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Operator: Good morning, everyone, and welcome to Blue Owl Capital Corporation's Third Quarter 2025 Earnings Call. As a reminder, this call is being recorded. At this time, I'd like to turn the call over to Mike Mosticchio, Head of BDC Investor Relations. Michael Mosticchio: Thank you, operator, and welcome to Blue Owl Capital Corporation's Third Quarter 2025 Earnings Conference Call. Yesterday, Blue Owl Capital Corporation issued its earnings release and posted an earnings presentation for the third quarter ended September 30, 2025. These should be reviewed in connection with the company's 10-Q filed yesterday with the SEC. Additionally, OBDC and Blue Owl Capital Corporation II, or OBDC II, issued a joint press release announcing that the companies have entered into a merger agreement pursuant to which OBDC will acquire OBDC II. The merger is subject to the satisfaction of customary closing conditions, including OBDC II shareholder approval. All materials referenced during today's call, including the earnings and merger press releases, earnings and merger presentations and 10-Q are available on the News and Events section of the company's website at blueowlcapitalcorporation.com. Joining us on the call today are Craig Packer, Chief Executive Officer; Logan Nicholson, President; and Jonathan Lamm, Chief Financial Officer. I'd like to remind listeners that remarks made during today's call may contain forward-looking statements, which are not guarantees of future performance or results and involve a number of risks and uncertainties that are outside of the company's control. Actual results may differ materially from those in forward-looking statements as a result of a number of factors, including those described in OBDC's filings with the SEC. The company assumes no obligation to update any forward-looking statements. We would also like to remind everyone that we'll refer to non-GAAP measures on the call, which are reconciled to GAAP figures in our earnings presentation available on the Events and Presentations section of our website. Certain information discussed on this call and in the company's earnings materials, including information related to portfolio companies, was derived from third-party sources and has not been independently verified. The company makes no such representations or warranties with respect to this information. With that, I'll turn the call over to Craig. Craig Packer: Thanks, Mike. Good morning, everyone, and thank you all for joining us today. In addition to reporting another quarter of solid results for OBDC, we are also pleased to be announcing a merger between OBDC and OBDC II, a transaction which we believe can create meaningful value for shareholders of both funds. First, I would like to review OBDC's results for the quarter, and then I will spend a moment discussing the transaction. Our objective has always been to deliver consistent returns to shareholders, and we are pleased to have done that since our founding nearly 10 years ago. This long-term focus continues to guide our strategy and how we manage OBDC and in the third quarter, we delivered solid results that reflect the ongoing strength and resilience of our portfolio. We generated adjusted NII per share of $0.36, which represents an ROE of 9.5%. These results were roughly in line with our long-term average, though they have come down from peak levels due to the declining base rate and spread environment. While Jonathan will go into more detail shortly, our results in the third quarter reflected a lower level of nonrecurring income as compared to our historical average. As of quarter end, our net asset value per share was $14.89, a modest decline of $0.14 from the prior quarter. We note that our NAV remains consistent with levels from a few years ago and has increased over 4% since inception, underscoring the durability of our strategy and portfolio. Our portfolio continues to benefit from our disciplined investment approach which emphasizes larger recession-resistant businesses. During the quarter, we marked down a few watchlist positions, but we want to emphasize that these positions have been on our watch list for several quarters and don't reflect new credit issues in the portfolio. Overall, the portfolio's fundamentals remain strong. And as Logan will detail later on, we are not observing any broad signs of stress or a material increase in amendment activity. With that, I want to take a moment to address the recent headlines surrounding private credit, which have generated a lot of intention and a confusion for investors. It's important to clarify where we participate within the broader landscape. Our primary focus is on direct lending, which we believe is one of the most attractive areas of the market. Direct lending, we make primarily senior secured loans directly to companies, typically as the lead lender which affords us the ability to be a direct dialogue with our borrowers and sponsors to shape transaction terms and credit documentation. This direct engagement also gives us access to comprehensive financial reporting, and an ongoing dialogue with our portfolio companies. The transparency and control this provides allows us to build a complete picture of each credit during underwriting, gives us greater confidence compared to deals in the public fixed income markets. Our portfolio is continuing to perform well. And as Logan will describe later, our borrowers are demonstrating solid revenue and EBITDA growth. OBDC's healthy credit performance as evidenced by our below industry average nonaccrual and loss rates is a direct result of our disciplined approach, and focus on high-quality, upper middle market businesses. Public market sentiment with respect to BDCs seems to be disconnected from the realities on the ground and we encourage investors to look beyond the headlines and focus on the fundamentals that drive our strong risk-adjusted results over time. Next, I'd like to briefly highlight the transaction we announced yesterday to merge OBDC and OBDC II, with OBDC as the surviving entity. The merger strengthens OBDC's position as the second largest publicly traded BDC adds nearly $1 billion in net assets and creates a larger, predominantly senior secured portfolio with potential for earnings accretion over time. This merger marks an important step in streamlining our BDC platform while enhancing long-term value for shareholders. Now I will turn it over to Logan to provide more detail on OBDC's portfolio and the proposed merger. Logan Nicholson: Thanks, Craig. We saw a pickup in deal activity during the third quarter with originations of $1.3 billion and fundings of $1.1 billion, that outpaced $797 million of repayments and resulted in net leverage of 1.22x at the end of the quarter. In addition to a higher number of new deal originations this quarter, approximately 40% of the originations were add-ons, consistent with the past 3 quarters. This sustained level of add-on activity underscores the benefits of being an incumbent lender as it allows us to support the continued growth of our borrowers. As we've increased in scale, we've been able to commit capital in greater size to larger borrowers while maintaining a highly diversified portfolio. For example, our average hold size across our platform on new direct lending deals has grown from $200 million in 2021 to roughly $350 million this year, while the total deal size doubled to nearly $1.5 billion over the same period. This enhanced capacity allows us to participate in some of the largest and most attractive transactions in the market and shows the secular trend of larger borrowers preferring direct solutions. Next, I'd like to reiterate that the fundamental performance of our portfolio remains strong. We believe our borrowers are among the highest quality we've seen since inception. This is supported by the scale and diversity of our $17 billion portfolio, the increasing size of the companies we lend to and our continued focus on senior secured investments, which represent 89% of the portfolio near record levels, excluding our specialty finance and JV investments. Our credit metrics continue to reflect strength. The cumulative fair value of our 3s to 5s rated names is approximately 8%, which declined nearly 2% since year-end 2024. Our nonaccrual rate remains at the low end of the range across the BDC sector and in line with our historical average at 1.3% at fair value this quarter which is modestly up, primarily due to the addition of Beauty Industry Group, which had been on our watch list for over 2 years. Credit-related amendment activity is stable with no signs of increased pace or intensity of amendments over the last 2 years. We also monitor portfolio company revolver drawing activity closely as it's an indicator of stress and our average revolver draws are below 20%, a conservative level that has actually been decreasing throughout the year. Further, on the theme of larger, more resilient borrowers in the market, the average revenue and EBITDA of portfolio companies has grown to over $1 billion and $229 million, respectively, nearly double the level of 4 years ago. We continue to focus on upper middle market borrowers that are scaled players with access to more resources to manage various headwinds. These companies have market-leading positions with diversified revenue streams, strong recurring cash flow profiles, healthy liquidity and generally operate in noncyclical defensive sectors of the economy that are expanding, including health care, technology, business services and insurance brokerage. As a reminder, we intentionally avoid more cyclical sectors such as energy, chemicals and retail, which are featured more prominently in the public markets and tend to be more volatile. These larger businesses have continued to perform well with year-over-year revenue and EBITDA growth again in the mid- to high single digits, and average LTVs of 42%. Our interest coverage ratio increased to approximately 2x based on current spot rates up from 1.7x, 1 year ago, reflecting ongoing portfolio company EBITDA growth as well as base rate reductions, and we expect that will continue to improve as base rates decline further. Also, I wanted to highlight that PIK income at 9.5% of total investment income is down from 13.5% a year ago, primarily driven by refinancings of several PIK investments. As we've highlighted in previous earnings calls, the vast majority of our PIK names were underwritten at inception, and we have not had any nonaccrual bankruptcy or principal loss on any of these structured PIK loans since inception. In summary, Q3 credit performance metrics, including below market loss rates, steady amendment activity and strong borrower fundamentals underscore the quality of our portfolio and we believe our credit business remains well positioned. Turning back to the proposed merger between OBDC and OBDC II. OBDC II was launched in 2017 to give individual investors access to the same strategy and platform we originally offered institutions through OBDC. Both portfolios are highly aligned and comparable exposures to senior secured loans and nearly all of OBDC II's investments, about 98% overlap with OBDC. These portfolios are managed by the same investment team and reflect a consistent investment composition and credit quality. As Craig mentioned, this transaction adds scale to OBDC's portfolio, bringing in $1.7 billion of investments which will increase the portfolio to $18.9 billion across 239 companies. With the addition of complementary portfolios from OBDE last year and now OBDC II, the overall portfolio will have grown by 40%, affording us more scale and diversity. The merger strengthens our balance sheet given OBDC II's lower leverage at 0.78x, and we expect the transaction to be accretive to NII over time. We anticipate approximately $5 million of cost savings in the first year, largely from eliminating duplicative expenses. Over time, there is potential for lower cost sources of capital and greater flexibility to pursue new investment opportunities. Finally, while this merger would provide liquidity for OBDC II shareholders, it is worth noting that these shareholders have had access to liquidity through a quarterly repurchase program, which met 100% of shares tendered for nearly 7 years. We believe this transaction positions the combined company well to continue to deliver attractive risk-adjusted returns as a market leader in the space. And now I'll turn over the call to Jonathan to provide more detail on our third quarter financial results and the mechanics of the proposed merger. Jonathan Lamm: Thank you, Logan. To summarize OBDC's quarterly performance, we ended the quarter with total portfolio investments of over $17 billion, total net assets of nearly $8 billion and total outstanding debt of approximately $9.5 billion. Our second quarter NAV per share was $14.89 down from $15.03 last quarter following write-downs of existing watch list positions. Starting with the income statement. As Craig mentioned, we earned adjusted net investment income of $0.36 per share, down from $0.40 as compared to the prior quarter driven primarily by lower nonrecurring income, which was $0.02, well below the $0.05 we generated in the second quarter and our historical run rate average of approximately $0.03. The Board also declared a fourth quarter base dividend of $0.37, which will be paid on January 15, 2026, to shareholders of record as of December 31, 2025. In prior quarters, we over-earned our base dividend, allowing the Board to declare supplemental distributions. This quarter, given the lower rate environment over the past year, we did not generate excess earnings to distribute under our dividend policy. Craig will provide additional color on our dividend outlook later in the call. As we have previously reported, our spillover income remains healthy at approximately $0.31 per share and supported our base dividend this quarter. Moving to the balance sheet. We finished the quarter with net leverage of 1.22x, up modestly from 1.17x and within our target range of 0.9 to 1.25x as we had net fundings of $273 million. In terms of liquidity, we remain well capitalized with significant capacity to invest as new opportunities come in. We ended the quarter with over $3 billion in total cash and capacity on our facilities which was well in excess of our unfunded commitments. We have no material short-term maturities, and our robust liquidity position provides us with more than ample unfunded capacity to meet any near-term funding needs. Overall, we remain very pleased with our results and believe that our balance sheet is well positioned for the environment ahead. Lastly, I'd like to spend a minute describing the proposed merger consideration. The transaction is structured as a stock-for-stock merger with each OBDC II's shareholder receiving a certain number of OBDC shares to be determined just prior to closing. The exchange ratio will be determined by a formula, which will be struck on a NAV-for-NAV basis if OBDC is trading at or below NAV per share, or a premium that will benefit OBDC's shareholders if OBDC is trading above NAV per share. As a sign of support from Blue Owl, OBDC and OBDC II will be reimbursed for 50% of the fees and expenses associated with the proposed merger up to $3 million in total which will be paid for by OBDC's adviser if the proposed merger is consummated. OBDC's Board of Directors has also authorized a new share repurchase program of up to $200 million in open market purchases from time to time, to account for the increased size of the combined company. This will replace our current $150 million share repurchase plan. Finally, we are expecting to close the transaction in the first quarter of 2026, subject to customary closing conditions. Now I will turn it over to Craig for some closing remarks. Craig Packer: Thanks, Jonathan. To close, I want to talk about our earnings outlook in the current environment and the quality of our portfolio. As expected, rising rates over the past few years increased our earnings given the floating rate nature of our portfolio. We have passed those gains through to our shareholders via regular and supplemental dividends. As a reminder, we implemented the supplemental dividend policy, in part because we expected that elevated base rates would likely eventually subside and this mechanism would provide for a naturally adjusting tool to allow for these rate movements to flow through to dividends. Naturally, if base rates decline further as the market currently expects our earnings and dividends will adjust as well. That said, we think it's important for investors to separate out the impact of potentially lower rates on the portfolio from the risk of significant credit concerns. While rates may decline, we continue to feel confident in the strength of our portfolio, supported by solid fundamentals, disciplined underwriting and a defensively constructed asset mix. Our loss rates remain well below market averages, a reflection of our consistent focus on downside protection and credit selectivity. Even in a lower rate environment, we believe OBDC will continue to have strong credit performance, that will provide investors with a steady stream of dividends that will be attractive relative to other investment opportunities. Thank you for your time today, and we will now open the line for questions. Operator: [Operator Instructions] Our first question comes from the line of Brian Mckenna, with Citizens. Brian Mckenna: So starting on the OBDC II merger nonaccruals in this portfolio are 60 basis points above OBDC. So what's driving this? And then what part of that portfolio has underperformed relative to OBDC? And then leverage is clearly lower, but what kind of ROEs has OBDC II generated since inception? And then is there a way just to think about the incremental ROE post the merger? Craig Packer: I'll start. Brian, it's Craig. I'll start and then Jonathan can chime in. Look, for those that aren't familiar, OBDC II was raised about a year after we initiated OBDC. The portfolios have almost complete overlap, almost 100%. It's the same names invested in the same period of time with the same economics with the same strategy and the same team. The OBDC II will comprise about 10% of OBDC. So the impact of merging it in is really quite modest given the overlap in names the higher nonaccrual rates are a function of the names on nonaccrual being a little bit bigger, at OBDC II because OBDC II is still operating under a lower leverage constraint than OBDC. It has the old leverage rules. So it's capped at one turn of leverage. We'd be running at 0.75x of leverage. And so we've had the nonaccruals or just a little bit bigger part of that portfolio. But it's the same names that OBDC already has exposure to. When you add them in, it has an immaterial impact on overall credit statistics at OBDC. So their names were already in, slightly higher immaterial impact. I don't know, Jonathan, maybe you want to hit the ROE question. Jonathan Lamm: Yes. So on the ROEs, obviously, just given we've been running OBDC leverage the middle -- towards the middle over time, middle to the upper end of our target leverage ratio, whereas OBDC II has been running as Craig alluded to, at 0.6x, call it to 0.75x. Historically, the ROEs just based on the returns associated with that leverage have been lower. But as the companies come together, Brian, we think that there's about 15 to 20 basis points of ROE accretion that we can create across the portfolio, and that's really driven by OpEx synergies that we can see, some liability management associated with some of the financings in particular in OBDC II that we can refinance into single facilities, and OBDC II just has a little bit of a higher weighted average asset yield. Brian Mckenna: Okay. Great. That's helpful. And then just as it relates to the stock, it's now trading at 82%, give or take, of book value. A few years ago, you did an Investor Day, you laid out some steps you were going to take to improve the valuation. As we sit here today, we're clearly in a different part of the cycle. But I mean, what are you doing as a management team to improve the valuation? You refreshed and upsized the buyback to $200 million. Should we expect you to be a little bit more active there? And then should we expect to see maybe some insider buying and even some repurchases from OWL? Craig Packer: So we laid out some goals at Investor Day that I think were very effective. And in fact, the stock within a year or so actually got to book value. So we were very pleased with that at the time. One of the goals, just to say it at the time was also to simplify our BDC portfolio, which at the time was 7 names, and we had a stated goal of getting it down to 4 names. And with the merger we're announcing today, if that's approved and closes, we'll accomplish that goal. We're quite mindful where the stock is, and it's something we take quite seriously and discuss as a management team and with our Board. I think just running some math, the stock is yielding more than 11%. So it's hard for us to reconcile that with the performance, which has been very consistent. We think that what's happening with the company and high-quality BDCs is simply a rate cycle that we're going through. And as you acknowledge, we're in a different part of the rate cycle now. But credit performance in the portfolio remains very strong even with the impact of the one nonaccrual. I won't try to go point by point through all the tools, but I just would say all the tools are on the table. Buyback, I think part of what we did in the earnings day was just provide a lot of transparency around the quality of the portfolio. I think with a lot of the headlines now, investors are oftentimes taking just a knee-jerk reaction to a headline. And so I think part of our job is to make sure that people hear our confidence in the portfolio, and that remains the case today. But whether it be buybacks, I think certainly with the merger, that's something that we'll be attuned to. We have the buyback that's out there. Insiders, we don't -- direct insiders to buy the stock, but obviously, a lot of employees find it attractive from time to time. We did do a special program around at the time you mentioned for employees, we'll certainly look at that tool as well. So it's all available. And we've been very focused and have been very focused on creating value for shareholders and getting the stock back to where we think it should be. And candidly, where the analyst community has it projected out as well. Operator: Our next questions come from the line of Arren Cyganovich with Truist. Arren Cyganovich: With respect to what you were discussing in your prepared remarks about base rates declining further as the market expects and earnings and dividends having to be adjusted, I guess, is there a certain level that you would have to be below the current NII? Or is it just once you kind of see the future there, you'll make that adjustment? And then I guess, lastly, what are your expectations for rate cuts over the next 4 or 5 quarters? Craig Packer: So on our expectation, look, we don't consider ourselves macro economics with the macro view. We tend to look at the forward curve as the best sense of market sentiment. The market sentiment, and we focus on SOFR. And by the end of next year, that's expected to get to be about 3%. So I think that's our expectation, but that we're really just mimicking the market, and we'll have to see there. The -- in terms of -- look, dividend policy is robust. We look at it every quarter. We discuss it with the Board every quarter. That's not new to this environment. We had those same discussions as rates were going up and -- throughout this period of time. And obviously, we're in a different rate environment. We want to have a base dividend that is sustainable with a rate environment that we -- if we expect the rate environment to stay in a stable place, but rates could move up and down. And so you're constantly evaluating this. We put the supplemental dividend in place when rates went up because we thought that might not be sustainable and the supplemental, I think, worked extremely well. We're going to strive to find the right balance between being very thoughtful on rate moves -- excuse me, dividend moves. We -- the portfolio is performing well. This quarter, our NII was $0.01 -- our dividend was $0.01 above at our NII. We have significant spillover. We've said we're comfortable through the end of the year. We remain comfortable through the end of the year. But as we look to 2026, given how much rates have come down or expected to come down, it's logical for investors to think that we'll evaluate reducing the dividend appropriate with the earnings power in a lower rate environment. So we'll look at it. We have a strong performing portfolio. And our dividend levels for investors who are newer to the stock were lower in a lower rate environment. If you went back to when rates were at 3%, our dividend was about $0.33. So it's -- there are good data points that investors can look to, to try to calibrate where dividends will go. We enjoy the benefit of higher rates, but this -- we think this company is designed to generate a premium return in all rate environments. It's not designed to generate a high level of return when rates are low because of the quality we're investing in, in the market we invest in, the rate -- the investment opportunities fluctuate. The absolute return fluctuates based on where rates are. So I think you can look at where our rates were at a 3% environment at $0.33 and get a sense of the order of magnitude of what we might consider. We're not doing that now. We're not going to do that for the fourth quarter. And we'll have discussions with our Board as 2026 gets underway based on rate expectations at the time to consider what we do with the dividend. But we have a quarter's worth of spillover income. And so that gives us a little bit of cushion, but we're not stubborn about it either. We think that the base dividend level should reflect the earnings power of the portfolio and the expected rate environment for a reasonable period of time. So hopefully, that gives you a little bit of a context of how we think about it. Operator: Our next questions come from the line of Robert Dodd with Raymond James. Robert Dodd: Moving on to like the outlook for originations activity, et cetera. I mean, I think you've well covered the dividend discussion at this point. I mean, you are at basically towards the high end of your target leverage. Obviously, when OBDC comes in, then that would adjust. But I mean, is there any opportunity to -- or do you expect there to be an opportunity to may take any assets or anything like that in terms of to be -- if M&A activity does continue to ramp that we're hearing about, you're a little -- not tapped out, but I mean, you're towards the -- you might not be able to participate that in that as fully given where the leverage is unless you can obviously, repayments happen too. I mean what are your thoughts on what the opportunities are if there is a real M&A cycle given where your leverage is to start with? Craig Packer: So I'll make a couple of comments, and Logan, maybe you can comment on what activity levels we're seeing right now. You're right. We are at sort of the higher end of the range that we've had. Look, we have a very prolific ability to originate assets at Blue Owl. It's one of our great strengths as a platform. Even in moderate M&A environments, we -- this past quarter, as a platform originated $10 billion worth of deals. What we've been doing at OBDC is really trying to match originations to repayments to stay at sort of the mid- to higher end of our range to generate good returns. It's not easy to do that perfectly because deal closings and repayments aren't perfectly precise. So we're at the higher end. The merger will take leverage down a little bit by itself, and so that will create some cushion. And guys, what is it, 1.15x or something pro forma. So 1.15x pro forma. So that alone will get us down a little bit. And we can modulate this pretty easily in any given quarter because we're constantly getting repayments and so I think that we can participate in an attractive deal flow cycle if we see an unusually attractive cycle just by allowing some repayments to come in and deploying to get back to a 1.2x, 1.25x. We -- Logan, maybe just comment on what the deal environment has been. Logan Nicholson: Yes. Sure. In the fall, we've seen a meaningful pickup in our activity levels. We've seen in the last couple of months, particularly in September, a pickup of our activity and pipeline by about 1/3 from prior quarter levels. And the mix is significantly weighted now towards sell-side M&A opportunities, which usually and typically result in greater upfront fees when doing a brand-new deal. And there's more new capital, obviously, in those new deals as well in the supply versus what you've seen over the last 2 years is dollar-for-dollar refinancings of deals that come with very little upfront fees. So the mix is better and the pipeline is higher. We're trying to be cautiously optimistic given we need to get the signings of those deals, but we would note that the teams are very busy and the outlook, we're quite optimistic. I'd also point out something that we pointed out last quarter and after the OBDE merger that also rings true after OBDC II, we continue to have less pro forma JV and strategic equity investments as we would have had prior to the merger. And so it gives us an opportunity to deploy into those accretive and noncorrelated opportunities. And if you look at this quarter, as an example, the differences are modest, but that dividend income offset some of the base rate decline and was stable and noncorrelated to the rest of the portfolio. It was really more onetime income-related items that had the impact this quarter versus last quarter. So I think those JVs and strategic investments will be a place post the OBDC II merger where we're able to take advantage of it. Robert Dodd: And the follow-on is exactly that. I mean you created a new vehicle, the cross-strategies opportunities or whatever it was called, I think, this quarter to take advantage of that. I mean it's obviously very, very small right now. I think it's like $5 million position. I mean how big could that vehicle be as a piece of the portfolio? And what kind of return on capital do you expect from those versus the -- from that type of opportunity versus the on-balance sheet direct lending? Logan Nicholson: Sure. So I think it's a great example of the benefits of the platform. Last quarter, we talked about the equipment leasing JV we set up with CalSTRS. And this quarter, we set up another entity really for asset-based and alternative credit across the platform. It's meant to be a diversified box of secured investments across a diversified pool of, call it, conviction calls or best-in-class opportunities from the Blue Owl platform. We're going to go slowly and keep it quite diversified. But I would expect that there will be some meaningful opportunities there. Just like every other one of our strategic equity and JV investments, it's going to be a small individual part of the portfolio. It could be 1% or 2% over a number of years. So I wouldn't expect it to move the needle a lot in the next quarter or 2. But over the next few years, we would look to grow it. And returns-wise, just like all of the other JVs we've set up, we're targeting a low double-digit type of return profile that should hopefully be with an asset-backed -- asset base noncorrelated to the corporate credit in the other direct lending names. So similar return profiles, and we're going to move slowly and deliberately in the deployment of that new entity. Operator: Our next questions come from the line of Finian O'Shea with Wells Fargo. Finian O'Shea: Logan, sticking with you. I found one of your opening comments interesting on the average or hold sizes and facility sizes approaching $1.5 billion. Correct me if I'm wrong there. I think you were talking about the tranche size total of an average name. Is that indicative of more refi repricing risk as the leveraged finance market continues to hold up strong -- and how much, I suppose, higher do you think that will go over time? Or do you think it's more -- do you think you'll be more so broadening as opposed to growing in size of companies? Logan Nicholson: Yes. No, thanks for the question, Fin. It is related to tranche size, not our specific Blue Owl hold size. And it's been increasing meaningfully. If you look at the first quarter, we noted a comment that in one of the quarters this year, the average deal size exceeded $2 billion total tranche size. So we're seeing sizable businesses, some of them even north of $10 billion enterprise value, choosing direct. And I think if the average deal size or even half of that, we would have the same dynamic of competition with syndicated markets or public markets. So I don't think that that's new. And I think a point of validation that we continue to monitor are the new M&A and new borrower choices. And there are third parties like S&P, for example, that put out market share statistics quarterly. And despite the public markets being wide open, north of 3/4 of all of those new M&A deals and LBO deals are still choosing direct. So we don't see -- even in this low spread public market environment we don't see material share loss. In fact, we see it the other direction. And I think the experience our borrowers are having is a good one with direct lending. And I think you're seeing that adoption continuing. So the number of companies in the private markets, the scale of those companies, how long they can stay private for longer is a secular shift. And I think the secular shift to direct is something we're experiencing every single quarter. So I think we have a reasonably long runway for that to continue. And we're not concerned that the dynamic right now is any different with the public markets. Operator: Our next questions come from the line of Casey Alexander with Compass Point. Casey Alexander: I'm kind of curious in relation to the $200 million share repurchase program. And I noticed that the merger doesn't have any lockups or gates for the OBDC II shareholders. So is it kind of your plan or your strategy to hold that for after the merger and use that to absorb any potential selling pressure that might come from the merger? Craig Packer: I don't think that we've made that determination. I think that we think about the buyback, this is something that to be used anytime and obviously, current share price environment is one that you have to be looking hard at it. Just because you're raising it, and again, investors may not be familiar with OBDC II. OBDC II throughout its entire life for 7 years has had quarterly tender offers. And we have fulfilled every penny of every tender offer for every quarter for 7 years. So unlike other BDC mergers in the space, where a merger with a public BDC would be the first opportunity for investors to get liquidity. These investors have not only had access, but they've all -- anybody who's wanted out it's gotten out on schedule. So I think there's a lot of fact patterns to suggest that investors in OBDC II wouldn't necessarily be sellers because if they wanted to sell, they could have just sold in the last tender off we did. So I don't -- so therefore, we're not thinking about our buyback as necessarily needed for the closing of that merger because that fact pattern wouldn't suggest that the merger would create more sellers. So we just view it as to be used in any environment. And certainly, again, the stock price is at a level that we'll look at it. Operator: Our next questions come from the line of Mickey Schleien with Clear Street. Mickey Schleien: Craig, thanks and Logan, thank you for all the discussion of the market backdrop. But I wanted to follow up on that issue by noting that we've heard generally that activity has picked up in the third quarter, which is obviously a good thing and that could help balance the direct lending loan market. And with that in mind, I'm curious what your sense is of the market's current balance or disequilibrium and your outlook for spreads, particularly going into next year? Craig Packer: Sure. I'll start and Logan, you are welcome to chime in. Look, I'm glad you're asking the question because I think when you look at earnings, certainly our earnings and maybe other BDCs, there are a few different pieces that are at play here. And I think it's worth spending a second on this. We're really confident in the quality of our portfolio. Our portfolio continues to perform well. We did have the one nonaccrual. But overall, we expect credit performance to continue to perform well. What's happened is there's been a meaningful move on rates over the last year, 100 basis points move on rate, and that's been the primary driver of earnings. That shouldn't be a surprise given the floating rate nature of the assets, but it certainly will produce headlines that earnings are down in a given quarter or down over a year. It's just a function of rates. But to your point, there's another piece, which is spread. Spreads have tightened in the direct lending market. Directionally, if you look at our OBDC, a year ago, we published this spreads in the portfolio were 50 basis points wider than they are today. So we have two things going on, a 100 basis point drop in rates and a 50 basis point drop in spreads. Two different cycles. The spread cycle, which is what you're asking about, I think, is a function of two things. One, we do compete with the syndicated market. Syndicated spreads are at all-time tights. We're seeing single B credits getting priced at 275 to 300 over. Any student of the public loan markets would say that's exceptionally tight. In my experience in the leveraged finance space in all these years, that market tends to be cyclical. At some point, you should expect the public loan market spreads to widen out and that could be material. The other activity that's going on is the M&A cycle remains modest. We're seeing signs of pickup. The private equity firms are eager to resume M&A activity, and we're starting to see signs that, that's happening. I don't want to predict this is the beginning of a new cycle, but we're seeing signs in the last month or two that are encouraging, and I know other managers have observed that as well. So if you get an environment where M&A continues to pick up and you get some -- I won't even say dislocation, just normalization of the public loan market, then spreads in the direct lending market will follow suit and spreads will widen out. So I think there's just going to, at some point, be a normal spread widening cycle in the direct lending market. As to when that happens, my prediction skills haven't been good. I would have thought it would happen this year, and it hasn't. But at some point, it will. And when it does, that will offset some of the rate tightening that we've experienced and generate better returns. So again, I want -- I don't say I expect to happen next year because I think that it would be it's just impossible to predict. But if folks observing the loan market and observing the M&A cycle, I think it's pretty reasonable to think over the next 12 to 18 months that one or both of those things will happen, and we will benefit from it. Logan Nicholson: One additional point to add on is Craig has mentioned of where syndicated market spreads are today, we've seen spread deployment stability over the last few quarters in private markets. And if you look at the average spread on our new deployments, excluding a couple of one-off second liens or refinancings, we've been deploying right around that 500 over spread level basically for the last year, plus or minus. And so our deployments have been consistent, while public markets continue to tighten. So the relative spread environment still feels reasonably good. Mickey Schleien: I appreciate that. That's really helpful. And sort of in line with my thesis. Moving on, there were several portfolio companies which contributed to this quarter's unrealized portfolio depreciation, but Conair and Beauty Industry Group or most of it on a net basis. Could you just help us understand what the issues are there? And do you see those sort of factors affecting other portfolio companies? Logan Nicholson: Sure. So absolutely, thanks. And I think there's two different issues on the two names. On Conair to address the first one. It's a second lien position predominantly behind a syndicated market first lien. That first lien has been downgraded to CCC ratings and so it has a technical pressure to it, and the marks reflect a relative value to the trading price of the first lien. So there's an element of both technical and fundamental. It also has tariff-related weakness and tariff-related issues affecting the business. They import the vast majority of their goods from China and are working through redeveloping their supply chains to work around or to fix that issue. And so it's going to take time with Conair. It's a name where on the Conair side, they have well over a year's worth of liquidity. And so there's no imminent event or imminent catalyst that we can see, the company is on solid footing and should have a long period of time to try to work through the tariff-related issues. So it's a tariff-related name in our list, but it's one that's depressed in trading price by a public market name and public market rating dynamic. On the beauty industry side, there are some similarities in the fact that tariffs have impacted the fundamentals beauty industry is a name that we've had in our portfolio for over 5 years through two ownership periods. It's been on our watch list for 2 years, and there have been a number of issues. Tariffs is just the latest. Importantly, they had some competition-related issues a number of years ago and then an operational issue and most recently, tariffs given they import most of their beauty-related products from China as well. The sponsor there over time has put in capital and at this period of time, we're unsure that they'll put in additional capital to support the business. So we had further markdowns that we took. But that one doesn't have the same trading dynamics and is a much tighter liquidity situation than Conair and so it's -- it was marked down accordingly this quarter. Hopefully, that provides some color. Craig Packer: Yes. I would just add, we have said when tariffs kicked in, there were a few names that we thought [Audio Gap] were names. And so although disappointing, it's not surprising to us, but I want to reassure investors, this is not indicative of a long list of other names that could migrate [Audio Gap] Michael Mosticchio: Why don't we move to the next question. Operator: Our next questions come from the line of Kenneth Lee with RBC Capital Markets. Kenneth Lee: Just one on the merger here. Wondering if you could just talk a little bit more about expected time frames for achieving the expected ROE accretion that you mentioned. Jonathan Lamm: Sure. I mean, timing-wise -- similar timing in terms of our expectation to close the merger, which should be at some point, hopefully in the first quarter, maybe later in the first quarter. The OpEx synergies tend to come in relatively quickly. Just given they're mostly related to duplicative expenses and things along those lines. The capital structure-related synergies do sometimes take a little bit longer, but we expect most of -- we expect we can achieve most of those in 2026. And the effect of just leveraging out the portfolio, just given the relative small size of OBDC II to OBDC also is a relatively near-term event. So we don't think that it's going to take very long. Kenneth Lee: Got you. Very helpful there. And then just a follow-up, if I may, another one on the new share repurchase program. How would you evaluate potential share repurchases in the context of OBDC's leverage -- and as well, how would you approach balancing between repurchases and a potential pickup in investment opportunities over the near term there? Craig Packer: Look, I think that -- I think you're doing a good job of identifying all the variables. We're going to balance all of those variables. I think that, look, our capital is permanent and very valuable. And so we are always trying to preserve that capital for new investment opportunities. But certainly, in a world where the stock is where it is, and where we've already talked about how spreads are tight and rates are lower, then it's going to make the attractiveness of buying shares that much better. So -- and leverage obviously plays in. I've already commented on leverage. Leverage, we can manage leverage just as we get repayments, which we continue to get. So I can't -- it's not scientific, and I think this is well understood. We also operate with various windows based on our public disclosure periods of time. So in any given quarter, our legal judgment is -- there's periods of time in the quarter where we can buy shares, and we can't, based on when we're going to report results and the like and when we get information from our portfolio companies. So we're not open there's meaningful parts of a quarter where essentially we're not able to buy shares. So in the periods of time where we can buy, we look at where the share price is, we'll look at other -- where other investment opportunities are. We look at the leverage and we'll make appropriate judgments as we have in the past. I wish I can give you a more precise analytical answer, but I think it's a function of all those things. Operator: Our next questions come from the line of Sean Paul Adams with B. Riley Securities. Sean-Paul Adams: Given the impact of the uptick and the scale on earnings, are there any potential valuations for changes on the management fee cost structure on a go-forward basis? Craig Packer: I'm not sure I totally understand the question, but no, we're not looking at the management fee structure, if that's your question. We've had the same structure for almost 10 years and OBDC II had the same fee structure. So -- and our tech fund has the same, this is the fee structure. Operator: Our next questions come from the line of Christopher Nolan with Ladenburg Thalmann. Christopher Nolan: Just a follow-up on that previous question on the management fee structure. Given your comments in terms of narrower spreads, lower rates, you're in a different environment. And any consideration to improving expenses relative to revenues, improve the total return of OBDC? Craig Packer: I appreciate why you're asking the question. I just would urge you to look over the life of the fund. It's had the same fee structure -- has that same fee structure when rates were at 0 for multiple years. We had the same fee structure. The fee structure has been set. It's very visible. We're consistent with it. It's not something that we're evaluating. It's -- I think it's designed in a thoughtful way, consistent with other industry peers and commensurate with the quality and the resources that we apply to it. I don't think the intention of the fee structure is to move around based on where rates are in any 3-, 6-month, 9-month period in either direction. So I don't think that's an expectation that people should have. Christopher Nolan: Okay. The only reason I ask is your investment yields on debt is roughly 10.5% and your stock is yielding -- dividend yield is roughly 12% or so, a little less. And I'm just -- the total returns, part of the reason possibly while the stock is trading below book is total returns. And I'm just trying to look at the -- you mentioned earlier that all levers are available. I'm just following up on that. Craig Packer: I have lots of opinions about why our stock is trading where it is trading, but I'd say there are peer stocks that are comparable quality that have much lower yields. And so I don't think it's I don't -- I hear your question. We're hoping that this is a short-term technical situation. Investors have been very jumpy about some of the headlines in private credit generally. And so in the short term, investors seem to be reacting to a headline or two that's happening in the marketplace. I think your -- I appreciate your pointing out that our stock is yielding 12% for a really high-quality performing portfolio. And so our hope is that investors will find that attractive, and we'll certainly -- buy back is a factor. Look, there have been periods of time where the stock has been dislocated again over the last 10 years. We haven't changed the fee structure. I just -- I don't think that's something that is towards that -- is really a meaningful consideration. I want to keep saying it. But I think everything else is. And I'm hoping that investors will see the quality of the portfolio and the opportunity to earn that type of yield. And by the way, even if dividends go down a little bit, you're still going to talk about a 10%, 11% yield that hopefully folks will find that attractive and the stock will get moving in a more constructive direction. Operator: Our next question has come from the line of Brian McKenna with Citizens. Brian Mckenna: So just a quick follow-up on repayment activity. Clearly, a little bit lighter in the quarter, and they can bounce around from quarter-to-quarter, but any visibility into 4Q repayments? I'm just trying to think through is that $0.02 per share of nonrecurring income, a good starting point for the fourth quarter? Logan Nicholson: I think so far, it's consistent with the prior quarter. No change. Craig Packer: $0.02 seem about right. Operator: Our next questions come from the line of Mickey Schleien with Clear Street. Mickey Schleien: Apologies, the phone cut out. A couple of questions. In terms of the merger closing, are you assuming the government is going to reopen quickly and get the SEC fully up and running in your assessment? Jonathan Lamm: That would be part of the assessment that they would be able to review that. But ultimately, we think the projection that we've got in place accounts for that. Mickey Schleien: Okay. And I don't want to beat a dead horse here, but I just want to confirm, there were no repurchases made under the 2024 stock repurchase program. Is that correct? Jonathan Lamm: That's correct. Operator: Thank you. We have reached the end of our question-and-answer session. I would now like to hand the call back over to management for closing remarks. Craig Packer: Okay. Look, we appreciate the engagement. We're available. If folks have questions, please reach out. Thanks for your time, and we will speak with everyone soon. 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.
Operator: Good morning. My name is Carly, and I will be your conference operator today. At this time, I would like to welcome everyone to the Amylyx Pharmaceuticals third quarter earnings conference call. [Operator Instructions] Please be advised that this call is being recorded at the company's request. I would now like to turn the call over to Lindsey Allen, Vice President, Investor Relations and Communications. Please proceed. Lindsey Allen: Good morning, and thank you all for joining us today to discuss our third quarter 2025 financial results and business update. With me on the call today are Josh Cohen and Justin Klee, our Co-CEOs; Dr. Camille Bedrosian, our Chief Medical Officer; and Jim Frates, our Chief Financial Officer. Before we begin, I would like to remind everyone that any statements we make or information presented on this call that are not historical facts are forward-looking statements that are based on our current beliefs, plans and expectations, and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, our expectations with respect to avexitide, AMX0035 and AMX0114, statements regarding other development candidates, statements regarding regulatory and clinical developments, the impact thereof and the expected timing thereof and statements regarding our cash runway. Actual events and results could differ materially from those expressed or implied by any forward-looking statements. You are cautioned not to place any undue reliance on these forward-looking statements, and Amylyx disclaims any obligation to update such statements, unless required by law. Now I will turn the call over to Justin. Justin Klee: Good morning, everyone, and thank you for joining us. Q3 was a quarter of progress as we continue to focus on our lead program, avexitide, in post-bariatric hypoglycemia or PBH. Avexitide is our investigational first-in-class inhibitor of GLP-1 receptor activity with FDA breakthrough therapy designation. PBH is a condition characterized by recurrent hypoglycemic events, which can impose a significant and lasting burden on a person's quality of life. There is a robust body of data generated to date for avexitide, which includes 5 clinical trials, demonstrating statistically significant and clinically meaningful reductions in hypoglycemic events. Based on those results, we designed our pivotal Phase III LUCIDITY trial with the goal of replication. We remain focused on enrolling a similar patient population, collecting the data in a similar way and executing LUCIDITY with high quality. We continue to see high participant interest and broad engagement across clinical trial sites, which we believe supports the urgent need for an FDA-approved treatment. Our previous guidance for completion of recruitment was by the end of 2025, with top line data in the first half of next year. Based on our most recent projections, we now expect to complete recruitment in Q1 2026, with top line data expected in Q3 2026. We anticipated more of a ramp in the enrollment rate at this stage, but we have seen more of a steady enrollment rate in the last few weeks. Timing for potential launch remains unchanged. With early NDA preparation efforts underway, we continue to expect to be in a position to launch avexitide in 2027, pending FDA approval. Having launched a commercial product in the past, we're focused on key areas required for a successful launch. We are already laying the groundwork to be ready in 2027, if approved. We've been taking the initial steps towards building the medical affairs and commercial organizations with targeted investments in market research, insights, disease education, market access strategy, and commercial infrastructure. Our continued market research, claims analysis and engagement in the field support our confidence in our estimate of 160,000 people with PBH in the U.S., and bolsters our understanding of the unmet need. Turning to our broader pipeline. In Wolfram syndrome, we are advancing the clinical development of AMX0035, and pending alignment with FDA, we plan to initiate a focused pivotal Phase III trial in the second half of 2026. For AMX0114, our investigational antisense oligonucleotide targeting Calpain-2 in ALS, we are pleased to share that in September, we fully enrolled Cohort 1 in the Phase I LUMINA trial. We anticipate early cohort data later this year and plan to share the safety data at the 36th International Symposium on ALS and MMD, which is being held from December 5 to December 7. Based on biomarker collection and analysis time lines, we anticipate biomarker data will be available in the coming months and expect to present these at a medical meeting in the first half of 2026. We are excited by the potential of this novel mechanism and the fast track designation from the FDA. Across all of our programs, our team is focused on execution as we head toward a pivotal year in 2026 with top line data from LUCIDITY anticipated next year. Now I'll turn the call over to Camille. Camille Bedrosian: Thank you, Justin. As a reminder, PBH is a serious, persistent and life-altering condition with no FDA-approved therapy. People living with PBH often experience frequent unpredictable hypoglycemic events, driven by an exaggerated GLP-1 response that can severely limit their independence and quality of life. Many people with PBH live with a constant anxiety around meals, social interactions, and basic daily activities. Individuals with these experiences are not outliers. They reflect a broader underserved population that motivate our work. Avexitide is an inhibitor of GLP-1 receptor activity that reduces insulin secretion and stabilizes blood glucose levels. Based on the data and consistency from our 5 previous trials in PBH, we designed the pivotal Phase III LUCIDITY trial to optimize the potential for success by being as consistent as possible with the previous Phase II trials. Specifically, these studies directly informed the dose, endpoints, inclusion criteria, and surgical subtypes. LUCIDITY is evaluating avexitide 90 milligrams once daily in individuals with PBH following Roux-en-Y gastric bypass surgery. The FDA agreed upon primary endpoint, it's reduction in the composite rate of Level 2 and Level 3 hypoglycemic events through week 16. Based on prior Phase II data, we believe the trial is well powered to detect clinically meaningful benefit. We continue to be encouraged by the execution of the trial that prioritizes scientific rigor and operational excellence. All clinical trial sites are now activated and screening participants. There is high participant interest and engagement across our sites. In addition, investigators continue to report that participants are highly motivated to contribute to the study. Furthermore, participants have begun to move into the open-label extension portion of the trial. As awareness of PBH continues to grow, we are seeing increased recognition of the burden and the urgent need for a treatment option. We believe avexitide, which has been granted FDA breakthrough therapy designation, has the potential to be the first approved therapy for PBH and to meaningfully improve the lives of those affected. With that, I'll turn over the call to Jim, to review our financials. Jim? James Frates: Thanks, Camille. Our financial position is strong as we focus on careful execution of LUCIDITY and preparing the company for a launch in 2027, should avexitide be approved by the FDA. We ended the third quarter with a strong cash position of $344 million compared to $181 million at the end of the second quarter. This reflects the recent completion of our public offering in early September. This financing provided approximately $191 million of net proceeds; and together with our existing cash, positions us to support the potential launch of avexitide in 2027, and provides us with an anticipated cash runway into 2028. Turning now to our results for the quarter. Total operating expenses for the quarter were $36 million, down 53% from the same period in 2024. The decrease is primarily due to the onetime expenses related to the acquisition of avexitide that we incurred in the third quarter of last year. Research and development expenses were $19.9 million compared to $21.2 million in Q3 2024. This decrease was primarily due to decreases in spending on AMX0035, for the treatment of PSP and ALS. The decrease was offset by increased spending related to the clinical development of avexitide in PBH. Selling, general and administrative expenses were $16.2 million compared to $17.8 million in Q3 2024. This decrease was primarily due to a decrease in consulting, professional services and other expenses. We recognized $7.1 million of noncash stock-based compensation expense for the quarter compared to $6.8 million of noncash stock-based compensation expense in Q3 2024. In summary, the more work we do, the more we learn about the patients and providers, the more we believe that there is a major unmet need for people living with PBH. The key for us operationally is to execute the LUCIDITY study well and prepare for a positive outcome. We believe we have the scientific, operational, and financial resources we need to execute on our goals. With that, I'll turn the call over to Josh. Joshua Cohen: Thanks, Jim. Our conviction in inhibiting the GLP-1 receptor as a therapeutic approach remains strong. While LUCIDITY remains our primary focus, we also view it as a starting point, both for avexitide and for advancing research into GLP-1 receptor antagonism more broadly. For instance, our research collaboration with Gubra continues to show encouraging proof-of-concept data with new molecules demonstrating strong potency in vitro and in vivo, along with extended half-lives. We are very pleased with how the partnership is progressing to develop a novel long-acting GLP-1 receptor antagonist. We expect to make a decision on a potential development candidate in the next few months, and pending a candidate nomination, we are preparing to initiate our IND-enabling studies. Before we open the call up for Q&A, I would like to reflect on the urgent opportunity driving our work in post-bariatric hypoglycemia. PBH affects an estimated 8% of people in the U.S., who have undergone the two most common types of bariatric surgery: sleeve gastrectomy, and Roux-en-Y gastric bypass. That translates to approximately 160,000 individuals living with PBH, many of whom experience frequent unpredictable hypoglycemic events that disrupt daily life and limit independence. Multiple lines of evidence support our belief in the significant unmet need in this market, including several robust published prospective and retrospective studies, and our ongoing claims-based work. Most compelling is what we are hearing directly from the field, which has continued to corroborate the substantial burden in PBH. We continue to be excited by the data generated to date in the 5 clinical trials of avexitide in PBH. These findings, together with new analyses we shared last quarter at ENDO 2025, reinforce the robust body of evidence and give us confidence as we advance LUCIDITY towards top line results next year. We are committed to executing LUCIDITY and preparing to be launch-ready, following FDA approval, and we look forward to keeping you updated. Now I would like to open the call up for questions. Operator: [Operator Instructions] Your first question comes from Seamus Fernandez with Guggenheim. Seamus Fernandez: I wanted to just get a quick sense of the enrollment update. With regard to a couple of things, as we've been speaking with physicians, there were a couple of dynamics in play here. One, was the very careful decisions on the part of the company to ensure that there is a broad enough participation from a wide enough array of sites that it would take some time to basically, start up those sites. So just trying to get a better sense of the impact here. Is it site start-up that has resulted in the estimated modest delay of a quarter? Is it the run-in period that is potentially impacting the enrollment? Because, again, a 3-week with the requirements for Level 3 events, I could envision having an impact on enrollment just given the careful design there. And then another factor would be just ensuring that the patients that are enrolled are actually fully dedicated and committed to limiting any potential changes in diet over the 16-week period that could negatively impact the study. So just wanted to get a better sense of some of the operational dynamics that could be coming into play as it relates to the study. Then just a very quick follow-up on the Gubra comments. The DC development candidate selection to IND, can you just give us a sense of the time line that might come into play there? Justin Klee: Great. Thank you so much, Seamus. Great, great questions and important points on operations. So I think first, just to say at a high level, I think we're pleased with how the study is being executed, how it's progressing. The first participants are going into the open-label extension. And you raised really important points as well, which is our real focus -- is on quality, enrolling the right participants, ensuring the right data collection, especially in view of the 5 prior trials of avexitide in PBH, which demonstrated a very statistically significant and clinically meaningful reduction in hypoglycemic events. So the update is on the time line based on our most recent enrollment projections and estimates. And I would say that certainly, in every trial I've been a part of -- as you have all of the sites up and running -- recruiting participants, you tend to see a ramp in the enrollment rate. Now that could still happen. But so far, it's been a steady enrollment rate. And so that's why we're updating the projections to now estimated completion of recruitment in the first quarter. So I hope that helps, but I really appreciate your points on the quality of the operations. That's definitely where our team is focused as well, and we're pleased with our team's focus. Joshua Cohen: Maybe just touching on your other questions, too. Included in that quality, certainly, is maintaining the dietary guidance throughout the whole trial. So just as a reminder, at every clinic visit, patients do receive dietary guidance. And the goal of that is to keep everybody following closely with the recommended PBH diet. And we have heard that patients are quite engaged, quite excited to participate in the study and wanting to follow the protocol as best as they possibly can. You also asked about the drug candidate nomination from Gubra, and a sense of the time line. So first, I'll say we've been quite excited about the data from Gubra. We've seen really encouraging data both in vitro and in vivo, both on kind of efficacy outcomes as well as outcomes related to half-life and kind of the duration of the drug. We'll probably give more granularity on time line as we do nominate or as we get to the point of making the decision to nominate a drug candidate. But certainly, our goal will be to move as expeditiously as we possibly can. Operator: Your next question comes from Joseph Thome with TD Cowen. Joseph Thome: Maybe the first one, just on the Phase III study. Do you have a general idea of how long patients have trialed dietary therapy and still are not able to respond to that before entering the study? And maybe related to that, what's your kind of current screen failure rate for patients maybe not meeting the necessary events in the observation period? A follow-up if I can, on the ALS program. Can you just clarify a little bit what you're going to present later this year? Will you have early biomarker data from that first cohort already in this presentation? Or are you going to present all the biomarker data next year when you have a larger set? Joshua Cohen: Sure. So probably within an ongoing trial, we don't necessarily kind of give interim data or interim updates. But what I can share is when you look at past studies with avexitide, it was often the case that people have had PBH 6, 7, 8 years. And the usual standard in PBH is certainly the dietary therapy. So most of these patients will -- we do expect that most of the patients, if not all of the patients, will have been on dietary therapy many years prior to entering. And we do require that the bariatric surgery was at least a year prior to entering the study. So everybody has had the bariatric surgery well in their past as well. In terms of screen fail rates, similarly, we don't kind of report interim data as we're going through a study. But certainly, our goal, as Justin suggested, is to enroll the right patients in the study and to focus on quality throughout getting patients who have the appropriate level of severity and who hopefully will be able to complete the study also. In terms of the AMX0114 presentation in early December, that will focus on safety at this time. We will have biomarker data. We expect to report on that in the first half of the coming year at a medical conference. The biomarker work just takes a little bit longer, hence that coming in the first half. Operator: Your next question comes from Geoff Meacham with Citi. Unknown Analyst: It's Ross on for Jeff. We are curious about your sense of PBH and kind of the addressable market; and how has that continued to evolve? Justin Klee: Thank you. And I would say -- as we've done more and more commercial preparations looking forward, I'd say it only increases our confidence in both the unmet need in the market. So we've looked at multiple claims-based analyses now, as well as there's been independent work out of Stanford looking at the total population. And our estimates continue to be that there are about 160,000 people today who have PBH. And we expect more to come as well. Bariatric surgery rates continue to be quite significant. And with that, we would expect the population to only continue to grow from already quite a substantial unmet need. The other thing that I think has really come out from being out in the field is the unmet need. It's severe hypoglycemia as defined by Level 2, Level 3 events. These are frequent occurrences for people with PBH. To put it in context, severe hypoglycemia according to the American Diabetes Association, a single event is a medical emergency. And these are people who are having frequent hypoglycemic events. So it's highly, highly debilitating. And what we hear from clinics is that they're very worried for their patients because, one, they really have very limited options to help them; and two, that these hypoglycemic events can occur often without warning and, again, so frequently. So I think all of our research just continues to bolster our confidence in the unmet need and the opportunity here that we have with avexitide. Operator: Your next question comes from Corinne Johnson with Goldman Sachs. Kevin Strang: This is Kevin on for Corinne. Just wanted to follow up on the addressable market question in terms of the 160,000 PBH patients. As you do more work on that, what percentage of those patients do you think would be uncontrolled on diet? And what percentage of those patients do you think would be eligible for your Phase III? Joshua Cohen: Good question. So maybe starting with kind of uncontrolled on diet. So in coming up with the 160,000 estimate -- which, as a reminder, is based on published prospective and retrospective data, as well as claims-based work and direct work with physicians treating PBH -- we tried to eliminate upfront those who were controlled on diet. So the 160,000 is intended to be those who are not controlled on diet, and who are continuing to experience unacceptable and clinically problematic hypoglycemic events. In terms of direct eligibility for the Phase III, that's not an analysis we've done directly through the 160,000. But again, we do view the 160,000 as people who are having, as Dr. Colleen Craig calls it -- from Stanford, medically important PBH, PBH, which is significantly impacting their daily life. And as Justin said, even a single significant hypoglycemic event is considered a medical emergency. So these are patients who, in effect, are having frequent medical emergencies. Justin Klee: Just to give a picture of what we believe is going on from a pathophysiology perspective, the -- we believe that PBH is caused by the body dramatically upregulating the production and secretion of GLP-1. So people will have up to 10x normal levels of GLP-1. And so the reason that we think -- we hear from both clinics and patients that kind of no matter what they do, they continue to have these drops in blood glucose is because of this GLP-1 effect. So if you think no matter what they do, their body is producing up to 10x normal levels of GLP-1, their blood glucose is going to plummet. And that's also why we think avexitide has such potential because really to get to the heart of PBH, we believe that you need to blunt that GLP-1 bolus, which is ultimately what's causing the hypoglycemia. Operator: Your next question comes from Marc Goodman with Leerink Partners. Marc Goodman: Just to kind of come back to this delay in the time line. Can you help us understand like -- someone asked the question, but I wasn't sure if the answer was given about. -- I mean, we're talking about 75 patients and 20 sites, right? And this is 3:2 random. I mean, what -- help us understand what's going on here. Like do we need to add more sites? Do we have the right sites? Like what -- help us just understand what that issue is. You talked about these patients moving into the open-label extension trial. Talk about the side effects that you've seen? Is everything generally the same as what we've seen in the Phase II studies? Anything unusual? Joshua Cohen: Sure. Thanks, Marc. So first, I wouldn't characterize this as an issue. I'd say that as we continue to go along the study, we've updated our time line to expect to complete recruitment in the first quarter of next year, with data coming out in Q3 of next year. We have seen a lot of excitement across the trial. I'd remind that that time line would still be recruiting a Phase III study in under a year. And Phase III studies entail not just finding the patients, but also all the work that goes into activating sites, everything else. So we actually do see that as a very good time line for a Phase III as well. We probably won't report, at this point on, side effects or otherwise. We don't report interim data from a trial. But I think as we mentioned, we are excited to see quite a lot of participant engagement and patients moving into the OLE as well. So excited overall about the execution of the study and our team's great efforts in this space. Operator: Your next question comes from Rami Katkhuda with LifeSci Capital. Rami Katkhuda: I guess in LUCIDITY, are you measuring diet adherence via the blinded CGM? And can you intervene based on blood glucose levels if the patient is kind of liberalizing their diet as they start to feel better? Justin Klee: Rami, great question. So I would say that our team as well as the monitors are looking at all of the available blinded data, including CGM, as you mentioned, which we get in virtually real time. And the goal there is really to make sure that, one, yes, people are adhering to diet; and two, that people are collecting events as we would expect in the study. So yes, our teams are continuing to do that. And if we see significant deviations that we think need addressing, then our team will indeed reach out to the site and retrain as necessary. Rami Katkhuda: Got it. Makes sense. And then I know I'm jumping the gun a little, but a number of KOLs are excited to use avexitide for hypoglycemia associated with other GI surgeries as well. I guess have you talked to the FDA on the regulatory path forward there. Would you have to run a study in each population? Or is there a potential for kind of a basket study across a number of these surgery types? Joshua Cohen: Sure. So the Phase III study is in people with Roux-en-Y gastric bypass. It's early to -- label discussions happen later in the process, so it's early to say what an FDA label would or wouldn't be. But given that the study is in Roux-en-Y, that is a potential risk that we -- that element finds its way into a label or otherwise. That being said, we do believe both physiologically based on the biology of these different surgeries that the pathophysiology is similar or the same for why people are getting PBH across them. And in addition, our Phase IIb study included people with multiple surgical types and the effects look similar across those surgical types as well. So it's certainly something that we want to pursue. We do exactly, as you suggested, get a lot of interest from academics and otherwise with surgeries beyond Roux-en-Y, including people who have had gastrectomy for gastric cancer, Nissen fundoplication for gastroesophageal reflux disorder and otherwise. So it's definitely an area we're quite excited to pursue. And yes, I'd say stay tuned in that regard. Operator: Your next question comes from Graig Suvannavejh with Mizuho Securities. Unknown Analyst: This is Sam on for Greg. Can you just remind us of the manufacturing and CMC processes for avexitide in terms of the commercial doses and the process there, and if you anticipate any stags moving forward? Justin Klee: Yes, important question. So I would say we're doing all of the expected work as we move toward commercialization, hopefully with commercialization on the CMC side. So I'd probably touch on a number of points. So first, as you may expect, we have manufactured our registration batches and they're up on stability. I'd say, second, the suppliers that we're working with, both on the drug substance being the peptide and the drug products being the final finished product are manufacturers that have multiple commercial products and have very good inspection histories as well. And I would say then on the internal side, we're focused on all of the quality parameters, inspection readiness activities, as you might expect, with the anticipated approval in 2027. So I'd say our team is laser-focused on all of the things that would be required for both NDA submission and then eventual approval. Operator: Your next question comes from Chris Chen with R.W. Baird. Christopher Chen: Just going back to the LUCIDITY and the clinical sites. Have you noticed any differences in the ramp between sites? And are you kind of maybe learning from those sites that maybe are enrolling faster to kind of overall just make the ramp increase across those sites? Justin Klee: Thanks, Chris. And I would say in a clinical trial, you always have differences across sites, and that's why we have 21 sites. All sites are activated. And I would say, again, in my experience, as you have all of the sites activated and you go into the latter part of the study, that's when you tend to see an increase in the enrollment rate. So that could still come. But so far, in the last few weeks, we've seen more of a steady enrollment rate. Again, our goal is to conclude enrollment as expeditiously as possible. But of course, making sure that we're enrolling the right participants, we have the right clinical oversight as well. I'd say on the sort of site engagement level, the main message, I would say, is that the unmet need here is very real. I think we have high engagement from the sites. They're very eager to have a potential treatment option for their patients. So that's really come through in all of our engagements. Operator: Your next question comes from Tim Anderson with Bank of America Securities. Susan Chor: This is Susan on for Tim. I have a couple of questions. First question, given that you now have a time line estimate for the pivotal Wolfram syndrome trial, what can you tell us about the potential trial parameters? And just how have your discussions with the FDA gone? And I'll follow up with my second question. Camille Bedrosian: Thanks very much. This is Camille. As we have indicated, based actually on the HELIOS data in AMX0035 for Wolfram syndrome and the very encouraging results out to 48 weeks, we are advancing the clinical development of AMX0035 for Wolfram and plan to initiate our focused pivotal trial second half of 2026. We are pending, of course, FDA alignment, and we're actively seeking that alignment now, not only with the FDA, but also we are engaging a number of additional stakeholders, clinicians who treat people with Wolfram syndrome, researchers who study the disease as well as the Wolfram community itself, and we're seeking alignment across all those stakeholders. Susan Chor: Sorry to keep coming back to this -- but you've mentioned a couple of times already that you typically see a ramp in enrollment, when all trial sites are activated, but rates have been studied. Why do you think this is? Would you characterize this more as a system-wide issue or specific to the LUCIDITY trial? Joshua Cohen: I don't think I would characterize this as a system-wide issue or an issue really. I think just as we're updating our projections, we're trying to be as accurate as you possibly can and given the current rate we expect Q1 of the coming year. But remind that's still enrolling a Phase III trial in less than a year, which I think is a good time line for a Phase III, overall. Operator: Your final question comes from Ananda Ghosh with H.C. Wainwright. Ananda Ghosh: I have two; one for LUCIDITY, and the other from the ALS program. So maybe the first question, how is the Level 2 or 3 weighed in for the composite scale? And is there a way to kind of like the nocturnal and the diurnal rates differ? Or how is that kind of taken care of? The other question you might have discussed beforehand, but just to reiterate, how are prior therapies handled like GLP-1 agonist? Joshua Cohen: Thank you, Ananda. So two important questions. So first, coming off of 5 prior trials of avexitide in people with PBH, that showed statistically significant and clinically meaningful reductions in hypoglycemic events, the goal really here is replication. So to try to enroll a similar patient population, collect the events in the same way, et cetera. So for the primary outcome, Level 2 events are done by fingerstick blood glucose and Level 3 is an eDiary that's adjudicated by an expert committee. So that's how the data are collected. People can collect those during the day or during the night. Now people also have CGMs on, which have continuous monitoring. And so obviously, we will be looking at both. In the Phase IIb trial, where they use the 90-milligram dose that we're using in the Phase III, there were significant reductions, both as measured by the fingerstick as well as by the CGM day and night. But again, our goal really here is with replication. So we're trying to keep things as consistent as possible. In terms of use of GLP-1 receptor agonist or really any therapeutic that could alter blood glucose, we have a washout period before people can be randomized into the study, so that we don't have things that could affect people's blood glucose levels -- given that, of course, that is a key part of the study. Ananda Ghosh: Great. Maybe just one question on this is that how are those Level 2 or 3 weighed in the composite scale? Like how are they weighted? Are they weighted like equally? Joshua Cohen: Yes, they're weighted equally. Ananda Ghosh: The next question on the ALS program, if you can -- like how are you measuring the calpain and NfL levels in terms of -- and also given the short trial, what magnitude of NfL change might be practically feasible? Joshua Cohen: So the calpain, I'd say we're measuring kind of different points in the pathway. So we're certainly working to measure mRNA in the CSF. We are also looking at measures of calpain activity, including things like spectrum breakdown product 145 or SBDP-145, which is a specific protein cleavage fragment that calpain makes and is an element of calpain activity. And then as you mentioned, downstream, looking at markers of axonal degeneration like neurofilament to kind of see that downstream effect of potential calpain inhibition. I'd say in initial study, we don't quite know yet what the kinetics of changes in those markers might be. In our preclinical work, we have seen changes on multiple of those markers, which certainly makes us encouraged, but we'll have to see clinically how that bears out. Operator: There are no further questions at this time. If you have any follow-up questions, please reach out to the company. This concludes today's conference call. Thank you for joining. Have a great rest of your day.
Ben Allanson: Good morning from Stagwell's office in Miami. Welcome to Stagwell's Third Quarter 2025 Earnings Webcast. My name is Ben Allanson, and I lead the Investor Relations function here at Stagwell. With me today are Mark Penn, Stagwell's Chairman and Chief Executive Officer; and Ryan Greene, Stagwell's Chief Financial Officer. Mark will provide a business update before Ryan shares a financial review. After the prepared remarks, we will open the floor for Q&A. You are welcome to submit questions through the chat function. Before we begin, I'd like to remind you that the following remarks include forward-looking statements and non-GAAP financial data. Forward-looking statements about the company, including those related to earnings guidance, are subject to uncertainties and risk factors addressed in our earnings release, slide presentation and the company's SEC filings. Please refer to our website, stagwellglobal.com/investors for an investor presentation and additional resources. This morning's press release and slide deck provide definitions, explanations and reconciliations of non-GAAP financial data. And with that, I'd like to turn the call over to our Chairman and CEO, Mark Penn. Mark Penn: Thank you, Ben. In an industry undergoing major transformation, there are winners and there are losers. This quarter, coming on top of consistent sequential and year-over-year growth in our non-advocacy net revenue, we're clearly positioned as one of the winners. And today's game-changing Palantir announcement is another example of that. The overall revenue number of $743 million and net revenue of $615 million reflect 12% and 10% ex advocacy increases over last year. On a 2-year stack basis, our organic ex advocacy growth was 8.4%, a meaningful acceleration over the first 2 quarters, which came -- which both came in and about 1%. We expect this figure to be in double digits in the fourth quarter. Ex advocacy EBITDA jumped 23% year-over-year to $103 million, and our ex advocacy margin of 18% is the highest we have achieved in 2 years. Ryan will talk more about the cost reduction efforts that are clearly working there. Our adjusted earnings per share of $0.24 is up 9% from third quarter last year, and our year-to-date cash flow from operations increased $100 million. Our LTM net new business increased to a record number of $472 million and top client relationships continue to expand significantly. A top 25 client is now an average $28 million relationship. Our current pipeline of $0.5 billion remains at its highest levels. Marketing Services total net revenue grew 9% and digital transformation increased by 12%. And organic growth in our key segments was strong as well. Marketing Services grew 6.5% organically overall and 9% in the U.S. market. Digital Transformation grew at 7% organically and 7% organically in the U.S. While many of the competitors in the industry are shrinking and shredding operations, we are growing and meeting the demands of the new world of AI. Investors ask, given all these trends, why is organic growth not even higher? The answer is our client base is undergoing significant transformation. Our bigger clients are getting bigger, while our smaller clients of $500,000 and under are turning over. This shift towards achieving larger scale customer relationships when complete, will result in higher and more consistent growth. We're putting in additional awards for client retention and expansion. We are aiming to cut client shrinkage by 5 points next year and can meaningfully improve organic growth. Another factor is a slowdown in the communications vertical, reflecting industry-wide issues in that segment. We expect the trends in advocacy companies to reverse themselves next year in what promises to be a banner political year. We are also doubling the size of our new business team to cover all major sectors and geographies and to extend the efforts with government contracts and additional technology services. Our CMO, Ryan Linder, a leader in the industry, is spearheading this effort to take advantage of our growing market position. In terms of our strategy, we have made a major pivot from M&A to technology development this year in response to the reality of AI. It's a technology that touches everything. And as a former Microsoft Chief Strategy Officer myself, I have put together a top-tier team with John Kahan, formerly at Microsoft and IBM, Slavi Samardzija in from Omnicom, working with Mansoor Basha, [ Raman ] and the entire Code and Theory team headed by Dan Gardner and Mr. Treff. Nothing is more important in this industry today than being a leader in AI. We are in an ideal position as a newer technology-first company at our size to adopt technology as we grow compared to some of the behemoths in the industry who have massive legacy assets and have proven hard to transform. As part of the objective of leading in AI this morning, we announced the partnership with Palantir to build a groundbreaking industry-first audience platform that unlocks new ROI for corporate marketers. This platform is the holy grail of marketing finally brought to life. Building our proprietary algorithms and data on top of the Palantir foundry, we'll be able to offer clients access to a first-of-its-kind central hub for marketing and targeting designed to activate AI-enabled decision-making and support a wide range of use cases, such as audience creation, creative development and testing and campaign management. The platform is AI-based to enable large companies to access tens of millions of records of marketing and sales data and to create agents that will then implement complex marketing processes and campaigns. Demos of the products are available upon request. In addition to adopting it internally, we will sell it as a stand-alone platform that companies can use to monitor and enhance their marketing efforts and adopt highly personalized marketing strategies down to the retail outlet and the individual customer. This is a new business line for Stagwell and working together with Palantir, the goal is a significant one, creating products to generate potentially hundreds of millions of dollars in new revenue. We are also partnering with Adobe on the content management piece of our new products. The first client peaks of this emerging technology have been favorable. We've developed an MVP over the last 5 months and expect to have advanced versions in the market within months and demos will be available for qualified clients. In addition, The Marketing Cloud segment, which now reflects our suite of SaaS products saw excellent net revenue growth of 138% in the quarter, led once again by outstanding organic growth of 57% in our Harris insights suite of research products and strong contributions from recent acquisitions. Adjusted EBITDA margin in The Marketing Cloud was negative 4%, a significant improvement over the negative 30% margin posted in the same period last year. We're on track to deliver positive adjusted EBITDA in late 2026. As previously mentioned, a key potential strategy here will be to spin off The Marketing Cloud at a certain point if it's full value is not recognized internally. As part of this pivot, we also invested about $35 million this quarter, continuing to strengthen our tech capabilities, including investing in The Marketing Cloud, building out the machine, the operating system for all our agencies and rolling out the Stagwell content supply chain internally built on top of the Adobe stack. This investment enabled The Marketing Cloud to launch Agent Cloud just 2 weeks ago. This unified platform gives brands instant access to multiple LLMs, image video tools and custom AI agent creation all in one place, setting teams up for fully agentic workflows. Another part of our strategy is to expand our owned media properties so that we can offer our clients great low-cost opportunities for ROI. We just announced the acquisition of a 35% stake in Real Clear Holdings, which we've now expanded to 37.5% publisher of RealClearPolitics and 12 other news and analysis sites. This is on top of our Springs [ at airports ] travel publications and programmatic B2B media we own and operate. We have now launched the Stagwell Media Platform to bring our principal media to the market. At our current multiple, there's no investment we can find better than our own shares given our growth and cash flow and technology development. So a major use of capital this year was buying our own shares and we repurchased 90 million shares -- $90 million worth of shares to date. The basic share count now is 252 million, down 4% from last year. As part of the technology pivot, we did not acquire the planned $100 million of new revenue this year, but only about $65 million, but we've had increased organic growth in our core business and improved margins. We expect a strong finish as fourth quarters are typically our strongest, and we expect to be within the specified ranges on all metrics. As to guidance for the close of the year, we're reiterating the outlook of approximately 8% total net revenue growth, $410 million to $460 million in adjusted EBITDA, $0.75 to $0.88 in adjusted EPS and 45% free cash flow conversion. Looking into next year, we believe that our strength is building. Our core services are showing strong expanding pipelines and organic growth. Our media business is being bolstered by the development of new technology engines that will be deployed to foster even more growth here. The Marketing Cloud is turning a corner and the new partnership with Palantir will yield new products. On top of this, we expect a huge political season, and the cash demands of deferred acquisition payments next year are close to 0. Along with lower interest rates and the advantages of the new tax bill, these developments will free up considerable cash above the 45% level. We'll continue to evaluate the best ways to enhance shareholder value as it becomes clearer to the marketplace that we are one of the winners able to meet the challenge of transformative technology and be a leader in the deployment of it. Thank you very much. Let me turn it over to Ryan. Ryan Greene: Thanks, Mark. Today, I'll walk you through key reporting changes and an overview of our financial performance. This quarter, we adopted a new structure with 5 segments: Marketing Services, Media and Commerce, Digital Transformation, Communication and The Marketing Cloud, designed to simplify reporting and improve transparency. The advocacy adjustments are now limited to a single segment, communications, streamlined disclosures. Please refer to the revised earnings presentation and investor supplement posted on the Investor Relations section of our website for a restatement of prior period results and contribution percentages under the new framework. We also redefined our organic growth calculation. Revenue from acquisitions is now considered inorganic 12 months post close. This approach mirrors a leading competitor and provides a clearer view of Stagwell driven performance. Now turning to our results. In Q3, we generated $743 million of revenue. Net revenue was $615 million, up 5.9% year-over-year. Reported organic growth was down 0.4%, but when adjusted for advocacy, organic growth was 3.2% with nearly all segments achieving higher levels. Net revenue, excluding advocacy has accelerated throughout the year, 9.1% in Q2 (sic) [Q1] 9.9% in Q3 -- in Q2 and 10.2% in Q3. Adjusted EBITDA was $115 million, up 3% year-over-year, even without the higher gains from cyclical political work. Adjusted EBITDA margin on net revenue was 18.6%. Adjusted net income was $63 million, up 6%. Despite the advocacy pullback, adjusted EPS for the quarter increased 9% to $0.24. Looking at our geographical performance, the U.S. remained our largest market and key growth driver. Net revenue rose 1.1% year-over-year. Excluding advocacy, total growth was 5.9%, with organic growth of 5.2%. International total net revenue grew 25.9%, led by EMEA with a 39.6% increase. Let's take a closer look at how our operating segments contributed to overall performance. Starting with The Marketing Cloud. This segment grew 9.2% year-over-year to $246 million in net revenue. Adjusted EBITDA was $57 million with a margin of 23%. Strength in brand strategy, performance creative and research reflects steady demand across diverse client base. Next, digital transformation delivered $95 million in net revenue, representing growth of 11.9%. Adjusted EBITDA was $26 million, a margin of 27.1%. Demand continues to build around AI, experience design and platform enablement, especially among enterprise clients. Media and Commerce contributed $154 million. Growth of 5.9% was driven by multichannel and performance media campaigns across Europe, the U.S. and Latin America. Assembly, a leading media agency delivered 20% growth, a 14-point sequential improvement, driving stronger overall performance. Adjusted EBITDA for the segment was $25 million, a margin of 16%. Communications generated $97 million in net revenue, including $37 million in advocacy work. Excluding advocacy, PR results were softer, reflecting broader industry headwinds due to elongated pitch cycles and slower client decisions. Despite these headwinds, we maintained cost discipline to protect margin. Adjusted EBITDA was $25 million, a 26% margin. The Marketing Cloud contributed $27 million, growing 138%. This segment now includes only our suite of SaaS and DaaS products. Growth was driven by continued adoption of proprietary software platforms and analytics solutions. This includes 50% in organic growth at research platform Quest, along with contributions from M&A. Adjusted EBITDA was a loss of $1.1 million, reflecting a margin of negative 4.1%. This marks year-over-year improvement of $2.3 million in EBITDA and a 26% margin improvement from negative 30% in the same quarter last year. We remain on track to achieve positive adjusted EBITDA in the second half of 2026. Nearly all segments reported positive organic growth. Excluding Communications, total net revenue for all remaining segments was 11% or 5% organically. Building on that performance, we remain focused on margin execution and expense management. Our priority is driving top line growth while maintaining cost discipline. With a flexible cost structure, we can respond quickly to changing conditions as seen in our public relations results. This positions us to sustain margin and invest in growth while protecting profitability. Company-wide adjusted EBITDA margin was 18.6%, a sequential improvement of 310 basis points. Compared to Q3 2024, margin declined 60 basis points due to lower advocacy. However, excluding advocacy, margins rose 200 basis points year-over-year, driven both by revenue growth and labor cost controls. Turning to the cost savings initiative announced at our Investor Day. We remain on track to deliver $80 million to $100 million in annualized savings by the end of 2026, with $60 million to $70 million this year. Since announcing this initiative in April, approximately $27 million of savings have already been actioned. One of our principal initiatives is the rollout of the Stagwell content supply chain, a foundational effort transforming how work gets done. It focuses on integrating technology for content creation, streamline workflows that reduce low-value tasks and reduce the reliance on third parties and standardized process for training to embed lasting change across agencies. Adoption has been strong. Usage of foundational AI tools has more than doubled since Q2. We are already seeing results. On the revenue side, AI-powered content production is helping us win new business in automotive, gaming, retail and tech. On the margin side, the platform is streamlining workflows and improving efficiencies. Generative AI token usage is up 40% since Q2, showing strong adoption and impact. In addition to margin execution, our approach to cash flow and capital allocation remains a clear lever in driving shareholder value. Cash flow from operations year-to-date was $31 million, up $100 million year-over-year. This reflects sustained benefits from working capital initiatives, including media system rollouts, shared service migrations and tighter oversight. We've also reached a scale that allowed us to negotiate better terms with certain media partners globally, easing working capital constraints. We view these gains as sustainable and believe this strength is now fully reflected in our current trading multiples. Turning to capital deployment. Year-to-date CapEx totaled $72 million, including $45 million in capitalized software, primarily supporting technology investment in the machine, the Stagwell content supply chain, market research platform and ongoing product development with The Marketing Cloud. Additionally, $26 million was invested in acquisition of key data assets underpinning our IP platforms, along with necessary technology refreshes and leasehold improvements. We repurchased 7 million shares for $37 million in Q3, bringing our year-to-date repurchases to 17.6 million shares for $90 million. $80 million remains available under our approved plan. Our net leverage stood at 3.4x at quarter end. With Q4 typically our strongest cash period, we continue to target net leverage below 3x by year-end. We ended this quarter with $132 million in cash and maintained strong liquidity, including $312 million available under our revolving credit facility. Looking ahead, we remain focused on generating strong operating cash flow to support strategic initiatives. Our approach has evolved throughout the year, shifting from acquisitions to investing in technologies that position us to lead and grow as the industry evolves. The momentum we've built throughout the third quarter gives us the visibility to reiterate our full year guidance. We expect approximately 8% total net revenue growth, $410 million to $460 million in adjusted EBITDA, $0.75 to $0.88 in adjusted EPS and free cash flow conversion of approximately 45%. With that, I will turn it back over to Ben for questions. Ben Allanson: Thank you, Ryan. [Operator Instructions] A lot of questions coming in and a lot of them are focused on Palantir obviously announced this morning. First one, Laura Martin at Needham. [indiscernible] can you maybe go into a little bit of the background of the Palantir, how did they come about? And then also a number of questions asking about the TAM and the size [indiscernible]. Mark Penn: It really came about from discussions I had with Alex Karp about how we could take the unique targeting and AI capabilities of Palantir and for us to bring our unique experience in the marketing field together. And from those discussions, we set up 2 teams and the 2 teams went for 5 months developing the prototypes, which we began to show clients last month and the agreement to then go ahead and dive all the way in here to create what I consider to be the holy grail of marketing, that combination of data, technology and AI that will enable clients to say, well, let's run the back-to-school sale now and to have the marketing system bring together the content, data, find the audience and really manage and drive campaigns. And I think this is something that really will take companies -- large-scale companies who have tremendous data today, but can only use a fraction of it, and really open it up down to the retail customer manager level so that they deploy this technology. So we're really obviously excited about it, and that's how it came about, and that's how the commitment came about to move forward. Ben Allanson: And then maybe a little bit on the TAM and the opportunity set and also kind of a deep dive into what incremental infrastructure investments or CapEx, OpEx might be required to kind of get the partnership up to speed. Mark Penn: Sure. I mean, look, I think the TAM is enormous. I think these are $5 million and $10 million installations. I think this is something that one way or another, every major company is going to have in today's AI-based marketing world. Will some try to develop that on their own or others do do our system? Will competitors emerge? We think as we reviewed with a recent potential customer, we said we're clearly ahead of the others out there in the marketplace in terms of able to really bring together data and AI and marketing sciences. We're already -- as I said in the speech, we made a CapEx -- we made -- I'm sorry, we made a pivot this year and said, let's take the acquisition money, let's transfer it over to technology CapEx. AI is really the important new development that transforms marketing. We are the company built to transform marketing myself with the experience in technology, Code and Theory having 1,500-plus engineers. We have the capabilities, which combined with the incredible teams at Palantir and their ability to bring things also to market. I think that gives us a tremendous opening. So I think that the TAM here is really quite enormous. Ben Allanson: And just on timing, a couple of questions about P&L impact when it might start to flow through. Is it Q4 phenomenon? Is it a 2026 phenomenon? How you think... Mark Penn: I think it's definitely a 2026 phenomenon. I think that we are baking -- we're going from MVP. The teams are baking the next versions. I think in an AI world, you talk months, not years. I'm really expecting significant revenue by the end of 2026 for sure. Ben Allanson: Great. I just wanted to throw a question to Ryan here because you mentioned the CapEx side of things. Obviously, a little bit of an uptick in CapEx this year. Could you maybe just elaborate on it a little bit more what drove that... Ryan Greene: Sure. I think that underpins Mark's direction, the shift from acquisitions to technology. About $55 million of that is spread across a number of investments ranging from the machine, the Stagwell content supply chain is in there for content creation, product development within the marketing crowd across a host of products as well as innovations in some of the market research and the underlying data feed that feed all these systems. So Mark made this direction at the beginning of the year, you're seeing that flow through carry out in the results. Ben Allanson: Great. I want to pivot a little bit. I have a question here sort of talking about our media business. And the question is from Steve Cahall at Wells Fargo. He goes, it appears that much of the growth in the industry is being captured by some of the larger-scale players. Do you view media as a core function for Stagwell? And if so, do you have a plan to address Stagwell's position within the media ecosystem? Mark Penn: Yes, our plan has very much been to upgrade our capabilities in media based on technology. We're not going to be able to beat these behemoths on the basis of scale, but we can beat them on the basis of better technology and better use of data and information. And that's exactly where we're going. So we think that as we deploy the combination here of the content supply chain, the machine and the Palantir holy grail of marketing, that will create a very competitive market -- very competitive media offering that will enable us to push that. The second strategy here is really that we are buying media so that we will have as our -- principal media is really owned media. And we're particularly focusing in the news and politics and information sector because we think that there are really good buys in media. And the truth is what's happened is viewership of politics and political events is skyrocketed with interest. So we think that's going to be a hugely valuable area that we'll be able to deliver really strong ROI media for clients. Ben Allanson: I think part of that is the RealClearPolitics, Real Clear Holdings announcement earlier on this quarter. Could you maybe elaborate on that? Question from Barton Crockett just asking some additional color on that at the moment? Why you do it? What is the owned media strategy over there? Mark Penn: Yes. I think exactly we're going to be working with the RealClearPolitics team to create new innovations. I discovered when I was working at Microsoft, when you get near the elections, RealClearPolitics was the #1 search politically related team. And so it will get enormous traffic that we now have a good opportunity both for the midterms and by the presidential election to really work with the RealClearPolitics team, reengineer the sites, and I think tremendously upgrade the monetization of those sites and their effectiveness. So you're seeing unprecedented interest in news and politics. And that's where we can uniquely play against competitors in terms of owned media. Ben Allanson: I want to pivot slightly here, just talking a little bit about communications. It's maybe the only area of weakness really within the quarter. Could you maybe talk about what we're seeing within that? How much of that is advocacy related? How much of that is sort of a broader PR-related challenge? Mark Penn: Well, obviously, I think -- obviously, there's a tremendous reduction in advocacy-related work in the communications sector. And I think part of that also kind of bleeds over to kind of issues and other related communications work that sort of gets kicked into next year when it gets -- when it becomes more important. But we did seem to see, if you look at the results of competitors and industry-wide softness in that particular sector. And I think that affected us. We -- I think that will kind of straighten itself out, once we go into the advocacy year. What's interesting for us is that there are winners and losers in digital transformation. And while some of the digital transformation company showed real weakness, our digital transformation efforts even before the deal we announced today already showing really significant pickup because I think that we, in advance here for the last couple of years, really positioned ourselves well to take advantage of the AI revolution. I've always said we were a services company first and then let's get 4,000 clients first, then let's build those tools and then let's take them to market. That was always the vision of Stagwell. Ben Allanson: I want to stay on sort of the advocacy government side of things for just a second. A question from Jason Kreyer, Craig-Hallum. With the government shutdown still ongoing, it's going to impact my flight this evening, but that's okay. Does the government shutdown impact Stagwell's ability to penetrate the government opportunity? And so what efforts are kind of being undertaken right now to make sure that we're really well positioned maybe when the government spending comes back? Mark Penn: Well, we previously [indiscernible] government contract. So -- but we actually have begun to win several of those contracts. You don't see any significant effect either way because they didn't exist before, but we will want the government to reopen because it will enable the signing and moving forward of that. And I would be surprised that this lasts more than another week. Ben Allanson: Got you. Pivoting to the Multicloud, obviously, continued strong growth within the research suite of products and things as well. You mentioned that last quarter, you mentioned it this quarter as well, the potential for a spin-off of it. Question from Barton Crockett of Rosenblatt. What kind of performance would be required for that? And what are the criteria that would need to be met for The Marketing Cloud to kind of be spun out? Mark Penn: Well, I think there are several. The first question is, are people looking at Stagwell as the combined services and technology company that it is, if they are, and we see the kind of trading multiples, [ so I wouldn't spin it ]. If we think that there's greater shareholder value, basically, it has to be at a sustainable level. To me, that means at least $250 million or $300 million of revenue in order to be that at substantial margin. So if we -- and for you to really see in communications, it really has 3 lines of products, communications, research and media we're targeting. So you can see that really the research is the most advanced and we're seeing real organic growth and adoption of that. And I'm expecting the other main criteria here is that the 3 legs of the stool in the marketplace, showing substantial growth so that investors will be excited about it. Ben Allanson: I want to wrap up with one final question. And obviously, a number of management changes recently. I think you touched on a lot of what I'm about to ask within the script as well. But I think it would be great if you kind of maybe just summarize the current strategy for the business, the pivot that we've talked about, where are we right now? And as we look kind of over the course of the next 12, 18, 24 months, what's the real focus for Stagwell moving forward? Mark Penn: Sure. Look, the vision of Stagwell has always been to get to global full service down to platform self-service. I understand that this was an industry in transformation and to be a transformer as part of that industry. And I think what you see, particularly in this report, you see on the global full service top 25 client relationship now is now $28 million. When I came 5 years ago, we would have been lucky for that to be $500,000. We've had tremendous growth in the kinds of clients we serve and the relationships that we have because of the operations we have put together, and I think just the right Goldilocks kind of scale. And I think the second leg of that was always then to have a series of self-service and platform products that could then be sold in based on our experience and knowledge and connections with thousands of clients. It's far easier to develop software than it is to sell. We have a combination of client streams. We placed $5 billion or $6 billion of media. It may not be as big a scale others, but it gives us enough scale to really kind of, I think, understand how to apply AI technology to substantially improving it. And I think that's the shift in focus is we spent really a decade of more acquisition focus. We're now going to -- we're going to continue to do acquisitions as prudently and as makes sense. But now I think the second leg here of being focused on how we can bring AI technology best to marketing becomes a primary focus of the company. Ben Allanson: Thank you, Mark, and thank you, Ryan. That brings to an end the call for today. Please, if you have any questions, don't hesitate to reach out to the IR team, ir@stagwellglobal.com, and we'll see you in the new year for our fourth quarter results. Thank you very much.
Operator: Good morning, ladies and gentlemen, and welcome to the DRI Healthcare Q3 2025 Earnings Call. [Operator Instructions] This call is being recorded on Thursday, November 6, 2025. I would now like to turn the conference over to Ali Hedayat. Please go ahead. Ali Hedayat: Thank you, operator, and good morning, everyone, and thank you for taking the time to join us today. With me are Navin Jacob, Chief Investment Officer; and Zaheed Mawani, Chief Financial Officer. I will begin the call by providing an overview of our operating highlights. Navin will then discuss our portfolio assets with an update on the market outlook and provide more insights on our recently announced acquisition of the Veligrotug and VRDN-003 royalties. Finally, Zaheed will discuss our key financial highlights before moving on to Q&A. We are pleased with our third quarter results, which reflect the continued strength and resilience of our portfolio, solid execution across our business and the early benefits of our transition to an internalized structure. The third quarter represented our first full quarter operating as an internalized company. I am pleased with the performance in the quarter as we delivered strong performance across all our key financial metrics. Our portfolio delivered double-digit cash receipt growth led by the Orserdu, Xolair and Rydapt franchises, partially offset by lower Omidria performance and the persisting headwinds from Vonjo. Given the continued underperformance of Vonjo relative to our forecast, we have taken the appropriate steps and have booked an impairment to reflect our new expectations for the asset's performance. We expect Vonjo to continue to grow off current levels, both in units and in revenue, but net pricing trends have impacted our forecast relative to our underwriting, which is reflected in our fair value adjustment. While this is disappointing to us, I want to highlight that the revenues to date for Vonjo plus our expected future receipts remain in excess of our original cost, a fact that speaks to our conservatism in underwriting and the intrinsically attractive risk characteristics of our asset class. In addition to strong cash receipt performance, we delivered solid operating margin performance with adjusted EBITDA of $36.7 million or 17% growth over the same period last year. When we embarked on the internalization process, we outlined our view that the management company costs that we were bringing on to the income statement would roughly offset the management fees at the current scale of the business and leave margins at the same level as they had been in the past. I'm happy to say we have demonstrated that in our first quarter as an internalized entity with adjusted EBITDA margins of 84%. With this achieved, the road to higher operating leverage as the business grows should be fairly evident. As we continue to optimize our internal platform, you should expect our cost to come down a bit further in the near-term, after which we will start reinvesting in growth to position the trust for long-term value creation, both on the top line and in our margin structure. The quarter also marked an exciting milestone with the approval of Ekterly on July 7, for which we have begun earning royalties on a 1-quarter lag. With the approval, Calvista exercised its option to receive a onetime $22 million payment, which increased our royalty rate on the first year of sales and also increases the sales-based milestone amount. Ekterly represents a meaningful long-duration asset for DRI with expected cash receipts extending through at least 2041. It's an excellent example of our ability to structure creative and mutually beneficial transactions that deliver long-term value for unitholders and our partners. Navin will provide more detail on our asset performance shortly. Turning now to our latest royalty transaction. On October 20, we were pleased to announce a transaction with Viridian Therapeutics to acquire synthetic royalty streams on a pair of very promising treatments for thyroid eye disease, Veligrotug and VRDN-003. We acquired the royalties for an upfront fee of $55 million, and our total investment is expected to be up to $300 million. Veligrotug has been granted a breakthrough therapy designation from the FDA, and we believe the product will be approved and come to market in the second half of next year. VRDN-003 has a pair of ongoing Phase III clinical trials for the same condition with the top line results expected in the first half of 2026. Together, these therapies represent meaningful progress in treating a disease that affects about 300,000 people in the United States and has a current market size of about $2 billion. I would like to take a moment to lay out the strategic and financial fundamentals of this deal and why it is a very attractive and accretive addition to our portfolio. First and foremost, we believe these therapies, once approved, will provide a meaningful improvement in the quality of life for those affected with the condition. This is core to our mission, and we are pleased to enter into a strategic partnership with Viridian to bring these innovative therapies to market. Second, this transaction illustrates our competitive niche and our ability to structure innovative deal structures to meet the bespoke needs of the counterparty while also providing us with a strong risk-adjusted return profile, meaningful upside optionality and attractive capital efficiency characteristics. Investing in pre-approval drugs inherently carries some level of risk due to the potential for clinical trial failure. While our extensive diligence leaves us with a high confidence in the approval of both therapies, we've approached this transaction with a structure that gives us a lot of downside protection around those approval risks and is in keeping with our overall enterprise risk framework. Navin will share more on the royalty tier structure shortly. In addition to closing the transaction, we took further steps to optimize our capital structure during the quarter. We continue to execute on our normal course issuer bid and acquired and canceled about 394,000 units, bringing our total for the first 9 months of the year to roughly 1.35 million units. In addition, we amended our credit lines to allow greater flexibility and to unlock the remaining gap between our effective capacity and the headline size of the overall facility. We are well-positioned to capitalize on the opportunity ahead of us and to continue to drive value for unitholders. I will now turn the call over to Navin Jacob, our Chief Investment Officer. Navin Jacob: Thank you, Ali. Regarding our existing portfolio performance, the table on Slide 7 shows the individual royalty receipts for the third quarter of 2025 compared to Q3 of last year and the previous quarter. Summarize, Orserdu continues to experience strong growth in the U.S. and internationally. Orserdu royalty receipts were up 51% year-over-year at $16.9 million versus $11.2 million in Q3 2024, driven by sales growth and the removal of certain deductions in Orserdu2, where we are now experiencing a higher royalty rate on a go-forward basis. We continue to monitor the ongoing clinical trials of Orserdu in early breast cancer indications as well as in the metastatic setting in combination with other therapies. These trials, if positive, could potentially expand Orserdu's label, which would represent upside to our acquisition forecast. Offsetting Orserdu strength were our Omidria royalty receipts, which decreased 13% from the previous year as a result of continued impact from the Merit-based Incentive Payment Systems program, or MIPS. Omidria royalties are received with a 60-day lag and thus Q3 2025 receipts reflect sales from May 2025 to July 2025. As mentioned previously, we are now observing stabilization in demand as physicians refine their usage patterns to avoid potential penalties tied to overutilization. We continue to anticipate a gradual recovery in Omidria sales heading into 2026. Turning to Vonjo. Royalty receipts for the quarter decreased 5% compared to the previous year due mainly to changes in U.S. reimbursement impacting gross to net adjustments with the IRA impact to Part D Medicare discounts that came into effect in 2025, as previously discussed. During the quarter, we recorded an impairment to our Vonjo royalty asset in the amount of $13.7 million, which was consistent with Sobi's decision to write down its Vonjo rights. Our impairment reflects negative competitive pressures in the U.S. myelofibrosis market and increased Part D discounts relating to the Inflation Reduction Act. Our adjustment aligns with Sobi's revised outlook. We remain encouraged by Sobi's ongoing life cycle management efforts, including the Phase III PACIFICA study expected to read out in 2027. Ekterly received approval in July. And while the first cash flows won't be received until the fourth quarter, leading indicators are suggesting a launch that is ahead of our acquisition forecast. It is important to note that by design, our portfolio of royalties is diversified across a broad range of therapeutic areas and mechanisms, which helps mitigate the impact of challenges in any single asset. This diversification supports the stability of our cash flows and enables us to continue deploying capital with limited exposure to any one investment. Turning to Slide 8 and our recent acquisition of a synthetic royalty in both Veligrotug and VRDN-003. We are thrilled with the opportunity to make this investment in the franchise and partner with the team at Viridian. Our deep research expertise supports our conviction that these products have the potential to be a treatment of choice for patients living with thyroid eye disease or TED. TED is a serious rare autoimmune disease that causes ocular inflammation and results in bulging of the eyes, redness, swelling, pain, double vision and can even be vision-threatening. In the United States, between 15,000 to 20,000 patients are newly diagnosed each year. In 2024, the TED market was approximately $2 billion with only a single approved product currently on the market. We expect the TED market to grow to over $3 billion and the Viridian products to capture a meaningful share of the total market. Once approved, Veligrotug will be the second approved biologic treatment for TED in the marketplace. It has the potential to improve patients' quality of life by requiring fewer doses and significantly less time for a full course of treatment. Veligrotug has met all primary and key secondary endpoints in its Phase III trials. This week, Viridian announced that it has submitted the biologic license application or BLA for Veligrotug to the FDA. Veligrotug has been granted FDA breakthrough therapy designation, which may accelerate the review process. Pending approval, we are optimistic for a potential U.S. launch in 2026. VRDN-003 is a monoclonal antibody very similar to Veligrotug, but with some modifications to its sequence that can provide novel convenience benefits such as self-administration via low-volume subcutaneous auto-injector. VRDN-003 is being studied in active and chronic TED in 2 Phase III trials, which are anticipated to read out top line results in the first half of 2026. Subject to positive outcomes and subsequent regulatory review, Viridian plans to submit a biologic license application by the end of 2026. Under the terms of the agreement, Viridian is entitled to receive up to $270 million of committed capital, which included an upfront payment of $55 million, followed by a series of stage gate milestone payments. In the near term, upon achievement of such conditional milestones, DRI would fund an additional $115 million. The balance of the funding, specifically $100 million is tied to longer-term milestones coupled with a $30 million funding opportunity to invest in future partnership opportunities as mutually agreed. We have a tiered royalty agreement, which applies equally on annual U.S. net sales of both Veligrotug and VRDN-003. We're entitled to 7.5% of net sales up to $600 million, an incremental 0.8% on sales above $600 million to $900 million and a further incremental 0.25% on sales above $900 million up to $2 billion. We have a soft cap at $2 billion, above which we did not receive any royalties. Following the first commercial sale of Veligrotug in the U.S., we will collect royalty receipts quarterly with a 1 quarter lag. During the third quarter of 2025, we tracked at least 6 royalty transactions totaling approximately $1.7 billion in aggregate value. In the same period, there were more than 40 equity financing completed by biopharma companies across the United States and Europe, raising roughly $6.6 billion. Year-to-date, we have tracked $5.5 billion in royalty transactions across more than 20 deals. This level of activity underscores the strength and breadth of the opportunity set in our market. There is no shortage of investment opportunities. If anything, the pipeline of royalty opportunities continues to expand. What constrains our activity is not deal flow, but our extremely disciplined investment framework, which protected us in a highly uncertain macroeconomic and policy environment in the first half of 2025. As we saw greater clarity in the second half of 2025, our investment framework allowed us to actively pursue the Viridian transaction. In summary, we deliberately pursue a small number of transactions each year, focusing on the ones that meet our highest standards in terms of asset quality and risk-adjusted return potential. We believe that maintaining the selectivity is essential to generating durable value for unitholders, managing portfolio risk and preserving capital for the most compelling opportunities when they arise. I will now turn the call over to our CFO, Zaheed Mawani. Unknown Executive: Thank you, Navin. We are pleased with our financial performance for the third quarter. We recorded $43.6 million in total cash receipts, a 12% increase over the same quarter last year. We recorded $48.7 million in total income, a 17% increase over the same period last year. Adjusted EBITDA was $36.7 million, a 17% increase year-over-year with our adjusted EBITDA margin for the quarter at 84%. Adjusted cash earnings per unit in the quarter were $0.55. For the quarter, we also declared cash distributions of $0.10 per unit. We continue to generate strong cash flow from our assets. Over the last 12 months ending September 30, 2025, we recorded royalty income of $192.7 million, plus the change in the fair value of financial royalty assets, the unrealized gain on marketable securities and other interest income for a total income of $198.4 million. After adjusting for receivables, the unrealized gain on marketable securities and the net change in the financial royalty asset, we achieved normalized total cash receipts of $190.4 million. Our operating expenses, management fees and performance fees totaled $34.7 million, net of performance fees payable, resulting in an adjusted EBITDA of $155.7 million and an adjusted EBITDA margin of 82%. We also generated adjusted cash earnings per unit of $2.25. As of September 30, we had $35.6 million of cash and cash equivalents. We also had $52.9 million of royalties receivable and $265.4 million of credit availability from our bank syndicate. Subsequent to the quarter end and as of October 17, 2025, the remaining credit available was $222 million, which reflects the $50 million drawn to partially fund the upfront payment of $55 million in connection with the Viridian transaction. Our capital capacity positions us well to fund the near-term potential Viridian milestone payments in addition to retaining financial flexibility to fund new deals. We continue to be prudent allocators of capital, and our focus remains on growing our portfolio through the attractive opportunities we are seeing in the market that Navin outlined earlier. In addition, we will continue to pursue all opportunistic capital deployment strategies to maximize value creation for unitholders. This includes continuing to allocate capital to repurchase and retire units through our share buyback program, further reinforcing our commitment to optimizing capital structure and returning value to unitholders. As of September 30, we acquired and canceled over 4.5 million units through our NCIB programs. We will continue to retain discretion in making purchases under the NCIB, if any, and in determining the timing, amount and acceptable price of such purchases subject at all times to applicable TSX and other regulatory requirements. All units purchased by DRI under the NCIB will be canceled. Finally, post-internalization, we will deliberately but thoughtfully seek opportunities to deliver cost efficiencies to contribute to our drive for profitable growth and are pacing well against our expectations on this front. With that, let's open the call for questions. Operator: Thank you so much for that. And before we get to the question-and-answer session, I'd like to remind everyone that we have a disclaimer for this call. Listeners are reminded that certain statements made in this earnings call presentation, including responses to questions, may contain forward-looking statements within the meaning of the safe harbor provisions of Canadian provincial securities laws. Forward-looking statements involve risks and uncertainties, and undue reliance should not be placed on such statements. Certain material factors or assumptions are applied in making forward-looking statements, and actual results may differ materially from those expressed or implied in such statements. For additional information about factors that may cause actual results to differ materially from expectations and about material factors or assumptions applied in making forward-looking statements, please consult the MD&A for this quarter, the Risk Factors section of the Annual Information Form and DRI Healthcare's other filings with Canadian securities regulators. DRI Healthcare does not undertake to update any forward-looking statements. Such statements may speak only as of the date made. Today's presentation also referenced non-GAAP measures. The definitions of these measures and reconciliations to measures recognized under IFRS are included in our earnings press release as well as in our MD&A for this quarter, both of which are available on our website and on SEDAR. Unless otherwise specified, all dollar amounts discussed today are in U.S. dollars. And again, I'll remind you that today, this conference is being recorded, Thursday, November 26, 2025. DRI's quarterly press results release and the slides of today's call will be available on the Investor page of the company's website at drihealthcare.com. Operator: [Operator Instructions] And our first question comes from Michael Freeman with Raymond James. Michael Freeman: Congrats on these results. My first question is on the Viridian transaction and the TED franchise. I wonder how sensitive your assumptions on these assets providing future cash flows to you, how sensitive your assumptions are on the approval of both assets. So, say, Veligrotug gets its approval and then we find that VRDN-003 does not for whatever reason. I wonder if you could just describe the sensitivity of your assumptions to that. Navin Jacob: Yes. It's Navin. So, thanks for the question, Michael. So, the way we structured this deal, which was very interesting for us and why we did it is that regardless of whether one asset or both assets are approved, it will be quite positive for unitholders. Quite frankly, if 003 is not approved, there is potential upside to our returns. And as such, that's why -- that was part of the reason why we felt compelled to construct this deal with Viridian. Ali Hedayat: And Michael, just to give a little bit more color on that, it's Ali. I think the right way to look at that is the whole package of assets are approved, we'll have a certain return on a bigger amount of dollars deployed. And if 003 is not approved, we'll arguably have a higher return, but on less dollars deployed. So, something to that effect. Michael Freeman: And I wonder if you could describe -- you described the landscape of currently approved assets to treat TED with one approved product. What could you tell us about the pipeline headed toward the TED landscape? Navin Jacob: Yes. Great question. In fact, there was -- so Amgen obviously has TEPEZZA on the market, which is roughly $2 billion -- annualizing at roughly $2 billion. They announced their results just last night or 2 days ago, continues to be annualizing at roughly $2 billion. They just launched Europe, which is interesting. But with regards to other mechanisms of action or other pipeline assets, Roche actually recently presented on their IL-6 a couple of days before we completed our transaction. That data looked subpar, substantially subpar to the anti-FGR1 receptor antagonist that we own in the form of the liquid target VRDN-003, both on the primary endpoint and on secondary endpoints, the IL-6 was significantly worse. In fact, one of the Phase III trials that Roche presented technically was -- did not hit statistical significance. So, there is -- there are some questions as to whether it will get approved. We actually had included quite a bit of market share for that asset in our forecast. So, let's see how it plays out. If it does not launch, there is potential upside to our acquisition forecast. With regards to other mechanisms, there is a fair amount of competition coming. There are anti-FcRn products that are coming, a couple of other IL-6s. However, given the weak data from Roche as well as some clinical -- some clinician investigators-initiated studies that were conducted for other IL-6. We're not particularly concerned about the IL-6 class. But despite that, we have included significant market share in our assumptions for future anti-IL-6s and/or FcRn assets. Operator: Your next question comes from Erin Kyle with CIBC. Erin Kyle: I wanted to first ask on Orserdu and maybe if you can just elaborate how we should be thinking about those sales into 2026 with Lilly competing drug receiving FDA approval in September? And then can you just remind us of, again, the competitive landscape there and if there are other competing drugs that will likely enter the market in the next year or so. I believe AstraZeneca and potentially Roche were also running trials for Orserdu. T Navin Jacob: Thanks very much for the question, Erin. So, with regards to Lilly's Imlunestrant, I think the brand name is Inluriyo, it is only approved as a monotherapy for second-line HER2-negative HR-positive ESR1 mutant breast cancer patients, which is the same indication as Orserdu. This is in line with our expectations, but there had been some expectations from others that it would get a broader label because of some of the combination studies that it ran. When that data came out, we felt strongly that it was unlikely to get that, and it did not. That's well within our expectations. From everything we see, Imlunestrant is at best similar to Orserdu. There is a small argument to be made that it is worse than Orserdu. Having said that, it is Lilly and they're a strong marketer. We're not gun shy on that fact. But with that said, Orserdu has a 2-year -- 2.5-year head start, which is very important in this landscape. And given the undifferentiated profile of Imlunestrant, we're not overly concerned with that. We have that built into our acquisition forecast. The other asset that was -- that has been positive is Roche's Giredestrant and other oral SERDs that will compete against Orserdu, and had data from the evERA trial. That Phase III trial was in combination with an older drug called Afinitor, so Giredestrant plus Afinitor versus the standard of care plus Afinitor. It's a very interesting study. Admittedly, the data did look good, and it did look good in both all-comers and ESR1 patients. With that said, when I say it looked good, it's the PFS data, it's not the OS data. But nonetheless, it looked good. However, Afinitor is a very old drug, and it's not really used frequently in second-line breast cancer, especially not for all comers because you have the CDK4/6 drugs that are used there. Furthermore, Orserdu is also testing this Afinitor combination. They're testing -- or rather Menarini is testing this combination of Orserdu plus Afinitor in a Phase II/III study. And so even if that combination starts taking over some market share, we do have some protection in the fact that very likely, the Orserdu plus Afinitor study will also be positive because on a monotherapy basis, we don't see much differentiation between Giredestrant and Orserdu. Erin Kyle: That's really helpful color there. And then I just wanted to ask on the portfolio weighting. So based on our math, after the Veligrotug transaction, we see our portfolio is now weighted a little over 20% to preapproval, which is, I think, a bit above the 15% weighting target we've discussed in the past. So just in terms of appetite for another preapproval deal or what that looks like, should we expect you to defer on any preapproval deals until Veligrotug is approved? Or how are you thinking about that? Ali Hedayat: Yes, Erin, I think the kind of adding in the gross value of Veligrotug, including all the milestones is probably the wrong way to do that weighting in the sense that the upfront payment is preapproval risk, but obviously, the larger payments are sequenced primarily on approval, right? So almost by definition, when we are making those larger payments, it's an approved drug, not a pre-approval drug. So, on our math, I would say the weighting of genuine preapproval risk right now is the $55 million upfront over our net book value of assets, and it's a sort of mid-single-digit number. And in terms of, I think, broader approach to preapproval, we've been doing a lot of work on a risk framework essentially to really categorize and systematize our approach to pre-approval. We are comfortable with exposure in that space, both because of the return characteristics because of the fact that it sort of anchors at higher returns, ultimately on the back-end approval deals, approved deals, if it's structured correctly, and it sort of gives us duration and various other favorable boost to the portfolio. I think we're well progressed on framing that, and I think we feel pretty good about the framework that we have in place. So, you should expect us to continue to be active in the space. I don't think it will go significantly above the parameters that we talked about before, but it's not something we're backing down from either. Operator: Your next question comes from Doug Miehm with RBC. Douglas Miehm: First question just has to do again with these -- I wouldn't call them new type of approach to the marketplace, but one where you're definitely going to have competitive advantage in terms of pre-approval products. And I guess my question is, in your conversations with investors and owners of the shares over the last 6 to 12 months since you've, let's say, started this approach, how would you say that those conversations have gone? Are people comfortable with these types of deals that you're putting in place? Are they starting to recognize that given the duration, the quality of the assets, they're going to be okay with this approach? I'm just trying to get in their heads. Ali Hedayat: Doug, thanks for the question. I think there's a couple of ways to look at the direction of travel of the business. I think broadly speaking, we have been focused on maintaining high risk-adjusted returns. And I think to use a very broad word, what has become evident over the past 18, 24 months is that if you're targeting a point on the graph of risk-adjusted returns, the complexity under that has gone up. And you can define complexity in many different ways. You can define it as the structure of the transaction. You can define it as more synthetics versus traditional. You can define it as pre-approval. But I would say the mix of all of those things is probably higher for a given return than it was 2 or 3 years ago. And I think that is really what we are communicating to our investors. So, we are not saying it's all sales out for solely preapproval or all sales out for solely synthetic or super complex deals. But in general, to sort of achieve the great risk-adjusted returns the team is achieving, we find that we're being much more competitive when we're taking on situations that are complex, that require a lot of structuring that may have aspects of preapproval that may be synthetic. And we've been very transparent about that. I think our investor base is receptive and understands that. But when you look for a reason as to why the business has a competitive niche in what is a sector where many of our competitors are larger and better resourced, I think it is exactly our ability to execute on transactions like the Viridian one, where we have structured it in a way that is extremely well thought out, where we have taken synthetic risk, where we have managed in, I think, a very clever way the pre-approval aspects of the transaction. So, we have to outrun other people by doing a better job of those things, and I feel we're demonstrating that we can do it. Y Douglas Miehm: I just have a follow-up housekeeping item here. So, when you think about the royalty receipts that were generated by Orserdu this quarter relative to the income that was recognized in Q2, it was lower. And I know there can -- and that sort of thing. But I am curious, are we starting to see evidence of the marketplace pointing towards other products now that they're approved? Or was this simply a case of true-ups from quarter-to-quarter? Y Ali Hedayat: Sorry, Doug, one thing to keep in mind here is obviously the dynamic between our cash receipts and our recognized revenues, right? And I think you will see the impact of some of the Orserdu outperformance in the coming quarter in the sense that we've basically accrued that revenue into the receivables, but not put it through the top line yet, which is our traditional accounting. So, on our adjusted cash receipts, adjusted EBITDA, you are not seeing the impact of the performance of the drug right now. Operator: Your next question comes from Tania Armstrong with Canaccord Genuity. Tania Gonsalves: Congrats on a nice quarter. A couple for me. First, on the Viridian assets. I'm wondering if you have any insight into how Viridian might price those in the U.S. I know one of the big pushbacks against TEPEZZA is pricing, which is why it hasn't performed well in other international markets. And maybe just following along that line of thinking, if you can also comment on why you decided to pursue just the U.S. rights and not other international markets. Navin Jacob: I think you answered the question yourself, Tania, it's a very thoughtful question. That's exactly why we only pursue the U.S. just given the pricing power that we have here in the U.S. and our expectation is that it's priced in line with TEPEZZA. Tania Gonsalves: And then on your total income CAGR, I know you've previously given out guidance for this. I think the last update was kind of a mid- to high single digit through 2030. With these new potential assets in your, I guess, however you're baking in that risk adjustment, where do you anticipate that CAGR being? Ali Hedayat: We're going to update that guidance in the fourth quarter. I would say it's probably a fair statement that we're feeling pretty good about that, just given layering on of these new assets and the performance of the back book. Tania Gonsalves: And then lastly, we did see a bit of a tax recovery come this quarter. I'm just wondering if we should be modeling any kind of tax impact going forward now that the internalization is complete. Unknown Executive: I'll take that one, Tania. No, I think at this point, just given it was relatively material over there, Tania, I wouldn't sort of guide you to start putting that into your forecast. But as we know more through the internalization, if there's going to be another sort of provision that we need to make more regularly, then we'll update you accordingly for your models. Operator: Your next question comes from Zachary Evershed with National Capital Bank. Zachary Evershed: Congrats on the quarter. So just another one on the internalization process here. With this being the first quarter, would you be able to give us an idea of what normalized OpEx might look like, including the cost reductions you mentioned at the top of the call? Ali Hedayat: Yes, Zach, I'd point you to a couple of things. So, I think it's Page 18 or 19 of the MD&A. We have a walk-through of what we would consider sort of one-offs related to the quarter. I think it sums up to about $1.1 million. So that's really comprised of some severance and a few other bits and pieces, a transitional service agreement with our prior manager to deal with some issues that they were handling for us, and we have, at this point, internalized into our operations as well as some tail end of costs related to the internalization advisory work itself. And all of that is going to sort of fall out sequentially, I would say we're also, as a result of our restructuring efforts running at a lower run rate of overhead costs in the fourth quarter, both in terms of our headcount and in terms of our office lease. Unfortunately, our beautiful office on the top floor of First Canadian is going to fall prey to our optimization efforts, and we're moving into a new space, which we're excited about, and it's going to be great for the team, but it's also much more economic. So, I think as we go into the fourth quarter, you'll see sort of all of that fall through to costs. What I do want to caution you on is that it's probably the low point of our cost in the sense that our intention is to reinvest some of that back into growth and hires on the investment team and elsewhere in the organization. So, I wouldn't sort of run rate where we're going to come out at the end of the fourth quarter or the first quarter as our cost base. But I do think it's going to be overall a better mix of margins than we originally anticipated when we internalized. And certainly, that will scale as the business scales. Zachary Evershed: That's really good color. And on your Vonjo outlook, you aligned with Sobi's. What kind of hit to pricing or change in competitive environment do you think there would need to be to generate an impairment on Vonjo1? Navin Jacob: Yes. We feel very strong. We feel pretty good about that Vonjo1 acquisition -- and the forecast associated with that. I can never say never about any asset, but we feel pretty confident about where that forecast stands right now for Vonjo1. Operator: Your next question comes from Justin Keywood with Stifel. Justin Keywood: Nice to see the results. Does the FDA move to accelerate biosimilar development impact your view of future opportunities? Or perhaps are there any points of risk within the portfolio, maybe not today, but in the medium or longer-term? Navin Jacob: No. Very frank, very simply, most of our terms expire when the key patent that we believe is the strongest. When that patent expires, most of our -- most terms expire at that standpoint -- at that time point. And so, we don't rely on sort of the post-LOE tail to fund any of our acquisitions. That is not part of our assumptions. Having said that, 1 or 2 assets may go past the LOE, and that's pure upside, but that's not a driver for us. Justin Keywood: And then on the Viridian transaction, there was subsequently a financial raise and the pro forma cash balance is very healthy for that company, almost at $900 million. So, this was subsequent to the royalty transaction. Does that impact the way you're looking at the outlook for the asset given the healthier cash balance to go to market? Navin Jacob: No, that's an excellent question. There's 2 positive impacts from that. Number one, well, 3, I could argue 3. The first is it just creates a much healthier company, right? Viridian as an entity is much healthier and that reduces any tail end risk that we may have or sort of second standard deviation, third standard deviation risk we have around the credit risk of Viridian. So now they're a super healthy company. That's number one. Number 2, from the perspective of having a well-funded launch, Viridian is extremely well funded now and ready to go. We know that team. They're an excellent management team, very good executors and aggressive. So, we're excited to see what they're able to do with the cash that they have raised, and we're happy for them. So that will allow for a well-funded launch. And then the third is, I think that -- and this is a little bit more intangible, but it is our royalty deal allowed them to conduct that equity deal. And so, to the extent that other companies see that, that's a good thing for our pipeline. Operator: There are no further questions at this time. I'll turn the call back over to Ali Hedayat. Ali Hedayat: Thank you, operator. Thank you all for joining us today, and thank you for -- to the DRI team for an enormous effort in bringing these great results to fruition here. We look forward to discussing our Q4 and full year results with you next March, and thank you for your continued commitment to DRI. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good morning, and welcome to WeightWatchers International's Third Quarter 2025 Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to David Helderman, Director of Investor Relations. Please go ahead. David Helderman: Thank you for joining us today for the WeightWatchers Third Quarter Earnings Conference Call. Earlier this morning, we released a shareholder letter and press release with our third quarter 2025 results, which are available on the company's corporate website located at corporate.ww.com. The purpose of this call is to provide investors with some further details regarding the company's financial results as well as to provide a general update on the company's progress. Reconciliations of non-GAAP measures disclosed on this conference call to the most directly comparable GAAP financial measures are also available as part of the shareholder letter and press release. Before we begin, let me remind everyone that this call will contain forward-looking statements. Investors should be aware that any forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those discussed here today. These risk factors are explained in detail in the company's latest annual report on Form 10-K, quarterly report on Form 10-Q, the earnings release, the shareholder letter and as updated by the company's other filings with the Securities and Exchange Commission. Please refer to these filings for a more detailed discussion of forward-looking statements and the risks and uncertainties of such statements. All forward-looking statements are made as of today, and except as required by law, the company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Joining today's call are , Tara Comonte President and CEO; and Felicia DellaFortuna, CFO. Jon Volkmann, Chief Operations Officer, will also join for the Q&A. Tara Comonte: Thanks, David. As we close the third quarter of 2025, WeightWatchers is laying the foundation for renewed growth and leadership in the rapidly evolving weight management sector. I encourage everyone to read our shareholder letter, which we distributed earlier this morning and is posted on our Investor Relations site. It details our key strategic priorities, competitive differentiators and what you can expect to see from us over the near and longer term as we build on work already underway to drive growth and long-term value. But first, let me start with some context. In recent years, we've witnessed one of the most profound shifts in the history of health and wellness. The emergence of GLP-1 medications for weight loss has revolutionized the conversations around obesity, bringing hope and in many cases, results to millions who have long struggled to manage their weight. To many, the story was simple. Miracle drugs had arrived and traditional approaches like WeightWatchers proven high-touch science-based program could no longer compete in a changing world. However, we recognized early that this was not the end of an era, but the beginning of a new one. The future of weight management will be built on an integrated approach that pairs clinical care and medication access with structured nutrition, movement and accountability. That's why we acquired Weekend Health, a telehealth business now rebranded to WeightWatchers Clinic that allowed us to integrate medical expertise and prescription access into our program, broadening our proven science-backed model to include clinical care. We're now evolving and tailoring our behavioral offerings to provide the important support needed by members using these life-changing medications, helping them adhere to treatment, manage side effects and achieve lasting results over time. This evolution is not a rejection of our past, but an extension of our legacy as the world's leading evidence-based weight management partner. For 62 years, we've led with science. And as GLP-1s redefine what's possible, we're leading with the science again. I want to be clear on this. No company has a deeper commitment to the science of weight loss nor a longer history of helping people manage their weight than ours. Our industry-leading behavioral program serves as an essential foundation for the differentiated weight loss outcomes and significant nonscale results achieved through WeightWatchers Clinic. As you can see in our shareholder letter, the data proves the efficacy of this model. Studies found that WeightWatchers Clinic members who have prescribed anti-obesity medications, including GLP-1s, achieved an average weight loss of 19% to 23% over 3 years, significantly outperforming our competitors at 12 months. And what's more, 98% of WeightWatchers Clinic members prescribed a weight management medication reached more than 10% weight loss after 12 months and nearly half of them reaching 20% weight loss. Beyond the scale, GLP-1 users who also engaged with the WeightWatchers program experienced a 197% increase in self-esteem, a 78% increase in intimacy, 62% better physical function, a 53% boost in quality of life and 34% reduction in symptoms of depression. The data is clear. In a GLP-1 world, behavioral programs and community support in tandem with medical solutions are forced multipliers for effective, sustainable weight loss and superior health outcomes. What skeptics once saw as an existential threat to our company has instead become an extraordinary opportunity for us to deliver lasting results for our members and capture a greater share of the growing market we serve. 137 million Americans, over half of U.S. adults are eligible for GLP-1 medications. 12% of adults in the U.S. are now taking a GLP-1 medication with demand continuing to rise. $173 billion in annual medical costs are associated with obesity in the United States and $1.7 trillion in chronic disease costs are linked to overweight and obesity. This isn't just one of the largest health and economic opportunities of our time. It's a chance to help tens of millions around the world live happier, healthier lives. And it's a moment that WeightWatchers is uniquely positioned to lead. This is particularly true after last quarter's emergence from our financial reorganization. This proactive process aimed at strengthening our balance sheet and freeing up capital to invest in growth also provided the opportunity for a philosophical and strategic rebirth, opening the door for renewed and accelerated innovation. Looking forward, we're focused on 4 key priorities to drive our growth. First, we will deliver an engaging unified end-to-end member experience. WeightWatchers has long been the most trusted weight loss platform. But as the world changes, our digital ecosystem and experience must evolve to match both the scale of our ambition and the expectations of today's consumer. Under the leadership of Helene Causse, who is our new Chief Technology Officer, joining us from FIS, Snap and Amazon. We've begun modernizing the 2 most critical digital touch points for our members, our app and our website. The WeightWatchers app is being completely replatformed to remove legacy barriers between our clinical and behavioral offerings, ensuring that members can move seamlessly across the full spectrum of our programs while also discovering new tools and solutions that can help them on their journey. Over time, the app will become a personalized companion that leverages AI and behavioral insights to deliver individualized recommendations and curated programs. This will be fueled in part by the vast and constantly growing data set we've collected over more than 6 decades. By modernizing our systems, we can maximize the potential of this information to offer new personalized solutions that meet members where they are, whether that's on or off medication, managing menopause, diabetes or postpartum or in other life stages that deeply affect weight health. The WeightWatchers website is also being rebuilt on a mobile-first infrastructure designs to guide prospective members to the right starting point for their journey. It will be informative and easy to navigate, serving as both an educational resource and a more effective marketing and CRM engine. This new website will enhance our brand, improve conversion and create a clearer, more connected path from interest to acquisition. Together, these upgrades form the foundation of a full digital transformation. It will create a faster, more intuitive, data-enriched and integrated experience while also improving member outcomes and deepening engagement. The first iterations of our new app and website are expected for peak season early in the new year with ongoing releases throughout 2026. Last but certainly not least, we're reinvigorating the beating heart of WeightWatchers, our community experiences. Under the leadership of Julie Rice, our new Chief Experience Officer, who co-founded SoulCycle, we're revitalizing the community offerings that remain central to WeightWatchers. We're expanding our team of highly skilled coaches and introducing new virtual communities around shared interests such as GLP-1s, menopause, cooking and more. We'll also be upgrading the actual meeting platform that we use for our workshops to provide a more personal immersive experience for our members. And in addition, in-person workshops will also be refreshed with renewed focus on connection, consistency and brand experience to be strategically aligned with member demand and needs. Together and over time, all these initiatives will deliver a unified modern WeightWatchers experience that will remove friction between programs, connect digital and human support, produce better outcomes for members and generate expanded opportunities for profitable growth for our business. Second, we're growing our emerging medical business and investing in new diversified revenue streams. The widespread adoption of GLP-1s for weight loss has transformed the weight management landscape and created substantial opportunity for WeightWatchers. Our immediate priority is to scale what's working. That includes WeightWatchers Clinic, which offers medical access and clinical care. It includes our GLP-1 Companion Program, which provides a behavioral framework to support GLP-1 weight loss regardless of whether you get your prescription from WeightWatchers Clinic or your own care provider. And it includes our cash paid or reimbursable Registered Dietitian Network, which connects members with experts who can help them make curated nutritional choices based on their personal needs. Moving forward, we plan to invest in, expand and elevate these programs for existing and new prospective members. As innovation in the weight health market continues to advance rapidly, we're positioning ourselves to benefit from strong tailwinds that will boost our telehealth business. New oral medications that will expand treatment options are expected in early 2026. Price points are likely to come down for medication over time and long-term trends point towards broader insurance coverage for medical weight management. Each of these factors will ultimately contribute to expanded medication access and provide significant potential for growth. We're encouraged by the strong member interest in GLP-1 medication options through direct cash pay channels, including our integrations with NovoCare and LillyDirect. Our ongoing collaboration with Novo Nordisk is particularly meaningful as we work together to expand access to injectable Wegovy and support the upcoming launch of the Wegovy Pill, while exploring new and innovative ways to bring additional convenience and value to our members. As we continue to expand our medical solutions and capabilities, I will reiterate that patient safety, patient outcomes and regulatory compliance continue to guide our clinical approach. As we expand our GLP-1 medical weight loss program, we are also extending our reach into adjacent areas of weight health. This started with the launch of WeightWatchers for menopause, a new offering launched at the end of the third quarter that offers evidence-based support and medication access to the 1.3 million women in the United States who reach menopause each year, many of whom are managing weight, hormonal and metabolic changes simultaneously. The phased rollout throughout October has been well received, driving encouraging engagement among existing members and strengthening brand awareness around our evolving position in weight health. We also expect our long-term growth to extend beyond the United States, building on more than 50 years of presence in key international markets. Under the leadership of Alejandro Bethlen, Executive Vice President of International, who joined us in September, we will accelerate efforts to strengthen our position abroad, advancing new clinical capabilities while also recommitting to international growth more broadly across our business. Our partnership with U.K.-based telehealth provider CheqUp that we launched in May is exceeding expectations, and we will evaluate additional opportunities to extend our integrated model to other priority markets. We're also expanding our relationships with employers, payers and health systems seeking cost-effective outcome-driven solutions. One recent example is our WeightWatchers RxFlexFund. It launched in October and offers an innovative flexible approach for organizations looking to support employee access to GLP-1s while managing overall costs, underscoring the value of our integrated medical and behavioral care model. Looking ahead, we see meaningful opportunities to thoughtfully extend the WeightWatchers ecosystem into areas that complement our expertise in weight health. Through select partnerships, integrations and service innovations, our focus remains clear: improving member outcomes, expanding solutions and building a more diversified foundation for long-term growth and shareholder value. Third, modernizing the WeightWatchers brand and reclaiming our market leadership. WeightWatchers has been one of the most trusted and effective names in weight management for more than 6 decades. As the world's understanding of weight health is being rewritten, WeightWatchers is uniquely positioned to lead the future of our industry as a company that is grounded in trust, powered by science and committed to expanding clinical access to deliver meaningful lasting results. This is a forward-looking vision we are eager to communicate. That's why we are executing a comprehensive brand refresh that combines a more contemporary and engaging brand expression with a renewed focus on superior proven outcomes, including our growing medication offerings. The effort will launch for peak early in the new year and extend across our visual design, tone of voice and how and where we show up, presenting a bold, modern WeightWatchers. In addition, and over time, we'll evolve our marketing strategy from expensive performance-driven channels dominating spend to a go-to-market strategy built on proven results and real people while leveraging our role as the trusted authority in this space and ultimately creating an organic flywheel for growth. We'll lean into social and community-driven storytelling, leveraging the real voices of our doctors, clinicians, coaches and members to expand reach and bring the WeightWatchers experience to life. We're also dealing with the reality of many years of prolonged deep discounting, a tactic that takes time to wean off. Rather, we will shift towards more of a value-based pricing approach that will complement our brand modernization work, the expanding scope of our solutions and importantly, the success of our programs. Comprehensive pricing and product studies underway across our top global markets will inform this next phase for the business helping us balance access with value and rebuild our product and pricing architecture for durable revenue expansion. This work will all lead into our peak season objectives. That includes breaking through preconceived notions of the WeightWatchers brand and reestablishing ourselves as modern and relevant for an expanding set of target customer segments. It means driving widespread awareness of WeightWatchers' role as a growing provider of GLP-1 medications. And it includes acquiring both net new customers and lapsed rejoiners through compelling product innovation and marketing. Finally, as a business with a strong EBITDA margin profile, we remain committed to driving ongoing operational improvements as we also invest for growth. At every level of our organization, we're focused on efficiency, disciplined execution and prudent resource management. Following the execution of our previously committed $100 million in run rate savings, we continue to identify new opportunities to enhance productivity and performance across the business. Part of this effort is rooted in new technologies. The implementation of AI-powered voice support has improved member resolution rates and reduced service costs, while new AI tools within our clinical support model being rolled out over coming months will handle increased administrative tasks. These are the first steps in a broader effort to streamline and automate processes across our global operations, improving both speed and quality while reducing cost to serve. We're also more closely integrating our clinical and behavioral operations, which is vital to our long-term strategy. This integration is improving efficiency, facilitating cross-training of our teams, fostering shared expertise and delivering a more cohesive experience for our members. These efficiencies make our work faster and more cost effective while preserving the high-quality personalized care that defines WeightWatchers. Through this disciplined operational approach, we're building a more agile, efficient and resilient organization, one that enables reinvestment in growth, protects margins and strengthens our foundation for sustainable long-term value creation. In closing, our work to hone our strategy and streamline our operations has positioned the company for a new chapter of growth and impact during a historic moment. We're leveraging decades of expertise and name recognition with cutting-edge tools to write the next chapter of WeightWatchers, a new story, which redefines the meaning of weight health and positions us for long-term growth and leadership in the industry we created. Much work remains, but as our members know well, hard work can create new beginnings. Our direction is clear and the possibilities are exciting. And with that, I'll turn it over to Felicia to cover the financials. Felicia DellaFortuna: Thanks, Tara. We are pleased with the results for the quarter with continued strong adjusted EBITDA margins of nearly 25%, reflecting our focus on cost discipline and timing of spend while investing in future growth initiatives. Acquisition challenges continue to persist in our behavioral business, although slightly improved from last quarter's bankruptcy period and in part supported by brand marketing associated with the launch of our new Menopause program. We ended Q3 with 2.9 million end-of-period behavioral subscribers, a decline of 20% year-over-year as this sector remains challenged. Conversely, we were pleased with the clinic performance in the quarter with clinical end-of-period subscribers of 124,000, an increase of 60% compared to the same quarter last year. As a reminder, we added compounded semaglutide to our prescription formulary in October last year, and we will start to face more challenging comps over the next couple of quarters. Revenue was $172 million, which declined 11% year-over-year. Clinical revenue grew 35% year-over-year and behavioral revenue declined 16% year-over-year. Foreign exchange provided a $2 million benefit to the quarter and fiscal Q3 2025 included 1 extra day compared to fiscal Q3 2024. In the clinic business, we were encouraged by our retention of a greater-than-expected number of members who had been previously prescribed compounded semaglutide, transitioning approximately 20% of those members to branded or oral medications. We expect Q3 2025 to represent the low point in clinical subscribers with this transition largely behind us. Monthly subscription revenues per average subscriber, or ARPU, was $18.52 in the quarter, increasing 9% compared to the prior year quarter, reflecting the continued shift in mix towards higher-value clinical subscribers. However, ARPU declined sequentially in part due to an increase in clinic 12-month commitment plans together with certain promotional activity. Adjusted gross margin was 75.1%. We continue to closely manage costs while evolving toward a more variable expense structure with nearly 70% of our cost of revenue variable in Q3. Beginning last quarter, we refined our reporting methodology to align direct revenue-related expenses, primarily technology costs within cost of revenue. This adjustment modestly increased gross margin with an offsetting increase in SG&A, providing a clearer view of the scalability of our model. We expect gross margin to decline modestly in the fourth quarter relative to the third quarter, reflecting the seasonal increase of staffing ahead of January peak season. Marketing expense was 28% of revenue, more consistent with levels prior to last quarter's financial reorganization period. We expect marketing investment to increase as a percentage of revenue in Q4 with the start of peak season, along with the initial rollout of new brand and product initiatives Tara mentioned. Additionally, following emergence, we updated our accounting policy to expense advertising costs as they are incurred, a change from previous policy, which recorded advertising expense as deferred costs until airing commenced. As a result, certain costs related to peak may be included in the fourth quarter versus the first quarter of next year. However, we still expect Q1 to represent our highest seasonal marketing spend of the year due to new year demand and continued seasonality of the business. As a reminder, given the timing of our subscription model, there is a lag between marketing investment and related revenue recognition over the duration of a subscription. Adjusted product development expense, which primarily includes personnel-related costs for engineering, design and data teams was 4% of revenue, reflecting an increase in capitalized product and technology initiatives as part of our product road map. Adjusted SG&A was 18% of revenue, reflecting continued cost discipline and the flow-through of executed cost reduction initiatives. Adjusted EBITDA was $43 million and adjusted EBITDA margin was 24.9%. We expect adjusted EBITDA to decline in Q4 compared to Q3, reflecting the increase in marketing mentioned earlier while still maintaining a strong margin profile. Shifting to cash and the balance sheet. We ended Q3 with $170 million of cash and cash equivalents, up from $152 million at the end of Q2. The increase reflects strong Q3 EBITDA, partially offset by the first interest payment on our new term loan and a lease termination payment associated with the exit of our prior corporate headquarters in New York, which is expected to result in modest run rate SG&A savings moving forward. Cash flow from operations was a use of $3 million, reflecting the release of escrow funds reserved for professional fees associated with our financial reorganization. Capital expenditures in Q3 totaled $3 million as we increase investment in product, technology, innovation and other growth initiatives, we expect 2026 capital expenditures to begin to return towards historical levels. Cash taxes are expected to be approximately $15 million to $20 million for 2025, lower than historical years, reflecting the higher transaction-related deductions associated with the financial reorganization and the benefits of the One Big Beautiful Bill Act. WeightWatchers remains a high-margin, highly cash-generative business before debt service, reflecting recurring subscription revenue and low capital intensity. Shifting to our new debt profile, a term loan of $465 million represents a reduction of over 70% following our financial reorganization. The interest rate on the term loan is SOFR plus 680 basis points. It has a maturity of June 24, 2030. As part of the term loan agreement, there are annual prepayments to be made for excess cash above $100 million based on the last 10 calendar days of the first quarter. Now shifting to our outlook. 2025 has been a pivotal year for WeightWatchers. We reset our balance sheet, transformed our leadership team and defined clear strategic priorities that align with our long-term vision for growth. These actions now enable us to focus squarely on execution, allocating resources towards the initiatives that will drive a return to sustained profitable growth. Behavioral pressures persist, though slightly improved from the second quarter, and the compounded medication landscape remains complex with competitors continuing to offer compounded products at significantly lower prices than FDA-approved medications. Due to the recurring nature of our subscription model, however, these near-term factors will influence our starting point headed into 2026. At the same time, execution of our strategic plans throughout the year will target a strengthening of member acquisition and engagement and position us for sustained growth over time. We remain focused on maintaining strong adjusted EBITDA margins, while our variable cost structure and cash-generative business model provide the financial foundation and flexibility to continue to invest in key growth initiatives. We are narrowing full year fiscal 2025 guidance to the higher end of previously provided ranges and expect revenue of $695 million to $700 million and adjusted EBITDA of $145 million to $150 million. I'll now turn back over to Tara. Tara Comonte: Thanks, Felicia. The world of weight management has transformed and WeightWatchers with it. We stand on the precipice of a massive opportunity to build significant value for our business while helping millions of people around the world to live healthier, happier lives, reasserting ourselves as the leading destination for successful weight loss and lasting results. I'll now turn it over to the operator to open it up for Q&A. Operator: [Operator Instructions] And the first question will be from Alex Fuhrman from Lucid Capital Markets. Alex Fuhrman: Congratulations on what looks like a really strong quarter here. Very interesting that you're going to be removing all of the barriers between the 2 programs in the app. I think that makes sense as kind of the natural evolution of the program. I'm curious, when do you think that redesigned app is going to be available to members? Tara Comonte: Alex, I'm Tara. So first of all, thanks for the question. So there's a lot more detail. I don't know if you've had a chance to go through our shareholder letter yet, but I would direct you there for a bit more color around certainly this topic and others. But the first version of the new app, we are targeting to launch by early next year in time for peak. So the team is heads down working really hard on that. And then that will be the first release. There will be a number of subsequent releases of the app and our digital platforms over the course of next year. And it's really the app -- the new app experience or the new digital experience for members is it goes beyond just integrating and removing barriers. It will look and feel very modern, very different, much more intuitive than our existing legacy app that we've had for many, many years with sort of code on code, on code. It will be much better suited to highlight different features, different tools, different programs that may be appropriate to you on your weight loss journey that are today really hard to find at best in our app, things like our Registered Dietitian offering, things like our GLP-1 Companion Program that's currently buried within the core program as a setting that you've sort of got to figure out where to find it. This new experience will allow us to better showcase the full breadth of the offering. And then also as we get to know you and as this experience becomes more personalized and more data informed, it will allow us to better drive our members to solutions for them and meet them where they are on their journey. So we're really excited. The team is doing a huge, huge amount of work to get the first version of this out the door by peak. But yes, it should look and feel like a most definitely a different chapter for WeightWatchers for our members around the world. Alex Fuhrman: That's exciting. It'd be great to see when that comes out shortly. So, can you talk about some of the partnerships that you've been doing lately? You mentioned the partnerships you have with Novo, and it seems like you've been striking a number of these kind of deals that you announced recently. You have a partnership with Amazon for drug delivery. Can you talk a little bit more about some of these partnerships? Is that what's driving your growth? And in the case of Amazon, can you tell us a little bit more about what your members are getting as a result of this partnership? Tara Comonte: Yes, of course. Listen, I think strategic partnerships are a great lever for us across many different angles as we move forward. And certainly, that can include partners with pharmaceutical players like Lilly and Novo that we have or it can include some on the back end like Amazon. And way beyond that, I think there are strategic partnerships opportunities for the business that can extend our services that can help us expand internationally. And so while I would not say strategic partnerships are where our growth is going to come from, I do think they are a part of our growth strategy. But I'll flip to Jon to talk more specifically maybe about Amazon. Jon Volkmann: Yes. Thanks, Tara. Jon Volkmann here. So obviously, we're very excited about our partnerships with NovoCare and LillyDirect and very pleased to announce our new collaboration with Amazon Pharmacy. Overall, the theme of all of these is that it's really just another step in making medication access faster, simpler and more affordable for our members. And specifically to the Amazon partnership, by integrating directly with their infrastructure, our members now get access to real-time medication availability from their specific fulfillment center. They also get automatic coupon savings, applied at checkout with no code needed. And then obviously, the Amazon network for free 2-day shipping for Prime members. So again, all of these partnerships are with the theme of just reducing friction in the health care process and for these specifically allowing patients to focus less on pharmacy logistics and more on their health. And then looking at NovoCare, looking ahead to the orals launch here, we are working very closely with them to help support this launch, and it is fast approaching. And so like we've done in the past, we'll be looking for new and really innovative ways to bring both convenience and value to our members on that front. Alex Fuhrman: That's really interesting. And then if I could just kind of squeeze in one more here. WeightWatchers for Menopause, you just launched it. I imagine it's too early to talk about how that's going. But who are you initially targeting for this offering? Is this something that you think is a big opportunity within your current membership? Or is this an opportunity to reengage with former members that you haven't seen in a few years? Tara Comonte: I think it's both of the above and new members. So yes, we are really excited to have launched the Menopause program, which is really 2 programs, one with a clinical offering and one without -- with the clinical offering only being available in the U.S. with women's health trained clinicians. So we think this is an exciting market moving into women's health, but with a very clear overlap in terms of weight health. We think it's a global need. There's a lot of demand. It is fast being destigmatized. It's a very nice overlap with our existing customer base and has been much requested from our existing member base for a long time. So it feels like a really nice fit for the company and somewhat of a blueprint in terms of how we think about programming moving forward with leveraging each of our core pillars the most recent pillar being medication access and clinical expertise, but curated community offering, coaching, nutritional guidance, movement, but tailored to win in their perimenopausal and menopausal years. Also really we'll be leveraging new technology moving forward. And again, in the same way as we talked about the app, that app infrastructure and that new intuitive modern connected experience, the first version of that actually really is in menopause, albeit it's not yet fully on the new tech stack. But you'll notice that the barriers that exist in some of the other programming are removed in the Menopause program. So it was -- you're right, it's too early to sort of be conclusive about it in any way other than we're excited, and we think it's an important growth lever moving forward. But it was good to get back out in the market, be loud, be proud. You saw we launched it with Queen Latifah, which was great and provided a much needed sort of positive brand moment coming out of those fairly painful extended bankruptcy headings. So exciting about it moving forward. Operator: And our next question will be from Justin Ages from CJS Securities. Justin Ages: I wanted to ask a question on retention, which was better than expected. Can we just drill down on that and some of the returns that you're seeing in some of the programs? Given the headlines around the compounded GLP-1s, I think myself and everyone else thought that clinical subscribers would be down a little more. So that was impressive to see. So I wanted to get some more information on that. Jon Volkmann: Yes, sure. So the transition from compounded medications is largely complete, and we're pleased to announce that those results have exceeded our expectations. So we successfully converted approximately 20% of our compounding members directly into our ongoing clinical program. And within that cohort, we saw members transition to really 3 main treatment areas. So insurance covered GLP-1s. And for these members, we were able to successfully help them obtain coverage. And as previously stated, our ability to do so here really remains a key competitive advantage for us. We also saw members transition to cash pay GLP-1s, many of whom are using our direct integrations with NovoCare and LillyDirect and then finally, to our oral medication kits. Felicia DellaFortuna: We also strategically moved member subscribers towards 12-month LTCs in a very strong effort to retain clients for longer to keep with a more beneficial LTV for us long term. And so while we did see an ARPU decline in Q3, we were very optimistic and positive about that ARPU decline because it did mean better retention for our clinic subscribers. And then on behavioral, we do see that our overall retention is still trending at around 11 months and an area of opportunity for us as well. Tara Comonte: Yes, I was just going to add to the retention point as it being an area of opportunity, another perfect example of why a different member experience on the digital platforms, particularly the app is so needed because, again, some of these silos in the existing journey prohibit us from executing against some valuable tools to drive increased share of wallet, but upsell into different programs, particularly the clinic program, but also to drive retention through stickier, more personalized programming for our members. So all tools sort of pointing to the same set of objectives. Justin Ages: Great. And then one more, if I could. And I know it's early in terms of kind of the reorganization and the rebrand, but there's been some new influencer campaigns at the company. Just wanted to know early returns on broadening the subscriber base. Have you seen any changes in the demographics of the company? Tara Comonte: Well, I'm glad you're seeing our new influencer campaigns. That will make our marketing team extremely happy. Nothing specific to comment on right now. I mean, hopefully, you got from the prepared remarks, and again, there's a little more color in the shareholder letter. But we're really looking to reassert and reposition and sort of reenter this brand into the weight management market. We've got some pretty dated preconceptions of the brand. We've obviously come off the back of some prolonged bankruptcy headings -- headlines that were very challenging for the business over many months this year. And what you're seeing in the influencer strategy is a shift in how we show up, who we engage with as well as the types of channels that we're going to be leveraging to really execute against that strategy. Over many years, the company has really become quite dependent on, as I mentioned in the prepared remarks, a discounting strategy, heavy bottom of funnel performance marketing. And we are -- we have a high level of conviction that as an iconic global brand of more than 6 decades that we should be deploying a much more of a full funnel strategy, leaning into the strength of that brand and rebuilding that organic flywheel through multiple different channels. But certainly, social, telling real-life member stories, showcasing our clinicians, our coaches and leveraging appropriate influencers helps us do that as well as reach new target audiences. Operator: [Operator Instructions] The next question will be from Nathan Feather from Morgan Stanley. Nathaniel Feather: So compounding has certainly driven a lot of volatility in the clinic subscriber growth over the past year. I guess if we strip that out, how should we think about the underlying growth here? And given that, what's kind of the right run rate of clinic growth now that we're past the churn off here? Tara Comonte: Listen, you can't really strip it out, unfortunately. So this is a pretty complex landscape right now, as you know, moving very fast. The business prescribed compounded medications from October last year to the end of May. As Jon mentioned, we have a very robust insurance PA approval engine on the back end. We have non-GLP-1 oral medications, and we are partnering with Novo to bring this new oral Wegovy to market early next year. So there are a lot of moving parts in the clinic business. We have a very high level of conviction in the strength of this integrated holistic medically centered but broader care model, nonetheless, over the long term. We think it is -- it drives superior outcomes. It drives a better member experience. It drives more sustainability in results and really is quite differentiated from just pure-play telehealth. So outside of compounding noise over the course of the year, this is a really important growth engine for us that is only going to receive, I think, more and more demand and adoption of members, particularly as pricing comes down and these medications become more accessible. Jon Volkmann: Yes. And to that end, obviously, we're monitoring the situation closely, as I'm sure you all are with the recent headlines that appear to be putting a lot of downward pressure on medication prices. And I think important to call out that we view that downward pressure really as a net positive and a significant tailwind for our business. As access expands, we believe that the market is going to increasingly value quality of care, and that plays directly to our strengths. Our model has always been built on -- on really high-touch and holistic clinical support. So our members have access 24/7 to their care teams. And as you saw in our shareholder letter, our customer satisfaction and our patient outcomes are really best-in-class. So like looking more long term and looking ahead as this market matures, we're really confident that the key stakeholders in this industry from regulators to pharma partners will increasingly value providers to ensure patient safety, manage outcomes and drive long-term adherence. And when we think about where we are long term, that's the business that we're in. Felicia DellaFortuna: Last thing I would mention is that we also stated that we do anticipate Q3 2025 being the trough on end-of-period subscriber for clinic. Nathaniel Feather: Great. That's very helpful. And then heading into peak season shortly, there was a little bit of commentary in the letter, but interested to hear a touch more about your plans across both product and marketing as you work to improve the resonance, especially within the core behavioral business. Tara Comonte: Yes, happy to take that, and then you guys can jump in if I miss anything. There's -- hopefully, it is clear the extensive work that is going on across the company right now from a full top to bottom digital rebuild, an extensive brand refresh, a relaunching of our virtual community offerings, a showcasing of programs and solutions that have been somewhat buried up until this point and really a rallying around the need for significant increases in awareness in the market that WeightWatchers is in the medication space and provides medication access and clinical expertise as part of this more holistic offering with the force multipliers, if you like, that the behavioral solutions can also play. So a pretty important reentry, an important peak for us and we're obviously targeting an uptick in subscribers Q1 from Q4 as a result. It's early to tell what that's going to look like, but we're really excited. There is a vast amount going on, and it is bold and impactful. And outside of the tactics, everything we're doing first, second and third is to continue to drive superior results for our members. People are looking to achieve results. They're coming to us on -- to achieve their weight loss and do it in a healthy and sustainable manner and really making sure that we turn up at peak, showing how we are very different with some very impressive data to back that up is key. And then supported by the product. So yes, it's an important couple of months as we run up until that point and then beyond, right? So the difference with this peak versus others is really peak is just the beginning of the launch of many of these things that we're talking about. It's Chapter 1, right, of the brand coming back in. It's Chapter 1 of the -- it's the first version of the new app. It's the first version of the new website. So I'm sure we will have a lot to learn, but we have a lot of exciting things planned on post peak as we continue to roll out various growth initiatives across the ecosystem. So hopefully, that's helpful. Felicia DellaFortuna: I would also just mention that we do anticipate, as Tara mentioned, the step-up from Q4 to Q1, but we do still have the acquisition challenges on behavioral that albeit has improved relative to the bankruptcy headlines of Q2, it is creating an opening access tailwind on our subscriber model for 2026 and so -- a headwind in 2026. And so a lot of our strategic priorities are to offset that opening access headwind. Jon Volkmann: Yes. And I think just lastly, to jump in here from a clinical standpoint, a really interesting factor with peak this year is that it happens to coincide with one of the most anticipated things that we've seen in quite a while in the space, and that's the launch of an oral GLP-1, which as Novo Nordisk has stated, is expected to come to market in very early 2026 and then expected with a fast follow-up from Lilly. And we really view that as a significant market catalyst that's going to open up a new top funnel for a large portion of people who are interested in GLP-1s, but resistant to injectables. So in addition to everything that we have planned with our normal peak activities, this also just presents a very interesting and exciting dynamic that we view as an opportunity for our clinical business as well. Operator: And ladies and gentlemen, this concludes today's question-and-answer session. I'd like to turn the conference back over to Tara Comonte for any closing remarks. Tara Comonte: Thank you, everyone. Really just appreciate you joining the call. Appreciate your interest in the business and support of the business. This is an exciting time for WeightWatchers. We are running hard to fully leverage all the growth opportunities ahead of us. So look forward to following up in one-on-ones. And if there's something that you wanted to cover that we didn't get to, please just get in touch directly. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good afternoon, and welcome to AstraZeneca's 9 months and Q3 2025 webinar for investors and analysts. Before I hand over to AstraZeneca, I'd like to read the Safe Harbor Statement. The company intends to utilize the Safe Harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Participants on this call may make forward-looking statements with respect to the operations and financial performance of AstraZeneca. Although we believe our expectations are based on reasonable assumptions, by their very nature, forward-looking statements involve risks and uncertainties and may be influenced by factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. Any forward-looking statements made on this call reflect the knowledge and information available at the time of this call. The company undertakes no obligation to update forward-looking statements. Please carefully review the forward-looking statements disclaimer in the slide deck that accompanies this presentation and webcast. There will be an opportunity to ask questions after today's presentation. [Operator Instructions] And with that, I'd now like to hand the conference over to the Head of Investor Relations at AstraZeneca, Andy Barnett. Andrew Barnett: A very warm welcome to AstraZeneca's Year-to-Date and Third Quarter 2025 Presentation, Conference Call and Webcast for Investors and Analysts. I'm Andy Barnett, Head of Investor Relations. And before I hand over to Pascal and other members of our executive team, I'd like to cover some important housekeeping items. Firstly, all of the materials presented today are already available on our AstraZeneca Investor Relations website. Next slide, please. This slide contains our cautionary statements regarding forward-looking statements, including the safe harbor provision, which I'd encourage you to take the time to read carefully. We will be making comments on our performance using constant exchange rates, or CER, core financial numbers and other non-GAAP measures. A non-GAAP to GAAP reconciliation is as usual, contained within our results announcement. All numbers quoted are in millions of U.S. dollars unless otherwise stated. And next slide, please. This slide shows the agenda for today's call. And following our prepared remarks, we'll open the line for questions. As usual, we will try and cover as many questions as we can during the allotted time, although please limit the number of questions that you asked to allow others a fair chance to participate in the Q&A. And with that, please advance to the next slide, and I will hand over to Pascal. Pascal Soriot: Thank you, Andy, and welcome, everyone. I'm pleased to report that our strong growth momentum and pipeline delivery have continued through the first 9 months of 2025. Total revenue grew by 11%, driven by continued demand for our innovative medicines and core EPS increased by 15%. Since our full year results in February, we've achieved 31 regulatory approvals across key regions and the pace at which we are bringing new medicines to patients continues to accelerate. Importantly, we've announced positive results from 16 Phase III trials and 6 of our data sets were presented in plenary sessions at major conferences, a clear reflection of the importance of this data to the medical community. Please advance to the next slide. Combined, our global reach and diverse sources of revenue have a significant strength, ensuring low concentration risk and resilience to regional disruptions. We have continued to deliver strong growth across therapy areas and geographies. In the first 9 months, our oncology franchise grew by 16%, reflecting the ongoing demand for our medicines across the globe. Our Biopharmaceuticals and Rare Disease franchises were also up 8% and 6%, respectively, with strong growth from our newer medicines more than offsetting the loss of exclusivity of a limited number of mature brands, including Brilinta, Pulmicort and Soliris. Importantly, we continue to see robust growth across all key geographies, particularly in the U.S. and the emerging markets outside of China, where revenues were up 11% and 21%, respectively. Please move to the next slide. We are in a unique catalyst rich period, one that I'm excited to say, look set to continue well beyond 2026. Shown here are the high-value positive studies we've announced in 2025. And as you can see, we are delivering success across all of our key therapy areas. Since our last quarterly update, we've announced four additional positive Phase III study readouts. DESTINY-Breast05 together with DESTINY-Breast11 that read out earlier this year marks an important advance for patients with early HER2-positive breast cancer that could potentially benefit from a HER2. TROPION-Breast02 has the potential to establish Datroway as a new standard of care in triple-negative breast cancer. The Bax24 trial results reinforce the best-in-class profile of baxdrostat in treatment-resistant hypertension. And finally, TULIP-Subcu will enable us to bring a more convenient subcutaneous administration of Saphnelo to SLE patients. All these positive Phase III readouts continue to give us confidence towards our $80 billion 2030 ambition. Next slide, please. I'd like to address recent developments for AstraZeneca in the United States. The U.S. remains our largest market and is projected to account for around 50% of our total revenue by 2030. We announced a landmark agreement with the U.S. government which provides greater clarity around pricing and a 3-year exemption from tariffs. The agreement will lower the cost of many prescription medicines for American patients, while safeguarding Americas cutting-edge Biophamaceutical innovation. With the administration support, we are now working with others to deliver price equalization across wealthier markets, an approach that offers a more sustainable future for governments, industry and patients. In addition, we continue to focus on clinical trial diversity and further enhancing our clinical trial footprint in the U.S. To support our growth ambitions, we've been steadily expanding our global manufacturing capacity including broadening our U.S. footprint over the last several years. Last month, I was pleased to break ground on our new Virginia facility joined by Senator, Lutnick; Governor, Youngkin; and Dr. Ross. And lastly, I'm grateful for our shareholders to voting through our proposal to harmonize our listing structure in London, Stockholm and New York. AstraZeneca ordinary shares will be listed on the New York Stock Exchange from February next year. This new listing structure will offer flexibility to access the broadest available pool of capital, including in the U.S. and enable more shareholders to participate in AstraZeneca's exciting future. And with that, please advance to the next slide, and I will hand over to Aradhana. Aradhana Sarin: Thank you, Pascal, and good morning, good afternoon, everyone. As usual, I will start with the reported P&L. Next slide, please. Total revenue increased by 11% in the first 9 months. Product sales grew by 9% with strong growth seen across the business in key regions. Alliance revenue increased by 41%, driven by continued growth for both Enhertu and Tezspire in regions where our partners book product sales. Next slide, please. This is our core P&L. Our core gross margin in the first 9 months was 83%. We continue to anticipate a slight decrease in the core gross margin for the full year versus 2024, due to the Medicare Part D reform, Brilinta LOE, Soliris biosimilars and increased profit sharing from partnered products. Similar to prior years, we anticipate the core gross margin in the fourth quarter to be lower than in the third quarter, driven by the usual seasonal pattern with more sales from lower-margin products like FluMist and Beyfortus. R&D expenses increased by 16% in the first 9 months, driven by sustained high activity, including many clinical trials having enrolled ahead of plan. We've also made significant investments in high-value pipeline opportunities, such as our I/O bispecifics, weight management and cell therapy portfolios. As a percentage of total revenue, core R&D costs accounted for 23.3%, and we continue to expect R&D to land at the upper end of the low 20s percentage range for the full year. We have continued to make progress towards our 2026 margin goal and remain on track, as you can see from our 9-month results with core operating margin at 33.3%. Operating leverage continues to remain a focus internally. And again, as you can see from the first 9 months, product revenue grew at 11% and SG&A grew at 3%. Core EPS of $7.04 represents CER growth of 15%. Next slide, please. We have seen strong cash flow inflow from operating activities in the year-to-date, up by 37% versus the prior year to $12.2 billion, driven by robust underlying business momentum. In the year-to-date, we saw CapEx of $2.1 billion. And as previously stated, we anticipate an increase of around 50% for the full year versus 2024, which implies a step-up in the fourth quarter which also is normal as in prior years. Our capital allocation priorities remain unchanged. We currently have interest-bearing debt of close to $33 billion, which is a level we're comfortable with as we plan to continue making investments to support future growth, build our supply chain globally and further strengthen our R&D pipeline. Our net debt-to-EBITDA ratio currently stands at 1.2x. Turning to guidance. Today, we are reiterating our full year guidance with total revenue and core EPS anticipated to increase by high single-digit and low double-digit percentage, respectively, at constant exchange rates. We expect our strong revenue momentum in growth brands to continue. I would like to remind you that in the fourth quarter of 2024, we booked more than $800 million in sales-based milestones under collaboration revenue. This year, we do not anticipate any significant milestone revenue in the fourth quarter, which will affect the year-over-year growth rate comparisons for the fourth quarter. In addition, in China, while growth has been strong throughout the year, fourth quarter revenues are anticipated to be affected by VBP-associated stock compensation costs for Farxiga, Lynparza and Roxadustat and the usual year-end hospital budget capping, in addition to tender order variability in emerging markets. Similar to prior years, we also anticipate a sequential step-up in both R&D and SG&A expenses in the fourth quarter versus the third quarter. With that, please advance to the next slide, and I will hand over to Dave, who will take you through the incredible performance of our oncology and hematology business. David Fredrickson: Thank you, Aradhana. Next slide, please. Oncology total revenue grew 16% in the first 9 months to $18.6 billion with broad-based double-digit growth across U.S., Europe and emerging markets. The U.S., in particular, continued to report strong year-over-year growth of 19%, highlighting robust demand for our medicines, which substantially outpaced the increased liabilities resulting from Medicare Part D redesign. Emerging markets also delivered impressive performance with 20% growth during the period. Focusing on third quarter performance, we achieved robust 18% growth for the second quarter in a row. Tagrisso delivered sales of $1.9 billion in the third quarter, representing 10% growth on the prior year. Widespread demand across all major regions reinforces Tagrisso's role as the backbone of care for EGFR-mutated lung cancer. The first-line lung cancer combination market continues to expand with FLAURA2, the clear leader, in terms of new patient starts and total scripts. The compelling overall survival results presented at the World Congress of Lung Cancer and subsequently published in the New England Journal of Medicine will drive further leadership. Calquence remains the leading BTK inhibitor in first-line CLL across major markets, with total revenues increasing by 11% to $916 million in the third quarter. In the U.S., we continue to see increased demand more than offset the impact of Part D redesign with improved market share versus the same period last year. We're seeing positive early signs of adoption for AMPLIFY in Europe and expect this trajectory to continue through the remainder of the year with the U.S. launch anticipated in the first half of 2026. Lynparza, which remains the leading PARP inhibitor globally delivered revenues of $837 million in the third quarter, up 5% year-on-year with consistent growth across key regions. Truqap total revenues of $193 million in the third quarter represented 54% growth versus Q3 last year. With the AKT/PTEN biomarker altered population almost fully penetrated, growth is now primarily driven by increased uptake of the PIK3CA population and ongoing launches in developed and emerging markets. This was another outstanding quarter for our I/O franchise with growth of Imfinzi and Imjudo of 31% and 14%, respectively. We see continued enthusiasm for Imfinzi in the new lung indications, ADRIATIC and AEGEAN and in bladder cancer with NIAGARA, alongside further expansion in our more established indications such as HIMALAYA and CASPIAN. We are also starting to see early signs of adoption of MATTERHORN in the U.S. following its Category 1 NCCN guideline inclusion and eagerly await regulatory decisions. Enhertu total revenues grew 39% in the third quarter with ongoing launches of the DESTINY-Breast06 indication, further strengthening our leadership position in HER2-low metastatic breast cancer. The strong initial uptake in China following NRDL enlistment has persisted through Q3 as we achieve even broader coverage and continue to drive adoption. Positive readouts across HER2-positive breast cancer at ASCO and ESMO are anticipated to further drive growth with data now spanning across the spectrum of HER2-positive disease. And finally, Datroway continues to make inroads in hormone receptor positive breast cancer across the U.S. and Europe. And this quarter, we have started to see encouraging early signals of uptake in the previously treated EGFR-mutated lung cancer space following U.S. approval and NCCN guideline inclusion. We are confident in carrying our strong performance from the first 9 months through to year-end as we continue to expand the reach of our innovative medicines. With that, please advance to the next slide, and I'll pass over to Susan to cover key R&D highlights from the quarter. Susan Galbraith: Thank you, Dave. Just over 2 weeks ago at the European Society of Medical Oncology, AstraZeneca delivered multiple pivotal data sets with the potential to reshape clinical practice, including two featured in presidential sessions. This underscores the quality and breadth of our science and reinforces AstraZeneca's leadership in bringing new advances to patients worldwide. DESTINY-Breast11 and 05 advanced Enhertu into the early treatment setting for HER2-positive breast cancer, highlighting its potential to become a foundational therapy in early disease and ultimately increasing the likelihood that more patients could be cured of breast cancer. In DESTINY-Breast11, treatment with Enhertu followed by THP prior to surgery resulted in a pathologic complete response rate of 67% in patients with high-risk HER2-positive early-stage breast cancer, the highest ever reported rate in the Phase III registrational trial in this setting. We also saw an early trend towards an event-free survival benefit with Enhertu followed by THP. Importantly, this regimen demonstrated a favorable safety profile versus the 5-drug AC-THP regimen with lower rates of Grade 3 or higher adverse events, serious adverse events and treatment interruptions. This makes DESTINY-Breast11 the first regimen in over a decade to significantly improve outcomes in the earliest treatment setting for HER2-positive breast cancer, and these data are now under FDA review. In DESTINY-Breast05, Enhertu reduced the risk of disease recurrence or death by 53% compared to T-DM1 in patients with high-risk HER2-positive early breast cancer following neoadjuvant therapy, with over 92% of patients treated with Enhertu free of invasive disease at 3 years. This data set offers a critical second opportunity to reduce recurrence risk in this patient population. Taken together, DESTINY-Breast11 and 05 have the potential to transform early-stage HER2-positive breast cancer by reducing metastatic recurrence and bringing patients closer to cure. And this represents a blockbuster opportunity across the alliance. We also shared data from the TROPION-Breast02 trial, which evaluated Datroway versus chemotherapy as a first-line treatment for patients with locally recurrent inoperable or metastatic triple-negative breast cancer for whom immunotherapy is not an option. These patients typically have poor outcomes with the current standard of care and 5-year overall survival rates of just 15%. TB02 included those with the poorest prognosis often excluded from clinical trials, such as patients with a short disease-free interval and those presenting with brain metastases at baseline. In TB02, Datroway delivered an unprecedented 5-month improvement in median overall survival versus chemotherapy, along with a statistically significant and clinically meaningful 43% reduction in the risk of disease progression or death. In addition, almost 2/3 of patients experienced a complete or partial response to Datroway, double the rate seen with chemotherapy, alongside a manageable safety profile, low rates of discontinuation and no treatment-related deaths. These data clearly differentiate Datroway and together with its convenient 3-weekly dosing, position it to reshape the TNBC landscape for the 70% of first-line patients who are not suitable for immune checkpoint inhibitors. Our other key Phase III readout at ESMO was POTOMAC. This trial moves Imfinzi into earlier-stage bladder cancer, demonstrating that adding 1 year of Imfinzi to BCG induction and maintenance therapy delivers both early and sustained disease-free survival benefits with a 32% reduction in risk of recurrence or death compared to BCG alone in high-risk non-muscle invasive bladder cancer. With this Imfinzi regimen, 87% of patients remained alive and disease-free at 2 years, highlighting its potential to change the trajectory for these patients and further building on Imfinzi's impact in muscle-invasive disease as shown in NIAGARA. These results reinforce the strength of our bladder program, and we very much look forward to data from the VOLGA trial in cisplatin-ineligible muscle invasive bladder cancer, which is now expected in the first half of next year. In addition, we presented Phase III data from CAPItello-281 for Truqap in combination with abiraterone and androgen deprivation therapy in PTEN-deficient metastatic hormone-sensitive prostate cancer. Taken together, these pivotal data sets strongly support our strategy to advance novel therapies into earlier-stage disease, where they have the greatest potential to improve patients' lives. We also presented significant new data at ESMO across our early programs, including first-in-human results for our folate receptor alpha ADC, AZD5335 or torvusam, in platinum-resistant relapsed ovarian cancer. New data for our PARP1 selective inhibitor, saruparib, in combination with androgen receptor pathway inhibitors in metastatic prostate cancer, updated findings for rilvegostomig in checkpoint inhibitor naive lung cancer, which compares favorably to current PD-1-based therapies and encouraging new results for the combination of rilvegostomig and Datroway in bladder cancer. All these results build our confidence in the long-term strength of our pipeline, positioning us to deliver innovation well beyond 2030. Before closing, I want to highlight the upcoming American Society of Hematology Meeting in December, where we will present updates of our CD19/CD3 T-cell engager, surovatamig, and our CD19 BCMA dual CAR-T AZD0120. These pipeline assets both have $5 billion-plus non-risk-adjusted peak year revenue potential, and we will build our position in hematologic malignancies with the opportunity to set new standards across this space. And with that, please advance to the next slide, and I'll pass over to Ruud to cover Biopharmaceuticals performance. Ruud Dobber: Thank you so much, Susan. Next slide, please. Our Biopharmaceuticals medicines delivered a strong performance in the year-to-date with total revenue reaching $17.1 billion, reflecting growth of 8%. Starting with R&I, we saw growth of 40% in the quarter, driven by strong performances across our inhaled and biologic portfolio. The growth medicines now constitute over 60% of the therapy area's revenue and have grown at an impressive rate of 30% year-to-date. Our products now make up half the new-to-brand prescriptions for the severe asthma biologics segment in several markets. Fasenra continues to lead in eosinophilic asthma. We were pleased to see growth accelerating to 20% in the quarter with Fasenra's product profile being strengthened by uptake in EGPA and our first revenues from China. Tezspire continued its rapid market share gains in severe asthma with 47% growth in the quarter. Its growth potential has been further enhanced by recent approvals in the United States and the EU for chronic rhinosinusitis with nasal polyps based on the WAYPOINT trial, which demonstrated a significant reduction in nasal polyp size and nearly eliminated the need for surgery. Breztri grew at 20%, driven by market share gains in the growing triple class. All revenues today come from COPD patients, and we have now filed regulatory submissions for asthma in all major regions following the positive readouts from the KALOS and LOGOS trials. We are pleased to receive a positive CHMP recommendation for our next-generation propellant, which has 99.9% lower global warming potential, a key milestone towards our company's sustainability goals. Breztri will be the first of our inhaled medicines to transition to the next-generation propellant. Saphnelo, our biologic medicine for SLE, continues to win share in the intravenous segment of the market and grew at 44% in the quarter. In September, we announced positive high-level results based on the interim analysis from the TULIP subcutaneous study, which paves the way for Saphnelo to reach SLE patients who prefer a subcutaneous option. TULIP-SC recently received a positive CHMP recommendation in the EU. Total revenue from the CVRM therapy area was flat in the quarter, reflecting the loss of exclusivity for Brilinta, which saw a revenue decline of 56%. Farxiga delivered 8% growth despite a slight decline in Europe due to the earlier-than-expected entry of generic competition in the United Kingdom. Lokelma grew 30%, maintaining its leading share in the potassium binder class for chronic kidney disease and heart failure patients. In anticipation of further growth for Lokelma, we were excited to have recently opened an expanded manufacturing facility in Texas. In addition to the strong product performances in the year-to-date, I'm also particularly excited to see the number of high-value biopharma trials due to readout in 2026. And with that, I will now hand over to Sharon to discuss the latest developments for baxdrostat, the next NME we anticipate to launch in biopharma with more than $5 billion peak year revenue potential. Sharon Barr: Thank you, Ruud. Next slide, please. At AstraZeneca, our ambition is to transform care across interconnected cardiorenal and metabolic diseases where multiple risk drivers and organ systems overlap. Hypertension is a key part of this challenge. And in the past 20 years, there has been very limited innovation. For example, around half of patients currently treated in the U.S. remain uncontrolled while on multiple medicines. Baxdrostat is designed precisely for these patients. As a reminder, baxdrostat is a once-daily, highly selective and potent aldosterone synthase inhibitor, targeting the aldosterone pathway at its source. Excess aldosterone is well established as a driver of hypertension and broader cardiorenal disease. By limiting aldosterone production, baxdrostat provides a clean targeted mechanism that has the potential to enable more patients to reach their treatment goals, particularly those with uncontrolled or resistant hypertension. In the third quarter, we presented the first Phase III data for baxdrostat monotherapy with the BaxHTN trial at the European Society of Cardiology. We were also delighted to report the positive high-level results for the Phase III Bax24 trial. Collectively, these readouts reinforce our confidence in baxdrostat's more than $5 billion potential as a franchise. In the BaxHTN trial for patients with uncontrolled and treatment-resistant hypertension on maximally tolerated background therapy, baxdrostat delivered the largest systolic blood pressure reduction reported in a primary analysis to date. At 12 weeks, placebo-adjusted reductions were 8.7 and 9.8 millimeters of mercury on the 1 and 2 milligram doses, respectively. Responses were highly consistent across prespecified subgroups, and we saw a powerful target engagement with a 60% to 65% reduction in serum aldosterone at week 12. Importantly, this reduction was sustained over time. Furthermore, in the randomized withdrawal period, patients continuing baxdrostat saw further reductions in blood pressure out to 32 weeks. Baxdrostat also demonstrated a favorable tolerability profile. Adverse events were mostly mild with no off-target hormonal effects and no clinically relevant drug-drug interactions observed. Confirmed hyperkalemia above 6 millimole per liter was 1.1% in both dose arms, and we saw low discontinuation rates of 0.8% and 1.5% for the 1- and 2-milligram doses, respectively. 24-hour control of hypertension matters clinically. Early morning blood pressure variability is strongly correlated to the risk of cardiovascular events. So sustained control of blood pressure between doses is important. Baxdrostat's long half-life is a key differentiator. In an ambulatory sub-study of BaxHTN, we saw substantial reductions in 24-hour average and night-time systolic blood pressure. Building on this, we recently reported positive high-level results from the Phase III Bax24 trial, which was conducted in the most difficult-to-treat patients, those with resistant hypertension. In Bax24, baxdrostat demonstrated a statistically significant and highly clinically meaningful reduction in ambulatory 24-hour average systolic blood pressure. Efficacy was observed across the entire 24-hour period, including early morning. We look forward to sharing you exciting data with the medical community at the American Heart Association this coming weekend. These results solidify baxdrostat's potential as a first and best-in-class option for patients with uncontrolled and resistant hypertension, offering convenient once-a-day dosing with sustained blood pressure control around the clock. We are advancing our regulatory filings and rapidly progressing our robust clinical development program for baxdrostat, both as a monotherapy and in combination with dapagliflozin. And with that, please proceed to the next slide, and I'll pass over to Marc to cover Rare Disease. Marc Dunoyer: Thank you, Sharon. Can I get the next slide, please? Rare Disease medicine grew 6% to $6.8 billion in the first 9 months of the year, driven by growth in neurology indications, increased patient demand and continued global expansion. In the third quarter, Ultomiris grew 17%, driven by patient demand growth across indication, including the competitive MG and PNH markets. Soliris revenues continues to decline due to the successful conversion to Ultomiris as well as biosimilar pressure in Europe. Strensiq grew 28% and Koselugo grew by 79%, respectively, due to strong underlying demand for these medicines. Koselugo's growth also benefited from some tender orders in emerging markets. We continue to see great momentum across the rare disease portfolio with recent approval for Koselugo and Ultomiris that further our geographic reach for this medicine. Please advance to the next slide. We presented data from our Phase III PREVAIL trial, investigating gefurulimab on our dual branding nanobody targeting C5 in patients with generalised myasthenia gravis. Gefurulimab demonstrated 1.6 point improvement from baseline, placebo adjusted in myasthenia gravis activities of the living total score at week 26. The MG-ADL total score change from baseline reached 4.2 points at week 26 in the gefurulimab-treated patients. A clinically meaningful improvement in MG-ADL total score was observed as early as week 1 and was sustained through week 26. Gefurulimab demonstrated rapid, complete and sustained complement inhibition. Gefurulimab also met all secondary endpoints, including quantitative myasthenia gravis total score, where gefurulimab demonstrated a 2.1 point improvement at week 26 compared to placebo. A pre-specified measurement at week 4 also made statistical significance, again demonstrating the rapid onset of action of gefurulimab in patient with gMG. The PREVAIL trial was conducted in a broader gMG patient population compared with prior trials of C5-targeted therapies. Gefurulimab is a convenient, self-administered subcutaneous once-a-week treatment with the potential for two delivery option, a pre-filled syringe and auto-injector, which would be the first in gMG. We believe that the strength of this data and convenient administration, gefurulimab has a potential to become a new first-line therapy following immunosuppressive therapies. I also wanted to update on other important Phase III data we had this year. Analysis of the 52 weeks results on the CALYPSO trial to further characterize eneboparatide are ongoing. We will continue monitoring these patients in the open-label extension. For anselamimab, we have shared clinical results from the Phase III CARES program with regulatory authorities. Following further discussion, we plan to submit for the pre-specified patient subgroup in which anselamimab demonstrated a highly significant improvement in both time-to-all-cause mortality and frequency of cardiovascular hospitalization compared to placebo. And finally, efzimfotase alfa, we expect to announce results from all Phase III studies, HICKORY, CHESTNUT and MULBERRY in the first half of next year. Together, these three trials cover patients across pediatric, adolescent and adult hypophosphatasia population. And with that, please advance to the next slide, and I will hand over to Pascal. Pascal Soriot: Thank you, Marc. Next slide, please. As I mentioned at the start of this call, we are in the midst of an unprecedented catalyst switch period, one which is anticipated to extend through 2026 and beyond. We look forward to exciting readouts in each of our key therapy areas in 2026, which on a combined basis represent a risk -- sorry, risk-adjusted peak year revenue opportunity of more than $10 billion. Our exceptional performance for the first 9 months so has delivered a core operating margin of 33.3%. This is a clear demonstration that despite the opportunities to invest in this rich pipeline, we remain committed to driving operating leverage and we remain on track for both our 2026 margin target of mid-30s and our $80 billion 2030 revenue ambition. Next slide, please. In closing, I'm very pleased to report that we are making exciting progress across our transformative technologies, which have the potential to drive AstraZeneca's growth well beyond 2030. We are moving at pace with our oral PCSK9 inhibitor, laroprovstat. And now we have three Phase III trials ongoing, and we are looking forward to the results from our Phase II trials across our weight management portfolio next year. We're driving forward with our ADC and our radioconjugate portfolio with the first Phase III of our wholly owned ADC sone-vedo reading in the first half of next year. Supporting our ambition to replace current immune checkpoint inhibitors with next generation bispecifics, we now have 14 Phase III trials underway for rilvegostomig and volrustomig. And we are continuing to strengthen our hematology portfolio with our first Phase III trial already underway for our CD19 CD3 T-cell engager surovatamig, and we are planning to advance CD9, BCMA, CAR-T, AZD0120 into Phase III next year. And lastly, our first gene therapy is now entering the clinic. And with that, please advance to the next slide, and we will move to the Q&A. Pascal Soriot: As Andy mentioned at the start of the call, please limit the number of questions you ask to allow others a fair chance to participate. For those online, please use the raise hand function on Zoom, and with that, let's move to the first question. Our first question is from Michael Leuchten at Jefferies. Over to you, Michael. Michael Leuchten: Two questions for you, please. One, thank you for the comments around the environment in Washington. Just wondering if you could comment on what is the risk of residual activity coming from the administration? How confident are you that the deal that AstraZeneca has managed to secure removes enough of the overhang? So, we don't have to look over our shoulders constantly as we think about R&D productivity and the cost of innovation. And the second question for you, Pascal, the $10 billion number that you just mentioned in terms of the catalyst potential coming out of the '27/'28 period, is that part of the $80 billion? Or is that incremental potential already on top of that? Pascal Soriot: So, the first question, what I would say about this is that we have addressed the four points in the President's letter. And the four points, as you know, they covered Medicaid, they cover prospective equalization, direct to consumer and also returning to the U.S. government, some of the potential price increases for existing products. And so, we've covered all of this. So, now our expectation is that essentially, we have an agreement with the U.S. government, and we don't expect anything more to come. But of course, we are not the government, so we cannot guarantee anything. We can only say that our expectation from the discussions we've had, our expectation is that this agreement is delivering what the President was looking to achieve. On the $10 billion, this is part of our $80 billion. This is, by the way, not a 2030 number. It's a peak year revenue number. It's a risk adjusted $10 billion. But certainly, it will contribute to achieving our 2030 ambition. There is more to come. We have a number of readouts next year and we expect from the readouts to expect another $10 billion -- actually $11 billion of risk-adjusted sales to come out of these readouts, assuming, of course, they are positive, we could get even more. So, as I said before, it is quite unprecedented for us as a company to have such a rich series of readout across not only oncology but also hematology, cardiovascular disease, respiratory disease, immunology, rare disease. So really, I would say, the company is firing from all engines in terms of our ability to innovate and come up with new products. So with this, I'll move to Sarita Kapila at Morgan Stanley. Sarita, over to you. Sarita Kapila: Thanks for taking my questions and the comments on 2026 margins. Perhaps you could indicate your level of comfort on where 2026 consensus sits at the low end at 34% and talk about the step-up to get there? And then more broadly, could you speak about the pushes and pulls, please, on 2026 margin? And then secondly, there's been a lot of investor focus on the Roche persevERA trial coming in Q1 '26, which is looking at duradestrant in all-comer breast cancer. Could you talk about the potential read across to camizestrant? Are there any notable differences between the molecules or any differences in the trial design that could increase chances of SERENA for success versus persevERA and why it may not be a good read? Pascal Soriot: Thank you, Sarita. So, it's really three great questions. The first two, Aradhana, can you cover, and Susan with -- can you pick up the persevERA question and Ruud to camizestrant? Aradhana Sarin: Sure. Thanks, Sarita. Though as you've seen, we've had very strong momentum in all our growth brands. And with this momentum going into the year-end, we hope it continues and expect it to continue in all markets and all brands. The key headwind in 2026 will really be the loss of Farxiga in both U.S. as well as China. And that's something that we had anticipated and are obviously planning around. We're right now going through our budget process, and we'll take all these different pushes and pulls as well as the recent agreement with the U.S. government and all those impacts into account. As we set our budget, we will continue to invest behind growth brands and plan for new launches such as baxdrostat, cami and dato. And given all the portfolio, I think we'll continue to invest in R&D towards the high end of the 20% given all the progress in the ADC and the cardiovascular and weight management portfolio. So, those are some of the pushes and pulls. And you've seen the performance and the continuous margin progression as well as the SG&A, which we have maintained very strong leverage over and R&D, obviously, is where we always find great opportunities. So, while we remain disciplined, we're going to continue investing behind that. Pascal Soriot: Just before Susan covers the next point. I think, Aradhana covered really very well. Our view of 2026 one, maybe a piece I wanted to add is that, some people may be wondering about the impact of the agreement with the U.S. government. What I would say on this is that, Aradhana covered it, we have a very broad portfolio geographically and also a broad portfolio of new products, new launches, and we think we can absorb the impact of this agreement. We're confident we can absorb it in '26 and beyond and really doesn't affect our 2030 ambition and doesn't affect our midterm ambition. So, over to you, Susan with persevERA. Susan Galbraith: Thanks, Pascal. So just as a reminder, camizestrant with the data that we showed in both the SERENA-2 study and then with the recent SERENA-6 study in first-line, has really shown the best profile of all of the oral SERDs that have reported so far. We've had the best hazard ratio versus fulvestrant in both the ESR mutant as well as in the wild type. But the fundamental point is, as you move from second line to first line, there's an increase in the endocrine sensitive part of the population. So, for those wild-type patients, they can still be expected to benefit because what you're doing is, you're inhibiting both the transcriptional signal downstream of the estrogen receptor regardless of whether it's wild type or mutated. And you're also reducing the amount of that receptor through degradation to very low levels, and we showed that in the SERENA-3 study. So, both those mechanisms of action are expected to be superior to the aromatase inhibitor component of current first-line backbone therapy. In terms of cost comparisons, I would point out that the SERENA-4 study is a larger study than persevERA. And we've designed it to enrich for patients that have got endocrine sensitive profile based on the clinical inclusion/exclusion criteria. So, we've designed it taking into account what we've previously learned and including from trials such as persevERA, et cetera, to optimize for the opportunity for success in that first-line setting. Pascal Soriot: Thank you, Susan. So the next question is Justin Smith at Bernstein. Over to you, Justin. Justin Smith: Just a couple on Wainua for Sharon or Ruud. Just firstly on CARDIO-TTRansform. Just your thoughts on whether that could meaningfully reshape treatment guidelines long term? And then also just your thoughts on whether any new simpler diagnostic tests are coming soon to potentially expand the cardiomyopathy population? Pascal Soriot: So Sharon, do you want to cover and Ruud if you have anything to add please jump in. Sharon Barr: Sure. So, we look forward to the readout of the Phase III CARDIO-TTRansform study in 2026. Do we have the potential to meaningfully transform that treatment algorithm for patients? I think what we're able to demonstrate with the CARDIO-TTRansform study is both the role of silencers in adequately treating disease and in a planned subset, key secondary endpoint readout will be looking at the effect of eplontersen in patients who have tafamidis. And so that will give us the opportunity to be able to address that key question for patients comparing the effect of silencer plus stabilizer versus silencer, which I think will be very important in guiding patient treatment decisions. And then finally, AstraZeneca is in a unique position in developing new therapies for patients living with ATTR amyloidosis and that we also have Alexion 2220, the amyloidosis depleter in our portfolio. And we continue to work towards creating a combination approach of a depleter and a silencer, which we think could be truly pivotal for patients living with ATTR amyloidosis. Now with regards to diagnosis, we know that's a key part of the patient journey. And we know that this is not simply a hereditary disease. The hereditary variants are rare, but the disease is not. This is also a disease of the aging. So, being able to screen for and detect patients earlier in their disease progression will be really fundamental to offering patients improved outcomes. So to that end, we are exploring a number of different opportunities to be able to more accurately and earlier diagnose ATTR amyloidosis. And those include AI-informed models that allow us to identify patients on screening with echocardiogram or potentially EKG as well as developing new biomarker assays to be able to detect soluble amyloid. So, we continue to work on all fronts to be able to drive both earlier detection and earlier treatment. Pascal Soriot: Thanks, Sharon. Ruud, anything you wanted to add or? Ruud Dobber: No. Just like everyone, everyone is eagerly waiting for the results. What hasn't mentioned yet by Sharon is that, this is the largest CM trial so far in ATTR cardiomyopathy. And if successful, hopefully, we will see a CV mortality benefit, which, of course, is extremely important for treating cardiologists. Now on top of that, we are very pleased to see, let's say, the progress we are making in the first indication, the PN indication. So we can only hope for patients and also for the company and other interested that the ATTR-CM trial will be positive, and we will know that in the course of 2026. Pascal Soriot: Sachin Jain, Bank of America. Sachin Jain: I've got one each for Sharon and Susan on Phase III starts you've each referenced. So for Sharon, I wonder if you could just remind us of the obesity portfolio, the oral and amylin as we look for Phase II data next year. How are you thinking about your target competitive profile given the competitive landscape has rapidly changed? Obviously, with oral, we've seen the ortho data since you last presented. And with amylin, we've had the Lilly data out today. And then for Susan, I think you referenced the Phase III start for the BCMA CAR-T, where we see data at ASH and $5 billion peak. Just looking at the abstract, it looks like you've got 100% MRD negativity in almost fourth-line patients. So just wondering how you're thinking about the fastest route to market for that and beyond efficacy, how you're seeing differentiation on safety and administration. Pascal Soriot: Thank you. Sharon, do you want to start? And then Susan? Sharon Barr: Sure. So Sachin, as you know, we are moving forward with multiple molecules in our weight management portfolio. That is AZD5004 that's currently in Phase II for patients with obesity and type 2 diabetes. AZD6234, that's our long-acting amylin peptide, subcutaneous injectable that is also in Phase II for the same patient populations. And ACD9550, and that's our dual GLP-1 glucagon receptor agonist, also subcutaneous injectable also in Phase II. As we move all three of these forward at pace, of course, we're looking to have highly competitive molecules that give us reason to believe that these could be valuable treatment options for patients. As we move forward, we're also thinking about the potential for market segmentation, and we know that there will be room for multiple mechanisms. And the bar is high. We've seen the very interesting data from Eloralintide today. And so that gives us more reason to believe that a selective amylin receptor agonist similar to 6234 has the potential for efficacy in terms of weight loss and better sugar control for patients with type 2 diabetes. So, we have seen no red flags to date and continue to move forward at pace and expect to enter Phase III pending competitive data and we will be making those decisions in 2026. Susan Galbraith: So, in terms of the 0120, which is the CD19 BCMA dual CAR, thanks for the question, Sachin. We will be presenting data in the later-line patient population at ASH. This includes patients who are triple-class refractory and a substantial proportion that have had prior BCMA CAR-T therapy. So, what the data show is that, we do have a really impressive response rates and complete response rates in evaluable patients that are also progressing, and they tend to evolve over time. There's a relatively small number of patients that are currently MRD evaluable, but you rightly point out in that small number in the abstract, all of them have achieved MRD negativity. The overall profile of this cell is as dosed is attractive. We have no Grade 3 CRS and no ICANS in the dataset that we've presented in the abstract. And I think the -- both the efficacy and the safety profile is related in part to the FasTCAR manufacturing, which Gracell had developed, which is helping to deliver this predictable CRS profile and deep and early responses. So, we're very excited about the prospects for this. And we want to reiterate that we're going to start Phase III trials for this next year. And again, we'll be taking this forward in multiple settings, in multiple myeloma. Pascal Soriot: Thank you, Susan. The next question is from Richard Vosser at JPM. Richard Vosser: Two questions, please. Firstly, one, just following up on the TB02 Datroway data at ESMO. Maybe you could talk about the read across. From the better tolerability you showed relative to competing products there, both to your Datroway trials, but also more importantly, across the other ADC programs, what can we learn from that? And then secondly, maybe a more commercial rollout question. Just the Imfinzi or Imfinzi sales were very, very strong this quarter. I wonder if you could give a little bit more color on the rollouts. You highlighted bladder and lung, but how should we think about the runway of growth from here for Imfinzi? Pascal Soriot: Susan, do you want to cover the first one? And David, the Imfinzi rollouts question? Susan Galbraith: Sure. Thanks for the question. So yes, we're delighted with the TROPION-Breast02 data that was presented at ESMO. And I think this does speak to the actual design of this ADC, which similar to the Enhertu design, is based on linker stability. So it's really important to have linker stability so that you're actually delivering a higher proportion of the payload actually to the tumor cells and less exposure in the peripheral circulation. That drives the difference in terms of the bone marrow toxicity profile that you see with Datroway compared to some other TROP2-based ADCs. And I think that also speaks to the fact that we then delivered a higher response rate, longer progression-free survival and this 5-month improvement in overall survival, which I think is a differentiated profile. So that -- first of all, within the breast cancer space, it increases the confidence in the early-stage studies, the TROPION-Breast03, which is in the post neoadjuvant setting, a little bit analogous to the DESTINY-Breast05 setting. And that's in combination, of course, with Imfinzi, the TROPION-Breast04 setting, which is in the neoadjuvant treatment of PD-L1 negative breast cancer and then TROPION-Breast05, which takes that double-up combination of Datroway and Imfinzi also into the first-line setting. So with those studies, plus, of course, the lung cancer studies, the AVANZAR studies, I think the profile that we've got is one that we're confident about, and we look forward to having the future readouts in the coming months and years. David Fredrickson: Thanks, Susan. With respect to the Imfinzi growth drivers in '25 and outlook moving forward, I think it has really been a great example of delivery against multiple new life cycle expansion opportunities. The primary growth drivers have been with Adriatic and small cell, AEGEAN in early lung cancer and then also NIAGARA has also been an important area of growth. All three of those represent opportunities for us to continue to see full year benefits across the globe as we launch those. Now, there is competitive pressures that we face on all of those. With that said, our differentiation, I think, is strong and our first-mover advantage is clear. I would also just point out that very importantly, we've got positive studies with MATTERHORN, with strong overall survival that was presented at ESMO. We've got POTOMAC. Those are both studies that we are looking forward to hopefully achieving regulatory approvals across the globe. And there will be further readouts as well that we have coming forward from here. So, the Imfinzi trajectory is one that has been both strong and I anticipate will be sustained. Pascal Soriot: Thank you, Dave. Next question is from Peter Verdult at Exane. Peter Verdult: Peter Verdult here, BNP. Apologies for any background noise. Two questions for you, Pascal. I thought it was noteworthy at the investor event, the ESMO cancer event. You called out baxdrostat in your opening remarks. KOLs that we're speaking to, say, they see sort of placebo-adjusted blood pressure lowering in sort of 11, 12, 13 range. Their excitement around this asset is going to be cranked up. So, I know you can't talk to the data. We're going to have to wait until Sunday. But when you look at consensus expectations down at $2 billion, would you expect that expectations for this asset materially increase post the Bax24 data? And then secondly, we've talked about the political environment in the U.S. I mean, the industry wants to and has to invest more in the U.S., wants to invest more in China. Where is that leaving Europe? I mean Europe, what's the political environment in Europe? Are the politicians waking up to the direction of travel. Do you think that the innovation debate can be genuinely had in Europe? Or are you more, you say, sanguine about the outlook of -- regarding innovation being paid for in Europe? Pascal Soriot: Thank you, Peter. So, let me start with baxdrostat and then maybe I'm sure, Ruud, who is very excited about this product, will want to add some more. I'm personally very excited about this product, because not only because hypertension -- uncontrolled hypertension is a big problem. A lot of people are on three drugs and still uncontrolled. That drives kidney disease, heart disease, cardiovascular events. So that's a big unmet need, much, much bigger than people understand really. The second reason is the effect on aldosterone, the 60%, 65% reduction that Sharon mentioned a bit earlier, I think will prove over time a massive benefit. Because aldosterone has not only effect on blood pressure, but also a deleterious effect on the organ. It still has to be proven, but I think there's good reason to believe it is actually the case because it docks on not only aldosterone receptor, but also the other aldosterone receptors and are not blocked by traditional MRIs. And if you have too much aldosterone in your body, it drives organ damage over time. So, I think this is going to prove really a big deal. And then you will see the data we have over 24 hours. This is really important because you need to control blood pressure at night in particular, the early morning. Sharon mentioned it. That's when people tend to have cardiovascular events, strokes, MIs. So again, this long-lasting effect over 24 hours is important. And I can tell you, you won't be disappointed with the blood pressure reduction, you would see. Ruud, anything you want to add in terms of the question about peak sales and the potential for this agent? Ruud Dobber: Yes. No, of course. And we are very excited, and hopefully, on Sunday, you will see why. I'm not going to speculate whether it is more than the peak $5 billion peak year sales we've articulated. The only thing I can say, Peter, is that we have, in total, seven studies on this program as we speak. And there are a few studies also in the fixed dose combination with dapagliflozin. And Pascal was alluding to that. Yes, blood pressure in itself is important to control that. But it has a quite devastating effects on the kidney, and we truly believe that the combination of a well-known product like dapagliflozin plus the potential effect -- the positive effect of baxdrostat will be a very substantial driver whether it is $5 billion or perhaps even $10 billion. Time well tell. But there is an enormous amount of excitement, not only in the company, but more importantly, among physicians for these products. And let's not forget, that's my last remark that if a 10-millimeter mercury increases your risk of a MACE event with 30%. So I think you will see a renaissance of the treatment of hypertension with a product like baxdrostat. So very exciting. Pascal Soriot: Thank you, Ruud. The the U.S. political environment, I mean, we've talked a lot about it. And this issue has been long coming in my opinion. Because, if you go back 20 years or so, there was limited difference in pricing between the U.S. and Europe. Let's talk about Europe for a second, really. And over time, what has happened is, there's been a growing difference mostly because in Europe, we've been facing price cut, clawbacks, a whole cottage industry of price reductions and control of access. And if you look at healthcare costs today, well, 20 years ago, I guess, healthcare, 20%, 30%, 15% of healthcare costs were dedicated to pharmaceuticals, innovative pharmaceuticals in particular. Today, you are at 7%, 8%, 9%. And one of the lowest is the U.K. with 7% of healthcare costs dedicated to innovative pharmaceuticals. And you got to ask yourself, I mean, what can you do with 7%? Not much. It creates limited room for innovation and innovation that can save lives, but also reduce healthcare costs by delaying or delaying things like dialysis, saving patients' lives and in cancer, et cetera, et cetera. So, I think there has to be a rebalancing. Because the U.S. for the last number of years has been really paying for the cost and the risk associated with innovation. We should never forget the risk. Everybody talks about the cost, but there's a massive risk. I mean, we have a portfolio committee. And very often, we spend several hundred million dollars in one meeting. And if those studies fail, it's a lot of money in the rubbish bin. We've been lucky. This year, we've had almost 90% success rate with our Phase III, but it's -- that's not the norm, right? So, people have to realize innovation is expensive, but it's also very risky. So, I think there has to be a rebalancing, and Europe has to cover a little bit more of this innovation by increasing budgets allocated to innovative pharmaceuticals. And finally, I would say that if you look at innovation, it's happening in the U.S., very rapidly now it's happening in China, and there's not so much in Europe. So, it would be great for everybody, starting with patients. If Europe was also innovating a lot in our industry, it will also attract investment from companies and drive economic growth. Now whether we are able to show the benefit of these investments to governments in Europe is still to be seen, but there's clearly benefits to patients, of course, but it also benefits to healthcare cost as innovation can drive healthcare costs down. And there is also economic benefit as the Life Sciences sector can drive economic growth like we see in the U.S., we see now in China. So, whether we succeed or not, I don't know, but the danger for Europe is that a lot of these new technologies that we are talking about, they need new capacity, new manufacturing capabilities. And right now, this is going to happen in the U.S. And so, the risk is in 15, 20 years, Europe realized that they have lost control of their supply chain for some of those most important innovative technologies, because they are manufactured in the U.S. and in China. So more to come, and of course, a lot of convincing to try to achieve, but we'll see whether we are able to do that or not. So, we see. I'll move to the next question, Mattias Häggblom at Handelsbanken. Mattias Häggblom: Mattias Häggblom, Handelsbanken. Two questions, please. Firstly on Farxiga, following the validation of the pattern in U.K. and subsequent generic launch, remind me why this loss would not encourage generic companies to explore similar challenges elsewhere in Europe prior to pattern exploration in '28. And why the situation in the U.K. was unique? And then secondly, for Sharon, Marc will present Phase III data for its oral PCSK9 inhibitor this weekend. Once we get the detailed data, what in particular will your team be studying to better understand its clinical profile and how it compares with your own small molecule PCSK9 inhibitor currently in Phase III? Pascal Soriot: And the first one I can quickly cover for -- in the interest of time, Mattias, it's a very specific U.K. law. We can cover the details separately with you if you want offline. But just for everybody's interest, it's a very specific U.K. law that doesn't apply to other countries. And the PCSK9 question, Sharon, do you want to cover that? Sharon Barr: Sure. I'd love to. So as you know, our own laroprovstat is a true small molecule inhibitor of PCSK9 currently in Phase III. We have shared the Phase II data. They're very encouraging. And we note that because our PCSK9 is a true small molecule, it does not require solubility enhancers, and it doesn't require fasting. And so, it offers a target patient profile that we think is very attractive for both monotherapy and combination approaches. And in fact, we're exploring combination approaches with a small molecule Lp(a) that is in our portfolio in Phase I, and it also allows us to easily combine with statins, which is standard of care. We were thrilled to see that with combinations, we were able to bring 80% of patients on study to their LDL-C lowering goals. And so, we think that we're in a very solid place in the competitive landscape. Now of course, we'll be watching Merck's data to understand how we can continue to meaningfully differentiate ourselves in this landscape as we continue to work on our go-forward plans. We remain very positive about the potential for laroprovstat in this environment and for the potential to really meaningfully change patients' lives because dyslipidemia is not yet solved. We know the majority of patients aren't reaching their LDL-C lowering goals. And so, there's still a major unmet medical need in the marketplace. Pascal Soriot: Thank you, Sharon. So, we still have quite a number of questions. So, can I suggest that we go one question per person, and we on our side will try to be short in our responses. So the next one is Seamus Fernandez. Over to you, Seamus. Seamus Fernandez: So my one question is on the competitive developments and the evolution of the treatment of asthma and COPD. Just hoping, Ruud, if you could comment on your, I guess, primary competitors outside of Dupixent, but GSK specifically making moves to advance long-acting agents both depemokimab and their potential long-acting CSLP program. Can you just help us with your thoughts specifically on the value of having long-acting agents in that marketplace? And how your own -- whether it be pipeline pursuits or separately, your own existing portfolio is built to defend against that? Ruud Dobber: Yes. Thank you so much for your question. And let me first emphasize that, where we are as a company with both Fasenra and Tezspire, is very pleasing. We have for the second quarter -- consecutive quarter, sales of above $0.5 billion for Fasenra. So, the product is now annualizing of more than $2 billion a year. And the reason I'm mentioning it is that, in all the market research and our own experience in the last few years across all geographies, clearly, efficacy is the #1 reason to prescribe products. And I think that's very important in the choice of physicians. Having said that, there's always room for further other modalities. And AstraZeneca is putting a lot of effort in order to generate the first inhaled T-slip molecule, which is quite exciting in order to broaden the patient access for severe uncontrolled asthmatics. We think there's a high unmet medical need. For the simple reason that still too many patients are suffering from severe asthma and are not eligible for injectable. So, moving earlier in the treatment paradigm with an inhaled T-slip if it is working, of course, and we will know that in the course of 2026, I think will be a huge advantage for so many patients still suffering. But all in all, it's clear that there are great products. We are in a very good position. We're the market leader in new-to-brand prescriptions, as I mentioned in my prepared remarks, but there's still an enormous opportunity to further accelerate the bio penetration. And last but not least, we are a verge in order to launch Fasenra in China, which is another very important growth driver for us as a company. Pascal Soriot: The next question is from Matthew Weston at UBS. Matthew Weston: Thank you, Pascal. I think it's probably a question for Dave, but you flagged in your comments that '25 has been or seen a very significant benefit from new patients due to lower Part D co-pays. Of course, that's allowed companies to bring free drug patients into paid coverage. As we think about '26, do we need to consider a significant slowdown in the underlying growth of some of your assets as that free drug warehouse bolus runs out? And if yes, which product should we be most aware of? Pascal Soriot: Dave, do you want to cover this? David Fredrickson: Yes, Please. Thanks, Matthew, for the question. So, I think just to take a small step back, if we compare what we'll expect to see in Q2 -- excuse me, Q1 '26 versus '25. First, we'll have a good, if you will, apples-to-apples comparison because both quarters will include the impact of the Part D liability. Secondly, I think also we will continue to see benefit of patients staying on commercial medicine who had switched over this year or were otherwise abandoning. So, I think that one of the things that is really important here is that if you take a look at the oral medicines Tagrisso and Calquence in particular, although it's also true of Lynparza. They have fairly long durations of therapy, CLL with treat to progression, Tagrisso in terms of the early settings but also indeed what we see with FLAURA2. So, I would expect that patients who've come over to commercial medicine as opposed to being on free drug that we'll continue to see the benefit of those patients and the TRxs come into 2026. The bolus patients who would have been your prevalent pool who came on as the co-pay cap went from the mid-300s down into the 2,000s. We may not see that repeat. But I really do think we're going to see demand coming forward from new patients, new indications. And I think that we'll see good oral growth moving forward on our assets. Pascal Soriot: Thanks, Dave. Maybe I could add that, a year ago, you may remember a number of people were worried about the impact of the part D liability on our growth rate. And you can see we've been able to manage that as we said we would, and Dave and his team have been doing an amazing job driving usage and growing our share and growing the volume, to compensate for this part D liability that we've had to absorb in 2025. The next question is from Steve Scala at Cowen. Steve, over to you. Steve Scala: Actually, a question on Calquence. Is the upper end of the peak sales guidance of $3 billion to $5 billion is still achievable given the positive data from competitors Calquence's 2027 IRA negotiated price, which you presumably have by now and IMBRUVICA's IRA negotiated price. And related to all this, was the Calquence IRA price in line with your expectations? Pascal Soriot: Dave, I think it's for you again. David Fredrickson: Steve, thanks for the question. On your last piece, we will share the IRA negotiated price on Calquence once that's public, which will be happening later this quarter. What I do want to comment on, though, with respect to your peak year sales question, recall that when we put forth the ambition for 2030 in 2024, we had visibility at that time into the fact that we anticipated that the Calquence would be an IPA. So that's absolutely consistent with the expectations that we had. We expected that we would get positive data from AMPLIFY. That's come through and been part of what we've seen. And I think that we've seen really even better than we expected volume growth of Calquence, particularly within the United States. So, in terms of the assumptions that went into the projections that we put forth or the ambition that we put forth in 2024, I think it's been positive news, against that and good momentum against those figures. I'm happy that we've seen good share growth in the United States this year on the work that we're doing. We're seeing AMPLIFY in Europe with good initial uptake and we look forward to the AMPLIFY opportunity in the U.S. I do want to note that remember that there are no BTK/BCL-2 combinations for finite that are approved in the U.S. in frontline CLL. There's a large number of patients that are receiving a finite treatment that don't involve BTK at all, and we see this as an important opportunity for the asset going forward. Pascal Soriot: Thanks, Dave. So, still lots of growth coming from those approved or soon to be approved indications. And -- we also have escalate in DLBCL that is still to come. Next question is Rajan Sharma, Goldman Sachs. Rajan Sharma: I just wanted to get your thoughts on Enhertu's trajectory from here, given that we now have the DB09 and the DB11 data and PDUFA next year, which have been seen historically as two of the largest opportunities. Some of our KOL feedback has suggested that initial uptake may be a little bit tentative to begin with. So yes, we'll just be keen to get your thoughts on that. And do you expect those potential approvals during the first half to drive an immediate step-up in Enhertu's growth in '26 and '27? And then just thinking further out, do you think you'll be reaching peak penetration in breast cancer as you approach your 2030 target? Pascal Soriot: Thank you. So question, we'll switch up to David, go ahead. David Fredrickson: All right. We'll do. So first of all, I think as we take a look at 09 and the combination of both 05 and 11, let's take those in two separate parts. DESTINY-Breast09 is clearly a very important opportunity to move Enhertu from the later line metastatic setting or the second-line plus metastatic setting that we're in today into a frontline setting. The reason that, that is important is, first and foremost, many more patients will have the opportunity to benefit from an Enhertu. Because unfortunately, the number of patients that are able to receive a second-line therapy goes down just as patients unfortunately either pass away or they're unable to receive further treatment. So, opening up that population is going to be really important. Secondly, the duration of therapies that we see because of the long PFSs within DB09 are really important. And that's as a result of this treat to progression, new paradigm that's being established. And I think that on this, it's important to note that one of the things that's been really well received by the clinical community is the lack of cumulative toxicity that is associated with Enhertu and what we're seeing within these studies. That cumulative toxicity is in large part why there's been discontinuation of the taxanes in some of the other metastatic settings. And so, we're really looking for this to be an opportunity to make sure that we're driving to the way that DB09 was designed, which is treat to progression. DB05 and DB11 in early stage, they represent a blockbuster opportunity together. This is a great opportunity to bring Enhertu into early settings. And I think that in terms of when will we expect uptake, certainly, the clinical community does follow guidelines. DB09, we anticipate coming into guidelines sometime soon, we would hope. Remember that the New England Journal of Medicine publication just came through just very, very recently. And we'll obviously look forward to making sure that the progress that we've made on the early studies gets published as well. Pascal Soriot: So, we'll try the last four questions in the time that remains. Let's go with one question per person and be short in our responses. Luisa at Berenberg. Over to you. Luisa Hector: Thank you, Pascal. I wanted to return to the 2030 ambition. Because you've talked about and we've seen there's unprecedented success rate this year. So is the $80 billion now conservative? Can you comment at all on the mix that you're seeing with the success and what that means for profitability? And although the ex U.S., you're sticking at 50% ex U.S. contribution, are there any changes in timing of launches or the mix of the ex U.S. in light of that U.S. deal? Pascal Soriot: Thank you, Luisa. Not long ago, people were thinking the $80 billion was not achievable. Now it's going to be a soft goal. It remains an ambitious goal. And of course, we are very excited with all this new positive readouts. But it's a risky business. That's what I said not long, a few minutes ago. So, we have to remain cautious with the readouts that are coming next year. We don't know. I hope to God, we continue to have a high positive success readout -- in our readouts, but we can't be sure. So, let's stick to the $80 billion. It's an ambitious goal. And if we can overachieve of course, we'll do our very best to overachieve. Now in the second question with the profitability, we want to be a growth company until 2030, but also beyond 2030. So certainly, we can assume -- we can assume profitability increases, but you also have to understand we will want to continue investing in R&D. We have tremendous technologies in our hands, cell therapy, T-cell engagers, radioligands, which we haven't talked about today, all of those are making good progress. So, we certainly would want to invest in those from an R&D perspective, but also from a commercial perspective. And beyond oncology, we have a lot to do also in biopharma and rare disease. So, we're not going to commit to any profitability target or improvement beyond what we've already said in the past. Aradhana, anything you wanted to add to this? Aradhana Sarin: No, not at all. It's a long answer, obviously, with all moving parts. So, maybe another time to reach out. Pascal Soriot: Good. so, the next question is from Gonzalo Artiach at Danske Bank. Gonzalo Artiach Castanon: Gonzalo Artiach at Danske Bank. I have one for Marc on gefurulimab and the data has been recently presented. It seems that the efficacy and safety signals have come fairly in line with Ultomiris in MG. How should we understand the dynamics between these two products in MG? And also I wanted to ask if you have any plans ahead for gefurulimab in other indications where Ultomiris is now approved. Thank you very much. Marc Dunoyer: First of all, thank you very much for the question on the rare disease. So, if you remember what the trial of gefurulimab was done in patients earlier than the trials we have done historically with Ultomiris. You will remember that Alexion was a pioneer company to obtain the first approval with modern medicine in myasthenia gravis. And subsequently, we -- after Soliris, we developed Ultomiris and now we go one step earlier. The other important factor of gefurulimab is a mode of administration, a subcut weekly provided in either prefilled syringe or an auto-injector that can be injected in 15 seconds. So, it's a very patient convenient, patient easy type of administration. And the speed of onset has been demonstrated in the study and also the sustainability is as good as it was for Ultomiris. So, that's what I can say about gefurulimab. Pascal Soriot: Thank you, Marc. And the last question is from Simon Baker at Redburn. Over to you, Simon. Simon Baker: Just changing the subject slightly. We don't ask many questions on. But one for Susan, could you give us an update on your confidence in sone vedotin as we come up to the gastric Phase III data in H1 '26? And also some thoughts on the broader scope of Claudin18 beyond gastric? Susan Galbraith: Thanks for the question. So, sone vedotin is a Claudin18.2 ADC with an MMAE tubulin-based payload. And we've seen encouraging response rate data in late-line patient populations. We are investigating this versus current standard of care, but we're also looking within the potential to take it into earlier line settings, including in combinations. And you all have seen, of course, that there are exciting opportunities for MMAE-based ADCs in combination with I/O therapy. So, that represents a significant opportunity to sone v. Claudin18.2 is expressed in a high proportion of gastric cancer more than 50% of patients. So it's a much bigger opportunity than the HER2 high group, if you want to compare with what we've seen with HER2. And I think, it's also expressed in pancreatic cancer. And we are looking at the data in pancreatic cancer as well. I mean, of course, there the bar is high. So, what we've done is go forward with the gastric cancer opportunity first, and we'll continue to explore the opportunity for this and also a topo-based ADC with a Claudin18.2 targeting also in pancreatic cancer, just to see which payload works best. Pascal Soriot: Thank you, Susan. So in closing, maybe a few words back to Luisa's question. I realized I didn't totally answer Luisa's question. As the pipeline develops, you can see we'll have a lot of Specialty Care products moving forward. And of course, those tend to drive higher profitability as we know. But we also have products that will address conditions like weight loss, metabolic conditions, metabolic disease and those, of course, require more investment. So, I think overall, you can suddenly assume improvement of profitability from a commercial viewpoint. The R&D, we want to continue spending at the -- in the low 20s, as we've done in the past. But as I said before, we will not commit to any direction of travel of our profitability, because we need to see how the pipeline develops, and that's what we've said in the past. And more frankly, we've been good and lucky. We have had a very high success rate, and I hope it continues. And if it does, then we have to support all these products. So with this, thank you so much for your great questions and your interest, and I wish you a good rest of the day.
Operator: Welcome to the Brookfield Business Partners Third Quarter 2025 Results Conference Call and Webcast. [Operator Instructions] The conference is being recorded. [Operator Instructions] Now I'd like to turn the conference over to Alan Fleming, Head of Investor Relations. Please go ahead, Mr. Fleming. Alan Fleming: Thank you, operator, and good morning. Before we begin, I'd like to remind you that in responding to questions and talking about our growth initiatives and our financial and operating performance, we may make forward-looking statements. These statements are subject to known and unknown risks, and future results may differ materially. For further information on known risk factors, I encourage you to review our filings with the securities regulators in Canada and the U.S., which are available on our website. We'll begin the call this morning with a business update from Anuj Ranjan, our CEO -- our Chief Executive Officer. Anuj will then turn the call over to Adrian Letts, Head of our Global Business Operations team to provide an update on the progress we're making at 2 of our most recent acquisitions. Jaspreet Dehl, our Chief Financial Officer, will finish with a discussion of our financial performance for the quarter. After we finish our prepared remarks, the team will then be available to take your questions. With that, I'd like to now pass the call over to Anuj. Anuj Ranjan: Thanks, Alan, and good morning, everyone. Thank you for joining us on the call today. We had a great quarter. We delivered strong financial results, made good progress on our growth and recycling initiatives and continue to execute our strategy to create value for our shareholders. Since the start of the year, we've generated more than $2 billion of proceeds from our capital recycling program and repaid $1 billion of borrowings on our corporate credit facility. We've also bought back just over $160 million of our units and shares and invested an additional $525 million in 3 exciting strategic growth acquisitions, including First National, which we just closed at the end of October. Apart from our growth initiatives, in September, we announced plans to simplify our corporate structure by converting all BBU LP units and BBU C shares into one new publicly traded Canadian corporation. We expect this reorganization will improve our trading liquidity, increase demand for our shares from index investors and more generally make our business more accessible for investors around the world. The feedback from the market has been excellent. And since the announcement, our consolidated market cap has increased by nearly $1 billion. We're excited about the benefits this reorganization will bring to all of our investors, and we are on track to have it completed early in the new year. Stepping back, we created our business almost a decade ago as a way to provide public investors access to Brookfield's global private equity business, which has been delivering top-tier returns for investors over the past 25 years. As a public company, we've been executing that same consistent strategy of acquiring high-quality, market-leading vital businesses and operationally transforming them into global champions. Each dollar that is recycled is reinvested by the same team to fuel that flywheel of our business and continue compounding long-term value. And while the price of our shares and units has significantly improved and is up approximately 150% over the past 2 years, our NAV has also continued to increase. This means that our trading discount, while it's narrowed, there's still more room to go as our NAV will continue to grow going forward. Simply put, there's never been a better time to be a BBU investor. T he fourth industrial revolution powered by AI is happening before our very eyes and is going to happen a lot faster than people think. The productivity improvements that need to be captured from all the capital investment going into the build-out of AI will be massive. What's exciting is that the bottleneck today isn't really the technology. It's actually the operators who have the need for change management and broader expertise to implement and properly transform businesses. That's where we come in. We have both access to capital, but more importantly, the strong operational capabilities to leverage AI as another tool in our toolkit to accelerate our value creation plans and ensure our businesses are positioned to be propelled and not disrupted by it. We're pleased with the progress we've achieved through the first 3 quarters of the year and are cautiously optimistic heading into the fourth quarter. Despite all the headlines, the broader global economy has remained relatively resilient. Public markets are at record highs and transaction activity, both in public and private markets continues to pick up, supported by the downward trajectory in global interest rates. These are all powerful tailwinds for our business as we continue to execute our strategy and find accretive ways to surface value for our shareholders. Before wrapping up, I'd like to thank everyone who was able to join us in September for our Annual Investor Day. We had a fantastic turnout, and it was great to see many of you in person. For anyone who missed it, the webcast and the materials are available on our website. With that, I'll turn the call over to Adrian. Adrian Letts: Thank you, Anuj, and good morning, everyone. It's great to be joining you on the call today. We've been making great headway at the businesses we've acquired since the start of the year, and I want to spend some time today providing an update on where we've been focusing our efforts to advance our value creation plans. Let me start with the acquisition of Chemelex. As a reminder, Chemelex is a global leader in electric heat management solutions, providing mission-critical temperature control systems used to regulate temperature across a wide range of industrial and infrastructure applications. Chemelex has a number of things we look for in high-quality industrial businesses. It's a market leader. Its products are low absolute cost but have a high cost of failure. And the business generates a majority of its earnings from recurring aftermarket revenue, which underpins durable earnings and cash profile. In addition to its strong underlying fundamentals, what made this acquisition particularly interesting to us was the value creation opportunity. The business was a carve-out of a carve-out and had been noncore to a series of previous corporate owners. We saw a clear path to margin improvement by adding a strong management team and improving operational efficiency. With any business that we acquire being able to hit the ground running, having the right management team in place out of the gates, establishing a transformation office to drive accountability and crystallizing optimization savings as quickly as possible is so important to what we do and fundamental to our success. That's exactly what we've done at Chemelex, and I'm really pleased with the tremendous amount of progress we've achieved in just over 6 months of owning the business. Since closing, we've got off to a strong start, completing the carve-out and rebranded the business as a stand-alone company. We strengthened the management team and set up a transformation office to guide operational changes and refocus the business after years of being an underappreciated segment under previous owners. Alongside new leadership, we built out a 100-day plan focused on identifying cost savings opportunities and executing commercial initiatives aimed at rationalizing low-volume SKUs and improving margins primarily in our aftermarket product business. We also put in place a new go-to-market strategy aimed at driving growth through expansion into new verticals and geographies. Finally, we completed a project plan to optimize our manufacturing footprint and our primary production facility. Our investment will enhance equipment, improve measurement and sensing via AI and machine learning as well as enhanced process flow from an improved layout, all of which we expect will increase throughput, reduce labor costs and improve product lead time. We're also off to a strong start in Antylia Scientific, which we acquired in May this year. As a reminder, Antylia is a leading manufacturer and distributor of specialty consumable products and equipment for lab-based testing and research markets. Antylia has a sticky base of over 50,000 customers, producing high-quality mission-critical products that support accuracy and repeatability for lab-based processes. Our value creation plans are progressing well. We've strengthened the leadership team to accelerate execution, enhanced our go-to-market efforts with key sales and product hires. In addition, we are working to enhance the business' digital capabilities like search engine optimization and an AI quoting tool that will improve sales productivity while also building out the business' e-commerce presence. We've deployed significant resource to jumpstart our value creation initiatives and are working on improvement opportunities across procurement, site rationalization and automation of the manufacturing and distribution process. With that, I'll hand it over to Jaspreet for a review of our financial results. Jaspreet Dehl: Thanks, Adrian, and good morning, everyone. Third quarter adjusted EBITDA was $575 million compared to $844 million in the prior period. Current period results reflect the impact of lower ownership in 3 businesses following the partial sale of our interest and includes $77 million of tax benefits. This compares to $296 million of tax benefits included in the prior year results. Excluding tax benefits and contribution from acquired and disposed operations, adjusted EBITDA was $512 million compared to $501 million in the prior period. Adjusted EFO of $284 million during the quarter benefited from lower current tax expense at our advanced energy storage operation and lower interest expense due to the reduction in corporate borrowings compared to last year. Turning to segment performance. Our Industrial segment generated third quarter adjusted EBITDA of $316 million compared to $500 million in the prior period. Including the impact of tax benefits, segment performance increased 17% over the prior year. Increased underlying performance at our advanced energy storage operation was driven by higher overall volumes, growing demand for higher-margin advanced batteries and continued benefits from operational and commercial improvement initiatives. Adjusted EBITDA of our engineered components manufacturer increased on a same-store basis compared to prior year, after adjusting for the impact of a partial sale of our interest in the business earlier this year. Improved performance reflects higher volumes driven by recent customer wins and the benefit of commercial actions and ongoing optimization initiatives, which are supporting resilient margins despite relatively weak market conditions. Moving to our Business Services segment, we generated third quarter adjusted EBITDA of $188 million compared to $228 million last year. Current period results reflect an $11 million impact related to the sale of a partial interest in our dealer software and technology services operation. Our residential mortgage insurer continues to benefit from resilient demand across the businesses served market segment, which includes first-time homebuyers as well as low losses on claims. Results during the quarter reflected the timing impact of slower revenue recognition under the IFRS 17 Accounting Standard due to more conservative model assumptions given an uncertain Canadian economic outlook. At our dealer software and technology services operation, stable bookings were supported by continued renewal activity and commercial initiatives, which largely offset the impact of customer churn during the quarter. Results also reflect the impact of ongoing strategic investments to strengthen its customer service and product offerings. Finally, our Infrastructure Services segment generated third quarter adjusted EBITDA of $104 million compared to $146 million during the same quarter last year. Results reflect the sale of our offshore oil services shuttle tanker operation and a $7 million impact related to the sale of a partial interest in our Work Access Services operation earlier this year. Stable performance at our Lottery Service operation benefited from improved margin performance driven by productivity gains and favorable mix of services despite the timing of terminal deliveries, which were lower compared to the prior period. The business is focused on executing a significant pipeline of system implementations, which include the rollout of digital lottery services in the U.K., which is expected to go live early next year. Turning to our balance sheet and capital allocation priorities. We ended the quarter with approximately $2.9 billion of pro forma liquidity at the corporate level, including the fair value of units we received in exchange for the sale of partial interest to the new Brookfield Evergreen Fund earlier this year. We're in a great position with significant liquidity and flexibility to support our growth and balanced capital allocation priorities. To that end, during the quarter, we renewed our normal course issuer bid, which provides us with the ability to buy back an additional 8 million units in shares. As a reminder, in February, we launched our current $250 million buyback program. And as Anuj mentioned, to date, we've repurchased just under $160 million of units and shares under this program. Going forward, we'll continue to remain opportunistic when it comes to our repurchase activity, balanced against our continued growth objectives. With that, I'd like to close our prepared remarks and turn the call back to the operator for questions. Operator: [Operator Instructions] Our first question comes from the line of Devin Dodge with BMO Capital Markets. Devin Dodge: I wanted to start with a question on BRK. They had a regulatory filing last week about potentially pursuing an IPO. Just wondering if an IPO, is that still the most likely path for an exit? And is the IPO market open in Brazil even with interest rates remaining quite high? Jaspreet Dehl: Devin, it's Jaspreet. I'll -- I could start and then Anuj can add anything that I've missed. I'd say we've talked about BRK in the past. It is one of our more mature investments, and it is one that we're looking actively to monetize. IPO is one option that is available to us, and we always make sure that we keep all optionality. The capital markets environment in Brazil is still difficult. Interest rates are high, but they seem to have peaked. But -- so you're starting to see some green shoots. And we think BRK is an excellent business, and it would make a great public company. So we're keeping that optionality open and having some early discussions to gauge interest, but it doesn't mean that there isn't other options then we would look at and review. Devin Dodge: Makes sense. Maybe just continue with BRK. It's been relatively quiet on investing in new concessions recently. Just do you expect the business to be more active going forward? Or is financial leverage a bit too much of a constraint currently? Jaspreet Dehl: The focus has been kind of twofold in the business. One has been just operational initiatives to continue to increase margins and EBITDA, which the team has done a great job. The EBITDA is up, I think, in the double digits in the business over -- year-over-year. And the second piece has been around the concessions that we do have continuing to appropriately allocate capital to the development of the underlying concessions, get our inflation and other increases that were allowed under the existing concessions. So there's been a lot of focus on that side as opposed to going out and looking for inorganic growth. So the organic growth within the business, we're quite happy with. And look, we'll be opportunistic. But right now, our focus, just given we've executed on everything that we wanted to do within BRK. We've created an incredible platform, which we think is going to be really valuable. And there continues to be a massive need in the country just around water treatment and sewage and BRK and the platform we've created can play a really important role there. So we think there's lots of opportunities for growth, but our focus right now is more around kind of monetizing the asset. Devin Dodge: Okay. Makes sense. And then just last question here for me on La Trobe. Lots of media coverage related to some actions taken by the regulator. Just -- can you provide a bit of context for the issues, kind of where it stands now? And if this has had much of an impact on the underlying fundamentals of the business, including redemptions? Anuj Ranjan: It's Anuj here. I'll take that one. So La Trobe, I'd say this issue is more of a disclosure issue that the regulators raised. The regulator does this quite often in Australia. It's happened, I think, 90 times in the last year or 2 to other fund managers. So it's something that the guys -- that our team are working through and are going to implement some changes probably over the next little while and just in terms of some of the disclosures. It hasn't had any real impact to the underlying fundamentals of the business. which remain very strong. So the business is performing great, and it's doing really well. And we're still very confident in its future growth perspectives and that the -- many of the interested parties who are interested in La Trobe continue to see it the same way. Operator: Our next question comes from the line of Gary Ho with Desjardins Capital Markets. Gary Ho: Maybe start off with Anuj here, just very high level. Just seeing the success of nuclear and Westinghouse today, just gets me thinking kind of what could have been had BBU just kept that asset today. Just curious, does development of those assets make you consider keeping assets longer for the fullness of time to reap the full potential? Just want to pick your brain on that. Anuj Ranjan: Yes. Look, it's a great question. Westinghouse is an amazing business. It's done incredibly well after we sold it, as you've all seen. Many of the reasons it's doing incredibly well are things that would not have been knowable at the time that we sold it, and we had a very good outcome for the time that we owned it. I think our role as we see it is to buy and truly operationally transform these vital businesses to the global economy, and that's exactly what we did with Westinghouse. So it's a great playbook, and it's a great sort of outcome that we're all still really proud of. Our goal is to make businesses so good that others find value in them, and they should all, frankly, after we exit, others should continue to do well off the businesses that we exit that we've done our job right. So we don't have any regrets in that sense. In terms of our strategy, the nice thing about BBU is it's always presented us a bit of that optionality of some businesses that we thought could be longer-term holders that we could find that makes sense. And so I'd say we've not changed our strategy from the beginning. We have had -- we have co-invested alongside Brookfield's broader Private Equity business. And we have sometimes occasionally considered owning businesses on a more longer-term duration. And I think that sort of optionality that we have continues to exist. We do, of course, look at many companies in our portfolio today and some of them are exceptional. And if there was an opportunity to own them longer, we could always consider it. But I'd say our focus still is on -- we want to compound value over the long term. And much of the compounding that we do is by improving those margins dramatically in the early years. And if we do our job right and we get paid the right value on exit, we still find that sometimes recycling that capital in the new opportunities where we can deploy that same playbook will allow us to generate these sort of exceptional returns that we've done over the past 25 years. Gary Ho: Yes. That makes sense. And while I have you, can you maybe just talk about the new Evergreen fund, the Brookfield Private Equity Fund? Are there other opportunities to further monetize parts of maybe BBU into these vehicles over time? Maybe talk about how you pick and choose these assets to sell. Anuj Ranjan: Sure. Maybe just to start with them, we very recently launched the BPE fund, as I think some of you saw in the press release in Canada. And what I can say is it's been going very well. We're very, very pleased with the results so far. And by next quarter, I presume -- I assume that we will have some redemptions of that prep and be able to share more information in terms of the cash inflows to BBU as a result of that sale, which we think is going to be very successful. The -- in terms of future opportunities, I'd say it's a function of 2 things. One is it is accretive for BBU and shareholders and the share price. And obviously, the share price since we did the first one is better today, but it's still a material discount, we feel to NAV. So part of it depends on how things go over the next little while. And of course, it depends on the inflows that BPE may continue to have in the market. But if that natural opportunity exists in the future, we could explore opportunities. I would say it's not something that we're actively advancing at this moment, but it's an option that we always have in the future if it makes sense for both sets of investors. Gary Ho: Okay. And then if I can sneak one more in just on CDK, your results dipped year-over-year. I know part of that was due to some ongoing strategic investments made and product enhancements. Just wondering if you can provide a bit more details on these initiatives, maybe quantify the impact in the quarter and also future spend in the next 12 to 18 months. Adrian Letts: So it's Adrian here. Yes, look, current quarter reflects continued investment, as you said, in modernizing the technology. I think it's important to step back first, though, margins are ahead of where we bought the business, and we continue to see the benefits of the operations and improvement that we've done across the business. Churn has stabilized and we've started to roll out some of the new features and products that we've been investing in and customer response has been overwhelmingly positive. We will continue to invest, and it's something that we'd always plan to do. We think now is the right time, but we're expecting to see the benefits come through next year. Gary Ho: And are you able to quantify the amount in the quarter? Jaspreet Dehl: I don't think -- Gary, it's Jaspreet. I don't think we've kind of broken that out specifically to say what the contributions are from each piece. But I'd say the bulk of the decrease that you're seeing is related to the technology spend. There's positive kind of commercial actions there is some churn, but the bulk of the year-over-year decrease is related to the technology spend. Operator: Our next question comes from the line of Jaeme Gloyn with National Bank. Jaeme Gloyn: Yes. First one, just -- I might have missed it. Did the tax credits, have you received cash for that at this stage yet? Jaspreet Dehl: Jaeme, it's Jaspreet. We have not. So we're still awaiting. The -- we were told that it's being processed. And I think with the government shutdown in the U.S. now, we're expecting that there's delays and slowdowns just in the processing. But our expectation is still that we will receive the credit, and it's more just a matter of timing. Jaeme Gloyn: Okay. Understood. And then, I mean, pro forma liquidity is in -- probably the best it's been in some time. Should we expect a ramp-up here in deployments? Or is that still somewhat contingent on recycling some of the other assets? Jaspreet Dehl: Look, I'd say our capital allocation priorities are still around funding the growth of the business and maintaining leverages at a good level, so kind of maintaining that. And then the $250 million buyback program. I'll let Anuj provide additional commentary, but the pipeline is very robust. We're opportunistic and selective in terms of where we want to deploy our capital. So if we find the right opportunities, we have the liquidity available to fund growth. So far this year, we've deployed $525 million into 3 what we think are really great businesses. And if there are opportunities to continue to deploy capital, we'll do that. Anuj Ranjan: Yes. I'd just say that I think everything Jaspreet said is right. And I'd just say that generally speaking, the investment environment is looking very good right now. Obviously, financing markets are very strong and very enabling for private equity style transactions. But more importantly, we're just finding great businesses that we really like, many who we have been following for many years that are possibly coming available at great prices. And some of those are deals that we've done so far this year that BBU has participated in. So the pipeline is very strong. There's some incredible opportunities that we're working on. It's sort of -- I don't know if they'll go through or not, but if they did, I think BBU would look to participate in them. This is sort of a great time to be putting money to work, and we're really excited about the overall landscape. Jaeme Gloyn: Okay. Great. And then last one, just on DexKo. Volumes are up year-over-year. EBITDA looks like it's up low double digits. Has this sort of turned the corner? Are you feeling more confident in the near-term outlook for DexKo? Maybe an update on that business and what we should expect in the coming year? Adrian Letts: Yes. So it's Adrian here. I'll give you some color. So look, we are pleased with the performance. The business continues to do well in what is an improving but still somewhat challenging market. Market demand remains below normal cycle levels, but we're seeing some signs of an early recovery in both North America and internationally. And we're hopeful that as we start to go through 2026, we'll see some further green shoots. Operator: [Operator Instructions] Our next question comes from the line of Bart Dziarski with RBC Capital Markets. Bart Dziarski: Just wanted to ask around AI, and you highlighted AI benefits across Clarios and Sagen at the Investor Day. And I was wondering if you could highlight some of the AI benefits you might be seeing across the other large investments. So I'm thinking CDK, DexKo and Scientific Games. Adrian Letts: Yes. So look, it's Adrian here. Just some comments on CDK, Scientific Games and DexKo. So we talked in the past about the benefits that we're seeing in Clarios. We've installed sensors across the business, started to measure and understand quantums of data to really help operationalize and improve the throughput of manufacturing and manage inventory levels. If you talk to CDK, I think the most important thing to talk about from a CDK standpoint is the data opportunity we have there to improve workflow. The volume going through the CDK platform, which is responsible for over 50% of dealerships in North America, the volume of transactions presents a really interesting insight and opportunity that we can start to build out the product proposition for our customers to benefit from that. If you think about SciGames, equally, the understanding of lottery behavior, purchasing patterns and the like is a tremendous opportunity for us to bring to bear to support licensees, licensors in monetizing and growing lotteries within their particular jurisdictions. And then if I talk to DexKo, it's similar to Clarios in terms of understanding sales patterns, managing inventory better and really seeking to improve the operational performance of the business. Bart Dziarski: Great. And then a follow-up on the capital allocation. So the prior $2 billion of proceeds, about half of that was used to pay down debt, so $1 billion. And if I'm reading it right, it doesn't sound like this next $2 billion will be used primarily towards debt reduction. It's most likely capital deployment and buyback. Do I have that reading right? Or am I misunderstanding? Jaspreet Dehl: Look, I'd say the corporate leverage is at a level that we feel quite comfortable. As we have monetization activity and we have proceeds, we'll pay down the line. But to the extent that there are great new investment and acquisition opportunities, we do feel like we've got sufficient liquidity today to participate in that growth. On the buyback side, we've got -- we announced the $250 million buyback program earlier this year, and we've deployed about $160 million of that $250 million. So considering that our units and shares continue to trade at a discount to our view of intrinsic value, we will continue to kind of -- our buyback activity. So I'd say all of those facets are still in play. And just given the -- it's hard to predict the timing of acquisition monetization activity. So the working capital lines will continue to use them. Operator: Thank you. And I'm currently showing no further questions at this time. I would now like to turn the call back over to Anuj Ranjan for closing remarks. Anuj Ranjan: Thank you all for joining us, and we look forward to speaking with you next quarter. Operator: This concludes today's conference. Thank you for your participation. You may now disconnect.
Operator: Good morning, and welcome to the Sun Life Financial Q3 2025 Conference Call. My name is Galeen, and I will be your conference operator today. [Operator Instructions] The conference is being recorded. [Operator Instructions] The host of the call is Natalie Brady, Senior Vice President, Capital Management and Investor Relations. Please go ahead, Ms. Brady. Natalie Brady: Thank you, and good morning, everyone. Welcome to Sun Life's earnings call for the third quarter of 2025. Our earnings release and the slides for today's call are available on the Investor Relations section of our website at sunlife.com. We will begin today's call with opening remarks from Kevin Strain, President and Chief Executive Officer. Following Kevin, Tim Deacon, Executive Vice President and Chief Financial Officer, will present the financial results for the quarter. After the prepared remarks, we will move to the question-and-answer portion of the call. Other members of management are also available to answer your questions this morning. Turning to Slide 2. I draw your attention to the cautionary language regarding the use of forward-looking statements and non-IFRS financial measures, which form part of today's remarks. As noted in the slides, forward-looking statements may be rendered inaccurate by subsequent events. And with that, I'll now turn things over to Kevin. Kevin Strain: Thanks, Natalie, and good morning, everyone. Turning to Slide 4. We had a good Q3 for top line and for bottom line, demonstrating the benefits and strength of our diversified business model. Our underlying EPS was $1.86, up 6% year-over-year. Underlying ROE was 18.3%, progressing well towards our medium-term objectives, and our book value per share grew 3% quarter-over-quarter. Individual - Protection sales grew 35%, Group - Health & Protection sales grew 12%, and we had almost $3 billion of positive net flows in Asset Management and Wealth. We achieved strong underlying earnings in Asia and Canada with solid underlying earnings in Asset Management. We continue to navigate the industry challenges in our U.S. business, which performed below our expectations this quarter. Results in our U.S. business were challenged by unfavorable insurance experience across group and dental, reflecting the structural changes occurring in the U.S. healthcare system, which are driving higher claims frequency and cost. It is important to remember that our U.S. Group Benefits and dental businesses are repriceable over a 1- to 3-year time frame, and our experience is largely in line with or better than industry trends. Our Employee Benefits business saw higher disability claims in July, but this started to normalize in August and September, and we see this as normal volatility. In our medical stop-loss business, we saw a higher frequency of claims over $1 million in the quarter, and we increased our stop-loss ratio assumptions to reflect this accordingly. We are industry leaders in the stop-loss business with scale and strong capabilities, and we continue to have industry-leading claims ratios. We have seen cycles like this in the past where the claims run ahead of pricing, and we continue to be confident in our ability to pick the best risk and manage the pricing. In Dental, we continue to navigate industry-wide headwinds from the slower pace of Medicaid contract repricing. We remain focused on improving our U.S. dental business performance through repricing, expense actions, and growth of our commercial business. In Asia, we achieved double-digit growth -- double-digit protection sales growth in six markets, with new business CSM growing 20% year-over-year and overall CSM has more than doubled over the past 3 years, reflecting sustained momentum across Asia. In Canada, we continued with strong individual protection sales driven by solid demand for our participating life policies sold through both third-party and proprietary channels. We are also continuing to see steady growth in our asset management net flows, including strong capital raising and deployments at SLC Management and institutional net inflows at MFS. We ended the quarter with a LICAT ratio of 154%, demonstrating our strong capital position, announced a $0.04 increase to our dividend to $0.92 per share, and we repurchased approximately $400 million of shares in the quarter. Turning to Slide 5. We've invested significantly in our asset management business over the past decade and have industry-leading capabilities, which span across public equities and public fixed income at MFS to alternative asset management at SLC. With $1.6 trillion in assets under management, we are Canada's largest asset manager and are one of the largest asset managers in the world. We also have significant wealth management capabilities in Canada and Asia that we can leverage. $1.4 trillion of our AUM is managed by our asset management businesses, of which $1.2 trillion is on behalf of third-party investors. Our asset management pillar today includes both MFS and SLC. And a few weeks ago, we announced Tom Murphy as President, Sun Life Asset Management. Tom has a deep asset management background. He previously led investment businesses in Europe and the U.S. before joining SLC Management in 2018, where he was the President of SLC Fixed Income. Over the past 3 years, Tom has been Sun Life's Chief Risk Officer. He will assume his new role on January 1, 2026. It is important to note there will be no change in how MFS or SLC are managed under this structure. MFS is a global leader in public equities and public fixed income with a strong management team and a focus on the client. We support the MFS strategies, including growing public fixed income and active ETFs, and we saw good progress in both this quarter. SLC has equally strong management capabilities and is equally focused on clients. We are seeing significant interest in partnering with SLC from banks, insurers, reinsurers, and others and are focused on unlocking these opportunities. We see long-term growth potential in Asia asset management. We currently manage over $140 billion in assets through our general account and wealth businesses. In addition, our asset management JV in India sits at $65 billion in assets under management. Adding further capabilities in Asia will support growth in asset management and investment returns in our insurance and wealth businesses. Unlocking the synergies between our asset management business and our insurance and wealth businesses will be an important part of Tom's mandate. I'm excited by the opportunity to accelerate the growth of our asset management businesses globally. We have an excellent mix of capabilities across asset management, insurance, and wealth. Sun Life Asset Management will be an important growth engine for Sun Life going forward. Turning to Slide 6 and staying on Asset Management and Wealth, we saw good momentum across our platform this quarter. At SLC, fee-earning assets under management grew 9% year-over-year, driven by strong capital raising and deployments across all platforms. We are on track to achieve our full year underlying earnings target of $235 million. At MFS, net outflows of USD 0.9 billion were the lowest since 2021. Strong institutional gross sales of USD 12.9 billion included large mandate wins in separately managed accounts and collective investment trusts. We also had solid net inflows in public fixed income and active ETFs. MFS continues to deliver industry-leading pretax net operating margins with a 39.2% margin this quarter. In Canada, Sun Life Global Investment marked its 15th anniversary of helping Canadians grow and protect their wealth. Since launching in 2010, SLGI has grown to over $44 billion in AUM and has become the largest Canadian-based provider of target-date funds for group retirement plans. This quarter, SLGI launched its first ETF series in Canada, leveraging the power of our asset management platform, we are providing investors and advisors with more ways to access the deep expertise of MFS, SLC, SLC Fixed Income and Crescent Capital. Moving to Asia. We saw robust individual protection sales. Agency sales were up 25%, bank insurance sales were up 36% and broker sales were up 47% year-over-year, highlighting the strength of our distribution in Asia across channels. Asia Asset Management gross flows and sales of $2.2 billion were up 17%, driven by higher fixed income fund sales in India and MPF sales in Hong Kong. We are poised for growth in Canada, Asia, and Asset Management and are focused on aligning our U.S. business for growth in the new realities we face in the U.S. health space. We have strong capabilities in the U.S. health space and scale in these businesses. They are capital-light and they are repriceable by design. I have strong confidence in the U.S. management team and will work closely with David Healy to manage through the repricing and repositioning that needs to be done for growth. Overall, we are committed to our medium-term objective of 10% underlying earnings growth, 20% ROE and dividend payouts in the range of 40% to 50% of underlying earnings. With that, I'll turn the call over to Tim, who will walk us through the Q3 financial results in more detail. Timothy Deacon: Thank you, Kevin, and good morning, everyone. Turning to Slide 8. Overall, our third quarter results reflect the benefits and strengths of our diversified businesses as strong growth in Asia and Canada, and solid results in Asset Management were partially offset by lower earnings in the U.S. In Q3, we reported underlying net income of $1.047 billion, up 3% year-over-year. Underlying earnings per share of $1.86 were up 6% over the same period. Asset Management and Wealth underlying earnings were up 5% over the prior year on improved credit, higher fee income in Canada and higher net seed investment income at SLC Management. Group - Health & Protection underlying earnings were down 18% year-over-year, driven by unfavorable insurance experience across the U.S., partially offset by business growth and favorable insurance experience in Canada. Individual Protection underlying net income was up 25% over the prior year on business growth, favorable mortality experience in Asia, joint venture earnings in India, and higher investment earnings in Canada. Underlying return on equity was 18.3%, up from the prior year on higher earnings and the impact of share buybacks. Reported net income was $1.1 billion or 6% above underlying net income, driven by a gain from our increased ownership in Bowtie, partially offset by amortization of intangibles, acquisition-related expenses, market-related impacts and the impact of our third quarter review of actuarial assumptions or ACMA. Market-related impacts reflect unfavorable real estate experience as modestly positive returns in the quarter were below our long-term expectations. We completed the annual review of actuarial assumptions, which resulted in a modest net loss of $13 million and $139 million benefit to total CSM. Total CSM, which reflects future profits, increased 12% year-over-year to $14.4 billion, driven by strong organic CSM growth. New business CSM of $446 million increased 16% on strong sales compared to the same period last year. Organic capital generation, net of dividends, was strong at $624 million or 60% of underlying net income, well above our target range of 30% to 40%. Our capital position remains strong with an SLF LICAT ratio of 154%, up 3 points from the prior quarter, driven by a $1 billion debt issuance executed in the quarter and organic capital generation, partially offset by share buybacks. Holdco cash was $2.1 billion, and our leverage ratio remains low at 21.6%. Our book value per share increased 2% over the prior year, demonstrating our ability to generate strong growth while returning value to our shareholders with over 19 million shares repurchased in the last 12 months and 4.8 million shares repurchased this quarter. Finally, we announced a 4.5% increase to our common shareholder dividend. Turning to our business group performance on Slide 10. MFS is underlying net income of USD 215 million was down 1% over the year, primarily reflecting a decrease in net interest income, mostly offset by higher fee income on average net asset growth. Our pretax operating margin of 39.2% decreased 1.3 percentage points from the prior year, primarily from lower interest income. Assets under management of USD 659 billion were up 2% over the prior year and up 4% over the prior quarter. The sequential movement in AUM was driven by market appreciation, partially offset by net outflows. Overall net outflows of USD 871 million were at the lowest level since 2021 and included retail outflows of $4.7 billion and institutional inflows of $3.8 billion. Retail outflows reflected continued investor preference for risk-free investments and were in line with industry. Institutional gross and net flows were the highest they've been in 10 years and were driven by several large mandate wins over $1 billion in separately managed accounts and new target-date product offerings in the defined contribution retirement channel, a key growth segment for MFS. MFS also had positive net flows in public fixed income and active ETFs this quarter. Turning to Slide 11. SLC Management generated underlying net income of $54 million, up 15% year-over-year, which reflected the impact of higher net seed investment income and higher fee-related earnings. With year-to-date underlying net income of $184 million, SLC is well-positioned to achieve its underlying earnings target of $235 million for 2025. Fee-related earnings of $78 million were up 8% compared to the prior year, primarily from strong capital raising. Reported net income was $23 million, down from the prior year due to a revaluation gain on acquisition-related liabilities in the third quarter of 2024. SLC Management continues to demonstrate strong momentum across the platform with capital raising of $5.6 billion, primarily in Crescent, BGO, and SLC fixed income and deployments of $7.4 billion across all asset classes. SLC's fee-earning AUM of $199 billion was up 9% year-over-year, driven by net flows, partially offset by realizations. Turning to Slide 12. Canada reported net income of $422 million was up 13% over the prior year on strong business growth, favorable insurance experience, and higher fee income. Reported net income of $414 million was up 8% over the prior year, driven by underlying net income growth and favorable ACMA, partially offset by market-related impacts. Asset Management and Wealth underlying earnings were up 19% year-on-year on improved credit experience and higher fee income from AUM growth. Asset Management and Wealth AUM of $213 billion was up 11% with the prior year on market appreciation. Group - Health & Protection earnings were up 15% year-over-year, reflecting business growth, favorable mortality and morbidity experience from lower claims volumes and shorter durations and improved credit. Group sales were down 21% from last year due to the timing of large case sales. Individual Protection earnings were up 3% compared to the prior year on higher investment earnings. Individual Protection sales were up 16% year-over-year, driven by solid demand of nonparticipating life products across both third-party and proprietary sales channels. Turning to Slide 13. Sun Life U.S.'s underlying net income was USD 107 million, down 34% from the prior year. In Group - Health & Protection underlying earnings were down 50% from the prior year, reflecting unfavorable insurance experience in medical stop-loss, higher claims frequency in Dental and unfavorable disability experience in Employee Benefits. U.S. Group - Health & Protection sales of USD 273 million were up 25% year-over-year, driven by higher large case sales in Employee Benefits and higher government sales in Dental. In Employee Benefits, we experienced moderately elevated long-term disability claims in July, which improved over the remainder of the quarter. In Medical stop-loss, the unfavorable insurance experience this quarter is comprised of residual claims from the pre-2025 business and the impact of existing pricing shortfalls and moderately elevated claims volumes on January 1, 2025, business. As a result, in Q3, we increased our loss ratio assumption on the January 1, 2025, block for the impact of 3 quarters of expected experience to date, reflecting our disciplined approach. In Dental, we continue to experience pricing shortfalls and higher claims frequency in our Medicaid business. In addition, we're seeing seasonally higher utilization in Q3 as the majority of our Medicaid membership base is comprised of children who typically receive dental services prior to the start of the school year. Individual Protection underlying earnings were up 29% year-over-year on other experience gains, improved credit experience and higher investment contributions. Reported net income of USD 72 million was down 71% compared to Q3 of 2024, reflecting unfavorable ACMA and lower underlying net income. Turning to Slide 14. Asia posted record underlying net income of $226 million, up 32% year-over-year. Individual Protection earnings were up 38% over the prior year on strong continued sales momentum and in-force growth, favorable mortality experience and higher earnings in India. Asset Management and Wealth earnings were in line with the prior year. Reported net income of $373 million was higher year-over-year, driven by the gain from our increased ownership in Bowtie, favorable ACMA and higher underlying net income. We continue to see strong sales in Individual Protection, up 38% year-over-year, driven by double-digit sales growth across most of our markets and channels. Asia's total CSM of $6.5 billion grew 17% over the same period last year, driven by strong organic CSM growth. New business CSM of $322 million was up 20% over the prior year from strong sales. Overall, our results were underpinned by the growth in Asia and Canada and solid results across Asset Management. We remain focused on executing the actions to position our U.S. health businesses for growth in the current environment. We are confident that our strong fundamentals, diversified business mix in geographies, and a robust capital position will enable us to continue to deliver on our medium-term objectives. With that, I will pass it back to Natalie for Q&A. Natalie Brady: Thank you, Tim. To help ensure that all of our participants have an opportunity to ask questions this morning, please limit yourselves to one or two questions and then requeue with any additional questions. I will now ask the operator to pull the participants. Operator: [Operator Instructions] Our first question is from Paul Holden with CIBC. Paul Holden: Two questions, both related to U.S. Dental. I guess the first would be what kind of expectations do you have for Medicaid repricing to start 2026, i.e., what are you hearing from the states? And what should we expect? And then the second one is maybe talking about growth in U.S. commercial premiums up roughly 6.5% year-over-year. So it's growing. But should we expect sort of reinvigorated efforts to accelerate that growth so to diversify away from the Medicaid business? David Healy: Yes. So thanks for the question, Paul. This is David. So yes, we're very much focused on pricing in the U.S. business. The way to think about it is we have states and direct relationships with them, which is the majority of our business, but we also have a significant relationship with health plans where we're the delegated provider of dental services. And then we also have ASO business, which is a mix of both states and health plans. Generally, we're making reasonably good progress with states around '26 with the exception of one large space. Health plans is going slower. We're making less progress. And how we're thinking about it is we continue to focus with them on pricing and repricing appropriately. In some cases, we're making structural changes to plans, including as appropriate, maybe moving from risk to ASO with some health plans and also including maybe terminating contracts if we can't get the price we need. So we're very much committed to it. We're making progress. I would expect it to be gradual in '26, but we're continuing to stay focused on it. Also on the ASO front, we continue to enhance the value of our services to make sure we're getting paid appropriately for the work we're doing in support of those contracts, but it is slow progress. With respect to commercial, your second question, yes, we're making progress. Since the acquisition, premiums have grown more than 30%. Membership has grown more than 20%. This is an important opportunity for growth for us into the future. As you know, in the U.S. market outside of healthcare, commercial dental is the #1 sought-after benefit after healthcare, and it's a great opportunity for us to package commercial dental with the rest of our group benefits products, and we have a really strong employee benefits offering and a great distribution system in which to bring that through. So we're very much focused on that. It will take time, of course, it's a competitive landscape, but we expect to continue to make progress over time with commercial dental sales. Operator: The next question is from Alex Scott with Barclays. Taylor Scott: I wanted to see if you could talk about the asset management flows. And can you give us a feel for the institutional progress that's been made there? And to what extent should we view that as more lumpiness and something driven by more of a single mandate as opposed to the things that you're doing to improve the more medium- to long-term trajectory of the flows in the business? Ted Maloney: Sure. This is Ted Maloney. I think lumpiness, the word you use is a really important one to use, and it is a reminder that we do have lumpiness in both directions. And so in the quarter, we got a couple of large inflows that Tim mentioned that we think are indicative of themselves longer-term trend. But the broad trends, both institutionally and retail remained with more headwinds than tailwinds. Some of those headwinds may be lessening on the margin, but the headwinds persist. Within that, we'll continue to have big wins as well as continued losses. And in this quarter, we had those couple of big wins. I can give you a little bit more color on them, which might be helpful to think about longer term, which is -- one was a separately managed account within the -- what we would characterize as institutional that is in our -- one of our international strategies, so the world minus the U.S., which is one of the many areas where we have a really dominant set of franchises and are seeing as market leaders. And so that's been a nice growth tailwind for us for a period of time and should continue to be, but that was obviously a very big chunk of a tailwind. The other is actually smaller, but perhaps more exciting. Tim mentioned this as well, the collective investment trust vehicle is the most important vehicle in the retirement space. And there's a unique feature to it, which is that you can't see it yourself, you need a client to be an initial investor. So getting that first investment in a target-date CIT was a huge win on its own, but also allows us to fund CITs across all the components of the target date. So we think that's another one that will provide long-term tailwinds. But again, I do want to reiterate the headwinds across the industry that we've been talking about for a long period of time persist. We are executing well. We believe within those headwinds, they may be abating slightly on the margin, but we are not declaring a change to that. Our long-term strategy very much includes long-term net flow positive growth over time. We think we've got a very clear strategy to execute on that, and we'll continue to do that. We'll need some help from those industry headwinds abating. Taylor Scott: Got it. That's helpful. Second one I had is on stop loss. I wanted to see if you could provide a little more detail around how much of it this quarter was unfavorable development from earlier or loss picks that were made earlier in the year. And maybe further to help us think through how much of the cash claims do you still have to come in? And are we getting late enough in the year that it's potentially becoming a little too late to reflect what you're learning in the 1/1/26 renewals? Or do you feel like you are fully getting that? I'm just trying to get a better sense for what to expect going into next year. David Healy: Okay. Thanks for the question. It's David again. Yes, let me just break down the unfavorable insurance experience for medical stop loss in the quarter. There was really three factors involved. About 20% of it was related to the pricing shortfall that we've previously discussed on this call that we knew this year. 35% of it was related to late emergence of claims from cohorts prior to 1/1/25, including one large claim that came through in the quarter. And the rest, just under half was related to the 1/1/25 cohort itself. So we did see a higher number of greater than $1 million claims late in the quarter. So we did update our loss ratio pick for the year. It's important to know that as a result of doing that, it reflects really 3 quarters of updates to reserves, as Tim had mentioned, for Q1, Q2, and Q3 premiums that came in. You'd also asked about pricing and I think how we're looking at it for 2026. Well, obviously, U.S. healthcare costs are elevated. Medical trend has been rising to 8.5% this year, and we expect that to continue into 2026. And our pricing reflects our view of leverage trend. And it's also considering recent experience. So we continue to stay focused and disciplined in our pricing approach. You asked about how much of it has come through. In terms of what we see at this point in the year, obviously, Q3, we had enough credible claims to be able to update our loss ratio pick for the year. We typically see about 30% of our claims by Q3 and then a further 30% come through in the fourth quarter. So it's still early in the cohort of 1/1/25, but we're certainly updating our view on experience as we see it. Kevin Strain: Alex, it's Kevin. I just wanted to maybe sort of reiterate some of what David was saying. We expected significant increase in price when we went into this year, and we increased prices by 14%. And as we saw the year-end experience, we added another 200 basis points to that. So we continue to see that trend. And then this quarter, we added another 1% approximately, which was for the 3 quarters sort of experience we were seeing. This business is repriceable. But when costs are rising so rapidly, it's hard to keep up with that repricing. But over time, we will be able to do that. We have confidence in our ability to do that because we do have scale and we do have good risk selection there. But when costs and claims are rising so rapidly, we can lag a little bit, and we've seen that in the past. So I think that we're taking the right actions. A chunk of what you saw this quarter was for the year-to-date, but it all reflects that increasing claims experience that we're seeing at the higher end, which I referenced in my speaking comments. Operator: The next question is from Gabriel Dechaine with National Bank Financial. Gabriel Dechaine: Yes. So if I understand correctly, your 17% of the total repricing target, and that's the number you'll try to have fully embedded in the book by Jan 1, '26. And I guess aside from pricing actions, what other -- and the timing of the effectiveness, what other considerations are there? It's one thing to just increase pricing, but market share impact. There are some known unknowns, I guess, because we saw that with dental, where there's a dynamic with the counterparties that wasn't anticipated. And I'm wondering if there's a similar kind of dynamic that we should be aware of when repricing or seeking repricing when it comes to this stop-loss business, which is a commercial one, not state. Kevin Strain: Gabe, it's Kevin. Let me just -- since I mentioned the [ 14 and the 2 and the 1 ], that's for this year, right? That's what we thought we would have priced at if we had all the full information of how claims were coming through. So that's related to this year, and we're going through the repricing for next year right now. So I'm not signaling what we're doing for next year, but maybe David can go into some more detail. David Healy: Yes. Just to add to that, as Kevin noted, we do have a typical underwriting cycle in this business, and there are times when claims can come out ahead of pricing updates, and we've seen this before. Historically, we've had amongst the lowest loss ratios in the industry, and we continue to do that. There are other things, of course, we're doing. We have a very talented team. We're not just only focused on pricing, although it's a specific focus for us. We continue to build out our cost containment programs, which are really important. We have expert clinical capabilities. Our clients are really seeking out more cost containment support in light of the rising healthcare costs. And then we have care navigation capabilities as well, which we're building that help support employers and their employees as they deal with the escalating costs in the U.S. healthcare system. So we're confident that we can work through this. We have an industry-leading position, and we're certainly continuing to stay focused on it. Operator: The next question is from Tom MacKinnon with BMO Capital Markets. Tom MacKinnon: Maybe you can share with us sort of an outlook for the Medicaid dental loss ratio going forward? How much is that going to be improved as a result of any pricing benefits? And as we move into 2026, would you reset your expected -- your earnings on PAA business in the U.S. as a result of perhaps a different expected loss ratio for U.S. Medicaid Dental? David Healy: Yes. So I noted that we're very focused on pricing and working through them on a state-by-state and contract-by-contract basis. What we're seeing at the same time is we're seeing rising utilization in the U.S. and that has eaten up some of the pricing gains that we even saw coming through this year. We're still seeing a pretty conservative view on forward-looking trend in utilization. And so we're certainly trying to influence that in what we're doing and the work we're doing with states and health plans. But it is a gradual progress that we're seeing and that we're expecting to make. Tom MacKinnon: So if you were to maintain your best estimate here in terms of your Medicaid dental loss ratio, is the outlook for continued negative insurance experience with respect to this line at the kind of the same level that you had in the quarter? Or should it improve? David Healy: So it's important to note that this quarter is a seasonally high quarter. As Tim noted, we do typically see this in the third quarter. We ensure a lot of children, they go back to school. They use the dentist a lot in this quarter. It's traditionally the highest quarter in the year. Q4, by contrast is the most favorable quarter. And so we do expect things to improve in the next quarter. And like I said, going into 2026, we do expect gradual improvement in the loss ratio as we move forward, and we're continuing to work through that. Brennan Kennedy: Tom, it's Brennan Kennedy. Just on your question about the reset, the earnings on short-term insurance. So we do reset that at the beginning of the year, looking at the premiums in force and the pricing assumptions that are in effect. Kevin Strain: Tom, it's Kevin. I would say that there's a variety of reasons, but I've been following the benefits business a long time. And when people think their benefits are going to end because they're going to retire or something is going to happen to it, they tend to use them more. And I think that's what we're seeing in the U.S. Medicaid Dental space. There's concern that they'll be losing those benefits, and so they're utilizing them. There's other factors, but that's the big one. We do continue to believe that over time, the states will reflect -- this is an important benefit. David talked about it. This is an important benefit for people. And the states will reflect that cost and that need. It just will take some time to come through. So we still believe that this is going to turn. But as I was saying earlier, when you're in a rapid change in terms of utilization, it can take a little bit of time to get that reflected in the price. So it's not -- it's more of a shorter-term issue, 1 to 2 years. And over the longer term, we expect that to come back to more of our pricing levels when we did the deal. Tom MacKinnon: Great. And then as a follow-up, I mean, if I look at the organic capital you generated and you add the dividend here, it's over 100% of your underlying earnings. And that's been a trend -- that's been -- we've seen over the last several quarters here. So why not step up on the share buyback? I realize you've got some money here to be earmarked for SLC buy-ins. But if you're generating capital at this kind of rate, why shouldn't you step up the share buyback here to offset any kind of pain you might see from some of the dental? Kevin Strain: Well, Tom, as you know, we have the remaining purchase for SLC early next year for the BGO and the Crescent transactions. And so our current capital position does reflect that, and we're preparing for that transaction, which will be around $2 billion. Historically, we've also run the buyback at roughly what we're generating for capital, and we're committed to seeing the current buyback through, and we're committed to buybacks on a longer-term basis as one of our tools to manage capital levels. So I think you're going to see us be active on the buyback that we have in place, and you're going to see us be committed to the capital priorities that we've had, one of those being the buyback. And I think that consistent approach to the buyback is something that we think is important and valued by our shareholders. Operator: The next question is from Doug Young with Desjardins Capital Markets. Doug Young: Just maybe -- I apologize, back to the U.S. medical stop-loss business. I just want to make sure I understand this. So based on your description, it seems like you've had a 2% shortfall that's been running through and you had 3% shortfall coming through this quarter, but you had to kind of make up for the last 2 quarters. So when we look forward to Q4 and we think about the experience that should flow through in Q4, it should be about a 3% loss ratio shortfall. Do I have that correct? Any way you can quantify that? And then second part of the question, are there ways you can temper the volatility such as being a little bit more conservative on the reserve pick early in the year in these times of uncertainty and higher medical cost inflation? I just thought I'd throw that out there. David Healy: Yes. So in terms of the -- quantifying it for Q4, I would say, like I said, the 1/1/25 cohort, we did update our ultimate loss ratio pick for the year because we did that, it reflected reserve updates for the first 3 quarters. So in Q4, you would expect it to be 1/3 of that. So it would be a smaller amount in the single digits. And so that's how you should think about it. It was updated by just over 1 point from where we had in Q4. Doug Young: Sorry. And then just -- so single-digit U.S. dollar millions is the negative impact for Q4 and the experience. Is that what you suggested? David Healy: That's what our current projection is based on our cohort and how it has evolved so far. Obviously, it could get a little better than that or it could deteriorate further. And we've seen about 30% of the claim volume that we expect on that cohort. We'll see another 30% in Q4 that will be a more meaningful view of what the ultimate loss ratio will be for this cohort of business from 1/1/24. Doug Young: And then I don't know for David or for Kevin, just in terms of just mitigating the volatility in terms of is there ways you can be a little more conservative than the reserve picks early in the year? And similar to like property and casualty insurance and reserve development is the way I think of it. And just like I think I've asked this before, but has there been any conversations around that? Brennan Kennedy: Doug, it's Brennan Kennedy. So using our current method, this is the volatility we see. We continuously look at ways to refine things that we're doing to maintain best practice, and this is something that we've had discussions on and we will take away. Doug Young: Okay. And then just second, maybe for Manjit, Asia underlying earnings, 16.2%. I think you've hit your target already. Is there anything unusual this quarter? Is this kind of like the new sustainable run rate? And can you talk a little bit about where you think you can take that underlying ROE in Asia? Manjit Singh: Doug, it's Manjit. So as you noted, we've had some pretty strong performance in Asia over the last little while. I'm pleased with what we've been able to deliver. We delivered 17% earnings growth last year. And year-to-date, we've delivered 20% growth. I think there are a number of factors that's driving that growth, Doug. So first of all, I feel we have very good fundamentals. We're in attractive markets with high growth potential. We have good partnerships across the region. We've got strong distribution across banca, agency and broker, and we've got a talented team. We've also made some pretty good investments over the last little while. We've invested in digital to increase our straight-through processing. We've invested in delivering better client experiences, which has resulted in record high client satisfaction scores and also in our agent experience. We've also invested in our brand, and that's also resulted in record high brand awareness. And the third thing I'd point out is that we've also increased our focus and capabilities to drive strong execution. So I think all those things are contributing to the strong results that you're seeing. In this current quarter, the results did reflect some favorability that we had in high net worth mortality as well as some strong security gains. So those will bump around quarter-to-quarter. You won't necessarily see them in every quarter. Some quarters, it might go a little bit the other way. So I think fundamentally, we've got a very strong business and expect to see strong performance in Asia going forward. Kevin Strain: Doug, it's Kevin. Sorry, I was just going to say it's been a long time since we've seen 6 of our 8 markets growing in double digits. And I think Manjit is doing a good job creating momentum across the Asia platform, and I think that's really important. And it's all the -- it's a whole bunch of factors, but leadership matters, and I think he's doing a great job driving that change in the Asia outlook. Operator: The next question is from Mario Mendonca with TD Securities. Mario Mendonca: I want to look beyond 2025 and the medical stop loss and think about '26 and help me sort of gain this out. But assuming the company is sufficiently conservative in building the reserves throughout the year and again, perhaps in Q4, and you've got it right, assuming everything works out right, would it then be appropriate to assume that the experience gains and losses that we see in the U.S. would relate solely to dental and solely to experience on the 2026 cohort. Is that the right way to think about it? David Healy: Mario, it's David. Yes, that's a fair assumption. Mario Mendonca: And then -- so help me then go to the next level. So if you get that right, then growth in this business, then, of course, there would be a change in the level of experience gains relative to last year, that certainly helps. But what's the other big driver? Would it simply be the net premiums in the business and the extent to which that grows or perhaps shrinks as you push through some significant pricing increases? Is that the way to think about it that the base from which the short-term insurance earnings emerge could potentially decline during the renewal period? David Healy: That's the way to think about it is the base of premiums does drive ultimately the earnings over time. Mario Mendonca: And is it your expectation? Kevin Strain: Sorry, Mario, it's Kevin. I mean we've I think exactly like you're discussing. We've got the ability to price for the cost because the employers want this coverage. We've got the experience to underwrite this well. And it's that the costs have been rising rapidly with some of the structural changes that are happening in the U.S. And so that will eventually level itself out, and we will be able to price for the costs that we're seeing there. So I think you've got that exactly right. And our expectation is we'll be able to price right now for the 2026 experience that we expect to see. So that's our expectation. But we're watching closely what's going on with those structural changes in the U.S., which are driving that higher cost. Mario Mendonca: Where I was going with this is, is there a potential other sort of shoe to drop in the form of a much smaller business in 2026 relative to 2025, like that base, that install of business simply declines as your customers go to other providers or decide to self-insure. Is there some reason why that base could shrink materially in '26? David Healy: So no, we have -- we're very confident in our plans and how we're approaching the market. We have a great platform. We have a great distribution network, and we have strong customer relationships. We have historically had some of the most low loss ratios in the business, and we expect that to continue. We are going through this period of adjustment for sure, but we feel very well-positioned competitively, and we continue to expect to grow the business over time. Kevin Strain: I would add to that, Mario, that others are seeing the same higher cost. And so it's not like we're negatively positioned for that. In fact, given our scale, we're positively positioned. So I think our strategic positioning would support growth in that sort of environment versus declines. We do have pricing discipline, which is serving us well because our loss ratios remain less than the industry, but the industry is experiencing the same higher costs, and it's going to have to reflect that in pricing as well. Mario Mendonca: So that's your real -- that's the real takeaway. I'm taking from what you're suggesting that strategically, competitively, Sun Life is not disadvantaged. It's just a matter of the entire industry repricing going into 2026. Kevin Strain: Yes. I'd even say we're advantaged. Operator: The next question is from Darko Mihelic with RBC Capital Markets. Darko Mihelic: Just a follow-up on that line of questioning there. I just want to ensure one thing. Are we still talking about your targeted return of 7% in the stop loss? As you hit... David Healy: So if you look at our quarter results, our group benefits after-tax margin was at 6.9%, so slightly below our long-term target of 7% plus. We do price for a margin in the medical stop-loss business higher than what we're currently experiencing. And so we certainly expect that to move up over time. As Kevin noted, our loss ratios are 10 to 15 points better than others that disclose their loss ratios in the industry. So we're in a good position here, and we continue to work through the cycle. Darko Mihelic: Okay. So it's a hardening market and your expectation would be that with the entire market hardening that you should actually gain share in '26. Is that how I should at your targeted profit margin. Is that -- I just want to be very clear on that. Kevin Strain: Dark, I'd say it a little bit differently. We're holding our pricing discipline, and that will -- it will a little bit depend on what others are doing, but others are seeing high loss ratios as well. So we expect them would -- they would also be reflecting that. So we'll see how that turns out, but we will hold our pricing discipline. But we are very good risk selectors as well, and we've added additional capabilities, which support us being -- getting the types of margins that we have been getting. So we still see this as a really good business for us. We see -- we have a great management team there. And I think that over time, that we'll get back to being in a very strong competitive position. We'll see what others do when it comes to pricing. as we go through the process for next year. But we are not giving up on our pricing discipline, and we certainly think that even given that, we'll keep our scale. Darko Mihelic: Okay. Okay. That's helpful. And just a follow-up on the -- for the fourth quarter in terms of the expectation. I just wanted to make sure that I understood something. You had mentioned that the -- reserving this quarter for the stop-loss was based on 30% claims experience. Is that different from the 50% reports that you get by this time of year? David Healy: Yes. So this is David again. So this is an accumulation product, and we hold reserves for 26 months. And so how we [Audio Gap] to assess our ultimate loss ratio pick. We'll see another 30% of claims come through in Q4 and typically another 30% in what would essentially be [Audio Gap] how it will play out. Operator: The next question is from Gabriel Dechaine with National Bank Financial. Gabriel Dechaine: I guess, I got cut off. My line dropped there last time around. My second question, on the dental business and the repricing outlook there, there's a couple -- it's not so straightforward in that if you need 10%, 15%, 20%, whatever the number is, percentage pricing increases for your counterparties to accept those, they have to also accept an accelerated recognition of loss experience. So I understand it's a 3-year look back, maybe 1- or 2-year good years in the look back in there. So you want to have them emphasize the most recent experience, which hasn't been as favorable. I'm wondering how those discussions are progressing, if you can shed some light on how difficult of a challenge that is, if it is. David Healy: Yes. So it's David again. Thanks for the question. So we continue to work through it. As Kevin noted, this is a repriceable business, and we ultimately expect repricing to catch up with the experience. In Medicaid, the rates are reset annually and by the state. And they typically look back, as you said, through a period of time, can be more or less than 1 year, either directly with us, where we have those direct relationships or through health plans where we're subcontracting to those states. We can influence the rates. We provide a lot of data and insight and our opinion. And as you noted, it does include historical experience, but it also has to take into consideration a forward look for what utilization is going to be in the future And that's where we're seeing some conservatism in the rate setting process. Some of it is related to the dampening effect of really the broader government pullback on spending in healthcare. And so people are taking a more conservative view of what that utilization might be. But what we're actually experiencing is a higher rate of utilization in the claims experience from what they're projecting and actually what we were seeing even pre-pandemic when rates were more normalized. So we do expect it to catch up and return, but it is taking time, and we continue to influence the rate setting process as we educate on what we're seeing through experience coming through. Gabriel Dechaine: So there's a disconnect. Yes. Sorry, go ahead. Kevin Strain: I was just going to say -- sorry, I thought as your last question, and I'm going to just add to it a little bit. Gabriel Dechaine: What is my last question? It's not unrelated. So stick with the dental, I guess. Kevin Strain: Yes. Well, I was just going to say, Gabe, that it's -- I'm glad you asked the question again about the dental business, and we've had a lot of questions about stop-loss. And they are going through a structural change to some of these things in the U.S. This is a repriceable business. We will -- we've got a strong management team and capabilities and scale there. David comes from an IT and operations background, and he's been in the group business his whole career. He's ran our employee benefits and also our -- he's ran our dental business. He's ran IT there. I have a lot of confidence that we're going to work our way through these issues. And I think you heard that on the call. If you look at the quarter, the diversified nature of our business model and the growth that we saw in Asia, in Canada and the strong asset management results we're in line with our medium-term objectives, right? We -- so I think that I have a lot of confidence that Asia will -- or Asia and Canada will continue to do well, but the U.S. will turn this around, and that's going to be part of our growth story as we go forward. But it's going to be -- it's a difficult time, but they'll work their way through it, and they're doing all the right things to do that. But as a company, if you look at the diversified nature of our business, I still am committed even with the U.S. being a little slower to achieving our medium-term objectives, and you saw that in the quarter. So I think it's a very strong quarter in Asia and Canada under Manjit and Jess's leadership. I think we're poised for growth in the asset management space. And we're going to work through these issues in the U.S., and we're going to work through it together, and we're going to work through it with the same type of discipline that we provide. But we have good people there, and we have good scale, and we have good business capabilities. So it's -- when I step back, I see us really positioned quite well through the quarter and that it was a strong quarter. Gabriel Dechaine: No, I'm not disputing that. I think even in -- with this challenge, you have an 18% plus ROE or something like that. So it's just -- we're learning as we go a little bit and trying to get a sense of the moving pieces and what could -- what sort of timing and we should expect for stuff to stabilize, I suppose. But that brings me -- just to clarify Tim's comment about the Q4 stop-loss outlook, I believe you -- just to dumb it down, you've adjusted your reserves to accelerate recognition of these -- the trends in that 30% of the claims volume you've seen on the Jan 1 cohort such that if you have the same experience in Q4 as you did in Q1, same claims or whatever, you would have a lower experience loss, but then you would probably have some other item -- line item elsewhere that would be lower, I assume. I don't know. Maybe we can take that offline. David Healy: Yes. So it's David. I'll just quickly comment that, yes, we have updated our best estimate loss ratio pick for the entire 1/1/25 cohort, and that reflects what we currently expect in Q4, but it can change based on the claims that show up in the quarter. And -- but at the moment, that is how we are viewing it. Operator: The next question is a follow-up from Paul Holden with CIBC. Paul Holden: I guess the question that we're all trying to get at on U.S. dental is that USD 100 million profit target. Are you confident that, that can be achieved in 2026 or too early to know because of the uncertainty in terms of these utilization rates and uncertainty in pricing? David Healy: Yes. So I think we've signaled that we are continuing to focus on pricing, and we're making progress. We're taking a very careful approach to it and working closely with the states and the health plans we work with. But it's going to be slow progress over the course of 2026, and we do need to see some of the more recent utilization trends being better reflected in our pricing as we move forward, and that's something that we're working through. Paul Holden: Okay. So $100 million in '26 might be too much to ask at this point. That's what I'm going to take away. Operator: We have a follow-up from Tom MacKinnon with BMO Capital Markets. Tom MacKinnon: Yes. A question just with respect to other fee income, especially in Canada, up nicely year-over-year and quarter-over-quarter, probably up better than the asset growth rate. Is there anything else in that number that could be driving that? And how sustainable is it going forward? Jessica Tan: Tom, this is Jessica. Yes. No, I think there are two pieces. I think one is that indeed, our asset management and wealth is quite strong. If you look at our core, it was up 13%. If you look at the underlying growth, both in insurance investment, other fee income is underlying 7% growth. So our AUMA grew up by 11%. So that definitely helps a lot. And then I think our group business on the fee side has also increased. So you see our group premiums actually increased by 6%. So as Kevin was saying, I think both -- in Canada, there's strong underlying growth, and we continue to do well. Tom MacKinnon: So that kind of trend is continue -- should continue assuming asset -- assuming the markets behave. But I guess how much of that is really driven by ASO fees, which are probably just more a function of net premium growth in group? Jessica Tan: Yes. I think the wealth part, we expect to continue to do the momentum. You see that actually, if you take out DBS, which is more lumpy and is a softer market this year, we had net inflows in Canada of $1.5 billion, which is almost twice the net inflows from last year. So I think you'll continue to see strong growth in our asset management and wealth AUM. And if you look at year-to-date, our underlying net income in Canada is at 8%, up, which is, I think, well above our medium-term target of 6%. So we feel very confident of our 6% growth. Operator: This concludes the question-and-answer session. I'd like to turn the call back over to Natalie Brady for closing remarks. Natalie Brady: Thank you, operator. This concludes today's call. A replay of the call will be available on the Investor Relations section of our website. Thank you, and have a good day. Operator: This brings to an end today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
Operator: Good day, and welcome to the Kennedy-Wilson Third Quarter 2025 Earnings Conference Call and webcast. [Operator Instructions] Please note, this event is being recorded. I would now like to hand the conference over to Daven Bhavsar, Head of Investor Relations. Please go ahead. Daven Bhavsar: Thank you, and good morning. Thank you for joining us today. Today's call will be webcast live and will be archived for replay. The replay will be available by phone for 1 week and by webcast for 3 months. Please see the Investor Relations website for more information. With me today are Bill McMorrow, CEO; Matt Windisch, President; Justin Enbody, CFO; and Mike Pegler, President of Europe. On this call, we will refer to certain non-GAAP financial measures, including adjusted EBITDA and adjusted net income. You can find a description of these items along with the reconciliation of the most directly comparable GAAP financial measure and our third quarter 2025 earnings release, which is posted on the Investor Relations section of our website. Statements made during this call may include forward-looking statements. Actual results may materially differ from forward-looking information discussed on this call due to the number of risks, uncertainties and other factors indicated in reports and filings with the Securities and Exchange Commission. As you may have seen in our Form 8-K that we filed on Tuesday, the Board of Directors of the company have received a proposal letter from a consortium consisting of Bill McMorrow, our Chairman and CEO; and Fairfax Financial Holdings Limited about a potential take-private transaction. The Board has formed a special committee to evaluate the proposal and its options. The company does not plan to provide any updates on an ongoing basis until there is a definitive transaction to announce or the process has been terminated. We will not be taking any questions with respect to this potential transaction or any related matters on today's call. I would now like to turn the call over to Bill McMorrow. William J. McMorrow: Thanks, Daven. We reported our results for the third quarter of 2025 yesterday, which reflects the progress we achieved on expanding our investment management platform while executing on our noncore asset sale plan. Starting with our quarterly highlights. We saw improvement across several of our key financial metrics in the quarter, including adjusted EBITDA and adjusted net income compared to Q3 of last year. Driving our results was the growth in our investment management business with assets under management growing to $31 billion in Q3, which reflects an increase of 11% year-over-year. Fee-bearing capital grew to $9.7 billion, an increase of 10% from a year ago. Fee-bearing capital has now grown by approximately 20% per year over the last 4 years. Growth in our fee business this quarter was driven by capital deployment, supported by improving liquidity across the commercial real estate market. We deployed or committed approximately $900 million in Q3, driving total capital deployment to $3.5 billion year-to-date through September. Capital deployment in the quarter was largely focused toward rental housing-related credit and equity investments. On the credit side, we originated another $600 million in new rental housing construction loans, driving total originations to $2.6 billion for the year. Our share of these loans is 2.5%. Since July of 2023, our credit team has surpassed $6 billion of new loan originations, while also successfully realizing over $2 billion of repayments from loans purchased as part of the PacWestern Bank loan portfolio transaction. On the credit side, our comingled U.S. fund acquired 3 multifamily communities and an industrial property for a combined total of $173 million. In Europe, our investment activity remains centered around expanding our U.K. single-family rental platform with CPPIB. There remains a meaningful housing supply-demand imbalance driven by population growth as well as the cost of purchasing a new home. In Q3, we added $62 million in new investments, which brings our total portfolio to 1,300 homes. Since launching in Q4 of last year, the platform has demonstrated good momentum, reaching approximately $585 million of committed capital relative to the initial $1.3 billion purchase target. In our co-investment portfolio, we recapitalized 2 existing U.S. multifamily joint ventures, reducing our ownership from 51% to 10%. We also sold a smaller wholly owned multifamily asset built in 1988 located in suburban Salt Lake City. Our Q3 sale and recap activity generated approximately $200 million of cash to KW, $130 million of additional fee-bearing capital and $30 million of realized gains. Year-to-date, we have generated $470 million of cash from our asset sales to KW and exceeded our target of $400 million for the year. We have achieved real progress on our initiatives over the last 2 years to grow our investment management business. In 2023, we added the credit team from regional bank, growing that platform from $4 billion to $10 billion in AUM today. In 2024, we launched our U.K. single-family rental platform, as I mentioned, targeting $1.3 billion in asset purchases where we are approximately $0.50 committed against that target. And in September, we announced our pending acquisition of Toll Brothers Apartment Living platform, including its in-house development team. The transaction will include a minority interest in 18 apartment communities and student housing properties, $3 billion of assets that Kennedy-Wilson will manage on behalf of Toll Brothers and a development pipeline, which would total approximately $3.6 billion in new development projects. This combination will create immediate scale for our investment management platform. First, the acquisition will immediately add $5 billion to assets under management and includes a portfolio of 21,000 existing and planned units. On a pro forma basis, our total AUM is expected to increase to $36 billion, of which over 70% will be attributable to rental housing. Our national rental housing platform would grow to over 90,000 units, inclusive of the units we currently own, we are financing or have in the development pipeline. Turning to the markets in general. We continue to see improvement in both the cost of capital and availability of capital with lower borrowing costs and spreads supportive of higher transaction levels. Rental fundamentals remain strong as the structural undersupply of housing across all our markets remains a long-term tailwind and renting continues to be significantly more affordable than buying. With that, I'd like to turn the call over to Justin Enbody, our CFO. Justin Enbody: Thanks, Bill. I'll begin with a review of our Q3 financial results and then discuss the balance sheet. GAAP EPS for the first quarter totaled a loss of $0.15 per share compared to a loss of $0.56 per share in Q3 of last year. Adjusted EBITDA totaled $125 million in Q3 and was up almost double from $66 million in Q3 of last year. For the year, adjusted EBITDA has increased 6% to $371 million. Q3 baseline EBITDA was steady at $101 million, resulting in trailing 12-month baseline EBITDA of $425 million. Our results reflect further growth in investment management fees, which increased by 8% in the quarter and an impressive 23% year-to-date. We also saw improving results from our unconsolidated investments with increases to both our share of revenues, carried interest and gains on sale, all resulting in a $55 million increase in income from unconsolidated investments compared to Q3 in 2024. Now turning to our balance sheet. In October, we paid off the last tranche of our KWE unsecured bonds totaling $352 million. This payoff completes the repayment of 2 legacy bond issuances dating back to 2015 and greatly simplifies our capital -- debt capital structure going forward. The payoff was funded in part from cash generated from our recap transactions, asset sales as well as our line of credit, which we will look to reduce in the next few quarters from additional sales of noncore assets. Our debt -- our total debt is 96% fixed or hedged with a weighted average maturity of 4.5 years and a weighted average effective interest rate of 4.7%. We also have $255 million of consolidated unrestricted cash. With that, I'll now hand it over to Matt Windisch for a portfolio update. Matthew Windisch: Thanks, Justin. Our portfolio of stabilized real estate investments generates estimated annual NOI of $434 million to KW with 70% positioned in our 2 key conviction sectors, rental housing and industrial. In the rental housing sector, there remains a long-term undersupply of housing and homeownership remains unaffordable. After record supply last year, future new supply is decreasing. Demand remains strong across our portfolio with occupancy ending the quarter at over 94%. U.S. same-store NOI grew by 2.4% for our market rate portfolio. Revenues were up 1.3% and expenses were down due to favorable property taxes in certain markets and reduced insurance costs. Leasing spreads totaled 1.4% in Q3 with renewal spreads increasing by 3.4% and new leasing spreads declining by 1%. At quarter end, our loss to lease totaled 3.3%. I'd like to highlight a few regional stats. The strongest growth came from our Pacific Northwest portfolio, where NOIs grew by 3%. This region benefited from return to office mandates with limited new supply being delivered. The Mountain West, our largest region, saw a 2.6% NOI growth. In particular, our assets in Idaho benefited from higher occupancy, lower bad debt and lower real estate taxes, resulting in 6.8% NOI growth. In Southern California, our lower density suburban portfolio generated 2% revenue and NOI growth with same-store occupancy at 96%, while our smallest region, Northern California, saw NOIs fall by 1.5%. Our vintage housing affordable portfolio surpassed 11,000 units in the quarter. Same-store NOI was flat in Q3 as rental increases were offset by higher expenses incurred in the quarter. We remain on track to stabilize another 2,000 units, which are currently in lease-up or development. We are also actively evaluating new opportunities to further expand our affordable portfolio platform. In Ireland, same-property occupancy grew by 1.7%, primarily at our newly completed assets, resulting in revenue growth and NOI growth of 6%. Moving over to our office portfolio. 76% of our stabilized office portfolio is in Europe, where same-property NOI decreased by 6% and was impacted by a 5% decline in occupancy. However, our asset management teams have quickly signed agreements for lease for a bulk of the vacated space. Our European stabilized office portfolio ended the quarter with 91% occupancy. In closing, we saw continued growth in our investment management business in Q3, while at the same time, monetizing noncore assets. Finally, we look forward to closing the pending transaction with Toll Brothers in Q4. With that, operator, we can open it up to Q&A. Operator: [Operator Instructions] And your first question today will come from Anthony Paolone with JPMorgan. Anthony Paolone: I was wondering if you can talk about just where cap rates are for multifamily in your various markets. We saw some of the deals you did in the quarter, I think, [ were 5.4%, ] but just maybe generally, kind of where do those sit? And then also as it relates to Toll Brothers, if we think about the development platform there for multifamily, like where would you develop? And like what would the spread be versus like market cap rates? Matthew Windisch: Tony, it's Matt. So in terms of cap rates we're seeing in the market, it really depends on a number of factors, including age of the assets and the submarket you're in and what's happening around supply. So we've seen things trade in the high 4s. We've seen things trade in the high 5s. It's really kind of a broad range depending on those factors, but they seem to be holding relatively steady over the past couple of quarters at those levels. And in terms of the Toll Brothers portfolio and kind of the future pipeline, we continue to like the markets they've historically built in. So it will be some of the West Coast markets we currently own and operate as well as some East Coast markets where we've historically just been a lender. And we think, generally speaking, again, depending on markets and a number of factors that we can generally build the spreads of somewhere between 125 and 175 basis points on new developments relative to market cap rates. That's kind of the target in terms of how we'd be looking to capitalize these deals. Anthony Paolone: Okay. And then I get the sensitivity around the go-private proposal, but maybe I missed this. Did -- was it outlined who on the Board is on like comprises the committee that will kind of go through this and make the decisions? Matthew Windisch: Yes, Tony, it's Matt. So we -- again, we can't talk about anything related to the offer that was made a couple of days ago. But that was not outlined in the offer, who the special committee may be. Operator: And your next question today will come from Jana Galan with Bank of America. Jana Galan: Congrats on a really nice quarter. I was curious if there was any impact thus far from the government shutdown on the affordable multifamily portfolio? Justin Enbody: Yes. I mean we haven't seen anything there. We did see a bit of weakness in terms of NOI in the quarter, as we pointed out, but that was more expense driven, not really related to anything from the government shutdown or any subsidies that would be passed on to the tenants. So no, we have not to date seen any impact from that yet. Jana Galan: And congrats on the impressive growth in the investment management platform. Just wondering if you can maybe talk to kind of fundraising right now globally and where you guys think you're taking market share? William J. McMorrow: Yes. That's a good question. I think it's evident and at least from what I read that the capital raising, particularly in the private equity firms is there's challenges associated with it. I think what we have seen is that really the discretionary funds have become somewhat less prevalent unless you're one of the really big capital raisers. And generally speaking, people want to do their capital deployment through separate accounts. I think the -- in our case, we've had great -- we've had good success in really several geographies, but particularly in Asia, where we've been for 30 years and here in the United States and Canada and parts of Europe. But we continue to see our capital deployment increasing, but we think that we've got the capability to raise capital to support all of that. Operator: [Operator Instructions] And your next question today will come from Tayo Okusanya with Deutsche Bank. Omotayo Okusanya: In regards to the buyout offer, while I know the company can't make any comments specifically, I don't know if it's possible for Bill to make any comments about why or his rationale for making the offer. Matthew Windisch: Yes. Tayo, it's Matt. Again, I'm sorry, we just -- we can't comment on anything beyond what we said on the call earlier about the offer that was made. Omotayo Okusanya: Fair enough. No worries. Next question, just around origination volume in the -- from the loan business. Again, granted 2Q was kind of a record, but in 3Q, there is a slowdown. Just kind of curious, is that seasonality? Is that more competition? Just kind of curious what was happening there. Matthew Windisch: Yes. Good question. Yes. So we -- historically, Q3 has been a bit slower and if you kind of look at the prior year as well. So Q3 tends to be a [ little lower ] on the origination volumes kind of coming out of the summer. And so certainly, there's heightened competition. I think we talked about that on the last call, and we've seen some spreads coming in over the past year. But we're still very active in the space and have a strong pipeline, and we expect to continue to originate out of that business. Omotayo Okusanya: Okay. That's helpful. And if we could go international just for a minute, the SFR platform, again, some additional acquisitions there. Just kind of talk a little bit about how that's coming along, how that's growing, what the ultimate economics of that business will be? William J. McMorrow: Mike, do you want to touch on that? Michael Pegler: Yes, I'll pick that one up. Obviously, we're a year into the venture now. We signed the venture with CPPIB in October last year, I believe. And so we've had really good growth over that period. We're really pleased with the number of houses we've committed to. We're up and running with our leasing. We've got almost 200 houses actually physically built and leased now. And we're -- including the acquisitions that we reported today, we're up to, I think it's about 1,300 homes. We've got a great pipeline ahead of us and a good appetite for doing more. I think by the year-end in Q4, we're expecting several more acquisitions to complete. We still see a good pipeline coming out of the housebuilders in the U.K. who are seeing this as a way to deliver additional stock. And we have strong support from CPPIB to grow the platform. So I would expect you'll see more acquisitions in Q4, and we look forward to continue to grow into 2026 as well. I think we've got some good ways to go on this. Omotayo Okusanya: Okay. That's helpful. And then you kind of still stay international. Just quick thoughts on U.K. office. Again, the occupancy decline, just kind of talk a little bit about was that just an actual lease move-out? Or was it an actual termination? And if you also kind of talk about lease-up at Coopers Crossing as well. William J. McMorrow: Yes. In terms of U.K., we've had a couple of lease move-outs that effectively we've been backfilling, but the backfills haven't kicked in yet. There are a number of cases where we've actually signed agreements for lease that haven't completed. So I would expect that occupancy to go back up over the course of the next couple of quarters. In fact, we've got committed deals that are going to send that occupancy back up again. And beyond that, we have a good pipeline of leasing. So I don't see a structural problem in our office leasing. It's really a timing issue around the time taken to bring these buildings back into circulation after a couple of lease breaks. But actually, we're re-leasing at better rents in most cases. And the demand has actually proved decent to the positive side. So I think on the U.K. office occupancy, I would expect that to tick back up over the next few quarters. In terms of Coopers Cross, we have a good pipeline. We are under offer to a really interesting tenant who's looking to take some space. Hopefully, we can get that deal done in the next quarter, and we've got a good pipeline of interest. It's clearly taken a little bit longer than we'd like, but that market is coming back to life now, and we see a better pipeline than we've seen in quite a while. Operator: That concludes our question-and-answer session. I would like to turn the conference back over to Bill McMorrow for any closing remarks. William J. McMorrow: Thank you, everybody, for joining the call today. Much appreciated. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning. My name is Constantine, and I will be your conference operator today. Welcome to Canfor and Canfor Pulp's Third Quarter Analyst Call. [Operator Instructions] During this call, Canfor and Canfor Pulp's Chief Financial Officer will be referring to a slide presentation that is available in the Investor Relations section of the company's website. Also, the companies would like to point out that this call will include forward-looking statements, so please refer to the press releases for the associated risks of such statements. I would now like to turn the meeting over to Susan Yurkovich, Canfor Corporation's President and Chief Executive Officer. Please go ahead, Susan. Susan Yurkovich: Thanks, Constantine, and good morning, everybody. Thanks for joining the Canfor and Canfor Pulp Q3 2025 Results Conference Call. I'm going to start off with a few comments before turning it over to Stephen Mackie, Canfor's Chief Operating Officer and CEO of Canfor Pulp; and Pat Elliott, Chief Financial Officer of Canfor Corporation and Canfor Pulp. Kevin Pankratz, our Senior Vice President of Sales and Marketing, would normally be with us as well, but he's traveling in the market today with customers. And so we will do our best to handle your lumber market questions. But of course, if there's any that need follow-up, we can do that after the call. However, we do have Brian Yuen, our Vice President of Sales and Marketing for Canfor Pulp with us, and he can take any questions related to the pulp market. As we've indicated in previous calls, over the last several years, Canfor has taken significant actions to further diversify our portfolio, improve our underlying cost structure and prepare for the challenging duty environment that our industry is facing. And this has included making difficult decisions to permanently close some of our higher cost operating assets, including the recent closure of our Estill and Darlington sawmills in South Carolina this last quarter. At the same time, we've largely completed a significant modernization of our fleet in the U.S. South and expanded our presence in Sweden with the acquisition of 3 additional sawmills from Karl Hedin, a transaction that closed in September. As a result, while global lumber market conditions remain very challenging, we have better aligned our production capacity with market demand and significantly improved our cost competitiveness and leveraged our balance sheet strength to opportunistically acquire strategic assets. This transformation has been hard work. However, we now have a diverse portfolio of assets that are better positioned to both serve our customers and withstand these difficult market conditions. And with approximately 70% of our business located out of Canada, we are also able to mitigate some of the impacts of the punishing duty environment we are currently facing. While we expect the economic uncertainty is likely to persist in the near term, Canfor is well positioned to navigate these turbulent times. And importantly, our balance sheet remains strong. And with over $1.2 billion of available liquidity, we have significant financial flexibility to withstand current market conditions while also pursuing opportunistic strategic investments at the bottom of the cycle. I'd now like to turn it over to Stephen to provide an overview of Canfor Pulp. Stephen MacKie: Thanks, Susan, and good morning, everyone. Canfor Pulp continues to be impacted by challenging global pulp markets with elevated inventories and weak demand weighing on our financial results in the third quarter. While our paper business continued to perform well, we also experienced subdued demand for bleached kraft paper. With challenging market fundamentals and current economic uncertainty, Canfor Pulp continues to focus on achieving targeted cost reductions and improving our operating performance. We have made progress on several operating initiatives in recent quarters, including sourcing additional fiber supply to support our current operating footprint, enhancing reliability and productivity and improving our cost structure. Notwithstanding recent operational improvements, results in the fourth quarter will continue to reflect the impact of weak global pulp markets and results will also be impacted by a scheduled maintenance outage at Northwood. This outage was recently completed and the Northwood operation is currently in the process of restarting. As a management team, we remain focused on mitigating the impacts of global trade and economic uncertainty as we closely manage factors within our control. Given the challenging financial position of Canfor Pulp, management has introduced additional cost-saving measures, working capital reductions and the deferral of some capital expenditures in 2026 as we continue managing our financial covenants, debt levels and available liquidity. I will now turn it over to Pat to provide an overview of our financial results. Patrick A. Elliott: Thanks, Stephen, and good morning, everyone. In my comments this morning, I'll speak to our third quarter financial highlights, a summary of which is included in our overview slide presentation located in the Investor Relations section of Canfor's website. Our lumber business generated an adjusted EBITDA loss of $2 million in the third quarter, which was $70 million lower than the prior quarter. These results reflect weak lumber market conditions, particularly for Southern Yellow Pine in addition to seasonal downtime in Europe in the quarter. Notwithstanding current market conditions and the impact of elevated duties and tariffs, we've seen a notable improvement in our underlying cost structure in recent quarters. While markets are expected to remain challenging in the near term, our lumber platform is well positioned to navigate the current market dynamics, supported by a solid balance sheet and actions taken in recent years to transform our operating platform. As Susan mentioned, during the third quarter, we completed the acquisition of 3 sawmills in Sweden for total consideration of $171 million, which included $22 million of cash and $44 million of noncash net working capital. With the completion of this acquisition, diversification of our portfolio and optimized sales strategy, approximately 15% of our production capacity is currently exposed to duties and tariffs. Turning to our pulp business. Canfor Pulp reported an adjusted EBITDA loss of $2 million in the quarter, which was $9 million lower than the prior quarter, reflecting the impact of lower pulp and paper sales realizations, which more than offset a modest reduction in pulp manufacturing costs and improved productivity. Canfor Pulp ended the third quarter with net debt of $89 million and $64 million of available liquidity. While Canfor, excluding Canfor Pulp and the duty loan, which we completed in 2024, ended the third quarter with net debt of approximately $247 million and available liquidity of $1.2 billion. On a consolidated basis, capital expenditures were approximately $40 million in the third quarter, of which $4 million was for Canfor Pulp. We anticipate capital spend of approximately $240 million in our lumber business for 2025, with approximately $45 million remaining to be spent in the fourth quarter. For Canfor Pulp, we anticipate capital spend, including capitalized maintenance of approximately $45 million in 2025. Of that $27 million remains in the fourth quarter. As Stephen mentioned, given current pulp market conditions, operational downtime at Northwood due to its scheduled maintenance and remaining capital spend in the fourth quarter, Canfor Pulp has implemented several cost-saving measures to improve its financial position. We have noted in our financial statements the material uncertainty that exists in the current business given the significant debt load, remaining capital spend for the year and market conditions. As we have disclosed, we are in active negotiations with our lenders around additional covenant relief. Looking ahead to 2026, we anticipate capital spend of approximately $175 million in our lumber business and approximately $35 million for Canfor Pulp, including capitalized maintenance. In addition, we anticipate Canfor will continue to allocate a modest amount of capital to opportunistically repurchase shares throughout the year under its normal course issuer bid. And with that, Constantine, we're ready to take questions from analysts. Operator: [Operator Instructions] Your first question comes from the line of Ketan Mamtora from BMO. Ketan Mamtora: Maybe to start with, can you talk a little bit about the European performance in Q3? If I'm reading this correctly, to me, it seemed like there was an EBITDA loss in Europe in Q3. Can you just talk about some of the sort of the big moving pieces there? Patrick A. Elliott: Kate, it's Pat. Thanks for the question. Yes, you're right. We've had great performance in Europe the whole time since we've owned them back in 2019. So it's a little surprising to see the situation. I would note that there's an inventory deval in Vida, which is about $9 million of the $10 million. So it's the vast majority. But your point is correct. We're continuing to see log cost pressure in Europe. We think that's going to moderate as we move into next year, but it has been significant over the last number of quarters. I think additionally, we've seen inventory levels in Europe building and pricing as a result has been depressed. And so I think the operating conditions in Europe are the most challenging we've seen since we've owned Vida, but we continue to be encouraged by how well they perform on a relative basis. And we think as we move into next year and we see some of the downtime that's happening start to take hold, we'll see better results. But you're right, this is sort of a first of a kind since we've owned Vida. Ketan Mamtora: That's right. I was looking at my model, and I don't think I've seen like a negative EBITDA. Got it. So when do you expect sort of things to start getting better in Europe patch. Patrick A. Elliott: Yes. Well, I think it's a global story, right, Ketan. I mean I think that we're definitely seeing some retrenchment in Europe and the shipments into North America have declined somewhat certainly since the peak. I think they're trending kind of at 2.5 billion board feet. And so it's really going to be a question of how quickly that inventory can be run down. And I think as in North America, we're definitely hearing about lots of downtime, not so many kind of big announcements, but we definitely know that downtime is being taken. And so I think as we move into -- certainly, we're more like into 2026 than in the fourth quarter here, we think things will rebalance and we'll start to see improving conditions. And on the log side, we're definitely seeing that stop rising, which is an encouraging sign and the trend is definitely down. But of course, that takes a number of months to work through our system. Ketan Mamtora: Got it. And order of magnitude, what kind of log inflation are we talking about here in Europe, Pat? Patrick A. Elliott: Well, over the course of the last number of quarters, it's been 30%, 40%. I mean it's been significant. And so that's really not sustainable, and that's why we're starting to see it turn the other way. Ketan Mamtora: Understood. And then just switching to North America. Can you just give us sort of your approach to managing production here over the next, I don't know, couple of quarters. One is, of course, the seasonal component in Q4, but just cyclically as well, things seem to be a little slow. So can you just talk about sort of what trends you are seeing here into October and your approach to managing production? Stephen MacKie: Sure, Ketan, it's Stephen here. Yes, we're -- with respect to the Q4 production levels, our intent is to run our facilities. We have -- as you know, we've made a number of difficult decisions and really worked hard to optimize our operating portfolio across North America over the last several years, including the recent closures of our Estill and Darlington facilities in South Carolina this past quarter, which removed about 350 million board feet. So we're comfortable with where we are. We've got a solid asset base, competitive facilities and our intent is to operate across North America. So I think you can expect to see that through Q4 and into next year. Now of course, we're always continuously assessing the situation relative to demand and pricing levels, but our intent is to run. Operator: Your next question comes from the line of Sean Steuart from TD Cowen. Sean Steuart: First question is on Canfor Pulp. If you don't get waivers from the lenders, can you give us the path forward for Canfor Pulp as a stand-alone entity? How might this play out, I suppose, over the next few quarters? Patrick A. Elliott: Sean, that fills a question for me. It's Pat. Certainly, hard to -- speculating here is a bit dangerous. So what I would say is that Stephen mentioned, I mentioned where we've got significant cash and margin improvement program going inside the business. We are certainly not in a place from a liquidity point of view that feels comfortable, but we are really working to do what we can to kind of get through the near-term challenge that we're in, which is really the market conditions. And I think if we look at going forward, I'm not sure we have prices rocketing up, but certainly, the trend line is for improving prices and with sort of some decent operational performance and improving prices, it puts us in a better position. So we're just -- we're tighter than we want to be, and that's why we've kind of got to go back and deal with our lenders here, particularly at the end of the year. But I think that we'll just have to see how things play out because it will be very dependent on how markets perform over the next number of quarters. Sean Steuart: Okay. Understood. Second question is on your North American lumber operations this quarter. The price realizations actually surprised the upside versus what we were expecting. And I'm hoping you can sort of connect some dots. Your shipments skewed more heavily to the U.S. South this quarter than they did in Q2, which all else equal, I would think would hurt your price realizations. Any context you can give on mix this quarter, certain dimensions outperforming others? Can you explain that at all? Patrick A. Elliott: Yes. Like I think, Sean, there's some -- and without Kevin here, it's a bit dangerous for the finance guys to have more marketing. But the -- we do have a broader sort of go-to-market strategy that and how we ship to different jurisdictions and the widths that we produce. With the new kind of new and improved mills that we have, we have much more flexibility to be, I would say, a bit more dynamic about that, and we've been able to sort of optimize our profile. I think additionally, some of the products that we produce in BC and Alberta are maybe of a higher quality than some of the mills that were further north that were more of a call it a standardized profile. So I think it's really a little bit of the fruition of all of the changes that we've made in our production footprint over the last number of years kind of coming together, particularly in tougher markets, kind of the opportunity to outperform when you have some of that higher value or you're a little more dynamic, I think, is pretty positive. And so I appreciate you noticing it because it's certainly something we're working on. But obviously, embedded in that is a bit of our own sort of formula of go-to-market that we sort of hesitate to get into beyond that. Operator: [Operator Instructions] your next question comes from the line of Ben Isaacson from Scotia Bank. Ben Isaacson: I just have 2 of them. Susan or Pat, I was hoping you could spend a little bit of time just talking about Canfor's portfolio diversification, particularly in Europe. Why is the outlook -- you talked a little bit or maybe I'll phrase it this way. How disconnected or interconnected is the European business from your North American portfolio? Is the weakness in Europe coincidental to the weakness in the U.S.? Or are these just global commodities and that's having an impact all over? Susan Yurkovich: So thanks, Ben. I mean there is -- we see weaknesses in markets across the globe. I think there's a lot of uncertainty. I don't have to sort of tell you that. It's a very volatile environment right now. And so we're seeing that in North America and also in Europe. I think the -- for us, the European piece is kind of -- it's a business -- that business has a lot of market optionality. So of course, we operate in Sweden, but we have access to many, many markets in Europe, Middle East, North Africa and Australia. So we've got a lot of options for our products. So when one market is tough, we can move to other markets. And so there's a lot of optionality and flexibility. We've got very high-quality fiber there. And that -- we've had a very good business. I mean we've talked about the fact that this is an anomaly. Normally, the European business has been very, very steady, and we expect it to come back into that place. It's why we have added to our portfolio with the Hedin assets and was at the new mills a few weeks ago, 5 weeks ago, I guess, now. Those are really good assets to add to our portfolio. We like the fiber quality is phenomenal. And we've got really good -- we've acquired some really capable operators there that share a very similar culture to Vida. So we're very happy with that and happy to be able to have that in our portfolio. Ben Isaacson: Great. And then just a follow-up question for you. And perhaps you can think out loud on this. And it's not related to Canfor or any company at all. But it's clear to me that all management teams are controlling their controllables as best they can. But obviously, external market forces are still a meaningful overhang. So in your view, does the industry need to see meaningful sector consolidation? And is it possible that lumber pricing power can be taken back or at least improved even if this is a 5-, 10-year process? In other words, philosophically speaking, is an industry consolidation path inevitable? Susan Yurkovich: Well, that's a very big question, Ben. Yes, there's a lot of operators in our space. And I have my own views about what should or shouldn't happen. But I think what you hit the nail on the head, and we are focusing on the things that we can control. We're looking at our own portfolio. We want to have -- we are working to a place where we have very strong assets that are able to withstand all kinds of market volatility. And I think you're seeing -- that's been a change that's been occurring over a number of years, but I think you're starting to see that play out. What if -- can we consolidate to the place where we can have more impact on price? Perhaps, but that's a long journey. I don't know how many operate lumber manufacturers there are in the U.S., but I bet there's 500 plus. So that would be a very long journey. So I think what we are really focused on is our portfolio where we want to position ourselves and the growth opportunities that we see. Operator: Your next question is from the line of Hamir Patel from CIBC. Hamir Patel: Susan, I imagine your Alberta operations are always in the black. But just given the large extended losses sawmills are experiencing here in BC and the greater duty headwinds Canfor is contending with, how do you think about whether you'd be better off just shutting all your BC mills until prices move above breakeven? Susan Yurkovich: Well, we -- look, we've -- as you know, we've made a lot of changes to our BC portfolio, and those are really tough changes for us. We are a BC-based company. We've got a long history here, and we've made a lot of -- we've made a dramatic change here to try and optimize our portfolio. What we have in our portfolio now, we like. We've got -- we're in the Kootenays largely. We've of course, got our Prince George sawmill, which is really useful in supporting our pulp business and is a good facility, but we also have our mills in the Kootenays, which has a different fiber mix and allows us to make a number of products that our customers are looking for. And so we have greater kind of optionality and flexibility there as well. We like Alberta. We've made changes, and we like the portfolio we have right now. So we don't have any intention to make further changes at this time. Hamir Patel: Okay. Fair enough. And Pat, are you able to kind of comment on maybe how your operating rates have been faring this year, Alberta versus BC? Stephen MacKie: Hamir, it's Stephen. Yes, all of the mills across our operations, actually, I would say, broadly across North America, again, we're pleased with the progress. Susan referenced the modernization capital that we've done down in the U.S. South. Our facilities are running well down in the U.S. And I know your question is about BC and Alberta, and we're running well in the Canadian context as well. The mills are doing a great job. The teams out there, our folks are controlling what they can control, and we're happy with the operating performance across our suite of assets. So again, we feel pretty good about -- not about the market conditions and obviously, the challenges that we're facing from a financial perspective, but the teams are performing well, and we know how tough it is out there for us and how tough it will be out there for others as well, given our current operating rates and how well our teams are performing. Operator: [Operator Instructions] your next question comes from the line of Matthew McKellar from RBC Capital Markets. Matthew McKellar: First, it sounds like you're still quite positive on the European opportunity. Do you see further growth in Sweden and the Nordic countries more broadly over the medium term as continuing to be attractive here? And if so, could you maybe remind us what your checklist would be for any further acquisitions? Susan Yurkovich: Yes. I mean we like Europe, and we are continuing to look. I would say that right now, we are razor-focused on integrating the assets that we just acquired from Karl Hedin, and we've got lots of work underway to do that. We're always looking around whether it's in Sweden or elsewhere in the Nordic countries, and we will continue to do that and fortunate -- as we do in North America, and we're fortunate to be able to do that given the strength of our balance sheet. Matthew McKellar: And then just one high-level question on market conditions in pulp. In your view, what is the pathway from here to a healthier pulp market look like either in the near term or the medium term? How do you think about how conditions improve from here? Brian Yuen: Matthew, thank you. It's Brian here. Well, as Stephen highlighted earlier, we see markets to remain challenged for the balance of the year. Having just returned from overseas seeing our customers at the end of the day, given all the economic uncertainty, the situation right now for the remainder of the year, we see will remain unchanged. At the end of the day, there's just simply too much capacity supply in the system. And we all know at current price levels, they are not sustainable. So we need to see, I guess, material reduction on the supply side to see a change in the market conditions. Matthew McKellar: Okay. And do you have a sense of the magnitude of response you'd be looking for compared to where we are today that would maybe catalyze that stronger environment? Brian Yuen: Yes, for sure. I mean if we look at the stats right now, rough and dirty in terms of producer stocks on the softwood side, we guesstimate there's roughly about 0.5 million tonnes of excess inventory in the system. If you add on top of that, some of the, I guess, data that we're picking up out of China, the domestic ramp-up of softwood kraft anywhere between 1 million to 1.5 million tonnes. I'd have to say you're looking at 1.5 million tonnes out of the system for unless there's a material uptick in demand, there needs to be 1 million, 1.5 million tonnes of supply that has to be taken out of the system. Operator: There are no further questions at this time. I will now turn the call over back to Susan Yurkovich for closing comments. Please go ahead. Susan Yurkovich: Thanks so much for joining us, and we look forward to hearing from you next quarter. Thank you, operator. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.
Operator: Welcome to the Lexicon Pharmaceuticals Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] As a reminder, this call is being recorded today, November 6, 2025. I will now turn the call over to Lisa DeFrancesco, Senior Vice President for Investor Relations and Corporate Communications for Lexicon. Please go ahead, Lisa. Lisa DeFrancesco: Thank you, Mila. Good morning, and welcome to our third quarter 2025 conference call. Joining me today are Dr. Mike Exton, Lexicon's Chief Executive Officer and Director; Dr. Craig Granowitz, Senior Vice President and Chief Medical Officer; and Scott Coiante, Senior Vice President and Chief Financial Officer. This morning, Lexicon issued a press release announcing our financial results for the third quarter of 2025, which is available on our website at www.lexpharma.com and through our SEC filings. A webcast of this call, along with the slide presentation is also available on our website. During the call, we will also review the information provided in the press release, provide a corporate update and then use the remainder of our time to answer your questions. Before we begin, let me remind you that we will be making forward-looking statements, including statements related to the safety, efficacy, clinical development, regulatory status and therapeutic and commercial potential of pilavapadin, LX9851, sotagliflozin and our other drug programs as well as our business generally. These statements may include characterizations and projections relating to the clinical development, regulatory status and market opportunity for our drug programs and the commercial performance of INPEFA for heart failure. This call may also contain forward-looking statements relating to our growth and future operating results, discovery and development of our drug candidates, strategic alliances and intellectual property as well as other matters that are not historical facts or information. Various risks may cause our actual results to differ materially from those expressed or implied in such forward-looking statements, and we refer you to our most recent annual report on Form 10-K and our other SEC filings for detailed information describing such risks. I would now like to turn the call over to Mike Exton. Mike? Michael Exton: Okay. Great. Thank you, Lisa, and good day, everyone. Great to have you all with us this morning. We're really excited to give you updates on this quarter and all the great work that's going on here at Lexicon. Now as we approach the final weeks of the year, I wanted to really begin by regrounding you on the ambitious set of strategic imperatives that we set out at the start of this year, which were designed to drive long-term value for the company. Now these goals were, firstly, to progress pilavapadin to be ready for Phase III registrational trials. Secondly, submit an IND for LX9851, our novel non-incretin candidate in obesity. Thirdly, to recruit patients and accelerate recruitment into our ongoing Phase III clinical trial in hypertrophic cardiomyopathy, or HCM, named SONATA; continue the ongoing discussions with FDA on Zynquista and establish a path forward in type 1 diabetes. And finally, to add targeted partnerships to maximize the value of our R&D programs. Now throughout the past 3 quarters, we've made really excellent progress, not only against these goals, but within our pipeline and across our organization. In addition, we've continued to make strategic decisions to further advance our position across cardiometabolic disease with high unmet need. In so doing, we've successfully repositioned the company to really focus on R&D. We've achieved this focus by developing our innovative pipeline, maximizing operational efficiency and elevating the focus on targeted partnering. So allow me to outline the substantial progress in R&D. For pilavapadin, we recently presented a post-hoc analysis of the aggregated results of our Phase II program in diabetic peripheral neuropathic pain or DPNP. All of our findings to date reinforce the broad clinical potential for this novel molecule as well as its Phase III readiness, and we're working with the FDA on next steps as well as engaging with potential partners. For LX9851, I'm really pleased to say that we've completed our IND-enabling studies. And as you know, earlier this year, we entered into an exclusive agreement with a strong partner who have the capabilities to develop this asset as quickly and as broadly as possible. And finally, for sotagliflozin, all 130-plus sites are now active in our Phase III SONATA study in HCM, which is the only Phase III HCM program enrolling both obstructive and non-obstructive subtypes. Now operationally, we are very mindful of resource utilization here at Lexicon across all parts of the business. This has enabled us to significantly reduce our operating expenses while preserving investment in areas where we believe we have the highest probability of value creation. Embedding an efficiency mindset has also resulted in us implementing innovative ways to drive our business forward. For example, as many of you are aware, a substantial proportion of the current evidence generation for SOTA is conducted and funded by third parties. On the commercial side of our business, we've recently introduced an innovative virtual sales support system for INPEFA here in the U.S. as we look to move INPEFA from a stable breakeven business to a growing profitable revenue stream for Lexicon in 2026 and beyond. Now before Craig takes us through specific updates on the pipeline, I'd like to take a few moments to talk about some other internal and external pillars that we believe will continue to positively shape our business moving forward. First of all, as we continue to advance the science and explore the clinical potential of our assets, strategic and thoughtful partnering is vital to increasing the likelihood of our potential products reaching patients. Now we've demonstrated our ability to partner with strong organizations, and I'm really impressed not only by the capability and drive our partners are demonstrating, but how seamlessly and effectively our teams are really working together, and we can already see our strategy in action. Firstly, we're working closely with Viatris on expanding the reach of SOTA for heart failure in major markets and territories outside of the U.S. and Europe, and they're making really excellent progress. Really, really happy with that partnership with Viatris. Secondly, we aim to maximize the potential of LX9851 with our licensee Novo Nordisk, who, as you know, are a global expert in obesity and related conditions. And our recent completion of IND-enabling studies of LX9851 in obesity means that we may earn up to $30 million in near-term milestone payments as LX9851 enters future phases of development. Lastly, partnership discussions are ongoing with pilavapadin, where we aim to collaborate with a high-quality partner to unlock the pipeline and appeal potential of this asset globally and across multiple indications. So our approach to partnership remains flexible as we aim to stay focused internally on our core cardiometabolic expertise. Second, I'd like to turn your attention to Zynquista as our engagement with the FDA has progressed significantly. In September, we shared that we've submitted additional data to the FDA supporting the benefit risk profile of Zynquista as an adjunct to insulin for glycemic control in adults with type 1 diabetes. These data were from an ongoing third-party funded investigator-sponsored trials of Zynquista and were submitted as part of a Type D process to address the concerns the FDA had raised in its December 2024 complete response letter. Now we feel that these data support a positive benefit risk of Zynquista and address the concerns raised. And we're committed to working with the FDA on a path forward. In fact, the agency confirmed that they expect to provide written feedback by the end of this year. And following alignment with the FDA, Lexicon would target a resubmission as early as possible in 2026. And finally, with health care on the political agenda in D.C. and beyond, we see positive shifts and opportunities in this environment for our portfolio. Now one area where this is particularly apparent is neuropathic pain management. Neuropathic pain is a type of chronic pain in which there's been little advancement in treatments for over 2 decades despite its significant impact on patients' quality of life. For those with chronic pain, many have prescribed oral opioids despite the known serious risks of misuse. Better, safer options are not only needed, but in fact, being demanded. And there have been 3 major developments this quarter that I want to update you on. Firstly, as a part of our advocacy efforts this year, Lexicon convened the first ever chronic pain roundtable in D.C. with representatives across clinical, patient and payer communities. We're really inspired by this discussion with all of these experts, all of whom are actively advocating for recognition of chronic pain in legislation and the need for new innovation and access to non-opioid treatment options. Second and most recently, just a few days ago, a new bill, the Relief of Chronic Pain Act was introduced into the U.S. Senate to increase access to non-opioid therapies for Medicare patients with chronic pain. And finally, the FDA recently issued new draft guidance to expand non-opioid options for chronic pain management. So these 3 factors, together with additional legislative efforts that are currently making their way through Congress really underscore the critical bipartisan demand for opioid alternatives in pain management. So overall, we're encouraged to see that not only these signals from the broader legislative environment, but also other important catalysts for change. From regulatory openness, evolving access dynamics, AI exploration and overall changes in clinical care, all of these changes are huge opportunities for our company. So with that, I'll turn it over to Craig to further update you on our assets under development. Over to you, Craig. Craig Granowitz: Thank you, Mike. As Mike mentioned, we have made significant progress across our pipeline this year. It has been a busy and productive 3 quarters. I'd like to begin with pilavapadin, our novel non-opioid AAK1 inhibitor. Data and analyses from 3 separate Phase II trials in neuropathic pain provide evidence of consistent and clinically meaningful pain reduction and validate the response and tolerability profiles of pilavapadin. While our lead indication in DPNP represents a mature clinical program, several secondary indications are also Phase II-ready, providing significant expansion opportunities. In addition, the AAK pathway is central to a number of cellular processes such as synaptic signaling between neurons. With this in mind, we've also conducted IND-enabling work in multiple neuroscience indications, underscoring pilavapadin as a potential pipeline in a pill. We've accumulated data from more than 600 patients treated with pilavapadin and have demonstrated a well-understood and acceptable safety and tolerability profile. Finally, patent protection on the pilavapadin molecule extends through 2040 when including an anticipated 5-year extension. This provides a long period of exclusivity to maximize the value of any investment related to this asset. For the past several weeks, we have presented data on pilavapadin in DPNP at a number of important medical meetings. For context, earlier this year, we shared top line data from PROGRESS, our Phase IIb study of pilavapadin in patients with DPNP. The study met its objective of identifying 10 milligrams as the appropriate dose to advance into Phase III development. Since that time, we have completed additional post-hoc analyses and an additional renal impairment study to further clarify the product profile. We set out to achieve a few objectives with these analyses. One, to investigate an exposure response relationship; second, to evaluate adherence across treatment arms; third, to validate the robustness of the 10-milligram dose; and finally, to confirm the safety and tolerability profile by evaluating pilavapadin’s pharmacokinetic profile in a broader patient population. The post-hoc PROGRESS and RELIEF analysis that we presented in September and October successfully addressed these key objectives, leading us to a few important conclusions. There is a linear relationship between increased plasma levels of pilavapadin and reduction in pain score. The post-hoc analysis confirmed the biological activity of this drug. Second, pilavapadin’s effects on pain is clinically meaningful. Notably, the 10-milligram dose achieved a 2-point drop in ADPS from baseline by week 12. Third, the 10-milligram dose demonstrates an acceptable tolerability profile with nearly the same percentage of patients completing the study on treatment arm as the placebo arm. And lastly, we conducted additional human studies that have concluded there are no cardiac signals such as QTc prolongation. And in patients with mild to moderate renal impairment, no pilavapadin dose adjustments will be required. These are important findings that support a broader potential patient population to be included in the Phase III studies. So what's next for pilavapadin? With the results from our Phase II program, our request for an end of Phase II meeting with the FDA has been granted. We are scheduled to meet with the agency by the end of this year and receive written feedback from the agency by early next year. In parallel, we are progressing our planning for a Phase III program in DPNP. We have incorporated the input from our Scientific Advisory Board who were supportive of our Phase III development approach as well as elements from the recent guidance from the FDA on non-opioid clinical development. In conjunction with this activity, we continue to have ongoing engagement with potential partners. Now, to shift our attention to sotagliflozin, where we believe our opportunity continues to strengthen with time. INPEFA has remained on the market in the U.S., and we see steady sales from our base of loyal prescribers. We also continue to build distinguishing evidence from investigator-initiated studies supporting sotagliflozin's mechanism in hypertrophic cardiomyopathy, heart failure and in major adverse cardiac events, or MACE. Beyond heart failure, where sotagliflozin has been approved in the U.S. based on clinical data from 2 large outcome studies, enrollment in our Phase III program of sotagliflozin in HCM continues to accelerate. And lastly, as Mike outlined earlier, we are maintaining close communication with the FDA about the potential resubmission of Zynquista in type 1 diabetes. We strongly believe these 3 factors are integral in establishing sotagliflozin's potential as a new class of therapy. We have 3 upcoming data presentations this week at the AHA Scientific Sessions and the HCM Society meetings, which will highlight sotagliflozin's unique potential across diverse patient populations. As you may know, cardiac care is complex, involving multimodal treatment in an effort to improve overall patient outcomes. Of particular importance for us, many patients who have hypertrophic cardiomyopathy go on to experience major adverse cardiac events such as myocardial infarction, stroke or heart failure. At this weekend's meetings, Dr. Qin from Boston University Medical Center; Dr. Badimon from Mount Sinai in New York City; and Dr. McGuire from the University of Texas will highlight, respectively, sotagliflozin's impact on cardiac remodeling in HCM, an AHA late breaker on the benefits of sotagliflozin in HFpEF and a presentation on the effects of MACE events in patients with type 2 diabetes. SONATA-HCM is a large global registration trial with a KCCQ endpoint designed to support a regulatory filing and broad label in HCM. SONATA-HCM is the only ongoing registrational trial currently evaluating a treatment in both obstructive and non-obstructive HCM. We recently completed the target 130-plus site initiations in 20 countries across the United States, Europe, Israel and Latin America. This is an important milestone for the program, and I couldn't be more proud of the team's significant efforts in achieving this goal. With these site initiations complete, there has been a significant acceleration in study enrollment. I'll now turn over to Scott to provide an update on the company's financials. Scott Coiante: Thank you, Craig, and good morning, everyone. For the third quarter of 2025, we reported total revenue of $14.2 million compared to total revenue of $1.8 million for the third quarter of 2024. Q3 2025 revenue consisted primarily of $13.2 million of licensing revenue recognized from our agreement with Novo Nordisk. Licensing revenue under this agreement is being recognized as the IND-enabling work is completed. Through September 30, 2025, a total of $40.7 million has been recognized as licensing revenue from this agreement with the remaining $4.3 million expected to be recognized in Q4. Total revenue for the quarter also included net product revenue of $1 million from sales of INPEFA. Research and development expenses for the third quarter of 2025 decreased to $18.8 million from $25.8 million in Q3 2024, primarily reflecting lower external research expenses associated with the completion of our PROGRESS clinical trial, partially offset by increased investment in our SONATA Phase III clinical trial in HCM. Selling, general and administrative expenses for the third quarter of 2025 decreased to $7.6 million compared to $39.6 million in 2024. The continued decrease reflects lower costs as a result of our strategic repositioning in late 2024 and significantly reduced marketing efforts in 2025 for INPEFA as well as general diligence and focus on operating our business efficiently. Net loss for the third quarter of 2025 was $12.8 million or $0.04 per share as compared to a net loss of $64.8 million or $0.18 per share in the corresponding period in 2024. We ended the third quarter with $145 million in cash, short-term investments and restricted cash as compared to $238 million as of December 31, 2024. I would also like to note a few other items from the quarter. On the expense side, we continue to reduce costs and streamline our operations. Quarter-over-quarter operating expenses decreased by $39.1 million, primarily due to the strategic repositioning as an R&D-focused company. We are maintaining our full year 2025 guidance for operating expenses. Total operating expenses are expected to remain between $105 million and $115 million, with R&D expenses projected to be between $70 million and $75 million. SG&A expenses are expected to range between $35 million and $40 million. Our R&D expense assumptions do not include costs associated with Phase III pivotal studies of pilavapadin as our goal would be to take this asset forward with a development partner. Overall, we are in a strong position with the resources needed to advance our ongoing clinical programs while maintaining a disciplined approach to capital allocation and a focus on creating value for our shareholders. I will now turn it back to Mike for his closing remarks. Michael Exton: Yes. Thanks, Scott. Look, you can see that we have achieved quite a lot already in 2025, and I'm excited about where we continue our strong execution to wrap up this year. As I shared earlier regarding pilavapadin, we're planning for an end of Phase II meeting by year's end. Our preclinical work continues as we explore the broad potential value of this asset and evaluate expansion into additional indications. Additionally, a partnership for pilavapadin will allow us to become therapeutically focused on our core cardiometabolic programs and expertise. For SOTA in HCM, we're really excited to share results from complementary studies of SOTA starting this upcoming weekend with AHA, which could provide valuable additional insights on this therapeutic candidate. In parallel, our SONATA study sites in the U.S., EU, Israel and LatAm are enrolling according to plan with all Phase III sites up and running. For INPEFA, our partner, Viatris, continues to make progress against plans for regulatory approval. Sotagliflozin was recently approved in UAE and now has been submitted for approval in Saudi Arabia, Canada, Australia and New Zealand, where there are a significant number of potential patients in need. In addition, Viatris has announced plans to submit for approval in additional markets, including Mexico and Malaysia by the end of this year. That's a total of 6 important markets to be filed by the end of the year, and we're thrilled with the momentum that we're building together with Viatris. For Zynquista, we're working closely with the FDA on a potential path forward for T1D. The agency confirmed that they expect to provide written feedback by year's end. And following alignment with the FDA, we'd work to submit our NDA as early as possible in 2026. And finally, LX9851, our IND-enabling studies for obesity have been completed, and we anticipate that Novo will expediently prepare and file the IND and advance into clinical development. So looking ahead to 2026, we plan to maintain focus on what we believe makes Lexicon well positioned for success. We got a strong pipeline of differentiated assets, not only first-in-class, but first-to-market potential in therapeutic areas of high unmet need. We're excited to embrace these opportunities and showcase what we achieved going into next year in our future updates. So we've got time now for some Q&A. So I'll turn it back over to the operator to manage the questions. Operator: [Operator Instructions] Our first question comes from the line of Andrew Tsai from Jefferies. Unknown Analyst: Congrats on the progress. This is [ John ] on for Andrew. So for Zynquista in type 1 diabetes, you're seeking regulatory feedback in Q4. Are you looking for like a simple yes or no? Or just looking for like whether a resubmission would make sense? Or is there like perhaps more color that you're seeking? And then if you're able to resubmit in 2026, would it be a Class I or Class II resubmission? Craig Granowitz: Yes. Thank you for the question, John. It's Craig Granowitz. As Mike has mentioned and we've discussed previously, we're really leveraging ongoing trials, particularly the STENO trial in Denmark to use the exposure data in a very large number of patients to address the single concern that FDA raised at their end of review meeting, which is a prospective study to document rates of diabetic ketoacidosis. And as you might recall and as the CRL letter that was made public by the FDA a few months ago mentioned, "FDA accepts that there is efficacy with this drug, has meaningful reductions in A1c, meaningful reductions in severe hypo effects and obviously, the proven outcome that we've already seen in the labeling we have in patients with type 1 diabetes and heart failure.” So we are using the STENO trial with adequate levels of exposure, which is what we're really discussing with the FDA to prepare a submission really focused on that one single issue. To answer your second question, while we don't have final written confirmation of this with the FDA, our expectation is that this would be as a resubmission, a 6-month review clock. Michael Exton: I think, John, just to provide a little more color from my side, I think what's really pleasing here is that the FDA has endorsed and accepted that the STENO protocol and patients that they're capturing are acceptable and the way they're capturing DKA is acceptable. So as we move forward, it really is around appropriate exposure levels to be able to give them confidence that the positive data that we are seeing gives them confidence for resubmission. Unknown Analyst: Great. And then maybe one more, if I can. For those third-party IST studies for SOTA in HCM and HFpEF, how do you expect the non-HCM data to perhaps give you greater conviction in the Phase III SONATA study success? Michael Exton: Yes, it's a great question. Clearly, there's an overlap between HFpEF and HCM. From a clinical standpoint, they are, in essence, indistinguishable. You see a very similar profile. You have normal ejection fraction, but you have patients that have symptomatic dysfunction, particularly diastolic dysfunction. And I think as you've seen with the CMIs, they're actually trying to go from HCM into HFpEF. I think they're having some challenges with that because a lot of patients are then developing ejection fractions that are dropping below 50%. We believe that by demonstrating data, and you'll see some of that as early as this weekend in the [ SOTA-P-CARDIA ], which is an oral late breaker at AHA as well as our continued mechanistic data that will be presented on tomorrow, actually Friday at the HCM Society meeting, we are distinguishing the effects of sotagliflozin in both the preclinical models, the animal models on energetics and cardiac remodeling that will fit very nicely with some of the clinical results that you might be seeing in HFpEF patients that will be presented at the SOTA-P-CARDIA data on Saturday at HCM. So it continues to build a wall of evidence that is similar between HFpEF and HCM regarding cardiac energetics, cardiac remodeling, cardiac fibrosis and ultimately improved functionality and symptomatology in patients either with HFpEF or with HCM. Craig Granowitz: And John, again, allow me to sort of pile on there, I guess, more from a sort of commercial bent of how we see this. We have this program in HCM for both obstructive and non-obstructive thinking that a medicine that is oral once daily, easy to use and a well-known and understandable side effect profile, particularly given the data coming out of MAPLE really gives us a great opportunity potentially to work alongside CMIs, but in a first-line position in HCM. And that first-line position, particularly as you're sort of expanding outside of the HCM centers into retail cardiologists and large-scale cardiology practices allows HFpEF and HCM, the patients present very similarly in those offices. And so having SOTA as an option for both HFpEF and a differentiated option for HFpEF and HCM gives the cardiologists peace of mind that they can use this medicine very successfully in either condition and particularly in non-obstructive where diagnosing the difference between the 2 is a little more challenging. So both from a utilization as well as scientifically, we continue to generate additional data that will help support the use of this in a broad range of cardiology patients in across the cardiology community in the U.S. Operator: Our next question comes from the line of Yigal Nochomovitz from Citigroup. Unknown Analyst: Congrats on the progress. This is [ Joohwan Kim ] on for Yigal. Maybe just 2 quick ones from us. Regarding the partnership opportunity in DPNP, can you orient us on how far along you are in identifying a partner and remind us whether or not you are awaiting to complete the discussions for the end of Phase II meeting with FDA before completing any partnership agreements? Michael Exton: Yes, that's a great question. So over the last, I'd say, 4 to 6 weeks, we've reengaged with a range of partners who we had originally discussed the top line data with. Obviously, the data that we presented over the last month, including the totality of the Phase II program, we've had the opportunity to talk with all of these partners. The end of Phase II meeting is a very important milestone in those discussions. I think it's fair to say in a space where there's been nothing developed for 2 decades in a space where new draft guidance has come out, it's important to have that confirmation as a part of those overall discussions. So we're really looking forward now that, that end of Phase II meeting is scheduled for this year to continue to progress around that. We feel very confident actually with the dossier that we've submitted and are really looking forward to having the FDA's endorsement on what we think is a robust Phase III program that reflects their draft guidance, and that will certainly be a part of the partnering discussions that we're having. Unknown Analyst: Got it. And just one more, if I may. Understanding that you're seeking a broad HCM label. But in your discussions with the FDA, have they suggested the possibility that you would also be able to get approval for specifically non-obstructive or obstructive HCM as data from SONAT is stronger in one particular subgroup? Craig Granowitz: Yes. Very good question. We're approaching it similar to how we approached heart failure, and we had a broad label for heart failure regardless of whether it was HFrEF or HFpEF. And we're really taking that same approach with the FDA and the commitment we have on them when we met with them to discuss the protocol before initiating the trial was that this -- if the study is positive as conducted, would give us a label that would include both obstructive and non-obstructive patients. So we are seeking that. We are looking to have 2 groups of 250 patients each within the study. There is a stratification by obstructive versus non-obstructive, but the overall endpoint is anchored to the overall population. Operator: Our next question comes from the line of Joseph Pantginis from H.C. Wainwright. Joseph Pantginis: So a few as well, if you don't mind. So first, I think it would be helpful if you remind us when SONATA moves forward and if it were to be positive. Can you discuss the positioning, especially with the continued growing excitement in the HCM space and the role of CMIs and the hopefully upcoming approval of aficamten. So where would SOTA be positioned with regard to these other assets? Michael Exton: Yes. It's a great question, Joe. So I think it's firstly important to note that patients on a CMI are actually eligible to enroll in SONATA. And we've purposefully taken the approach again of using a very pragmatic trial that SOTA can be used in conjunction with underlying meds that are used in hypertrophic cardiomyopathy. Now, where I would see the positioning is typical across a lot of chronic medications in as much as those medicines that are somewhat more laborious, somewhat more costly often depending on sort of where it ranges and often positioned as sort of later lines in therapy. And we would see sotagliflozin as we discussed a little bit earlier, as being a broad potential not only being used in the somewhat restrictive academic centers that have HCM study sites and clinical sites, but really across the broad scope of cardiology because it's a known mechanism. It's easy to use. And if we get positive results out of SONATA in both obstructive and non-obstructive, it allows this broad utilization and particularly given the results of the MAPLE trial, which showed that, in fact, beta blockers don't necessarily add any value, and there's a question as to whether, in fact, they may be causing some harm in HCM. I think that offers for us a really good opportunity to become a first-line agent in HCM, both obstructive and non-obstructive. Craig Granowitz: Mike, if you don't mind, I just want to add one other point. I think it's becoming more clear, Joe, and I think you've seen and heard some of these presentations even very, very recently that all of the CMIs that are currently under regulatory review will have REMS of some sort. And that certainly does put significant paperwork and process in place for patients being initiated. I think that inherently is going to limit the sites that are willing to do that because you need to have a critical mass in order to create the paper workflow. And there'll be many places that will have HCM patients in relatively low numbers that will not be willing to take on that burden. So I do think the fact that the CMIs will have REMS and there might be differentiated REMS between them, but they will be what I would call significant limitations that are always a part of a REMS, and we don't have any inclination that, that would be the case with SOTA, which is a well-known agent that has already an indication for heart failure. Joseph Pantginis: That's really helpful. And then I'll just ask my last 2 questions together. So first, with regard to the upcoming end of Phase II study, you've already provided some nice details around that. I just want to make sure I understood, you already have a lot of great feedback. Is there anything you would describe as questions that are left to address or finalize, number one? And then if Zynquista were to move forward on the regulatory front in a positive fashion, what kind of commercial plan would you potentially be looking at, bringing it forward on yourself, a potential partner or what have you? Michael Exton: Great. I might throw the first one to Craig, and I'll take the second one. Craig Granowitz: Yes. Joe, great question on the end of Phase II. I think when it comes to the endpoint, the duration of the study, the patient population, I think we feel very comfortable with that, and I think that's been validated as well for other companies that are in Phase III in neuropathic pain and diabetic neuropathic pain that it will be 2 trials of roughly 300 to 350 patients each with a 12-week visual analog pain score with an average daily pain score outcome. I think with any centrally acting agent, some of the areas of discussion are going to be regarding potential for central effects such as drowsiness. I think there's always going to be a question with any agent in this regard, even though there is no reason to believe and we don't believe that there is any issue of human addiction potential type activities. But we don't believe that there are any meaningful or significant next-day drowsiness or other central effects of this agent. And there is no indication in that large Phase II program that we've run, including a blinded withdrawal that there is any issue around addiction potential, but those certainly are areas that could be points of discussion with the FDA. Michael Exton: Right. And I very much appreciate, Joe, the question on the commercialization of Zynquista and to a degree, also thinking forward for HCM. And just allow me a couple of moments here to talk a little bit more generally and philosophically about how we're commercializing sotagliflozin. As you know, one of the first things that we did when I came into Lexicon was unfortunately having to relook at how we commercialize INPEFA. I want to state categorically that both Zynquista and for HCM are not going to be INPEFA situations for a couple of reasons. As you know, INPEFA was third to market, actually fourth really in a space where there were 3, particularly 2 major incumbents and that made market access incredibly difficult. What we're seeing actually is that when physicians use this medicine and patients use them, it's incredibly sticky, but access was a very difficult situation. That is not the case for Zynquista and HCM. Why is that? Because it will be the first and only SGLT inhibitor potentially indicated in each of these indications. That does a couple of things. First, it allows us to completely rethink our pricing in both of these indications, and that has certain implications, particularly in HCM, where the CMIs are priced at a significant multiple to what other medicines are being used. But secondly, and perhaps more importantly, there's not an ability at the payer level to substitute, to step through. And so the access conditions for Zynquista and HCM are very, very different. Now that does not mean that we intend to go with a full-blown commercial model -- traditional commercial model. And in fact, that's part of our installing the INPEFA virtual sales support system that we've got, which is all encompassing, and we'll have an opportunity perhaps to talk you through that, which is a good way for us to learn over the coming months of how we do this in a nontraditional way, whether that be completely virtual field presence, whether that be looking at a hybrid, whether it be even partnering on co-promotion, which could be an option. We're exploring all of these details in parallel. And of course, the other thing that makes us really excited is we have partnered with patient groups over years now, well before I joined the company, and there's interesting commercial models that we can use and utilize some of this patient-driven advocacy like, for example, in my experience, we've seen with migraine and other conditions where patients just have this built-up pent-up demand, and we can do it in a very unique way. So more to come on that, but we're certainly exploring how we intend to potentially promote Zynquista should it come on the market. Joseph Pantginis: And especially on the last commentary, it sounds like you have the ability to leverage a lot of optionality. Operator: Our next question comes from the line of Yasmeen Rahimi from Piper Sandler. Unknown Analyst: This is [ Dominic ] on for Yasmeen Rahimi. Congrats on a great quarter. So we were looking at HCM. We know it's going to be an exciting year this year and especially considering that there's going to be a few presentations on the SGLT1 and 2 inhibitor class in HCM in the preclinical models. Could you help us understand how much proof-of-concept data we could gain from these presentations in HCM? Craig Granowitz: Yes. Thank you, Dominic. We look at any one of these presentations and particularly a preclinical model as part of a broader tableau around the mechanism of action and particularly the functionality of both the SGLT1 and the SGLT2 effects of SOTA, whether we're looking at the effects on stroke and MI, whether we're looking at the effects in HFpEF over looking at the effects in HCM. And as you know, we've generated data on all of those over the past year and have published on that extensively. The data from the Boston group that will be presented tomorrow at the HCM meeting, I think, continues that narrative. And in a particular murine model, this group has a lot of experience and a long track record. And the effects that they've seen with SOTA in that model, and I don't want to presage their presentation, but I think are quite dramatic. And I'll just sort of provide the overview is that it's affecting the energetics and there are some mechanistic data around the energetics effects of SOTA in that model. And by affecting and improving cardiac energetics, you're improving fibrosis and other cardiac remodeling, but most importantly, ultimately, diastolic function. And as you know, the major physiologic issue in HCM is diastolic stiffness. So there's really 2 main issues physiologically in human hypertrophic cardiomyopathy. In obstructive, there is a physical barrier to outflow tract obstruction, and that really is what distinguishes between obstructive and non-obstructive HCM. But fundamentally, the issue that is common, whether it's obstructive or non-obstructive is cardiac hyperdynamic function that the actin and myosin are overly active, and there's also an issue around altered energetics. And we believe that sotagliflozin is acting on both of those fundamental physiologic characteristics. And that's why we believe and we had strong support from the medical community and the FDA that we could study both obstructive and non-obstructive in the same trial because the underlying pathophysiology is the same regardless of whether they are obstructive or non-obstructive, which is really defined anatomically as opposed to physiologically. Unknown Analyst: Great. That was definitely helpful. And then we just had one more. Once pilavapadin's end of Phase II meeting is complete, and I know you touched on this a little bit earlier, but how soon do you envision a partnership materializing? And then what are your thoughts on the type of deal that you could explore you would be interested in? Michael Exton: Yes. I think we will continue those engagements after the end of Phase II meeting and certainly into the start of 2026. I think the type of partnership that we're -- and the type of partners that we're engaging with are really pretty diverse. And I think that gives us optionality as to how we take our involvement with pilavapadin forward. And so we'll continue to engage with them. We'll wait for the minutes, obviously, to have that formalized, which will be in early 2026, and then we'll take it from there. Operator: I am showing no more further questions. We will now turn it over to Mike Exton, Chief Executive Officer of Lexicon for closing remarks. Michael Exton: Well, thanks very much, everyone. Thanks for the great questions. I really enjoyed those and look forward to discussing in more detail with you soon. I think -- and I hope that what you've seen is that this year, Lexicon has really put our nose to the grindstone and focused on reshaping the company and advancing our pipeline forward. We have a number of great things happening in the next couple of months really as we close out the end of the year and into 2026. So look forward to sharing more information on all of those at future updates. So thanks very much, and have a great day. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Greetings. Welcome to Ameren's Third Quarter 2025 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. At this time, I'll now turn the conference over to Andrew Kirk, Senior Director of Investor Relations and Corporate Modeling. Thank you. You may now begin. Andrew Kirk: Thank you, and good morning. On the call with me today are Marty Lyons, our Chairman, President, Chief Executive Officer; and Michael Moehn, our Senior Executive Vice President and Chief Financial Officer, along with other members of the Ameren Management Team. This call contains time-sensitive data that is accurate only as of the date of today's live broadcast and redistribution of this broadcast is prohibited. We have posted a presentation on the amereninvestors.com homepage that will be referenced by our speakers. As noted on Page 2 of the presentation, comments made during this conference call may contain statements about future expectations, plans, projections, financial performance and similar matters, which are commonly referred to as forward-looking statements. Please refer to the forward-looking statements section in the news release we issued yesterday as well as our SEC filings for more information about the various factors that could cause actual results to differ materially from those anticipated. Now here's Marty, who will start on Page 4. Martin Lyons: Thanks, Andrew. Good morning, everyone. Before we get into the financials, I want to highlight the strategy that drives our actions and deliver strong long-term value for our customers, communities and shareholders. Pursuant to this strategy, we've been investing in the electric and natural gas infrastructure of Missouri and Illinois to harden it and make it more reliable, resilient and safer. And we've been adding new energy generation resources to meet the needs of our communities today and in the years to come. Because we are committed to providing a strong value proposition for our 2.5 million electric and 900,000 natural gas customers, we are also laser-focused on optimizing our operations to keep customer rates affordable. As we look ahead, the region and communities we serve are poised for significant economic growth, bringing investment, jobs and tax revenue as well as necessitating incremental investment in utility infrastructure. To support this growth, we are actively engaging with stakeholders on economic development opportunities and to advance constructive regulatory frameworks designed to serve new large load customers and maintain just and reasonable rates for all customers. We're excited about the opportunities in front of us and believe the future is bright for Ameren and the communities we serve. Michael and I will dive into more details on the pages ahead. Now let's turn to Page 5 for a summary of our third quarter results. Yesterday, we announced third quarter 2025 adjusted earnings of $2.17 per share compared to adjusted earnings of $1.87 per share in the third quarter of 2024. Our recent FERC order provided guidance on ratemaking for net operating loss carryforwards. And as a result, we recorded a tax benefit of $0.18 in the third quarter of 2025. Given the nature of the tax benefit, we have excluded it from our adjusted third quarter 2025 earnings. The key drivers of our strong third quarter results are outlined on this page. As we move to Page 6, I'll cover how execution of our strategy has translated into tangible results for our stakeholders throughout this year. During the first 3 quarters of 2025, Ameren delivered on its commitments, deploying more than $3 billion in critical infrastructure upgrades for customers. For example, as part of our Ameren Missouri 2025 Smart Energy Plan, 11,300 electric distribution poles were replaced, 600 of which were upgraded to stronger composite poles. 300 smart switches were installed to reduce outages and speed restoration. 32 miles of subtransmission lines were hardened. 5 new or upgraded substations were energized and 55 miles of underground cable were replaced to strengthen system reliability. In Illinois, our customers are benefiting from the replacement of more than 8,500 stronger electric distribution poles, 8 miles of coupled steel gas distribution pipelines and 13 miles of gas transmission pipelines for safety. Further, our transmission business placed in service 11 new or upgraded transmission substations and 40 miles of new or upgraded transmission lines to deliver energy more efficiently. These are just a few of the many projects completed through September. We also continue to execute on Ameren Missouri's preferred resource plan. As you know, we updated this plan in February to reflect the growing energy needs of our customers and communities, including during extreme weather conditions. The plan calls for the addition of approximately 10 gigawatts of generation capacity by 2035, including 3.7 gigawatts of natural gas generation, 4.2 gigawatts of renewables and 1.4 gigawatts of battery storage. Through September, we've invested more than $825 million in new or existing generation resources and have requested CCNs from the Missouri Public Service Commission for 1.45 gigawatts of additional resources. In 2025, we also made the decision to spend more on operating and maintenance by accelerating certain tree trimming and energy center maintenance activities. All of these efforts underscore our commitment to delivering reliable energy for the long term. And as you know, our electric rates remain below both national and Midwest averages, a testament to our unwavering focus on continuous improvement and affordability. Now let's turn to Page 7. We have a long track record of strong and consistent earnings per share growth. As we look ahead, we expect this to continue. In February of this year, we updated our long-term earnings growth guidance, which included our expectation to grow earnings at a 6% to 8% compound annual rate from '25 through 2029 based off of our 2025 original guidance midpoint of $4.95. For 2025, we expect adjusted diluted earnings per share to be in the range of $4.90 to $5.10, up from our original guidance range of $4.85 to $5.05. We're well positioned to continue our long history of delivering above the midpoint of our original earnings guidance range. For 2026, we now expect diluted earnings per share to be in the range of $5.25 to $5.45. And we expect consistent earnings growth near the upper end of our 6% to 8% EPS compound annual growth rate range in 2027 through 2029. Consistent with prior years, we plan to update our long-term earnings growth guidance on our fourth quarter call in February 2026, including our 5-year capital and financing plans, which will reflect, among other things, firmed up capital estimates related to Ameren Missouri's preferred resource plan. Turning to Page 8. I'll provide an update on economic development activities in our region and associated sales growth expectations. We remain closely engaged with potential data center customers and are building a robust pipeline of large load opportunities that extend into the next decade. Data centers represent significant private investment opportunity for our states, bringing in thousands of jobs in fields such as construction, plumbing, electrical work and technology as well as substantial tax revenue. As we discussed on our earnings call in August, data center developers continue to evaluate opportunities in Missouri, given the numerous desirable construction sites in our territory, available transmission capacity and our ability to deliver power when needed at competitive rates. As a result of this engagement, Ameren Missouri's executed construction agreements with data center developers have expanded to 3 gigawatts, up from the previous total of 2.3 gigawatts. The developers of the data center sites with construction agreements in place have now made nonrefundable payments to us totaling $38 million to cover the necessary transmission upgrades and which demonstrates their confidence in and commitment to the proposed projects. We also continue to actively engage with potential data center customers to negotiate electric service agreements that are aligned with our proposed Missouri large load rate structure and, among other things, would establish anticipated minimum ramp schedules. I'll talk more about progress on that large load rate structure in a few minutes. As outlined in Ameren Missouri's preferred resource plan, we expect 1 gigawatt of new load from data center customers by the end of 2029 and a total of 1.5 gigawatts of new data center demand by the end of 2032. To give you a sense of the proportions, 1 gigawatt of new data center load by 2029 would represent approximately 5.5% compound annual Missouri sales growth from 2025. In addition, we're seeing notable expansion in the region's defense and geospatial intelligence ecosystem which is stimulating growth across multiple sectors, including advanced manufacturing. One such example is the opening of the National Geospatial-Intelligence Agency's new nearly $2 billion campus in St. Louis this September. The campus, which employs more than 3,000 people, represents the largest federal investment in St. Louis' history. Private sector participation is also strong with companies like Scale AI choosing to locate their headquarters downtown. The presence in St. Louis of federal and private sector geospatial operations, including advanced mapping, satellite imagery and spatial analytics, strategically aligns with our region's strength in defense and defense tech industries. Looking ahead, Boeing has begun construction of new facilities to build the F-47 fighter approved earlier this year. Production of the F-47 is scheduled to start in 2026. These developments further strengthen St. Louis' position as a national hub for innovation and strategic investment. In Downstate Illinois, developers are also advancing data center projects with expected incremental energy demand totaling 850 megawatts. We have signed construction agreements with these developers and received payments to support the necessary transmission interconnections. Energy supply for these projects is expected to be provided through third-party supply agreements. We expect to provide an update on our Missouri and Illinois 5-year sales growth expectations in February. Moving now to Page 9. We provide an update on generation resources currently in progress at Ameren Missouri. We have procured long lead time components such as turbines and transformers for our planned energy centers with expected in-service dates through 2029. And we have secured production slots for the 3 turbines for our combined cycle energy center expected to be in service in 2031, remaining on track to deliver the dispatchable resources called for in our preferred resource plan. In August, we requested a certificate of convenience and necessity for the Reform Solar Energy Center, a planned 250-megawatt solar facility to be located adjacent to our existing Callaway Nuclear Energy Center. Generation projects with CCN requests pending before the Missouri Public Service Commission will support progress toward our goal of maintaining a balanced energy mix. We're targeting approximately 70% generation from on-demand resources and 30% from intermittent resources by 2040. Ameren Missouri's planned generation portfolio is expected to provide an estimated $1.5 billion in customer savings from tax credits through 2029, of which approximately $270 million has been realized so far in 2025. Building, maintaining and operating a sufficient and optimal mix of energy centers to meet our customers' needs in an affordable manner is critical for our stakeholders, and I'm proud of the work our team is doing in those regards. On Page 10, we outline Ameren Missouri's proposed large load rate structure, which was filed with the Missouri PSC in May and updated in surrebuttal testimony earlier this week. In accordance with Missouri State law, any future large load data center customers would be required to pay for cost to connect them to our system and for their share of ongoing cost of service. Under the proposed large load rate structure, we would deliver service under our existing large primary service base rate, which is currently approximately $0.06 per kilowatt hour, and customers would agree to additional terms and conditions as part of an electric service agreement. The additional terms would include a service commitment of 12 years after ramp, a minimum demand charge of 80% of contracted capacity, exit provisions and credit and collateral requirements, all designed to protect existing customers. In addition, new customer programs would be available that would allow qualifying customers to advance their clean energy goals by supporting the carbon-free energy resource of their choice through incremental payments, which would help offset costs for other customers. This structure would offer a fair and competitive rate to large customers and maintain just and reasonable rates for all customers. While no deadline exists for Missouri PSC approval of our proposed large load rate structure, based on the existing procedural schedule, we would expect a decision by February of 2026. Moving now to Page 11 for an update on the long-range transmission planning process at MISO. Our focus remains on building the LRTP Tranche 1 and Tranche 2.1 projects that were assigned to us and developing strong proposals for Tranche 2.1 competitive projects. We are carefully evaluating each bidding opportunity, and we'll submit bids for projects when we believe we offer a clear advantage on project design, cost and execution. As we have successfully done in the past, when it enhances the strength and competitiveness of our proposals, we expect to partner with other entities. For example, in August, we submitted a joint proposal with 3 other partners on a Tranche 2.1 competitive project in Wisconsin. We expect MISO to select the developer for this project in early 2026. The bidding and selection process for the 4 remaining Tranche 2.1 competitive projects will continue to take place over the remainder of this year and next. As a reminder, we do not include investment related to competitive projects in our 5-year plan until projects have been awarded to us. Further, MISO continues to analyze increasing energy demand and updated resource mix assumptions across the region as part of the futures redesign process. We expect this analysis will show the need for significant incremental transmission investments that would benefit the wider MISO region over time. MISO is expected to issue its report in early 2026. Moving now to Page 12. Looking ahead over the next decade, our pipeline of investment opportunities continues to grow, standing today at more than $68 billion. We will provide further details in February as to the planned capital investments expected for the period of 2026 through 2030 and the associated financing plan. These investments will deliver significant value to all of our stakeholders by making our energy grid stronger, smarter and cleaner and by powering economic growth in our communities. Turning to Page 13. In February, we updated our 5-year growth plan, which included our expectation of 6% to 8% compound annual earnings growth from 2025 through 2029. This earnings growth expectation is primarily driven by strong anticipated compound annual rate base growth of 9.2%, reflecting strategic allocation of infrastructure investment to strengthen the grid in each of our business segments and to build new energy resources to meet increased demand. We expect to deliver strong long-term earnings and dividend growth, resulting in an attractive total return. I'm confident in our ability to execute our investment plan and our broader strategy across all 4 of our business segments as we have a skilled and experienced team dedicated to achieving our growth objectives while keeping customers at the center of everything we do. Now before turning the call over to Michael, I'd like to briefly share a leadership update. Effective January 1, Michael will assume the role of Group President of Ameren Utilities, overseeing the operations of each of our business segments. Michael is an experienced leader, bringing to this newly created position, deep financial and broad operational expertise, qualities that will continue to support our focus on delivering value for customers and shareholders. When Michael transitions to this new role, Lenny Singh, currently Chairman and President of Ameren Illinois, will transition into the role of Executive Vice President and Chief Financial Officer. Lenny has nearly 35 years of utility leadership experience with substantial operational, regulatory and profit and loss responsibilities. These experiences will ensure we continue to practice financial discipline aligned with our regulatory frameworks and deliver value for our customers and shareholders. I'm pleased with the strength and alignment of our leadership team and believe these changes position us well for continued execution of our strategy and strong performance. With that, I'll hand the call over to Michael. Michael Moehn: Thanks, Marty, and good morning, everyone. Turning now to Page 15 of our presentation. Yesterday, we reported third quarter 2025 GAAP earnings of $2.35 per share, which included a tax benefit related to our Ameren Transmission segment. This tax benefit was recorded due to IRS guidance and a FERC order issued to another taxpayer regarding treatment of net operating loss carryforwards. Pursuant to this guidance, this quarter, we decreased income tax expense by $48 million or $0.18 per share. Excluding this benefit, third quarter 2025 adjusted earnings were $2.17 per share compared to adjusted earnings of $1.87 per share for the third quarter of 2024. The key factors that drove the $0.30 increase in adjusted earnings per share are highlighted by segment on Page 16 and reflect the important investments we've made to strengthen the energy grid across our service territory. In addition to benefiting from new electric service rates in Missouri and warmer-than-normal weather in July, we continue to experience strong sales growth within Ameren Missouri's service territory. In fact, total normalized Ameren Missouri retail sales over the trailing 12 months through September increased across all customer classes with an overall increase of approximately 1.5%. Further, in light of the benefit from weather this year and to support stronger reliability, we've increased energy center and discretionary tree trimming expenditures, the latter in targeted areas to address vegetation growth near our power lines. Moving to Page 17. Since 2013, we've delivered strong, consistent normalized adjusted earnings per share growth of greater than 7.5% compound annually. Yesterday, we increased our 2025 earnings per share guidance range of $4.90 to $5.10. The midpoint of the new range represents approximately 8% growth compared to both our original 2024 earnings guidance range midpoint and our 2024 results. Outlined on the page are select earnings considerations for the fourth quarter of 2025, which I encourage you to take into consideration as you develop your expectations for the balance of the year. And moving to Page 18, we provide detail on our 2026 earnings per share expectations, which we also announced yesterday. We expect our 2026 earnings per share to be in the range of $5.25 to $5.45, the midpoint of which represents 8.2% growth compared to our original 2025 earnings guidance midpoint of $4.95. Expected 2026 earnings details by segment compared to our 2025 expectations are highlighted on this page. Robust planned infrastructure investment, strong expected sales and economic growth and strategic business process optimization opportunities give us confidence in our ability to grow earnings in 2026 and the years ahead. Now turning to our financing plan on Page 19. To support our strong credit ratings and maintain our balance sheet while we fund our investment plan, in February, we outlined a plan to issue approximately $600 million of common equity each year through 2029. We have fulfilled our equity needs for 2025 and 2026 through forward sales agreements that we expect to physically settle near the end of these years. Having utilized most of the capacity available under our existing equity sales distribution agreement, in August, we increased the program capacity by $1.25 billion to enable additional sales to support equity needs in 2027 and beyond. And in September, Ameren Illinois issued $350 million of 5.625% first mortgage bonds due 2055, completing our planned debt issuances for this year. We feel great about our financial position and the progress we've made in our financing plan. Turning to Page 20. I'll provide a brief update on ongoing regulatory proceedings in Illinois. Our Ameren Illinois natural gas distribution rate review is pending with the Illinois Commerce Commission, or ICC, and we expect a decision this month. As a reminder, we have requested $135 million annual base rate increase. In October, the Administrative Law Judge, or ALJ, recommended an annual base rate increase of $91 million based on a 9.93% return on equity and a 50% common equity ratio. The difference is primarily driven by allowed ROE, the common equity ratio and the treatment of other post-employment benefits. Following the ICC's decision, we expect rates to be effective in December. Turning to Page 21. Our 2024 annual reconciliation proceeding under the electric multiyear rate plan continues to progress. In September, the ICC staff revised its reconciliation adjustment recommendation to a $47 million increase compared to our updated request of $60 million, with the variance primarily driven by treatment of other post-employment benefits. The ALJ recommendation and the reconciliation proceeding is expected later today. An ICC decision is expected by mid-December and rates reflecting the approved reconciliation adjustment will be effective by January 2026. Turning now to Page 22. Our strong performance so far this year has positioned us well to continue executing our strategic plan, which will drive superior value for all of our stakeholders. We continue to expect strong earnings per share growth to be driven by robust rate base growth, disciplined cost management and a strong customer growth pipeline. Our strategy and team are well aligned and focused to ensure we capitalize on these opportunities for our customers and shareholders. We believe our growth will compare favorably with the growth of our peers. And further, Ameren shares continue to offer investors an attractive dividend. In total, we have an attractive total shareholder return story. That concludes our prepared remarks. We now invite your questions. Operator: Our first question is from the line of Jeremy Tonet with JPMorgan. Diana Niles: This is Diana Niles, actually on the call for Jeremy. So I was wondering with 3 gigawatts of signed data center construction agreements, would you foresee a need for future revisions to generation plans? Martin Lyons: Yes, it's a great question. Yes, we're very excited to have expanded the data centers that we have subject to construction agreements. As you know, last quarter, we were at about 2.3 gigawatts, and now we're up to about 3 gigawatts. And I'll tell you, it's great because it gives us even greater confidence in the sales projections that we put forward earlier this year. You'll recall that embedded in the integrated resource plan was about 1 gigawatt of sales increase by 2029 out to 1.5 gig by 2032. And as you can see on the slide that we presented in our materials, Slide 8, the current generation plans that we have in place would allow us to serve up to 2 gigawatts of increased sales out through 2032. So number one, the 3 gigawatts of construction agreements gives us greater confidence that we'll be able to achieve the sales growth expectations that we've got. And over time, we'll see what -- how these translate into actual ramp rates for the hyperscalers that would utilize these data centers. So as you know, we're working to get a tariff across the finish line with the Missouri Public Service Commission. Then we'll sign energy services agreements with hyperscalers pursuant to that tariff. Those energy services agreements will lay out what the hyperscalers expect to be their minimum ramp rates over time. And with that, we'll see where we land within these projections that we show on Page 8. Now I will say that the current generation plans that we do have allow us to serve greater than 2 gigawatts beyond 2032. So we'll really have to see what those ramp rates look like over time and what that means for added generation capacity over time. But again, the current plans that we have in place, the current plans that we're executing for generation expansion, it would allow us to serve up to that 2 gigawatts by 2032. Michael Moehn: Yes. The only thing I might add to that is that as we go through '26, as Marty indicated, we'll have another opportunity to look at this IRP. We'll have an IRP filing probably in the fall, around September '26. So that's something to keep an eye on as well. Operator: The next question is from the line of Nick Campanella with Barclays. Nicholas Campanella: Congrats to Michael and Lenny on the new roles. Yes, absolutely. So I just wanted to ask, you're delivering on an 8% year-over-year growth off of 25%. And I hear you on the communication upper half of the earnings range. But just given you've had some companies kind of moving out to 7% to 9%, what's your view on just what puts you lower in that 6% range now? And could that be up for kind of consideration as we look towards fourth quarter? Martin Lyons: Nick, this is Marty. I'll start, and then Michael can certainly tag on. But you're right, the guidance we gave today, obviously, we're delivering earnings this year and projecting earnings next year that are in the top end of that range as we look to '27 to '29, continue to expect to be in the top end of that 6% to 8% earnings growth range. So we feel really good about the growth that we've been achieving and the growth that we project over the next several years. I think as we look ahead, we've got some important things that will really solidify our plans. The most notable one we just talked about in response to the last question, which is really getting the tariff approved by the Missouri Public Service Commission and getting these energy services agreements signed with the hyperscalers and really getting some better firmness, if you will, to the ramp rates and to the sales projections that we see between now and 2030. So when we roll around to February, obviously, we're going to update our sales growth expectations. We'll update our CapEx, our rate base growth expectations as well as our financing plans and update our growth guidance. So right now, I feel real good about the 6% to 8%, feel real good about delivering near the upper end of that growth range. And look, we won't constrain the growth. We're looking for economic development in all of the regions, the communities that we serve in Missouri and Illinois and certainly don't want to constrain that. And if that translates into greater investment opportunities and greater growth opportunities for us, certainly, we'll pivot with that. Michael Moehn: Yes, not much to add there. I mean, as Marty said, I mean, you look at what we did here for '25, I mean, it's again, 8% off of '24. What we introduced for '26 is, again, 8.1% off of that $4.95 midpoint. And I think it's a fair question. As Marty said, we'll continue to evaluate it. I mean I think all of this is just consistent with the track record that we've had now for, what is it, 12, 13 years, 7.5% growth, and we'll continue to focus on delivering the upper half of that. Nicholas Campanella: Understood. Not going to constrain the growth rate. All right. And then maybe just as we prepare for the fourth quarter update, maybe how are you framing balance sheet capacity to serve some of the load in CapEx? And just you've always kind of operated at an FFO level that is north of your peers. But I'm just curious, one, is the increased sales forecast a net benefit to cash flow and thus should equity needs to be lower? And then two, just any interest in using some balance sheet capacity relative to your minimums? Michael Moehn: Yes, absolutely. And look, I mean, obviously, all the sales growth is accretive over time. I think we get -- you have to get these ramp schedules and get all that timing nailed down, but certainly look forward to that. And I think we've talked about these tax credits that we're flowing back to customers. There's a brief period of time where those are helpful as well. But look, Nick, I mean, we start this from a position of strength, as you know. I mean, we're sitting at Baa1, BBB+. Moody's is really that threshold metric for us. It is a 17% downgrade threshold today. I mean we're operating above that here in '25. So we got good margin above that. We continue to guard this balance sheet. I mean we've been very disciplined about the equity that we needed over time and been very good about getting it out there. And again, as you know, we've taken care of all of our '25 and '26 needs. We continue to have very constructive conversations with the rating agencies about sort of where that downgrade threshold will be. We'll see over time where those conversations continue to go. We have been leaning into the balance sheet, as you know, but it's a balancing act. But we do like our position where we are today and feel good about what we have, and we'll continue to give you the updates as we move into that February call. Operator: The next question is from the line of Carly Davenport with Goldman Sachs. Carly Davenport: Maybe on the data center front, just with the construction agreements now at the 3 gigawatt level, is there anything you can share on that delta just in terms of how many customers that change is attributed to? And then I think there previously was an indication on the slides that you expected the ramp to begin in late 2026. Has that view changed at all? Just curious how we should think about that. Martin Lyons: Yes. Carly, we're really expecting the ramps to begin in 2027 at this point. So not so much in 2026. So as we've worked through this, a bit of delay there. But nothing discouraging overall as we talked about up to the 3 gigs of construction agreements. Carly, I don't have it in front of me, but I think that's one additional site. I mean these are big sites that folks are looking at. I'll tell you that overall, when you look at the development pipeline we have, we talked about this last year, just still a large number of sites being looked at and data center developers, I'd say, at a minimum kicking the tires, we've got across the 2 states, about 36 gigawatts of economic development opportunities broadly, and it breaks down about half and half. So think about 18 gigawatts in each state, Illinois and Missouri. Now -- and about 80% to 90% of those are data centers, by the way. But -- and most of those are in the early stages of looking at the various sites. But I will tell you in Missouri, in addition to the 3 gigawatts of signed construction agreements, there's another 2 gigawatts of considerations that are in, I'd say, advanced stages of discussion. So there are folks still looking very seriously at sites and considering entering into construction agreements there as well. Over in Illinois, by the way, I think I mentioned in the prepared remarks, we've got some construction agreements as well, about 850 megawatts of large load with construction agreements. So some good progress really in both states. Did I answer all your questions, Carly? Or was there something else there? Carly Davenport: No, that covered it. That's really helpful. And then maybe just a follow-up on Illinois, just with the Omnibus Energy bill passing over the last couple of weeks here. Just kind of curious your early views on any sort of implications for the business there. Martin Lyons: Yes. Overall, we were neutral on Senate Bill 25 that passed in the veto session, although I think that I'd probably highlight 3 things, and there were a number of things in this bill that go beyond the 3 things I'd cite. But one of them was that it does call now for an integrated resource planning process to be done at the ICC. I think it's the first time that we've really had integrated resource planning in states since 1997. So I think that is a positive thing that the state is going to be looking at integrated resource planning holistically. And my expectation is sort of utility by utility region by region. But I think that's a good thing. And certainly, we'll look to engage there as the ICC gets that process underway in 2026. The other thing, I think, driving this is that certainly, there's been concern as folks think about resource adequacy across the state and also want to be mindful of the clean energy goals that the state has. And so a couple of other things that I'd mention is that it does establish an energy storage procurement process across the state and also gives the Illinois Power Authority the ability to enter into long-term contracts for renewables. And all of those things are going to be subject -- they'll occur over time, and they'll all be subject to consumer protections that are built into the legislation. But again, processes that lawmakers believe over time will reduce the price of capacity and help to keep volatility and cost under control for customers as it relates to energy and capacity. And then the third thing I'd mention is increased investment in energy efficiency, which is something we -- does involve us that we partake in. Over time, we'd expect our investment in energy efficiency on behalf of our customers to double to about $250 million a year. All of that would continue to be subject to treatment as a regulatory asset recovery over time with a return. I will tell you that the return there is being reduced down to the return that was granted as part of the multiyear rate plan. However, we have the opportunity to earn up to 200 basis points of incentives. And we believe with the spending that's called for as well as the metrics to be achieved that we have a very good opportunity to earn incentives that would be additive to that ROE. So those are the 3 things that I'd really call out. There were some other provisions to the bill, but those are the things I'd highlight. Operator: The next question is from the line of Julien Dumoulin-Smith with Jefferies. Brian Russo: It's Brian Russo, on for Julian. Just a follow-up on the Clean and Grid Reliability Affordability Act in Illinois. Do you -- are there anything in that bill that could lead to incremental investments for the Ameren utilities, whether it's indirectly through transmission and distribution, maybe lesser so on the storage opportunities. Just wondering if you could provide more specifics there. Martin Lyons: Yes. Brian, good question. I think the -- really, probably the biggest opportunity, if you will, is in that energy efficiency space where, again, we do treat that as a regulatory asset. So it does get sort of rate base treatment in there. We do expect the investments in energy efficiency, as I said a moment ago, to double over time to about $250 million a year. But I'd say that's the only notable thing from a real investment opportunity standpoint. Brian Russo: Okay. Understood. And then also on the last earnings call, you had mentioned existing data center customers requesting more studies to pursue possible expansions. And I think there was about 1.7 gigawatts of existing customer expansion cited in some of the large tariff testimony. That's incremental to the 3 gigawatts. Is that correct? Martin Lyons: Yes, it is. I think that, again, with respect to the 3 gigawatts of construction agreements, we still don't know what the ramp rates are going to be with respect to the hyperscalers there. So again, some of that growth could be between now and, say, 2030 or it could be beyond. We'll just have to wait and see. But again, to your question, and I said a few minutes ago, besides that 3 gigawatts of signed construction agreements, another -- we got another 2 gigawatts that are in very advanced stages of discussion in Missouri, which would bring it to 5 overall. And again, the overall sort of funnel, if you will, of data center opportunities is much more significant because, again, we're looking at about 18 gigawatts of overall economic development opportunities in the pipeline. So there's a lot of other sites for data center developers to consider and to pursue. And as we talked about on the last call, the conversations with the hyperscalers are progressing very well with respect to the energy services agreements that would be pursuant to this tariff. And it's those hyperscalers that are also inquiring about these expansion opportunities that would be available to them after we sign these ESAs and serve their initial needs, they're certainly looking at expansion opportunities beyond that. And again, we've got plenty of sites in our part of Missouri to accommodate. Operator: Our next question is from the line of Paul Patterson with Glenrock Associates. Paul Patterson: It sounds to me -- and I apologize, I got slightly distracted when you were talking to Nick. But just to sort of summarize his question about the earnings, it sounds like you guys are sort of being conservative now. And when you guys refresh the numbers and everything, there's a potential for upside. Is that sort of a -- is that a good summary? Does that summary make sense or... Martin Lyons: I would -- I'll start out. This is Marty. Paul, I think that there's certainly upside. We do agree with that. In terms of conservative, maybe we're always a bit conservative, but I think what we really try to do is be accurate with you in terms of our expectations based on sort of what we know today. And again, what our plan has been based on is, as it relates to sales growth, you look at that Page 8 and you look at that 1 gigawatt by 2029, 1.5 gigs by 2032, which is sort of the demand expectations that are at the heart of our preferred resource plan, those are also the sales expectations that we've got built into our plan. But there's -- we still got to get the ESAs across the finish line. We've still got to get the ramp rates spelled out. But we also can serve, as we've talked about, as you see there, up to that 2 gigawatts by 2032, you see in the lighter green shape. And we've got construction agreements for up to 3 gigawatts of sites. So certainly upside in the plan. But again, I think what we're providing to you today is what we believe is sort of the best guidance given the facts that we've got today. Michael? Michael Moehn: Yes. And look, we are providing, obviously, quite a bit of clarity today. I mean I think the thing that's really missing is what Marty said, it's getting this large load tariff across the finish line, getting these ESA executed. And I think we can put a bit finer point in terms of the overall guidance. But we pointed to today is somewhere close to the upper end of that 6% to 8% off of this 26% that we just put out there at $535. So hopefully, that gives you a decent amount of visibility. Paul Patterson: No, I think it does. And then with respect to the tax gain, it sounds to me like it might be related to -- you guys did mention it was related to, I guess, a FERC order. And I'm just wondering, without getting into great detail on it, is there a potential for any rate base change as a result of the IRS and the FERC order that you're referring to? Michael Moehn: Yes, Paul, this is Michael. A small amount. I mean what you're effectively doing is taking some net operating losses and putting those -- setting those up as some tax assets. So you'll have some opportunity over time with a little bit of rate base. I wouldn't say that it's a material number. And again, that's really why we ended up excluding it from the GAAP earnings. Paul Patterson: Okay. And then just with Carly's question on the legislation. I was just wondering, it does seem like there's -- the ROE change that you referenced seems like an improvement. Of course, there's some execution issues there. I was wondering like -- am I right in thinking that? I mean, like -- I mean, just -- it sounds like that could be kind of a boost potentially. Obviously, there's execution, but you guys have been executing pretty well. So any elaboration on that? Martin Lyons: Yes. I'd go into it looking at it more as a neutral. I do think that there is some -- from an ROE perspective, I do think that over time, as I said before, there's opportunity for incremental investment. And you're absolutely right. We have a good track record of execution overall as a company, and we're going to look to execute well on these energy efficiency programs for the benefit of our customers. I think that's what is expected of us. And if we do that well, then we'll have the opportunity to earn the incentives that are in there. But you're right. I mean, we're -- there's some opportunity in there. I think about the overall ROE effect as being more neutral, some good investment opportunities. And certainly, we're going to try to maximize the impact for the benefit of our customers. Operator: The next questions are from the line of David Paz with Wolfe Research. David Paz: Yes. Just a couple of quick questions and clarifications here. First, how should we think of the $5 billion increase in your 10-year capital plan pipeline as we sit here today, is that back-end loaded? Or could we see the bulk of that in the '26 to '30 update? Michael Moehn: David, it's Michael. Yes. Look, we'll obviously give you some more visibility on that here in the February time frame. As you noted, I mean, there is a $5 billion increase there. I think Marty alluded to some of that -- I mean, I wouldn't say it's one thing. It's a number of things in terms of kind of firming up some of this generation, which you know is a bit back-end loaded. But there are other things in terms of just investing in the grid and continue to build out reliability and making sure that -- we're making investments that are benefiting customers, et cetera. I mean we have a massive service territory, 64,000 square miles, 1 million poles, thousands of substations, et cetera. And so as we continue to go through time and look at those opportunities, those are all things that are being accretive to the capital plan. Technology is also an opportunity here. As we continue to invest in systems, those are also leading to some increases as well. So not one thing I can point to, but we'll certainly give you visibility on the years as we roll forward into February. But some great opportunities in terms of the overall pipeline. David Paz: Okay. And then just on the [Audio Gap]. Can you break that down by Missouri and Illinois? Michael Moehn: David, you're back. We missed that question. Can you repeat it again? Sorry, we had a technical issue. David Paz: Sure. [Audio Gap] You gave a number that was in advanced discussions. Just can you break that down between Illinois and Missouri? Martin Lyons: David, I'm going to try to answer the question. I think you're asking, but you may need to ask it again. You've cut out twice. I think you're talking about sort of advanced discussions on the data centers. And when I talked about the 2 gigawatts of discussions that were sort of advanced, those were in Missouri. So we've got 3 gigawatts of signed construction agreements, another 2 gigawatts in advanced stages of discussion. If that didn't answer your question or you have more, why don't you repeat it again? David Paz: No, I think we're having a technical issue. Sorry about that. Noticing it elsewhere, too. But anyway, yes, that was the answer. It sounds like Missouri is the 2 gigawatts that were in advanced discussions. And then maybe just one quick one. Obviously, we've heard from some in the state of Missouri on new large load and affordability. Just maybe if you can elaborate on the regulatory and political engagement you have there and then touch on how those conversations might look in Illinois and your wires-only business. Martin Lyons: Yes. So in Missouri, I would say the state is very supportive and encouraging of economic development and including data center development and data center attraction. And so the state certainly wants to realize those opportunities. Certainly, there are certain communities that have expressed concern around various things, water usage, noise, electricity rates and the like, things that have to be addressed as we go through the process of getting these data centers approved and built. And I think those concerns can and are being addressed. And of course, these data center opportunities bring with them, as we said earlier, tremendous investment, a lot of jobs, especially in construction trades as well as tax base over time, taxes for communities over time. So a lot of good economic development benefits associated with these data center opportunities. Of course, I think a concern as it relates to utility rates over time is just making sure that these data center developers, the hyperscalers pay for the cost to serve them, the cost to connect them to the system, to make sure that over time, they're paying a cost of service that reflects the cost to serve them and that there's no detriment to the rest of the utility customers that we and other service providers are serving. And that was actually one of the focuses of Senate Bill 4 earlier this year in Missouri, where, again, they embedded in that requirement that the Missouri Public Service Commission as they think about the tariff that would be approved to serve these to make sure that, again, there was reasonable assurance that the rest of the customers were not being harmed by these data centers. And so David, when we filed our tariff with the commission, and again, we outlined the components of that on Slide 10. It was really designed to make sure that we were designing the tariff and charging the hyperscalers a rate, which would be in accordance with Senate Bill 4 and the provisions that I just talked about. And I think that's been a concern of some of our elected officials just making sure that we weren't providing the discounted rate, that we were providing a rate that held the rest of our customers harmless that there weren't costs included in rates for our existing customers that were associated with service to these large load customers. So I think that's sort of the balance of concerns that are out there. But back to your point, overall, the state is very supportive and very desiring of these economic development opportunities. We're certainly working in concert with the state as well as economic development organizations across the state to bring the fruition in our service territory. And we're going to try to do this the right way, where we make sure that there are rewards that are brought to the communities that we serve in terms of the economic development opportunities and that from a rates perspective, these customers pay their fair share and the rest of our customers are not harmed by their usage. Operator: Our final question is from the line of Stephen D'Ambrisis' with RBC Capital Markets. Stephen D’Ambrisi: Congrats to Marty and Lenny on the new roles -- Michael and Lenny, excuse me. Just really quickly on -- there's been some questions about Illinois legislation, but I thought given we'll probably see some bills get prefiled in December and Missouri, I was wondering if there's any legislative priorities that you guys are advancing or if there's anything we should be legislative topics that you think will be pertinent or come up kind of in the bill prefiling in December? Michael Moehn: Yes. Nothing to comment on specifically, Steve. I mean, obviously, we've continued to improve the environment there. I appreciate what the legislature has done. I mean the commission continues to be very thoughtful and forward-looking. I mean, trying to find ways to provide the right incentive for investment, but at the same time, continue to balance that with customer impact. So anything that would occur over the next couple of months, my sense is would be constructive and balanced, and we'll see what time brings. As you know, the prefiling is December 1. And so beyond that, it's probably a bit premature to get into the details. Operator: This now concludes our question-and-answer session. I'd like to turn the floor back over to Marty Lyons for closing comments. Martin Lyons: All right. Well, thanks to everybody who joined us this morning. A lot of great questions, a lot of great dialogue. As you can tell, we remain absolutely focused on strong execution of our plan, and we will continue to do that for the remainder of this year and into next as we work to really diligently serve our customers and deliver safe, reliable and affordable energy. So again, thank you all for joining us. I'm sure we'll see many of you at the upcoming EEI Financial Conference. And with that, have a great day and a great weekend. Operator: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may now disconnect your lines, and have a wonderful day.
Operator: Greetings, and welcome to the EchoStar Corporation Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Dean Manson, Chief Legal Officer. Dean Manson: Thank you, Joe. Welcome, everyone, to EchoStar's Third Quarter 2025 Earnings Call. We will begin with opening remarks from Hamid Akhavan, President and CEO of EchoStar Capital, followed by Charles Ergen, CEO and Chairman of EchoStar. We are also joined by other members of the leadership team. We request that any participant producing a report not identify other participants or their firms in such reports. We also do not allow audio recording, which we ask that you respect. All statements we make during this call other than statements of historical fact, constitute forward-looking statements made pursuant to the safe harbor provided by the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause our actual results to be materially different from historical results and from any future results expressed or implied by the forward-looking statements. For a list of those factors and risks, please refer to our annual report on Form 10-K for the fiscal year ended December 31, 2024, filed on February 27, 2025, and our subsequent filings made with the SEC. This information and supplemental materials related to today's call will be posted on our Investor Relations website. All cautionary statements we make during the call should be understood as being applicable to any forward-looking statements we make wherever they appear. You should carefully consider the risks described in our reports and should not place any undue reliance on any forward-looking statements. We assume no responsibility for updating any forward-looking statements. We refer to OIBDA and free cash flow during this call. The comparable GAAP measure and a reconciliation for OIBDA is presented in our earnings release and in the case of free cash flow in our Form 10-Q as filed with the SEC today. With that, I'll turn it over to Hamid. Hamid Akhavan: Thank you, Dean. Welcome, everyone, and thank you for joining us today. I would like to start by addressing the change in our call format this morning in that we have Charlie Ergen, our Founder and Chairman, here with us today. Charlie and I will provide some updates on our business, our recent transactions and discuss some changes within our organization. As you know, we recently announced the signing of a series of major transactions, one with AT&T at the end of August and another with SpaceX in September, valued at approximately $23 billion and $19 billion, respectively. These transactions were instrumental in resolving the FCC's review of the company's spectrum utilization. Further, just this morning, we announced an amended definitive agreement with SpaceX, which builds up on the agreement the company entered into in September to sell EchoStar's unpaired AWS-3 spectrum license for approximately $2.6 billion in SpaceX stock. Once these transactions close, we will have the capital runway necessary to continue to expand our existing operations as well as the freedom to pursue new opportunities. This focus on new growth avenues significantly broadens the aperture of our business going forward. In light of this increase in the scope of responsibilities for the company, Charlie and I have decided to create a new division focused primarily on capital management and M&A. Going forward, I will lead this new division as the CEO of EchoStar Capital. I will also continue to manage Hughes Network Systems. Charlie will take on the position of EchoStar CEO in addition to his role as Chairman. Managing our video and wireless operating business units, these changes are effective immediately. Building up on a 45-year operating heritage across communications, media and technology infrastructure, EchoStar Capital will be a great steward of our resources. a vision and thesis-driven and strategic investment-oriented operation with a global perspective and a proven track record of value creation. Our institutional knowledge and experience uniquely positions us in the marketplace to create superior and lasting value through innovation, execution and integration, allowing us to invest in operating businesses, we can expand our capabilities and market reach and focus on initiatives that generate sustainable shareholder value. I'm incredibly excited about this opportunity and ability to usher in this new phase for EchoStar. I will now hand off to Charlie for a few comments. Charles Ergen: Well, it's good to be back on the call, and it's funny kind of way. But I just have a couple of comments and you knew my style is just to take questions because I never know what's on your mind. Hamid and I will do that and team. One housekeeping issue is we agree with the President in the sense that we think corporations should just only file -- have to file twice a year instead of quarterly because it just takes -- by the time you finish the quarter, you're almost starting to work on the next one, it takes enormous amount of time. But since that hasn't changed, obviously, we'll still continue to file quarterly. But we may, from time to time, not do quarterly conference calls like this because we'll try to stay focused on our business. We will do a call next quarter for year-end. And obviously, we'll have a lot of things change between now and then. But after that, we may be sporadic in terms of how we do how to do these calls. So with that, let's take questions. Operator: [Operator Instructions] And the first question comes from the line of John Hodulik with UBS. John Hodulik: Maybe first on EchoStar Capital. Charlie, could you talk about how it will be capitalized? Will all the proceeds from the spectrum sales go into EchoStar Capital? Or just anything you could tell us about those proceeds would be great. And just what areas do you expect to invest in? And then lastly, if I could, you still have the AWS-3 spectrum. Any update you can give us on the potential sale of that block? And just how do you think of relative value for the paired versus the unpaired transaction we just saw? Charles Ergen: Yes. Thanks, John. I'm going to take the second part of your question. I'm going to have, I think, Hamid, the better person to answer the EchoStar Capital question. But on AWS-3, the big picture is the sale to SpaceX is timely. I think it's because we still own the paired AWS-3 and we sold some spectrum to AT&T, the unpaired was for us, somewhat orphan spectrum. But in SpaceX hands, it gives them a lot of flexibility of combining uplink and downlink and it gives them a lot of flexibility for where spectrum might come in the future. So, for them, obviously, went for a lower price, but they're going to be able to make obviously much better use of it than we can in today's terms. And so -- and we're pleased to get SpaceX stock because we think that's -- Hamid will talk about this maybe later, but that's obviously the kind of the first place EchoStar Capital is going with the equity interest in SpaceX. And we can talk more about why we think that's an excellent investment. The paired spectrum is we still have. Obviously, we would transact if there was a meaningful transaction. AWS-3 is quite a bit more valuable. When you -- for us, this is -- and I think other people -- I think the other carriers look at it the same way. When you look at spectrum, value comes really from three sources. One is, is it in phones? And so is it in devices. That was one of the biggest problems we had in building our own network was getting some of our spectrum in devices. But our AWS-3 paired spectrum has always been in devices for as long as I can remember. I doubt there's -- there may not be any phones in the United States that have AWS-3 spectrum in it. So it's already valuable in that sense because you don't have a bunch of extra cost on devices. But the second thing is who uses AWS-3 and the three major carriers all use AWS-3 spectrum. It's a very wide band, 70 by 90 megahertz, it's a very wide band and all three of them use it. And in most cases, they're adjacent to our spectrum. So -- and then that brings up the third thing is most -- what does it cost you to deploy the spectrum. And in most cases, it's my understanding that the radios that are out there today, all can take our AWS-3 spectrum without having to climb the tower and put new radios in for the most part. So it's a very valuable spectrum in that sense. We'll get a sense of that, obviously, as the auction comes up next year for some of the spectrum from a smaller swath of spectrum, but we're very comfortable with that spectrum. And we'll work with the FCC in terms of the auction rules and how that might all take place. But I think it's -- I think it's the most valuable piece of the spectrum we have, and we'll see where that goes. Hamid? Hamid Akhavan: Yes. Thank you. I'll answer the question regarding the proceeds from the sales. Our intention is that all of that would be within the EchoStar Capital. And EchoStar Capital will -- I believe our shareholders would be remiss if we didn't take advantage of 45 years of our institutional heritage and thesis-driven innovation and execution in the broad fields that EchoStar has been involved in to maximize the value that they can get for that capital that comes into the company. I can't see too many companies that have the strategic understanding and the breadth that EchoStar brings to the table across telco, space, aero, defense and all the fields that the portfolio families of EchoStar have been leading and involved in. Now obviously, we always will be great stewards of capital, and we'll maximize the use of the capital. And if distribution of capital is necessary, we'll do that in an optimized way to our shareholders as necessary. So the road map is not 100% laid out at the moment, depending on how we see the market and opportunities come to us, we'll try to take advantage of every opportunity in the best way. And as I said, I can't imagine too many companies out there with the breadth and knowledge that EchoStar has gathered over the past 45 years. That's our plan at the moment. Obviously, as time goes on, we will be more specific about how and where we deploy that capital or any sort of distribution that could be decided in the future. But to start, we need to get all of that in place. The money is not here yet. So we have time to organize ourselves around how we would maximize the use of that capital. John Hodulik: Great. And one more follow-up, if I can. Just Charlie, any update on negotiations with the tower companies? And what happens to the entity, the DISH network that has the deals with the towers? Will that entity sort of stay in place? Charles Ergen: Well, the -- obviously, we had some unprecedented kind of curve out on us when the SEC informed us that they were going to investigate take the spectrum. So obviously, we believe that's a force majeure event. And so we're happy to -- we'll work with all our vendors. Obviously, we're the biggest company that got affected by that. But obviously, we also have other vendors and people we worked with for a long time they're affected by that, and we'll work with them to the extent that they want to work with us to try to resolve those issues. Unfortunately, one company has already commenced litigation, and that kind of sour some of the ability to talk to people because once things go into litigation, it's lawyers talking to lawyers and it's not business people talking to business people. And so that's a bit unfortunate. But -- the network is obviously an independent company when we did it, still an independent company. And it will obviously handle this through that entity. It will handle all these negotiations through that entity. So we'll see where that shakes out, and we hope that everything can -- other than the current litigation, we hope that those things can be resolved, and we're open to have those discussions. Operator: The next question comes from the line of Brent Penter with Raymond James. Brent Penter: A couple of follow-ups on some of John's questions. So you clearly are excited about the SpaceX stake that's now getting bigger. As you bring in some of this net cash, how do you think about that as an additional area to deploy capital? And as SpaceX raises additional capital, do you have rights in terms of maintaining or potentially growing your stake? Just help us think about that SpaceX stake and then where you might put your capital. Hamid Akhavan: First of all, we are very excited about having that equity on our balance sheet. We consider that our first investment in EchoStar Capital. We believe that Equity has tremendous growth opportunities just by the fact that SpaceX has such a significant lead in the technology within the space and space is becoming the next infrastructure in the world as launch capabilities and cost has become economical and also global security and communication has become more important in the age of AI. So we see that as being a strategic holding. We obviously will keep that our balance sheet excited about having the additional $2.6 billion that joins it. We certainly look to have additional investments of similar strategic nature as we -- as I mentioned, there's a number of areas, a number of industries that we have a heritage and a deep thesis about understanding of those trends within the industry. We'll be very careful about investments that are synergistic with our thesis and understanding -- very excited about that opportunity. I can't comment about us getting more SpaceX equity or some other transaction. As I said, we are just -- this is the first day of our announcement about how we're going to go forward. But we will be diversified. We'll certainly have -- we'll be great stewards of capital. And as time goes on, we'll be more specific about the transactions. Good news is that we still have a few more months before we even have the capital on our balance sheet. So we do have the time to do a proper job of planning and communicating with you where we're headed. Charles Ergen: Yes. And I'm just going to follow up a little bit with -- this will give you some insight, I think, to the way Hamid and EchoStar will think about extra capital will think about things. But SpaceX in terms of -- we're excited about that as an investment. And what things we look at -- first thing we look at is management. And SpaceX management, we've got to work and gotten to know over the last 10 years because we've launched on them. And they really have been the best vendor that we've worked with the space and solve very complex problems for us to move very quickly. And then we've worked a lot closer, obviously, as we've gone through these deals. And so they don't brag about themselves. They're pretty understated, but they are doing -- based on my experience, they are doing incredible things with space, whether it be launching or satellites or services. So the second thing you look at is, obviously, are they -- is this a place that over the next decade, there's going to be business. And as Hamid said, space is going to continue to grow particularly you see governments with golden dome and security, but it's also the consumer and the ability to do broadband from satellite and also connected devices, those two things fit together. There's a lot of synergy between those two things in one company. And the third thing is who's going to be the winners and losers. And we look at other industries, I don't know who the winner in AI is going to be. One thing I'm sure of, there will be winners and there will be losers. I just don't know which one will be winners and which ones will be losers. But in space, I think it's pretty obvious that while there's some companies doing some very interesting and creative things, SpaceX is going to be the leader for the foreseeable future because they have the most efficient launch capability and satellite manufacturing capability, in my opinion, that I've seen. So when you add all that together, and then I think we built for 17 years, this ability to technically be able to go satellite device and regulatory-wise in the spectrum and all those kind of things. We've now -- that's now in SpaceX hands or will be in SpaceX hands. And we know that worldwide capability and the same frequency, we know that that's -- we would have built a good system, but they're going to build even a greater system in a faster period of time. So that's going to be -- that's going to grow their business by -- that's going to -- that business by itself is going to be a huge part of where they grow. That's not probably in people's calculations of their value today. So that gives you a feel how we think about things. Brent Penter: Okay. Great. I appreciate all the detail there. And then a follow-up on the tower side. Since you all feel that you're relieved of those tower payments, what would actually cause you to stop making your payments to the tower companies? And then just any update on the timing of when we might have a resolution as we think about litigation and negotiations with them? Charles Ergen: Yes. I just don't think we would get into that. I mean the only thing I would say is litigation is not positive. Operator: The next question comes from the line of David Barden with New Street Research. David Barden: I guess my first question, Charlie, there weren't many numbers in the press release today about the SpaceX AWS-3 unpaired deal. But one of those numbers was that you pay or you invested at a $212 price. So could you, for the public side investors, tell us what information do you have? What information can you share to support what apparently is your belief that $212 is an appropriate valuation for the SpaceX company today? And then I guess my second question is maybe for Hamid or maybe also Charlie. The taxes on the asset sales, Joe, what the taxes would be helpful kind of given all the different moving parts on depreciation and capitalized interest. But also there's a theory out there that if your frustration of purpose argument works with respect to the towers that you have access to the 1033 stepped-up basis on these spectrum sales and that the taxes could be far less than maybe the market imagined. So I wonder if you could kind of opine on that. Charles Ergen: Yes. So I really -- in terms of valuation of SpaceX, I would just say that I think I'm always repeat myself that we don't -- we have a pretty good feel of what they're doing and where they are. I think they just publicly announced 8 million customers and in broadband, I think you could overlay their growth in broadband and then overlay a device growth and look along that same curve, and you would see a greater -- much greater valuation than the $400 million. So -- and again, as I said, the management team is excellent and understated in my opinion, in terms of what they do. And they have a pretty big moat around their business. They have 90% of the launch business, and that's -- and they've launched the new generation of satellites, which is at least twice as big as anything else out there, maybe even bigger. They've launched it 12x and they've caught it, returned back, right? And other people unfortunately are struggling to get their first ones up. So I just think -- I actually, I think their lead is actually growing. Their biggest competitor is China probably, but China, I don't know this has even successfully landed rocket. So their lead is big and growing. So if you had to pick a winner in an industry, from my opinion, I could be wrong on this, of course. And while they'll face competition and there's creative things going on in their space, they're the most obvious, of any industry that I know, they're the most kind of obvious winner, right, in terms of every other industry, you just got a lot of people that you just don't know who roughly ends up on top. And of course, SpaceX still has challenges to get through, but -- and there's still risk there. But that's the way we think about it. That's the way we'll think about things that our capital, who has those characteristics. On the tax side of it, we're well aware of 1033, but maybe I turn it over to Paul, do you want to take that? Hamid Akhavan: I'll make a comment on then we go with Paul. First of all, I absolutely endorse Charlie's statements on SpaceX. But first, we want to mention that we are not insiders to SpaceX. So we have no inside knowledge of SpaceX. And Charlie and I views are 100% aligned and common on how great a SpaceX is, but that's just personal views. And based on what we have seen, you should rely on SpaceX's statements on what they see about the valuation of the business. We are excited about having that equity -- just -- as Charlie said, we see all the trends in the space being good and SpaceX being a leader in there. Naturally, we think that this is a good place for us to go. Now on taxes, we have not broken out the taxes separately from our other liabilities in the towers and others that we just referenced. As we have previously said, we've not sharpened our numbers since the last time we spoke in Paris. We still believe that somewhere in the range of $7 billion to $10 billion is the combination of our unoptimized taxes and unoptimized value of our liabilities. So that range is what we essentially think we have. Now can 1033 provide additional benefit and reduce that number? I'll ask Paul. He might have some knowledge in terms of how applicable that may be, Paul. Maybe you can comment on that. Unknown Executive: Thanks. So there's a lot of puts and takes there. Obviously, the AT&T transaction is going to close in '26. The SpaceX transactions expected to close in '27. We have NOLs that play into the mix. And we're going to do everything we possibly can to mitigate the exposure. We're working on that currently. But the range that Hamid gave that includes both decommissioning costs and tax of $7 million to $10 million is still currently our best estimate. David Barden: So just to follow up real quick. The 1033 is not in the $7 to $10 million, but it's a possibility. Does it -- is it contingent on kind of how these litigations go and whether you're successful in making this frustration of purpose argument, which would allow you to kind of move up the basis and shift assets to another class? Charles Ergen: I'll just say, it's been used. I think some of the 600 megahertz broadcasters when they put a spectrum in auction, I think they used 1033 in some cases successfully. So we're aware of it. And obviously, it's -- there seems to be a lot of similarities between how it's been used in the past, but everything is specific, and we'll look at that as part of our strategy. And I don't think it's contingent. Unknown Executive: Yes. I would just add to what Charlie said, it's not contingent on what happens with the litigation. Those are totally independent concepts. Operator: The next question comes from the line of Walter Piecyk with LightShed. Walter Piecyk: On SATS cap, I assume all the cash from all the spectrum sales is going into there. Does that keep it away from DBS shareholders and any OpEx obligations, meaning like the tower companies? And then, Hamid, you kind of like danced around returning the capital saying if it's necessary to do it. I don't know when it's ever like required that you distribute cash. But can you give us a little bit more color on kind of at what point do you say, hey, we've used our 45 years of experience. We've looked around. There's not enough interesting stuff, and we're going to send cash to the shareholders. Hamid Akhavan: Let me take that piece first. Look, first of all, comments of dancing around. First of all, Walter, it's a little early for me to give you an exact formula or recipe or road map for how we're going to utilize the cash. But as you would expect, as any great company that has institutional knowledge and heritage within certain verticals, the best ability, the best option usually is to use that knowledge to deploy the capital because they're strategic. They're the insiders to an industry that a financial investor from outside will never, never get that insight, right? So we would be remiss not to take advantage of all that institutional knowledge and return the capital to shareholders that would now they have to deploy that capital in a way that they would not take advantage of this disability. I think the shareholders that have been with us, and we have great ones around the table right here, Charlie himself, would certainly want us to maximize the value. Now there's a limit to that. If I had $2 trillion, I couldn't use all of it. How much institutional knowledge I have, I probably couldn't use enough because the industry just doesn't have that ability or just the opportunity is not there because the market is not good or the industries that we are focused on are out of favor or they just don't have enough great opportunities for us, then we obviously, as great stewards of capital, we figure out how we would distribute that capital back to the shareholders in a tax-optimized way. We are not novices in this. And certainly, we're not walking into this without a full understanding of the options ahead. The only thing I can say is that we have deep heritage. This company has proven it can return value by the fact that you have seen for the past year, the thesis that Charlie had put in place decades ago has come to play. There's much more we could do there. But if at the end of the day, we have excess capital beyond what we can properly use -- strategically use, we certainly will not sit on it in an unoptimized way. Very, very early stage for me to make any further detail on that. It would be premature for me to say that. Just trust us that we'd be great stewards of capital. We manage it like our own capital as it is our own capital primarily. Walter Piecyk: And then just is this protected from DBSD and the tower companies? And then just really a follow-up on that. Can you at least say that you're not going to like build a network or something of that ilk? These are really more passive investments that you're giving -- that you're using your years of expertise to look at? Charles Ergen: Yes. This is Charlie. I'll take -- maybe Paul want to jump in there, but the -- obviously, our capital structure is well known, and they are obviously separate independent entities for specialized purposes. One thing that is clear for the AT&T transaction is we will be paying to DBS. DBS will receive about $2.8 billion for Tranche B, which is the C-band spectrum that we're selling to -- that's collateral there. So the one thing you can say is that there will be capital moving into DBS at at least $2.8 billion. Walter Piecyk: And then just on the types of investments, is this -- I assume these are not operational. These are all passive like, hey, we're investing in great new things that maybe SpaceX gives us access to? Hamid Akhavan: So, well, we certainly don't intend to be purely passive investors. We don't intend to do that because, obviously, we do not want to be, and it does not -- it's not in our best interest of our shareholders to become a fully act regulated company, investment company. We will have to manage this according to those rules, which means we'll make a combination of active and passive investments. And even when we make a passive investment, it will be strategic for us. It will be a thesis-driven investment. It will not be just -- we're not wealth managers. We don't view ourselves as just broadly deploying capital in the marketplace. And we only focus on areas where we understand. Now in some cases, that investment cannot be a controlled investment or significant influence investment as is the case for SpaceX. The valuation of that company is very high. We would not be able to provide enough and we would not have access to enough equity to make that a control or significant influence as defined by the '40 Act. But we will balance that with other investments that we will have control and we will have operating influence to the point that we manage around any sort of regulation that will be in front of us. We will be much more precise in all of this as time goes on. Great questions for today, but we are aware of how we need to manage that, and we are not going to become a passive investment company. We like to rely on our heritage of operations. As I mentioned, we think we can -- a combination of our understanding of technology, our ability to execute and our heritage of innovation will give us a very good platform to create great value. Charles Ergen: And I would just add, realize we own and run three different companies today and Hughes and DISH and Sling and Boost. So -- and clearly, obviously, from a Boost perspective, we think we have -- that's a business that should grow. And obviously, the video business is somewhat challenged as it has been for a decade, but we still see those businesses lasting for a long time. Hamid Akhavan: Yes. And we obviously have -- both Charlie and I have extensive operating experience, not just domestically, but also globally. We have a very broad range and scope of places and domains and verticals that we can deploy the capital effectively. Operator: The next question comes from the line of Michael Rollins with Citi. Michael Rollins: Charlie, in your brief opening comments, you described the reasons that you're going to do an earnings call for the fourth quarter was it's end of the year. And there's -- you alluded to changes that could be coming between now and then. I was just curious if you could give us a little bit of a preview or a road map of the range of potential changes that can continue to happen for EchoStar between now and your fourth quarter earnings call? And then secondly, just a follow-up on kind of moving beyond being a wireless network operator. As you're selling the spectrum, at what point can you unplug the radios so that you're no longer meeting the minimum use requirements, but you're able to start saving money from doing that? Is it when these transactions close? Is it now that you've announced a few transactions and you have maybe some more possibly that you have to kind of figure things out for? Or what's the formula where you could just start unplugging? Charles Ergen: Yes. On the second part of that, we work with -- we really need to work with regulators on that. And so those discussions are ongoing. And so it wouldn't be appropriate to discuss that. But obviously, we'll have more color on that early next year. I'd say I'm going to give you a general answer because it's a very good question about what might happen between now and February. You asked a good question. I think while we -- I think we pivot two pivots in our company. One is the pivot to being a capital-rich company, maybe more asset-light. But the other pivot is within EchoStar, where I'm going to be involved in the day-to-day operations now is to pivot to long-term thinking. So we had to think about things short term because we're putting all our capital into the build-out of our network. And we had lots of requirements, regulatory to do that. So we did that. So we had to think about things in the rest of our businesses in a short-term way. That historically is not the way we think as a company. One of our principles is to think long term, and we can get back to that principle now. And so I think you'll see that we're -- by making -- by thinking about things long term, we maybe we'll take a little bit of a step backward short term -- because when you go from short term to long term, it's a little bit of a step backward. But I think you'll see that in a general sort of way, we'll be more competitive in terms of what we're doing in some of our businesses. We think about things in terms of long-term cash. We don't really think about it for EBITDA and those kind of metrics. We think about deploying capital where we get a return. And we think about strategically, particularly in wireless, where you're one of really five county cable, you're one of five companies that are basically doing the same thing. How do we do some things differently and how do we look like a little bit different animal than what everybody else is doing. And so we're kind of going -- we were building the highway and we were Uber and we were building the highway. Now we get to be Uber, and we don't -- we just rent the highway. And so for that, that puts us in a little bit different situation. And I will say that I don't think people truly understand the efficiency of what we call a hybrid MNO where we rent the radios, but we have the core, basically the brain, the cloud and how the system operates. So we can have a differentiated experience for our customers. We can -- we do get a lot of data from what we're doing with customers so we can make that experience better and automate that experience. And yet we don't have the burden of building and maintaining the towers, which normally wouldn't be a problem, but our scale is so small that was a challenge for us. So I don't know that I totally answered your question, but from a big picture, we're going to be thinking a little bit longer term in the core business. Operator: The next question comes from the line of Ben Swinburne with Morgan Stanley. Benjamin Swinburne: Charlie, good to have you back on the call. Appreciate your time I was curious if you could talk about any opportunity to sort of wrap the remaining AWS-3 spectrum that hasn't been sold with the upcoming auction where you are, as you know, on the hook for any shortfall with a multibillion-dollar liability. Is there any opportunity with the FCC to sort of combine those two try to monetize the spectrum and also kind of derisk the auction from an EchoStar perspective? Would love any thoughts if you have any to share. Charles Ergen: Yes, Ben, it's a good question, and I'm not going to answer it, but I'll talk around the edges of it. But I mean, obviously, this FCC put us in a difficult situation. We went kind of through the five stages of grief denial and anger and depression and now we're in acceptance, of course. And that's the first thing from our perspective. The second thing is we really hadn't talked with the FCC folks for a couple of years. And once we started having conversations, we've gotten on the same path. And this FCC has quite the vision of -- we didn't totally agree with it, but they want spectrum to get used more quickly and for the benefit of more Americans. And it's hard to argue with that vision. And once we've started communicating, now we're in lockstep really with where the FCC wants to go, and it's our job to now work with them and make sure that every -- all our assets get put to the best use for American public. Part of that indirectly goes to your question, as you look at the AWS-3 auction coming up, there potentially are ways to make that the most efficient auctions. There may be -- and we're in the process of those discussions with the FCC, and they will -- obviously, others will have input into that as well. But we at least have a sounding board to say, how can we share your vision this FCC to get the spectrum in use as quickly as possible and in the hands of people that will compete with it. One of the great things about the AT&T deal we did is because of our MNO hybrid MNO deal with AT&T, we could actually use the spectrum that we sold to. So you can think about those things in a different way. And so this FCC is going to -- they have a vision of where they want to go, they're going to -- they're going to be the most influential FCC that I've worked with ever. And so it's our job to help them get there where they want to go, and that's what we're going to do. Benjamin Swinburne: That's helpful. And just a follow-up on the Boost business now that you're running it. The history of MVNOs, these are typically not great businesses, and I know this is a hybrid MVNO. But you sound excited about the opportunity. It's got revenue scale, but it's at least to a degree, but it's still burning a lot of cash flow. I know you're going to start decommissioning and you've started decommissioning the network. Just can you talk about, I guess, the strategic vision for the business? And then I don't know if there's any help you can give us on the path to getting this thing to cash flow positive now that you've switched models. Charles Ergen: Yes. So the strategy is simple. We have to do things -- we have to do two things. right? And if you look at any company that's the fourth or fifth player, this is what they have to do to be successful. You have to do two things. You have to use technology in a way to be different. And you have to do things that the other guys aren't doing or they could do, but they won't do. It didn't make sense for them to do it. So on the technology side, we've already made our first strategic move, which is an agreement with SpaceX for our Boost customers to have worldwide connectivity to the handset, both for voice, text and broadband. So I'm sure others will follow suit with SpaceX. But carriers now are -- many carriers have some choice as to who they might sign up with. And so there's a wide variety of where those carriers are going. We are highly confident that we have aligned with which the company is going to have the best technology, and we can do some things different than others. So we've already started that. That's two years away, probably realistically, but that we've already started. How we do things differently, I think, is for our team to come up, we'll -- I officially start like Monday. So we'll start having strategic sessions on how we can think about how we do some things differently. I don't think it's a good path. I don't think we can be successful if we look just like the other guys. They just have too much scale. Benjamin Swinburne: And any help on just getting the business to profitability? I don't know how much of the expense base goes away when you fully convert, anything like that? Charles Ergen: Those of you who have been with us for 30 years as a public company know that we'd like to run things for cash, and we don't like losing money. So I don't have a -- we'll have a lot more on that. But I think that as you move to long-term thinking, that becomes an easier path. And short term is always difficult. But that was -- that's just the cards that we had to play short term. Now we get to play a bit better. We're better as a company when we're thinking long term. And we're definitely going to be -- and again, if -- I think the nature of our hybrid MNO, it's underestimated by the market. People try to say it's an MNO or that. It's a different animal. And the AT&T network that we ride on is a great network. And with our spectrum, they're already putting our C-band to use, is my understanding, some of it. So that network is only going to get better. And so I just think -- I think we could be more competitive. We certainly will be more competitive than we have been in the past. Hamid Akhavan: Yes. So adding to that, one of the things that hopefully shortens the path to profitability is the reduction of the fixed cost of the business, which you can imagine is drastic. Certainly from a network side, you need a much greater scale to reach that profitability going to retire the fixed cost. Obviously, not having that shortens the horizons tremendously. And second, having an MVNO deal with AT&T kind of makes our costs more variable on a usage basis. So again, another way to create operating leverage for us as the more we sell, I mean, obviously, we don't need to have a large scale in order to reach growth. So all the strategic things that Charlie is talking about, should get us to profitability in a much shorter horizon than you would have originally modeled. We're not going to give you that today. But obviously, as time goes on, that information might become more available to you. We're excited about -- we're really excited about our ability to develop that business as the most scaled MVNO -- hybrid MNO, MVNO model in the marketplace with the benefit of having access to space and having to the great coverage of AT&T, which is using our spectrum now will be the best coverage in the nation in our view. Operator: The next question comes from the line of Bryan Kraft with Deutsche Bank. Bryan Kraft: Had a few, if I could. First is a follow-up on the tax side. I was wondering if you could confirm that there will be a tax benefit from the impairment charge that you're taking today? And is that benefit excluded from the $7 billion to $10 billion range that you cited? Secondly, just a follow-up on AWS-3 and the auction. Does the timing of the auction matter as it relates to you selling the paired AWS-3 licenses? Is it optimal to wait? Is it better to do it first? Just wondering how you're thinking about that? And then also the converts, I was wondering if ultimately you plan to settle those in cash or stock? And then lastly, I would just love to hear your latest thoughts, Charlie, on a potential DBS merger with DIRECTV at this point in time. Charles Ergen: Paul, do you want to take the first? Unknown Executive: Yes. This is Paul. Good question there. I'll take the tax question. As it relates to the impairment charge, some of the items have already been deducted. For instance, we take bonus depreciation on the network or amortize the FCC spectrum. So we won't get a benefit of that. But the other costs, we will. And to answer your question, is that included in the $7 billion to $10 billion range? Yes, that is. Charles Ergen: And this is Charlie. In terms of AWS timing, and so again, that's -- I wish I could give you more information, but we're really working with the FCC to make that, a, to make sure this most successful auction possible and that spectrum gets used as quickly as possible. But we're -- again, it's pretty valuable spectrum, I'd say that. And as part as the converts, we'll make a decision at the time that we can call those converts as to whether we call them or not. And if so, is it cash or stock or some combination of that. That would just be premature to speculate on that today. And Hamid, maybe I'll throw over to you on DIRECTV. Hamid Akhavan: Yes. Certainly, at EchoStar Capital, we look at every opportunity for value creation through inorganic transactions. The DISH and DIRECTV always has seemed like a natural combination and it's been an in-house combination. Our track record of making that work has not been great. So it's hard to predict how it might go. But certainly, we will always look at any opportunity to take advantage of assets we have in-house with a transaction. I can't make any prediction right now about how that might go, but that item has always been on our radar, and Charlie has been very vocal about the fact that the combination of the two companies would create significant and tremendous amount of value. Charles Ergen: Operator, we'll have time for one more question. Operator: And the last question will come from the line of Chris Quilty with Quilty Space. Christopher Quilty: I was hoping you could possibly give a long-term update on the plans for one of those operating businesses, Hughes. You've obviously got downturns in the VSAT business and the consumer broadband. It looks like IFC is growing. Are there thoughts on either growing that business organically or nonorganically? And what markets are you most focused on? Hamid Akhavan: Chris, thank you. Regarding Hughes, as you know, we have been on a multiyear journey at Hughes at least three years now. to transition that business more towards an enterprise business from a consumer business and purely from the realization and understanding that the consumer connectivity to satellite is now highly competitive given the SpaceX's offerings and perhaps in the future, other LEO offerings such as Kuiper. We recognized years ago that we could not have a LEO system on the broadband side to compete with those. So we started shifting towards enterprise. Our expectation is that as early as next year, we'll be crossing over the 50% mark on enterprise revenue. We have had significant progress in an aero, which we had almost no share on three years ago, and now we are only one of the couple of companies in the world that are growing on the aero side. So there are some progress being made in there. We're happy with that. We still have a long journey to make Hughes much larger scale in the enterprise. We are on the Gartner's leader quadrant as one of the few -- in fact, in this industry, in their industry, in its industry, there is none other than Hughes on the Gartner's leader quadrant. So it shows the ability of Hughes to serve global brands across the world. We'll try to monetize and maximize that if there's any sort of M&A opportunity. As I mentioned, on the list of areas, domains where we will be looking for additional M&A. You saw three or four of those actually fall within the Hughes purview. That's aero, space. we talked about enterprise services. We talked about defense and domestic manufacturing, which I think all of those are areas where we have green shoots and a good understanding of the trends. And if there's -- at EchoStar Capital, if we find opportunities in any of those domains that would enhance users' position, we'll take advantage of that. Charles Ergen: That concludes our call. Thanks for joining. Thanks, everybody.
Operator: Good day, everyone, and welcome to today's AMG Q3 2025 Earnings Conference Call. [Operator Instructions] Please note, this call is being recorded. [Operator Instructions] It is now my pleasure to turn the conference over to Thomas Swoboda. Please go ahead, sir. Thomas Swoboda: Yes. Thank you, Jen, and good afternoon, everyone. Welcome to AMG's Third Quarter 2025 Earnings Call. Joining me on this call are Dr. Heinz Schimmelbusch, the Chairman of the Management Board and Chief Executive Officer; Mr. Jackson Dunckel, the CFO; and Mike Connor, the Chief Corporate Development Officer. We published our third quarter 2025 earnings press release yesterday, along with the presentation for investors, both of which you can find on our website. They include our disclaimers about forward-looking statements. Today's call will begin with a review of the third quarter 2025 business highlights by Dr. Schimmelbusch. Mr. Connor will comment on strategy and Mr. Dunckel will comment on AMG's financial results. At the completion of Mr. Dunckel's remarks, Dr. Schimmelbusch will comment on outlook. We will then open the line to take your questions. I now pass the floor to Dr. Schimmelbusch, AMG's Chairman of the Management Board and Chief Executive Officer. Heinz Schimmelbusch: Thank you, Thomas. Our Q3 adjusted EBITDA of $64 million represents a 58% increase versus Q3 last year, driven by continued momentum in AMG Technologies with AMG Engineering's order backlog as well as profitability in AMG Antimony. On top of that, we benefited from a $5 million compensation settlement at AMG Vanadium for an equipment failure related to our growth investment in Zanesville. We remain focused on the elements within our control, executing operationally, strengthening our balance sheet and streamlining our portfolio. The divestment of our natural graphite business represents a key step in this strategy, and we expect the transaction to close later this year. While our 2 main products, lithium and vanadium continue to face low pricing, constrained for profitability and cash generation in the near term, AMG is actively advancing expansion projects across our portfolio. These initiatives are closely aligned with governmental efforts to onshore strategic materials production and strengthen domestic supply lines in the United States. Construction of our chromium metal plant in Newcastle, Pennsylvania is progressing on schedule with a start-up targeted for Q2 '26. Upon completion, it will be the only chrome metal facility in the country reinforcing AMG's role as a key enabler of national material security. We also expand our U.S. titanium alloys capacity at the same facility to keep up with our customers' increasing demand for aerospace applications. In addition, we are evaluating the establishment of a tantalum and niobium metal plant in the U.S., leveraging our long-standing experience in both metals in Brazil and our unique backward integration into AMG Engineering processing technology. This project if executed, significantly enhances our position in the aerospace sector in North America and globally. Similarly, we are assessing the construction of an antimony trioxide production facility in the United States, the first of its kind in North America with a final investment decision expected in the first half of '26. Leveraging AMG's unique positioning and technical expertise, we are confident in our ability to execute these projects efficiently and with limited capital investment financing from ongoing operating cash flow now -- generated from our ongoing cash flow. Together, this initiative, combined with the expected recovery of the lithium and vanadium markets down the road, position AMG for sustained long-term value creation. We look forward to providing further updates as these projects progress in the coming quarters. Let me now hand over this to Mike Connor. Mike? Michael Connor: Thank you, Heinz. Good day, everyone. I will now provide an update on AMG's strategic positioning, highlighting key developments and progress made over the past quarter. In October, we signed a definitive agreement with Asbury Carbons for the sale of our graphite business. This transaction reflects our commitment to active portfolio management, and we will use the proceeds from this transaction to strengthen our balance sheet and focus on our core growth businesses. AMG is uniquely positioned across its portfolio to strengthen Western critical material supply chains as governments in the Americas, EU and Gulf states intensify efforts to secure access to strategic raw materials, our diversified platform stands out as both uniquely positioned and increasingly attractive to partners and policymakers alike. Importantly, control of critical materials today is often determined less by ownership of raw material resources and more by mastery processing infrastructure, technology know-how and the ability to scale refining capabilities. This processing know-how defines the modern geopolitical landscape of material supply. AMG's integrated approach of combining advanced processing technology with regionally distributed production directly addresses this challenge. Our multiregional, multi-material footprint not only reduces supply vulnerability, but also positions AMG as a unique enabler of critical material independence for Western economies. In October, AMG Lithium signed an MOU with Beijing Easpring for the supply and offtake of battery-grade lithium hydroxide. Both companies' investments in Europe underline the joint commitment to a localized battery supply chain. As a first step, we are collaborating closely with Easpring to ensure a successful qualification of AMG's lithium plant while negotiating a binding offtake agreement. Our partnership with Easpring underscores that the European battery value chain is rapidly materializing. This tangible progress is an encouraging indicator of the region's growing capability to build a competitive and self-sustaining energy ecosystem. And after successful commissioning our Bitterfeld lithium hydroxide refinery in May and having produced material in specification, we are making progress on the ramp-up of the plant and the qualification progress with customers as planned. We are now producing multi-ton batches from raw materials of mixed origin according to specification. This marks a significant step on our way to commercial production. Finally, in Saudi Arabia, we remain on schedule with our joint venture Supercenter project in the detailed engineering phase. The EPC contract has been awarded on a full notice-to-proceed basis, and preconstruction works are expected to begin very soon. This project exemplifies AMG's global execution capabilities and underscores how we combine deep technical expertise with alignment to local industrial policies, advancing long-term economic diversification and resource transformation. I will now pass the floor to Jackson Dunckel, AMG's CFO. Jackson? Jackson Dunckel: Thanks, Mike. I'll be referring to the third quarter 2025 investor presentation posted yesterday on the website. Page 3 shows our strategic announcements, including the sale of our graphite business. I'm pleased to report that the net cash proceeds for the sale will be approximately $55 million. Starting on Page 4 of the presentation, I'd like to emphasize Heinz's comments about the strength of AMG's portfolio. AMG's Q3 '25 adjusted EBITDA increased 58% since the same period last year despite the continued low lithium and vanadium prices. On Page 5, you can see the price and volume movements for our key products represented by arrows, which underscore our segmental results. I will cover these volume and price movements in the individual segment comments. AMG Lithium results are shown on Page 7. On the top left, you can see that Q3 '25 revenues decreased 33% versus the prior year, driven by an 8% reduction in lithium market prices, a 32% decrease in lithium concentrate sales volumes and a 64% decrease in tantalum sales volumes caused by shipping delays that will be reversed in Q4. These impacts were partially offset by higher average tantalum sales prices versus Q3 of last year. In Brazil, we are currently running at an annualized production rate of 110,000 tonnes due to the continued effect of the failure during Q2 '25 of one piece of equipment associated with our expansion project. As noted in yesterday's release, we are addressing this issue. Despite the decrease in lithium market prices and the depressed volumes, we remain profitable and low cost due to our multiproduct mining operation. AMG Vanadium results are shown on Page 8. Revenue for the quarter increased by 2% compared with Q3 '24 due largely to the increased sales prices in ferrovanadium and chrome metal, partially offset by lower volumes of ferrovanadium driven by production issues from our refinery suppliers. Q3 '25 adjusted EBITDA of $19 million for our vanadium segment was 81% higher than Q3 of last year. This increase was primarily due to the higher sales prices as well as the Zanesville compensation payment of $5 million. The results for AMG Technologies is shown on Page 9. The Q3 '25 revenue increased by $92 million or 59% versus Q3 '24. This improvement was driven primarily by higher antimony sales prices and stronger sales volumes of turbine blade coating furnaces in the current period. Adjusted EBITDA of $41 million during Q3 was more than double the same period last year. This increase was due to the higher profitability in AMG Antimony and AMG Engineering. Page 10 of the presentation shows our main income statement items. The key change on this page is regarding our tax expense, which was $7 million in the current quarter compared to $2 million during Q3 '24. The Q3 '25 expense was primarily driven by strong profitability in the quarter as well as tax expense from unabsorbed losses, partially offset by a Brazilian deferred tax benefit related to the appreciation of the Brazilian real. Page 11 of the presentation shows our cash flow metrics. Our Q3 '25 return on capital employed was 14.4% compared to 7.4% in the same period last year. Our free cash flow generation remained negative in the third quarter. The inventory buildup for our production ramp-up in Bitterfeld and adverse shipping schedules in tantalum have held back our free cash flow generation during the current quarter. We are optimistic about delivering positive free cash flow in the fourth quarter of this year. AMG ended the quarter with $544 million of net debt. And as of September 30, 2025, we had $220 million in unrestricted cash and $199 million available on our revolving credit facility. The resulting $419 million of total liquidity at the end of the quarter demonstrates our ability to fully fund all approved capital expenditure projects. Also, in July, we executed a maturity extension on our $200 million revolving credit facility to preserve our liquidity and reduce financing risk. The revolver maturity date was extended from November 26 to August 2028 with terms similar to the original agreement. Our term loan maturity date of November 2028 remains unchanged. We continue to expect capital expenditures to be $75 million to $100 million for 2025. And that concludes my remarks, Dr. Schimmelbusch. Heinz Schimmelbusch: Thank you, Jackson. Our AMG Technologies segment continues to perform particularly well, driven by a very high order backlog in AMG Engineering and high profitability in AMG Antimony. We update our estimate for the temporary tailwind from selling low-priced antimony inventories for -- of more than EUR 50 million to more than EUR 70 million for the full year of '25. We, therefore, increased our adjusted EBITDA outlook from EUR 200 million or more to EUR 220 million or more in '25. Over the last few years, we have provided you with financial guidance for the following year at the time of the Q3 results. Based on your feedback, we have decided to push forward our guidance publication for the full year results in line with our peers. We trust that this change will lead to improved guidance accuracy. Operator, we would now like to open the line for discussions. Operator: [Operator Instructions] And our first question will come from Stijn Demeester with ING. Stijn Demeester: I have 3, I will ask them one by one, if that's okay. First one is on the guidance. The low end of your EUR 220 million EBITDA guidance suggests an earnings slowdown in Q4 to a level of around EUR 28 million, roughly half the level that you achieved in Q4 -- in Q3 on an underlying basis. Is this driven by your usual conservatism? Or do you actually see elements that would justify such a slowdown such as the recent downtrend in antimony prices or other elements? That's the first question I have. Heinz Schimmelbusch: I apologize for being boring answering these questions referring to limited visibility. Now, in this particular case, we just experienced, to give you an example, the announcement of export restriction lifting by the Chinese government following the meeting with the United States on a presidential level. Then this announcement was followed by another announcement by China to point out that there will be procedures, which then will be developed to channel to use dual-use goods in a particular way. We don't know these procedures. There will be a variety of clarifications coming and then the visibility will slowly reappear of what that all means. Given those things, and in particular, the antimony example, we are living in rather volatile times. And therefore, we are sitting together as a Management Board and discussing thoroughly such statements about guidance. And they are not optimistic or conservative. They are just based on data, which has to be analyzed and then we come to that conclusion. This is a very thorough process. Stijn Demeester: Understood. Understood. Second question is on the graphite divestment. My perception was -- or other divestments, my perception was in the past that several units within technologies that are not engineering could be considered as non-core. Is this still valid for AMG Antimony or has the recently changed market dynamics changed your view on that front? Heinz Schimmelbusch: Very clearly, antimony was never a non-core business in AMG, but always a very contributive, steady and part of our portfolio. And based on technology leadership and our market position in the overall trade of antimony. And that market position and that technology leadership has enabled us to materialize opportunities as they were related to the export restrictions. We're very happy about that. It was a highly profitable period, and we continue to experience satisfactory results, which are distinctly better than what the average results were in the long past. We also want to point out that we just announced -- or I just announced in my introductory remarks that we intend to build. We intend, it's in an early stage because we are in feasibility studies, but that will be very materializing that we have a position to build an antimony trioxide plant in the United States. It would be the only material plant of that kind -- the only plant of that kind and it would be joining the other one and only plants which we have in the United States in critical materials as we build our position as partnering United States industries and government. Stijn Demeester: Understood. Then last question for now is on the cash flow. I believe the working capital further increased throughout the quarter. Can you maybe give some color on this increase? Is it structural? Or should we count on unwind in Q4? Jackson Dunckel: It should unwind in Q4. So some of it was due to shipping delays, as we said. Some of it is due to increased working capital in our lithium and vanadium businesses, but you should see unwinding in Q4. So as we often do, the fourth quarter is very strong from an operating cash flow basis. Operator: And we'll take our next question from Michael Kuhn with Deutsche Bank. Michael Kuhn: I'll also ask them one by one. Starting with your portfolio and recent discussions about raw material supplies. Obviously, rare earth is not a part of your portfolio as of now. Would that be something you would consider to add? And what would be, let's say, the time line and, let's say, the implementation steps that would be needed for such an expansion? Heinz Schimmelbusch: That's a very interesting question because it was asked -- we were asked as a broadly based really early in the market, critical materials company running a fairly vast portfolio in critical materials. We consider ourselves to be in the group of industry leaders in this. So we were asked many times, so what about rare earths? And so the question is very relevant. Now you might please take notice that we are in rare earths, not in resource -- presently resources of rare earths, but in processing technology of rare earths. In the rare earth downstream flow sheet, you need several applications, material applications, which involve metals, and, therefore, are being treated as high purity, necessary for magnetics, for example, are treated in vacuum furnaces. Since ALD is the world leader in vacuum furnaces, our AMG engineering star, we are deeply involved in the downstream industry of rare earth since a very long time. Now it is tempting -- was always tempting for us to combine our downstream know-how with a resource acquisition. As regard to resource acquisitions, we are particularly careful. We presently as regard to resources, we operate a highly successful large-scale lithium-tantalum mine in Brazil. So we are in resources. So in this screening process of opportunities to add resource capabilities to our downstream know-how, we are involved in this. And I would say this is a very thorough process. It is not academic. It's real. But I would say stay tuned would be a too aggressive statement. Michael Kuhn: Understood. But I guess, let's say, especially among the U.S. government, there is such a high interest that there could be scenarios imaginable where, let's say, some kind of support schemes could be enacted to, let's say, support such development? Heinz Schimmelbusch: Yes, of course. And we are in contact with that world. You are finding us here, this conference call is happening in Pittsburgh, Pennsylvania, which is indicating just visiting one of our expansion sites in the United States, which is our focus right now in expanding our portfolio and deepening our portfolio in line with what we see is necessary in the United States in onshoring and in improving the domestic value chains. And that includes, of course, rare earth. And you could see a business model which combines magnetics capabilities, production capabilities with a resource, which tailors the resource, adding such a thing, and have a uniquely vertically integrated operation. Michael Kuhn: Very interesting. Then one more question on portfolio consolidation. I think you were very clear in the context of antimony. Is there any other part in the portfolio that might be up for disposal, which you would regard rather as non-core? Heinz Schimmelbusch: Our portfolio is fairly elaborate and it is not really totally visible. So there are many parts which are very difficult to explain and very special. But surprisingly, there are corners here as the company develops and as our focus is increasingly pointed to products where we are clearly in the leadership group, non-core opportunities or opportunities to somehow streamline our portfolio occur. Now the last thing we want to do is to say what it is because that would be sort of in our -- when you think about negotiating strategies, that would be not optimal. I have -- Mike, do you want to add to this? Michael Connor: No, I think that's pretty clear. We constantly evaluate the portfolio. And if we identify opportunities to dispose of assets that we would consider to be integral to the key trends that we're working towards, we will dispose if we can get the right price in the right space, for sure. So we constantly work on that and maintain our portfolio as aggressively as possible. Michael Kuhn: Understood. And then last question on cash flow and, let's say, expansion projects. You mentioned you signed an EPC contract in Saudi Arabia now for this joint venture. I would be interested to know, let's say, what that would imply for the cash flow and for potential cash injections into that entity. And also regarding the potential U.S. expansions, obviously, your chrome plant, you mentioned that repeatedly will have a pretty short payback period for the other projects potentially underway, would those be similarly short? And yes, what kind of CapEx thinking should you apply, let's say, for the next 3 years generally? Jackson Dunckel: So let me start with ACMC, which is our Saudi Arabian plant. As we've said in the past, we are focused on nonrecourse project financing. We own 1/3 of that plant. And so our equity contribution would in turn be 1/3. And you would expect to see 70% of it financed by debt. So if you put all those numbers through CapEx estimates, it comes to quite a small number, which will not strain our balance sheet in any shape or form. And as we have more information, we'll share that with you. But we're in the beginnings of the project financing for that. In terms of other projects, the number that we told everybody for chrome was roughly $15 million. I will say that the incremental projects that we're considering are in that order of magnitude or less and have similar paybacks because of being located in the United States, which is chronically short of such critical materials. And therefore, we expect very strong paybacks as well. And then in terms of '26 and a longer look on capital expenditures, we'll cover that in February. But that -- hopefully, that gives you some guidance that we're not looking at big projects here or big expenditures. Operator: [Operator Instructions] And we'll take our next question from Martijn den Drijver with ABN. Martijn den Drijver: I have a couple, I'll take them one by one as well. My first question is about antimony. Have you now fully utilized the low-priced inventory that you had available? Or will there still be tailwinds in Q4 and possibly even into 2026? Jackson Dunckel: No, we would expect that to have fully been utilized. So no further inventory tailwinds in '25. Martijn den Drijver: And then my second question is on lithium. And you mentioned in the press release that the Bitterfeld plant is producing specification using raw materials of mixed origin. Can you elaborate a little bit on that mix supply? And what percentage of that raw material is off-spec material versus technical grade lithium hydroxide from China? And can this percentage of off-spec material go up? And equally important, what is the price difference of this off-spec material versus the supply from China? Just to get a better understanding of the impact. Heinz Schimmelbusch: The qualification process is not based on off-spec material, the qualification process is based on virgin material in our inventory. So later on, strategies imply that we benefit from off-spec materials as the opportunities occur and our procurement network can identify such prospective materials. Right now, this is not what we are doing. Right now, we are doing standard material, and we turn standard material in specification results. And that process is fairly advanced and as expected. Martijn den Drijver: Clear. Any additional color on when that off-spec material could become part of the supply chain? Heinz Schimmelbusch: It already is right now. We want to qualify the material. That means that the next step will be large-scale samples to be audited after audits to be given to our customers, and then we will start production, and that's then the moment where we can optimize further supply chains. Martijn den Drijver: Understood. Then moving on to vanadium and the supply issues. Could you elaborate a little bit on when you assume a normalization of that supply? And once that supply normalizes, how should we think about profitability given that the mix will also include spent catalysts from the Middle East? Jackson Dunckel: It's a very good question, Martijn. Thank you. Our refinery supply customers continue to struggle. And we don't expect to see any resolution of that through Q1/starting in Q2. The incremental purchasing that we've done in the Middle East will be available also starting in Q2. So you should see significant volume improvements starting in Q2 and improving in Q3 and Q4. Martijn den Drijver: That's clear. And then forgive me for asking, but I looked a little bit into the silicon operations and with regards to that portfolio management question before. If you add the adjustments to gross profit in the last 8 quarters, that has been almost $10 million, which means that the EBITDA losses are slightly higher. What do you intend to do with the silicon operations as it's not likely that energy prices in Europe will come down? Heinz Schimmelbusch: Our silicon metal operation is presently partly shut down. We're operating on a minimum level. And it for the last 3 years has been suffering tremendously under the -- primarily under the energy price situation in Germany. And by the way, our competition in other European countries to a much lesser extent, are also suffering under those things. And as we experience consistent problems with German energy supply, it is not likely that we will shortly reappear as a silicon metal producer. So this is an ongoing, keeping it alive, intense-care operation, and we -- our options are very limited. Jackson Dunckel: Just on the numbers, the gross profit adjustment you see is a negative, right? So we are taking profitability out of our gross profit, i.e., the silicon plant is making money, albeit not very much, but it is making money. Martijn den Drijver: Okay. Good. And then my final question is just a bookkeeping question. The $5 million from the compensation settlement, has that been received? Or is it in receivables? Heinz Schimmelbusch: It has been received. Operator: And our next question will come from Maarten Verbeek with AMG. Unknown Analyst: It's [ Marcus Baker ] of DRD. A couple of questions from my side, maybe some clarification on the previous answer you mentioned or you gave. Concerning those 3 CapEx plans you plan to execute and you mentioned for the chrome metal that was some EUR 15 million. For the other 2, was it also EUR 50 million each or combined EUR 50 million? Michael Connor: We're still in pre-feasibility stage. So we're finalizing numbers at this point. But I think what Jackson was trying to give you is a sense of scale. So we believe that they're of that size of nature, but we don't have exact figures now as we're working through that. I mean, really, what we're trying to get across is that we're looking to capitalize on our existing footprint in the United States, leveraging our processing capabilities globally to use those existing assets as a footprint for a platform for expansion into the United States into other materials using our key technologies. And we can do that very cost effectively because of our experience gained from our operations in other locations. Unknown Analyst: Okay. And concerning the Supercenter in the Middle East, I think you will be starting to construct shortly. How long will this take? Will it take 1.5 years, 2 years before completion? Michael Connor: It will be about 2 years. Unknown Analyst: Okay. And then lastly, you have sold your graphite business, and you will see $55 million in net proceeds. Obviously, you still have a liability towards Alterna because you bought 40% of them and you will pay them back in cash or in shares. When will that happen? Or can you simply hold on to that amount for the next 3 years and then pay them? Jackson Dunckel: Yes. Heinz Schimmelbusch: It will happen, but we will not be able at this moment to comment on whether we pay in cash or in shares. Michael Connor: But we have an additional 2.5 years, as you know. Operator: [Operator Instructions] And it appears there are no further questions at this time. Mr. Swoboda, I will turn the conference back to you. Thomas Swoboda: Thank you, Jen. Thank you, everyone, for this very dynamic conference call. I hope we were able to answer all your questions. We are looking forward to see some of you on our investor marketing activities in Europe in due course, and please stay in touch. Thank you so much. Operator: And this does conclude today's AMG Q3 2025 Earnings Conference Call. Thank you for your participation. You may now disconnect.
Operator: Greetings, and welcome to Nutrien's 2025 Third Quarter Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference call over to Jeff Holzman, Senior Vice President of Investor Relations and FP&A. Jeff Holzman: Thank you, operator. Good morning, and welcome to Nutrien's Third Quarter 2025 Earnings Call. As we conduct this call, various statements that we make about future expectations, plans and prospects contain forward-looking information. Certain assumptions were applied in making these conclusions and forecasts. Therefore, actual results could differ materially from those contained in our forward-looking information. Additional information about these factors and assumptions is contained in our quarterly report to shareholders as well as our most recent annual report, MD&A and annual information form. I will now turn the call over to Ken Seitz, Nutrien's President and CEO; and Mark Thompson, our CFO, for opening comments. Kenneth Seitz: Good morning. Thank you for joining us today to review our results, strategic priorities and the outlook for our business. Through the first 9 months of 2025, Nutrien delivered structural earnings growth through record upstream fertilizer sales volumes, improved reliability and higher retail earnings. We raised our 2025 potash sales volumes guidance range for the second time this year and maintained the midpoint of our retail adjusted EBITDA guidance, highlighting the stability of this business throughout 2025. At our June 2024 Investor Day, we communicated a set of strategic objectives and targets that we believe provide a pathway to increase our earnings and free cash flow. Our results through the first 9 months show significant progress towards achieving these goals. Starting with our upstream operating segments. We increased fertilizer sales volumes by approximately 750,000 tonnes compared to the same period last year. These results highlight the capabilities of our world-class operations, extensive distribution network and strong customer relationships that we have built over many decades. In potash, we delivered record sales volumes in the first 9 months. We increased the percentage of ore tonnes cut with automation to over 40%, maintaining our position as one of the lowest cost and most reliable global potash suppliers. Our nitrogen operations achieved a 94% ammonia utilization rate through the first 9 months, up 7 percentage points from the previous year. Our operating performance demonstrates the significant progress we are making on reliability initiatives across our Nitrogen business. Within our Downstream Retail segment, we delivered 5% higher adjusted EBITDA in the first 9 months by driving down expenses and growing our proprietary product gross margin. We remain focused on efficiently supplying our growers with the products and services they need to maximize returns. As previously communicated, we are on track to achieve our $200 million cost reduction target 1 year ahead of schedule. These efforts contributed to a 5% reduction in SG&A expenses through the first 9 months of 2025. We lowered capital expenditures by 10% on a year-to-date basis through optimization efforts focused on sustaining safe and reliable operations, along with a highly targeted set of growth investments. Delivering on these structural growth drivers, reducing expenses and optimizing capital spend has supported our ability to further enhance return of cash to shareholders. We allocated $1.2 billion to dividends and share repurchases in the first 9 months, representing a 42% increase from the prior year. To put this all together, Nutrien is demonstrating significant progress across all our strategic priorities, delivering higher earnings and cash flow while increasing shareholder returns. At our Investor Day, we also communicated a focused approach to simplify our portfolio and review noncore assets. To date, we have announced the completion or have agreements in place for the divestiture of several noncore assets, including our equity interest in Sinofert and Profertil as well as smaller assets in South America and Europe. These divestitures are expected to generate approximately $900 million in gross proceeds. We intend to allocate the proceeds to initiatives consistent with our capital allocation priorities, including targeted growth investments, share repurchases and debt reduction. We continue to assess assets on the merits of strategic fit, return and free cash flow contribution. As a result, we have initiated a review of strategic alternatives for our Phosphate business. This process will include evaluating alternatives ranging from reconfiguring operations, strategic partnerships or a potential sale. We intend to solidify the optimal path forward for our Phosphate business in 2026. In October, we completed a controlled shutdown of our Trinidad Nitrogen operations due to uncertainty with respect to port access and a lack of reliable and economic gas supply. Our Trinidad operations were projected to account for approximately 1% of our consolidated free cash flow in 2025, a contribution that has been under pressure for an extended period of time. We continue to engage with stakeholders and assess options to enhance the long-term financial performance of our Trinidad operations. Each of these portfolio actions are driven by a focus on enhancing the quality and consistency of our earnings, improving cash conversion and supporting growth in free cash flow per share over the long term. Now turning to the market outlook. In North America, harvest is in the late stages of completion with the pace supportive of a normal fall fertilizer application season. In line with the stronger plant health season we experienced in the third quarter, we expect a record crop will support the need to replenish nutrients in the soil. Summer crop planting in Brazil started at a faster-than-average planting pace, which has supported crop input demand and increased potash purchases since the beginning of the fourth quarter. In August, we increased our global potash shipment projection for 2025 to a record 73 million to 75 million tonnes. We expect demand will continue to grow at the historical trend level in 2026 with potash shipments forecast between 74 million and 77 million tonnes. This would mark the fourth consecutive year of demand growth, an indicator of the stability we are seeing in global potash markets. Our positive outlook is formed by strong potash affordability, large soil nutrient removal from a record crop and low-channel inventories in most major markets. This is most evident in China, where reported port inventories are down by more than 1 million tonnes year-over-year. In addition, we anticipate limited new global capacity additions in 2026 with announced project delays and remain constructive on supply and demand fundamentals. Global nitrogen supply challenges are expected to support a tight supply and demand balance going into 2026. Ammonia markets are currently very tight due to plant outages and project delays, and we anticipate the emergence of seasonal demand to further tighten urea market fundamentals. I will now turn it over to Mark to review our results, full year guidance and capital allocation priorities in more detail. Mark Thompson: Thanks, Ken. As Ken described, our third quarter and year-to-date results highlight strong execution on our strategic priorities and supportive market fundamentals. Nutrien delivered adjusted EBITDA of $1.4 billion in the third quarter, a 42% increase compared to the prior year. In potash, we generated adjusted EBITDA of $733 million in the third quarter, which was higher than last year due to higher net selling prices. Potash prices remained affordable on a relative and absolute basis, which supported sales volumes near record levels for the quarter. Our year-to-date controllable cash cost of product manufactured was $57 per tonne, which was slightly higher than the prior year due to lower planned potash production and increased turnaround costs. At these levels, we continue to track favorably against our goal of maintaining a controllable cash cost that is at or below $60 per tonne. We raised our full year potash sales volume guidance to 14 million to 14.5 million tonnes, supported by strong offshore demand. Canpotex is now fully committed through year-end, and we anticipate a similar split between offshore and domestic sales volumes in the fourth quarter compared to the prior year. In nitrogen, we generated adjusted EBITDA of $556 million in the third quarter, an increase compared to last year due to higher net selling prices and higher sales volumes. We advanced planned turnaround activities at our Redwater and Borger nitrogen facilities and achieved ammonia operating rates that were well above the same period last year. Our nitrogen sales volume guidance range of 10.7 million to 11 million tonnes reflects the assumption of no additional sales volumes from our Trinidad operations for the remainder of the year. Reduction in Trinidad volumes is expected to be partially offset by the continued strong performance of our North American nitrogen operations. In phosphate, we generated adjusted EBITDA of $122 million in the third quarter as higher net selling prices and sales volumes more than offset increased sulfur costs. Our phosphate operations achieved an 88% operating rate in the third quarter as reliability and turnaround activities completed in the first half led to a significant improvement in performance. Our Downstream Retail business delivered adjusted EBITDA of $230 million in the third quarter, up 52% from prior year. We saw strong crop input demand across the U.S. corn belt, consistent with our previous expectations for a strong plant health season, providing Nutrien with the opportunity to efficiently serve growers in their efforts to maximize crop yield. Our full year retail adjusted EBITDA guidance was narrowed to $1.68 billion to $1.82 billion, reflecting the continued stability of this business and execution of our strategic growth initiatives in 2025. We expect North American crop nutrient volumes to be slightly higher in the fourth quarter and per tonne margins similar to the prior year. Our expense reduction initiatives and Brazil improvement plan continue to be in line with previous expectations, helping offset the gain on asset sales and other nonrecurring income items realized in the fourth quarter of 2024. Turning to capital allocation. Last year, on the third quarter call, we discussed our plans to optimize sources and uses of cash as we introduced a refreshed capital allocation framework. We've taken decisive actions to execute our plans and our priorities remain consistent. From a uses of cash perspective, we're focused on sustaining our assets on a risk-informed basis and further evaluating opportunities to optimize spend as we complete our portfolio optimization initiatives. We're also investing in a narrow set of growth initiatives that have a strong fit with our strategy, attractive returns and a lower degree of execution risk. And we continue to build on our long track record of stable and growing dividends per share and are deploying capital towards ratable share buybacks that provide for more consistent returns of cash to shareholders. As an illustration, through the first 9 months of 2025, we repurchased shares at a rate of approximately $45 million per month and anticipate a similar run rate on a full year basis. As we enhance our structural cash generation capabilities and deploy proceeds from the announced divestitures, we also expect to meaningfully lower our net debt position by year-end and gain greater flexibility to allocate capital through the cycle. I'll now turn it back to Ken. Kenneth Seitz: Thanks, Mark. We have a constructive outlook for our business, which is supported by expectations for healthy crop input demand and growth in global potash shipments in 2026. We continue to progress our strategic initiatives and take actions to simplify our portfolio, enhancing earnings quality, improving cash conversion and supporting growth in free cash flow per share over the long term. These features underpin Nutrien's competitive advantages and offer a compelling investment case for our shareholders. Finally, I would like to share an update on the advancement of our succession planning process. After an outstanding 30-year career at Nutrien, Jeff Tarsi will be stepping back from the leadership role of our Downstream Retail business at the end of 2025. I'm pleased to announce that Chris Reynolds has accepted the leadership position for our Downstream business beginning in 2026. Chris has been with the company for 22 years and has held senior leadership positions in our sales, potash and commercial functions. He brings deep knowledge of our business and the markets we serve across our downstream network. Jeff will remain with Nutrien in an advisory role to support the transition and execution of our downstream strategic priorities. We would now be happy to take your questions. Operator: [Operator Instructions] The first question comes from Andrew Wong from RBC Capital Markets. Andrew Wong: So just regarding that Phosphate business today. How would you say cash generation for that business compares to the rest of your business? Are there certain parts of the Phosphate business that maybe are better cash generators than others? And then just regarding that strategic review, is there -- is this about the business maybe just being better suited to run a different way? Or is there something specific about the phosphate assets or the phosphate outlook that's prompting the review? Kenneth Seitz: Yes. Thank you, Andrew. At our June 2024 Investor Day, we talked about this focused approach to simplify our portfolio, with the focus really being on quality of earnings and free cash flow over the long term, and that's absolutely relevant to your question. It is true that we produce phosphate out of White Springs and Aurora. But at the same time, it's only contributing about 6% of our EBITDA. So as we looked at it, it compels us to do a strategic review. And of course, this is on the heels of some of the portfolio of the work that we've been doing, disposing our Sinofert shares, the process that we're in to close Profertil by the end of the year and other noncore assets. And that's all adding up to about $900 million to date. For our Phosphate business, and again, to your question, we're looking at a range of alternatives across our strategic review. And that could be everything, yes, from revised and reconfigured operations with the goal of maximizing and optimizing free cash flow and strategic partnerships that we'll be looking at and the sale as well. We'll be looking at all those alternatives, and we expect to have some conclusions about the path forward in 2026. Operator: Our next question is from Ben Isaacson from Scotiabank. Ben Isaacson: Mark, I have a question for you. You've worn the CFO hat for a little over a year now. I was hoping you could reflect on what initiatives you've undertaken or what's changed in your role? And then as part of that, last summer in '24, targets were set for 2026. And now as we're 7 to 8 weeks out from the start of '26, can you just give us a check-in on just some of the big targets that were set and how those are tracking? Mark Thompson: Ben, thanks for the question. So I'll maybe just start by reiterating some of the comments that Ken and I provided in our prepared remarks this morning. So as you noted, Ken and our team, we laid out a set of objectives and targets at the Investor Day in June 2024. And as we've said this morning, those were focused on levers to drive structural growth in earnings and free cash flow over time. If you look at the progress we've made on a year-to-date basis and our full year guidance, I think you can see we've made very significant progress on those initiatives. If you look at upstream fertilizer sales volumes based on the midpoint of our guidance for 2025, we're on pace to deliver 1.4 million tonnes of volume growth compared to the baseline we set at Investor Day from 2023 results. And obviously, this has come from a few different areas. There's been a focus on reliability, debottlenecking projects in nitrogen and then utilizing our existing potash capacity. And all of those are, of course, very low capital intensity initiatives, and they've got strong cash margin contributions. From a downstream perspective, we set targets to grow earnings through a number of levers, including expanding proprietary products, our network optimization, expense management, margin improvement in Brazil and bolt-on acquisitions, primarily in North America. And if you look at our progress to date versus that 2023 baseline, we're projecting that there will be $300 million in retail EBITDA growth at the midpoint of our 2025 guide. And we're pleased with that, and we think that's something that can continue over time. In terms of cost discipline, as Ken mentioned, we set a $200 million cost reduction target for 2026. We're a year ahead of schedule on that. And of course, we're always looking for more. And also, as Ken mentioned, we've completed or have agreements in place to divest noncore assets as part of our portfolio review that will have generated once closed about $900 million over the last year. And these are assets that didn't fit the strategy, weren't consistently generating cash flow for Nutrien. And so we're pleased with that as well. So all of these initiatives feed into that objective that Ken talked about in terms of increasing structural sources of cash flow. And then, of course, beyond this, as Ken has just mentioned, we've announced a strategic review of the Phosphate business, and we continue to assess our options at Trinidad. And all of that's in the spirit of increasing quality and resilience of free cash flow. From a uses of cash perspective, we set a target at that Investor Day that you highlighted to reduce CapEx to $2.2 billion to $2.3 billion. And as you know, we've overachieved on that target through optimization efforts. Our guidance this year is $2 billion to $2.1 billion, and we're focused on maintaining discipline in this area moving forward. And then finally, one of the items you've heard us speak about over the past year quite a bit is to further enhance our cash returns to shareholders, primarily through more ratable share repurchases. Through the first 9 months, we increased return of cash to shareholders through dividends and share repurchases by 42%, and we've ratably bought back shares at that pace I mentioned of around $45 million per month. And Nutrien shareholders should continue to expect that ratable repurchases are going to be a part of a consistent staple in our capital allocation framework going forward. So as Ken said and I've said, we think we've made a lot of progress over the past year on our strategic priorities. We're continuing to take actions to enhance our competitive position, and we believe this will drive structural growth in free cash flow per share over the long term. Operator: Our next question is from Hamir Patel from CIBC Capital Markets. Hamir Patel: Ken, beyond the strategic alternatives review of phosphate, whatever plays out in Trinidad and the divestitures you've already announced, do you see any other meaningful opportunities for noncore asset sales over the coming years? Kenneth Seitz: Yes. Thanks, Hamir. No, that -- I think for the time being, we're really focusing on the things that we've talked about. And so we've talked about phosphate, obviously, working very hard on the Trinidad file and assessing options as we go forward there and making sure that we carry on with our improvement plan in Brazil. Those would be the three big areas of focus, I would say, going into and through 2026. And again, as Mark just described, expecting that as we progress through that work, really an improvement in quality of earnings and free cash flow. Operator: Our next question is from Joel Jackson from BMO Capital Markets. Joel Jackson: Maybe a shorter-term question. Maybe talk about the fall season. You talked about maybe crop nutrient demand being up year-over-year in Q4. Maybe talk about for the fall season. Maybe talk about 85% expectations a few months ago. How is this fall playing out? It's been an early harvest, but there's a lot of uncertainty going on. One of your large competitors is talking about seeing phosphate demand deferral, which may also lead to potash demand deferral. Can you comment on all that, please? Kenneth Seitz: You bet, Joel, thanks for the question. Yes, we haven't changed our -- the midpoint of our guidance in our Retail business, as you know. And we're staring into the fall, which the next 2 weeks will be kind of critical for that. As we've mentioned, we're on track in Brazil for this year. Here in North America, we're coming off a strong Q3, good plant health season for both crop protection and crop nutrition. Heading into the fall here, yes, we expect that nitrogen volumes probably up. Potash volumes may be a bit flattish from last year and perhaps phosphate volumes a bit down. But it's a few days into November here, Jeff, I'll pass it over to you. Jeffrey Tarsi: Yes. Thanks, Ken. Yes, so we -- as you would have seen in our results, our growers stayed very engaged through the third quarter. In our business, Ken mentioned very strong plant health sales in that quarter as growers were working to protect yields. And I mentioned that because we're just at the completion of harvest now and crop yields look very strong, especially across corn and soybeans. Strong crop yields lead to what we need to replenish for going into the '26 crop. We're doing a lot of soil testing right now. Our largest 2 weeks of application are the week we're in right now and this following week. And to date, weather looks favorable. From that standpoint, we're seeing pretty robust action right now out in the field. A lot of anhydrous going down and then of course, our dries P&Ks as well. But I'll remind people that growers footfall applications out in order to get ahead of the next year's crop. And corn looks strong again for '26. And so growers are going to want to get out ahead of that in the best way that they can. And as Ken said, I think in our projections at the midpoint of our guidance, we just got slightly elevated volumes compared to last year. And if you remember last year, we got -- we did get into some weather issues, especially as it related to anhydrous ammonia. Operator: Our next question is from Chris Parkinson from Wolfe Research. Christopher Parkinson: Great. Just real quick, when you take a step back on your nitrogen strategy, could you just kind of go through how you're thinking about the intermediate term in terms of what facilities kind of can make up a little bit of that gap based on what cadence you were seeing out of the T&T assets in 2025? And perhaps a quick comment on just how you're thinking about the longer-term strategy. I mean are you interested in assets? Would you ever consider a greenfield again? Perhaps that's still a question. But just an updated thought process would be very helpful. Kenneth Seitz: No, that's great. Thank you, Chris. I mean as you know, I think we've been working on reliability issues in nitrogen and challenges that we've had there and deploying meaningful sustaining CapEx and focusing on some of the bad actors in our portfolio and our fleet. And those -- that's yielding results with the 94% operating rate that Mark mentioned earlier. We're also working on our ongoing debottlenecking and brownfield initiatives that are adding tonnes. When we talked about 11.5 million to 12 million tonnes at our June 2024 Investor Day, certainly part of those volumes were coming from those debottlenecking and brownfield initiatives. And we have more opportunity there as it relates to expanding our nitrogen volumes. And we would look at those opportunities, which would be low CapEx, high-margin opportunities prior to certainly looking at something like a greenfield opportunity. In the context of the broader portfolio, which, of course, includes Trinidad, I mean, as we speak, high operating rates in our fleet ex Trinidad are helping to make up some of the difference with our Trinidad operations being, of course, shut down, as you know. In Trinidad itself, we are looking at our various alternatives, assessing options because we do need line of sight to stable and economic gas supply and, of course, access to port. So we're working -- talking to the Trinidad government about what those sort of optimal operating conditions might be. And again, as I say, assessing our path forward. Stepping back from it all, our Investor Day targets, 11.5 million to 12 million tonnes next year, that did include us achieving our full complement -- the 12 million tonnes, our full complement of natural gas supply in Trinidad. The 11.5 million tonnes, the math there would say that you sort of get the 80% of our gas complement in Trinidad to get to that 11.5 million tonnes, depending on the outcomes in Trinidad now, we'll see as our operating rates come up in the balance of our fleet, and we chart our path forward on the island there in Trinidad. Operator: Our next question is from Vincent Andrews from Morgan Stanley. Vincent Andrews: Could you speak a little bit about the Latin American, maybe more specifically the Brazilian environment, just both as we exit this year and into next year, I see you're projecting another year of growth there for potash shipments. But maybe you could just sort of talk to the credit conditions and the incremental financing terms in terms of how fast you're able to get paid down there still? And what gives you the confidence that, that market can grow again in '26 off of very high levels despite the challenging farmer economics and limited credit that's available? Kenneth Seitz: Yes, thanks for the question. So yes, I think the most important point for us is that our -- we're on track with our improvement plan in Brazil. And that's included the things that we've talked about, the shattering of our -- idling of our five blenders. We've talked about unproductive locations and having closed 54 of them now, workforce reduction, 700 people. But to the question, also allocating resources with a real focus on credit and credit collection. And that is, again, largely playing out as we had assumed here in 2025 and hence, part of the story of being on track with our improvement plan. As it relates to growth in agriculture in Brazil, we have seen, once again, a 2% increase in Brazil from last year. Last year, 47 million tonnes of fertilizer went in land on to Brazilian farms, and that's up again 2% this year. And it's the case that looking at corn and soybean prices, Brazilian farmers continue to do the things that they need to do to maximize yield and appropriate application rates are part of that story. So we've been here before, but year-over-year, the Brazilian farmer with expanded acreage and a focus on yield continues to import more volumes. And of course, we, as Nutrien and Canpotex have been the biggest part of that story, now the largest supplier of potash into Brazil. The last thing I'll say is we continue to focus on our proprietary products, also experiencing growth on Brazilian farms, and that will continue to be a focus of ours as well. Operator: Our next question is from Steve Hansen from Raymond James. Steven Hansen: If I'm thinking back in time when you've actually divested a phosphate asset, I think you've really tried to retain much of the strategic value through some longer-term offtake, at least in the initial term. In the context of the current review, really what is the optimal outcome for you? It sounds like all options are on the table, but have you thought about trying to maintain access to the supply as it relates to your integration benefits? You're just looking for someone to cut you a check. How do we think about the optimal outcome here for you as you go through this review process? Kenneth Seitz: Yes. No, thanks, Steve. And actually, it's really everything, all of the above. So we will look at a range of alternatives as it relates to, as I mentioned earlier, reconfigured operations, partnership sale and could that include some form of contractual arrangement. I suppose that's possible. But I can tell you what we will be solving for is free cash flow. And yes, we could probably achieve that in a number of ways. It's early days for us and we just announced their strategic review. The time is good for that. Obviously, what's happening in the phosphate market, the focus on mineral that's as important as they come in the U.S. and of course, the focus on -- in the U.S. on domestic security of supply for something as critical as phosphate. So the time is right for us to announce this. And now that we've announced it, we can talk freely about these strategic options and do the full review assessment. Again, we expect to have line of sight to that in 2026. So we'll have more to talk about. Operator: Our next question is from Kristen Owen from Oppenheimer. Kristen Owen: A couple of things on the Retail business. First, anything that maybe shifted from 2Q to 3Q? I know we had some weather issues. So anything that maybe went a little bit better than expected once we account for that timing shift? And then separately, I wanted to ask about your proprietary products, the growth opportunity there, particularly now that one of your large customers is going through a bit of a restructuring themselves, if that offers an opportunity for you or if there's any real change with that large customer in the retail business? Kenneth Seitz: Yes. Thanks for the question, Kristen. I'll hand it over to Jeff to talk about, as you say, any questions, any shifts between quarters, I think the answer there is not really. And then certainly, on proprietary product growth, I think I know the challenge that you're pointing to, but the growth that we're experiencing would certainly be independent of that. But Jeff, over to you. Jeffrey Tarsi: Yes, Kristen, as far as any kind of shift from Q2 to Q3, no, everything is pretty much going as we've expected this year, especially as it relates to when we capture revenue and margin from that standpoint. You've always got some give and takes in there, but there would be nothing material from that standpoint. On the proprietary side of our business, proprietary products continues to be a very strategic growth driver for our business. We just finished a very strong third quarter as it relates to proprietary products. In the third quarter here, we had significant increase in margins on our nutritionals and biologicals, which again is very impressive. And we also had an uplift to margins in our crop protection side of our business as well in the quarter. And if I look at our portfolio of proprietary products today, I think we're sitting in a good place. I think we basically have what we need from that standpoint. We've got a very strong seed play as it relates to proprietary products, Dyna-Gro and Proven varieties. We've got a very strong play on our crop protection side of the business, and we continue to talk about our nutritional and biologicals. And I think as we go into 2026, you're going to see us introduce over 30 new products globally in our business. About half of those are going to be crop protection products. We're going to introduce seven new nutritional products and several seed treatment products. So again, that's going to continue to be a strategic growth driver for our business, very critical to the growth that we talked about, especially as we reach out into '26. Operator: Our next question is from Matt DeYoe from Bank of America. Salvator Tiano: This is Salvator Tiano in for Matt. So I want to go back to the phosphate strategic review. And specifically, there was one of the options, not the sale of -- or partnership, but the reconfiguration of the business. And can you clarify a little bit what does this mean? Would you, for example, try to make products more for the feed or the food market or even try to do something like purified acid for LFP batteries? And also, can you remind us what are your ore reserves in phosphate? Kenneth Seitz: Yes. No, thanks for the question. And so reconfigured operations, I think, means probably everything that you just described. And again, we're looking at that at the moment. We have, as I think you probably know, we have improved reliability rates at our Phosphate business. We have reduced costs, and we have diversified our product mix. We've done all those things. At the same time, phosphate still only contributes, as I mentioned earlier, 6% of our EBITDA. So when we use the words reconfigured operations, it is exactly, as you say, looking at life of mine at both White Springs, Aurora, assessing how we best exploit the remaining reserves. There's also additional reserves in the area. So we're looking at all those things. And again, we'll have more to talk about on the path forward as we conduct the review. Operator: Our next question is from Jeff Zekauskas from JPMorgan. Jeffrey Zekauskas: You've stressed share repurchase as a use of capital for you. I think over a 10-year period, the average price of Nutrien is $57. And if it turned out that 5 years from now, the price of Nutrien was still $57, would it be a mistake to repurchase shares or not? Kenneth Seitz: Yes, thanks for the question, Jeff. And, yes, I would say that our strategy now as it relates to return of cash to shareholders, of course, we use the word stable and growing dividend and ratable share repurchases. As we look at the word ratable, we'll always assess whether in the moment, at the time, based on our outlook, based on our assessment of value, whether that makes sense. So it's not with the blinders on at all times, just charging forward, we do think about value as we deploy our share buyback programs. Operator: Our next question is from Edlain Rodriguez from Mizuho Securities. Edlain Rodriguez: Ken, so when you look at all the puts and takes in the different nutrients right now, like what's your sense of like near-term pricing movement? I mean which one do you think is better positioned to see an uptick in pricing or do prices need to take a breather from where they are now? Kenneth Seitz: Yes. Thanks for the question, Edlain. It's just going back to the fundamentals and understanding in potash, when we say 74 million to 77 million tonnes and looking at how we're going to supply as an industry, how we're going to supply into that range. I mean at the midpoint, that's about 1.5 million tonne increase from 2025. And that would include probably some supply additions from FSU, maybe 0.5 million tonnes from Canada, 0.5 million tonnes -- and then Laos. And of course, we know Laos -- adding 0.5 million tonnes out of Laos would be a real challenge, I think, given some of the existing challenges in that part of the world. So you look at the level of crop nutrients that have been pulled out of the soil in 2025, you look at the affordability of potash today, and importantly, you look at channel inventories in potash and really being at average or at below average levels, I mean, China is a great example of that, where port inventories are down 1 million tonnes from last year. And so we're constructive on potash heading into 2026, and it's for all of those reasons. Similar story in ammonia and urea, I mean, export restrictions in China on urea having been eased. But just through the summer here, we saw strong demand out of India and now heading into the fall here, seasonal demand, which we expect and probably as we speak, are seeing some firming in urea pricing. And then on ammonia, I mean, on the supply side of the equation, there's all kinds of challenges there and even our own Trinidad operations, which are shut down this year. I would say phosphate probably will continue -- and again, looking at the supply and demand balance, it will probably continue to be tight. I know that potash -- sorry, phosphate prices are elevated compared to historical average levels. But at the same time, it's a supply story. And while we might see some reduced phosphate volumes going down here in the fall, given where phosphate prices and therefore, affordability is at, we might see some of that. We expect that, like I say, into 2026, the market will continue to be tight. Operator: Our next question is from Michael Doumet from National Bank. Michael Doumet: So you've completed a few acquisitions, and you expect to have leverage come down in Q4. And then again, I think next year, another potential divestiture if that happens. Any way you can frame out how much debt you'd like to repay before you consider introducing maybe some additional flexibility into how you're thinking about capital allocation/your share repurchase program? Kenneth Seitz: Yes. You bet, Ben, thanks for the question. And so yes, we will end the year having paid down -- reduced some debt. That's true even while we've increased returns -- cash returns to shareholders, as I mentioned earlier, by over 40% compared to last year. And yes, heading into 2026, we'll see how the year plays out and some of the things that we've announced and how we're thinking about proceeds among our capital allocation priorities. But I'll hand it over to Mark maybe just to provide a bit more detail. Mark Thompson: Sure. Thanks, Ken. So look, I think you step back and think about the priorities we've articulated, capital discipline, cost discipline, the overall focus on free cash flow and really being able to do that on a through-the-cycle basis, really regardless of market conditions. So we've built the strategy, built the capital allocation and returns framework to really be consistent across cycles such that Nutrien will generate structural free cash flow at any commodity price that we can foresee and have consistent abilities to deploy that capital. So when you look at the actions we've taken to enable that, I think the track record is strong over the last year. Specifically on your question, part of being able to support that framework across the cycle is having debt in an appropriate position. We haven't changed our perspective that BBB flat from a rating standpoint is the right place for us. But as we look through a cycle, we think that at roughly mid-cycle prices, we should be roughly 1.5x adjusted net debt to EBITDA. And when we get into a trough, although we can go higher than this, we think 2.5x is probably the trough that we'd like to see when we get to the bottom of the commodity cycle such that we have abundant optionality to take advantage of those moments, return capital to the shareholders and do all the things that we need to do. So what you've heard us articulate today is that with the benefit of divestiture proceeds and the strong cash flow from operations that we're going to see in 2025, we're going to take a step closer to that. And we think we'll be getting in the ballpark. Of course, as we move forward and Ken articulated, we're always going to be looking at the best use of deployment for the cash that we have that maximizes value for our shareholder. So we believe we're on the right track with that. Operator: Our next question is from Ben Theurer from Barclays. Benjamin Theurer: On some of the commentary you already made in regards to the Trinidad assets. Now I was wondering if within the asset review, aside from what you've talked about, phosphate and then obviously, we have the Trinidad decision pending. How you think about the rest of your portfolio? Are there any other assets that you would consider for divestiture or any sort of like an adjustment here given where the market conditions are in the different locations? Kenneth Seitz: No. Thanks for the question, Ben. And it's the case and will be the case that we'll be perpetually reviewing our portfolio. And again, we're talking about our objectives of earnings quality and free cash flow per share and being able to structurally improve those metrics over the long term. As I mentioned earlier, at the moment, consuming our attention is phosphate, is Trinidad and is our work in Brazil. We -- among our divestiture program today, we've talked about our -- to date, we've talked about our Sinofert shares, talked about Profertil. There are a few other smaller assets that we've divested of in Europe and in Latin America. And would there be other smaller assets that we would look at sort of cleaning up in the portfolio? There would be. But there would be nothing that I would describe beyond those three areas of focus today that I would call material. And so again, today, the big things that we need to focus on and talk about are phosphate, Trinidad and Brazil. Operator: Our next question is from Lucas Beaumont from UBS. Lucas Beaumont: I just wanted to clarify a couple of things. So I guess just on Trinidad to start with, so to the extent that remains shut down into 2026, what's the sort of fixed cost base there on EBITDA that will be impacting you? And then just secondly, I saw your potash shipment outlook for North America is flat year-on-year into next year. So are you guys assuming that you don't get any kind of demand destruction impact there at all? Kenneth Seitz: Yes. No, on Trinidad, we'll see, Lucas. We're certainly not prognosticating that we're going to be shut down into 2026. We're just -- we're working through that at the moment and looking for those optimal operating conditions where, again, reliable and affordable gas supply and access to ports and in those discussions today. So those discussions will be ongoing. Trinidad contributes less than 1% of our free cash flow. And so it is from that perspective, in terms of the overall contribution, it's de minimis. As it relates to potash volume growth, I think the best way to think about it is the potash market continues to grow. And we had talked about after some of the demand destruction that we saw, the conflict in Eastern Europe, the return to trend level of potash demand. And indeed, that is exactly what we have been experiencing for the last few years. And given everything that we're seeing on crop nutrient removal from the soil on channel inventories and overall affordability for potash, we expect trend level demand to continue into 2026, and that's why we say 74 million and 77 million tonnes. And for our part, you can think about us participating in that demand growth in the way that we always have. And so sort of that 19% to 20% market share. And so as we look at how we're going to guide into 2026, it will be doing exactly that kind of math. And as you know, with our 6-mine network and our capability to continue to grow our volumes at a very competitive capital, we'll continue to pace along with growth in the market. Operator: Our next question is from Jordan Lee from Goldman Sachs. Suk Lee: Just another one on the Trinidad closure. You mentioned that it contributes a small amount of free cash flow. Can you discuss the different possibilities you see for that asset? Do you think there would be interest if you were to try to sell it? And is that something you are considering? Kenneth Seitz: Yes, thanks for the question, Jordan. What I'll say today is just the things that I've reiterated, and that is we're searching for an optimal path forward here as it relates to our operating configuration in Trinidad, which is dependent on arriving at, as I say, reliable and affordable supply of natural gas in the region, and access to ports so that we can export the volumes off the island. That's the focus for today. Operator: Thank you. There are no further questions at this time. I will now turn the call back to Jeff Holzman for closing remarks. Jeff Holzman: Okay. Thank you for joining us today. The Investor Relations team is available if you have any follow-up questions. Have a great day. Operator: Thank you, ladies and gentlemen. This concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Greetings, and welcome to the Altice USA Third Quarter 2025 Earnings Results. [Operator Instructions] It is now my pleasure to introduce your host, Sarah Freedman, Vice President of Investor Relations. Thank you. You may begin. Sarah Freedman: Thank you. Welcome to the Altice USA Q3 2025 Earnings Call. We are joined today by Altice USA's Chairman and CEO, Dennis Mathew; and CFO, Marc Sirota, who together will take you through the presentation and then be available for questions. As today's presentation may contain forward-looking statements, please carefully review the section titled Forward-Looking Statements on Slide 2. Now turning over to Dennis to begin. Dennis Mathew: Thank you, Sarah. Good morning, and thank you all for joining us today. Throughout today's presentation, we will discuss the progress we have made, the challenges facing our business and most importantly, how we are responding with urgency and discipline to ensure we continue to strengthen our business for the long term. I want to start by recognizing where we stand today and the work that still lies ahead. Over the past 3 years since stepping into the CEO role, we've been executing a comprehensive transformation aimed at stabilizing the business, driving operational discipline and slowing declines to position us for future growth. Our financial performance is starting to reflect our operational investments. Gross margin percentage reached an all-time high. Capital efficiency continues to improve. Adjusted EBITDA decline is moderating and we are targeting year-over-year adjusted EBITDA growth in the fourth quarter. We have also made significant progress in elevating our customer experience and the quality of our network as we continue working to rebuild trust with our customers. Because of this progress, despite market pressure, we are reaffirming our full year outlook of approximately $3.4 billion of adjusted EBITDA. Our outlook includes revenue of approximately $8.6 billion and direct costs and other operating expense, each of approximately $2.6 billion. We recognize that achieving our full year outlook implies a meaningful ramp in the fourth quarter performance and believe that our focus on profitability over subscriber growth at any cost positions us for financial improvement. Our results in the third quarter reflect shifting dynamics. The first part of the quarter was relatively stable, both against fixed wireless and fiber overbuilders. However, in September, competitive intensity significantly accelerated with aggressive offers paired with heightened marketing spend from our competitors as well as elevated FWA activity, which impacted our results. In the face of this, we remain disciplined by prioritizing financial stability and protecting margins over chasing lower-value gross adds. At the same time, we recognize that we must be bolder in our go-to-market and base management strategies to stabilize broadband performance. That being said, while we have made progress, we know there is more to do to attain consistent broadband subscriber growth. Reflecting this evolving competitive landscape, in the third quarter, we recorded a noncash impairment charge of approximately $1.6 billion related to our indefinite live cable franchise rights. The fair value of these assets was originally established during the company's formation in 2015 and '16. Since then, competitive and macroeconomic pressures have evolved, including incremental market entrants and low move activity. The impairment reflects the anticipated persistence of these conditions for the foreseeable future, which are factors that were not contemplated in the original valuations at the time of the Cablevision and Suddenlink acquisitions. This was a noncash charge and it does not affect our cash flow, liquidity or ongoing operations. As we move into the final months of 2025, our priorities remain consistent and clear. We are focused on evolving our go-to-market and base management strategies to improve our broadband and revenue trajectory, driving operational efficiency and enhancing and growing our network. Turning to the next slide, I'll review highlights from the quarter. Adjusted EBITDA declined 3.6% year-over-year and grew 3.3% quarter-over-quarter. Adjusted EBITDA margin of 39.4% expanded 70 basis points year-over-year and 200 basis points quarter-over-quarter. Gross margin reached an all-time high of 69.7%, reaching the milestone of approximately 70% a full year ahead of plan and largely reflects a mix shift away from video. Other operating expenses improved by over 2% year-over-year and by over 6% quarter-over-quarter. These results reflect our efforts to operate with discipline by driving innovation enhancing the customer experience and improving operational and financial efficiency across the business. On revenue, we maintained a disciplined approach to our revenue strategy prioritizing margin accretion and profitability as industry growth remains near record lows. In addition, we remain focused on expanding penetration of new and existing products designed to unlock additional revenue over time. While total revenue declined 5.4% year-over-year, driven primarily from video pressure, we showed revenue momentum in mobile service revenue, which grew 38%, Lightpath, which grew almost 6% and underlying news and advertising, which excluding political, grew almost 9%. Turning to our network. We continue to advance our network modernization efforts with the deployment of mid split upgrades across our HFC footprint. Later this month, we expect to begin offering 2 gig speeds in our first HFC market, an important step toward our multi-gig evolution with additional markets expected in 2026. Additionally, we continue to expand our network with total new passings expansions and additional hyperscaler contracts awarded at Lightpath. In August, Lightpath announced plans to construct 130 route miles of AI grade fiber infrastructure in Eastern Pennsylvania to connect the rapidly developing hyperscale data center ecosystem in the region. Turning to Slide 5. I want to provide more context on our Q3 broadband subscriber results and our disciplined strategic and financial focus as broader market conditions persist. In the quarter, we lost 58,000 broadband subscribers. We continue to operate in a challenging market, characterized by historically low growth intensified competition and ongoing consumer financial strain as more providers compete for fewer customers who are increasingly price-sensitive. This dynamic has led to elevated subscriber acquisition spending across the industry. Specifically, late in the quarter, we saw competitors ramp up promotions and significantly increased marketing spend, often combining deep discounts with aggressive add-on offers, which impacted our ability to capture win share. We maintained margin discipline in managing subscriber acquisition costs during this time, prioritizing quality growth and returns over uneconomic volume. Looking ahead in this environment, we intend to maintain this discipline. We recognize that we need to continue to adapt and evolve our go-to-market approach to compete more effectively. We have made steady progress in our head-to-head performance against fiber overbuilders and have observed encouraging trends there. Though on the fixed wireless side, as I referenced earlier, the competitive landscape demands a stronger stand. And we are developing and executing on a plan centered on our faster, more reliable network and superior product set, including mobile to execute with urgency and win. Turning to Slide 6. We continue to expand our product portfolio and increase penetration across both new and existing offerings. Our goal is to create stickier customer relationships, compete more effectively and capture additional revenue opportunities over time. We added approximately 40,000 customers to our fiber network and ended the quarter with over 700,000 fiber customers, representing a penetration rate of 23% across our fiber network. Thanks to the investments we made to enhance the quality and reliability of our HFC network, we refined our fiber migration strategy into a balanced returns-driven approach, one that prioritizes customers who benefit most from our superior fiber speeds and low latency experience. This strategy allows us to improve portfolio yields by balancing the strengths of HFC and fiber to deliver the right performance at the right cost to the right customer segments, ensuring each connection drives the greatest impact for both our customers and our business. On mobile, we added 38,000 mobile lines in the third quarter, representing a year-over-year uptick in mobile line growth and a consistent pace with the prior quarter. As we focus on customer quality and churn reduction, we are pleased with our progress. Annualized churn improved by approximately 900 basis points and we expect the potential for further gains as we continue to prioritize gross additions of higher-quality customers, those who port their number, finance the device or choose unlimited plans. While this strategy is expected to keep gross additions muted in the near term, lower churn is expected to offset that impact, driving steadier net adds in the long run. This deliberate shift improves efficiency and profitability, building a more stable, high-value customer base and reducing acquisition costs over time. Of note, today, only 35% of our mobile customer accounts include more than 1 line, which highlights a significant growth opportunity. We are evolving our mobile strategy with more attractive simplified pricing that makes it easier for customers to add lines and bundle services. Specifically, we have a heightened focus on driving multiline adoption, strengthening broadband convergence and enhancing pricing and offer competitiveness. We expect this evolved mobile go-to-market approach to roll out in late Q4, which we believe could position us for improved performance heading into 2026. Last year, we introduced a new and simplified 3-tier video offerings, Entertainment TV, Extra TV and Everything TV. These packages deliver greater value by including the most watched content, offering customers more flexibility and choice while enhancing our video margin profile. In the third quarter, we added or migrated a total of 58,000 video customers to these new tiers, representing a ramp from the phase launch in this prior year ending the quarter with 13% penetration of residential video customers. We continue to evolve our video strategy as we bring in partners such as Netflix, Disney, Hulu and others to strengthen our value proposition and bring more optionality to our video customers. More broadly, we have launched several new value-added services and products over the past few quarters, including Total Care, Whole-Home Wi-Fi and B2B add-on services such as connection backup and Secure Internet Plus. These offerings continue to scale and together with other products in our road map helped to create stickier customer relationships. Over time, we believe these services may help offset ARPU headwinds from declining legacy products such as video. In closing, over the past year, we've strengthened our foundation anchored in product quality, network reliability and customer service, which we believe remains central to winning in the marketplace. Our focus remains on enhancing our value proposition, rebuilding customer trust and sharpening our go-to-market and base management strategies to compete more effectively in this highly competitive landscape. Although market conditions remain challenging, we remain focused on the elements within our control, maintaining discipline and execution, competing with precision and allocating resources with intent. This balanced approach protects profitability near term while positioning the company for durable growth and value creation over time. With that, I'll now turn it over to Marc to walk through the financial results in more detail. Marc Sirota: Thank you, Dennis. Let's begin on Slide 7 with a review of our financial performance. Total revenue of $2.1 billion declined 5.4% year-over-year. Video cord cutter remains the primary driver of year-over-year revenue declines, representing nearly 6% of total declines with residential video revenues down close to 10%. News and Advertising revenues declined 10%, driven by the benefits in the prior year period from incremental political ad revenue. Excluding political, News and Advertising revenue grew by almost 9%. Over the full year, we expect to offset most of the revenue pressures through continued improvement in programming and direct costs as we manage expenses in line with the lower revenue environment. Residential ARPU declined 1.8% year-over-year to $133.28, lower by $2.48, primarily driven by the impacts from video. In the third quarter, video contributed to a $3.16 decline year-over-year to total residential ARPU. This is related to volume, partially offset by disciplined video price expansion and representing nearly 130% of total ARPU decline. Offsetting those declines, we saw steady improvement in all other service revenue, contributing to a $0.68 year-over-year improvement driven in part by rate discipline and growth of mobile and new product sell-in. This underscores that even with improving margins, video's revenue pressure remains the biggest factor weighing on top line and ARPU performance. Broadband ARPU declined slightly year-over-year to $74.65, tied mainly to seasonal trends with expected low promotional roll-off volumes. We expect full year broadband ARPU to be slightly up year-over-year, supported by additional rate benefits in the fourth quarter. Continuing on Slide 8, our gross margin reached an all-time high of 69.7%. Gross margin expanded by 160 basis points year-over-year reflecting the continued mix shift away from video, along with a disciplined approach to stronger programming agreements and ongoing efforts to optimize video margins. Adjusted EBITDA of $831 million declined 3.6% year-over-year. This represents a moderation in the rate of decline compared with recent quarters, reflecting the benefits of ongoing operational efficiencies and disciplined cost management, as evidenced by the 3.3% sequential improvement in adjusted EBITDA in Q3 compared to the second quarter. Third quarter adjusted EBITDA margin expanded by 70 basis points year-over-year to 39.4%, representing our highest EBITDA margin in the past 2 years, and underscores the continued progress in improving efficiency. In the fourth quarter, we are targeting year-over-year growth in adjusted EBITDA, which will represent the first quarter of growth in 16 quarters. The expected step-up in adjusted EBITDA is driven by both improvements in top line trends and our cost profile. On revenue, we see a path of slowing the rate of decline in our core residential and B2B businesses. Our strategy focuses on more disciplined ARPU management through a seasonal timing of rate actions and continued expansion of value-added services. For the full year, we expect broadband ARPU to increase slightly year-over-year, supported by anticipated growth in the fourth quarter. As expected, third quarter results were impacted by typical seasonal dynamics, including back-to-school and lower promotional roll volumes. As noted, Video continues to be the largest driver of our revenue declines. However, we have successfully slowed the rate of decline by adding incremental subscribers to our new video tiers, and we expect this trend to continue. Additionally, our Lightpath business continues to gain share in the hyperscaler market. As we exited 2024, we announced more than $100 million in awarded contracts. And since then, we've meaningfully increased both the total value of awarded deals and opportunities in the pipeline. We expect these contracts to begin contributing to revenue in the fourth quarter with continued growth through 2026 and beyond. In News and Advertising, while we continue to face year-over-year headwinds from the prior year political cycle, we expect to see acceleration in our advanced advertising platform driven by seasonal contracts, primarily tied to the NFL season in the fourth quarter. Additionally, we anticipate some political advertising benefits this year from races in New York City and New Jersey. On direct costs, our teams have done a great job at resetting and executing innovative programming agreements which contributed to a 14% reduction in programming costs year-to-date. We expect this momentum to continue, supporting our full year outlook on direct costs of approximately $2.6 billion. And finally, on operating expenses, we continue to expect benefits from our workforce optimization efforts. These actions were taken without impacting our customer-facing teams, ensuring no compromise to the quality of our customer experience. In addition, we see continued reductions in call volumes and truck rolls tied to the strength of our network in AI-driven automation yielding up savings. And last, as we said previously, we expect moderation in consulting and professional fees tied to our transformation efforts. All of these opportunities from incremental revenue to lower cost profile give us confidence in the path to achieving approximately $3.4 billion of adjusted EBITDA in the full year. Next, turning to Slide 9. I'd like to go a bit deeper regarding our operational efficiency momentum. In the third quarter, our operating expenses improved 2.4% or approximately $16 million lower year-over-year, marking the first quarter of year-over-year OpEx improvement in 6 quarters. As we discussed in August, we delivered OpEx moderation, staying on track to achieve a 4% to 6% reduction in full year 2026 operating expenses compared to full year 2024. Historical OpEx elevation was driven by incremental investments on our transformation journey to refine processes and implement new tools, some of which have now begun to taper, portion of transformation-related costs remain in our operating expenses today but are expected to further decline in Q4 and into 2026. In addition, we reduced sales and marketing expenses in the third quarter, reflecting our disciplined approach to managing subscriber acquisition costs and avoiding overspending on lower-value customers. Salaries and related costs are running below the prior trajectory driven by workforce optimization actions taken in the second quarter with the full benefit expected in the fourth quarter. Although this is partially offset by employee-related health and wellness costs, which continue to run at a higher rate than 2025. Specifically, health and wellness costs were higher by $8 million year-over-year in the third quarter and higher by $30 million year-over-year in the third quarter year-to-date. Beyond OpEx, we continue to drive efficiency across our operations. First, annualized service call rate improved by approximately 6% and the annualized service visit rate improved by approximately 20% year-over-year in the third quarter. Next, we continue to focus on strengthening our programming agreements and take a data-driven analytical approach to these negotiations, ensuring our content strategy aligns with customer preferences and viewing behaviors. This approach, combined with continued adoption of our new video tiers, supported video gross margin of expansion of almost 350 basis points year-over-year in the third quarter. We continue to integrate AI tools across multiple areas of the business from predicting outages to coaching sales reps. AI is helping drive efficiency and supporting growth opportunities. For example, we launched our AI virtual assistance in sales and build partnerships with companies like Google and Cresta to transform customer support. So far, the results have been fewer customer touch points, faster resolutions and better experiences. And finally, our customer satisfaction continues to improve with the relationship NPS up 6 points in the last year and up 17 points over the past 3 years, reflecting ongoing enhancements to network performance and overall customer experience. Stepping back, these overarching trends reflect the progress we've made and laying a foundation of quality across our products, network and services. The discipline and efficiencies we built into the operations are now beginning to be reflected in our results as we position the business for sustained improvement. Next, on Slide 10, I'll review our network investment and capital expenditures. We now project full year 2025 capital expenditures of approximately $1.3 billion compared to our prior outlook of approximately $1.2 billion. The increase reflects incremental investment at Lightpath to support continued hyperscaler build activity, which is now expected to be at the higher end of the Lightpath capital range of $200 million to $250 million. In addition, there are some timing impacts towards the end of the year that are contributing to our higher 2025 capital outlook. Cash capital expenditures in the third quarter were $326 million, down 9.4% year-over-year. This reflects lower capital spend in the second half of the year as more capital-intensive phases of our build activity occurred earlier in the year, and capital has tapered substantially each quarter since. In the third quarter, we added 51,000 total passings and 30,000 fiber passings. Year-to-date, we've added 112,000 total new passings and continue to target 175,000 total new passings in the full year. As we discussed in previous calls, the majority of our passing growth in 2025 is expected to come from new fiber deployments. In addition, we are efficiently upgrading portions of our HFC network to enable multi-gig speeds. We continue to deploy mid split upgrades at a low cost per passing and expect to begin marketing multi-gig HFC service in our first market later this month. And finally, turning to Slide 11, we will review our debt maturity profile. As discussed in August, we are pleased to have partnered with Goldman Sachs and TPG Angelo Gordon on a $1 billion asset-backed receivable facility loan. This first of its kind securitization transaction backed primarily by HFC assets has added additional debt capacity. The loan transaction was completed in July of 2025 and is included in our consolidated debt maturity profile and debt calculations presented. At the end of the third quarter, our weighted average cost of debt is 6.9%, our weighted average life of debt is 3.4 years, and 73% of our total debt stack is fixed. Consolidated liquidity is approximately $1.2 billion and our leverage ratio is 7.8x the last 2 quarters annualized adjusted EBITDA. Before we close, I'm pleased to share that earlier today, we announced the alignment of our corporate identity with Optimum, a brand trusted by millions of customers. Effective tomorrow, November 7, we expect to change our corporate name from Altice USA to Optimum Communications. In connection with this, starting on November 19, our Class A common stock, which currently trades under ATUS ticker symbol on the New York Stock Exchange is expected to begin trading under our new OPTU ticker. We view this transition as an important milestone in our multiyear transformation journey, uniting us under a single Optimum brand identity. In closing, we believe our strategy and unwavering discipline and focus enables us to build a more resilient business over time, positioned for sustainable, long-term growth and enhanced value for our shareholders. With that, we will now take questions. Operator: [Operator Instructions] Our first question comes from the line of Kutgun Maral with Evercore ISI. Kutgun Maral: Two, if I could, one on broadband and one on cost. First, on broadband trends, Dennis, as always, your candor and the detail around the market realities are much appreciated. It's clearly a dynamic backdrop. As we think about your commentary that competitive intensity has significantly accelerated in September, along with the high likelihood that there'll probably be even further pressures from the big 3 telcos on both fixed wireless and fiber ahead. What's the right way to think about the broadband subscriber trends for Optimum going forward? Broadband net losses widened from 50,000 last year to 58,000 this quarter, particularly given your disciplined financial approach, it seems like these year-over-year pressures will likely widen, but would welcome your thoughts. And second, I was hoping to get more color on the cost structure since there have been a number of puts and takes this year given the ongoing transformation efforts. I know it's way too early to talk about 2026. But as we try to put the pieces together for EBITDA, is the fourth quarter cost base the right way to think about the shape for next year? Dennis Mathew: Yes, I'll start with the broadband trends, and I'll let Marc jump in on EBITDA and OpEx and provide some color commentary. As you know, last quarter, we did make some progress in terms of year-over-year performance as we were executing our hyperlocal strategies, our income-constrained strategies, and we were starting to make some progress. But I also indicated that we are working on a much broader transformation of this company, and we are working to ensure that we deliver long-term subscriber revenue and EBITDA growth and as such, we are prioritizing financial discipline. And as we entered into Q3, we found that in this low growth environment that the competitive landscape continues to evolve, and the marketing spend by our competitors continued to increase. We had competitors that were increasing marketing spend in certain instances by double digits. We also had -- since I've been sitting in the seat, the most aggressive offers I've ever seen in the marketplace. I mean I'll just be quite frank with you. There are competitors offering 3 and 4 months of free service, $500 plus of incentives, free streaming, $29 gig and these are all being stacked on top of each other. And so we meet every day, every week, and we decide how are we going to continue to drive this business we've committed to the $3.4 billion in EBITDA, keeping EBITDA relatively flat year-over-year. That is our focus. And so we decided that we're not going to chase high-cost, low-value gross adds that we are going to continue to stay disciplined. And we're doing that across the east and the west, in the East. We see heightened competition from fixed wireless in particular. And then in the West, we do have some fiber overbuilders that are very, very aggressive on price. That being said, we have the right network, the right products and the right value propositions to compete as I mentioned in the last quarter, we saw some benefits from our hyper local strategy, and that continues to bear fruit in Q3. But we have to be bolder. We have to scale. We have to accelerate and drive our marketing to tell that story more effectively across the West. And in the East, we have to do a much better job of really showcasing that our products superiority against fixed wireless and our value proposition. And so those are the things that we're focused on from a go-to-market perspective, really continuing to evolve those strategies and continue to scale those strategies. And then on the base management side, in this low-growth environment, we have to continue to focus on managing our base effectively. And while churn has remained relatively stable. There's more opportunity. There is more opportunity. We have to -- we focused, as you know, over the last couple of years on making sure we have the right quality in terms of network and product and service, we have to sharpen our toolkit in terms of value. And folks want crystal clear transparency on pricing and packaging, and we have some opportunities there, and we're working on that. So this is not a time where we're going to go chase high-cost, low-value gross adds. We're going to remain disciplined. And the competitive intensity continues into Q4. But the good news is that we've got a great team, and we've got more tools than we've ever had to be able to test and learn and evolve our strategies so that we can compete most effectively and find the right balance of rate and volume into Q4 and going into Q1. Marc, do you want to talk about the cost profile and how we're managing our financials. Marc Sirota: Absolutely. Yes, really pleased on our operating expense moderation that you saw in the second quarter this just reflects our continued focus on optimizing our operations. You saw and we talked about in the last quarter, we were optimizing our workforce and that transformation really started to highlight some results here in the third quarter. We continue to remain disciplined, as Dennis mentioned, around marketing expenses and being balanced on our subscriber acquisition costs. We are not going to chase low end, gross adds and results are reflected in our results today. And as we mentioned, we saw less consulting fees and things tied towards the transformation. Those are really first half of this year related. Those will wane. And we'll continue to moderate expenses as we look into the fourth quarter, again, driven by how we're managing the network. We see service call rates as we talked about, down 6% quarter-over-quarter service digits rate down 20%. We're deploying AI throughout our ecosystem which is just getting customers the answers quickly and first time right, is at an all-time high in those rates. And it's a very personalized experience with our customers. So we'll continue to moderate. Proud of coming out of the second quarter, our annualized run rate was over $2.7 billion coming out of this third quarter, we brought that down to $2.55 billion, a 6% reduction already and we expect further reductions in the fourth quarter. So as you think about long term, I think you'll be thinking around that space and how we're moderating expenses for the long term. Operator: Our next question comes from the line of Vikash Harlalka with New Street Research. Vikash Harlalka: Two, if I could. Dennis, you've spoken at length about all the changes that you're making to improve your long-term broadband trends and then you've also spoken about the competitive impact on your subscriber trends. Could you just unpack the 2 opposing forces for us so that we can understand how much benefit you're seeing from the improvement that you're making and how much that's being taken away by the increased competitive intensity. And then second question on the EBITDA guide. I know you mentioned about rate increases. And then you also mentioned the workforce rationalization, there's a lot of skepticism among investors about your 4Q guide because the implication is you're looking at double-digit growth. So it would be great if you could just help us understand how much effect it has been driven by price increases versus the cost.. Dennis Mathew: Thanks, Vikash. I'll, of course, answer the first, and then I'll let Marc jump in here. But on the broadband trends, as you've heard me say time and time again, we are evolving the way we operate, the way we go to market. We've upgraded our leadership team. We've made changes in terms of pricing and packaging and how we compete at the market level and all of these things are really helping us gain command of our acquisition and base management strategy. We now have the ability to provide strategies, not just one size fits all across the country. But as we've established these OMS areas and as we've really laid a foundation to help us create playbooks depending on what type of competitor is in the marketplace, whether it's a fiber over builder, fixed wireless, those are helping us. That being said, we are in an environment with both macroeconomic challenges and extreme competitive intensity. And so we do need to continue to evolve. The good news is we are able to see what's working, what's not working and continue to act in a rational fashion, evolve those strategies, and that's exactly what we're doing. As we looked at our performance from Q2 to Q3, we saw that there was an opportunity to continue to really be ensured that we're leaning into being more transparent with our pricing, a bit more aggressive and bold in terms of the pricing and packaging strategies in the East and the West, making sure that we're not overly surgical, but we're able to really go into a market and provide the marketing halo necessary to be able to tell our story most effectively and to continue to do that town by town, neighborhood by neighborhood. These are things that we could not do when I showed up. And so it is something that we are looking to continue to evolve in a disciplined fashion. That being said, we are seeing the competitors react. We saw them react from Q2 to Q3. by increasing their marketing spend and by increasing the aggressiveness of the offer. And so we're going to stay disciplined and not chase -- not have a chase to the bottom but really find the right balance of rate and volume. Marc, do you want to talk a little bit about EBITDA question? Marc Sirota: The EBITDA question? Yes. The cost, good to hear from you. You may need to mute your line. I think we're picking up some of the typing. Just on the full year EBITDA guide, pleased to be able to reiterate that we have confidence in our ability to deliver that both from a top line perspective and a cost perspective. Again, in my prepared remarks, we mentioned some of the path to get there. Again, we see from a top line perspective, we'll continue to drive improvements, mainly through ARPU management, through just the seasonal timing of normal rate event activity, including promo role. In addition, we continue to sell our value-added services, and we continue to see that trend continuing. On the full year, we do expect broadband ARPU to be up slightly year-over-year with some incremental acceleration coming out of fourth quarter. And just to note again, the third quarter was seasonally down, really tied to back-to-school activity and just less promotional roll activity. And just really want to stress, the largest contributor to our revenue decline is really still tied to video only have slowed the rate of video declines as we add more and more customers onto our EBITDA accretive new tiers of services. We expect that trend to continue. In fact, we are more than offsetting all video revenue declines with direct cost savings and that strategy is boosting our gross margins to their highest levels ever a year ahead of where we originally thought they would get to actually. Additionally, we see real acceleration coming out of our Lightpath and news and advertising businesses. First, on Lightpath, as we've talked about previously, the hyperscaler market is a large opportunity for us. The team has done a fantastic job winning a large amount of contracts. We think those contracts really start to pay dividends here in the fourth quarter and beyond into 2026. So I think that's a real tailwind for us. And then our News and Advertising business, despite the political headwinds, we expect to see some acceleration. You saw that in this quarter's results we expect that to continue really coming from some seasonal contracts really tied to the NFL season. Plus, we had some benefits here in the quarter tied to the New York City and New Jersey political races. Can't stress again enough how well the team is doing on direct cost management, being disciplined in this time of revenue pressures tied to video cord cutting. We've driven down our programming cost by over 14% year-to-date, I think, industry-leading. And I think that trend continues and will drive us to our guide of approximately $2.6 billion. And then just on OpEx, we mentioned the workforce transformation. We cut heads by nearly 5%, again, without sacrificing quality. The benefit showed up slightly here in the third quarter, we expect the full benefits to manifest itself in the fourth quarter. We continue to see call volumes and truck rolls decline as we strengthen our network and really drive AI automation into each department. And then just we're moderating our use of consultants and fees tied to the transformation efforts, and that showed up in the third quarter, and we'll continue to see the benefits of that discipline in the fourth quarter. So all of those things, both the top line improvements and our discipline around profitable growth and cost controls and optimizing the operations give us the confidence to deliver our first quarter of growth in 16 quarters in the fourth quarter and get us to our approximate $3.4 billion guide for the full year. Operator: Our next question comes from the line of Frank Louthan with Raymond James question. Robert Palmisano: This is Rob on for Frank. So you might have touched on this a bit earlier in your prepared remarks, but can you give us an update on the lower-end product that you guys were looking to sell into rural areas? Have you gotten any traction with that yet? What are you seeing in the way of take rate there? And going off of that, can you talk about East versus West CapEx investment and how you guys expect that breakdown to trend going forward? Dennis Mathew: Yes. Thanks, Rob. I'll let Marc talk about CapEx. But in terms of our income-constrained product, we are seeing double-digit improvement in terms of sales and connect rates. And so now is the opportunity for us to scale that across the footprint and really go a bit larger with that strategy. As we continue to see headwinds, and we continue to see competitive pressures, we really wanted to test our way into this to make sure that we were doing a good job of managing rate and volume and ensuring that we had the ability to control access to that offer and where we were providing that offer in a just a very surgical fashion. We do have the ability to now scale that a bit further and to really start to market it. We haven't done any real public marketing of it. And so this is an opportunity for us to start to get a bit more aggressive as we round out the year and go into the first half of next year. Marc, do you want to talk about CapEx? Marc Sirota: Sure. Again, just pleased on the discipline we're showing around our capital envelope and lowering capital intensity. And the team has done a great job in, and really being able to be efficient with every dollar we spend to drive maximum ROI. You'll see, as you kind of think about East West, we'll continue to guide to 175,000 total new passing. Again, that will be mainly in a fiber-rich manner. A lot of that build is actually happening in our West footprint. And we're really excited about the investments that we're able to do at a very economic and efficient way to drive mid split technology and really excited here in this month to launch our first multi-gig HFC network service that will be in the West and excited to see that occur and really speaks about the trajectory of where we're heading with our network performance. So again, pleased on the how the team is managing capital and being disciplined and again, driving growth. Operator: Our next question comes from the line of Craig Moffett with Moffett. Craig Moffett: I had 2 questions, if I could. First, can you just give us some sense of how you're thinking about the 2027 maturities wall at this point? Presumably, you've been looking at options to term that out if that was possible. So how do -- have conversations started with your creditors about how you address the 2027 wall? And then just to clarify the remarks that you just made, Dennis, about the introductory or the kind of the low-end offer that you've got for rural markets. That seems to be a bit of an odd when you say you're going to be more aggressive with that, a bit at odds with the overall message of today's call, which sounds like you're going to be more disciplined. I wonder if you could just help us reconcile those 2 things. Marc Sirota: Craig, let me jump in on the first question around the '27 maturity law. We are not going to be actually taking any questions on our capital structure today. So we'll leave that and I'll pass it. Dennis Mathew: Yes. And Craig, so to your point, when I say we're going to be a bit more aggressive, is that we've only launched that across a portion of our footprint. We have now the opportunity to launch it broadly across the footprint, but it's going to be very surgical. We're not going to -- this is exactly why we've been taking it very methodically. We didn't want to make it broadly available and then erode ARPU and erode kind of the entire footprint. So we do have the ability and the data sets now to be able to identify the demographics and the areas where this would resonate most effectively so that we can compete at that local level versus making this general market offer. And so this is some of the foundational things that we had to put in place so that we could have really command and control of what offers are available when? When I started, it was -- everything was available everywhere across the footprint. And there was really no control and so over the last couple of years, we've had to do a lot of work in our billing systems and in our offer management to be able to be more controlled and more surgical. We think that this is an opportunity for us, but we do want to have command of it. And so we've tested in a few states, in a few areas within those states, and we've seen the benefit in terms of sales velocity and so now we're going to continue to roll that out in areas where we think it will resonate most and help us compete most effectively. But to your point, my earlier comments still prevails. So we are going to be disciplined, and we're going to continue to compete in a disciplined fashion to make sure we balance rate and volume. Operator: Our next question comes from the line of Sebastiano Petti with JPMorgan. Sebastiano Petti: I mean, I guess, just kind of following up on -- I mean, to the same tone of Craig's question there, but how are we thinking about the overall pricing environment? Dennis, you're talking about trying to be disciplined. But obviously, against the broader backdrop within cable here, we've seen one of your peers suggesting maybe they're going to forgo a pricing increase but just kind of given the overall level of competitive intensity in the market. I mean, is this -- what you're seeing in the market, does that change how you're thinking about the growth algorithm and your ability to kind of take price and have pricing power in the market against the backdrop of a more competitive market and trying to be more disciplined? Dennis Mathew: Sebastiano, customers want quality and they want value. And when I started, we really didn't have a product portfolio that could deliver any sort of value. And so over the last couple of years, we've started to fill up the product portfolio. We now have an amazing product in mobile and we've made some progress, but admittedly, there's more work to do. And over the last couple of quarters, I mentioned last quarter in particular, that the near-term focus was to ensure quality gross adds and so we've leaned in on that. And we've seen a 900 basis point improvement in churn as we focus on selling in more lines as we focus on boarding in phone numbers as we focus on making it easier for customers to finance devices, and that's a huge value proposition that customers are looking for, and it's resonating. And so we're going to continue to drive that across all of our channels, drive participation and continue to evolve the pricing and the packaging to make it simpler and also provide value and value when you buy both together. When you buy both broadband and mobile and so some of that is going to be coming to life over the next couple of months. The other nice thing is we've launched a whole host of other value-added services like Total Care, which we now have over 100,000 customers in the time since we've launched it, like our streaming billing on behalf of products. We now have over 200,000 -- over 100,000 customers on that product. And so these are all opportunities for us to provide value. The video packages as well have been resonating. We've been able to hold our gross add attach flat this year, but in previous years, we have seen that coming steadily down. We now have over 200,000 customers on these new video packages. And so we're focused on quality, as you know, in terms of making sure we have great products and network and service. And now we have these tools like value-added services, mobile and these video packages, and it's up to us now to bring those packages together so that we deliver the best value. That being said, that customers also want transparency in their pricing, and we have to do a better job, and there's more work that we need to do even on the fundamentals of our billing system and the way we present our bill and making sure people understand what they're paying and how much they're paying. Admittedly, we are seeing that folks are resonating with price locks but we're going to do that in a very controlled fashion. We're going to test into that and see where there's opportunities to leverage price locks to help us accelerate our go-to-market but we're not going to do that in an undisciplined way. We're going to do that in a disciplined fashion and find ways to leverage that as well to continue to drive our go-to-market and base management strategies. Sebastiano Petti: And then if I could quickly follow up. Any update on the MDU strategy? Obviously, or just the overall rollout because obviously, Verizon, a little active in the market acquiring Starry, any impact on what you're seeing from them from a competitive standpoint? I guess maybe where you are internally in terms of the strategic rollout and trying to tap that opportunity. Dennis Mathew: Yes. So MDU is a huge focus for us. We've continued to evolve our strategy there. We've got a big focus as we come upon contract renewals to focus on exclusive and bulk agreements. That has continued to increase over 2 million opportunity homes passed in our footprint. And so we've continue to upgrade our leadership team, continue to upgrade the tools that we have to be able to really go after these underpenetrated properties in particular. I'm excited about where we are in this journey because this is really upside opportunity for us to have a very disciplined go-to-market strategy. We didn't even have visibility into all of the units and what level of penetration until earlier this year. And so now that we have that visibility, we're mobilizing our teams to go after these opportunities proactively so that we manage those relationships. We provide those building owners with the right level of value in line with the competition. We didn't even have the platforms to be able to do that. We now launch those platforms. We have those capabilities. And I do believe that this will be a tailwind as we go into 2026. Operator: Our next question comes from the line of Sam McHugh with BNP Paribas. Samuel McHugh: Just a bit of a follow-up, I guess. So it sounds like you're planning some price-ups in Q4. Obviously, we heard Comcast talking about pausing price up activity. How do you think about the need to do that as well just to kind of get towards that stabilization in the broadband base in the medium term and reducing churn. It seems like you're still struggling to balance the two. So how should we think about price up going forward? Dennis Mathew: Yes. So we remain very disciplined in evolving our promo roll rate event activity. We can see in real time what the impact of those activities are, how much call volume that's driving, how much churn it's driving, how do we make sure we maximize the monetization of those promo roles and rate events when they do occur. When we first joined, there was a lot of art and not a lot of science, now we're doing a lot of science and making sure that we have complete command of how we do that most effectively. So that is strategy that we continue to evolve. The key -- some of the key things that we found helping us maximize the monetization of those events is proactively communicating with the customers, helping them understand what we're doing, why we're doing it and doing that ahead of time and then giving them options, giving them the opportunity to repackage themselves into these more attractive, valuable margin-accretive video packages, for example. And we're finding customers raising their hands and saying, hey, I don't want to be in this legacy package. I actually want to be in this new package. We're messaging them about the opportunity to take mobile so that they can make sure that they're able to manage their monthly expense most effectively because as customers are looking to manage their monthly expense, we can provide the best value through the mobile service. And so historically, it was really little to no communication, no ability for customers to have any options other than to call us and demand the credit. We are now going on the offensive and communicating ahead of time what's happening, why it's happening and giving them options and customers appreciate that. And so we're going to continue to evolve and find the right balance so that we can balance ultimately rate and volume and not only stabilize our financials, but we will ultimately get to a path where we stabilize broadband as well. And I'm confident that we have the products and the tools and the capabilities to do that over time. Sarah Freedman: Thank you, operator. I think that concludes our Q&A. Operator: I'll turn the floor back over to management for closing remarks. Dennis Mathew: Thank you all for joining. Please reach out to Investor Relations or Media Relations with any additional questions. Operator: Thank you. And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Operator: Good day, and thank you for standing by. Welcome to Pharming Group N.V. Third Quarter 2025 Results Conference Call and Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Fabrice Chouraqui, Chief Executive Officer. Please go ahead. Fabrice Chouraqui: Thank you, operator, and good morning and good afternoon, everyone, and welcome to the Pharming's Q3 2025 Earnings Call. I'll be joined on this call today by Steve Toor, our Chief Commercial Officer; Anurag Relan, our Chief Medical Officer; and Kenneth Lynard, our new Chief Financial Officer. On this call, we will be making forward-looking statements that are based upon our current insights and plan. As you know, these may well differ from future results. As you saw in our press release earlier today, we delivered another very strong quarter. Total revenues grew by 30% in the third quarter of 2025 versus the same quarter last year, and operating profit jumped to $15.8 million, nearly 4x last year's result. Operating cash flow came at $32 million, putting our cash position almost back to where it was at the end of 2024 before the acquisition of Abliva. Our strong top line growth was fueled by the continued significant growth of our 2 commercial assets, RUCONEST and Joenja. RUCONEST grew 29% year-on-year, fueled by continued strength in new prescribers and in new patient enrollments, even amid the launch of a new oral on-demand therapy in July. This reflects RUCONEST's unique value proposition for severely affected HAE patients, which Steve will elaborate upon in a minute. Joenja third quarter revenue increased by 35% reflecting the 25% year-on-year growth in patients on treatment and our increasing success in finding new APDS patients. The drug continues its uptake in the 12-year plus APDS segment. And when looking ahead, we anticipate adding new sources of growth with the pediatric indication, the reclassification of the U.S. patients and our geographic expansion. The strong momentum for our 2 commercial assets support an upgrade to our full year 2025 revenue guidance to $360 million -- to $365 million, $375 million from the previous $335 million, $350 million, for which Kenneth will provide more details later in the call. Finally, the recently announced significant reduction in G&A headcount follows through on our plan to optimize capital deployment to high-growth initiatives to fully capitalize on our significant growth prospects. Before we review our commercial and financial results in greater detail, I'd like to highlight that our Q3 performance reflects our strong growth foundation. In just a few years, Pharming has transformed from a single asset company into a fast-growing biotech with 2 high-growth commercial products and a late-stage pipeline with 2 programs with over $1 billion sales potential each. As we've seen, RUCONEST continues to grow double digits after 10 years on the market. Its unique value for severe HAE patients and specific manufacturing process make it a reliable cash engine to fund our future growth. Joenja is just at the beginning of its life cycle with multiple growth catalysts. The recent data published in sales suggests significantly higher APDS prevalence and the expansion in larger PIDs and CVID could unlock a much larger market. KL1333 for primary mitochondrial disease is another $1 billion-plus opportunity with a positive futility analysis in the ongoing registrational study. So this combination of durable revenues, first-in-disease innovation and late-stage pipeline positions Pharming well for substantial value creation in the near and long term. With this portfolio and pipeline as the foundation, we can leverage our strong rare disease capabilities to build a leading global rare disease company and deliver on our vision. I'll now hand over to Steve, who will discuss our commercial progress during the quarter and elaborate on the continued strong growth of RUCONEST and Joenja. Stephen Toor: Thank you, Fabrice. Good morning, everybody. As Fabrice said, RUCONEST has delivered another very successful quarter with high double-digit growth of $82 million in revenue, which is up 29% on Q3 of last year. The strong growth is being driven by the continued increase in prescribers quarter-on-quarter. New prescribers are recognizing the value RUCONEST brings to patients suffering with moderate to severe HAE, and this underpins our consistent prescriber growth over the years. In fact, we've added an average of 22 new prescribers in the past 6 quarters, which leads directly to the high level of new patient enrollment and the vial volume increase over prior year, which is at 28% versus the first 9 months of 2024. Pharming's sustained success unabated by the recent launch of the oral product reflects RUCONEST's unique profile and strong differentiation in the acute on-demand HAE market. RUCONEST remains an important treatment option for moderate to severe patients who experience more frequent attacks, which explains the continued strong momentum and our confidence in the product's long-term growth prospects. As a reminder, RUCONEST is a highly effective product serving all patient types, type 1, type 2 and normal C1, specifically those patients suffering from frequent moderate to severe debilitating HAE attacks. They've also typically failed other single pathway-specific targeted acute therapies such as Icatibant, which have not been effective for them, often leading to the need to redose to stop their HAE attack. As the only recombinant C1 protein replacement therapy, RUCONEST uniquely addresses the root cause of HAE, providing strong differentiation versus single pathway targeted therapies. This differentiation is why RUCONEST is a cornerstone treatment for HAE attacks. You can see in the photographs on this slide an actual RUCONEST patient, and this is exactly the type of patient I mean, with a more severe course of disease attacking frequently and having to redose on other therapies along with her recovery as she resolves the attack. HEA patients with the disease profile I've described need RUCONEST on hand, which through its IV mode of action delivers a bolus of C1 straight in the vein, which is critical for them. As a result, by using RUCONEST, patients get complete resolution in a single dose for 97% of their attacks. Half of those patients actually get complete attack resolution in 4.5 hours with the vast majority within 24. That efficacy is both critical and reassuring, and that is direct feedback from the patients we serve. Switching gears to Joenja. As with RUCONEST, we've delivered another strong third quarter. We achieved high double-digit year-over-year revenue growth of plus 35%, generating $15.1 million in revenue for the quarter. The number of U.S. patients on paid therapy is up 25% versus Q3 2024. And importantly, we've identified 13 additional APDS patients in Q3 alone, which shows our ability to keep building the patient funnel in this ultra-rare disease. We're finding patients faster than we did in 2024 with a total number of APDS patients in the U.S. now at 270. Importantly, the resulting significant increase in patients versus 2024 on patients consistently high adherence to therapy is driving this strong revenue growth. The launch of Joenja in the U.K. is also going well, and this is an important first step as we execute our focused geographic expansion plans. Let's now review the next significant inflection point, which is the pediatric launch in the U.S. for patients aged 4 to 11. The FDA has granted priority review of our application to expand the label and assigned a PDUFA date or an approval date of January 31, 2026. Our preparations for launch after the expected approval in January are on track. As we approach the U.S. pediatric launch, the team has already identified 54 patients diagnosed with APDS aged 4 to 11. 1/3 of those patients are already on therapy through Pharming's early access program and with many others likely to go on therapy soon after launch. So this represents an important growth driver for Pharming, which starts in just a few months. I'd like to now hand over to Anurag, who will discuss our development programs and the forthcoming data presentations at the American College of Allergy, Asthma and Immunology later this week in Orlando. Anurag Relan: Thanks, Steve. In addition to the commercial successes in the quarter, we continue to advance our pipeline in the past 3 months. In APDS, as you mentioned, Steve, the FDA granted priority review for our sNDA for 4- to 11-year-old children, underscoring the seriousness of the disease and the potential to offer a new treatment option with leniolisib. We also have regulatory filings under review in Europe, Japan and Canada with approvals anticipated in 2026. We have 2 Phase II proof-of-concept studies for PIDs with immune dysregulation, and these are also on track for readouts in the second half of '26. And then our newest addition to the pipeline is also progressing nicely, KL1333 in a registrational study for primary mitochondrial disease, where enrollment and site activation are advancing, and we continue to expect to read out in late 2027. As you recall, there was an important publication in Cell in June. This work has implications for the variants of uncertain significance or VUS reclassification work, which is ongoing by the labs. The publication in Cell, however, also opens another potential avenue to expand the APDS population. Specifically, the paper found more than 100 new gain-of-function PI3K delta variants. What surprised the researchers was that these gain-of-function variants were much more commonly found in population databases, suggesting an APDS prevalence up to 100x higher than current estimates as well as a broader set of clinical symptoms. This raises a number of key questions to determine how these variants may cause disease, including which variants cause clinically meaningful gain of function, what symptoms and diseases do these variants cause and how do we find patients with these variants. We started a number of activities now to help answer these questions. First, we're convening a global KOL at [ AG Board ] this month to address how these variants can cause disease. In parallel, we're sponsoring work to build a predictive AI-driven model that could identify patients who could benefit from targeted PI3K delta inhibition with the goal then to be able to apply the model to large EMR databases. And given the significant findings, we can actually identify more gain of function variants with newer base editing technologies. Generating additional variants will be important not only to understand the broader prevalence, but also for the ongoing VUS resolution project. So much more to come on this exciting work. We also have new data being presented at the American College of Allergy, Asthma and Immunology. There are 5 posters on RUCONEST where we performed a reanalysis of our clinical trial data with recently used definitions of key endpoints. These data highlight the key symptom benefits in HAE patients experience with RUCONEST across a number of clinically relevant outcomes. In addition, an indirect treatment comparison with sebetralstat will be presented, providing additional evidence for the unique benefits that RUCONEST offers HAE patients. On the APDS side, we have posters describing the treatment burden of the disease on both patients and caregivers. We also have a number of posters on Joenja with real-world data highlighting key benefits, including a reduction in infections. Lastly, ahead of our expected pediatric approval, we have new data in this 4- to 11-year-old APDS population, showing important outcomes, especially on quality of life improvement seen in the study. I'll turn it over now to Kenneth, our newest member of the team, to review our financials. Kenneth Lynard: Thank you, Anurag. As the new CFO, I'm excited to have joined Pharming at such an exciting time and have the opportunity to provide more color on our strong financial performance and outlook. Q3 was an excellent quarter with revenues at $97.3 million, up 30% versus the same quarter last year. We saw double-digit revenue growth for both RUCONEST and Joenja. Gross profit grew by 33% to $90.2 million, mainly due to the higher revenues. And accordingly, we recorded a gross margin of 93% versus 91% same quarter in 2024. Our operating profit with a slight adjustment, as it's noted here on the slide, almost increased to 4x to $16.0 million compared to $4.1 million last year. That came from growth in revenues, the improved gross margin and well-managed operating costs. Cash and marketable securities increased from $130.8 million at the end of the second quarter to $168.9 million at the end of Q3. This increase was driven by significant cash flow from operating activities with $32 million. And as Fabrice mentioned, the total balance of cash and marketable securities is now back in line with the end of 2024 prior to the Abliva acquisition. Our year-to-date consolidated financial numbers for the first 9 months show continued strong execution of our strategy. Total revenues grew by 32% to $269.6 million due to strong double-digit revenue growth for both products and gross profit grew by 35%. Operating expenses increased by $29.2 million, excluding $20.4 million of Abliva-related acquisition expenses and our operating expenses were up by only 4%. Adjusted operating profit, excluding nonrecurring Abliva acquisition-related expenses compared -- was $29.7 million, which compared to a loss of $15.3 million for the first 9 months of 2024. Cash flow from operating activities was $44 million in the first 9 months of the year. Following the strong results for the first 9 months, we are raising our 2025 total revenue guidance to $365 million to $375 million, up from $335 million to $350 million. This implies full year revenue growth between 23% to 26%. The increase is due to continued strong performance and outlook for the remainder of the year. We continue to expect total operating expenses between $304 million to $308 million, this assumes constant foreign exchange rates for the remainder of the year, includes $10.2 million of nonrecurring Abliva acquisition-related transaction expenses and excludes approximately $7 million in onetime restructuring costs related to the implementation of our G&A reduction plan. We continue to expect that our available cash and future cash flows will cover the current pipeline and related prelaunch costs. Going forward, we'll further accelerate setting the foundation for strong financial discipline with investments into areas that matters the most to spark near- and long-term value creation. On a personal note, I came to Pharming given my deep belief in its mission to bring life-changing therapies to rare disease patients and so the strong potential to develop a leading global rare disease company. I see great opportunity to sharpen our focus on profitable growth, effectively allocate capital to maximize return on investments and improve transparency and predictability in our financial reporting. And with that, let me hand back now to Fabrice for closing remarks. Fabrice Chouraqui: Thank you, Kenneth. So in summary, we are really pleased to report yet another strong quarter, reinforcing the strength of our business for sustainable growth and long-term value creation. As you heard from Kenneth, as a result of this performance and our outlook for the remaining of the year, we are raising again our full year guidance. Looking ahead, RUCONEST is poised to continue to grow and to remain the cornerstone treatment for severe HAE patients, underpinning a strong revenue base. Joenja is well positioned to generate a significant portion of our revenues in the future given strong growth and the additional opportunities we are actively unlocking. Our high-value pipeline is advancing rapidly with a clear objective to deliver 2 potential blockbuster assets, creating a meaningful value creation catalyst for shareholders. And we are also taking decisive steps to enhance financial discipline, including optimizing G&A headcount to ensure efficient capital allocation and maximizing our return. I'd like to end this call by expressing my sincere gratitude to Steve Toor for his contribution to Pharming over the past 9 years. We look forward to his continued support as an adviser to the company, and we are very excited to welcome Leverne Marsh as our new Chief Commercial Officer to drive the next phase of commercial growth. Let me now open the line for questions. Operator: [Operator Instructions] First question comes from Jeff Jones of Oppenheimer. Jeffrey Jones: Congrats on a really strong quarter. Two questions from us. With respect to RUCONEST, can you speak to any impact you're seeing from the new oral that has come on to the market? Where do you see it being adopted? Do you anticipate any pressure on your patient base? And then for Joenja, you mentioned that 1/3 of the pediatric patients already identified are currently on therapy through early access. Any impact on revenue from these patients when the product is formally approved next year? Fabrice Chouraqui: Thank you so much, Jeff, for your question. So on RUCONEST, I mean, clearly, we don't see RUCONEST competing head-to-head with sebetralstat. And so that's why I cannot comment on how sebetralstat is doing. As I mentioned, I believe we have a highly distinctive value proposition that serves a different type of patients, more severe patients. And this is due to a unique mode of action that replace the missing, the deficient protein underlying the biology of the disease and a very specific mode of administration. As such, I believe that many more patients could benefit from RUCONEST, many more patients who are not yet well controlled on an on-demand treatment. And that's the vast majority of the RUCONEST patients. These are patients who have not been able to be controlled appropriately with other treatments and ultimately got the efficacy that they needed with a treatment with RUCONEST. When it comes to the pediatric, the question on Joenja and pediatric, as you rightly said, we have identified already 54 pediatric patients in the U.S. and about 1/3 of them are on our early access program. We expect to convert these patients, those patients who are already on the drug fairly quickly. And as such, which is typically what you see in rare disease, in ultra-rare disease, we expect somehow a bolus of patients to come on drug. This will then add to the patients that are already identified that we will strive hard to ensure that they can benefit from RUCONEST. And then will come additional patients, pediatric patients that we are committed to identifying. So the normal sequence where you have, first, patients who are on access program that will convert, second, patients who are already identified that will probably come on drug if the doctors decide so. And then new patients that you identify. So really, that sequence will probably happen next year. And given the number of patients that we have already identified, 54, it's a large number, we believe that pediatric, the expansion of the pediatric -- the label to the pediatric population will be a significant growth driver that will add to the current source of business in adults in the 12-year plus segment. Operator: Next, we have Lucy Codrington from Jefferies. Lucy-Emma Codrington-Bartlett: I've got a few, if I may. So just following then on RUCONEST, and apologies if I missed this at the beginning of the call, I was late joining. The plan to stop RUCONEST outside of the U.S., have you given a time frame on when that will become effective? And then just in terms of the competitive threat from Ekterly, given -- I'm totally understanding your -- the different positioning of the drugs. But how often are typically HAE patients seen by their specialist for them any -- if there were to be any switching for that to potentially become apparent? And then moving on to Joenja. In terms of the VUS opportunity, are you happy with the rate at which the -- this -- I mean, my understanding is we might start to see VUS patients in the second half. And I noticed that the guide no longer -- the kind of details with your outlook no longer kind of suggest that. So is that something that you think is now more likely to be pushed into 2026? And what is the process for VUSs outside of the U.S.? And then if I may, 2 more. Just in terms of the compliance rates on Joenja, I think before it's been roughly around 85%. Is that something you're still happy with? And then just in general, your rate of progress identifying patients, what do you think the anticipated peak could be within the U.S.? Sorry for so many. Fabrice Chouraqui: Thank you, Lucy. I'll try to cover all your questions. So I'll start with RUCONEST and your questions related to the delisting of RUCONEST in some countries in Europe. We plan to complete this by the first half, first quarter -- end of the first quarter, first half of next year. When it comes to -- and again, this is really driven by the fact that we don't see the commercialization of RUCONEST in these countries that's financially sustainable. Given the number of growth drivers that we have, we hope to be financially disciplined and ensure that we deploy our capital appropriately. Obviously, we are working with all stakeholders in those countries to ensure that those patients will be able to access the right treatment and if needed, ensure continuity of supply of RUCONEST through compassionate use access mechanism. When it comes to Ekterly, I mean, I said that clearly, for me, the RUCONEST and Ekterly are serving 2 different types of patients. And as such, I don't see a second threat for RUCONEST. I mean, RUCONEST is a drug that has a unique mode of action that replace the missing or deficient protein underlying the biology of the disease. RUCONEST has a very unique mode of administration that allow a very fast onset of action. And as such, it has a unique value proposition for more difficult-to-treat patients. That's why the vast majority of patients on RUCONEST are more severe patients, are patients that often have failed other treatments, are patients that need actually that level of efficacy, that speed of onset to really address their more frequent and more severe crisis. All right, moving to Joenja and your question about the U.S. as Anurag said, test labs are in ongoing conversations with the researchers, which published this paper in Cell. And we expect that over time about 20% of the U.S. patients to be reclassified as APDS. We have obviously to remain arm length, obviously, to what's happening and hope that the discussion will progress well and that we will see some patients being reclassified. Outside the U.S., the process will be the same. Test labs will have to, again, understand the data, incorporate the data, identify patients who are carriers of those newly identified variants. And if those test labs feel that those patients needs to be reclassified, then they'll call the doctors and then the doctors will probably reach out to the patients. The adherence rate is -- we don't see any change actually in the adherence rate for Joenja. It is actually remains extremely strong and around the magnitude that you have mentioned. When it comes to patient identification, you're right that we're very pleased to see that our efforts continue to pay off and that we have added 13 new APDS patients in Q3. We have identified 13 new APDS patients in the U.S. in Q3. That shows our capability to identify patients in this ultra-rare -- suffering from this ultra-rare disease. You asked about the peak. I mean, there are in the U.S., if you consider the prevalence, at least 500 patients suffering from APDS. On top of it, we've said that we expect that 20% of the U.S. patients actually could be reclassified as APDS, and that could increase the potential of this population by 50%. And then on top of that, Anurag mentioned the efforts that we are making to really leverage the work that has been published in sales and which suggests that APDS prevalence may be far higher. And that could be actually an upside. So again, I think there are some very concrete numbers I've shared with you. And on top of it, the potential upside, which we cannot quantify today. The authors suggested up to 100x. Again, this needs to be verified, and you can see that we have a very concrete and solid kind of action to be able to come back to you with more next year. I hope I addressed your question, Lucy. Operator: Next we have Sushila Hernandes from Van Lanschot Kempen. Unknown Analyst: This is [ Maridith ] for Sushila from Van Lanschot Kempen. I have 2 questions. First, given your more disciplined approach, what are your priorities for capital allocation? Can we expect another M&A transaction similar in size to Abliva? And second, how is your basket PID trial progressing? And when can we expect top line? Fabrice Chouraqui: Hi, thank you, Sushila. Thank you for calling out the disciplined capital allocation. That's true. And hopefully, it was very apparent. And with Kenneth joining, clearly, I'm extremely happy that given his track record, I'll be able to really embed that mindset, which is absolutely essential if you want to run a high-performing organization. I think as you see, we have a number of growth catalysts in our commercial portfolio in the short term. We also have a number of pipeline catalysts next year and the year to come. So when it comes to value inflection point, growth catalysts, we have a lot, and we are committed to showing that we can execute. Now it is true that we have higher ambitions, but there is no rush actually in doing any M&A. Obviously, given the strong growth platform, our ability to generate cash, the very strong capability platform that we have built over the years in clinical development, in supply chain, in commercial, in access, I believe we can be much more ambitious, and we should be looking at the continued expansion of our portfolio and our pipeline. And as such, we are continuously looking at potential opportunities to expand our portfolio and pipeline. So there is nothing planned. There is no rush. Anything that we would want to do will have to be value accretive for our stakeholders and shareholders. But clearly, this is something that we keep in mind. It is part of the work that we're doing. And if we find the right opportunity, obviously, we will engage with our shareholders. Anurag Relan: And I think you had asked also about the basket PID trial. And if you remember, this is a study with multiple genes that can drive the PI3K pathway, a Phase II proof-of-concept study. And this study is actually progressing very nicely. We continue to expect readout from the study in the second half of '26. So a very exciting program, along with the CVID program, both on track for second half '26 read out. Operator: Next we have Joe Pantginis from H.C. Wainwright. Unknown Analyst: This is Josh on for Joe. So I just wanted to ask a question about the new formulation. If you could give any more color on this new pediatric formulation for the 1- to 6-year-old group? And if there's any specific manufacturing hurdles that you may need to clear for this formulation? Anurag Relan: Josh, so we have indeed a new pediatric formulation for the youngest population, again, because this youngest population of children wouldn't be expected to be able to follow a tablet, which we currently have available for the older kids as well as the adolescents. For this youngest population, the formulation is granules. And so these granules, we've manufactured them, we've done PK work on them, and we're going through the -- we've actually completed the study with this 1- to 6-year-old population. So we expect to follow a similar process in terms of the regulatory path. And obviously, we've engaged with FDA, both with discussions on the formulation, but as well as on the study design. So I think all of it remains on track. Operator: Next, we have Natalia Webster from RBC. Natalia Webster: Firstly, I just wanted to ask around your revenue guidance uplift, just confirming how much of this comes from better-than-expected RUCONEST versus Joenja. And then in particular, for RUCONEST, how you're expecting that to develop into Q4 and 2026, given that you're not seeing much pressure from competition and also continue to see increases in prescribers and patients there? My second question is on Joenja and the international rollout. It seems that this is contributing around 11% this quarter. So curious to hear a bit more about how that's evolving and how you expect that mix to evolve over time? And then thirdly, just around the RUCONEST withdrawal from ex U.S. markets. Are you able to comment a bit on the savings you'll make from this and where you plan to redirect those resources? Fabrice Chouraqui: Thank you, Natalia. So when it comes to our revenue guidance, as Kenneth said, it was driven by the continued strength of our business that we've seen in Q3 and throughout the year in 2025. So obviously RUCONEST plays an important role because of the size of the drug, of the RUCONEST revenues in the total size of the revenues. But this upgrade is driven by both, obviously, the continued performance of RUCONEST and also the continued performance of Joenja. As Kenneth said, the new guidance suggests a growth for the year between 23% and 26%. We have not yet provided guidance for next year. But as we mentioned during the call, we expect RUCONEST to continue to grow as it's serving a differentiated population and has a unique value proposition for these more severe patients. And obviously, the acceleration of the growth of Joenja. Acceleration because until now we were able to source patients from only a unique source of business, the 12-year-old plus APDS patient population and that tomorrow we'll be able to unlock new source of business with the expected expansion of the label to the pediatric population that will add a significant number of patients. We have already identified 54 patients. That's a large number of patients. 1/3 of whom are already on drug, which we'll be able to convert, I hope, and fast. And then obviously, having already identified patients, these patients are more likely to be put on drug, and we will continue our efforts to identify more patients. And then we have other growth opportunities that we have elaborated upon in detail, the U.S. and then the geo expansion. That was actually one of your points. I think the launch in the U.K. is going very well. So we are very encouraged to see this. I think that shows our ability to launch a drug like Joenja in other countries. We have selected 8 markets outside of the U.S. where we believe we can develop a significant business for Joenja. And so we will roll out this strategy. Obviously, we are -- we will be -- we will make sure that reimbursement authorities in these countries reimburse the drug at the right price. It's absolutely. So the goal is not to launch just for the sake of launching. We have access program in place to allow patients to benefit from the drug at the present time. Obviously we are not a philanthropic company, and we need to have our drug reimbursed, but it cannot be done at any cost, and we will be working actively on this. When it comes to the RUCONEST withdrawal, as I said, we have to be more disciplined in the way we allocate our capital. We felt -- clearly we felt that maintaining the commercialization of RUCONEST in these countries was not financially sustainable. We'll take great care to ensuring -- great attention to ensure that patients can continue to access the right treatment. In terms of financial implication, it's difficult to quantify. It's going to be minimal. I mean you know that actually the vast majority of revenues came from the U.S. So I don't expect meaningful impact whether on the top line and in the bottom line, this is actually combined with our financial discipline efforts to really manage our cost structure more tightly. Operator: Our last question comes from the line of Simon Scholes from First Berlin. Simon Scholes: I've just got 2 questions. So you recorded a gross margin of 92.7% in the third quarter, which I think compares with 90% in H1 and 89% in '24. I was just wondering how we should think about the gross margin in your existing markets going forward? So do you think this 93% is sustainable going forward? And then you also say in the presentation, I mean, you said you've got -- you've seen an increase in more severe frequent attack patients. Does that mean that these more severe frequent attack patients are actually increasing as a proportion of the overall number of patients? Fabrice Chouraqui: So I'll start with the latter, and I'll let Kenneth actually elaborate on the gross margin point. So it is true that RUCONEST is serving a quite distinctive population in the on-demand market, more severe patients. And by more severe patients, I mean, patients who are having more severe crisis, often life-threatening crisis and more frequent crisis. And so that's basically the bulk of the patients. And so as the sales of -- as the revenue of RUCONEST developed, we see that pattern being reinforced. So RUCONEST is a drug that is primarily used on more severe patients, patients who are having more severe crisis, more frequent crisis. And I don't think that, that will change. I think there will be other treatment options for other type of patients. And RUCONEST will be able to continue to serve those patients, leveraging, again, the reliability that is built among this patient category and with prescribers. And I think that also illustrates the fact that quarter after quarter, although 10 years on the market, we see more prescribers using the drug. When it comes to the gross margin, I'll let Kenneth elaborate. Kenneth Lynard: Yes, thank you. Thank you, Fabrice, and thanks for the question. It's obvious that we have a high gross margin and it's impacted also by the mix of sales and across different geographies. As you see, so to say, the Joenja share growing and faster growing than RUCONEST, we're having a benefit coming from that. So we don't want to kind of give specifics in terms of the forward-looking performance, but I think you have seen kind of a slight increase on a continuous basis as we start to build out the Joenja sales to a larger extent. So I think Q3's performance is very encouraging, but we are not at this point of time giving the specifics around forward-looking, but think about it in that context of the Joenja share growth. Operator: That concludes the Q&A session. I will now hand back to Fabrice for closing remarks. Fabrice Chouraqui: Thank you very much, operator. Thank you all for attending this call and for your continued interest in our company. With that, I'll close the call. Thank you. Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Thank you for standing by. This is your conference operator. Welcome to the Intrepid Potash, Inc. Third Quarter 2025 Results Conference Call. [Operator Instructions] The conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Evan Mapes, Investor Relations. Please go ahead. Evan Mapes: Good morning, everyone. Thank you for joining us to discuss and review Intrepid's third quarter 2025 results. With me today is Intrepid's CEO, Kevin Crutchfield; and CFO, Matt Preston. During the Q&A session, our VP of Sales and Marketing, Zachry Adams will also be available. Please be advised that comments we'll make today include forward-looking statements as defined by U.S. securities laws. These are based upon information available to us today and are subject to risks and uncertainties that are more fully described in the reports we file with the SEC. These risks and uncertainties could cause Intrepid's actual results to be different from those currently anticipated, and we assume no obligation to update them. During today's call, we will also refer to certain non-GAAP financial and operational measures. Reconciliations to the most directly comparable GAAP measures are included in yesterday's press release and are available at intrepidpotash.com. I'll now turn the call over to our CEO, Kevin Crutchfield. Kevin Crutchfield: Thank you, Evan, and good morning, everyone. We appreciate your interest and attendance for today's earnings call. I'm pleased to report that Intrepid sustained its strong financial performance in the third quarter. This was highlighted by a net income of $3.7 million and adjusted EBITDA of $12 million, which compares to a net loss of $1.8 million and adjusted EBITDA of $10 million last year. Outside of the record pricing we saw in 2022, our year-to-date adjusted EBITDA of $45 million represents our best start since 2015. I'd like to take the time on our call to specifically recognize all of our employees and congratulate them on this excellent set of results, both for this quarter and year-to-date. Our strong results were primarily driven by 2 key factors: first, higher pricing in Potash and Trio as we realize the entirety of the first half increases in both segments in quarter 3. And second, our higher production over the past year has led to better unit economics. Both Potash and Trio improved our cost of goods sold per ton by low-single-digit percentages during the quarter and year-to-date our Potash cost of goods sold improved by 9% to $327 per ton, while in Trio, the same figure improved by 15% to $238 per ton. For Trio, specifically, our production has been consistently exceeding our expectations quarter after quarter, and we're confident we can continue to sustain these higher run rates, which should further improve our unit economics in 2026. Turning to market commentary. While sentiment in U.S. agriculture had softened over the past few months, there are some green shoots emerging. This was, of course, highlighted by last week's trade deal with China, which included soybean purchase commitments and yesterday's follow-through where they also confirmed they would remove retaliatory tariffs on certain U.S. farm goods including soybeans. While China soybean purchase commitments essentially put our exports back to historical levels, when those are combined with much higher recent domestic soybean crush, the total domestic soybean use has the potential to again reach recent historical highs. This, in turn, could also provide some relief for corn if we get lower planted acres next spring although corn exports have remained very strong regardless. In summary, the U.S. agriculture landscape is certainly looking better, which is also evidenced by corn and soybean futures, both now being up by 15% since August lows. For the broader Potash market, global supply and demand remains relatively balanced where demand in key international markets has been resilient throughout the year. Given the lack of significant additional potash supply until mid-2027, we think the market will continue to see pricing support for the foreseeable future. Furthermore, potash is currently trading at similar levels to where it was this time in 2023, offering good relative value compared to other fertilizers. Putting this together, we remain constructive on our sales volumes and pricing as we wrap up the year, and we'll continue to prioritize selling into our highest netback markets. Before passing the call on to Matt, I'll end my remarks with a couple of operational highlights. In potash, we're still working on the permitting and evaluation process for the AMAX Cavern at our HB facility and hope to have our permitting efforts wrapped up in the first quarter of 2026, which is consistent with the time line we outlined in the last earnings call. In Trio, as I alluded to earlier, our financial and operating performance continues to exceed expectations. This has largely been driven by the 2 new continuous miners we placed into service in the second half of '23 as well as the restart of our fine langbeinite recovery circuit. In addition, in January 2026, we expect to take delivery of another continuous miner, which will further improve our mining rates and continue our trend of year-over-year production increases. Accordingly, we now forecast our quarterly Trio production will be in the range of 70,000 to 75,000 tons for 2026, and our team is continuing to challenge itself to find even more tons through improved mining efficiencies and increased mill recoveries. Higher production should drive another year of record Trio sales volumes for Intrepid. And given that Trio pricing is close to parity with potash, this will also help to offset the modestly lower 2026 potash production guidance we gave on the last earnings call. Overall, Intrepid continues to deliver solid financial results and the recent improvements in U.S. ag markets is certainly a positive development. Looking ahead, we'll remain focused on strong operational execution, improving our margins and free cash flow through the cycle. As the only domestic producer of potash, we'll prioritize our investments into our core business to fully capitalize on our multi-decade reserve lives. So with that, I'll now turn the call over to Matt. So please go ahead. Matt Preston: Thank you, Kevin. Starting with our Potash segment. We delivered another quarter of solid results, primarily underpinned by improved pricing and higher sales volumes. Our Q3 average net realized sales price for potash totaled $381 per ton as we fully capture the approximately $60 per ton increase for sales into agriculture markets compared to the first quarter. Compared to the prior year, our higher sales volumes of 62,000 tons in the third quarter were driven by the increase in production over the past 12 months. As we noted on last quarter's call, during the third quarter, we did delay our production at HB with the goal of maximizing late season evaporation, which was the reason for our third quarter potash production decreasing to 41,000 tons. Despite the reduced production, we're still experiencing solid year in economics in potash particularly when you consider the other revenue streams of salt, magnesium chloride and brine that enhance our cash flows. In terms of segment gross margin, our Q3 figure of $6.3 million was approximately $2.2 million higher than last year. And year-to-date, our segment gross margin totaled $13.6 million, which compares to $13 million in the same prior year period. Due to the above average rain at HB in the summer of 2025, we expect our annual potash production next year to be in the range of 270,000 to 280,000 tons. Moving on to Trio. In the third quarter, we sold 36,000 tons at an average net realized sales price of $402 per ton. The strong pricing was driven by the continuation of supportive potash values and improved realization of low chloride pricing premiums in key markets and also reflects realization of first half price increases which totaled approximately $60 per ton since the start of the year. As for the lower Q3 Trio sales volumes, that was driven by 2 factors. First, our Trio demand was heavily weighted to the first half of 2025 and where we sold a record 181,000 tons and second, normal seasonality as customers focus exclusively on third quarter application needs. Last week, we announced the Trio fill program, where we reduced our reference pricing by $35 per ton for orders placed through the end of October, with pricing after the order period back up $25 to match levels seen during the spring season. We saw a very good subscription from our customers in the fill and expect to end the year with good sales momentum. Our East mine production rates and mill recoveries continue to exceed expectations in the quarter with Trio production of 70,000 tons, again driving solid unit economics. Trio's COGS per ton totaled $257 in Q3, which compares to $272 per ton last year and $235 per ton in the second quarter of 2025, with the sequential increase in Q3 attributable to a higher mix of premium Trio sales, which have a higher carrying cost relative to our other products. Overall, a combination of operational efficiencies, improving unit economics and higher pricing have driven a significant improvement in our Trio results. Our Q3 gross margin of $4.4 million was approximately $4 million higher than last year. And through the first 3 quarters, our gross margin totaled approximately $23 million, which compares to $1.6 million in the same prior year period. This is truly a step change in operating performance that we expect to not only maintain but continue to improve upon in 2026. For next year, we expect our Trio production to be in the range of 285,000 to 295,000 tons, which we expect will also drive a 5% to 7% improvement in our per unit costs and deliver another year of very solid margins. In Oilfield Solutions, lower water sales and oilfield activity reduced our gross margin in the quarter with water significantly lower, mostly due to last year's Q3 having the largest frac job in company history. Despite the dip in Q3, our year-to-date revenues and profitability on the South Ranch have mostly been consistent with recent historical performance. While not included in our segment results, I want to highlight another strategic sale of land on our South Ranch in the third quarter, where we sold approximately 95 fee acres for a gain of $2.2 million. These sales, while infrequent, highlight the strategic value of our ranch in New Mexico, and we will continue to pursue options to monetize our land position in the Delaware Basin. As for fourth quarter sales and pricing guidance, in Potash, we expect our sales volumes to be between 50,000 to 60,000 tons at an average net realized sales price in the range of $385 to $395 per ton. Compared to last year's fourth quarter, our Q4 volume should be roughly in line with pricing up approximately $45 per ton as our geographic advantage, diverse sales mix and limited sales into the corn belt are expected to insulate us from a potential slower start to the fall season. For Trio, we expect our fourth quarter sales volumes to be between 80,000 to 90,000 tons at an average net realized sales price in the range of $372 to $382 per ton. Compared to last year's fourth quarter, our Trio volumes are expected to be almost 60% higher after the very good subscription to the fill program with pricing up roughly $45 per ton, and we expect this sales momentum will again carry into the spring season. For our 2025 capital program, we expect our spend will be in the range of $30 million to $34 million. Our 2025 spend includes approximately $5 million related to the HB AMAX Cavern with the balance directed to other sustaining projects across our Potash and Trio operations. Overall, we're pleased with our year-to-date results and encouraged by the outlook. While we've had some pricing tailwinds this year in both Potash and Trio, much of the success has also been driven by the operational improvements we put into place, particularly at our East mine. Moreover, our debt-free balance sheet and cash position of roughly $74 million continues to put Intrepid in a position of strength and we're looking forward to a very strong finish to the year. Operator, we're now ready for the Q&A portion of the call. Operator: [Operator Instructions] The first question comes from Vincent Andrews with Morgan Stanley. Justin Pellegrino: This is Justin Pellegrino on for Vincent. I just wanted to touch on the AMAX Cavern and the permits. Can you give us an idea of what the CapEx would be associated with the injection well in the pipeline should those permits be obtained? And then within the overall capital allocation priorities for next year, I imagine this is impacting your decisions and how you're planning on going forward. But can you just give us an idea of where that falls within the potential for returning any other excess cash back to shareholders or any other projects that you might be taking on? Matt Preston: Yes. Thanks for the question, Justin. As we continue to evaluate the HB AMAX Cavern, if you recall, that capital will be spread out over a couple of years. Certainly disappointed that the cavern didn't have brine when we got the injection well or the extraction well, excuse me, drilled in the summer of '25. But as we evaluate it, I mean, the capital spend, it will really just kind of like I said, I mean, be over a couple of years. And kind of how that plays out is something we'll have a little more color on here as we get to the first part of the year. I mean, Kevin, I'll let you touch on the capital. Kevin Crutchfield: Yes. Yes, Justin. Thanks for your question on capital returns. I mean, I think the answer is consistent with the past. What we're really aimed at doing is continuing to reinvest in these core assets like we talked about before, to establish a position of resiliency, consistency, predictability, et cetera. So you've got repeatable results year-over-year-over-year. I think once we get to that point and are generating predictable steady free cash flows and cash flows, then that's when we can enter a period of what does a capital return policy begin to look like. And as we've said before, it's something that the Board registers very clearly and squarely with them, and it's something we talk about routinely. So I hate to give you the same answer, but it is the same answer. And we're kind of on the path as we begin to examine that going forward. Operator: Your next question comes from the line of Lucas Beaumont with UBS. Lucas Beaumont: So farmer economics has sort of been pressured in the U.S. There have been concerns around demand destruction kind of across some of the nutrients. So I just wanted get your view on sort of how your order book is looking for both Potash and Trio and if you're seeing any indications of that at all? Or it seems like a nonissue in terms of cost cutting from the growers so far? Zachry Adams: Lucas, this is Zachry. I appreciate the question. I think first on Trio, as Matt noted in his remarks, we saw a really good response to the fill program we released last week there. So order book looks really strong on that front, and we're really fully committed for fourth quarter at this point there. And then on the potash side, a similar story. Order book looks good. We're almost fully committed here for the fourth quarter versus our guidance values. And -- and the 1 thing I'll highlight is just the diversity of our potash mix between our feed sales, industrial and the geographies that we focus on. So that insulates us a bit if there is a slower start, as Matt said, to demand for fall in the Corn Belt, for example, and we feel good about where we're sitting today. Lucas Beaumont: Great. And I guess just as a follow-up then on the new well at AMAX. So I guess, could you maybe just give us a bit more detail around I guess, what the pathway forward would be. So if you get kind of -- if you get the permit in the first quarter, like when would you kind of look to sort of execute on that? And then what would sort of be the next steps if that's either successful or sort of not successful to then continue kind of moving the project forward? Matt Preston: Yes. I look to provide a little more color, Lucas. I mean depending on the permitting, we did the extraction well. It's about $5 million we spent on that. There's certainly a little more work to completely put that in service with pipeline. It'll only depend on timing of permitting and when we want to put the injection well in and what that time looks like to get that cavern full. When it comes to an injection well, it's about $5 million to $6 million for the well, a few million dollars for injection pipeline. But as far as exact timing of when that will spend and when that final completion capital around the extraction well will happen, that's something that I just will have more color on here as we get a little more clarity on permitting into the first part of 2026. Lucas Beaumont: Great. And then just, I guess, while the potash volumes are kind of going to be impacted and be a bit lower heading into '26 in the near term, when should we sort of start to see the negative kind of cost absorption there flowing through? I don't know if you can kind of give us a view on sort of what portion of your cost base there in potash, you sort of view as fixed versus durable maybe to kind of help with that as well. Matt Preston: Yes. I mean given the slightly lower production guide here in '26, we'll start to see, all else equal, some higher cost per ton here in the first quarter as we start to start harvesting the tons that were laid down in our ponds in the summer of '25. I think it's probably 5% to 7% increase for the full year cost per ton for potash compared to '25, which we're pleased is kind of offset by that improvement in our Trio segment. Lucas Beaumont: All right. And then I guess just in Trio, I mean you mentioned at the start that the pricing there has continued to be very attractive and they're sort of trading kind of in line with potash at the moment. How do you kind of see that dynamic that are playing out as we sort of move through 2026? Zachry Adams: Yes. Lucas, I think we continue to see strength on Trio, and it's really due to the components of that product. Obviously, kind of year-to-date, we've seen strength across the potassium markets. And not just on the potash side as well on the SOP side, too, where we're seeing a greater realization of that low chloride K value in the Trio. And then kind of pivoting over to the sulfate component of Trio, we did see a bit of a seasonal adjustment in the summer as expected. But just looking at sulfur values overall, they're starting to trend back up here in the fall, and we think that provides support going into Trio into 2026 as well. Lucas Beaumont: Great. And then just lastly on Oilfield Services, I mean, it's sort of in a tough water sales environment there that you called out with the low activity levels in the quarter. So how is kind of -- is the fourth quarter kind of tracking the same? And I guess, how should we kind of think about the outlook there for that business into '26, both on the sale side and I mean like you saw, you saw a fair bit of margin pressure there in the quarter as well, which I'm assuming the bulk of that is probably tied to the sales decline. But I mean, if there's anything else there to maybe roll out for us to kind of just help frame how we should think about the potential earnings if we're sort of running at a lower sort of sales level kind of going into next year? Matt Preston: Yes. I mean Q3 was certainly quite a bit lower, particularly when we compare it against last year's record frac. I mean, we're very exposed to kind of the drilling activity that's on our feed land there, and it's really kind of feast or famine with some of those bigger drilling jobs. As we look into Q4, we certainly expect it to be down a bit compared to what we saw in the first half of the year, where we were pretty consistent margins around $1.3 million and $1.6 million. So some improvement over Q3, but we see still a slower water environment here in the fourth quarter and likely into the first part of '26. Operator: Your final question comes from the line of Jason Ursaner with Bumbershoot Holdings. Jason Ursaner: Just for Kevin, it's been, I guess, nearly a role since your were -- nearly a year since you were announced in the CEO role. But I think you've been pretty clear on the priority in terms of consistency of earnings, sustainability. Just looking at the results, it does feel like a lot of that work to get back to structural profitability, at least the heavy lifting is kind of either done or kind of on the path. So I guess, in your mind, what else sort of -- what are the big steps that you're looking for to kind of get you there? Kevin Crutchfield: Well, I mean, the focus has been intense just around the core assets. And look, I'll tell you that while we're posting more consistent, more reliable results, we're still not pleased with where we are. We think there's more work to be done, and we're going to continue that work because what we'd like to do is continue to take costs out of the system move ourselves down the cost curve. Some of that comes from the removal of cost that you can avoid because some of that comes through tweaking the volumes. And I'd like to just specifically recognize the Trio team for the work that they're doing at our East mine, have been dramatic improvements there over the last year. And I think they'll continue to outperform going into next year. We've still got some work to do on the potash side. We had the AMAX disappointment and then the weather at the end of the year that kind of threw a little bit of a ranch into early part of next year, but we'd like to get that back on track and kind of get back over that magic 300,000 ton mark and even a little higher. So while we're pleased with what has been done, there still is more work to do to achieve that resilient, predictable, as you just said, structural reliability. So that continues to be job one. And once we feel reasonably satisfied that we've accomplished that, then we can start to think about where we go from here. So bottom line is pleased with progress to date, but we still have more work to do and look forward to reporting out on those results in the coming quarters. Jason Ursaner: And in terms of the capital allocation stuff, I mean, is it waiting to see it? Or is it kind of a linear thing where, I guess, or is it -- at what point you kind of feel like it's in the works sort of, I guess, is where I'm trying to go, is it just obviously sitting with a pretty big percentage of your market cap in cash. So the commentary on waiting for capital returns, just sort of how does that go together? Kevin Crutchfield: Yes, the nature of this business and a lot of businesses, you can make a capital investment and see the result in a week. Here, it can take a year or 2 before that stuff starts to play out, just given the long-dated nature of largely the evaporation seasons and our -- the impact that weather can have on us. But I would say that a lot of that's in flight. We still have more work to do, specifically around Carlsbad and Wendover and frankly, Moab as well, making sure that those assets are performing at what we believe to be sort of their entitled level of performance. So we've sort of done a couple of years of catch-up capital. I think next year will be another one of those years. And you'll start to see the benefits of those manifest themselves late next year and moving into 2027, I think. Operator: This concludes the question-and-answer session. I would like to turn the conference back over to Kevin Crutchfield for any closing remarks. Kevin Crutchfield: Again, I'd like to take just another moment to thank our team for their hard work and dedication this year and posting solid results year-to-date and look forward to continuing to work with them in the coming quarters. And thank you all for attending today's call, and we look forward to keeping you posted in the coming quarters. Everybody, have a good day. Thank you. . Operator: This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
Operator: Thank you for standing by. My name is Van and I will be your conference operator today. At this time, I would like to welcome everyone to the Q3 Planet Fitness Earnings Call. [Operator Instructions] I would now like to turn the call over to Stacey Caravella, Vice President of Investor Relations. Please go ahead. Stacey Caravella: Thank you, operator and good morning, everyone. Speaking on today's call will be Planet Fitness' Chief Executive Officer, Colleen Keating; and Chief Financial Officer, Jay Stasz. They will be available for questions during the Q&A session following the prepared remarks. Today's call is being webcast live and recorded for replay. Before I turn the call over to Colleen, I'd like to remind everyone that the language on forward-looking statements included in our earnings release also applies to our comments made during this call. Our release can be found on our investor website along with any reconciliation of non-GAAP financial measures mentioned on the call with their corresponding GAAP measures. Now I will turn the call over to Colleen. Colleen Keating: Thank you, Stacey and thank you, everyone, for joining us for the Planet Fitness third quarter earnings call. In the first 9 months of the year, we made considerable progress in executing our strategic imperatives and are feeling energized to capture even greater opportunities in the evolving fitness landscape. Our strong financial performance in the third quarter is indicative of that progress and allows us to raise elements of our 2025 outlook, which Jay will touch on in greater detail. As consumers increasingly prioritize their health and well-being, we are pleased to have ended the quarter with approximately 20.7 million members and 6.9% system-wide same club sales growth. We added 35 new clubs and ended the quarter with a global club count of 2,795. Our reach is unparalleled. At the same time, with population growth and deurbanization over the past several years, we see increased opportunities to bring our high-value offering to an ever-growing community of fitness-minded consumers in more geographies than ever before. In September, we announced record-breaking participation in our 2025 High School Summer Pass program with more than 3.7 million teens completing over 19 million free workouts in our clubs. Participation was up roughly 30% from last year, reflecting teens' desire to stay active and prioritize their well-being during a critical time when school is out. We believe that the marketing emphasis on our expanded product offering, including more strength equipment, is resonating with younger consumers. We also shifted our marketing approach this year by increasing the number of influencers we use to promote the Summer Pass and we prioritized platforms that drive participation such as TikTok. This year alone, we've invested nearly $170 million in waived membership dues. Historically, we've converted mid-single-digit percentages of the participants to paying members over time. To reach these highs in the fifth year of the program speaks volumes about Gen Z's commitment to their health and wellness. Key findings from this year's participants are particularly affirming with 93% of surveyed participants reporting that the program helped them create sustainable fitness routines and 78% feeling more confident. Let's now turn to the progress we've made on our 4 strategic imperatives during the third quarter. As a reminder, the 4 strategic imperatives are redefining our brand promise and communicating it through our marketing, enhancing our member experience, refining our product and optimizing our format and accelerating new club growth. I'll start with redefining our brand promise. In the third quarter, we continued with our "we are all strong on this planet" marketing campaign that highlights our best-in-class equipment, our welcoming atmosphere and the supportive community we offer. Our strong join trend has continued, and our member count at the end of Q3 was in line with our expectations. We also saw increased Black Card penetration in the quarter with 66.1% of our total membership now at the higher tier, a 300 basis point increase from the same quarter last year. Consumers continue to recognize the value of the Black Card with the smallest price gap between our 2 membership tiers since we launched the Black Card. As many of you know, we held off on increasing the price of our Black Card membership until we got on the other side of the Classic Card price increase anniversary. After thoughtful consideration, significant testing and data analysis, we've made the decision to raise the Black Card price to $29.99 after our peak join season in 2026. We're also continuing to test new Black Card amenities such as dry cold plunge and red light technology that would add even more value to our Black Card offering. We unveiled several of these potential new offerings to our franchisees last week at our annual franchisee meeting and they were met with great enthusiasm. We look forward to sharing our plans to modernize the Black Card Spa at our Investor Day next week. Finally, we're excited to announce that we'll be sponsoring New Year's Rockin' Eve next month in Times Square for our 11th consecutive year. This is a high visibility event that continues to put Planet Fitness on a global stage and keeps our brand top of mind for consumers as they think about prioritizing their health and fitness goals in the New Year. Now to member experience and format optimization. We know that establishing a relationship with our members is important to their engagement and retention. And utilization matters as people tend to be more loyal to brands that they use regularly. It's an indication of the value they find in their Planet Fitness membership, which is why we're pleased to see utilization rates continue to increase, a leading indicator of member stickiness. We're partnering with our franchisees to put the member at the core of everything we do, along with the team members in our clubs who play a critical role in personally welcoming every member. We see time and time again when club team members greet our members by name and provide personal recognition, it enhances the experience for both the member and the team member. Our goal is to create a deeper sense of loyalty and emotional connection to drive retention and ultimately, revenue. A recent consumer insights study showed that Planet Fitness outperformed several other fitness brands on feel welcomed. This is an important emotional equity when we consider that gymtimidation can be a barrier to gym membership and usage. We also saw strong positive associations for Planet Fitness with convenient location, value for money, price, easy access and machine variety and availability. These are strong associations for our brand. Member experience goes beyond a welcoming atmosphere. It includes providing members with the ideal equipment mix in a club with a format optimized layout so they can achieve their workouts their way. To this end, we gave franchisees who are developing or renovating clubs this year the opportunity to build a traditional layout or one of the new format optimized clubs and 95% elected to build one of the newer club formats. By the end of 2025, close to 80% of clubs system-wide will have some version of an optimized format. That's nearly 4 out of 5 clubs. We will share more about this next week at our Investor Day. And finally, our efforts to accelerate new club growth. We continue to refine our product offering and enhance operational efficiencies to maximize the economic value proposition for our franchisees while delivering the most relevant on-brand experience for today's members. That said, we're a top line-driven business and we are keenly focused on driving unit economics through top line growth. In August, our franchisees voted to shift 1 percentage point of the marketing funding from the local advertising fund to the national ad fund. This change will enable us to unlock new marketing opportunities to drive consideration and conversion, spend our dollars more efficiently and ultimately, fuel member growth. Our goal is to drive top line revenue as it is the key driver of unit economics. We do this through more effective marketing while enhancing the bottom line through greater marketing efficiency and the flow-through on incremental revenue in this high-margin business. We're grateful to our franchisees for this vote of confidence in our marketing leadership and strategy. Finally, we proudly received 2 notable honors recently. First, we were named to Fortune's 2025 100 Fastest-Growing Companies list. And second, we were recognized as #22 in this year's Franchise Times Top 400 as the top-rated fitness concept. These honors illustrate the strength of our brand and are a testimonial to the dedication of our esteemed team members and franchisees. Now I'll turn it over to Jay. Jay Stasz: Thanks, Colleen. We're very pleased to deliver another quarter of strong results. And as Colleen mentioned, we're raising our full year '25 outlook. Now to our third quarter results. All of my comments regarding our third quarter performance will be comparing Q3 of '25 to Q3 of last year, unless otherwise noted. We opened 35 new clubs compared to 21. Included in our openings are 5 locations where a franchisee acquired and converted regional gyms to Planet Fitness clubs. This is a strategy that we will use as another option to accelerate new club growth. These clubs, in many cases, open with a built-in membership base, giving franchisees a jump on top line ramp. We delivered system-wide same club sales growth of 6.9% in the third quarter. Franchisee same club sales increased 7.1% and corporate same club sales increased 6.0%. Approximately 80% of our Q3 comp increase was driven by rate growth, in line with our expectations with the balance driven by net membership growth. Black Card penetration was 66.1% at the end of the quarter, an increase of 300 basis points from the prior year and a sequential increase of approximately 30 basis points from Q2. Our Q3 ending member count of approximately 20.7 million members was in line with our expectations as the third quarter is typically not a quarter with significant membership change. Our join trends during the quarter were strong, including conversions to paying members from our High School Summer Pass program. Attrition rates, while elevated on a year-over-year basis, were not out of line with historical levels and we started to see moderation late in the quarter. For the third quarter, total revenue was $330.3 million compared to $292.2 million, an increase of 13%. The increase was driven by revenue growth across all 3 segments, including an 11% increase in franchise segment revenue and a 7.6% increase in our corporate-owned club segment. For the third quarter, the average royalty rate was 6.7%, flat to the prior year. Equipment segment revenue increased 27.8%. The increase was driven by higher revenue from equipment sales, including both new equipment and reequips. We completed 27 new club placements this quarter compared to 15 last year. For the quarter, replacement equipment accounted for 82% of total equipment revenue compared to 85% last year. Our cost of revenue, which primarily relates to the cost of equipment sales to franchisee-owned clubs was $58.2 million, an increase of 27.3% compared to $45.7 million last year. Corporate club operation expense increased 11.4% to $79.8 million. The increase was driven by operating expenses from 30 new clubs opened since July 1 of '24, including 10 in Spain. SG&A for the quarter was $30.5 million compared to $32.6 million, while adjusted SG&A was $30 million or 9.1% of total revenue compared to $31.3 million or 10.7% of total revenue, a decrease of 4.2%. National advertising fund expense was $21.4 million compared to $19.7 million, an increase of 8.7%. Net income was $59.2 million, adjusted net income was $67 million and adjusted net income per diluted share was $0.80. Adjusted EBITDA was $140.8 million, an increase of 14.4% and adjusted EBITDA margin was 42.6% compared to $123.1 million with adjusted EBITDA margin of 42.1%. Now turning to the balance sheet. As of September 30 of '25, we had total cash, cash equivalents and marketable securities of $577.9 million compared to $529.5 million on December 31, '24, which included $56.4 million of restricted cash in each period. During the quarter, we used approximately $100 million of cash on hand to repurchase and retire approximately 950,000 shares of our stock. Moving on to our revised '25 outlook, which we provided in our press release this morning. With 2 months remaining in the calendar year, we are confident in our ability to open between 160 and 170 new clubs, which includes both franchise and corporate locations. We recognize that we have a lot of clubs to open during the fourth quarter but this is standard business practice and we've completed this number of openings in prior fourth quarters. We are also confident that we can complete the 130 to 140 equipment placements in new franchise clubs. Given our strong results in Q3 and the overall strength in the business, we are increasing our outlook for '25. We now expect the following: same club sales growth of approximately 6.5%, up from 6%; revenue to grow approximately 11%, up from 10%; adjusted EBITDA to grow approximately 12%, up from 10%; adjusted net income to increase in the 13% to 14% range, up from 8% to 9%; adjusted net income per diluted share to grow in the 16% to 17% range, up from 11% to 12% based on adjusted diluted weighted average shares outstanding of approximately 84.2 million shares, inclusive of the impact of the shares we have repurchased throughout the third quarter. We expect net interest expense of approximately $86 million and D&A to be approximately $155 million with CapEx to be up approximately 20%. In closing, we are excited by the momentum in the business and evidence that our strategic imperatives are producing results. We had a highly successful High School Summer Pass program as we continue to build loyalty with Gen Zs. And our franchisees are investing in opening, remodeling and adding strength equipment as they see the benefits of our work to reposition our brand and optimize our layouts, putting the member at the core of what we do. I will now turn the call back to the operator to open it up for Q&A. Operator: [Operator Instructions] And your next question -- or your first question comes from the line of John Heinbockel with Guggenheim Securities. John Heinbockel: Colleen, your thought on holistically this marketing split, right, between local and national. I know the 1% shift that adds maybe, I guess, $50 million to the national piece. How do you want to spend that? Where do you think that goes over time, right? And what's sort of the right level? I guess you would think as you get larger, right, maybe you end up spending closer to in total, 7% of sales as opposed to something higher. What's the thought on that? Colleen Keating: So I'll speak to the shift of the 1 percentage point from the local ad fund to the national ad fund. I won't get super granular for competitive reasons, of course, but this will enable us to augment some of the marketing that we're doing digitally, use AI and augment our CRM, digital content optimization and a number of other things that, again, will give us the opportunity to have greater reach with each of those marketing dollars. It will also enable us to buy media more efficiently on a national basis. So again, really get more mileage out of every dollar that we're spending. John Heinbockel: Okay. And maybe a follow-up. I know, right, you've got this 5,000 store or club target in the U.S. Just remind us how you thought about that in terms of density. And then when you think about -- as you referenced geographies, is there a bigger opportunity than you thought for smaller markets, less dense? And does that require to make the economics work or how much smaller of a club do you need to make that work? Colleen Keating: So there's a couple of questions in there and I'll start maybe with the first one on the opportunity and density. As you know, we are more dense on the East Coast, so Northeast, East Coast, Southeast, less dense Midwest, West. And at the same time, where there has been population growth, job growth, deurbanization, new home construction, which, again, demographically meets the demand coming from millennials as forming households. We think there's opportunity where we're less dense to increase our penetration. And we think that some of the demographic shifts that have occurred with that deurbanization and population growth over the last several years complement that very well. And we've had several studies done to opportunity size the domestic landscape that supports that growth. Generally speaking, those growth numbers are supported with 20,000 or traditional 20,000 square foot club. At the same time, I think we've talked before, we're developing prototypes that are a bit smaller than the 20,000 square foot club that will enable us to go into markets that maybe don't have quite the population density but might be underserved from a fitness standpoint today. Next question comes from the line of Sharon Zackfia with William Blair. Sharon Zackfia: I wanted to actually double-click maybe on the churn. There was a lot of chatter kind of within the quarter amongst investors that maybe the click-to-cancel churn was much more elevated than what you expected but it doesn't seem like that was the case. So I wanted to check on that. And you mentioned moderation. Are you kind of back to normal levels of churn? And should we expect member growth to sequentially resume again in the fourth quarter? Jay Stasz: Sharon, this is Jay and I'll respond to that to start. And we don't guide to the membership growth, so I'm not going to comment on that. But we're pleased, right, as we said, the 20.7 million members was right in line with our expectations. And in regards to attrition, the rates were elevated on a year-over-year basis. But when we take a multiyear view, they were not out of line with what we've seen historically. And to your point, we did see some moderation late in the quarter. So what we have in our outlook and what we've modeled is continued elevation on a year-over-year basis. And that's very consistent with the way we thought about it in -- on the last call for Q2 and now this call and that's what we've modeled. It's included in our outlook that we've guided. So we're pleased with what we're seeing in the underlying trends in the business. Sharon Zackfia: And Jay, can I just follow up? Is that continued elevation just the tail from click-to-cancel? Or is it something you're seeing that's more macro? Jay Stasz: No, we think it's driven by the click-to-cancel tail. Operator: Your next question comes from the line of Jonathan Komp with Baird. Jonathan Komp: I want to just follow up. Could you maybe talk a little more directly when you look at the guidance raise for the year, combined with the confidence to commit to the Black Card pricing after your peak period coming up? Could you maybe just talk about more directly what's driving your increasing confidence to announce both of those today? Jay Stasz: So I can start with those items. I think, look, from a guidance standpoint, we had good results in our third quarter. So obviously, that is nice to see and gives us confidence. When we think about some of the drivers in the increase for the year, we have obviously some nice momentum in our equipment business, right? The franchisees, they are leaning in on these new formats, not only with the new clubs but certainly reequips and adders as we call them. So we've got some nice trends there. From an SG&A standpoint, we called out on the call, obviously, we had a decrease in the quarter. And some of that was driven by a annual franchisee conference that we're -- we were lapping last year that was pushed into the fourth quarter this year. But taking that out, we are seeing nice trends on SG&A. And we're also carrying forward, obviously, the upside that we had on the sales in the third quarter, pushing that into the full year guide. So all of those components are resulting in the guidance that we gave. We think that's a nice trend, seeing some separation between revenue, getting some leverage and driving EBITDA growth. In terms of the Black Card price increase, so as we said, we've tested this, we've analyzed it and made the decision to go to $29.99. When we've tested that, obviously, we've had -- it's been accretive to the AUV. So we're not going to really comment on the impacts for next year. We'll get to that when we actually do the price increase. But historically, what we have seen when we've made a change on the Black Card price is that the acquisition rate on Black Card does decrease for a period of time but usually rebounds within the year so that the penetration of Black Card gets back to where it was. The wrinkle and the difference now is that we've had the Classic Card price increase. So that increase is an element that we haven't had historically. So we'll have to wait and see on that. But again, we would expect for that Black Card price increase to be accretive to AUV. Jonathan Komp: Okay. That's great. And then maybe just a follow-up, Colleen. I know there's quite a bit of -- quite a few positives in today's announcements but it's unique that you have an Investor Day coming up next week. So could you maybe just share at a high level, maybe what we should expect to hear or the plans that you hope to share going into next week directionally just to set the stage. Colleen Keating: Yes, sure. Happy to. We'll give you a bit more granular detail on the progress that we're making on our strategic imperatives. And we'll also give you a multiyear view of what you can expect from a growth trend standpoint. So you'll get some numbers beyond, obviously, just a single year. So some multiyear projections from us. Operator: Your next question comes from the line of Joe Altobello with Raymond James. Joseph Altobello: I guess first question on the competitive landscape. Curious if you're seeing any shifts at all, whether it be from low-priced, high-value competitors or even some of the more higher-priced competitors in the space. Colleen Keating: I'll start and just say for the quarter and year-to-date, we've been quite pleased with the join trends and the join volume. So again, as I've said before, I think our biggest competition is fear of walking in the front door. And our marketing is really resonating with consumers today, both the strength equipment and the ability to get strong at Planet Fitness but also conveying the sense of community at Planet Fitness. So again, feeling very good about the join trends. Joseph Altobello: Helpful. And maybe just to follow up on that, in terms of new store openings for next year, I know, obviously, there's not a ton of visibility at this point. But what does the availability of real estate look like? And could we see more acquisitions and conversions like you did this past quarter? Colleen Keating: So we're not obviously guiding next year yet. But what I will talk about a little bit is -- and I have before, the real estate landscape and the fact that this year, for the first time in several years, we're seeing negative absorption specifically of shopping center retail space. So enclosed malls have had negative absorption but shopping center retail space, the type of space that we're looking for, for a Planet Fitness, negative absorption for the first time in several years year-to-date this year. And also a moderation in rent escalation where rents were going up quite dramatically in this year, the first half of this year, both quarters, they were below the rate of inflation. So we think those are positive indicators. And of course, the retail bankruptcies that have been occurring, store closures and even seeing grocery stores demising space and going to a smaller footprint, all of that is -- those are positive indicators for increased availability of retail space for clubs. Operator: Your next question comes from the line of Randy Konik with Jefferies. Randal Konik: Colleen, back to you. I think the question was asked what you're going to share at the Analyst Day next week. You gave a brief answer. Maybe give us some perspective on -- based on the content you plan to share next week, some of the kind of key themes or takeaways you want us on the buy and sell side to kind of take away about the Planet story, Planet business model as we go to the -- ahead of the meeting next week. Colleen Keating: Absolutely. Happy to do that and thanks for the question. So I know that many are looking for kind of the puts and takes to an algorithm to help project our business. But I think, most importantly, we want to really convey the kind of the macro tailwinds for this industry. The -- I've said we're in the golden age of fitness and I believe that's very much true. The demand for the offering that we provide, people are more fitness-minded than ever before. There's an incredible addressable landscape for fitness-minded consumers and our ability to answer that call. So we'll get into some specifics on that next week. So really kind of secular tailwinds, macro. And then the other thing is we've been talking about building our Blue Ribbon team. And we've had a couple of great new leader additions and then had some of our seasoned team members take on expanded roles and want to give everyone an opportunity to meet and hear from them. So marketing, development, operations, including the international opportunity. And you'll hear from a number of our new team members, our team members with expanded roles next week as well. Randal Konik: And then finally, just on how you're thinking about the globalization of the brand. Give us some perspective on how you're thinking about kind of telling that story for us next week. Do you think about taking Spain and kind of pushing that each year into a new country or another couple of countries each year beyond that? Or do you think about potential acquisitions ever? Just how do you think about the globalization of the brand, i.e., Planet taking over the planet? Colleen Keating: Absolutely. So I'm going to save a couple of things for next week but we absolutely will talk about the global expansion opportunity and the success that we have -- the success that we've enjoyed in Spain, the strong performance of our brand there. It was -- we launched Spain really as a kind of proof of concept and it's been wildly successful. So we'll give you some very specific data on Spain on how we define that wildly successful. And then also talk about where we see additional opportunities for growth and what the cadence of global growth could look like as a component or as one of the building blocks to the kind of the multiyear outlook for unit growth. Operator: Your next question comes from the line of Rahul Krotthapalli with JPMorgan. Rahul Krotthapalli: Colleen, can you discuss your thoughts on the strategic brand partnerships with like either large retail or consumer brands, hotels, airlines, whatever you're free to talk about and given the efforts around ramping the marketing strategy and the strong membership base you have? And I have a follow-up. Colleen Keating: So we've launched a number of partnerships and brand partnerships already that have inured to the benefit of our members. And we've had year-to-date well over $7 million of perks redemptions for our consumers. And that -- those redemption rates have been on a growth curve over the last 5 years because we're focusing on expanding that offering for our members. We do see additional opportunities for brand partnerships and we have some that we're cultivating today. Again, for competitive reasons, I won't speak to specific brands until we're ready to go to market with the partnership. But you're right that, that's something that we've been focused on. We've seen good utilization from our members where we've had partnerships in the past, again, with a new high watermark this year in redemption. And more opportunity. One of the things that Brian Povinelli brings from his prior experience is one of the absolute leading membership and loyalty programs in the hospitality space, rebranding that and relaunching that after a merger. So he's got a lot of experience with that and has brought perspective. So you'll see more of that to come. Rahul Krotthapalli: Perfect. And just on -- tacking on to the membership retention. You guys have lot of data, 20.7 million members. Can you give a preview under the hood on how you plan on utilizing AI and other technology tools you would like to invest in to improve membership retention and utilization? Colleen Keating: Yes. So from an AI perspective, I touched on it a little bit in marketing at a pretty high level. So think about AI-enabled CRM, think about AI-enabled marketing with digital content. So serving up content that is more targeted to a consumer. But again, I won't get into a ton of granular detail just for competitive reasons. And then I think you'll see it embedded in our app. We've talked about kind of the revitalization of our app, our app being one of the most downloaded, if not the most downloaded fitness app on the App Store and the opportunity to leverage AI to more personalize the experience for our members when they're utilizing the app and can enhance the in-club experience and out-of-club experience. Operator: Your next question comes from the line of Chris O'Cull with Stifel. Christopher O'Cull: Colleen, I know the company has been testing additional services in the Black spa -- Black Card Spa area like red light therapy and spray tanning, among others. But what are you learning about the value of those services to members? Colleen Keating: We're measuring utilization and also surveying our members for feedback. And as you know, we rolled out NPS earlier this year across the company, which is giving us immediate real-time feedback and the ability to capture more consumer data. So we also shared the potential Black Card amenities with our franchisees last week at our franchisee huddle and the franchisees were quite enthusiastic. We had a number of the vendors that were there and they were saying -- our franchisees were asking when can I get this? So we want to do the right amount of testing to make sure that we're really optimizing the Black Card Spa offering. At the same time, that data will help inform where we go to market with some new offerings to continue to invigorate the Black Card Spa. Christopher O'Cull: Great. And then I believe last year, you had some incremental marketing investment in the fourth quarter. So I was just hoping, could you maybe share or elaborate on how you plan to lap that this year? I'm assuming it may be safe to assume that year-over-year spend will at least be in line with the total spend last year. Colleen Keating: So keep in mind that as our revenue grows, so too does the marketing fund. So a big part of the marketing fund is influenced by the capture or the percentage capture on the growing revenue. At the same time, without being specific about Q4 kind of promo intentions, what I will say is we've -- we used to think about Q1 as the join quarter and what we've come to realize is that they're all join quarters and we know that we can put marketing to work in all quarters of the year and have favorable benefits. Operator: Your next question comes from the line of Max Rakhlenko with TD Cowen. Maksim Rakhlenko: Great job, everyone. Very nice quarter. So first, you recently ran a perk, which was a discount on a workout planning app. I'm not sure if that was new or not. But with an increase in popularity in many of these digital personal training or workout planning apps, are there bigger opportunities to embed this sort of technology into the Black Card membership? There was previously a push in the personal training and something that some of your HVLP peers are doing. So just curious, is leveraging technology an opportunity to both unlock revenues as well as provide a better member experience? Colleen Keating: So certainly and I touched on this a little bit when Rahul asked about AI, use of AI and we do see an opportunity to use AI or leverage AI to more personalize the experience for our members. And one of the ways we could use it is in personalizing workout plans for our members as well. So all of that is on the AI road map as well as the app revitalization road map. Maksim Rakhlenko: Got it. That's helpful. And then can you just unpack the implied 4Q comps guide for us as there are some puts and takes and how we should think about that versus 3Q's 6.9% and just comments around sort of better churn, especially exiting the quarter, just how we should think about mix and member rate as well. Jay Stasz: Yes, Max, this is Jay. And the way we're thinking about it and we don't want to get too granular but it should be relatively consistent quarter-over-quarter. Obviously, the big driver there is as we anniversary the Classic Card price increase that we did last -- at the end of June last year, right? As we've said, we do get a rate benefit from that but it diminishes over the tenure of our membership. So that rate benefit is decreasing, which is driving the decrease in the comp comparing Q3 to Q4. Operator: Your next question comes from the line of Logan Reich with RBC Capital Markets. Logan Reich: Congrats on a strong quarter. My question was on the High School Summer Pass. I mean, up 30% is a really impressive number and you guys talked about the strength of equipment and the marketing. I guess my question was more on the conversion rate to paying members that's in the mid-single digits. Just any more color you guys can give on that just on the timing of when those high school pass users convert, kind of the shape of that? And any sense on if that number could potentially be higher than historical levels, just given participation is up a lot. Just curious if that translates to upside to your conversion rate as well? Colleen Keating: Sure. I'll start. So we'll report on conversion at the end of the fourth quarter because we continue to convert through September, October, even a little bit in November because they are able to utilize the pass through the end of August and then we see this kind of surge in conversion in September, October, a bit into the fourth quarter as well. So we'll give you more data on that at the end of Q4. And when I think about the number of paid members converted out of summer pass, obviously, it's a bigger denominator. So even at a similar conversion rate, the numerator is going to be larger. But what we're seeing so far is fairly similar conversion percentage and really encouraged by the overall strength of the program. Operator: Your next question comes from the line of Brian McNamara with Canaccord Genuity. Madison Callinan: This is Madison Callinan. I'm on for Brian. First, are we now behind the lion's share of expected click-to-cancel impact? And do you expect any positive impact on rejoins next year as a result? Jay Stasz: Yes. So we're not giving guidance outside of this quarter right now. Of course, we'll be meeting next week and giving long-term targets and more color there. And from an attrition standpoint, as we said, right, consistent is that we have seen elevation in the attrition rate year-over-year. When we look at it at a multiyear lens, it is more consistent with what we've seen historically. We have modeled the elevated attrition rate into Q4 and that is included in our outlook. Colleen Keating: Yes. Can I also just add, one of the things that we have seen and we saw it in the test environment, a couple of test environments previously. One thing that has proven true is that where we are now able to say one click to cancel or cancel any time in the join flow, we are seeing it give us a lift in the join conversion. Madison Callinan: And then I know that you touched earlier on rate. But with 80% Q2 comp driven by rate and a Black Card increase coming next year, when should we expect volume to return to be the primary driver of comp growth again as it has been historically? And would you expect Black Card penetration to return to its historical 60% penetration levels after that price increase goes into effect? Jay Stasz: We'll talk more about that next week. And certainly, from a Black Card standpoint, we'll get into specifics on that more when we do the price increase. Operator: Your next question comes from the line of JP Wollam with ROTH Capital Partners. John-Paul Wollam: If we could just start first on kind of franchisee returns. A lot has been done in the last few years with the new growth model to really improve those franchisee IRRs. So I'm just wondering, are there maybe 1 or 2 data points you can share about kind of just some accelerating license sales or maybe interest in new licenses that you can share? Jay Stasz: I'll start. Yes. I mean we're not probably going to talk about ADA or license sales or franchise agreement sales. But what I can speak to the IRRs and how we think about it. We track, certainly our more recent club openings post the new growth model post the Classic Card price increase and we're tracking those from a top line basis to see if we're hitting kind of our internal hurdle rate for the IRRs, which obviously are shared with ourselves and the franchisees' lens. So we're pleased to report that those are tracking right in line. So we're seeing the lift as we would expect from those initiatives. And that's a top line lens. Obviously, part of the new growth model was giving some more flexibility on the CapEx reequipped timing schedules. So that's positive as well. And I think to your point, with Chip now here as the CDO, he continues the effort to value engineer the club build-out costs and we spoke about that to the franchisee group last week at our huddle. We've also, as part of our fit for strategy structure, established a formal procurement team under the finance org, under my org. And we've started some initiatives there where we think we can save the franchisees' money. Colleen Keating: Yes, I'll chime in on that, too. I think a couple of things. One data point I'd point to is franchisee same club sales growth coming out of the quarter at 7.1%. The franchisees are definitely feeling the strength of the join volume, the marketing landing. And then I think a couple of other proof points that we have talked about, real estate availability having been a bit of a headwind on development and I talked a little bit about earlier about that easing. I think another proof point is, we've had a franchisee last year and this year buy a couple of few conversion clubs and several conversion clubs. And those were conversions that enabled them to bring additional clubs into the system quickly. And that's a strong signal that franchisees are excited to continue to grow with us. I think the third is that in every case where we've had portfolios transact, certainly, in my tenure here, in every case, we've had incumbent franchisees at the table wanting to buy additional territory or additional clubs when they become available. So that -- I think that's another proof point of franchisee confidence in the system. At the same time, we're not letting up on enhancing franchisee economics, all of the things that Jay talked about and the things we're doing in build cost and trying to bring build costs down for our franchisees while also protecting the member experience. John-Paul Wollam: Perfect. And then just one quick follow-up and I think fairly straightforward. But I assume most of the unit openings coming in the fourth quarter are largely through a lot of maybe permitting and municipal processes. And I would assume it's largely all on a local basis. But anything in terms of the government shutdown that would be a potential risk to unit openings in the fourth quarter? Colleen Keating: We've not heard about government -- the government -- the federal government shutdown having any impact on openings. And you're right, a lot of permitting is done early in the build cycle. And then, of course, there's -- there are municipal inspections late in the build cycle like final COs and sign-offs. And those are done at the local municipal level, not at a federal level. Operator: Your next question comes from the line of Arpine Kocharyan with UBS. Arpine Kocharyan: Could you talk to the general trends you saw in terms of gross adds for the quarter? What you saw in Q3 and what you're seeing into Q4 as we see churn kind of normalize a bit here? And you saw slightly lower membership in Q3 versus Q2, which is, I think, in line with what you saw last year quarter-to-quarter. But last year, you were going through the price increase on Classic Cards. So maybe if you could talk to the gross adds versus underlying attrition trends in the quarter? And then I have a quick follow-up. Jay Stasz: Yes. And I -- you broke up for the back part of that question. So I heard the part about the gross joins. Could you repeat the back half of your question, please? Arpine Kocharyan: Yes. Just your membership is slightly lower in Q3 versus Q2, which is, I think, in line with what you saw last year quarter-over-quarter. But last year, you were going through the price increase on Classic Cards. So maybe if you could talk to the sort of gross adds versus underlying attrition trends in the quarter that you saw would be helpful. Jay Stasz: Yes. Well, I can start. And right, we don't speak to the gross joins or cancels. But I mean, we did see strong join trends and we commented that on the prepared remarks. Those join trends were offset by the elevated attrition rate that we talked about. And the attrition rate was elevated year-over-year. Again, when we look on a multiyear basis, it is more consistent with what we've seen historically. And the third quarter, generally speaking, is not a high net add quarter, right? It could be flat or slightly down. We've seen that before. That's what we experienced this quarter and it was in line with our expectations. And again, we think those trends will continue going forward on both fronts, right? We have nice trends in the strong join side and we do -- and we've modeled continued elevated attrition on a year-over-year basis. And both of those are included in our outlook for the year. Colleen Keating: And I think also important to note that as we've said in the past, where we rolled out click-to-cancel previously, after about-ish about 12 weeks, we started to see it moderate. Given when we rolled out click-to-cancel in Q2, we were within that expected elevated attrition window in the beginning of Q3. And as Jay indicated, we started to see that -- we start to see that moderate. And then we've also continued to have very strong rejoin rates. So in the mid-30s again from a rejoin rate standpoint throughout the quarter. And our marketing is very effectively driving join volume and we're also retargeting lapsed members and that's helping to drive the strong rejoin rate. Arpine Kocharyan: That's super helpful. And then just a really quick follow-up. Maybe just a bit of a bigger picture question. It seems like some of the demographic shifts you're seeing is younger customer that is maybe using the clubs more at a higher frequency, which should be good for structural retention, I would say, in longer term but maybe more wear and tear for the equipment. Does that mean more frequent replacement of that equipment longer term? And what implications that has for franchisee returns? Colleen Keating: Do you want to start? Jay Stasz: Well, yes, I'll start. I mean part of the strength of this brand is the quality of our equipment and the way we maintain it. So it is high-grade durable equipment and we would not expect any changes to the replacement timing because of wear and tear. Colleen Keating: I think the fact that we pushed out the reequip schedules by a year with the new growth model last year and the fact that also strength equipment does have a longer life than cardio, the utilization of strength actually is a piece of equipment that has a longer life. So there's no expectation that we're going to pull forward reequip schedules for our franchisees. And yet at the same time, we know that the consistency of our replacement cycles and the quality of our equipment is something that our members appreciate at Planet Fitness. Operator: Your next question comes from the line of Marni Lysaght with Macquarie. Marni Lysaght: I think recent more topical matters such as churn, et cetera, have been well covered in prior questions. But my question is mainly concern -- or just in terms of like your outlook for rollout, can you kind of give us a bit of color or maybe it's more of an appropriate topic to discuss next week at the Analyst Day. But just about when you're competing for space and you talked earlier about prototypes for smaller formats, how do we think about franchise groups and yourself looking at those sites and who you may be competing with for that space? Colleen Keating: Yes. I think one of the things that our real estate team is doing in partnership with our franchisees is getting ahead of space availability and talking with the large landlords and brokers to make sure that we articulate the value proposition of putting Planet Fitness in a center, particularly we skew heavy female. We contribute to traffic to the center because we don't have classes, we're not taking up significant amounts of parking at a given time and we also contribute traffic to a center during off-peak times because most retail centers are getting heavy traffic on the weekend and our heaviest traffic is weekday, in the early part of the week. So it's really about making sure that we highlight why Planet Fitness is a prospective great tenant and also the resiliency of our business, the durability of our cash flows, the fact that we came through COVID with a number of temporary club closures for municipal reasons but not one club permanently closing for financial reasons. And compare that to the retail closures and retail bankruptcies, we should be a very attractive tenant. So it's really about promoting the value of having Planet Fitness in the center. Marni Lysaght: Understood. Another question I have is just more about like the split of how you think about rate growth. So I think you said back at the prior results, 70-30 for the back half of this year to be driven by rates and volume. And you previously alluded to like a 50-50 split, just given the nuances here about your members coming in line with your internal expectations and some of the other dynamics at the moment, what's the correct way to be thinking about that? Jay Stasz: Yes. So we'll guide into that for future periods, we'll talk -- we won't guide into it but we'll talk about it next week from -- as we kind of lay out the growth algorithm. And really, what we talked about given the dynamics this year was kind of a 75-25 or an 80-20 split. This quarter landed right in line with our expectations and we don't think that's going to change dramatically in Q4. Colleen Keating: Yes. I will say, historically, when we've taken Black Card pricing in the past, we have seen a little diminution on the Black Card penetration but not on the join volume. So taking Black Card pricing in the past was not a headwind to join volume. It was just a little bit of a diminution on the Black Card penetration, the mix. Operator: [Audio Gap] further questions. I will now turn the call back over to Colleen Keating for closing remarks. Colleen Keating: Well, first, I'd like to thank our team members and our franchisees for delivering such a strong -- such a solid quarter. I'm very encouraged by the momentum that we're carrying through into the fourth quarter to complete a strong 2025. We look forward to providing more insight into our long-term growth opportunity at our Investor Day next Thursday. Thank you, everyone. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Lundin Mining Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the conference over to Jack Lundin, President and CEO of Lundin Mining. Please go ahead. Jack O. Lundin: Welcome to our third quarter 2025 conference call. The financial results press release and presentation are on our website where you can also find a replay of this call. All figures today are in U.S. dollars unless stated otherwise. After the presentation, we will open the floor to questions. Today's webinar will include forward-looking statements that involve risks and uncertainties. Please review the cautionary notes on Slide 2 and the disclaimer in our MD&A. With me today is our Chief Operating Officer, Juan Andres Morel; and our Chief Financial Officer, Teitur Poulsen, to discuss our Q3 operating and financial results. Touching on the highlights from the quarter. Consistent operational performance continues to drive solid financial results, which I'll briefly summarize on the next slide, and Juan Andres and Teitur will provide additional details shortly. We've tightened our production guidance ranges, increased copper guidance and reduced cost guidance, reflecting the strength and stability of our operations. We continue to advance the Vicuña opportunity during the quarter given the positive momentum and many working fronts that are progressing well against the baseline plan, we felt it was the right moment to further strengthen the management team. Effective tomorrow, Ron Hochstein will be leaving Lundin Gold to join Dave Dicaire in the rest of the Vicuña Corp. team, where he will support as Chief Executive Officer of the joint venture. Ron joined a group of familiar former colleagues, many of whom were involved on the successful project phase of the Fruta del Norte gold mine in Southern Ecuador, currently owned and operated by Lundin Gold. Together, the team will look to build on a successful track record by bringing the Vicuña project towards the sanction decision and ultimately, development and operations. Our operational success goes hand-in-hand with our safety performance. In the first 9 months of the year, we're pleased to report no major injuries across any of our operations and the total recordable injury frequency rate of 0.29, the lowest in the company's last 10 years. This achievement underscores our commitment to risk management and the effectiveness of our proactive improvements to critical controls. Lastly, as we outlined at our Capital Markets Day in June, we're advancing several near and midterm growth opportunities across each of our three Latin American operations. One key initiative relates to the Caserones cathode growth opportunity, and I'll provide an update on that towards the end of today's presentation. On the next slide, we're pleased to announce that the third quarter was the best quarter year-to-date by most metrics. We're seeing the benefits of a simplified portfolio, full potential initiatives and disciplined planning and the execution of our plans are paying off now. Copper production for the quarter totaled 87,400 tons, primarily driven by a strong performance at Caserones from higher copper grades and elevated cathode production. As a result, we have increased annual copper guidance by approximately 11,500 tons in the midpoint. The new guidance range is 319,000 to 337,000 tons of copper, improving by about 3.5% when you compare the midpoint. Gold production was in line with the last quarter at 38,000 ounces, and year-to-date, we are tracking to achieve our full year guidance. During the quarter, we produced copper at a consolidated cash cost of $1.61 per pound, benefiting from stronger gold prices and cost reduction efforts at our assets through our full potential programs. We have since lowered cost guidance to $1.85 to $2 a pound and tightened our production ranges on several of our assets as we enter the final quarter of the year. We will provide details on guidance improvements later in this presentation. And on the operational financial performance, we delivered over $1 billion in revenue in Q3, making it one of the strongest quarters in the company's 30-year history. And we generated approximately $490 million in adjusted EBITDA and $383 million in adjusted operating cash flow. We also declared our 38th regular quarterly dividend, highlighting our commitment to financial discipline and shareholder returns. There were no share buybacks in the quarter. Year-to-date, we've purchased or repurchased 12.6 million shares for approximately USD 104 million at an average price of CAD 11.70 per share. With about $45 million remaining under our $150 million buyback program, subject to market conditions, we intend to complete the buybacks before the end of this year. However, any shares that are not purchased will be turned into a special dividend, ensuring we deliver on our $220 million total annual return target. I would now like to invite Juan Andres, our Chief Operating Officer, to discuss our production results for the quarter. Juan Morel: Thank you, Jack, and good morning, everyone. Our assets continue to perform well, and the focus on increasing our operational discipline is correlating to strong safety and production results. As mentioned earlier, we increased copper guidance, and I will discuss that later on. Copper production for the company was 87,400 tons for the quarter and 244,200 tons year-to-date, which puts us in a comfortable position to meet our increased guidance range for the year of 319,000 to 337,000 tons of copper. Gold production for the quarter totaled 37,800 ounces and 107,700 ounces year-to-date. The company is positioned well going into the end of the year and tracking to production guidance on a consolidated basis for copper, gold and nickel for 2025. At Candelaria, copper production for the quarter totaled 37,000 tons, along with 19,900 ounces of gold. Candelaria continues to be extremely consistent this year, softer ore from Phase 11 led to higher throughput in the mill, which processed 8.1 million tons of ore during the period. This is the highest throughput in a quarter in the last 5 years and the second highest quarter for throughput since we have owned the asset. Year-to-date, Candelaria has produced 111,000 tons of copper and 61,500 ounces of gold, which puts Candelaria well on track to meet guidance for the year. We anticipate production levels in the fourth quarter at Candelaria to be in line with Q3. At Caserones, copper production reached 35,300 tons in Q3, one of the strongest quarters since we have owned the asset. Year-to-date, it has produced 93,300 tons. As mentioned last quarter, the asset is second half weighted. Head grades have improved in the second half of the year and should continue through Q4, putting Caserones on track to meet guidance. Cathode production continued to outperform expectations, but in line with what we announced in June during our Capital Markets Day. A total of 6,300 tons of copper of cathodes was produced in the quarter driven by increased material placed on the leach pads and improved irrigation practices. We have updated the hydrometallurgical model for the dump leach and anticipate cathode production for the full year to be approximately 24,000 tons, which is higher than what we have planned at the beginning of the year. This strong capital production has led us to increase overall guidance for Caserones and tighten the range. The new copper guidance is forecast to be 127,000 to 133,000 tons for the full year at Caserones. In the quarter, Chapada produced 12,600 tons of copper and 17,900 ounces of gold. Production at Chapada continues to be weighted toward the second half of the year, and fourth quarter production should be in line with Q3. At Eagle Mine, nickel production was 2,700 tons and copper production was 2,400 tons for the quarter. Mill throughput was strong at 183,000 tons, which was the highest quarterly throughput in the last 2 years. Eagle is tracking to guidance and is expected to be within 9,000 and 11,000 tons of nickel and within 9,000 and 10,000 tons of copper for the year. Year-to-date, operations have been performing well. Strong capital production and throughput at Caserones has led to a guidance increase for approximately 10,000 tons. As mentioned, the new guidance range for Caserones is now 127,000 to 133,000 tons. With increased confidence going into the end of the year, we have tightened the guidance ranges for Candelaria and Eagle. The new copper guidance range for Candelaria is 143,000 to 149,000 tons and for Eagle is 9,000 to 10,000 tons of copper. Consolidated copper production guidance range is now 319,000 to 337,000 tons of copper an improvement of approximately 11,500 tons to the midpoint of the guidance. Consolidated gold production guidance is now 135,000 to 146,000, representing a tightening of the range for improved confidence at Candelaria and Chapada. Overall, we're in a good position entering the fourth quarter. With improved guidance and consistency from our operations, we are tracking to reach the midpoint for our guidance for all metals. I would now like to turn the call over to Teitur to provide a summary on our financial results. Thank you for your attention. Teitur Poulsen: Thank you, Andres, and good morning, everybody. I'm very pleased to be able to present a strong financial quarter for the company. The company's financial performance was supported by strong operational results, as Andres has just now presented, coupled with favorable copper and gold prices. These factors enabled the company to achieve another quarter of strong financial performance. The revenue for the quarter came in at $1 billion with our revenue remaining heavily weighted towards copper, which accounted for 79% of the revenue mix. Gold and nickel contributed 13% and 3%, respectively. With the price of gold hitting all-time highs, we have seen our gold revenue contribution climb by about 2 to 3 percentage points. During the quarter, our Chilean mines, Candelaria and Caserones generated 74% of the company's revenue. In combination with Chapada in Brazil, operations in South America represented 95% of total revenue. Looking at volumes sold inventory levels of concentrate and realized pricing. During the period, we sold approximately 79,000 tons of copper at a realized price of $4.61 per pound, which is slightly better pricing than the average LME spot price for copper during the period. As disclosed in our pre-release in October, we incurred a shipment delay of approximately 20,000 tons of copper concentrate at Caserones due to weather-related impacts at the port of Punta Totoralillo. This has resulted in company carrying higher than normal inventory levels at the end of Q3. This elevated level of inventory is expected to unwind during Q4, and thus having the revenue and cost of goods sold associated with this inventory to be recorded in the fourth quarter, 2025. Traditional pricing impact in the third quarter was positive by $11 million, primarily driven by gold ounces that settled in the quarter. The realized gold price during the quarter was just below $3,900 per ounce. At the end of the quarter, 78,000 tons of copper were provisionally priced at $4.65 per pound and 34,000 ounces of gold were provisionally priced at $3,800 per ounce and remain open for final pricing adjustments in Q4. Turning to Slide 14. Production costs totaled $490 million for the quarter, consistent with the past few quarters. At Candelaria, total costs were higher compared to previous quarters due to higher mining costs and higher ore milled during the period and due to reclassifying certain stripping costs from sustaining CapEx to production costs. Cash costs have continued to benefit from strong gold prices and remain in the $1.90 range. For the full year, we reiterated the cash cost guidance of $1.80 to $2 per pound for Candelaria. Caserones costs for the third quarter are lower than normal due to inventory build relating to the deferred shipment of concentrate into the fourth quarter, representing approximately $20 million in costs associated with this delay. Costs in the third quarter also benefited from certain one-off credit notes from certain suppliers and due to a new and more cost-effective equipment maintenance contract. Total costs were in line with expectation of $158 million for the quarter when adjusted for the above-mentioned items. Cash cost at Caserones were $1.86 per pound and benefited from better TCRC terms, stronger cathode production and byproduct credits as well as lower contract costs as mentioned earlier. We expect cash costs in the fourth quarter to continue to benefit from strong cathode production and byproduct pricing and have lowered our guidance range for Caserones to between $1.15 to -- sorry, $2.15 to $2.25 per pound, representing an approximate $0.30 per pound decrease. Chapada's total cost for the third quarter amounted to $96 million, reflecting higher mill throughput during the quarter and volumes sold. C1 costs continued to decrease compared to prior period and came in at $0.50 per pound for the quarter, primarily due to higher byproduct credits from gold prices. We are reducing the full year cost guidance range again to $0.90 to $1 per pound from the previous guidance range of $1.10 to $1.30 per pound. On a consolidated basis, our C1 cost for the quarter was $1.61 per pound, well below our full year guidance range of $1.95 to $2.15 per pound. Based on the adjustments mentioned above, we are, as previously mentioned, reducing our consolidated cash cost guidance range to $1.85 to $2 per pound for the full year. Total capital expenditure, including both sustaining and expansionary investment was $160 million for the quarter and $485 million for the 9 months of the year. Full year guidance for the total capital expenditure has been revised down by $45 million to $750 million due to a deferral of projects at Candelaria and Caserones, as well as reclassifying some of the capitalized stripping costs at Candelaria to production costs. For sustaining capital, we expect spending to increase going into the fourth quarter to reflect the roughly $170 million that remains to meet guidance for the full year. At Vicuna, capital expenditure during the quarter was $51 million and year-to-date, $126 million and is tracking to guidance of $250 million for the full year. Q3 expenditure was primarily focused on field activities for water program, drilling, trade-off studies, engineering, cost estimation and permitting and preparation for the integrated technical study in the first quarter 2026. Our key financial metrics for the third quarter are presented on Slide 16. Adjusted EBITDA for the quarter was $490 million, with a 49% margin. Adjusted operating cash flow for the quarter totaled $383 million and for the first 9 months totaled just below $1 billion, including cash tax payments of close to $300 million. The company achieved solid free cash flow from operations of $169 million despite the impact of $113 million working capital build during the quarter. Adjusted earnings amounted to $255 million for the quarter, which translates to an adjusted EPS of $0.18, an improvement of 64% from last quarter. Turning to cash generation during the third quarter. We entered the quarter with around $279 million in cash and a net debt position of $135 million. We generated adjusted operating cash flow of $383 million after cash tax payments of $86 million and incurred a working capital build of $113 million. The sustaining capital investment amounted to $109 million, which resulted in free cash flow from operations for the quarter of $169 million. We had total shareholder and NCI distributions of $43 million during the quarter, of which $17 million related to the payment of regular dividends. After debt, leasing and interest payments as well as the deferred payment of $10 million relating to our Caserones acquisition, we ended the quarter with cash of around $290 million and a net debt position of $108 million, excluding lease liabilities. By the end of the year, we expect to be essentially net debt free. We continue to advance the process to increase our revolving credit facility as part of our strategy to fund future growth plans. We have a number of interested banks, both existing lenders and potential new lenders and have been progressing term sheets and expect the process to conclude towards year-end or in the early part of next year. So overall, a very good quarter that aligns with the financial outlook that we provided at our June Capital Markets Day. So, I will now turn the call back to Jack for some final remarks. Jack O. Lundin: Thank you, Teitur. I'll take a few moments to discuss one of our near-term growth initiatives, which we outlined at our Capital Markets Day back in June. Cathode production at Caserones continues to improve. We delivered another strong quarter and are on track to produce approximately 24,000 tons of cathodes this year compared to an original plan of approximately 16,000 tons. Total cathode plant capacity is roughly 35,000 tons. As we discussed in June, our goal is to capture an additional 7,000 to 10,000 tons of cathode production from a baseline of 15,000 tons which was the average annual production over the 2 years prior to us acquiring Caserones. Over the past 8 to 12 months, we've implemented several key operational improvements. Firstly, we enhanced leaching practices, including better dump leach coverage and higher irrigation rates. Secondly, we have increased oxide material placement on the dumps supported by improved geological understanding and tighter waste control in the open pit. These actions are now translating into higher cathode output as the benefits flow through with leach cycle residence times. As mentioned by Juan Andres, we also recently completed an update to our hydrogeological leaching model, improving our ability to predict leaching kinetics and incorporate recent operational gains. Based on these improvements, we see potential for future annual cathode production to increase further, which we are now analyzing. On the next slide, before reaching the closing remarks, I would like to outline a few upcoming catalysts to look out for. We're in the final stages of completing our reapplication and see a potential window to submit before the end of the year. In the first quarter of 2026, we expect to complete the integrated technical report for the large-scale fully integrated development and operations plan for the Vicuna project. This milestone will outline a clear path for Lundin Mining to become a top 10 global producer once in full scale operation at Vicuna. In parallel, and as Teitur mentioned, we're advancing our financing strategy to support these growth plans. We've initiated the process to increase our revolving credit facility and continue to see strong interest from our existing banking partners as well as future lenders. We expect this process to conclude towards the end of this year or early part of next year, as Teitur mentioned. At Chapada, the Saúva project represents a compelling near mine growth opportunity with the potential to add 15,000 to 20,000 tonnes of copper and 50,000 to 60,000 ounces of gold annually, production increases of approximately 50% and 100%, respectively, for the Chapada operation. And the study includes expanding grinding capacity to process higher grade ore from Saúva through the Chapada mill. Permitting and technical work are underway with the pre-feasibility study targeted for completion by the end of this year. We look forward to providing further updates as this exciting project continues to advance. Touching on the conclusions now. We delivered our best quarter year-to-date, producing 87,353 tonnes of copper at a C1 cash cost of $1.61 per pound. Strong operations and higher gold prices enabled us to raise production guidance and lower consolidated cash costs. The copper guidance midpoint increased by 11,500 tons to 319,000 to 337,000 tons of copper driven by stronger cathode production at Caserones and improvements in the leaching circuit at Caserones. Cash cost guidance at Caserones and Chapada dropped lowering the consolidated midpoint by $0.125 to $1.85 to $2 a pound. We generated $383 million in adjusted operating cash flow, strengthening our balance sheet with the company expected to essentially be net debt free by year-end. We continue to be in strong financial standing as we look to advance our growth initiatives at Lundin Mining. Looking ahead, our priorities remain focused to continue to deliver on strong safety performance which directly supports our operational excellence programs, advancing near-term growth and preparing Vicuna for potential sanctioning in 2026. The company enters Q4 well positioned with key catalysts over the next 4 to 6 months, including, as mentioned, a RIGI application in the near term and an integrated technical report for Vicuna. All-in-all, a very solid quarter, and we remain poised to deliver a strong overall 2025. Operator, I'd like to now open up the call for questions. Thank you. Operator: [Operator Instructions] The first question will be coming from the line of Orest Wowkodaw of Scotiabank. Orest Wowkodaw: Congratulations on the strong quarter. I'm just curious with the integrated technical report for Vicuna District, I guess, only a couple of months now from completion. Just curious if there's been any thought to any potential scope changes on what Phase 1 or Phase 2 could look like and whether we should still be anticipating, call it, around 175,000 ton a day operation for -- that would reflect Jose under Phase I? Or -- I'm just trying to understand if any of the goalposts have been locked in at this point or whether the project scope is still under discussion? Jack O. Lundin: Orest, thanks for the question. I would say that, broadly speaking, the scope for Phase 1 has not changed significantly since we last gave an update on Jose Maria, which is considered to be Phase 1 for the Vicuna project. We're working through this integrated technical report, which will have a lower level of definition as you get into the later phases. But I would say our level of confidence, especially for Phase 1 continues to grow with that -- those numbers that you mentioned there. So, the oxides, we're looking at opportunities, continuously looking at areas where we can improve costs and drive value. And I think as this technical report comes together and we put all the phases together and look at various trade-offs like that will show in Q1 when the report is published, but Phase 1 specifically, we continue to refine and derisk on scope that was -- that we've been speaking about for the last number of quarters here. So, we're on track and no significant changes should be expected from Phase 1 particularly. Orest Wowkodaw: Okay. And just as a follow-up on the time line, just given already in November, do you have a sense of when in Q1, we could anticipate that? Jack O. Lundin: I can't pinpoint an exact date for you, Orest. But I would say in the towards the latter part of Q1. That will be coming out with the results. And then, there's going to be a period between when we come out with the results and when we actually publish a technical report. But obviously, the team is working very hard on trying to get everything together. So that, some part in the second half of Q1, we'll be able to publish the results followed by the report coming out within 45 days of when the results get published. Operator: The next question will be coming from the line of Lawson Winder of Bank of America Securities. Lawson Winder: Very nice quarterly results, and thank you for today's update. If I could also ask about the integrated Vicuna plan and just get a sense for one aspect that Filo had previously proposed, which was this idea of a precious metals-focused initial starter pit. I mean, for a smaller company like Filo, it made a lot of sense. For a larger company like Lundin, perhaps it's just not enough capital or cash flow to really move the needle. But I mean, that would be in a much lower gold price than I would make a comment like that, I think in the current gold price, I mean, is there any thoughts potentially doing some sort of precious metals-focused starter pit with Filo in conjunction with the Phase I at that you just spoke about? Jack O. Lundin: Right now, we're still considering kind of going ahead with the base plan that we've outlined Phase 1 being Jose Maria. Of course, with commodity prices going higher, we see if there's opportunities to maximize value based on that -- based on market conditions. But right now, Lawson, I would say Phase 1 still is very much contemplating Jose Maria and then Phase 2 being the oxides of Filo, which includes base and precious metals. So, to summarize, no, we're not considering changing the scope right now. Lawson Winder: Okay. Perfect. And then, just thinking about some of the opportunities that lie ahead, including the success you've had at Caserones, this update we're looking for in early 2026 on Sauva. The current 2026 CapEx plan that you've laid out, is there a risk that ex Vicuna, that could change materially from what you currently have in the market? Teitur Poulsen: It's Teitur, here. But on CapEx, we have not guided any CapEx for the company in 2026. What we did say at the Capital Markets Day that we had around about $155 million, I believe it was for the Sauva expansion, and that number remains intact. Lawson Winder: And then as we think about Caserones, I mean, could you expect something material or I guess the way to think about it then is, can you expect something materially higher from what you guys are on track to spend this year? Teitur Poulsen: No, I don't think so. I mean, we will come up with our usual annual guidance in January, and all that will be disclosed, but I would not expect any significant deviations on current trends. No. Jack O. Lundin: And that increase in cathode production that we outlined in the presentation doesn't come at any real additional capital requirements, which is why it's such a robust opportunity. And really, the team has been -- behind it has been just working on optimizing the leaching circuit. So, as Teitur said, we wouldn't expect to come out with any materially increased capital numbers for Caserones specifically. Operator: [Operator Instructions] And our next question will be coming from the line of Daniel Major of UBS. Daniel Major: Congrats on a good quarter. Just first question on the oxide production profile at Caserones is 25,000 ton run rate this year. Is that a reasonable assumption to bake into the subsequent couple of years? And can you remind us what was embedded in the 130,000, 140,000 guidance? I've got about 15,000 tons previously. So is there upside to that '26 previous guide number? Juan Morel: Daniel, this is Juan Andres. Thank you for the question. Yes. I think the answer to your question is yes. Looking forward we're looking at sustaining that level of production from the cathode plant. So, 24,000, 25,000 tons per day, at least for the next, let's say, 3, 4 years is a good, good assumption. Daniel Major: Okay. And then, just a question on -- follow-up on the CapEx, sorry, if I'm getting some of the numbers mixed up here. But is it fair to assume the sustaining CapEx for the group, excluding any spend at Vicuna would be a similar kind of run rate, so like $400 million or so? And then on top of that, you're assuming in late FID of Vicuna late in the year, probably a similar run rate of spend at the Vicuna. So, are we looking at a similar sort of $650 million, $700 million range. Is that reasonable for CapEx for next year, excluding any other FIDs? Teitur Poulsen: Yes. I mean, we -- as I said, we will come up with further detailed guidance in January. But this year, we guided $530 million in sustaining CapEx for the full year, and we've now guided that down to $410 million. I think it's important to say that, that saving is -- or that reduction is not really a saving. It's more a deferral of projects from 2025 into 2026. Also remember, our CapEx guidance is based on cash payments, not incurred activity. But I think that run rate from about the current of 2025 run rate we have, it should be roughly what we expect to see going forward. Jack O. Lundin: Just to clarify, $530 million down to $510 million. Teitur Poulsen: Sustaining CapEx, excluding growth CapEx. Jack O. Lundin: Okay. Yes. And for Vicuna, like we're going through the 2026 budget now with the Vicuna team. And similarly, we would be updating kind of the guidance range on that. But hopefully, we'll be in a position where we can continue to ramp up with activities prior to a sanction decision. So, it wouldn't be like -- you could expect that provided progress continues on the trend that it is, that it would be higher than -- higher next year than it is this year. Daniel Major: Okay. That's clear. And then, maybe just a final one. This reasonably sizable working capital build in the quarter, $112 million or something, which puts you not up quite a bit in terms of working capital year-to-date. Would you expect that to reverse in the fourth quarter? Teitur Poulsen: Yes, I would expect that. It's always hard to predict the exact timing of year-end shipments, et cetera. But if everything goes according to plan, we should see an unwind of that in the fourth quarter, yes. Operator: [Operator Instructions] And our next question is coming from the line of Dalton Baretto of Canaccord. Dalton Baretto: Congrats on a great quarter and also a great choice appointing Ron as CEO of Vicuna. I wanted to ask about some of these cross-border negotiations that are still ongoing. Jack, can you sort of remind us what elements are under discussion? What the status is? And what's going to be assumed in the technical report when it comes out? Jack O. Lundin: Thanks, Dalton. Yes, I fully agree. It's great to officially bring Ron over to Vicuna, starting effectively tomorrow once Lundin Gold gets through their quarterly results. So the -- there's a binational treaty that exists today between Chile and Argentina. I think it was established in 1997. There is on that treaty of Vicuna protocol that exists during this current exploration phase that the project is in. So, we're able to kind of move from one side of the border to the other freely. And at the moment, what we would be looking at doing is specifically when we get to Phase 4, and we're mining from Filo sulfides and getting to full scale, that would require the binational treaty to turn into kind of an exploitation arrangement. And at that time, we would be contemplating significant pieces of infrastructure like desalinated water line, potentially concentrate slurry line and really integrating all of the infrastructure together during that final phase of the project. But initially, what we're looking at doing is building Jose Maria, 100% within Argentina and then trucking the concentrate out. And so, we don't need to have that significant uplift in that treaty. But we have time. There is engagement between both the Chilean and Argentinian authorities to elevate this national treaty into exploitation phase, but that's not required during the initial years of production through Jose Maria. Dalton Baretto: Got it. So, no concerns around moving the concentrate out through Chile, no concerns around bringing water up or any of that kind of stuff? Jack O. Lundin: I think it's early days that we're working on that plan and that scope, and we have time to ensure that we do it the right way. So far, our baseline schedule is intact. And I think dialogue is strong, and we just need to continue building on that momentum. So overall, I think we're feeling very positive about all phases, and we'll just continue to derisk as we bring the project forward towards integrated study and eventual sanction. Dalton Baretto: Got it. And then, once the study comes out and you put a pin in it, what are sort of the next remaining steps before an FID? Jack O. Lundin: So, I think having fiscal stability, having the integrated technical report released and published, having our financing plan so that Lundin Mining can ensure that we can fund our 50% portion of Phase 1. And then, there's various permits that we're still working through and government agreements in the provincial level at San Juan that we would need to receive. We're updating our environmental impact assessment as well. So, there's a number of kind of items on the checklist that we would be required to fulfill before going to the shareholders being BHP and Lundin Mining for a sanction decision. But we're progressing well on all of those fronts. Dalton Baretto: So this could be a sort of a back half of next year type thing? Jack O. Lundin: If we continue to progress on the plan that we currently are on, then it's not out of the question to have a sanction decision coming at the back half of next year. Of course, a lot of work to be done between now and then, and we're working to make sure that we get all of our ducks in a row to achieve that. So, that's the hope. Dalton Baretto: That's great. And maybe just one last one. This is more of a confirmation thing than anything else. What you're applying for under RIGI, it's is all the phases, right? Jack O. Lundin: That's a great question. So, because we have Jose Maria and Filo del Sol together now under Vicuna Corp within the same SPV, the projects are integrated together and they're looked at as one large-scale project. However, for us, it's important to get fiscal stability and approvals and permits for Phase 1 as we have much more definition around Phase I, but the intention would be achieving fiscal stability on the entire Vicuna project, which includes both Jose and Filo and potential future discoveries in the region. As we know, it's a very prospective area, and we definitely feel like we'll be finding more minerals as we continue to spend more time in the area. Operator: Thank you. And there are no more questions in the queue. At this time, this does conclude today's conference call. You may all disconnect.