplifying the bid process. All that takes time, but it will definitely help us make progress. Maybe, Sebastien, you want to answer the second question? Sebastien De Tramasure: On the investment in IT and digital, based on all the ongoing program, we have been increasing our investment if you take OpEx and CapEx in fiscal year '25 compared to fiscal year '24. And again, with this acceleration of our transformation with the ERP, with the finance supply platform, the food platform as well, AI and data, again, this amount will continue to increase for fiscal year '26. Sophie Bellon: And in terms of retention, as we said, we have made progress, and there are areas or countries where we are fully aligned with our targets, to be above 95% and at some point, in midterm, at 96%. And on the preemptive bid, yes, we are pushing. I don't have the exact number with me today, but we can get back to you. And we are definitely pushing, and it's something that we want to make happen, as I said, not just in some geography, but all geography and all segments, especially in the U.S. Operator: Next question is from Sabrina Blanc, Bernstein. Sabrina Blanc: I have three questions from my part. The first one is regarding the branded offer. I would like to have more idea of how it has been organized. I mean, who has designed the brand, who is in charge of the leadership of the brand? My second question is regarding -- you have mentioned the hiring of commercials. I would like to understand in which areas specifically, if it's regarding the GPO for new commercial? Or is it commercial dedicated to the retention? And are they incentivized in these three key segments? And lastly is regarding the M&A. You have mentioned bolt-on acquisition, but we would like to understand in which areas you are focusing and what are your KPIs? Sophie Bellon: Okay. Thank you, Sabrina. So for the branded offers, for example, I just discussed, all in one, in the Education market in the U.S. This brand has been designed one and all -- sorry, in the U.S. in the University business. It has been designed by the team in Universities and getting some support from the North American marketing team. There are some brands like Modern Recipe where we have -- that we have implemented in different countries, in the U.S., but also in Europe. And there, we have a center of expertise at the group level, so we can accelerate the share of best practice between countries. And -- but it's the countries that are responsible for growing the brand at the local level by segment because, of course, those offers are different what we propose, an indication is different from what we propose with a Modern Recipe or Good Eating Company in corporate services, even though sometimes Good Eating Company, if there is a need, could also be proposed on a campus. But the brands belong where most of the revenue happen with that brand. On the second -- your second question about commercial: in which area specifically? Well, in all areas. Now we hired a number of salespeople with -- in the GPO and in our Entegra business and especially in the U.S. But we also hired -- as I said, we want to increase our sales team. And we have increased our sales team, I think, in the U.S. by 30% this year. And how are they incentivized? We have changed the incentive for our sales team. And we have revamped our sales incentive structure. Previously, it varied by region and wasn't always linked to the individual performance or profitability. Now we have a global commission that based system with a consistent rule across the region. It includes clear threshold and accelerators for over-performance and staggered payouts to ensure quality and overs. And we also -- we have also added specific incentives for renewals, cross-selling and strategic priorities. So in terms of sales incentive, we have worked a lot. And now it's really rolling out, and it's really implemented for fiscal year '26, but we have really worked a lot on making sure that we have the right incentive and also the right teams. We have changed a number of people in our sales team. Sebastien De Tramasure: And to the third question regarding M&A. So we have a very clear strategy regarding M&A. We want to invest in food. We want to invest in our existing markets. And then we have done investment in GPO, especially in Europe over the past year and especially in France in fiscal year '25. We are also investing, and we have been investing since 2022 in convenience in the U.S. So here again, we are talking about small, midsized bolt-on acquisition, very important to get the scale and the efficiency with the supply. And then we want to invest in also a key market on food, again, market share in the U.S., in Europe, also in the Rest of the World, but again, focusing on our key existing markets. A good example is the acquisition, the signing of Grupo Mediterránea in Spain. It will allow us to double our footprint in the Spanish market. And also, we can also do some small acquisitions to gain capabilities in advanced food models. It can be also linked to commissary and central kitchen capabilities. And in terms of indicators, [ LGO ] payback, we look at the [ LGO ] payback below 10 years. And we looked at the ROCE and the objective is to have a ROCE above 15%. Operator: Next question is from Andre Juillard, Deutsche Bank. Andre Juillard: Just a follow-up on investments in general. Could you give us some more color about what you plan to do in terms of IT and reporting software? Do you still have some significant investment to do on that side? And could you give us some quantification on that? And regarding CapEx, you remain relatively low with 2% compared to your main competitor. Do we need to anticipate a significant improvement on that side or not? Sebastien De Tramasure: So I will start with the CapEx. So you are right. Today, our CapEx level is around 2%, fiscal year '24 and fiscal year '25. The objective is really to reach 2.5% with, I would say, two main components. The first one is supporting retention and development. So we need CapEx to sign large deals. And as we said before, this is one of our priority. And then we need also CapEx for the -- our investment in IS&T and digital, especially for our ERP program. So this is really the reason for the targeted increase in terms of CapEx. Sophie Bellon: And just to add to what Sebastien just said, in terms of CapEx, as I said -- and as I said also earlier, we want to sign more large deals, and we want to improve our hit rates on large deals. So the way that happens, the large deals are the one where we spend more money. And the fact that our hit rate has not been as good as expected explain also the fact that our CapEx today is closer to 2% than 2.5%. So hopefully, when our hit rate with those big targets improve, it will have an impact also, and it will automatically increase the percentage of our CapEx, and we will get closer to 2.5%. Andre Juillard: But you still consider that 2.5% is the right number? Sophie Bellon: Yes. Well, we have been talking about 2.5% and still staying at -- so far now, we really want to reach 2.5%. And if you know, some specific deals that sometimes it happens in Sodexo Live! or in Universities in the U.S., if we need to go beyond, we will go beyond but not systematically. Operator: Next question is from Johanna Jourdain, ODDO BHF. Johanna Jourdain: Two questions from me. First one, could you please remind us the level of renewals in large contracts to come in '26? And can you update us on where you stand there on those renewals? And second question, can you update us on the ramp-up of the Healthcare contracts that were delayed in '25 or late to start and in particular, the captive contract in North America? Sophie Bellon: So thank you, Johanna, for your question. So the level of renewal for the large contract, I think you're talking about the GSA contract because last year, we had -- in fiscal year '24 and '25, we had a big number of those GSA contracts in renewal. And today, this fiscal year, we don't have any. So there will not be any renewal of those large contracts and a very small number also for fiscal year '27. The contract that we discussed earlier is not -- it's not a global account. And so that's for a clarification on those large contracts. And then for captive, first, last year, we talked about the ramping up of Healthcare and especially that contract. We have had two big contracts in Healthcare, ProMedica and University of Cincinnati that started in June and July. So there, we are on track. And as I said, we had a very good net development for Healthcare during the fiscal year '25. For captive, during the first year, as I remind you, it was a very innovative contract. And the first year, we spent more time and focus than anticipated in evaluating the existing client for the transition into the captive program. And this led, as you know, to a slower-than-anticipated ramp-up of new business. We signed the very first contract with captive members at the end of financial '25. Currently, we are negotiating with a significant number of clients. The pipeline is well advanced and robust. And our objective remains unchanged to sign over EUR 100 million in contracts within the first 2 years of the program. But since the launch was shifted to the end of fiscal year '25 instead of the beginning of '25, our target is now to reach EUR 100 million in signed contracts across '26 and '27. Operator: We have no further questions registered at this time. Back to Sodexo for any closing remarks. Sophie Bellon: Well, thank you very much for your question. And as this is my last call as CEO, I would like to sincerely thank you for all your -- for your engagement and your constructive dialogue over the years. I remain deeply confident in Sodexo's strength, and I look forward to continuing to support the company as Chairwoman. Thank you very much, and take care. Operator: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.