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Operator: Hello, everyone, and welcome to the Jackson Financial Inc. 3Q '25 Earnings Call. My name is Charlie, and I'll be coordinating the call today. [Operator Instructions] I'll now hand the call over to our host, Liz Werner, Head of Investor Relations, to begin. Liz, please go ahead. Elizabeth Werner: Good morning, everyone, and welcome to Jackson's Third Quarter 2025 Earnings Call. Today's remarks may contain forward-looking statements, which are subject to risks and uncertainties. These statements are not guarantees of future performance or events and are based upon management's current expectations. Jackson's filings with the SEC provide details on important factors that may cause actual results or events to differ materially. Except as required by law, Jackson is under no obligation to update any forward-looking statements if circumstances or management's estimates or opinions should change. Today's remarks also refer to certain non-GAAP financial measures. The reconciliation of those measures to the most comparable U.S. GAAP figures is included in our earnings release, financial supplement and earnings presentation, all of which are available on the Investor Relations page of our website at investors.jackson.com. Presenting on today's call are our CEO, Laura Prieskorn; and our CFO, Don Cummings. Joining us in the room are our President of Jackson National Life Insurance Company, Chris Raub; our President of PPM, Craig Smith; and the Head of Asset Liability Management, Brian Walta. At this time, I'll turn the call over to our CEO, Laura Prieskorn. Laura Prieskorn: Thank you, Liz. Good morning, and thank you for joining our third quarter 2025 earnings call. I'll begin by reviewing the quarter's positive results, including strong sales growth and diversification, robust capital generation and consistent capital return to shareholders. Following my remarks, our CFO, Don Cummings, will discuss our financial performance in further detail. Beginning with Slide 3, Jackson's third quarter performance highlights our strong earnings diversification and healthy book of business. Adjusted operating earnings of $433 million increased over 20% from the year ago quarter, led by our Retail Annuities business. Retail Annuities continued to see significant growth and diversification from investment spread income as well as solid fee income from nearly $240 billion of separate account value. Retail annuity sales for the quarter reached their highest level since we became an independent company, exceeding $5 billion for the quarter, driven by growth in RILA and traditional variable annuities. Last quarter, we highlighted the launch of Jackson's Market Link Pro III and Market Link Pro Advisory III, which we refer to as RILA 3.0. The positive reception to RILA 3.0, combined with a robust RILA market resulted in record sales of $2 billion in the quarter, accounting for 38% of overall retail annuity sales. We expect RILA to remain a valuable source of growth, providing sustainable investment spread income and earnings diversification. Our RILA account balance approached $18 billion, a 21% increase from the second quarter and a 74% increase from the prior year. While the RILA market continues to evolve and grow, we believe our RILA 3.0 product offering provides advisers and their clients with a broad range of index and crediting options and a valuable range of protection levels. Jackson's long-held focus on product innovation and consumer choice has differentiated us and is highly valued by our distribution partners and their clients. Our RILA offerings continue to drive growth in the breadth and depth of our distribution. Since launching RILA 3.0 in May, we've added over 500 new advisers. Our new RILA relationship with JPMorgan Chase is one example of accelerating RILA sales through a valued partnership. Traditional variable annuities remain core to our business and accounted for over 1/2 of our third quarter retail annuity sales. Variable annuity sales increased 13% from the second quarter and 8% from a year ago. The growth of variable annuities sold without a lifetime benefit continued and sales increased 24% for the first nine months of 2025. Year-to-date, variable annuity sales without a living benefit accounted for 38% of Jackson's total variable annuity sales. Importantly, average variable annuity balances increased by $10 billion from the second quarter, supporting an increase in third quarter fee income of 8% quarter-over-quarter. Variable annuity net outflows improved from a year ago and were consistent with strong equity market performance. For the third quarter, strong investment performance exceeded the impact of net flows by over $7 billion. The diversity of Jackson's variable annuity fund offerings remains a valued feature and for the first nine months of 2025, separate account performance exceeded 13%. We continue to believe the asset growth potential, investment flexibility and guaranteed income provided by Jackson's traditional variable annuities meet a long-term need for millions of Americans retiring each year. This profitable book of business exhibits Jackson's thoughtful product design and disciplined risk management capabilities. Fixed and fixed index annuity sales reflect our opportunistic approach to pricing and have contributed to our sales diversification. Looking ahead, we expect our recent fixed index annuity launch will contribute to future sales growth. The Jackson Income Assurance Suite has an embedded guaranteed minimum withdrawal benefit designed to meet consumer demand for income and protected growth. Jackson's fixed index products further expand our portfolio of annuity solutions, meeting a wide range of retirement planning goals for advisers and their clients. Complementing the growth of our business is the investment expertise and asset growth of our investment manager, PPM America. Last quarter, we highlighted PPM's additional investment capabilities, which support the competitiveness and profitability of our spread-based products in the market. We believe our disciplined approach to the market, combined with incremental yield provided by PPM investment capabilities position us well for future growth and profitability across spread-based annuity solutions. The profitability of our in-force business and capital generation resulted in continued free cash flow and capital distributions. Through the first three quarters of this year, free capital generation exceeded $1 billion and free cash flow was $719 million. Quarterly distributions to our holding company through the first nine months of this year have totaled $815 million. These strong results lead us to believe we are well positioned to maintain capital flexibility at our holding company and sustain future capital return to our common shareholders. We continue to return capital consistently and for the third quarter, returned $210 million, bringing our year-to-date capital return total to $657 million. Given this pace and our outlook for the fourth quarter, we expect to exceed our 2025 capital return target range of $700 million to $800 million. Since becoming an independent company, we have returned nearly $2.5 billion to common shareholders, exceeding our initial market capitalization. We believe that our balanced approach to capital management will continue to support Jackson's financial strength, ongoing investments in long-term growth and future capital return to shareholders. Turning to Slide 4. We began the fourth quarter with great momentum and are approaching the end of 2025 in a very strong position with respect to all our financial targets. I've already addressed capital return and would add that in September, our Board of Directors approved a $1 billion increase to our common share repurchase authorization. Yesterday, we announced our Board also approved a fourth quarter cash dividend of $0.80 per common share. We believe shareholder dividends underscore our outlook for long-term profitability and combined with share buyback, highlight our commitment to shareholder returns. Over the course of 2025, our strong capital generation resulted in a risk-based capital ratio that was consistently well above our targeted minimum level of 425%, and we ended the third quarter at an estimated 579%. In addition, at the end of the quarter, the cash and liquid securities position at our holding company was over $750 million. Our strong capital position, combined with holding company liquidity provides valuable capital flexibility. Jackson's resilient capital, effective hedging strategy and disciplined risk management have enabled us to navigate through periods of market uncertainty. In today's environment, we believe this experience is essential to maintaining long-term leadership in the annuity market. At this time, I'll turn it over to Don. Don Cummings: Thank you, Laura. I'll begin on Slide 5 with our consolidated financial results for the third quarter. Adjusted operating earnings were $433 million, reflecting strong performance from our spread products, where earnings were supported by the continued expansion of our RILA fixed, fixed index annuities and institutional products. Additionally, strong equity markets in the quarter led to increased variable annuity assets under management, driving stronger fee income. Our high-quality, conservative investment portfolio supporting the spread product business is well positioned with diversification and strong credit quality, a theme throughout the portfolio. The exposure of our portfolio to commercial office loans and below investment-grade securities is less than 2% and 1%, respectively. Given recent headlines on asset quality, it is also important to note that our regional bank exposure is about 1% of our portfolio, and we have no material exposure to First Brands or Tricolor. Furthermore, our CLO portfolio remains highly rated and well diversified. Our spread product sales continue to benefit from enhanced asset sourcing capabilities at PPM America, which enabled recent new money allocation to certain higher-yielding asset classes, including emerging markets, residential home mortgages and investment-grade structured securities. We believe this modest shift in our new money asset allocation, combined with an attractive product lineup will allow Jackson to maintain a consistent and stable presence in the spread product marketplace. Before discussing notable items for the quarter, I want to highlight our strong performance in book value per common share. During the first nine months of the year, we returned $657 million of capital to shareholders, which has contributed to a modest decrease in adjusted book value since year-end. Importantly, our share repurchase activity reduced the diluted share count, driving a 6% increase in adjusted book value per share to $158.44. Additionally, our adjusted operating return on common equity for the first nine months of this year was 14%, up from 13% in the first nine months of last year. Slide 6 outlines the notable items included in adjusted operating earnings. Reported adjusted operating earnings per share was $6.16 for the current quarter. Adjusting for $0.04 of notable items and the difference in tax rates from our 15% guidance, adjusted operating earnings per share was $6.15 for the current quarter, up 27% from $4.86 in the prior year's third quarter. This improvement was primarily due to the growth in spread income noted earlier as well as a reduction in diluted share count from share repurchase activity. The only notable item for the current quarter was a $0.04 negative as limited partnership results came in slightly below our 10% long-term assumption. The prior year's third quarter included a larger $0.28 negative impact from this item. On Slide 7, we highlight the diverse and growing new business profile of our Retail Annuities segment, which achieved 2% growth over last year's strong third quarter and 22% growth from the second quarter of this year. Our RILA product suite delivered record sales of $2.1 billion, up 28% from the prior year's third quarter and 49% compared to the second quarter of this year. Since its launch in 2021, RILA assets under management have grown consistently, reaching a record high of nearly $18 billion at the end of the third quarter. As mentioned earlier, our spread product offerings were further supported by enhanced capabilities at PPM, resulting in $444 million in fixed and fixed index annuity sales for the third quarter. We are confident about the future growth potential of our spread business with strong early momentum from our recently launched fixed indexed annuity suite of products. Our sales mix continues to be capital efficient, which has provided flexibility to allocate additional capital to spread products as we focus on diversifying our business. We are pleased with the progress that we've made in building a well-diversified new business mix since becoming an independent public company, and we continue to explore opportunities to write higher levels of spread business on a capital-efficient basis. Turning to net flows. The sales we generated in RILA and other spread products translated to $2.3 billion of nonvariable annuity net flows in the third quarter. Variable annuity net outflows have been elevated in recent quarters, reflecting the moneyness profile of our book, the aging of policyholders and some larger past sales years coming out of the surrender period. On a year-to-date basis, our surrender rate was flat, even though strong equity market returns led to a higher surrender rate in the third quarter. These strong market returns also resulted in separate account investment performance of nearly $25 billion year-to-date, exceeding variable annuity net outflows by over $11 billion. This has driven variable annuity account value growth year-to-date and supported our strong levels of fee income. Slide 8 highlights pretax adjusted operating earnings across our business segments. In Retail Annuities, we benefited from a favorable environment for spread products and higher levels of fee income. Like an asset management business, retail annuity earnings are driven by the level of assets under management. Growing nonvariable annuity net flows and strong separate account returns have increased our average retail annuity AUM to $263 billion, up from year-end 2024. For the Institutional segment, pretax adjusted operating earnings were up from the third quarter of last year, reflecting higher spread income from our growing book of business. Our higher level of new business activity this year reflects strong demand for spread lending and our opportunistic approach in the institutional marketplace. Our Closed Block segment reported pretax adjusted operating earnings that were up from the third quarter of last year, primarily due to higher spread income. Earnings were down modestly on a sequential basis, reflecting higher levels of mortality. Slide 9 includes a waterfall comparison of our third quarter pretax adjusted operating earnings of $505 million to GAAP pretax income attributable to Jackson Financial of $57 million. The stability in our nonoperating results has significantly improved after moving to a more economic hedging approach in 2024, which has also contributed to our consistent capital generation. During the third quarter, our hedge results included a $14 million net loss on hedging instruments supporting our variable annuity and RILA businesses. This loss was primarily from equity hedges, reflecting S&P returns of about 8% during the quarter and gains on interest rate hedges resulting from lower long-term interest rates. Our RILA business continues to provide a natural offset to the equity risk of our variable annuity guarantees. This enhances our overall hedging efficiency as higher equity markets typically result in losses on our variable annuity hedges while resulting in gains for our RILA hedges. Changes in market risk benefits, or MRB, were driven in part by the same interest rate and equity market movements in the quarter, leading to a $226 million gain that more than offset the loss on our hedges. As a reminder, changes in the MRB relate primarily to our variable annuity business and include the impact of equity index implied volatility, which was a modest benefit during the quarter. Changes in implied volatility do not impact our Brooke Re MRB measurement since its modified GAAP methodology uses a fixed volatility assumption designed to promote balance sheet stability. The reserve and embedded derivative loss of $1.2 billion during the third quarter reflects increases in RILA reserves resulting from higher equity markets, which was largely offset by a gain on our RILA hedges. Net hedging results for variable annuities also reflect the highly diversified nature of our separate accounts, which can lead to differing performance relative to the market in periods where the returns of an index are driven by a subset of companies. This dynamic was at play in the current quarter with the underperformance of our separate accounts relative to certain hedging indices, leading to a modest net hedging loss. It is important to note that this dynamic plays out in both directions. And as a result, these impacts have tended to smooth out over time. In fact, this dynamic produced a modest benefit over the first half of this year. We believe these results underscore the effectiveness of our hedging program in supporting capital stability and proactively managing the economic risks of our business. Slide 10 provides a summary of Jackson's high-quality variable annuity business, which is differentiated in the marketplace, enabling us to outperform peers. In large part, our success can be attributed to our focusing on withdrawal benefits and avoiding more challenging guarantee features. Jackson also has long been a proponent of providing customers with investment freedom without forcing allocations or managed volatility funds. This approach is supported by a rigorous fund manager due diligence and oversight process to ensure a high correlation between separate account assets and the related benchmarks over time. The strong underlying fund performance benefits both our policyholders and Jackson. Prudent pricing and disciplined product design further mitigate risk and enable agile product launches and repricing actions as market conditions evolve. We believe our variable annuity products are highly valued in the marketplace, and we remain a consistent product provider for our distribution partners and their clients. The substantial cash flows generated by our large in-force block, combined with extensive policyholder experience data, enhance our risk management capabilities. By utilizing Brooke Re, we are able to further protect our book from market volatility and hedge more closely to the economics of our business. We believe our hedging performance has been proven through recent periods of financial market stress. Slide 11 provides context on how our high-quality variable annuity book and differentiated structure support our economic hedging approach. Brooke Re creates a structure for us to manage our profitable variable annuity block without the constraint of the cash surrender value floor, allowing us to align our hedging with the underlying economics of the guarantees. Specifically, we are focused on mitigating the impact of lower equity markets and interest rates on these liabilities. The result is well-protected variable annuity guarantees at Brooke Re and stable regulatory capital and distributable earnings at Jackson National Life, which has been evident in our strong free capital generation, free cash flow and capital return over the last seven quarters. This structure is beneficial for our management of the RILA business as well. Under this framework, RILA remains at JNL, separate from the variable annuity guarantees. The RILA business is managed and priced on a stand-alone basis with capital generation included in JNL's results. RILA and variable annuity guarantees have a natural equity offset with RILA exposed to upside equity risk and variable annuity guarantees exposed to downside equity risks. Variable annuity guarantees are reserved and capitalized on a stand-alone basis under our modified GAAP framework at Brooke Re and RILA is reserved and capitalized under the statutory regime at JNL without consideration of a diversification benefit. While there is no reserving or capital benefit of the offsetting equity risks, we are able to realize a hedging efficiency by netting them off through fully settled internal trades, leaving a reduced need for external equity hedging. Importantly, this benefit would continue even if RILA grew to the point of overtaking variable annuities from an equity risk perspective, simply shifting the external equity need from downside protection to upside protection. We believe this structure is a differentiator that highlights our consistent economic approach and the strong underlying performance of our book. We remain confident in the quality of our annuity business and our risk management capabilities. Slide 12 highlights our growing capital generation and free cash flow. Jackson adheres to an earn it, then pay it philosophy for capital return. This philosophy is built upon three pillars: the generation of free capital where we earn it, the creation of free cash flow where we pay it and ultimately, the return of capital to our common shareholders. After-tax statutory capital generation was $579 million in the third quarter. We believe this metric offers helpful insight into the underlying strength of our business and provides the foundation for making capital allocation decisions that balance future growth with the return of capital to shareholders. Free capital generation was $459 million in the quarter, reflecting the estimated change in required capital or CAL, resulting from our strong and diversified new business results during the quarter. Free capital generation totaled $1.1 billion in the first nine months of the year and $1.6 billion on a trailing 12-month basis. This pace is well above our $1 billion-plus expectation for the full year. Free cash flow was strong in the current quarter, once again illustrating the stability of our capital generation. In the third quarter, $250 million were distributed to the holding company. After covering expenses and other cash flow items, the resulting free cash flow at the holding company was $216 million in the quarter. Over the last 12 months, we've distributed nearly $1.1 billion to the holding company and generated free cash flow of nearly $1 billion. Based on Jackson's market capitalization at quarter end, we have produced a free cash flow yield of about 14% for the trailing 12 months. Although there are many factors that impact valuation, we believe this metric is a strong indicator of Jackson's value, and we will continue to pursue share repurchases while investing in the growth of our business. The outcome of our strong free capital generation and growing free cash flow allowed us to return $210 million to common shareholders in the quarter, up 37% from last year's third quarter on a per diluted share basis. On a trailing 12-month basis, we have returned $805 million, and we are on pace to exceed the top end of our full year capital return range. Jackson has now returned nearly $2.5 billion to common shareholders, exceeding our initial market capitalization as an independent public company. These results reinforce Jackson's robust capital generation profile and stable growing cash distributions, delivering enhanced value to our shareholders. Slide 13 summarizes our growing capital and liquidity position. The profitability of our in-force business, driven by fee income from our variable annuity base contract and growing spread-based earnings provided strong capital generation during the quarter. Our capital position and RBC ratio at Jackson National Life continues to be less sensitive to equity market movements with the Brooke Re structure. The main impact of equity market changes is on AUM and future capital generation rather than immediate changes in capital or RBC. This results in the earnings stream at Jackson National Life being like an asset management business. Consistent with our approach of taking smaller periodic distributions, we distributed $250 million to the holding company during the third quarter. After considering the impact of this distribution on our deferred tax assets, Jackson's total adjusted capital, or TAC, increased and ended the quarter at $5.6 billion. Our estimated RBC ratio ended the quarter at 579% and remains well above our minimum target of 425%. We believe Jackson is operating from a position of strength as we head into the end of the year. During the third quarter, Brooke Re continued to operate as expected. While equity was down modestly from the second quarter, Brooke Re's capitalization remains well above our internal risk management target that reflects a variety of detailed scenarios and our regulatory minimum operating capital level. During the quarter, there were no capital contributions to or distributions of capital from Brooke Re. Going forward, we will continue to manage Brooke Re on a self-sustaining basis given the long-term nature of its liabilities. Our holding company cash and highly liquid asset position at the end of the quarter was $751 million, which continues to be above our minimum buffer and provides substantial financial flexibility. This was up from $713 million in the second quarter of this year, reflecting operating company dividends and capital return to shareholders. Our third quarter results demonstrate strong positive momentum, bolstered by a robust balance sheet and rising capital and liquidity levels that firmly position us for continued success. I'll now turn the call back to Laura. Laura Prieskorn: Thanks, Don. In September, we hit our four-year milestone as an independent company. During this time frame, we've worked hard to capture opportunities to grow profitably while diversifying our sales mix and earnings. Our third quarter results represent another period of excellent operational and financial accomplishments. As the end of the year approaches, we'll take time to reflect on our valued relationships with our distribution partners and their clients and continue our shared mission to help hard-working Americans protect and grow their retirement savings and income. Most importantly, we believe our accomplishments and ability to consistently deliver on our promises are only possible through the dedication and hard work of our associates. We are truly grateful for all they do at Jackson and in the communities we call home. At this time, I'll turn it over to the operator for your questions. Operator: [Operator Instructions] Our first question comes from Ryan Krueger of KBW. Ryan Krueger: My first question is on the actual to expected policyholder behavior. It has improved year-over-year, but it got more -- I guess, it increased in the third quarter from the recent run rate. Can you give some perspective on what's causing this? I assume it's still just higher lapses. And to what extent you may consider changing your dynamic lapse assumption given that this has been occurring for a few years consistently now? Laura Prieskorn: Ryan, thanks for the question. I'll turn it to Don to respond. Don Cummings: Ryan, yes. So just to give you a little bit of context on policyholder behavior and kind of the level of net outflows that we've been seeing on our variable annuity book. First of all, I think it's important to remember that our surrender rate is sort of an all-in surrender rate as we've talked about on prior calls. So if you decompose that 12% that we've seen on a year-to-date basis, it breaks down like about 7% of that is full surrenders. And then there's 4%, which are withdrawals, and that's just simply customers using the benefit that they purchase those products for and being able to generate income and retirement. And then the remaining 1% is related to death benefits. And I would highlight that just for the quarter, we did see a bit more a bit of an uptick in the surrender rate, primarily driven by the fact that equity markets were up, and that does tend to influence surrender activity because of the moneyness of the contracts. Just overall, the VA performance that we saw in the quarter, which was also driven by the higher equity markets was about $25 billion, and that well offset the level of net outflows that we're seeing. So in terms of how we think about that from our assumption setting process, first of all, we do take a very comprehensive look at our assumptions every year. We complete that work in the fourth quarter. And we're setting assumptions with the long-term nature of our liabilities in mind. So we do look at our recent experience, but we wouldn't take one or two quarters of experience and use that -- simply use that to set our long-term assumption, we would look at our experience over time. Having said that, we'll certainly look at the experience we've been seeing over the last couple of years as we update our assumptions in the fourth quarter. And we'll publish those results along with our overall fourth quarter results as well as our financial targets for 2026, and we look forward to being able to discuss that in February. Ryan Krueger: One follow-up on that. I've heard some suggest that there has been some targeted efforts by distributors to roll older variable annuity contracts into other products when they've been out of the money and that may be contributing to the higher lapse rates beyond just the pure markets, but also may eventually dissipate once they kind of contacted all of their clients. Is that something -- do you agree with that? Is that something that you've seen at all impact the lapse rate? Don Cummings: I would say, Ryan, it's primarily more driven by the market environment than specific activities that might take place. Operator: Our next question comes from Suneet Kamath of Jefferies. Suneet Kamath: Just wanted to ask a couple on capital. So first on the RBC target of $425 million. You've been traveling well north of that for a while. My math suggests that if you were to bring that to $425 million, it would be maybe $1.5 billion of excess could be released. I guess if $425 million is really the target, what needs to happen in order to bring your RBC back down to that level? Don Cummings: Yes. Thanks for that question, Suneet. So yes, you're right. At the 425% target, we do have a substantial amount of excess capital at JNL. As we've talked about in the past, we expect that will come down over time rather than some sort of onetime outsized upstreaming of capital to the holding company. We believe that we are in a unique position to continue our efforts to diversify our book of business through focusing on more spread product sales, as I mentioned in the prepared remarks. And that obviously will assume a bit more capital than what we've historically been writing over the years, which is variable annuity business. And we've seen some of that over the course of this year. So we believe that we can both continue to grow our business through diversifying into more spread-type products as well as continuing to return significant levels of capital, but you'll see that ratio come down over time as opposed to one sizable transaction. Suneet Kamath: Okay. And then I guess my second one is on the Closed Block segment that you have. I mean it doesn't get a lot of attention. We never get asked about it. I'm just curious what's the strategic value of having that? I know it's small, but also curious about how much capital is supporting those liabilities that are in that segment. Don Cummings: Yes, good question. We obviously look at the Closed Block very frequently, and we're comfortable with the liabilities that are there. As you mentioned, it's not a huge portion of our balance sheet. However, we believe it does provide some balance to our overall general account structure and because there are some life liabilities in there, along with some annuities and other blocks of business that came about through some acquisitions that Jackson completed a number of years ago. So we do monitor the performance of that block closely. And to the extent we find opportunities to better leverage our capital, we would be prepared to take advantage of those. Suneet Kamath: And how much capital is in that segment? Is it an amount? Don Cummings: We don't break out the allocation of -- yes. We don't break out, Suneet, the allocation of our capital across the segments, but the liabilities are roughly about $20 billion. Operator: Our next question comes from Tom Gallagher of Evercore. Thomas Gallagher: Just a follow-up question on hedging. I heard the comment about how your RILA naturally hedges part of your VA guarantees, which lowers your need to buy the quantity of derivatives and hedges you need to buy. You have a peer out there, Brighthouse, that used to make the similar point. They eventually hit a limit and the company has struggled since they hit the limit. Now I'm sure there are differences between your book and their book. Your guarantees look far less risky quite candidly from my perspective. So that might be one of the reasons. But curious why you won't hit a limit and if you've spent any time thinking about what you're doing versus what Brighthouse is doing, just so you can at least clear up any confusion about why your program is fine. Don Cummings: Yes. Tom, thanks for that question. Well, we have spent a lot of time thinking about this issue, and we're very comfortable with the structure that we have in place. The new slide that we shared in the materials this quarter is intended to kind of help explain why we're different. And it really comes down to the fact that we have -- the VA guarantees are housed within Brooke. The RILA business is at J&L, and we're able to get this efficiency from a hedging perspective as we sort of offset the internal trades and then go out to the -- our derivative counterparties to purchase external hedges. The reason we're very comfortable that we won't have the issue that others have run into is because we don't have the guarantees and the RILA business being reserved for and hedged under a statutory framework, which I think was primarily the problem that you're referring to, which is the VM-21 construct. So we're very comfortable that even if the equity risk on RILA were to surpass the equity risk that we have on the VAs, then all that does is just shift the nature of our external hedging. It doesn't mean that we would have to suddenly put up some additional level of reserves. Thomas Gallagher: Got you. That's super helpful and clear. Yes, that is. The -- just from a follow-up perspective, if there was any impact to the actuarial review to Ryan's question, would that likely show up in JNL or Brooke Re in terms of the -- any changes that we would see there? Don Cummings: Yes. Well, as I mentioned, we're still working through our actuarial assumption review. But my expectation would be that we would see very minimal impacts at JNL. Any impact related to our VA business would be sort of below the line and a component of our MRB. Operator: Our final question of today comes from Alex Scott of Barclays. Taylor Scott: I just had a follow-up on the same kind of questioning that you just had from Tom and Ryan. So on the potential for an impact in Brooke Re, if there is an impact, do I take the comments that you made earlier in your script around the self-sustaining nature of the capital in Brooke Re to mean that based on what you're seeing at least as of today, regardless of how that actuarial review pans out, you don't feel like there's a risk that you would have to fund any capital into there. Is that a correct way of reading those comments earlier? Don Cummings: Alex, yes, so my comments earlier were more long-term focus in that we do believe with -- given the nature of the guarantees in Brooke Re that over the long term that Brooke Re will actually generate capital and be self-sustaining. I don't want to get ahead of our -- the completion of our actuarial review work at this point. We'll certainly look at it. And as I said, when we report fourth quarter earnings and our 2026 financial targets, including our capital return targets for next year, we'll update you on the status of our -- or the impact of our actuarial review. Taylor Scott: Understood. Okay. And then I also wanted to ask about potential reinsurance opportunities out there. I mean, I think on one hand, we're questioning you all about actuarial studies and so forth. I know on the other hand, you guys have expressed a lot of confidence about your ability to manage VAs. I mean are there opportunities out there that you're still considering and looking at around reinsurance of other blocks of business to take advantage of what you've built there? Don Cummings: Yes. So we talked a little bit about this on last quarter's call, Alex. And we certainly believe that we have very good expertise in the VA space and with risk management and hedging. And so to the extent that there were high-quality variable annuity blocks that were available that we believe would be complementary to what we already have at Brooke Re, that would be something that we would consider. We do believe that some of the recent VA transactions that you've seen indicate there are some buyers that see value in high-quality VA blocks, and we would look to participate in that. That probably wouldn't be the highest priority on our list. I think if we were looking at some sort of transaction, we might want to look at opportunities to further accelerate all of the work that we've done since becoming an independent public company to diversify our book. And that could include reinsurance of potentially some life business or something along that line that would be complementary to the businesses that we already have. But we're certainly aware of what's going on in the marketplace and are monitoring those kinds of things closely. Laura Prieskorn: I would just add that any growth opportunities that we were to explore or evaluate would be done in comparison to the value that we received from buying back our own shares. Operator: We have no further questions registered on today's call. So I'll hand back over to Laura Prieskorn for any closing remarks. Laura Prieskorn: Thank you all for your continued interest in Jackson. As you've heard this morning, our latest results represent another period of excellent operational accomplishments. We look forward to continuing the discussions and sharing our continued progress on our 2025 targets after the end of the fourth quarter. Thank you, and take care. Operator: Ladies and gentlemen, this concludes today's call. Thank you so much for joining. You may now disconnect your lines.
Operator: Ladies and gentlemen, thank you for standing by. I'd like to welcome you to Banco Santander-Chile's Third Quarter 2025 Earnings Conference Call on the 5th of November 2025. [Operator Instructions] So with this, I would now like to pass the line to Patricia Perez, the Chief Financial Officer. Please go ahead. Patricia Pallacan: Good morning, everyone. Welcome to Banco Santander-Chile's Third Quarter 2025 Results Webcast and Conference Call. This is Patricia Perez, CFO, and I'm joined today by Cristian Vicuña, Head of Strategy and IR; and Lorena Palomeque, our Economist. Thank you, everyone, for joining us today for the review of our performance and results in the third quarter. Today, Lorena will start with an overview of the economic environment, and then Cristian will go through the key strategy points and the results of the bank in the third quarter of the year. After that, we will have a Q&A session where we will be happy to answer your questions. So let me hand over to Lorena. Lorena Palomeque: Thanks, Patricia. During the third quarter of 2025, we observed positive economic indicators in the Chilean economy. Preliminary market figures suggest GDP grew around 2% year-on-year in Q2 or almost 3% when excluding mining. While we await the full national accounts report on November 18, which will also include Q1 and Q2 revisions, we estimate GDP growth of 2.4% by the end of this year and close to 2% for next year. We are now just a few days away from the presidential and congressional elections in Chile. Also, the outcome is still uncertain, polls suggest that a change in the government administration with an opposition candidate is the most likely scenario, which could generate stronger tailwinds for the economy next year. In terms of inflation, also moderation is already evident, it remains above the 3 target -- the 3% target with core inflation now below 4%. Limited second round effects, anchor expectations and a narrow output gap will allow inflation to converge to below 4% by the end of this year. We expect this inflation process to continue given the softer demand environment, both globally and domestically. In this context, we maintain our forecast for the U.S. of 3.6% for the end of this year, converging to 3% next year. Regarding the monetary policy rate, during the third quarter, the Central Bank of Chile maintaining the policy rate at 4.75%, responding to an inflation environment that continues to ease. Nevertheless, the bank will emphasize that it will closely monitor the evolution of core inflation, which remains higher than expected as well as domestic demand before considering a new rate cut. We expect another reduction in the last quarter of the year, bringing the rate to 4.5% by year-end and followed by an additional cut during the course of next year. On Slide 5, we present recent developments in the regulatory framework. Regarding the mortgage subsidy law, which was approved in May of this year, its implementation has continued within the framework of the allocation of the funds awarded in the first auction held in June. Under the law, 50,000 subsidies will be provided with almost 18,000 already authorized by banks. This has provided some momentum to the housing sector, whose growth is expected to become increasingly evident in the coming months. With respect to the interchange fee, the second rate cap reduction remains on hold and under review by the commission, and we are awaiting further updates on this matter. Open Finance system of FinTech law established an implementation schedule that begins with a collateral submission of information that banks and payment card issuers must share in July 2026. However, the system's technical definition remains under consultation, while costs and other operation details are still pending. This has prompted calls to review the implementation time lines, a request the [ FMC ] is currently analyzing. During September, the framework law on sectoral authorization for permits related to productive, energy and mining initiatives was approved. This will enable the development of tools for the simultaneous processing of permits streamlining the approval of low-risk projects, which should in turn accelerate investment in these sectors. As we mentioned before, there are only a few days left until the presidential and congressional elections in Chile, which will be held on November 16 with a potential runoff on December 14. According to the latest current polls, left wing candidate, Jeannette Jara leads the presidential race with 27% support, followed by right candidate, Jose Antonio Kast with 20%. While the presidential race has gained visibility, we must not overlook the parliamentary elections where the entire Lower House and nearly half of the senate, 23 out of 50 seats will be renewed. Polls show that Chileans remain highly concerned with crime, security and the economic growth. Simulation suggests that right wing candidates may gain ground in Congress, driven by local campaigns emphasizing security. This implies that even if the left wing candidate wins the presidency, Congress could lean right, potentially moderating more vital policy initiatives. As such, while some [ electoral ] related volatility is likely in the near term, we believe the longer-term market impact will be limited. And with that, I will now pass over to Cristian. Cristian Vicuna: Thanks, Lorena. On Slide 7, we show our value creation strategy for our stakeholders through our vision to become a digital bank with Work/Café. Our focus is on attracting and activating new clients, understanding their needs and deepening engagement. We aim to surpass 5 million clients by 2026 while continuing to grow our base of active customers. Next, we are building a global platform that leverages artificial intelligence and process automation to scale efficiently. It's about reducing the cost per active client and driving operational excellence. Our target is to maintain an efficiency ratio in the mid-30s or better, a reflection of a bank that is both digital and disciplined. We are focusing on broadening transactional and noncredit fee-generating services. Through this, we aim to grow our fee generation in double digits and ensuring best-in-class in recurrence, our income fees divided by our structural operating expenses. Our growing client base means more activity, and we are seeing increasing transactional volumes, especially in payments. Our digital ecosystem encourages clients to transact more frequently and seamlessly, driving engagement and loyalty. Finally, this is underpinned by strong CET1 levels, ensuring that our expansions remain sound, responsible and aligned with regulatory expectations. All of this leads to a strategy where we are capable of attracting value creation with ROEs above 20% and a dividend payout of 60% to 70%. On Slide 8, we can already see how our strategy over the last few years has succeeded in changing our income mix and creating a more efficient and profitable bank. Our key measure of value creation has been the strong growth in ROE achieved while maintaining solid capital ratios during the implementation of Basel III. Our ROE has increased more than 6 percentage points, more than double the increase in the rest of the industry. This has been supported by a 5 percentage point improvement in our efficiency versus a 2% improvement in the industry, demonstrating our consistent cost control and the success in the implementation of our digital transformation. We are particularly proud of successfully migrating our legacy mainframe systems to the cloud earlier this year under Project Gravity. On the other hand, we have been transforming the composition of our income revenue streams with fee generation increasing from 15% of our revenues to 20%, reflecting the success of the expansion of our client base and noncredit-related services through our digital accounts and card payments as well as other services such as asset management, brokerage and our acquiring business. Meanwhile, the composition of the industry revenues has remained stable. This mix is driving our revenues ratio to the best-in-class in the industry. This ratio, which shows how much of our costs are paid by our fee generation now stands at above 60%, far above for the rest of the industry. We are very proud of the success of our strategy has had so far. And as you will see later on, we are enthusiastic about the evolution of our results in the coming year. Now in Slide 10, we will take a closer look at the results this year. As of September, the bank generated a net income of CLP 798 billion, a 37% year-over-year increase resulting in a return on average equity of 24% and an efficiency of 35.9%. Growth was supported by an 8% rise in fee income and a 19% increase in financial transactions. Mutual funds grew 15%, and our recurrence ratio reached 62% year-to-date. Our net interest income, which includes our readjustment income increased 17% year-over-year, and our net interest margin remained at 4%. Furthermore, currently, we are provisioning a dividend payout of 60% of this year's income to be paid in April next year. This year, we have also been highly recognized on several fronts. We are proud to have been recognized by several institutions. Euromoney named us Best Bank in Chile, Latin Finance recognized us as Best Bank and Global Finance awarded as the Best Bank for SMEs. This year, we have improved our sustainability rankings with our MSCI ESG rating improving from A to AA and our Sustainalytics grade improving to 15.4 points. On Slide 11, we can see the evolution of our quarterly return over equity, where we can see that we have maintained our ROEs above 21% even in quarters with lower inflation such as this recent quarter, where the UF Variation was 0.56%, and we reached an ROE of 21.8%. On a yearly basis, our NII has improved 16.6% with a strong increase from net interest income as a result of a lower cost of funding, which improved some 100 basis points year-over-year. With this, our year-to-date NIM reached 4%. And given our current macro expectations, we expect our NIMs to stay around the 4% area for what is left of 2025. On Slide 12, we can see how our rapidly expanding client base is leading to a higher fee generation. We currently have 4.6 million clients, of which around 59% actively engaged with us and some 2.3 million are digital accessing the online platforms on a monthly basis. The number of current accounts is increasing 10% year-on-year, driving the 5% and 4% growth of our active clients and digital clients, respectively. The growing client base has led to a 12% annual increase in credit card transactions and a 15% rise in mutual fund volumes that we brokered. Overall, our clients maintain high satisfaction levels with the bank and our product offering. Furthermore, we continue to expand our footprint among companies, where we have increased the number of business current accounts by 23% in the last 12 months. This is explained by the simple business accounts we offer to smaller companies and the integrated payments offered through Getnet. As we can see in the table on the right, the increase in our client base and product usage is translating into high fees and results from financial transactions, growing 11.5% year-over-year. Our main products such as cards, Getnet, account fees and mutual fund fees continue to show strong trends, with cards and account fees registering a higher expense in the quarter related to certain campaigns in our loyalty programs during the quarter. On Slide 13, we can see how our recovery of income generation and tight cost control has improved our key performance metrics. Our efficiency ratio reached 35.9%, the best in the Chilean industry in 2025 so far, and our recurrence ratio reached 62%, meaning that over 60% of our expenses were financed by our fee generation. In early 2025, operating expenses rose temporarily due to the cloud migration costs, mainly reflected in higher administrative expenses during the first quarter. However, overall, our operating costs grew below inflation in the year so far. In the quarter, our total core expenses decreased 3.4%, mainly due to lower personnel expenses related to the seasonality caused by the winter holidays and national holidays in September. Overall, we have maintained our best-in-class levels of efficiency and recurrence compared to our peers. Furthermore, we continue to innovate in our branch network to align with our Work/Café format, improving both efficiency and customer experience. It is thanks to these adjustments to our contact points with clients along with the evolution of our digital platforms that we have been able to achieve these impressive levels of operating performance. On Slide 14, we show an overview of our cost of risk and asset quality. As in prior quarters, cost of credit has remained above historical average, reflecting elevated nonperforming loans earlier in the year. From the graphs, you can see that our NPL and impaired portfolio have shown some improvement in recent quarters with a slight pickup in September due to some seasonality related to collections in the month caused by the national holidays. However, our initial data for October is showing better performance. And over the last few months, we have seen tangible improvements in our asset quality that we expect these trends to continue in the coming quarters. On Slide 15, we can see that the CET1 ratio reached 10.8% in September '25, far above our minimum requirement of 9.08% for December 2025 and demonstrating some 45 basis points of capital creation since December 2024. This was driven by our income generation in 2025 and considers a 60% dividend provision for our 2025 profits accumulated so far and a 4% increase in risk-weighted assets. As noted in our previous call, we have a 25 basis point Pillar 2 capital charge, of which 50% was made by June 2025, in line with regulatory requirements. So on Slide 16, we show our guidance for what's left of 2025 and our initial guidance for 2026. Regarding our 2025 forecast, we are well on track to meeting our guidance with NIMs around 4% and efficiency in the mid-30s. Overall, we expect ROE to finish the year slightly above 23%. For next year, we're expecting GDP growth of 2% with a UF variation just below 2.9% and an average monetary policy rate of around 4.4%. With the upcoming elections in just 2 weeks, we expect a more favorable business environment next year, supporting mid-single-digit loan growth. Despite the slightly lower inflation, the loan growth and slightly lower rates should help to sustain our NIMs around 4%, while our fees on financial transactions should grow mid- to high single digits. This does not include any impact for a further interchange fee reduction, which is yet to be defined by the interchange fee commission. Our efficiencies should remain around the mid-30s, while our cost of credit should continue to improve gradually to reach around 1.3% for the year. With all of this, our initial expectations for 2026 are for an ROE within the range of 22% to 24%, underscoring the high ROE potential of Santander-Chile. With this, I finish my presentation, and we can start the Q&A session. Operator: [Operator Instructions] Our first question is from Lindsey Shema from Goldman Sachs. Lindsey Marie Shema: Congrats on the results. Looking ahead to 2026, it seems like ROE might be a little better, a little worse, but somewhat the same. Just wondering here on our end, what are the main upside and downside risks for your ROE estimate? And then on that note, does it factor in an unfavorable election result? Or could there be further downside there? Cristian Vicuna: Well, so thank you for the question, Lindsey. I'm going to hand over the first part because we assess that some of the most beneficial potential scenarios of next year are related to the change in political cycle. And we are not actually considering most of those effects into our guidance -- our current guidance. Patricia Pallacan: [indiscernible] Cristian Vicuna: Well, to provide some perspective, we are not considering in the potential scenario of growth for next year, the benefits of a political change that could trigger further growth in the commercial part of the loan portfolio. So we are thinking of mid-single digits, but a more benign scenario will probably make the commercial portfolio of the middle market companies grow stronger than this, maybe even going to figures of 7% to 8%, probably very skewed to the second part of next year and more into 2027 because of the delay of some projects to get approved and passed through to the practical part of the investment. So that's one of the things that's not actually considered on our guidance. The main risks that we have seen so far this year and next year are coming from the external part of the macro scenario. You have seen the volatility in terms of assets and commodity prices and all the effects that have come from all the discussions from international trade effects of the U.S. policies and the consequences of this. So that's a source of uncertainty that's also not considered in the central part of our scenario. But all in all, I think that we are favorable of the upcoming quarters in 2026 and that in general terms the more adverse scenarios are considered within our guidance. Patricia Pallacan: Yes. And maybe to complement the answer, our base case scenario considers a lower inflation, but partially offset by a lower monetary policy rate on average for next year. And also offset by better growth dynamics in terms of loans. So that could be better -- even better depending on the political landscape for next year. And we think for both scenarios, we are well prepared in our targets and guidance. Operator: Our next question is from Daniel Mora Ardila from CrediCorp. Daniel Mora: I have 2 questions. The first one is regarding loan growth. Can you provide further color of what do you expect about loan growth in 2026 by segment? If we can have the guidance by segment would be great. And I would like also to know if you can comment about the competitive pressures in loan growth, especially considering that there is one key competitor that is showing very high figures of loan growth in Chile. I would like to know if you feel the pressures, especially in the commercial segment. That will be my first question. And the second one is regarding NPLs and cost of risk. I would like to know, considering the slight deterioration of NPL in the consumer segment and mortgage segment, what will be the path or the evolution of asset quality indicators in 2026, given that you are guiding for a reduction of the cost of risk next year? Patricia Pallacan: Thanks, Daniel, for your questions. I will take the first one and Cristian will take the second one. So regarding the composition of loan growth for next year, we are seeing like a quite homogenic growth composition [ in segments ]. So regarding consumer loans, we continue to see growing at a healthy pace in that product. Regarding the mortgage portfolio, we also -- during this last quarter, we are seeing better dynamics leveraged by the government support or stimulus coming from the subsidies. So we are seeing good dynamics for next year as well. And regarding the commercial loans, that will be like the question mark, but we are also seeing better dynamics for next year, especially leveraged by the political landscape, right? And if we have the right changes in the regulation that we have already seen as part of the transition we will have growth in our guidance for next year. Cristian Vicuna: So within the commercial portfolio, to give you a little more flavor, we are expecting for the retail part, SMEs to grow mid-single digits as within our general guidance. But as I mentioned earlier, the question mark is what will happen with the large corporates and the investment decisions that they might trigger because of the political landscape. This is what we are not seeing yet in terms of market dynamics. And it's probably related to the part of your question about the competitive pressure, right? So I think that in terms of the commercial part of the portfolio, we are seeing some players growing, but we don't assess it on the local part of the portfolio. And we believe that this is set to improve by the second half of next year. And turning to your credit cost of risk and risk in general performance. So, so far this year, we are showing closer to 1.4% cost of risk year-to-date. We have some seasonal effects on September in terms of the absolute movements of the portfolio, especially in the NPL part, we are seeing it's pretty stable. Most of the increase in cost of risk is coming from the improvement that we have been displaying in the commercial NPLs. So these commercial NPLs are coming down from levels of 4.1% 12 months ago to levels of 3.4%. So we've been doing some write-offs of some nonperforming loans there, and that's explaining most of the pickup that we are seeing in terms of cost of risk. We know that's not going to continue for the upcoming quarters. So that's what makes us believe that the total cost of risk is set to improve in the next periods. Operator: Our next question is from Neha Agarwala from HSBC. Neha Agarwala: My first question is on the interchange fee. Could you remind us what are the current levels for the interchange fee? And what is the risk that the second caps actually go through next year? What is your expectation in that regard? Cristian Vicuna: So just a reminder, like we had a committee that was in charge of assessing the rate fees for the card business in general. So they implemented the first part of their reduction from levels of around 1.4% in credit to levels of 1.14%, which is the current rate and from levels of 0.6% in debit to levels of 0.5%, which is the current rate. So the second rate cut, which was suspended, it was set to decrease credit fees to levels of around 0.8% and debit to levels of around 0.35% and prepaid also to levels of around -- similar to credit of 0.8%. So that's the part of the decision that's being reviewed. The committee is expected to come to a decision by the final months of this year or early next year. Our initial assessment was that the total reform will mean an impact in our credit card fees of around $50 million, half and half in both impacts. So the second part is expected to come next year. We don't know. But the impact will be in the neighborhood of the $20 million in fees in the card impact if the committee comes to the decision to implement the second cut. Neha Agarwala: Very clear. So if the second cut actually happens, which is not in your guidance, the impact would be between $20 million to $25 million for 2026. Cristian Vicuna: Yes. Neha Agarwala: Super. And my second question is, again, going back to the cost of risk. I know you talked about it. But this year was -- we saw the NPLs coming down. You had to do some write-offs, there were one-off cases. But 2026, the asset quality should perform better than what we had this year. So why isn't cost of risk coming down, even more in the initial targets? Cristian Vicuna: I think 10 basis points, it's a good range to start because we are still not seeing the full effects of the projects that we've been implementing to improve the collection cycle. So we are still -- and I agree with you, which might sound a little conservative, but we are comfortable guiding some conservative improvements and leaving some room there. Operator: [Operator Instructions] Okay. It looks like we have no further questions. I will now hand it back to the Santander-Chile team for the closing remarks. Cristian Vicuna: Thank you all very much for taking the time to participate in today's call, and we look forward to speaking with you again very soon. Operator: That concludes the call for today. Thank you, and have a nice day.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to Royalty Pharma Third Quarter Earnings Conference Call. I would like now to turn the conference over to George Grofik, Senior Vice President, Head of Investor Relations and Communications. Please go ahead, sir. George Grofik: Good morning and good afternoon to everyone on the call. Thank you for joining us to review Royalty Pharma's Third Quarter 2025 results. You can find the press release with our earnings results and slides of this call on the Investors page of our website at royaltypharma.com. On Slide 2, I'd like to remind you that information presented in this call contains forward-looking statements that involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from these statements. We refer you to our most recent 10-K on file with the SEC for a description of these risks. All forward-looking statements are based on information, currently available to Royalty Pharma, and we assume no obligation to update any such forward-looking statements. Non-GAAP liquidity measures will be used to help you understand our financial results and the reconciliations of these measures to our GAAP financials is provided in the earnings press release available on our website. And with that, please advance to Slide 3, our speakers on the call today are Pablo Legorreta, Chief Executive Officer and Chairman of the Board; Marshall Urist, EVP, Head of Research and Investments; Chris Hite, EVP, Vice Chairman; and Terry Coyne, EVP, Chief Financial Officer. Pablo will discuss the key highlights, after which Marshall will provide a portfolio update. Chris will then discuss our development-stage pipeline, and Terry will review the financials. Following concluding remarks from Pablo, we will hold the Q&A session. And with that, I'd like to turn the call over to Pablo. Pablo Legorreta: Thank you, George, and welcome to everyone on the call. I am delighted to report another successful quarter of execution on our goal to be the premier capital allocator in life sciences with consistent compounding growth. Slide 5 summarizes our strong business momentum in the third quarter. Starting with the financials, we delivered 11% growth in both portfolio receipts, our top line and royalty receipts, which are recurring cash flow. The sustained momentum was driven by the strength of our diversified portfolio. We're also now starting to report on a quarterly basis, our return on invested capital and return on invested equity. In the third quarter, we maintained strong returns in our business with return on invested capital of 15.7%, and return on invested equity of 22.9% for the last 12 months. Turning to capital allocation. We deployed capital of $1 billion in the quarter on value-creating loyalty transactions. Taking our total to $1.7 billion in the first 9 months, and we repurchased 4 million shares in the quarter, taking the total value of share repurchases to $1.15 billion in the first 9 months. Looking at our portfolio, we remain very active in the growing market for Royalty. We acquired our Royalty interest on Amgen's lung cancer drug, Imdelltra, for up to $950 million. We entered into a funding agreement for up to $300 million with Zenas Biopharma for its development-stage autoimmune drug obexelimab. And since the quarter ended, we acquired a royalty on Alnylam's Amvuttra, a blockbuster therapy for ATTR amyloidosis for $310 million. We're excited by each of these three transactions, and Marshall will take you through the details momentarily. On the back of this busy year, our development-stage pipeline has expanded to 17 therapies. And as Chris will highlight, we're looking forward to multiple pivotal readouts in the relatively near future. Lastly, we're pleased to raise our full year 2025 top line guidance. This is the third time we have raised guidance this year and the 14th since our IPO in 2020. We now expect portfolio receipts to be between $3.2 billion and $3.25 billion, which represents impressive growth of around 14% to 16%, driven by our diversified portfolio. Consistent with our standard practice, our guidance is based on our current portfolio and does not include the benefit of any future transactions. Slide 6 is one I keep coming back to, as it demonstrates our consistent double-digit growth on average since our IPO. As you heard at our Investor Day in September, we have delivered this impressive record year in and year out, regardless of the market backdrop. This reflects our ability to execute successfully and consistently against our strategy. With that, I will hand it over to Marshall. Marshall Urist: Thanks, Pablo. We've had a busy last few months, and I want to provide more color on our recent deal activity. The breadth of these transactions totaling approximately $1.6 billion in announced value across three very different disease areas really highlights the power of Royalty Pharma's therapeutic area agnostic investment approach that focuses on innovative important new medicines to drive our diversified, sustainable and attractive growth profile. Slide 8 takes you through our Imdelltra transaction. This is a great example of a large investment in the kind of transformational medicines that are the foundation of our market-leading portfolio. Amgen's Imdelltra was approved in 2024 as a first-in-class targeted immunotherapy for small-cell lung cancer, where median survival is only 1 year after initial therapy. We acquired an existing royalty of about 7% of sales from B1 for up to $950 million, including an upfront of $885 million. B1 has the option to sell an additional portion of the royalty to us for up to $65 million. Imdelltra has strong clinical data in the second-line setting. And looking ahead, we have high conviction for expansion into newly diagnosed patients with the ongoing Phase III trials beginning to read out in 2027. Imdelltra has had a strong launch, currently annualizing at over $700 million with consensus sales reaching $2.7 billion by 2035. Based on this outlook, we expect the transaction to deliver an unlevered return in the low double-digit range, consistent with our target for transactions on approved products. On Slide 9, I want to turn to our most recent transaction in which we acquired Blackstone's 1% royalty on Alnylam's Amvuttra for $310 million. Amvuttra is approved for TTR amyloidosis, a progressive, debilitating and fatal rare disease and is already a blockbuster medicine. The clinical data shows a compelling patient benefit with dosing once a quarter and an approximately 35% reduction in all-cause mortality for patients with the most common form of the disease, TTR cardiomyopathy. Alnylam recently reported very strong third quarter sales with TTR franchise guidance rising to between $2.475 billion and $2.525 billion for 2025, with Amvuttra adjusting its third year on the market. Consensus sales are expected to reach over $8 billion in 2030. We expect an unlevered IRR in the low double digits or better that factors in significant potential competition from Alnylam's follow-on therapy, nucresiran. The third transaction is our agreement with Zenas Biopharma for obexelimab, an exciting Phase III product for autoimmune disease. Slide 10 sets out the key elements. Obexelimab is potentially the first nondepleting B-cell modulating therapy for a rare autoimmune disorder called IgG4-related disease, with Phase III results expected around the end of this year. We will provide up to $300 million to acquire a 5.5% synthetic royalty on worldwide obexelimab sales. Importantly, consistent with our careful approach to risk management, this investment is staged with an upfront of $75 million and the remainder to be paid on the achievement of certain clinical and regulatory milestones. The Phase II proof-of-concept data in IgG4-RD are strong, and Zenas' recent Phase II results in relapsing multiple sclerosis, which showed an impressive near complete suppression of active inflammatory disease, further increases our conviction in obexelimab's mechanism of action. Commercially, we see blockbuster potential in IgG4-RD given a patient population of more than 20,000 and still low uptake of advanced therapies. As a result, we expect to deliver an unlevered IRR in the teens, consistent with our target for development-stage therapies. So to close three very different transactions, but all consistent with our commitment to creating value for shareholders by investing in innovative therapies with high patient impact. With that, let me hand it over to Chris. Christopher Hite: Thanks, Marshall. It's my pleasure to provide an update on our development-stage pipeline. As a reminder, at our Investor Day, we highlighted that our pipeline is expected to generate over $36 billion in cumulative peak sales, which translates to over $2 billion in peak royalties to Royalty Pharma. So there's really significant potential in this pipeline. Slide 12 illustrates that 3 of our 5 Royalty transactions this year have been on development-stage therapies, namely litifilimab, daraxonrasib and obexelimab. This expands our total pipeline to 17 therapies, most of which have become -- most of which have multi-blockbuster potential. Without going into the details of each deal, there are a few key takeaways. First, all three transactions include a synthetic royalty component. This speaks to the growing recognition of this attractive nondilutive funding paradigm, which we pioneered and allows us to tailor solutions for our partners. At our Investor Day, we presented findings from the Deloitte survey, which highlighted that the biopharma industry is evolving towards a more diversified funding model, in which royalties, and particularly synthetic royalties are becoming a growing part of the capital structure. Our deal activity in 2025 underscores this point. We have, so far, this year, announced synthetic royalty transactions of up to $1.8 billion, which have already far exceeded 2024 as our best year ever. The second point here is about risk mitigation. Each of these three therapies is in Phase III development, which carries a lower risk profile. We only consider development-stage investments if there is a compelling proof-of-concept data in an area of unmet patient need, and if the range of commercial scenarios we model supports returns in the teens or better. Third, the broad spread of indications highlights our therapy area agnostic approach. In fact, since 2020, we have invested in 60 different disease areas. Without the therapy area constraints of most biopharma companies, we view the entire biopharma market as our pipeline of opportunities. Slide 13 shows the balance of our capital deployment between approved and development-stage investments. The mix varies significantly on a year-to-year basis given the timing of opportunities, but has typically been a roughly 65-35 split over time between approved products and development-stage therapies. We see this as generally a good rule of thumb for our capital deployment mix. However, this split does not tell the whole story. In fact, as a result of our success rate in development-stage investment, our portfolio risk is low overall. For example, 86% of our current capital at work is related to approved products, and this ratio has been very stable, averaging around 90% since 2012. Only 11% of our capital -- current capital at work is related to development-stage products, of which around 2% have already received positive pivotal readouts. Slide 14 expands on my earlier comments on risk mitigation. Here you see the industry probability of approval at each phase of development. Importantly, and in contrast with biopharma, we don't invest in Phase I or Phase II. Instead, we focus our investments where industry success rates are highest. By following this disciplined risk-reward approach, and by layering on top additional risk mitigation through deal structuring, we've built a strong track record of success. This explains why we continue to beat industry benchmarks with around 90% of our development-stage investments going on to receive approval. On Slide 15, I want to close by highlighting the multiple pivotal readouts that we expect for our development-stage investments over the next couple of years. In the fourth quarter of 2025 and 2026, we expect six Phase III readouts with deucrictibant first up in hereditary angioedema, followed by obexelimab in IgG4-related disease. Additionally, 2026 readouts include the first outcomes trial for our investment in the LP(a) class of drugs with Novartis' pelacarsen as well as Phase III results for litifilimab in lupus and aficamten and nonobstructive hypotrophic cardiomyopathy. Among these six therapies, three have the potential to generate peak annual royalties of up to $200 million, while daraxonrasib for pancreas cancer could be well above $200 million. For 2027, we expect pivotal readouts from a host of potential blockbusters, including our second LP(a) investment olpasiran as well as frexalimab in MS and daraxonrasib in lung cancer, to name just three. To conclude, the next few years will see multiple events that have the potential to unlock substantial value from our development-stage pipeline. And with that, I'd like to hand it over to Terry. Terrance Coyne: Thanks, Chris. Let's move to Slide 17. This slide shows how our efficient business model generates substantial cash flow to be reinvested. As you heard from Pablo, royalty receipts grew by 11% in the third quarter, reflecting the excellent momentum of our diversified portfolio. Key drivers were the strong growth of Voranigo, Tremfya and the cystic fibrosis franchise. Milestones and other contractual receipts were modest, both in this quarter and the prior year quarter. As a result, we also delivered 11% growth in portfolio receipts, our top line to $814 million. As we move down the column, operating and professional costs equated to 4.2% of portfolio receipts. This reflected cash savings from the internalization transaction and compares with over 12% in the first 6 months of the year. Net interest paid was $123 million in the quarter, reflecting the semiannual timing of our interest payment schedule with payments primarily in the first and third quarters and the interest we received for our -- the cash on our balance sheet. Moving further down the column. We have consistently stated that when we think of the cash generated by the business to then be redeployed into value-enhancing royalties, we look to portfolio cash flow, which is adjusted EBITDA less net interest paid. This amounted to $657 million in the quarter, equivalent to a margin of around 81%, and reflects a high underlying level of cash conversion and efficiency. Capital deployment in the quarter was just over $1 billion. This primarily included the $885 million upfront for Imdelltra, $75 million upfront for obexelimab and R&D funding for litifilimab. Lastly, our weighted average share count declined by 33 million shares versus the third quarter of 2024, reflecting the impact of our share buyback program. On Slide 18, I am pleased to share our first quarterly update on portfolio returns. We introduced these new metrics at our Investor Day, and I hope the message came across loud and clear. We are in the returns business, and every capital allocation decision we make is in an effort to create economic value for shareholders. Return on invested capital has been remarkably stable at around 15% on average from 2019 to 2024, and in the third quarter, was 15.7% for the last 12-month period ending September 30. Return on invested equity, which shows the impact of conservative leverage on our equity returns, has been consistently in the low 20% range, and was 22.9% for the last 12-month period ending September 30. We believe these new metrics facilitate a deeper understanding of the cash yield for our business and demonstrate that we are continuing to invest at attractive returns that will drive long-term value for our shareholders. Slide 19 shows that we continue to maintain the financial flexibility to execute our strategy and return capital to shareholders. At the end of the third quarter, we had cash and equivalents of $939 million. In terms of borrowings, we have investment-grade debt outstanding of $9.2 billion, including the $2 billion of notes we issued in the third quarter and a weighted average duration of around 13 years. Our leverage now stands at around 3.2x total debt to adjusted EBITDA or 2.9x on a net basis. We also have access to our $1.8 billion revolver, which is undrawn. Taken together, we have access to approximately $2.9 billion of financial capacity through cash on our balance sheet, the cash our business generates and access to the debt markets. Turning to our capital allocation framework. We have deployed $1.7 billion of capital on attractive royalty deals in the first 9 months of 2025. We have also returned a record $1.5 billion to our shareholders in the first 9 months of this year, including share repurchases of $1.15 billion and our growing dividend. On Slide 20, we are raising our full year 2025 financial guidance by approximately 4% at the midpoint. We now expect portfolio receipts to be in the range of $3.2 billion to $3.25 billion, an increase from $3.05 billion to $3.15 billion previously, representing growth of around 14% to 16%. The increase from our previous guidance primarily reflects the strong momentum of our diversified portfolio. Milestones and other contractual receipts are now expected to be around $125 million compared with $110 million previously. Importantly, and consistent with our standard practice, this guidance is based on our portfolio as of today and does not take into account the benefit of any future royalty acquisitions. Turning to operating costs. Payments for operating and professional costs are still expected to be 9% to 9.5% of portfolio receipts in 2025. As a reminder, costs in the first half of the year were greater than 12% of portfolio received, driven by approximately $70 million of onetime expenses related to the internalization and other onetime items. Collectively, these items are expected to impact full year cost by a little more than 2% of portfolio receipts. Lastly, interest paid in 2025 is expected to be around $275 million, with around $7 million to be paid in Q4. This guidance does not take into account interest received on our cash balance, which was $28 million in the first 9 months. In summary, we delivered a strong third quarter and 9 months, which puts us on track to achieve another year of strong financial performance in 2025, reflected in our raised guidance. To close, I want to highlight a few factors for the 2026 to help with your modeling. First, we expect minimal royalties from Promacta next year, which is facing the launch of generics in the United States and Europe in 2025. And second, we currently anticipate interest paid to be between $350 million to $360 million in 2026, which includes interest payments on the $2 billion of senior secured notes issued in September 2025. We plan to provide full year 2026 guidance when we report fourth quarter 2025 earnings earlier -- early next year. Consistent with our standard practice, this guidance will exclude contributions from any future investments. With that, I would like to hand the call back to Pablo. Pablo Legorreta: Thanks, Terry. To conclude, I'm delighted with our performance in the quarter. We maintained our double-digit momentum, we expanded our portfolio, and we again raised our guidance. We also hosted a successful Investor Day, where we were thrilled to share our plans for shareholder value creation. On that note, I want to close by reiterating some of the key messages from the day. We're the clear leader in an expanding market with strong fundamental tailwinds, reflecting huge demand for funding life sciences innovation in even more creative ways. We have a best-in-class platform for investing in the most exciting and innovative products marketed by premier biopharma companies and expect to remain the undisputed leader. We have announced an outstanding track record of delivering consistent and attractive returns, including an IRR and return on invested capital in the mid-teens and return on invested equity of over 20%. Lastly, we're on track to deliver strong global volatility growth through 2030 and beyond. Together, we think this adds up to a very attractive investment proposition with a potential for annualized total shareholder returns, at least in the mid-teens over the next 5 years. With that, we would be happy to take your questions. George Grofik: We will now open up the call to your questions. Operator, please take the first question. Operator: [Operator Instructions] The first question comes from Asad Haider with Goldman Sachs. Asad Haider: Congrats on all the progress. Just maybe a couple on the external environment. Recently, we are seeing a bit of an uptick in biotech M&A, and we're also moving into a lower interest rate environment. So could you perhaps speak to the pushes and pulls that these changing -- that this changing backdrop across these external factors presents for Royalty-driven deal activity and how you're thinking about the opportunity set and your target returns? And then just second, just any updated thoughts on how you're thinking about the China opportunity that you discussed at your Investor Day back in September? Any updates or insights around your China strategy as it relates to the types of investments that you're considering there would be helpful, and how, if at all, if the external environment impacts that? Pablo Legorreta: Thank you for the question. Chris, why don't you take this question, both of them? Christopher Hite: Thanks for the question. You're right, there has been an uptick in the M&A marketplace. And that really has very little impact on anything that we're doing. What you've seen is, obviously, large pharma is looking to fill some of their pipelines and LOE exposure. And we actually see that as beneficial to what we're doing. I think in the sense of it's just the companies out there need a lot of capital. There's a variety of ways in which they can get capital. We're clearly providing a key source of capital in the sector, which we're super excited about. So increased M&A uptick really doesn't impact the royalty market. In the sense of China, you're right. We're super excited. That's going to be -- and we've seen a lot of growth in the out-licensing out of China to multinationals. We see that as another leg of growth on the existing royalty marketplace. As you know, we spend a lot of time looking at companies and investing companies post proof of concept. I marked -- made some remarks in the prepared remarks about what stage of development. We invest in a lot of those deals out of China have been early-stage development deals. We're going to track those transactions and those molecules as they progress with the companies that in-license them, and there certainly will be opportunities to acquire those royalties as there's more known about the compounds that were out-licensed in multinationals. So we're super excited. We've had multiple teams go to China this year, multiple times, building relationships for that opportunity set. So we're excited about the opportunity. We see it just as another leg of growth on the existing royalty marketplace. Operator: And our next question will come from Chris Parikh (sic) [ Chris Schott ] with JPMorgan. Hardik Parikh: This is Hardik Parikh in for Chris Schott. Just wondering, I know Merck had recently announced a royalty deal with one of your peers. And you guys have also done a couple of R&D collaborations with Biogen and Merck in the past. Do you think the frequency of these types of collaborations with large pharma will increase as those names head towards their patent cycles? What type of factors drive these deals from pharma's perspective? Pablo Legorreta: Yes. Thank you for the question. And I think, I'll start by just saying that as the largest royalty buyer in the market, you can sort of assume that we look at every deal. This product is also a competitor to Trodelvy, where we have a Royalty, we funded the Phase III. So we're very familiar with the space. And regarding the deal specifically, what I would say is that it's just great to see how this idea of using royalties to fund trials, not only with biotech companies, but also with big pharma, is really becoming mainstream, which speaks to the big opportunity that we have in front of us. And I think this is going to just continue to grow, and it's a really big opportunity if you think of the scale of capital needed required by these companies. So we're very optimistic about these transactions continuing to happen. And I think with respect to the transaction specifically, as I said, we actually looked at it, but decided at the end that it was not for us, and continue to be very active with many big pharmas to talk about this kind of funding. Operator: And the next question will come from Geoff Meacham with Citi. Geoffrey Meacham: I guess, Terry or maybe Pablo, on the IRR, I'm assuming that that's likely to tick up. And by the way, thanks for presenting that data. It's likely to tick up as you hit a tipping point of new launches. I guess the bigger picture is, does that change royalty's willingness to look to maybe moderately earlier programs, or maybe just take bigger risks? I know you're not obviously going to materially change the model, but the question is more of a tilt going forward on the risk side. Pablo Legorreta: Sure. Why don't you take that question, Terry? But I think just one very top-level comment about it. You can imagine that we've been actually tracking this for three decades. And it really doesn't change much our behavior. If we see an attractive transaction in an approved product or an attractive transaction in a product that is in development, we will do it. And the fact that this calculation, these returns are going to move up and down a little bit, will not really impact our behavior in terms of us looking at transactions and deploying capital. But go ahead, Terry. Terrance Coyne: Yes. Pablo, that's exactly the point. And I would say on the specifics on the return on invested capital and return on invested equity metrics that we started to highlight, I think the thing that we're most proud of really is the stability and the consistency. And so as we've continued to scale our investments, it's remained remarkably stable. And we think that it's going to bounce around a little bit, quarter in and quarter out, but it should remain for return on invested capital in that mid-teens range for the foreseeable future, which we think really speaks to the value creation of our business model. Operator: And our next question will come from Umer Raffat with Evercore. Michael DiFiore: This is Mike DiFiore in for Umer. Two for me. I want to drill down on the Amvuttra deal. You mentioned significant competition from nucresiran potentially, but could you provide any color on the range of scenarios that factor in significant -- this significant competition from this asset. And in the scenario where it does get approved and launches in 2030, how quickly might you see Amvuttra eroding? And quickly, separately, any updates on the market for synthetic royalties in the obesity space? Pablo Legorreta: Marshall, why don't you take both questions? Marshall Urist: Sure. Mike, thanks for the question. So specifically, on how we thought about Amvuttra over its whole product life cycle. As we highlighted at the beginning of the call, we are really excited about this product. It's completely consistent with the kind of products that we've invested in, in the past. And I think the strong launch in Alnylam's strong execution behind it are all examples of that. Specifically to your question, as we always do, we looked at a pretty broad range of scenarios for both timing and the slope of how nucresiran might enter the market. We obviously have a case study, a very recent case study of the Onpattro to Amvuttra transition to sort of to help us and guide us as one scenario. But we certainly looked at a lot of sensitivities around that as well, with the message being and why we talked about that, that we're confident in an IRR of low double digits or better when we look across that range of scenarios, even baking in that range of nucresiran scenarios. Second, on the obesity market. So it continues to be, I think, message very consistently with what we said in the past, certainly on our radar looking for the right opportunities there. We don't just want to have a royalty on an obesity product for the sake of it, we want it to be an important product that differentiates itself in this space, and we'll be disciplined in waiting to find the right thing that creates value for our shareholders. Operator: And the next question will come from Terence Flynn with Morgan Stanley. Terence Flynn: Two for me. First, congrats on the Amvuttra deal. I think Blackstone originally signed a deal with Alnylam back in 2020. And Pablo, given your comments that you guys look at everything, I'm assuming you had a look at it back then. So I'm just wondering what's different now versus that 2020 deal? And then on the LP(a) front, probably a question for Marshall. Amgen, as I'm sure you guys heard last night talked about the olpasiran Phase III event rate tracking slower than expected. Just any thoughts there on your views on implications for probability of success here for this study? Pablo Legorreta: Sure. Marshall will take the second part of the question, but maybe to provide some color on the first one regarding Amvuttra? Yes, it is part of a larger deal that was done in 2020, which was about $1 billion. That actually related much more to nucresiran. And this small royalty 1% on Amvuttra was sort of an add-on to the transaction. It was sort of a $70 million part of the overall transaction. And we did look at that -- the whole deal at the time, but again, we decided it was not for us. And I think, one thing I will comment on because obviously, I think this provides some color regarding this question that we've had for -- since we went public 5 years ago about competition. And obviously, regarding the motivations of why Blackstone sold, you should ask them, but they've been in this investment for 5 years, and it's an attractive return given the investment they made specifically on this. But I think one thing to comment on, as we highlighted in our Investor Day is that we do have a very unique structure as a company now, ongoing business. Perpetual versus many of our competitors that are structured as close-in funds where they have investment horizons that are much shorter than ours. And as you know, royalties are very, very long. It can be 10, 15 years. So what's very unique about Royalty Pharma is that were structured to actually invest in assets that are very long and hold them to maturity. And I think this really speaks to the differences in the business models, where we are really set up to own royalties that are going to cash flow for 10, 15 or longer than that. And so we have sort of different investment horizons. And I think the last thing I would say is that this transaction also highlights something unique about Royalty Pharma, which is that given our diligence process that has been honed over decades, we were able to develop a differentiated view about the sales trajectory and importantly, the persistence and duration of the Amvuttra royalties that maybe differs from other people's perspectives. And that's why we think this is a very attractive investment that will deliver attractive returns for us. But the other question for you, Marshall. Marshall Urist: Sure. Thanks for the question on LP(a). So specifically, Amgen did talk about a slower event rate in that study last night. I think that probably shouldn't come necessarily as a surprise, given our other -- given Novartis where we also have an investment in their LP(a) product, had a similar observation from their trial. I think when we did the initial diligence, when you're running a first-in-class outcome study for a target in a population where there's not a lot of precedent, I think we were eyes open about the fact that there ultimately would be some uncertainty around timing and the exact event rate. So what that means to us, to your question is it doesn't change our view of the probability of success. And we continue to be really excited about having two royalties in the two leading therapies in this class that we think could be a very large, many multibillion-dollar class in the future, and we're really excited to be a part of it. Operator: And our next question will come from Mike Nedelcovych with TD Cowen. Michael Nedelcovych: I have two. My first is also on the LP(a) space. And specifically, I'm wondering if the Horizon trial fails in 2026, to what extent do you think differences in trial design could ride to the rescue as it relates to olpasiran's prospects in 2027? And my second question is on obexelimab. This agent posted some very interesting Phase II MS data right after Royalty Pharma announced this deal, so I'm just curious if that has changed your thinking at all around peak potential? Or was MS upside already taken into account? Pablo Legorreta: Sure. Thanks for the question. Again, this is for you, Marshall. Marshall Urist: Sure. Mike, thank you for the question. So specifically, your question on LP(a), just for everyone very quickly who might not be familiar with all the details here. So Mike, your question is if the first outcomes trial that will read out Horizon from Novartis were not to be positive, what would the implications be for the second one coming, which is Amgen's trial for olpasiran. And I think, there are certainly some differences in trial design. There are some differences in depth of LP(a) lowering. So we are optimistic about both trials. But certainly, there are differences in the trial design, which could differentiate the olpasiran outcome from the -- from Horizon and pelacarsen. Hard to comment really specifically on that right now until we see -- until we see the details in what happens. So are certainly optimistic and excited to see the first one next year. Your second question on obexelimab. So yes, we were the MS data that Zenas is reported looked great. And I think as we highlighted in the prepared remarks, it really kind of validates the underlying kind of scientific and clinical question here, which is if you have a non B-cell depleting but B cell activity modulating antibody, what would be -- what would that mean for activity in various autoimmune diseases. And I think the MS data and really showing very strong suppression of disease activity is very validating of the view that this is a new and different way of treating autoimmune disease, which is exciting. The near-term launch, and I think what we were really working with Zenas on funding, is certainly focused on IgG4-related disease. And so that was really the -- that was the focus of the deal because I think in a lot of ways, from a commercial perspective, that drives the near-term capital need, but they have a great team over there at Zenas and excited to see what they do, with obexelimab in addition to IgG4-related disease. Operator: I show no further questions in the queue at this time. I would now like to turn the call back over to Pablo for closing remarks. Pablo Legorreta: Thank you, operator, and thanks to everyone on the call for your continued interest in Royalty Pharma. If you have any follow-up questions, please feel free to reach out to George Grofik. Thanks. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the Chatham Lodging Trust Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] This call is being recorded on Wednesday, November 5, 2025. I would now like to turn the call over to Mr. Chris Daly. Please go ahead. Chris Daly: Thank you, Kelsey. Happy Wednesday, everybody, and welcome to the Chatham Lodging Trust Third Quarter 2025 Results Conference Call. Please note that many of our comments today are considered forward-looking statements as defined by federal securities laws. These statements are subject to risks and uncertainties, both known and unknown, as described in our most recent Form 10-K and other SEC filings. All information in this call is as of November 5, 2025, unless otherwise noted, and the company undertakes no obligation to update any forward-looking statements to conform the statement to actual results or changes in the company's expectations. You can find copies of our SEC filings and earnings release, which contain reconciliations to non-GAAP financial measures referenced on this call on our website at chathamlodgingtrust.com. Now to provide you with some insight into Chatham's 2025 third quarter results, allow me to introduce Jeff Fisher, Chairman, President and Chief Executive Officer; Dennis Craven, Executive Vice President and Chief Operating Officer; and Jeremy Wegner, Senior Vice President and Chief Financial Officer. Let me turn the session over to Jeff Fisher. Jeff? Jeffrey Fisher: Thanks, Chris. Good morning, everyone. I certainly appreciate everybody being on our call today. Before I comment on our third quarter operating results, I'd like to update some of our key corporate initiatives. Earlier this year, we completed the sale of 5 hotels with an average age of 25 years at an approximate 6% capitalization rate, and each of these 5 hotels were among the 6 lowest RevPAR hotels in our portfolio. In the fourth quarter, we are under contract to close on the sale of another hotel for $17 million with similar characteristics and at similar returns to the previously sold 5 hotels. These opportunistic sales add liquidity to execute on other value-enhancing opportunities for the company. On that note, we've now repurchased approximately 500,000 or 1% of our outstanding shares of our stock at an average price of $6.85. Included in that amount is approximately 230,000 shares that we have repurchased since the end of the third quarter. We intend to remain active repurchasers of shares moving forward since we believe we are trading at a meaningful discount. Lastly, we completed an upsized and recast syndication of our credit facility and term loan, further enhancing our financial condition and lowering overall borrowing costs. We are one of the lowest leveraged lodging REITs and have great flexibility to create value by using that capacity to repurchase shares, acquire hotels and fund our upcoming Home2 Portland, Maine development. With respect to acquiring hotels, we are somewhat more bullish on our ability to grow externally than we've been in the last 18 months. Deal flow underwriting has been steady here, and it seems like seller pricing expectations in some cases, are becoming more reasonable. We have been and will continue to exercise great patience and discipline as operating fundamentals are quite volatile. But of course, it is that volatility that I think is partially the catalyst for some movement in cap rates upward. The markets will have to make sense for us. And of course, yields have to approximate the implied yield on buying our own stock. We want to invest in markets that are going to benefit from continued population migration and business investment. The U.S. is poised to benefit from this potential capital expenditure as they're calling it super cycle based on the announced investments from companies based here and abroad. And more specifically, it's expected that the Central and Southeastern U.S. will be the biggest beneficiaries in some of these investments and additions of employment. Operationally, despite RevPAR growing -- excuse me, we'd like it to be growing 2.5% -- declining 2.5%, we were able to minimize our margin decline to less than 100 basis points, and we're able to deliver hotel EBITDA and FFO per share towards the upper end of our guidance range and beating consensus estimates. Looking at RevPAR performance in our largest markets, I want to address our Silicon Valley performance because on the surface, the decline appears weak. RevPAR at our hotels in Mountain View and San Mateo produced RevPAR growth of 2.5% in the quarter, while RevPAR growth at the 2 Sunnyvale hotels fell 9%. The underlying fundamentals in Sunnyvale are healthy with the third quarter submarket and competitive set RevPAR up as opposed to our 2 hotels, RevPAR was up 3% and 6%, respectively, in the market. Given the underlying health of the market, when one of our larger corporate accounts asked us to substantially discount our room rates, we declined to participate. We believe the better long-term option for us is to maintain our rate integrity, and that will benefit us in the future as the market outlook, as we've discussed, continues to remain strong and the market is growing and recovering. Our coastal Northeast and Greater New York markets experienced RevPAR growth of 2% and 8% in the quarter, and the coastal Northeastern portfolio remains fantastic, benefiting from long-term supply growth restrictions in those markets, combined with a balance of leisure, business and government demand. In fact, third quarter RevPAR at our Hampton Inn Portland, Maine set an all-time record high for quarterly RevPAR at any of our hotels. Just fantastic and another reason why we are excited about our upcoming development in Downtown Portland on the waterfront. All 3 hotels of Greater New York grew RevPAR in the quarter, led by our Residence Inn Holtsville, Long Island, which had growth of 28% due in part to having the Ryder Cup on Long Island in September; however, that hotel was still having a great year through August with year-to-date RevPAR up 17% as corporate demand has greatly improved really for the first time in that market post COVID. And 3 of our top markets, San Diego, Austin and Dallas were adversely impacted by convention-related demand losses. The Austin and Dallas convention centers are basically closed for renovation, as we've discussed and expansions while San Diego is coming off a record year in convention business in 2024, and our '24 third quarter RevPAR was the second highest quarter ever at that hotel. So the comp is difficult and the softening relative to 2024 in San Diego is really no surprise to us. Our 6 predominantly leisure hotels, which account for approximately 20% of our EBITDA produced RevPAR growth of 3% in the quarter. Within that group, our SpringHill Suites Savannah had a great quarter with RevPAR up over 30% as it has really surged after completing a fantastic renovation that was very well received by our guests and customers. Our fourth quarter RevPAR guidance assumes that our current RevPAR trend of a decline of approximately 3% continues for the rest of the year, unfortunately. It's really been a crazy year, a volatile year, hotel room demand and thus revenue has certainly seen its share of ups and downs this year. Encouraging business demand growth across the portfolio in the first quarter has been adversely impacted since then by DOGE travel spending halts, tariff threats, liberation day impacts and, of course, inbound international travel and especially from Canada being down substantially and now with the government shutdown certainly doesn't help matters. Many of these challenges should be short term, however, and the impact primarily on 2025 performance. But looking forward, Lodging dynamics are very favorable. Forecast for super cycle capital investments, limited supply growth and moderating wage increases all tilt in favor of RevPAR and margin expansion as we look forward to next year. Add to this, what is projected to be a favorable interest rate curve and thus lower borrowing costs should enable us to accretively grow as we move forward. Good years are ahead. With that, I'd like to turn it over to Dennis. Dennis Craven: Thanks, Jeff. Good morning, everyone. Continuing on with some color related to Silicon Valley. Excluding our 2 Sunnyvale hotels, portfolio RevPAR would have been down 1.7% in the quarter. Occupancy at the 4 Silicon Valley hotels was still a solid 75% with a range of 73% to 83% occupancy in the quarter between the 4 hotels. Importantly, October RevPAR at our 4 Silicon Valley hotels was flat to last year compared to the down -- down 4% trend for the quarter. RevPAR was down approximately 5% at the 2 Sunnyvale hotels and up 7% at the other 2 hotels. So just adding on to what Jeff talked about earlier in the call, our Silicon Valley hotels were essentially able to, over the last few months, replace approximately half of the business that we chose to pass on related to one of our larger corporate clients. So good trend developing as we move into the fourth quarter with respect to Silicon Valley and those 2 hotels. Obviously, our 3 Washington, D.C. hotels have been for quite a ride this year as evidenced by the following trends, which was First quarter RevPAR was up 6%. Second quarter RevPAR was down 2%, feeling the effects of DOGE when April RevPAR was down 9%. Our third quarter RevPAR really shows the impact of just the threat of a shutdown as we typically see just the threat of shutdown start to impact government travel into those markets. Our RevPAR for those 3 hotels was flat in July, then down approximately 9% in August and September. The government shutdown impacted the third quarter portfolio RevPAR by approximately 40 basis points. In October, the effect of those 3 hotels which were down 19% actually impacted RevPAR by 170 basis points. And when you just take out those 3 hotels, our RevPAR was down only about 1% for October. Outside of our top markets, our other tech-heavy hotel, our Bellevue Residence Inn produced RevPAR growth of 1% in the quarter. As we've talked about for the last really 2 quarters, vehicle border crossings and inbound travel from Canada has been an impact specifically in that region. If you look at vehicle border crossings from British Columbia into Washington State, they were down approximately 35% in the third quarter compared to last year. Having said that, that's better than the 47% that vehicle crossings were down in the second quarter. So at least from a trend perspective, that crossing decline is moderating. At our Home2 in Phoenix, as a reminder, it opened in early 2024, and we acquired the hotel in late May of 2024. RevPAR was up approximately 6% in the quarter. The fourth quarter looked quite strong in Phoenix, and our October RevPAR at that hotel was up another 8% year-over-year. Hotels in the Sunbelt continue to perform well for us. In addition to the previously mentioned Savannah Hotel, our 2 Charleston hotels had another solid quarter with RevPAR up 4%. Our 2 Florida hotels in Destin, Florida -- excuse me, Destin and Fort Lauderdale had flat RevPAR growth in the quarter. Our top 5 RevPAR hotels in the quarter were our Hampton Inn Portland, Maine, as Jeff mentioned, with an all-time high of $354, followed by our Residence Inn Washington, D.C. with RevPAR of $247 and our Hilton Garden Inn Portsmouth with RevPAR of $239, followed by our Hilton Garden Inns Marina Del Rey, Residence Inn White Plains and Holtsville, New York with RevPARs of approximately $204. Just to clarify, the second hotel was our Hilton Garden Inn Portsmouth, not our Residence Inn Washington, D.C. On the operations front, our gross operating profit margins declined 70 points in the quarter to a still strong 44%. As we all know, labor and benefits are by far our largest expense on a per occupied room basis, those costs were up only 2% in the quarter. Headcount is down approximately 3% from year-end at our comparable 34 hotels. With so much top line volatility, it is imperative that we closely monitor our staffing levels and productivity. Outside of labor and benefits, our other operating profit was up slightly year-over-year and improved margins by 30 basis points. Most other operating line items were basically stable year-over-year, though guest acquisition-related commission costs were up approximately 15% or $0.5 million. Our expenses there have increased really just due to the different booking channels year-over-year in the quarter. We had 16 hotels produced over $1 million of GOP in the third quarter compared to 17 in the second quarter, with the only difference related to a D.C. area hotel. What is quite incredible is that for the first time ever following an all-time RevPAR high, the Hampton Inn Portland led all hotels with GOP of $2.5 million in the quarter, unseating our Gaslamp Residence Inn that had led the way for the past 14 quarters. What's even more incredible is that the Hampton Inn Portland only has 125 rooms, while the Gaslamp Residence Inn has 240 rooms. Gaslamp Residence Inn did finish second in the quarter and rounding out the top 5 were 2 of our tech-driven hotels, our Bellevue and Sunnyvale 2 Residence Inns and our Hilton Garden Inn in Portsmouth, New Hampshire. On the CapEx front, we spent approximately $4 million in the quarter. Our last 2 renovations planned for 2025 are commencing in the fourth quarter and that being the Residence Inn Austin, Texas, which starts this week and our Residence Inn Mountain View, California, which starts next month. Our common dividend, which was increased almost 30% earlier this year, is currently $0.09 per share per quarter, and we will continue and we will reevaluate our common dividend in early 2026. With that, I'll turn it over to Jeremy. Jeremy Wegner: Thanks, Dennis. Good morning, everyone. Our Q3 2025 hotel EBITDA was $28.8 million. Adjusted EBITDA was $26.2 million and adjusted FFO was $0.32 per share. Our GOP margin for the quarter of 43.6% was only down 90 basis points from Q3 2024 despite the challenging RevPAR environment due to continued strong expense control and moderating inflationary cost pressures. In Q3, we were able to hold year-over-year increase in labor and benefits cost per occupied room to 1.7%. In Q3, we continue to strengthen our balance sheet by refinancing our revolving credit facility and term loan, which were our only near-term debt maturities. With this transaction, we upsized our revolving credit facility from $260 million to $300 million and upsized our term loan from $140 million to $200 million. Our low leverage of 3.5x net debt to EBITDA and the liquidity provided by our $300 million undrawn revolving credit facility provide us with significant capacity to pursue investment opportunities. In Q3, we ramped up utilization of our share repurchase program and repurchased 255,000 shares for $1.8 million. And subsequent to the end of Q3 in early October, we repurchased an additional 230,000 of shares for $1.5 million. At current price levels, we believe acquiring Chatham stock is a very attractive investment, and we continue to expect to actively repurchase our shares in the future. Turning to our Q4 and full year 2025 guidance. We expect RevPAR of minus 3.5% to minus 2.5%, adjusted EBITDA of $16.7 million to $18.3 million and adjusted FFO per share of $0.14 to $0.17 in Q4 and RevPAR growth of minus 0.7% to minus 0.3%, adjusted EBITDA of $89.2 million to $90.8 million and adjusted FFO per share of $0.96 to $0.99 for the full year. This guidance assumes no further asset sales, capital markets activity or changes in floating interest rates. This concludes my portion of the call. Operator, please open the line for questions. Operator: [Operator Instructions] And your first question comes from Gaurav Mehta from Alliance Global Partners. Gaurav Mehta: I wanted to ask you on investment opportunities. Can you maybe provide some more color on what you guys are seeing in the acquisition market as you're selling hotels? Are there any opportunities to redeploy that capital into acquisitions in the future? Jeffrey Fisher: Yes, I think I'll take that. Gaurav, it feels certainly, and we've been consistently like a lot of companies, looking at deals, talking to owners. But with RevPAR turning in a negative direction, I think that there does present and usually has in the past some opportunities. I feel like the overall ask is certainly now north even on the asking side, north of 8% on a cap rate basis, whereas everybody was hanging on to a lower number, notwithstanding what the hotel REITs trade at as an implied cap rate or otherwise. And I think what we're seeing in a few cases is perhaps the opportunity, as I said, and the goal is to try to create long-term shareholder value here with great hotels that will grow at least as good, if not better than the existing portfolio that are newer that are in the brands that we all know we specialize in. And I think we might be able to do that with some yields that will approximate what we can do by buying our own stock, as Jeremy was talking about. Dennis Craven: And Gaurav, I think I'll just add one thing to add on to Jeff's is when you combine all that with some of these newer assets are coming up on their next wave or really in a lot of cases, first waves of renovations. And as an owner who might have been relatively new to the industry now has to look at an environment that's a bit choppy and has to come up with $2 million to $3 million to renovate a hotel, that decision might spur a little bit more activity as well. So we're in a great financial position to be able to take on some of these opportunities in a market that might make others a little bit nervous. Gaurav Mehta: Great. Second question on the development. Can you remind us on the timing of the Portland, Maine development? Dennis Craven: Yes. I mean, Gaurav, I think we'll -- we're kind of proceeding as we'll start site work on that in 2026, probably be a 21- to 24-month construction time line. So kind of an early 2028 opening. Jeffrey Fisher: I think the seasonality and the results that Dennis was talking about in the existing asset really dictate we have to be very careful about when we start digging up the parking lot because it's the same land parcel. And as Portland has continued, it seems beyond, obviously, summer months well into the month of October to achieve ADRs, particularly on weekends that are over $300 a night. So we're going to look at that carefully and skirt those time frames as well. Dennis Craven: Yes. I mean I think October RevPAR at our Hampton Inn Portland was, I believe, around $380. So just to add on to Jeff's comment, that hotel does really well in almost every month, except for the late December and January and early February when just weather is a little tricky. Operator: And your next question comes from Tyler Batory from Oppenheimer. Tyler Batory: So I wanted to really dive into the RevPAR performance for a little bit, if I could. You missed the midpoint of the guide. Just isolate for us what really drove the variance? Just trying to understand what surprised you in the quarter and what caused that shortfall? Dennis Craven: Yes, Tyler, it really comes down to 2 things. It's our decision on the 2 hotels in Sunnyvale and basically the government shutdown impact on August and September. So you had -- the 2 Sunnyvale hotels are basically 10% of our room count. And for those 2 hotels to be down 9% in the quarter following a first and second quarter with growth in the mid-single digits was a very significant impact that I think, as Jeff talked about, is really, for us, we decided yes, it ultimately was a short-term hit to us, but maintaining that rate integrity. And I think as I spoke about, we were able to, in essence, replace half of that business in October already, I think, ultimately is going to prove to be a pretty good decision long term. And then obviously, in Washington, D.C., it was flat RevPAR growth in July. And then what we historically see, and by the way, we saw this back in -- late in the first and early in the second quarter with the DOGE cuts and the threat of a government shutdown is that as soon as the threat of a government shutdown starts or is kind of out there, generally speaking, that government travel pulls back. And we saw that leading into the actual shutdown with RevPAR at our 3 D.C. hotels down 9% in August and September. That's it. Tyler Batory: Okay. Awesome. So thinking about the outlook and the guide for Q4, RevPAR down 2.5% in Q3. You're guiding down 2.5% to down 3.5% in Q4. So the declines is getting worse. Last time that we spoke and last time you reported and just looking at kind of some of the industry forecast, there was an expectation that Q4 is going to be a little bit better compared with Q3, just from a year-over-year perspective. So just kind of unpack what's implied in that Q4 and kind of why things on a sequential basis are getting -- are deteriorating and getting a little bit worse. Dennis Craven: Yes, absolutely. That really has all to do with essentially the same answer. But just to really put a nail in it is the 3 D.C. hotels reduced our October RevPAR by approximately almost 200 basis points, 170 basis points. So just those 3 alone, in essence, if you excluded those, our RevPAR was off 1% for the month of October. So we obviously have -- we improved Silicon Valley in fourth quarter to flat RevPAR -- I mean, in October to flat RevPAR, but the moderating and lessening range of RevPAR is strictly due to the shutdown in D.C. Tyler Batory: Okay. And then taking a step back and also trying to think about 2026, the convention calendar and some of the disruption in Austin and Dallas and San Diego coming off of a record year in 2024. How are -- or how is the convention business shaping up for next year in some of those markets? And then the supply picture, I think, has been pretty favorable for lodging. So not sure if you can comment on just supply growth in your markets, whether it's next year or the next couple of years. Dennis Craven: Yes. I mean, with respect to the convention calendars, I mean, listen, I think Austin and Dallas are essentially going to maintain kind of where they are until '27. And with respect to San Diego, you had an all-time year last year. It came down this year. It will be something similar next year. So I think what you also have in San Diego is one thing that did happen that had a little bit more of an impact as well this year is you had the new Ryman property that opened up just outside of San Diego, and that obviously had an impact on smaller conventions that might have chosen to go there instead of the primary San Diego convention center. So I think as you move forward on that respect for '26, you probably have no incremental adverse impact from those 3 hotels. And then I think if you look at the supply outlook for our market, supply is less than 1% and is projected to remain that way for next year as well. So I think as just adding on to Jeff's concluding comment, which was when you look out into '26 and '27 and the overall macro looks really good, not only to the industry, but specifically to us with respect to some of these key markets. And I think just adding to what Jeff said, 2025 has just been a nut job of a year in terms of just all these things that have impacted the industry and us. And I think when we can get past a lot of these short-term things, which I think are primarily focused here in 2025, I think the outlook for not only the industry, but for us, and I think just with our upside to some of these markets should be pretty rosy at this point. So it's a little choppy. Tyler Batory: Yes. So switching gears to the margin side of things. I think the performance in the quarter was really quite strong, all things considered. Just talk a little bit more about how you're able to do that. Anything you want to call out that was just kind of driving the performance there? Dennis Craven: Yes. I mean it's -- listen, we're putting a lot of focus and energy on day-to-day and week-to-week management of headcount and productivity, specifically with respect to anything related to housekeeping. And obviously, that's very -- that fluctuates based on occupancy levels. So the key is to really keep a laser eye on those items and really just managing incoming and current wage levels. As you look at where we project moving forward, generally speaking, our hospitality staff, their annual wages are generally up for review every July 1. As you look at the wages we put in place across the portfolio, the average wage increase for us post July 1 year-over-year is about 2% as well. So I think kind of as wages have kind of stabilized, we've been able to maximize efficiencies in our housekeeping department. And I think the availability to hire labor for our hotels has really been fairly stable for the past 12 to 18 months. So we're able to, I think, have a 2% wage increase across the board is, again, pretty favorable when you look forward for us. Tyler Batory: So last question for me, just capital allocation. Balance sheet is in great shape, plenty of liquidity. Just given the backdrop, given where the stock trades, just rank order for us your priorities for your capital here. Dennis Craven: Yes. I mean, listen, I think the first is -- I think it's what Jeff had in his comment in order, which was we're active repurchasing shares and we will be and will continue to be active purchasing shares. We have a $25 million plan in place, which is about -- it's just a little bit less than 10% of our current equity market cap. So we'll continue to be really active there. And then I think the next priority is obviously acquiring hotels if we can do it. And we obviously have our Home2 Portland development. So I'd say #2 and #3 are kind of about the same. But in the meantime, we're going to be active purchasing shares. Operator: [Operator Instructions] And your next question comes from [ John San Gandi from Britney Holdings. ] Unknown Analyst: My question is primarily related to capital deployment as well. From my kind of calculations here, it looks like the stock is trading around $140,000 a key. Any kind of development right now, what we've been seeing is $300,000 a key. Can you walk me through the decision-making process on why to pursue the Portland development when the stock is trading probably around half of what that cost per key would be? Dennis Craven: Sure. This is Dennis. Nice to talk to you. I mean, listen, where our equity price is trading at, whether it's $140,000 or $150,000 or $160,000 a key, that's made up of -- that's comprised of a valuation based on the entirety of our 34 hotels. This specific hotel, you have to look at that deal individually and look and see what the returns project out to be for that specific asset and whether that's going to add value to the overall portfolio. And if you look at -- we're only going to do the deal if we believe it's going to make long-term sense and based on a lot of factors, which is the market is very restrictive on new hotel development. The market is very popular. The RevPARs and margins we're able to obtain and able to achieve on our existing Hampton, but also what we project for this particular hotel will -- based on where we are at the moment and where we believe we'll be after developing that asset, will derive and earn returns well above where the portfolio is returning. So would certainly add value to not only the company, but obviously then ultimately to our shares and be accretive to that value. So you have to look at each opportunity individually, whether it's buying a hotel, developing a hotel or selling a hotel. And if those add value ultimately to what you want to do with that -- with your capital dollars, that's how we assess it. Unknown Analyst: Got it. And then I think just on the acquisition side, you mentioned potentially looking for acquisitions. How would you allocate that -- discuss that and then review that against the share price because that's more of an immediate hit one way or the other with respect to buying shares or acquiring an existing property? Dennis Craven: Yes. I mean I think for us, it's -- you look at what we're trading at on an equity share price. You look at the acquisition, are the yields similar? Does the acquisition provide growth either consistent with or higher than your portfolio? And does it ultimately drive incremental distributable cash flow that ultimately you'd bring back and deliver to your shareholders via dividend. So yes. Operator: And there are no further questions at this time. You can proceed with the conference. Jeffrey Fisher: Well, thank you all for the questions. Thank you all for being here today with us, and we will talk to you as time goes by for better times, I think, as we move into next year. Operator: Ladies and gentlemen, this does conclude your conference call for today. We thank you very much for your participation and ask that you please disconnect. Have a great day.
Operator: Good morning, ladies and gentlemen, and welcome to the Avanos Third Quarter 2025 Earnings Conference Call. [Operator Instructions] This call is being recorded on Wednesday, November 5, 2025. I would now like to turn the conference over to Mr. Jason Pickett, Vice President, Corporate Finance and Treasurer. Please go ahead. Jason Pickett: Good morning, everyone, and thanks for joining us. It's my pleasure to welcome you to Avanos' 2025 Third Quarter Earnings Conference Call. Presenting today will be David Pacitti, CEO; and Scott Galovan, Senior Vice President and CFO. Dave will review our third quarter results and the current business environment. Scott will share additional details regarding these topics and update our 2025 planning assumptions. We will finish the call with Q&A. A presentation for today's call is available on the Investors section of our website, avanos.com. As a reminder, our comments today contain forward-looking statements related to the company, our expected performance and current economic conditions, including risks related to ongoing tariff negotiations and our industry. No assurance can be given as to future financial results. Actual results could differ materially from those in the forward-looking statements. For more information about forward-looking statements and the risk factors that could influence future results, please see today's press release and risk factors described in our filings with the SEC. Additionally, we will be referring to adjusted results and outlook. The press release has information on these adjustments and reconciliations to comparable GAAP financial measures. Now I'll turn the call to Dave. David Pacitti: Thanks, Jason, and good morning, everyone. I'm pleased to report we had a successful third quarter as we made great progress on our key strategic and operational goals in Q3. I would like to share with you our strategic imperatives, which guide us in how we operate the business. Our strategic imperatives are to accelerate growth in our strategic business segments, manage and mitigate the impact of tariffs, realize more operating efficiencies, improve or divest underperforming assets and acquire businesses that are synergistic with our Specialty Nutrition Systems and Pain Management and Recovery strategic segments. Let's take a few minutes to address each of those imperatives in a bit more detail, starting with our financial performance. Driven by the great execution of our commercial team, we achieved strong growth in our life-sustaining Specialty Nutrition Systems or SNS segment, with each of our SNS businesses delivering double-digit and above-market growth in the quarter. We also showed continued progress in our opioid-sparing Pain Management and Recovery segment, which posted positive year-over-year growth in the quarter, led by double-digit above-market growth in our radio frequency ablation business. For the quarter, we achieved net sales of approximately $178 million, adjusted for the effects of foreign exchange and the impact of our strategic decision to withdraw from revenue streams that did not meet our return criteria, organic sales for our strategic segments were up 10% compared to a year ago. Additionally, -- we generated $0.22 of adjusted diluted earnings per share and $20 million of adjusted EBITDA with adjusted gross margin of 52.8% and adjusted SG&A as a percentage of revenue of 40.6%. Given the strong sales momentum and effective cost discipline measures delivered during the first 3 quarters of the year, we are raising and narrowing our full year revenue estimates to $690 million to $700 million. Furthermore, we are raising and narrowing our full year adjusted EPS estimate to $0.85 to $0.95 per share. Moving on to portfolio management. We made solid progress on that front. As you may recall, we divested our hyaluronic acid business in July 31 as returns and growth outlook for that business fell well below acceptable thresholds. This divestiture represents an important step towards our goal of enhancing the future sales growth and profitability profile of our company. Following the sale of HA, I am pleased to report that we acquired Nexus Medical, a privately held medical device company based in Lenexa, Kansas. This acquisition expands our presence in the neonatal and pediatric settings and provides entry into a growing $70 million market. As indicated in our press release, we expected the acquisition to be immediately accretive to both revenue growth and earnings per share. I want to thank all those in the company who are involved in the Nexus transaction. It is already proving to be a great addition to our company. Moving on to our cost improvement efforts. I also have good news to share on that front. As I noted during our last earnings call, I tasked the team with identifying opportunities to optimize costs without impacting our commercial effectiveness. With this backdrop, we have recently taken steps to accelerate our decision-making, improve our new product development process and realize long-term cost-saving opportunities. We expect those efforts will deliver $15 million to $20 million of run rate annualized incremental cost savings by the end of 2026. We anticipate onetime cash charges related to those expanded program of approximately $10 million, with the majority to be incurred in the fourth quarter of 2025. Now on to the tariff front. We are executing on solutions to mitigate the impact of tariffs on our business and gross margin profile. We expect the current tariff environment will continue to impact the company in 2026. Our team is hard at work on implementing a range of strategies focused on tariff mitigation actions, including internal cost containment measures, pricing actions, leveraging previously issued temporary tariff exemptions for portions of our portfolio and lobbying efforts with AdvaMed and other third parties that have interactions with the administration. Lastly, we have prioritized supply chain investments to accelerate our exit from China, which will result in slightly higher-than-anticipated capital expenditures in 2025. With this additional strategic investment, we expect to be out of China for our neonatal syringe production by midyear 2026. And with that, I'll turn now the call over to Scott for a more detailed review of our financial results. Scott Galovan: Thanks, Dave. I'll spend the next few minutes discussing our strong third quarter results at the segment level. Our Specialty Nutrition Systems portfolio delivered outstanding above-market results, growing 14.5% organically versus prior year, reaffirming our market-leading positions in long-term, short-term and neonatal enteral feeding. Demand for our enteral feeding products remain strong, and our underlying growth continues to exceed market levels. Please note that we benefited from higher-than-expected distributor orders during the third quarter resulting from our go-direct transition in the United Kingdom. While trends are expected to remain solid going forward, we anticipate the fourth quarter will reflect normalization of inventory levels. Our short-term enteral feeding portfolio posted another robust quarter of double-digit growth globally during the quarter. These results were fueled by the continued expansion of our U.S. CORTRAK standard of care offering. Furthermore, adoption of our recently launched CORGRIP tube retention system designed to reduce the risk of tube migration and dislodgement has delivered higher-than-anticipated sales results. Finally, our neonatal solutions business delivered another excellent quarter, growing by double digits compared to the prior year. As we have previously signaled, we anticipate lower but still above market growth for our NeoMed product line over the next few quarters. Nonetheless, we expect lower year-over-year growth in the fourth quarter as in 2024, we benefited from an unusually large international order from an existing OEM partner and also capitalized on sales opportunities that arose from a competitor's backorder challenges during the quarter. From a profitability standpoint, operating profit for our Specialty Nutrition Systems segment for the third quarter was 20%, a 130 basis point improvement compared to a year ago, reflecting a higher volume of sales, partially offset by unfavorable tariff impacts. Now turning to our Pain Management and Recovery portfolio. Normalized organic sales for this quarter were up 2.4%, excluding the impact of foreign exchange and our previously announced strategic decision to withdraw from certain low-growth, low-margin products. Our radiofrequency ablation, or RFA, business continues to deliver outstanding results, posting double-digit growth this quarter compared to the previous year. We experienced sustained growth in our RFA generator capital sales in the third quarter, enabling us to capture higher procedural volumes, particularly within our ESENTEC and TRIDENT product lines. Additionally, we are encouraged by the progress of our COOLIEF offering internationally, leveraging reimbursement tailwinds in several geographies, including the United Kingdom and Japan. Our surgical pain business was flat in the third quarter compared to the prior year. While the implementation of the reimbursement decision afforded by the NOPAIN Act is taking longer than anticipated, the NOPAIN Act provides hospitals, ASCs and caregivers with improved options to administer non-opioid postsurgical pain relief. I would point out that we offer some of the few devices approved under this legislation. We are excited to support better patient care through our ON-Q and ambIT product line offerings. Finally, our Game Ready portfolio, while down year-over-year, posted similar revenue levels as the first 2 quarters of the year. As Dave noted on our Q2 call, we are in the process of enhancing our go-to-market model for this business. As part of the strategic assessment, we made the decision to transition the U.S. rental portion of this business to WRS Group. This transaction structure encompasses a strategic partnership in which WRS will manage the rental business through a distribution arrangement with Avanos. We believe this structure enables our team to focus on our core sports and rehab channels. Importantly, we expect this structure will enhance our profitability. Operating profit for our Pain Management and Recovery segment was 3%, a 200 basis point improvement compared to a year ago, which demonstrates our recent top line and cost management execution. Finally, our hyaluronic acid injections and intravenous infusion product lines reported in Corporate and Other declined over 20% during the third quarter, primarily due to the divestiture of the HA business at the end of July. As previously shared, we will continue to manage the IV infusion product line for cash and anticipate fully exiting this product category in early 2026. Moving on to our financial position and liquidity. Our balance sheet remains strong and continues to provide us with strategic flexibility with $70 million of cash on hand and $103 million of debt outstanding as of September 30. We have maintained leverage levels meaningfully below 1 turn for several quarters and will continue to be good stewards of our balance sheet. As illustrated with our recent Nexus Medical acquisition, we can continue to maintain healthy liquidity levels and balance sheet strength while also deploying capital towards strategic acquisitions that can bring accretive revenue growth and operating margin accretion. Free cash flow for the quarter was $7 million. Cash generated by operations was partially offset by higher capital expenditures supporting our strategic supply chain initiatives, as highlighted earlier by Dave. We anticipate generating approximately $25 million to $30 million of free cash flow for the year, including the onetime charges related to our transformation efforts and the impact of tariffs, which I'll address in a few minutes. Now turning to our 2025 outlook. Given our robust sales performance during the first 3 quarters of the year, along with favorable currency positions, we are raising and narrowing our full year revenue estimate to $690 million to $700 million. This projection is inclusive of the impact of our hyaluronic acid divestiture and Nexus Medical acquisition, which will contribute approximately $5 million to 2025 revenue. We remain confident in our ability to deliver on our originally communicated full year mid-single-digit growth target across our strategic segments despite anticipated headwinds in the fourth quarter, primarily in our Specialty Nutrition Systems segment due to one-off tailwinds in the prior year. Now regarding tariffs. The environment remains dynamic. We currently estimate the P&L impact of incremental tariff-related manufacturing costs, primarily related to products with country of origin from Mexico and China to be approximately $18 million due in part to the impact of higher sales. As we noted in our first quarter earnings call, we entered 2025 with challenges in our product portfolio as well as uncertainties related to tariffs. We made progress reshaping our portfolio with the divestiture of the HA product line and the Game Ready rental transition. We have put in place mitigation strategies that will address tariffs on a longer-term basis and are pleased with our overall commercial progress thus far this year. As a result, the company is raising and narrowing its 2025 full year adjusted EPS estimate to $0.85 to $0.95 per share, inclusive of the impact of our hyaluronic acid divestiture and Nexus Medical acquisition. I'll now turn the call back to Dave for his closing comments. David Pacitti: Thanks, Scott. As you have heard today, we are in the midst of a successful transformation of the company. I'm proud to be part of this dedicated and skilled team who has a clear understanding of our goals and objectives, and Avanos has the financial strength to execute on them. Our underlying business trends are steadily improving. Nonetheless, some of the progress is being obscured by the impact of tariffs. We are confident in the steps we are taking to address tariffs, and we believe we can enhance the value of Avanos by delivering a more attractive growth profile. I would like to thank all of those at the company who contributed to this successful quarter. The work you do makes a positive difference and helps patients get back to things that matter. With that, we are now ready to take your questions. Operator, please open the line. Operator: [Operator Instructions] Your first question comes from Danny Stauder with Citizens. Daniel Stauder: Congrats on the quarter. So I guess, first, I just want to ask on that cost improvement plan that specifically the $15 million to $20 million annualized cost savings. You mentioned a few different things there, a few different levers. So I was just hoping you could go into that a little bit more in detail and give us a little bit more color on what's driving that, what's different, what you're changing and what that looks like as we move through '26? David Pacitti: Danny, thanks for the question. So as we stated in the -- on the call, we expect these efforts around $15 million to $20 million to be realized by the end of 2026. We've been really focused on streamlining the overall organization, the management structure that we have, really trying to make it a much more effective and improve decision-making and also accelerate things within the organization. So there has been a reduction in our senior management organization. We also are looking at our R&D organization much differently than we had in the past. A lot of that is to improve getting new products out the door faster. So we've streamlined and revamped that organization as well. And that was probably the biggest part of the reduction. And we've taken the majority of those actions that we expect to realize next year already. Daniel Stauder: Okay. Great. I guess to follow up on that, you mentioned R&D. Just as far as the product development pipeline, is there anything you can call out that we should be looking for as we move into the end of '25 or into '26? Or is it a little further out than that? Anything that I think is worthy of calling out there that could drive sales? David Pacitti: Yes. So as we looked at the model that we had, the one thing we wanted to do, Danny, was go to a hybrid model, which is when I say hybrid, I mean, some of the projects that we'll do are going to be internal projects, especially those that are much closer to completion. But as we look at some of the further down the road projects, we'll definitely go to a hybrid model where we'll do outside contracting with other companies to do the work for us. We believe that this will allow us, number one, to help somebody extremely accountable. We think that there are institutions that can probably do some of this better than we can do it. We can focus on the products that we can make that we know we have the skill set. But as we continue to grow the portfolio, there are probably other entities that could do it better than us. So with this hybrid model, we'll still have an internal R&D organization, and we're committed to that organization, but they'll be focused on certain projects. But other projects where before we took everything on. And now we will contract out some of these other projects. Our belief is it will improve our speed to market with products. So we're not just relying on acquisitions, but we're also bringing out new products as well. Daniel Stauder: Okay. Great. And then I just want to move to M&A. It's nice to see you close on the Nexus acquisition. And I know you called out previously 2 other bolt-ons earlier in the year. So I was hoping you could give us a little more insight into how you're thinking about this and your appetite for more deals? Do you feel like this is enough for the near term or for now? And would you consider something larger? Just any more color on that front would be great. David Pacitti: Yes, absolutely, Danny. And thanks for the question. So again, a big focus for us is continue to find synergistic M&A opportunities. And we said that we would do that both in SNS and in pain management recovery. I think there'll be -- you'll see more focus on -- in the short term on the SNS business. And yes, we have an appetite to do more. And as we stated previously, we expect to do more. I can't say it will happen this year, but we expect to do more M&A, and we're actively seeking those opportunities. Daniel Stauder: Okay. Great. And then just one final one, more housekeeping. I just want to make sure. So for the free cash flow assumption, $25 million to $35 million, I just want to be clear, that includes the $18 million in tariffs and the $10 million onetime cash item from the cost improvement plan. Is that the right way to think about it? Scott Galovan: Yes. So it's $25 million to $30 million is the plan for '25. It does include the charges related to this recent transformation efforts that we've executed on. It also includes a little bit more CapEx than we had originally planned, and that's in order to accelerate our China exit plan. So we think that's good investment dollars to accelerate and reduce the impact of tariffs in '26. Operator: There are no further questions on the phone line. I will turn the call back over to Mr. Pacitti for some closing remarks. David Pacitti: Well, thanks for the questions, and congratulations to the organization for a really strong quarter. We appreciate it. We look forward to continuing the dialogue, and thank you very much. We appreciate the continued interest in Avanos Medical. Thank you. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a great day.
Operator: Good afternoon, ladies and gentlemen, and welcome to the Boardwalk Real Estate Investment Trust Third Quarter 2025 Earnings Conference Call. [Operator Instructions] This call is being recorded on Wednesday, November 5, 2025. I would now like to turn the conference over to Eric Bowers, Vice President of Investor Relations. Please go ahead. John Bowers: Thank you, Joelle, and welcome to the Boardwalk REIT 2025 Third Quarter Results Conference Call. With me here today are Sam Kolias, Chief Executive Officer; James Ha, President; Gregg Tinling, our Chief Financial Officer; Samantha Kolias-Gunn, Senior VP of Corporate Development and Governance; and Samantha Adams, Senior VP of Investments. We would like to acknowledge on behalf of Boardwalk, the treaties and traditional territories across our operations and express gratitude and respect for the land we are gathered on today, and we now know as Canada. We respect indigenous peoples and communities as the original stewards of this land. We come with respect for this land that we are on today for all the people who have and continue to reside here and the rich diversity of First Nations, Inuit, and Métis peoples. Before we get to our results, please note that this call is being broadly distributed by way of webcast. If you have not already done so, please visit bwalk.com/investors, where you will find a link to today's presentation as well as PDF files of the Trust's financial statements, MD&A and quarterly report. Starting on Slide 2, we would like to remind our listeners that certain statements in this call and presentation may be considered forward-looking statements. Although the expectations set forth in such statements are based on reasonable assumptions, Boardwalk's future operation and its actual performance may differ materially from those in any forward-looking statements. Additional information that could cause actual results to differ materially from these statements are detailed in Boardwalk's publicly filed documents. I would like to now turn the call over to Sam Kolias. Sam Kolias: Thank you, Eric. Starting on Slide 4, affordable multifamily communities have always been an essential product and service. Together with our resident members, our associates, investors, partners, capital, environment, community are all essential and interconnected with our Boardwalk family forever at our core with our true north where Love Always Lives. A keyword in community. is unity as reflected in our diagram. Together, we go far. Welcome everyone to our Boardwalk family forever and to our Q3 2025 results. Next slide, our culture. From our humble beginnings, our resident members remain at the top of our organization. Our leaders put our team first and our team puts our resident members first. Guided by the golden rule, we have a peak performing customer service culture that creates exceptional results as we can see on our next Slide 6. Our continued impressive performance with GAAP and non-GAAP measures increasing from the same quarter last year, same-property rental revenue increased 5.1% and same-property net operating income increased 8.6%. Our operating margin increased by 220 basis points as well as our funds from operation per unit increasing by 10.8%. I would like to now pass it over to Samantha Kolias-Gunn. Samantha Kolias-Gunn: Thank you so much, Sam. We are extremely grateful for our team's perseverance, performance and continued commitment to our purpose, bringing our resident members home to love always. Continuing on to Slide 7, our operational stability and commitment to affordable housing. Rental market fundamentals in our core markets are balanced. Demand continues for more affordable housing despite supply deliveries focused on higher-end luxury product to justify high construction costs. We are well positioned to deliver on our commitment to provide much-needed affordable housing in a more competitive environment with our experienced peak performing team, exceptional product quality from the $1.5 billion invested since 2017 in rebrand and repositioning efforts and dedication to our Boardwalk family has responsible community providers. CMHC and our federal government have emphasized the need for 430,000 to 480,000 more homes by 2035 to restore affordability in Canada. Affordability continues to drive positive population and leading economic growth in our core markets, Alberta and Saskatchewan reflected in our appendix. Québec has delivered exceptional results, further evidencing the strong demand for affordable housing. Ontario remains stable. We are strategically in all the right places at the right time. Please refer to our appendix for more data on the resilience of the Alberta economy. Our self-regulation provides us with continued steady results as we strategically moderate our rental rates within a resident-friendly renewal rate band, producing greater stability in occupancy and reputation. Paired with our strong financial foundation, minimum distribution policy resulting in maximum reinvestment and free cash flow, strategic repositioning, unparalleled customer service and on our foundation of strong family values, we remain in a position to deliver solid performance. This is what sets us apart, bringing you home to where love always lives. Boardwalk strives to be the first choice in multifamily apartment communities to work, invest and call home with our Boardwalk family forever. Moving on to Slide 8. Our strategic rebranding enhances our resident member experience and exceptional quality at an affordable price, keeping our occupancy high at just below 98%. Per Rentals.ca data, our average occupied rents of $1,582 for a 2-bedroom apartment are attractive, especially relative to the Canadian average of $2,279. We would like to now pass the call on to Gregg Tinling, who will provide us with an overview of our quarter results, strong balance sheet, fair value and ESG. Gregg? Gregg Tinling: Thank you, Samantha. Beginning on Slide 9, occupancy remains strong, supported by continued growth in occupied rent. While vacancy loss increased slightly, the Trust effectively reduced leasing incentives, which contributed to the higher rental revenue reported in Q3 2025 compared to the same period last year. These results reflect the success of our strategic initiatives aimed at maximizing free cash flow and diversifying our product offering, delivering meaningful financial performance. The decline in rental revenue from the previous quarter is due to property dispositions in Q3 that had previously been included in the same-property portfolio as reported last quarter. Slide 10 provides an overview of leasing spreads for new and renewed leases under our self-regulated resident-friendly centric model. This approach continues to drive strong retention and referrals while keeping turnover and operating expenses low. On a year-over-year basis, leasing spreads have moderated, reflecting a more balanced supply-demand environment. Increased supply in select portfolio markets, particularly at the higher price points, has led to greater competition and vacancy. In Alberta, renewal spreads reached 3.7% in September 2025. New lease spreads in Calgary were slightly negative as we strategically prioritized occupancy in the city's more competitive, higher-priced segments. Edmonton by contrast, continues to deliver positive new lease spreads, supported by sustained development for our high-quality affordable housing offerings. Overall, Alberta's blended leasing spreads for September were 2.3% with portfolio-wide spreads at 3.3%. We remain focused on maintaining high occupancy and maximizing resident retention. This strategy reinforces our commitment to providing affordable, resident-friendly housing in our core markets while also reducing costs and steady operational performance, delivering long-term value for all our stakeholders. Slide 11 shows sequential quarterly rental revenue growth, including 1.5% growth in Q3 2025 compared to the previous quarter. The change over each quarter is a reflection of Boardwalk's strategy, striving toward balancing the optimum level of market rents, rental incentives and occupancy rates in order to achieve its NOI optimization strategy. During Q3, the Trust closed on acquiring the other 50% interest in our Brio property located in Calgary. Calgary results include 100% of Brio effective August 6, 2025, excluding Brio altogether, the same-property rental revenue growth for Q3 2025 compared to the previous quarter would be 1.1% for Calgary and 1.4% on a total portfolio basis. Turning to Slide 12. Same-property net operating income increased by 8.6% in Q3 2025 compared to the same quarter last year, supported by revenue growth of 5.1%. Alberta, the Trust's largest region, contributed meaningfully to this performance with a 5.1% increase in rental revenue, driven by stronger in-place occupied rents and reduced leasing incentives. Total rental expenses declined by 1.8% year-over-year, primarily due to lower utility costs with the removal of the federal carbon tax earlier this year, alongside reductions in property taxes and insurance premiums. Slide 13 highlights that administration costs and deferred unit-based compensation remained relatively stable quarter-over-quarter. The year-over-year increase in administration expenses is primarily attributed to inflation-driven wage adjustments implemented at the beginning of the calendar year, along with higher profit sharing and bonus accruals, reflecting strong year-to-date performance across the portfolio. Slide 14 outlines Boardwalk's mortgage maturity profile. The Trust's debt portfolio is well staggered with approximately 96% of the mortgage balance carrying NHA insurance through CMHC. This insurance remains in place for the full amortization period and backed by the government in Canada, enables access to financing at rates below conventional mortgage levels with a current estimated 5-year and 10-year CMHC rate of 3.35% and 3.90%, respectively. Although current interest rates are above the Trust's maturing rates over the next few years, the Trust's maturity curve remains staggered, reducing the renewal amount in any particular year. Lastly, the Trust had an interest coverage of 3.10 in the current quarter. Slide 15 provides an overview of our 2025 mortgage program. To date, the Trust has renewed or forward locked $294 million in financing at an average interest rate of 3.83% and with an average term of 6 years. Current underwriting criteria in our most recent submissions to CMHC and our lenders has remained in line with our historically conservative estimates. Please refer to Slide 55 for additional details. Slide 16 illustrates the Trust's estimated fair value of its investment properties, excluding adjustments for IFRS 16, which totaled $8.8 billion as of September 30, 2025, compared to $8.2 billion as of December 31, 2024. The increase in overall fair value is the result of new acquisitions during the year and increases from rental rate growth, while being slightly offset by dispositions of non-core assets, along with an upward adjustment for vacancy assumptions in Calgary to reflect a more balanced market. Current estimated fair value of approximately $242,000 per apartment door remains below replacement cost. And in consultation with our external appraisers, the Cap Rates used in determining Q3 2025 fair value were unchanged from Q4 2024. As it does every quarter, the Trust will continue to review completed asset sales transactions and market reports to determine if adjustments to Cap Rates are necessary. Most recent published Cap Rate reports suggest that the Cap Rates being utilized by the Trust for calculating fair value are within their estimated ranges. Slide 17 highlights our ESG initiatives. We'd like to highlight our 2025 GRESB score of 72, which represents a 7.5% increase compared to the prior year. Using a disciplined capital allocation approach, we are focused on reducing emissions through reduced utilities consumption and therefore, reducing utilities costs while always promoting social and governance initiatives. We encourage our stakeholders to view our 2024 ESG report available on the Trust's website. I would like to now turn the call over to Samantha Adams to highlight our capital allocation and discuss our development pipeline. Samantha Adams: Thank you, Gregg. Throughout 2025, we have maintained a disciplined approach to capital allocation, focusing on value-add rebranding initiatives, targeted dispositions and acquisitions and our NCIB. Slide 18 highlights our reinvestment of free cash flow back into our current communities, which enables us to drive market share and enhance the experience for our resident members. Our goal for 2025 is to complete the rebranding of 15 communities. And by the end of this year, 77% of our communities will have been renovated. These upgrades, including rebranding initiatives, common area improvements and value-add amenities deliver exceptional value to our resident members with minimal impact on per suite rents. Slide 19 outlines the $733 million of real estate transactions announced year-to-date. This includes $221 million in dispositions of our non-assets with an average vintage of 1987 and average Cap Rates in the low 5% range. We have also completed $512 million in acquisitions comprised of townhomes, mid-rise and high-rise assets in our target growth markets acquired at Cap Rates ranging from the high 4s to the low 5s. From these sales, we have generated $120 million in net proceeds. Slide 20 details how we have strategically redeployed this capital into new acquisitions and our tactical unit repurchase program. The strength of our balance sheet has provided us with the remaining equity required to complete the transactions. And just a quick update on the Aspire, our development in Victoria, BC. We remain on track to welcome our first resident members December 1 with the remaining building scheduled for completion in early Q1 of 2026. For the balance of the year our focus will remain on dispositions and executing our unit repurchase strategy, while other development opportunities remain paused. Slide 21 demonstrates the ongoing disconnect between our unit price and the value of our portfolio. Our NCIB continues to be a key capital allocation tool. And to date in 2025, Boardwalk has invested $37 million in unit buybacks, including a recent $7 million repurchase of 102,000 units at an average price of $66.74. This tactical investment represents approximately a 6.9% FFO yield, providing an accretive use of our capital. Slide 22 summarizes our Q3 dispositions, 6 non-core properties located in Edmonton and Québec City with a weighted average Cap Rate of 5.3% and an average vintage of 1987. These successful transactions at pricing in line with our fair value have allowed us to upcycle the equity into high-quality assets with strong cash flows and lower CapEx requirements in addition to providing capital to support our unit repurchase plan. Slide 23 showcases the previously announced acquisition of Central Parc in Laval, Québeca 541-unit 3-tower community delivered between 2019 and 2022. With condo quality finishes, U.S.-style amenities, destination retail and a strong suite mix, Central Parc offers affordable luxury at approximately $2.30 per square feet. The acquisition price of $249 million or $460,000 per suite is well below replacement cost and the property benefits from attractive in-place financing at a blended sub-2% rate. Laval continues to be one of the stronger submarkets within the Greater Montreal area, supported by its connectivity to transportation networks and relative affordability. Slide 24 introduces our latest acquisition, 639 Main Street, located in one of our strongest growth markets, Saskatoon. The province of Saskatchewan has one of the lowest unemployment rates in the country, is one of the strongest markets globally for mining investments and offers food, fuel and fertilizer, all of which the world needs. 639 Main Street is well located and close to downtown, the University and Saskatoon's main retail strip. Acquired for $39 million from the developer at a Cap Rate of 5.5%, this fully stabilized community enhances our product offering in Saskatoon, will benefit operationally from being in close proximity to our other communities and is expected to generate strong cash flows. I would now like to turn the call over to James to discuss our track record of creating value and our updated 2025 guidance. James Ha: Thank you, Samantha, and thank you to our entire Boardwalk team for your service and commitment to our resident members while continuing to deliver consistent and strong performance that our team is sharing. Slide 25 provides an update to our outlook for the remainder of the year. The strength of our platform and ability to outperform in a more balanced housing market continues to show through as the demand for affordable housing remains resilient. And as a result, our outlook for the year has further improved. Our team and platform continues to maintain high occupancy and strong blended leasing spreads. Expense optimization has been a priority as demonstrated in our performance to date. As we move forward toward closing out 2025, we are anticipating a continued solid revenue profile paired with strong performance in our operating expense management. These lower expenses will help to ensure that our high-quality affordable housing remains the best value for our resident members. With the completion of the third quarter, our 2025 outlook has further improved toward the upper end of our estimates with same-property NOI growth guidance adjusted to 8.5% to 10%, while also increasing our FFO per unit outlook to $4.58 to $4.65. The increase in our FFO per unit outlook is a result of contributions from our strong NOI performance as well as our accretive capital recycling in both acquisitions and our NCIB. This guidance is forward-looking in nature, and we look forward to providing our final results for 2025 and the introduction of our 2026 guidance in February with our year-end results. On Slide 26, we have confirmed the payment dates of our next 3 regular monthly distributions equating to $1.62 per trust unit on an annualized basis. This represents a 12.5% increase from our distribution a year ago. Since 2021, our distribution has increased at an annual average growth rate of over 12% while still retaining an industry high proportion of our cash flow to reinvest and compound growth. This formula and operating model has extended our FFO per unit track record, and we are positioned in 2025 to more than double our FFO in just 8 years. Please note, as we near our year-end, our team is in the process of finalizing and conducting our tax review and we'll provide any special distribution update prior to the end of the year to reflect the taxable gains from our dispositions. Our regular distribution review is also conducted at year-end and any increase to our regular distribution is expected to be announced with our year-end results in February. On Slide 27, this FFO growth, along with our approach to maximum cash flow retention has improved our leverage metrics to provide Boardwalk with one of the strongest and most flexible balance sheets. In the quarter, we assumed an attractive low-cost mortgage as part of our Central Parc acquisition that Samantha highlighted earlier, and this has slightly increased our leverage for the period. As our platform optimizes the NOI from this community and we continue to deliver organic growth from our existing portfolio, we anticipate a continuation of our leverage improvement trend. This solid financial foundation, which includes our current significant liquidity position with over $100 million of cash, provides us with the flexibility to take advantage of opportunities that arise. One of these opportunities is shown on Slides 28 and 29, which highlights the exceptional value that our trust units represent. Our current trading price equates to less than $190,000 per apartment door, and a mid- to high 6% Cap Rate on a forward basis. Both metrics are exceptional when considering our product quality, locations, spread to financing costs and cash flow growth as shared in our outlook. Recent private market transactions continue to be supportive of our estimated net asset value of $242,000 per door or $98 per trust unit. With this current attractive implied valuation, we anticipate in the near term, our deployment of capital will be focused on investing in our own assets and platform through our normal course issuer bid. In closing, our team continues to be focused on delivering the best quality and value in housing to our resident members. Our unique operating platform continues to demonstrate our ability to create value for our stakeholders as we consistently deliver leading organic and FFO per unit growth that is increasing our free cash flow. Thank you again to our resident members, our team, our partners and all our stakeholders for making Boardwalk your first choice in providing the best quality homes and communities, and we are looking forward to continuing our track record of growth. We would now be happy to take questions from the line, Joelle. Operator: [Operator Instructions] Your first question comes from Jonathan Kelcher with TD Cowen. Jonathan Kelcher: First question, just, James, you finished on capital allocation, so I figure I'd start there. You guys have been selling assets and upgrading through buying newer stuff. It sounds like the NCIB is going to be more of a focus. Will you -- are you going to consider -- are you going to continue rather to sell assets in order to fund that? Samantha Adams: Jonathan, it's Samantha Adams speaking. I can take that question, if you don't mind. Yes, the plan is to continue our disposition program into 2026. And today, where our cost of capital is, obviously, those net proceeds would be used to buy our stock back. But we will remain active through 2026. James Ha: Jonathan, it's James. Just to add to Samantha's comments, we're seeing a lot of interest and bid and value-add acquisitions. CMHC financing is a big part of that as well. And so our team has done a fantastic job in 2025 meeting the market there as well as finding and unearthing opportunities for us to recycle that capital. We've made some great acquisitions that have provided very additive results to our overall performance. In addition to that, taking what the market is giving us, we're seeing huge opportunity in buying back our stock, and we've done that through September and October and as discussed, expect to continue to do that through the balance of the year. Jonathan Kelcher: Okay. Would you -- given that you are going to be selling some or looking to sell some assets into next year, would you take your leverage up near term to fund the NCIB? James Ha: I don't think we need to right now, Jonathan. We've got over $100 million of cash on the balance sheet. Our liquidity is as strong as it's been in a long time. And so that provides us the opportunity and optionality to deploy that capital. And as we said, buyback is that best place right now. We're having a tough time finding a better place than 6.5-plus Cap Rates today for our portfolio. Jonathan Kelcher: Okay. Fair enough. And then just secondly on -- I know it's a little bit early for 2026 guidance. But how should we think about revenue growth into next year and expense growth, at least on a high-level basis? Gregg Tinling: I can start with the expense side, Jonathan. And you're right, it is still too early. Normally, we don't give formal guidance until February when we release our year-end results. But I can say that through our preliminary late work and discussions we've had, we are expecting property taxes to be higher next year. James Ha: Yes. Just to add, Jonathan, to Gregg's comments, it's James. We're seeing very consistent results. Multifamily, especially affordable residential housing is quite consistent in terms of the demand for our product. You're seeing that through our leasing spreads as an example, pretty well throughout the year, we've seen consistency. And so I would expect that from our team. Our team is always striving for that. We'll keep occupancy high. We'll continue to provide affordable adjustments when we're negotiating our rent adjustments. And from what we're seeing so far, we expect consistent results from what we're seeing here. Operator: Your next question comes from Mike Markidis with BMO. Michael Markidis: Just with respect to the Gregg property tax comment being higher next year. I guess what are the drivers? And can you remind us, I think there's been a phase out of the premium on multifamily, and I think it's Edmonton, maybe the rest of Alberta, but just sort of the dynamics at play. James Ha: Yes, Mike, we've -- we're very supportive and thankful to our municipal leaders and provincial leaders. We saw very reasonable property tax increases this year. In fact, we saw declines in certain municipalities in Western Canada, and that's a testament to the strong financial position that our provinces have. As we look forward to next year and as we know, property taxes are a product of assessment and tax rate. What we're seeing here is increased assessments in multifamily apartments. So as a result of that, there is some potential we're going to see some property tax increases. Our team is working really hard right now in engaging with municipalities and negotiating assessments so that we all have sustainable increases for next year so that we can continue to provide and deliver sustainable and affordable rents to our residents. Michael Markidis: Okay. And are you concerned at all that -- sorry, go ahead. Sam Kolias: Mike, it's Sam. And we work really hard with our policymakers, and we're very vocal about supporting more government or less taxation. And that's a proven public policy because we ask everybody who can spend our super hard earned after-tax dollars better than we can. And we haven't found anybody yet that says somebody else can. So less taxation is a proven public policy that works for everybody. And we're super happy with a big change in our municipal leadership that believes the same because it helps everybody to keep more of our money in our pockets. And so we're super happy with the results. We've seen positive support and signals from our newly elected policymakers in our municipal governments, both in Calgary and Edmonton because we, the people have spoken. We all believe less taxes is better for all of us. So we're cautiously "optimistic" as per our newly elected mayor in Calgary as about our budget, too. James Ha: I just want to go back and add to Gregg's comments on -- as we're thinking about next year, another place where we've had a great track record is delivering below inflation expenses. Last year was not the only year of that. We can go back many years and thank our team for finding innovative ways to reduce that expense growth. Next year is not going to be any different. We're in the midst of working through our budgets now for 2026, and we are striving and pushing our team to look for continued efficiencies so that we can continue to deliver these great results into next year and that's all expense line item. Michael Markidis: Yes. No, no, that's great. Just I guess a couple of things before I turn it back. So number one, just on Railroad, it looks like there's a recap there. You pull a little bit of money out, refinanced the construction loan. And I think you had effectively negated the construction loan by extending a loan to the JV on your books. Is there any material change in the FFO contribution from that asset moving forward based on the recap? Gregg Tinling: No, we're not expecting that any material change. Basically, even our profit this quarter was $900,000 from that asset, and we're projecting for the year-to-date to be around $1.5 million. James Ha: Huge -- I know some -- from our team in Ontario are listening in on this call. And so a huge shout out to them. Our 45 Railroad project in Brampton is full. And so great work to that team for leasing that up over the last couple of months. Michael Markidis: Okay. Wonderful. And just last one for me, $100 million of cash. So you've got great liquidity. You did push leverage up. This was a consequence of the net investment activity. I guess with the special, is there anything that precludes you from doing it in kind? Or are you going to anticipate you'll have to give some cash back to unitholders would be question one. And then question two, you earmarked for the NCIB, but I guess is there any appetite to bring leverage back down? Or are you just happy to run at a higher leverage on a go-forward basis? Gregg Tinling: Mike, I'll answer question one for you. Like you're right, given the dispositions we've had in 2025, there will be tax implications of capital gains and recapture. We know we're going to have to do a special distribution by the end of the year. Right now, it's still premature. The team is still working through assessing the full impact, and we'll be planning to get a special distribution before the end of December. But we're right now just going through the analysis required. James Ha: And on the leverage front, Mike, as we said in our prepared remarks, we do anticipate our leverage to continue to follow the similar trend we saw previously in terms of that downward trajectory. In this case, we did see leverage tick up this quarter with that Central Parc acquisition, but it was extremely attractive financing. I think as we continue to bring in our platform into Central Parc and you continue to see the growth in our own existing portfolio, we do expect that leverage to continue to tick downwards. Operator: Your next question comes from Kyle Stanley with Desjardins. Kyle Stanley: Just looking at your incentives for a second. It looks like there was a more significant decline in incentives this quarter. Just given the broader market softness we're seeing, how have you been successful on the leasing front while rolling those incentives back? Is it just adjusting rental rates where needed instead of extending further incentives? Or what maybe is it that you're doing to keep occupancy high? James Ha: Kyle, it's James. Again, really proud of our team for reducing those incentives over the past several years. We're on the cusp of having that almost an immaterial number, which has always been our goal. The incentive declines are primarily coming from our renewals and retention and just eliminating those past discounts that were given. On the new leasing front, where you are seeing some incentives in the market across the country really is just at the upper end of the market, more expensive rents. Our approach and our leasing team's approach has really been more so just to reduce market rents if we are seeing more competitive environments. And so we're not using incentives as much in our leasing activity, really just focused in on that net rent. And just a reminder for everybody, all of our disclosures, all of our leasing spreads, all of our occupied rents are always net rents. Sam Kolias: Mike, it's Sam. Kyle, sorry. It's Sam, and there's 1,582 reasons why our incentives are so low, and that's the average occupied in-place rents. And it's always in demand. Larger 2-bedroom unit on average at that low price is always in strong demand. And that's why it's so important for us to continue our self-regulated approach, keep our rents as low as possible, our value proposition as high as possible, our locations, our renovations, our schools that we're nearby, hospitals, employer and employee source locations is what keeps us occupied and our rents being adjusted close to and around inflation is how we continue to do that. Kyle Stanley: Okay. And maybe just on that self-regulation, we've seen your renewal spreads trend slowly lower, but it seems like we're kind of nearing a trough here. So I'd just love your thoughts on where do you see those renewal spreads trending in the year ahead? James Ha: I think very similar to what we're seeing here today, Kyle. On average, our renewal spreads across the portfolio were in the 4s. That's kind of the inflation plus that we've talked about in the past. It's very sustainable, both from us as a community provider and covering our expense growth as well as from a resident standpoint. But first and foremost, we're always going to be flexible. Every resident's case is unique. And of course, we're going to be flexible with any residents who aren't able to afford that. But we're not seeing that and as the various slides that we have in our appendix and all the macro slides that we've gone through in the past, affordability is not the issue here in our core markets of Alberta and Saskatchewan. We remain some of the most affordable... Kyle Stanley: Okay. That makes sense. And then just last one. You mentioned strong interest for value-add assets in the market today and looking to continue on the disposition program in the year ahead. Would you say is it still primarily like the smaller mom-and-pop type buyers that are active in the space today? Or are you seeing signs that institutions are beginning to step back in? Samantha Adams: Kyle, it's Samantha Adams, and I'll take that question. Yes, we're receiving a lot of inbound calls. Some days, we're almost inundated with inbound calls with interest in our value-add communities, some of our non-core assets. To date, it's been mostly the private buyers, I would suggest, some family offices. But we're starting to hear that perhaps some of the institutions are going to come back into the space, whether they're interested in some of our sort of non-core properties will remain to be seen. But we are starting to see I would say a slightly elevated interest from what we're being told. But to date, the buyers of our communities have been the private buyers. And that interest is still very strong. Operator: Your next question comes from Brad Sturges with Raymond James. Bradley Sturges: Just following up on that line of question around the disposition program. Now that, I guess, it could go through to the end of '26. I guess how much is left to do in terms of either dollar amount or percentage of the portfolio that you would deem to be non-core that could be considered for divestiture? Samantha Adams: Well, where we're sitting today, I mean we've had a very successful 2025 on the disposition front. And I think you could expect us to be as active through 2026. A lot will depend on the market and where interest rates go through the next, call it, 12 months. But I think it'd be fair to say you can expect us to be as active as we've been in 2025. Sam Kolias: And it really depends on our stock price, too, Brad. It's very opportunistic right now to continue selling our non-core assets at really the equivalent of a 90-plus unit price and reinvest that at today's unit price in the 60s. That's an incredible window of opportunity. And so that gap is something that we can continue to sell with the high demand of our value-add and non-core apartments and redeploy back into our repositioned and portfolio overall at a big discount. So what a great opportunity. Bradley Sturges: Okay. That makes sense. Maybe just high level, the budget came out last night, obviously had some different elements between immigration and on the housing side. Just any general thoughts in terms of the implications for demand and supply for the Canadian apartment sector and particularly in your core rental markets? Sam Kolias: High level, we really need to increase our productivity. And the more we invest in increasing our productivity, the more jobs we're going to have, the more economic growth we're going to have in prosperity and affordability. And the one really positive is the skilled migration. We need more skilled migrants to build more infrastructure, more affordable housing, more schools, hospitals and energy corridors. We really need to continue to provide, as Samantha Adams noted, fuel, fertilizer and food, really core products. And we have all of that in Canada. And the more we invest to provide more Canadian energy infrastructure to more Canadian energy and more fertilizer and food, the more productivity and not just Canadian energy for more Canadians, but Canadian energy for our entire world. We need more affordable energy that will drive our economic growth. That's a proven public policy and investment that's always done very well for all of us. And so that's on a big high level what we continue to advocate for. Operator: Your next question comes from Sairam Srinivas with Cormark Securities. Sairam Srinivas: Sorry, guys, I know it's kind of turning out to be a long call, but just one question from me. When you look at the opportunities ahead in '26 in terms of acquisitions and dispositions, and when you think about your preferences across geographies, can you marry the 2 and kind of just comment on where do you see more non-core disposition opportunities versus markets where you would like to expand there? Samantha Adams: It's Samantha Adams. We're -- in terms of the opportunities we're seeing from an acquisition perspective, we've been fairly, I think, transparent in terms of where our target markets are. Obviously, our home markets in Saskatoon and Calgary being top there. We announced a beautiful acquisition in Laval as well and the Québec economy continues to grow, positive population growth and job growth. So I suspect it will all depend on the opportunities. But from that perspective, you will probably see some growth there. And then in terms of the dispositions, it really depends on what the market is doing. But given our size in Edmonton, you'll probably see a few more non-core assets sold out of the Edmonton market. And we're working through our disposition strategy now through for 2026. So I think it -- we'll be able -- be in a much better position to comment on that next year. James Ha: Yes, it's James. Just to add, it's going to remain opportunistic as well. To Samantha's point. I think we've got great platforms in each of those markets. There are markets that we like. And we've shown which of those markets are this year with our great upcycling that has been done. But we can't reiterate this enough. As of right now, there is no better opportunity than buying back our stock today. Sam Kolias: And then the dispositions, just a little bit more color with respect to the size and the location, typically very small off the beaten path, more difficult to attend to for just that smaller community size. So that's really what we're doing here is increasing our efficiencies and scale and making our whole communities and our team way more efficient to be able to spend way more time with our resident members and our communities than driving from site to site to service small community sizes. And by the way, small providers are awesome at hands-on operating small communities. And that's where we grew up and came from is with small communities. So it works great. It's a win-win for us. It's a win-win for the smaller operators that are buying our communities. And so it's really a great way to create value, especially when we can buy our apartments all back at a big discount. Operator: Your next question comes from Mario Saric with Scotiabank. Mario Saric: I wanted to circle back just on the spreads. On the renewal spreads, the kind of 3% to 4% or so. I think going into September, October, the range was closer to 3% to 7%. So I just wanted to confirm whether that's indeed the case where you've seen the kind of the top end of the expected renewal spreads come down a little bit? And if so, is that simply due to seasonality? Or are you seeing maybe a little bit more pressure in select markets? James Ha: Mario, it's James. It's very market dependent. We're seeing in our most affordable markets continued ability to deliver kind of the upper end of perhaps not that range, but above our average. And then other markets where we have more expensive product where it is more competitive, and we have to also compete on those spreads, and you're seeing the lower end or below our average range. And so it's very market dependent, Mario. At this juncture, though, as you can see over the past several months, we're seeing fairly consistent results. And with renewals, as you know, as we do them 2, 3, 4 months in advance, we expect it to be fairly consistent at this point. Mario Saric: Okay. And then maybe just on the new lease spreads, I think they were close to 2% this quarter. You've highlighted affordability is not necessarily an issue within the portfolio. Most of the portfolio is in markets where rents are some of the lowest in the country, as you point out. What do you think is going to be required to see that 2% inch up over the next 6 to 12 months? Is it supply deliveries coming online? And if so, what's the inflection point from a timing perspective there? Just curious to hear what could be the catalyst to get that number up a little bit. James Ha: I think continuing to deliver strong results. As you know, into this -- into the fall here, there is a return to seasonality in the market. We've noticed that. We see that in terms of traffic flow. So is that going to inch up here this winter? Likely not. We're going to focus in on occupancy. We're going to focus in on affordability come this spring, as we start to see more traffic we'll come to the market and see if there is potential to bring that up. But our focus is on retention, Mario. Retention and renewals represent 70% to 80% of our deal flow. And so that's really going to continue to be where we focus. Mario Saric: Okay. My last question is more of a technical question. Just during the quarter, there was a nice sequential revenue bump up to 1.4% for the portfolio relative to prior quarters, which were closer to 1% growth. How much of that delta would have been driven by Québec this quarter? James Ha: Mario, it's James. Great point in Québec, exactly the reason why Samantha and team and we are all very excited about Québec and huge opportunity from that value standpoint. We estimate that in July, if you strip out Québec, it represented about -- was it 0.7% of that sequential revenue growth in -- and just for context, about 1/3 of our deal flow in Québec occurs in the month of July. Operator: Your next question comes from Jimmy Shan with RBC Capital Markets. Khing Shan: Just one question with respect to Calgary. What are you expecting in terms of new supply, whether it's condo or purpose-built rental over the next 12 months? I'm just trying to get a sense of where we are relative to peak delivery. John Bowers: Jimmy, it's Eric. I can speak to that. So Calgary specifically, I think we have at the moment about 11,000 rental units under construction. I would see the deliveries over the next 12 months being pretty close to that range in general. Calgary, specifically, we have seen a little bit of an increase on the condo supply side. Bear in mind that only, call it, 30% of that would go to the rental market. But generally, I would say that's fairly consistent with what we have under construction today. Khing Shan: Okay. And that 11,000 of rental units, how would that compare to a year ago roughly? John Bowers: I'd say you're probably up about 10% to 15% year-over-year on an absolute basis. What I would say though is in terms of location of deliveries, Jimmy, I would say a year ago, a lot of those deliveries would have been in the Beltline Central core area. And I would say now there's more product being delivered in the more suburban locations of the city that would be outside of our ring road in Calgary. James Ha: I'll just add, Jimmy, it's James. We had the Calgary Real Estate Forum here in town last week or the week prior, and it was busy. There was record attendance. But I'll say that the general consensus was that development economics are challenged, and this is no different than any other place across the country right now. If we run that math, hitting performance is going to be tougher. The yields, the already very small yields for developments have compressed even further. And so -- we think we are hitting peak development economics right now for multifamily construction. Everybody we talk to seems to be pens down on development. And so we would anticipate at some point that the under construction numbers are going to start to tail off, purely just on economics. And again, that's just a little bit of color from what we're hearing from the development community in Calgary. Operator: [Operator Instructions] Your next question comes from Matt Kornack with National Bank. Matt Kornack: This call has been pretty thorough, so I don't have much. But turnover did seem to come down sequentially, and it seems like skips and evictions are down, but maybe there's an increase in kind of people leaving for transfers and assignments. At this point, is it population growth that's driving demand? Or is it employment growth? And how are your markets faring on the employment side? And just given the reduction in turnover sequentially, is that by design essentially going into the winter months on your part? Sam Kolias: Yes. Matt, it's Sam. And it's really important to come and see us and feel our energy and our economic vibrancy. We have a lot of jobs here. And we're seen a lot of employment, a lot of tech investment in Calgary, a lot of distribution, a lot of moves from Ontario, BC, affordable housing. And everybody seems really busy. Our restaurants, our stores, it just is a good economy. And that is really what we see and feel and affordability continues to be a big driver. And so yes, we're doing well relatively speaking on our economy and especially Saskatchewan, that is a real -- we attended the Saskatchewan real estate Forum and Samantha Adams shared with everybody, fuel, fertilizer and food. We just don't have enough of it for our planet. And we do have a lot of it in Saskatchewan and Alberta. And so our regional economies here continue to be very strong. Then if you look on Slide 53 in the appendix way back in the back section, average rents of Québec, $1,416 it's so affordable. And when we visited our team and our communities in Québec, it's same very vibrant, restaurants are busy and our economy in Québec seems to be doing really, really well, too. So a lot of increased hiring in teachers, nurses. That's what we need more of, too. And so we're seeing a lot of jobs that are important jobs that are being created. Ontario, we've held our rents really low in London and Kitchener, Waterloo, we're all full in Brampton. You know what there's a shortage of really big low-priced apartments. That's what there's big demand for. And that's what we got. That's what we've been focusing in on for 40 years. Samantha Kolias-Gunn: Sorry, Matt, just to expand on that as well. Alberta has experienced a record high immigration for the past few years. So there's simply not enough homes for all these people to live. And the continued economics of affordability will increase the amount of people being attracted to our province. And Alberta is diversifying. As you can see, as Sam pointed out, the slides in our appendix, the jobs in health care, professional scientific and other diverse sectors, we've talked to in past conference calls like the Lufthansa Technik and WestJet partnership continuing to bring jobs in aviation and engineering. We have the skilled labor force to provide to provide those really exceptional well-paying jobs and transform and be the energy superpower in Canada and hopefully, the world. James Ha: Yes. The second part of your question, Matt, it's James. On the skips and evictions, awesome observation, that is by design and our team's part as well. A big reason for it is the affordability that Sam and Samantha was talking about and the exceptional value that we offer. But we have to give credit to our team and our screening processes and always being flexible with residents. And so we're happy to see that number decline. Overall turnover has decreased as well. We've seen that trend happen over the past several years. Again, that's by design. It costs a lot of money to turn over suites. It costs a lot of money to acquire new residents. Why aren't we -- strategically, our strategy there is just to keep residents within our Boardwalk portfolio for their entire rental lifespan, and our team is doing a good job of that. Operator: Your next question comes from Dean Wilkinson with CIBC. Dean Wilkinson: Hopefully, I can make this quick. On the topic of affordability, how are you guys looking at the sale of the older assets, which I believe would probably have a more affordable and lower rent versus replacing those with the newer, more amenitized higher rents? Is that affordability metric the same across the assets? Or does it shift over time as you sort of new grade the portfolio? Sam Kolias: Dean, it's Sam. And just seeing and we're really looking forward to sharing our Central Parc community in Laval with everybody, really big units at really low price per square foot. And so there's affordability everywhere and especially affordable luxury. That's our nicest community now. And again, we're big fans of the Four Seasons. It's a Canadian brand. And what I'd like to say is if the Four Seasons was ever going to develop an apartment, it would be Central Parc and so inspired by our partners that we purchase from and the value proposition and the insight to build such big apartments and to rent them at such a low and affordable price. So Main Street in Saskatoon, same, very affordable brand-new product. And so we're all about affordability in every single category. And so it's building up on that. The smaller communities that we are selling, they're older. We would invest a lot more in value-add than some of our competitors would and smaller operators. And so we have a different expectation with respect to our older communities and invest a lot more than most of our competitors in our older communities. And so we think the smaller, older communities are best and smaller providers and our competitors that take a different approach and provide a product that we call and are proud of classic product. And it's just like classic Coca-Cola always in demand. And so affordable, classic, affordable linoleum carpet, older product has a purpose in our marketplace and provides that choice. And it's all about maximum choices. So it's all about affordability, Dean. James Ha: And it comes back, Dean, it's James. Just to add, this comes back to what we were talking about with Matt and trying to retain residents within our Boardwalk portfolio for their entire rental cycle. And part of that is having that diversified product offering. We continue to have -- most of our portfolio remains affordable. But even Central Parc, which we're referring to here, average rents of $2.30 a foot for Four Seasons like model. Again, that's highly affordable and Samantha wants to jump in. Samantha Adams: Sorry, James. I was just going to say, I think that when you look at the acquisitions we've announced this quarter and then the most recent one, obviously, being 639 Main Street, our average rents per square foot range from just over $2 a square foot up to sort of $240 a square foot. So I think when you put the Canada-wide lens on rents per square foot, even our new product is still very affordable. Dean Wilkinson: That's great. Everyone loves the classic. I think we're all looking forward to the trip to Laval. Operator: There are no further questions at this time. I will now turn the call over to Sam Kolias for closing remarks. Sam Kolias: Thank you, Joelle. As always, if there are any further questions or comments, please do not hesitate to contact us. With gratitude, we'd like to thank our entire team that puts the extra ordinary day in and day out, our team is truly extraordinary. Thank you, loyal residents, CMHC, our lenders, partners and of course, our unitholders from far and wide and local. It really is all about our Boardwalk family forever, whose huge shoulders we stand. And as leaders, we continue to do everything we can to support continued growth and extraordinary. We really can't thank our extraordinary team and great leaders enough. We are pleased with our improving results on a foundation of exceptional value, service and experience we continue to provide our family resident members, our investors and all our shareholders and stakeholders. We conclude home is where our heart is, our heart is where our family is and our family is where love always lives. Our occupied rent average, $1,582 our Love Always priceless. Welcome home to Love Always. Our future is Boardwalk Family Forever. What can be more important when choosing where to call home. God bless us and now more than ever, grant us all peace, our greatest prize of all. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
Operator: Greetings, and welcome to the Select Water Solutions 2025 Third Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Garrett Williams, VP, Corporate Finance and IR. Thank you. You may begin. Garrett Williams: Thank you, operator, and good morning, everyone. We appreciate you joining us for Select Water Solutions conference call and webcast to review our financial and operational results for the third quarter of 2025. With me today are John Schmitz, our Founder, Chairman, President and Chief Executive Officer; Chris George, Executive Vice President, Chief Financial Officer; Michael Skarke, Executive Vice President and Chief Operating Officer; and Mike Lyons, Executive Vice President and Chief Strategy and Technology Officer. Before I turn the call over to John, I have a few housekeeping items to cover. A replay of today's call will be available by webcast and accessible from our website at selectwater.com. There will also be a recorded telephonic replay available until November 19, 2025. The access information for this replay was also included in yesterday's earnings release. Please note that the information reported on this call speaks only as of today, November 5, 2025, and therefore, time-sensitive information may no longer be accurate as of the time of the replay listening or transcript reading. In addition, the comments made by management during this conference call may contain forward-looking statements within the meaning of the United States federal securities law. These forward-looking statements reflect the current views of Select's management. However, various risks, uncertainties and contingencies could cause our actual results, performance or achievements to differ materially from those expressed in the statements made by management. The listener is encouraged to read our Annual Report on Form 10-K, our current reports on Form 8-K as well as our quarterly reports on Form 10-Q to understand those risks, uncertainties and contingencies. Please refer to our earnings announcement released yesterday for reconciliations of non-GAAP financial measures. Now I'd like to turn the call over to John. John Schmitz: Thanks, Garrett. Good morning, and thank you for joining us. I am pleased to be discussing Select Water Solutions again with you today. During the third quarter of 2025, we advanced key strategic objectives across each of our segments. In Water Infrastructure, we secured incremental contracts to enhance long-term water infrastructure scale and cash flow generation. In Water Services, we continued our consolidation and divestment efforts to drive a focus on long-term margin enhancement and efficiencies. And finally, in Chemical Technologies, we increased our market share gains, driving strong sequential revenue and margin improvement. I'd like to start with some of the key third quarter highlights, then provide an overview of several additional long-term contracts before addressing the forward outlook in more detail. In the third quarter, we maintained steady consolidated margins despite a weaker activity environment, driven by another strong margin quarter for the Water Infrastructure segment and improved Chemical Technologies margins. While general industry activity levels have been down, the produced water challenges our customers face continue to grow, creating the necessity for durable solution from commercial water midstream players. Pore space availability and seismicity-based curtailments remain a concern for traditional disposal solutions, which are driving tailwinds behind the continued demand for Select's recycle first solutions. Accordingly, we continue to advance our end-to-end water midstream offering with new contracts, organic expansion and bolt-on acquisitions. The Permian Basin remains the most active basin in the industry, but it still lacks the necessary infrastructure and solution to support future operator plans and expected produced water volumes over the coming years without additional development. We continue to scale our infrastructure operations to meet this demand and are proud to be recycling nearly 1 million barrels of water per day in the Permian Basin with the vast majority flowing through our fixed facilities. Every day, these recycling solutions create significant operational efficiencies and economic value for our customers by providing synthetic disposal capacity that alleviates the need for significant produced water volumes to be injected into subsurface reservoirs. We expect to exceed our produced water recycling targets again this year with an active backlog of projects currently under construction, we expect strong growth into 2026 as well. Supporting this future growth, in the third quarter, we signed several new midstream contracts in the Permian Basin to add over 65,000 additional acres under long-term dedication across both Texas and New Mexico. We now have added nearly 800,000 additional acres under dedication during 2025 alone and are highly confident that we will continue to add incremental dedications to this inventory backlog before the end of the year. Something else that I'm very excited about, during the third quarter, we signed a new long-term contract for water transfer, our last mile temporary pipeline and logistics services in the Permian Basin. The existing water infrastructure contracts we signed in the Delaware Basin in the second and third quarter of 2025 paved the way for this expansive water transfer agreement with a key customer. This contract enhances more than 300,000 acres under existing dedication with newly contracted water transfer services alongside existing water recycling, gathering and disposal dedications. I believe this shows the strengths of Select's unique integrated value proposition and our customers' trust in our automated water transfer and logistics services. While produced water gathering, recycling and distribution remains the primary growth driver, we also continue to responsibly grow our Permian disposal capacity to complement this recycling footprint. With ever-growing produced water volumes, the Permian Basin demands comprehensive and flexible water midstream solutions going forward. Our produced water systems incorporate large diameter dual gathering and distribution pipelines that are connected to both centralized recycling and disposal facilities, providing optionality on how we manage produced water for our customers. Disposal is and will continue to be a cornerstone of produced water management, and we will continue to add disposal capacity as needed to balance our overall system. Our growing disposal network operates in unison with our recycling capabilities to provide comprehensive long-term solutions that bring stability and enhanced takeaway assurance for the long-term contracted water inventory volumes of our customers. As our network continues to scale, this optionality will further expand over time and will play a critical role in our long-term beneficial reuse solutions as well. Treated produced water offers a unique and cost-effective starting point for both desalination and mineral extraction and provides enhanced flexibility and capacity [ as an ] alternative disposal outlet. We remain at the forefront of developing these new technologies and scalable solutions and are actively partnering with key customers, regulators, universities and other stakeholders on advancing the framework necessary for these beneficial reuse solutions. Elsewhere on the technology side, we continue to advance our mineral extraction efforts that are very synergistic with our existing water midstream footprint and future beneficial reuse solutions. This includes the recently announced groundbreaking of Texas' first commercial produced water lithium extraction facility in the Haynesville Shale in East Texas. This facility will be funded, designed, constructed and operated by our partner, Mariana Minerals, a leader in domestic critical mineral resource development. This project will leverage Select's extensive produced water gathering pipeline and disposal infrastructure in the Haynesville to source, transport and manage produced water streams critical to the extraction process. For this, Select will receive reoccurring royalty payments. Based on the near-term goal to deliver up to 70,000 barrels per day and expected fixed price contracts, we expect royalty payments of about $2.5 million per year beginning in early 2027, ramping up to $5 million per year once the refinery is producing at full efficiency and capacity. With nearly 1.3 million barrels per day of produced water moving through our infrastructure on average during 2025, there remains tremendous mineral extraction potential across Select portfolio, and we expect to grow this royalty-based cash flow over the coming years. To update on some of our other ongoing strategic initiatives, our municipal and industrial project in Colorado is steadily progressing as expected. Additionally, on the peak rental side, demand for our distributed power solution continues to grow and stakeholder engagement remain constructive. We are aiming to establish a distinct path forward for peak before the end of the year. While two very different initiatives, the underlying strategy and message is consistent. We are focused on delivering to our shareholders a streamlined water infrastructure-focused company with more predictable and stable long-term earnings. Ultimately, we have high confidence in what we are building. And even in a lower commodity price environment, our Water Infrastructure segment is demonstrating growth and resilience. We expect Water Infrastructure to grow by 10% in the fourth quarter and more than 20% during 2026. We believe that in a lower commodity price environment, more than ever, our customers will look to us to unlock incremental economics and efficiencies. Large-scale water balancing and recycling is a prime example of the combinations of good stewardship and good economics as it mitigates potential reservoir pressure impacts from produced water injection while also serving as a cost advantage alternative to legacy disposal. In addition to reducing lease operating expenses for our customers, recycling also provides a cheaper source barrel for our operators' completion needs as compared to traditional freshwater supply, thereby also reducing their capital expenditures for new well development. While the current activity environment may present some challenges for more of our completions-oriented offerings in water services and chemical technologies, we believe our market-leading positions in these segments will allow us to outperform the market and continue to generate solid free cash flow to fund our overall growth. In summary, I am pleased with the ongoing advancement of our strategy and the way our organization responds to the challenging environment. One of the key statements and tenets we tell ourselves at Select is that we have to do more with less with better results. The current market environment and our customers effectively demand this from us. But most importantly, we demand it of ourselves every day, and we are committed to delivering that for our stakeholders. Looking ahead, I think the fourth quarter will be a good demonstration of these efforts, and I appreciate the continued dedication of our employees and the ongoing trust and support of our long-term shareholders. With that, I'll hand it over to Chris to speak to our financial results and outlook in a bit more detail. Chris? Chris George: Thank you, John, and good morning, everyone. In the third quarter, Select exhibited resilience in light of declining activity levels and made steady progress in advancing its strategic objectives. During the third quarter, we achieved another quarter of strong water infrastructure margins, sizable increases in Chemical Technologies revenue and gross profit before D&A of 13% and 29%, respectively, and cash flow from operating activities of $72 million, outpacing our adjusted EBITDA. Looking at our third quarter in more detail, Water Infrastructure revenue decreased 2.5% with margins of 53%, modestly below prior quarter levels, but in line with our expectations. The modest reductions were primarily driven by reduced skim oil sales and lower realized oil prices as both disposal and recycling volumes held fairly steady during the quarter. Looking ahead for our Water Infrastructure segment, we anticipate revenue and gross profit growth of approximately 10% in the fourth quarter compared to the third quarter. Furthermore, with our sizable backlog of ongoing construction projects and our latest contract wins, we expect continued growth well into next year, driving more than 20% annual growth in 2026 compared to 2025. We expect to maintain gross margins before D&A consistently above 50% in both Q4 and throughout 2026 as well. In the Water Services segment, in the third quarter, we saw revenues decrease by approximately 23% sequentially. This decrease was heavily impacted by the divestment of legacy trucking operations associated with the Omni transaction, which closed in early July. This divestment accounted for more than 1/3 of the overall decline with the remainder driven by lower customer activity levels during the quarter. While sizable, this decrease was better than our prior revenue guidance of an expected 25% decline, though our gross margins before D&A and services of 18% came in slightly below our expectations during the third quarter. We expect the impacts from ongoing lower activity levels and typical fourth quarter seasonality to result in sequential revenue declines of low to mid-single digits in Water Services with margins before D&A improving to 19% to 20% in the fourth quarter of 2025. Moving on to Chemical Technologies. This segment achieved a sequential revenue increase of 13% during the third quarter, significantly above our guided expectations as ongoing successes with new product development initiatives drove market share gains. Importantly, gross margins before D&A also materially exceeded our expectations, coming in at 19.9% in the third quarter, resulting in gross profit before D&A of $15.2 million, a 29% sequential increase. During the fourth quarter of 2025, we expect steady revenue with gross margins of 18% to 20% as continued market share gains and product mix contribute to notable outperformance versus the expected activity levels in the key markets and regions we serve. On a consolidated basis, SG&A increased to $42 million during the third quarter, driven primarily by severance and deal costs, including from the Omni transaction and ongoing peak efforts. We expect SG&A to return to approximately $40 million in the fourth quarter, and we will continue to look for opportunities to reassess the cost structure of the business in conjunction with the ongoing rationalization efforts in Water Services. Altogether, adjusted EBITDA came in at just under $60 million during the third quarter of 2025, at the high end of our previous guidance. For the fourth quarter of 2025, we expect consolidated adjusted EBITDA to grow to $60 million to $64 million as strong sequential growth in the Water Infrastructure segment is expected to more than offset typical fourth quarter seasonality. I'll now hit on a few below-the-line items and cash flow details before we wrap up. Looking at our other costs for the third quarter, D&A increased approximately $2 million in Q3 to approximately $45 million. With the continued build-out of our growth capital projects, we expect D&A to increase in Q4 to approximately $46 million to $48 million. Interest expense should remain relatively steady, and our book tax rate applied to pretax operating income should stay in the low 20% range with cash taxes on the year remaining consistent with prior guidance of $10 million or less. Given recent federal legislation, we would expect our cash tax obligations to remain relatively muted across the next couple of years as well. On the cash flow side, cash flow from operations of $72 million meaningfully exceeded our adjusted EBITDA for a second consecutive quarter as we continue to improve our working capital profile. Growth CapEx increased to $95 million during Q3, primarily in support of contracted infrastructure growth projects, resulting in negative free cash flow of $19 million in the third quarter. We also incurred $35 million of cash outflows for acquisitions in the quarter related primarily to the Omni transaction as well as the acquisition of other disposal assets in the Permian and Northeast regions to strategically support our market-leading recycling and disposal networks in those basins. For several quarters in a row, we have seen our large backlog of water infrastructure opportunities materialize into actionable contracts. Following the recent project wins and continued pace of development, we are modestly increasing our 2025 net CapEx guidance range to $250 million to $275 million, up $25 million since the prior update. While near-term cash flow is expected to be impacted by elevated growth CapEx spend associated with our new contracted infrastructure growth projects, we maintain a very healthy balance sheet overall. We are well underway in executing our strategic commitment to streamline our overall business and deliver to our shareholders an industry-leading water infrastructure and midstream growth platform comprised of strong free cash flowing assets while upholding our commitment to a low leverage balance sheet. We maintain our expectation of $50 million to $60 million of annual CapEx going towards ongoing maintenance and margin improvement initiatives in the near-term, although this could come down over time with additional services rationalization. Absent the ongoing sizable growth capital outlays, we have a very maintenance-light capital model. Our operating assets have significant free cash flow generating capabilities and flexibility to manage maintenance spend in accordance with market conditions without impacting our overall operational performance. In summary, we advanced our strategic initiatives in the third quarter and remain confident in our overall strategic outlook. We are proud to have positioned the company with strong liquidity, resilient earnings and growing contract coverage, and we look forward to continuing to deliver on our strategy. With that, I'll hand it over to the operator for any questions. Operator? Operator: [Operator Instructions] [Technical Difficulty] Unknown Analyst: Congrats on a nice result and continuing to advance the ball on contracting water infrastructure. John, I think we all pretty well know kind of your strategy around the infrastructure side with what you're doing in recycling, building out the networks and kind of controlling the water. And you mentioned -- I think both you and Chris mentioned adding some disposal capacity this quarter and something you'll do going forward just to support what you're doing. I'm curious how you feel like you're positioned there versus -- obviously, there's a lot more water volume coming out of the Permian than you can recycle. So maybe spend a minute on how you think about disposal. John Schmitz: Well, I guess the first thing to say about it is it's the thing we continue to be -- to say is we always want to do our best to make an optionality of recycle first. We think it's the best economics to our customers. It's a very good profile for profitability for us. But we have to backstop that network, those volumes with that relief and that relief is that disposal, [ Jim ], that you're asking about. As I think about it, and we continue to find it, I mean, we announced and have continued to get exposure to and find opportunities to buy what I would call stranded assets. So as we put these networks together and you get an ability to hook one piece of pipe or one storage, one recycling to other pipes and storage, you go across asset bases that we have been able to buy and those are stranded disposals. And that disposal comes to us in the network to fit within the equation of water balancing in a big way. And that has showed up and continues to show up, and we expect it to continue to be an opportunity for us as this network gets built out, Jim. Unknown Analyst: Appreciate that, John. And the other kind of exciting thing, I think, or at least really interesting is the mineral extraction and you kind of mentioned beneficial reuse and you guys are working on that. Maybe just talk about kind of what inning you're in, in the beneficial reuse and maybe what is the opportunity set of beneficial reuse and mineral extraction over the next 5 years, just kind of thinking about how this compounds the growth in water infrastructure. John Schmitz: Sure. I'll let Mike Lyons and Michael Skarke throw in here. But logically, with the announcement of what we did in East Texas, extremely excited to be able to spread that across more volumes that are in our control in our networks. And then the beneficial reuse our partnership with regulators or universities or upstream major players, we're very excited about taking a piece of that water and repurposing it. But Mike, please, I'll turn it to you. Michael Lyons: Yeah. Thanks. So I think, Jim, the big win for us here is we spent a lot of -- we spent the last couple of years really digging in and characterizing our portfolio. And so we're really glad to seeing it pay off. And this is a commercial scale facility. So I mean, we're in the early innings of creating revenue around this, but I think we're farther along in that from a technical perspective and making sure that these projects make sense commercially. We cast a pretty wide net to find partners who are good operators, who are well capitalized, have a competitive advantage and are committed, quite frankly, to moving beyond pilot scale because none of this means anything to us unless we can make money on it. And so the -- our water infrastructure networks, particularly recycling is what is so attractive to these partners, and it's what is going to create this value. And so we have -- we do have concrete plans in place to monetize the rest of the portfolio as well. And of course, we'll continue to share that as they are put in motion. We like to talk about the stuff that's happening, not just talk about plans. And so I think we are clear on how this particular project will ramp, but you should expect to see more. And I think, Michael, on the desal side, if you want to say a few words, but I think recycling there provides a great starting point as well. Michael Skarke: No, sure. I appreciate it. So Jim, on that point, we are looking to monetize the expansive network we have in New Mexico by providing traditional disposal in that way, we can be a recycling first provider, but still really monetize our position and make sure we solve the total water problem with traditional disposal. As we look forward, there's issues with in-basin disposal, there's distant disposal and there's beneficial reuse, and we think it's going to be all of the above. So there's not going to be one answer to the proverbial water that's going to come in the Delaware Basin and the Permian more broadly. So we continue to work with strategic partners, like John mentioned, operator partners, universities and others on beneficial reuse solutions. We think this is coming. We've had some success at different levels and hope to have an announcement at some point in the future when we're further along in the process. Operator: The next question is from Bobby Brooks from Northland Capital Markets. Robert Brooks: So Chemical Technologies was a bright spot. Sales up 13% sequentially, the 20% margin, and that was versus a mid-single -- the guide of a mid-single-digit decline and 15% to 17% margins. I know, Chris, you had mentioned share wins via new products was kind of the drivers of strength. But I was just curious if we could hear a little bit more, like was the new products, the entire driver of market share gains? And do you think you can keep -- you can maintain those market share gains? And maybe just discuss why those new products saw such strong adoption? Chris George: Yeah. No, I appreciate the question, Bobby. Obviously, we were very, very excited to see the performance of the segment during the quarter here in -- the Chemical products, the R&D side, we've got a very strong technology team. And I think one of the core drivers is the continued advancement of efficiency that John mentioned from our customers. That comes in a number of different ways. In some ways, it's extending lateral wellbore lengths. In some ways, it's trying to decrease the number of days on pad and increase that overall efficiency. But at the end of the day, all of those things translate into, I would say, new technical requirements around chemical products as well. The type of chemistry required to get out to the end of a 4-mile wellbore lateral as well as the type of chemistry required to push through a simul, trimal or quad frac, all of that translates into, I would say, advancing technical requirements, particularly when integrated with produced water and recycled produced water. And I think that works really well in our favor when we're talking about the scale of our recycling capabilities here and the technical experience we have on managing that water resource as well. So those are some of the primary drivers here. And I think that as we continue to look forward, we think that the recent success is going to continue, and we're proud of the team's ability to continue to progress those products in line with the market demand around efficiency. Robert Brooks: Got it. That makes sense. And if we think about the kind of soft guide you've given of greater than 20% growth for water infrastructure next year, which is up from the 20% growth on the 2Q call you mentioned. Could you just break down maybe how much of that is going to be coming from the dozen or dozen plus new infrastructure projects you've announced this year versus how much of it is higher utilization on existing assets? Chris George: That's a very good question. It's definitely a combination of both. As we've conveyed previously, we generally look to underwrite these projects with a core anchor tenant customer and commercialize as they come online with additional contracted counterparties and interruptible volumes as well to balance the system effectively. Given the pace at which new projects are coming online over the fourth quarter through the -- really the first three quarters of next year now, we think it's going to be a steady cadence of both new projects coming online as well as the commercialization of the investments we've made over the course of '25. So it's going to be a mix of both. I would say there should be a steady cadence of growth throughout the year next year. And with the new projects we added online this quarter, that's adding capital backlog for us well into the third quarter of next year. Robert Brooks: Got it. And then just on the lithium extraction news from the inter-quarter press release put out. Obviously, really exciting. But I was just curious to maybe get a sense of how many more opportunities you feel like you have across your portfolio? It seems like you've kind of been in some deeper discussions. Just was hoping to get any additional color on how to think about the opportunity set there. Chris George: Yeah. As we mentioned, obviously, we've got well north of 1 million barrels of water moving through our infrastructure every day, and that's going to continue to grow as we look forward into next year, like we talked about. We've spent a good bit of time looking at the content and the quality of the water and the minerals across the full portfolio. We've got leading positions in many basins here. But Mike, maybe hit on some of the more specific opportunities that are prioritized. Michael Lyons: Yeah. I think coming on the heels of this, I think next year, you'll start to see some more tangible progress around our recycling facilities. And I think if you put 2030 as a goal out there, I think this total business can be somewhere in $10 million to $15 million of margin contribution. And I think what's unique about it is often our partners are serving a very unique role for the offtakers. They're essentially a natural hedge with domestic lithium or iodine. So they're valued in the market. Often the contracts that we are signing LOIs around or signing commercial contracts around our partners are signing can be fixed price and fixed volume in nature. So these royalty streams are obviously -- they're 100% margin and they're stable. So we think it's a really unique, low-risk, repeatable, predictable cash flow stream to add to the business. And it's because of our infrastructure networks and our high concentrations of water that we can -- that we are uniquely positioned to be able to deliver this kind of business and this kind of value to our partners. So I hope that answers your question, Bobby. Robert Brooks: Definitely does. Operator: The next question is from Don Crist from Johnson Rice. Donald Crist: I wanted to start out by just asking a kind of more detailed question about how you're building out the Northern Delaware infrastructure. And as I appreciate it, your infrastructure is kind of built out to where with the flip of a valve, you can move between recycling and disposal. And the genesis of my question is, how does that kind of play out when you're talking to potential customers on acreage dedication and whatnot? And how does that factor into contracts going forward? Does that give you a leg up over some of your competitors? John Schmitz: Yeah. Thank you for the question, Don. And you're exactly right. So we started our infrastructure in Lea County really in 2025. We've been expanding it into Eddy County. And in '26, we're going to be connecting our expansive systems in Lea County and Eddy County. They're all dual pipeline kind of large diameter systems, so we can move water in both directions in large quantities at high rate to really maximize optionality and expansion opportunities. And this is in an area where completion water is scarce and where production water has a hard time finding disposal because the state of New Mexico is not permitting more disposal. You're undercapacity, you have all the seismicity and pore space issues that are becoming more and more talked about. So the fact that we have large diameter dual pipes and significant storage in place is really critical in solving the solution. And where I think it gives us a leg up is we're able to take the water from the operator. They have a need to get rid of that water, and we can take it. And we're recycling first. We said that first to everyone, and that's well known. And the reason we're recycling first is we think it's a better economic model for us and for our customers. And so we do better when they do better. So it really is kind of a true win-win. But to the extent that we can't recycle it across a very vast system spanning most of Lea and Eddy County, then we'll flip it to disposal. And that way, there's the surety that we can continue to take their water and be that commercial backstop and fully monetize the contract and the assets we put in the ground. Donald Crist: I do appreciate that color, and it seems like you do have a leg up over some that are just disposing of water, not recycling. Kind of along those lines on the disposal side, are you only disposing of water in New Mexico or do you have kind of pore space outside of New Mexico into Texas where you can move water if and when that becomes necessary? John Schmitz: We have disposal operations and pore space in both New Mexico and Texas. So we do have that optionality that you're alluding to Don. Donald Crist: Okay. And one final question for me. On the Haynesville, what kind of discussions are you having as we kind of move into kind of the back half of '26? I mean all of us energy analysts believe that there's going to be a whole lot more gas drilling, particularly in the Haynesville? And kind of what are you hearing on the customer front in that regard? Chris George: Yeah, that's a great question, Don. I think certainly, in the current market environment, there's definitely a strong optimism around the bull case on the gas side of the market. The LNG demand that's going to continue to ramp is very well suited for first volumes out to come out of the Haynesville. As we've mentioned before, we're the largest commercial disposal provider in both the Haynesville and in the Northeast in the Marcellus Utica. And so we're very well-positioned to capitalize on any advancing activity growth in either of those basins. But I think in particular, in the Haynesville, you're going to see that first initial ramp to support that outlook. And I think we're well-suited to satisfy that demand. But more importantly, many of our customers are already looking forward in terms of how they're going to meet not only their activity development cadence that they're planning for, but some of their obligations that are in place for that LNG offtake. John Schmitz: And we're in the middle of those discussions with kind of the market-leading position of disposal in the Haynesville. We're a part of those, and we've seen some strengthening in the Haynesville this year where other basins have seen some softness. And most of the research analysts or like yourself are getting more bullish on gas, and we're seeing that through the lens of our customers when we look into 2026. Operator: The next question is from Scott Gruber from Citigroup. Scott Gruber: I want to touch on the review that you're undertaking on the opportunity set in distributed power for your Peak business. What type of end markets are you contemplating? What type of assets could be required? Just some color on the potential growth avenues for Peak that you're contemplating, that would be great. Chris George: Yeah. Good question, Scott. So obviously, as we mentioned, that process is underway, and we'll certainly update you guys as we get further along here, but certainly looking to have a path forward by the end of the year. But we continue to see demand growth for those solutions, both on the nat gas generation side as well as the battery storage side. We've continued to add to the backlog of the capital program there. And effectively, every unit we get delivered goes out, many of which under contract. And we've seen that both in support of Select infrastructure build-out in New Mexico as well as commercial counterparties on a number of different outlets. But John, do you want to speak to it? John Schmitz: Sure. Yeah. So on the market and what we are targeting, First of all, Select has been in this business a long time. It was on distributed power. It was diesel generated, and it was primarily in fairly large scale into the drilling and completion support. That's where that mechanism is. So the footprint that we have to support that is already in place. What we have now took advantage of and start to develop is applying battery storage along with that distributed power and what you can do with peak powers and the clean application of electricity into certain pieces of equipment because of that battery system. That's going really well. And then we also want to bridge with the same MSAs that we have in place for long periods of time that customer that we were doing business with on the drilling and completion side, we now are doing business with them on the production side. And a lot of that is the distributing natural gas generations that we're putting in place for production facilities, which is way longer-term application for that piece of equipment. And we also believe that even though it's a larger power consumption, that battery solution will fit into that application in the production side as well. So that's the targeted position that we are executing on today. Scott Gruber: All right. Interesting opportunity. As you think about deploying capital into the business? Obviously, there's some competition for capital within the portfolio given the growth opportunities on the produced water side and into recycling assets. Just how would you frame up that competition for capital within the portfolio across all these growth opportunities? John Schmitz: Yeah. So I mean, we are very focused on water infrastructures and contracted and our position in these networks and water balancing, real value-add long-term contractual, high gross margin, very good profile returns. We believe that thesis fits into the franchise of Peak with their distributed, electrical and battery storage. But it is a different thesis than what's inside of Select, and we are very focused on making sure that both of it is answered. And that is the process that Chris talked about earlier when we first started to answer your question. Chris George: To kind of put a bow on that, Scott, I mean, at the end of the day, we think it's a great growth opportunity set within Peak and the distributed power side, but we don't want it to limit or compete for capital on the water infrastructure side where our primary growth opportunity set lies, and that's the reason we're undertaking the process to ensure that it has the ability to capitalize on its own market opportunity in the correct way within the portfolio. Scott Gruber: And the others in the expanding in the power space have used their balance sheet to amplify growth and get in the queue for assets. Just how do you think about using the balance sheet on the power side? Would you limit yourself in that regard or would you put it to work? Chris George: Yeah. It's a good question. To date, it has not been a limitation for us. But obviously, the pace and the opportunity set at which that can grow is going to be, I would say, determined by the outcome of the undergoing review process we're taking. And so I think part of the outcome there is going to drive the pace at which capital can drive that growth as well. So to the extent that the opportunity set comes at us differently or faster, we'll make that assessment. But our primary is to ensure that it has its own capital availability that's going to support that growth profile outside of the scope of the water business. John Schmitz: I think one thing to point out is a lot of the companies that are -- have high growth capital profiles going into the distributed power business, they're businesses that they're transforming from is not the same profile as our water infrastructure. Our Water Infrastructure business is a very good, stable capital return, high gross profit, long-term contracts in a space that we are a value-add and recycle first profile. So we're very focused to make sure that we protect that and capitalize it properly. But at the same time, we do recognize that, that distributed power and battery business has the same type of thesis in the profile of returns and long-term relationship to production facilities or compression facilities or water transfer facilities in an area that it's very valuable to the customer and to us of being able to use natural gas or peak power battery application. Operator: The next question is from Derek Podhaizer from Piper Sandler. Derek Podhaizer: Just wanted to ask a question about the water transfer and logistics service contract that you announced. You talked about water infrastructure paved the way to secure this new contract. So maybe just talk to us about the strength of this integrated approach that you have between infrastructure and services and how it's a differentiating factor for you versus your peers? Michael Skarke: Sure. No, thanks for the question, Derek. So I mean Water Transfer is part of our Water Services business, and it's traditionally a call-out service. So the fact that we can get a multiyear contract for all of the water transfer services is new and unique and something that, as John mentioned, we're particularly excited about. It was enabled by our water infrastructure contracts and the success we've had executing with that operator. I mean, without that, the contract would not have been available. And just because of that execution, the operator was happy to expand the scope of our relationship into that full custody and water [ delivered to ] location, which I think is reflective of the position we have on water transfer. So we're the largest water transfer provider. We have automation capabilities and an asset base that is second to none. And with produced water jobs becoming more complex, longer, more highly engineered and the environmental sensitivities around that, I think we were a logical choice for this operator to really expand the scope of our relationship. And as we kind of look specifically to the New Mexico, but more broadly, across our asset base, I think other operators will see it similarly and that you have a best-in-class water transfer provider who can provide care and custody of that barrel all the way to location at a fair market rate and reduce the liability and any uncertainties. And so we're hopeful we can continue to leverage that strength and that synergistic relationship. John Schmitz: Yeah. I think it's a great question, but it really does completely fit within the value add to both our company and our customers from water infrastructure, large containment to delivery to job site. And we put together a Control Center that I want Mike Lyons to talk about a little bit because it really tells you why these things could work. It work together and bring a lot of value throughout the system. So Mike, you might walk through our efforts with the automation. Michael Lyons: Yeah, sure enough. So we call it the [ ROC ]. It's our Remote Operating Center. It's staffed 24/7, covers all of our assets across all Lower 48 -- so every disposal well, every treatment facility and any active water transfer jobs are monitored by folks that often have worked in the field now are essentially board operators, and we have 2-way communication and monitoring of every job. And that allows us to sense and interpret and find leaks often before they happen to prevent that leak. And as Michael was saying, I mean, the full care and custody of the barrel is of critical importance. And as we are still deploying a lot of layflat hose and doing a lot of water transfer, often 50, 60, 70 jobs at a time, that is a critical part of how we operate now. And as we become, I would say, more focused and majority focused on infrastructure, we're putting hundreds of miles of pipe in the ground, and we have to be able to check and monitor and look after every foot of that network. And that is a big priority for our operating partners knowing that, that water is safe and contained. And it's also, for us, a big value unlock because the network optimization piece of that as you build a bigger and bigger network, we can create value that others can't. It's because we watch the barrel every second of every day. Derek Podhaizer: Got it. That's all very helpful color. And then maybe just on the Water Services, maybe the margin profile here. So I'm just trying to think about how we should think about these margins moving into 2026. So obviously, they came down quite a bit. Maybe talk to us about that. I'm not sure if that was related to the recent divestiture within the segment. Top line is coming down in the fourth quarter, margins are improving. So if I think about 2026, do you expect to get back above that 20% level, same levels that we saw in the first three quarters of 2024? Chris George: Yeah. It's a great question, Derek. And obviously, with the rationalization efforts we've undertaken in Water Services, a fundamental part of that initiative is margin improvement over time. We've been able to continue to improve the consolidated gross margins with the continued growth in Water Infrastructure, great outcome in growing the margin profile in chemicals. And so obviously, we have not yet executed on that in services, but that remains the, I would say, the #1 priority for that segment. We've got a market-leading position across generally everything we do in that segment. And so we've got, I think, a lot of opportunity to pull that margin profile up over time as we've divested and rationalized out of some of the more commoditized lower-margin operations. And what we were just talking about in terms of the integrated water services contract with Water Infrastructure is a great example of how we can add efficiencies that benefits not only the customer but benefits us as well. If we can integrate that last mile logistics with our infrastructure, that's generally going to help save our -- save money for our customers, and it's going to improve the margin profile of our operations as well in Water Services. But the short answer is we very much believe that segment needs to get back into the mid-20s in the near- to medium-term to generate an appropriate return on its capital. It's already generating a good free cash flow profile for us. And anything we can do to move that margin profile up over the next year or two is going to continue to benefit that cash flow profile. Operator: The next question is from Derrick Whitfield from Texas Capital. Derrick Whitfield: I wanted to start with the M&A environment. In the release, you guys are highlighting the success you're having with strategic infrastructure acquisitions during the quarter. As I think about the upstream sector, less M&A tends to occur in the $60 per barrel or lower price environment. Having said that and understanding that E&P-owned assets could transact in a lower price environment, how would you guys characterize the A&D environment for water infrastructure at present? John Schmitz: Yeah. So Derrick, this is John. I would characterize it as -- as you put networks together and you find assets that fit that network, as a standalone, that asset earnings profile is considerably less than if you can incorporate that into a large network and move water and water balancing to a new level of application with the intensity that's happening in the marketplace right now. We continue to find that. We continue to find either stranded assets or assets that as we put networks together, get more acreage under dedication, build more pipe, build more storage that the value of bringing those assets into that network is real. Even to the level that now some of the commercial agreements that the team has put together and negotiated, some of the operators that we're getting under contract in those negotiations actually give us some of their assets to bring in that network. And we think there's going to be more of it. Some of it in one-off single assets and some of it potentially in large networks that fit together and can be utilized as well as customers' assets that are way underutilized because they were built for single application. That application is long past and this piece of pipe that goes from one area to another area can be incorporated and it's fully underutilized. So we think there's real value in that market to continue to build this out. Michael, you got any addition? Michael Skarke: What I would say, Derrick, is we're looking at smaller accretive acquisitions off of our expansive network. And that's very different than kind of new projects or large organic step-outs. And so what John is highlighting is whether it's replacement CapEx or an acquisition, if we can tie it into a larger system, it becomes very attractive to us. And you've seen us do a fair bit of that this year. And I think that we will continue to look for those opportunities going into next year. Derrick Whitfield: Makes sense. And for my follow-up, I wanted to focus on the competitive landscape in the Delaware. During the quarter, you guys achieved exceptional success with signing new contracts. How would you characterize the competitive landscape post ARIS being acquired by WES and the opportunity you see to continue your third quarter momentum into 2026? Michael Skarke: Yeah. So I mean, water is a hot topic, and the market is getting more competitive. We're aware of all of the people out there and what they're doing. We understand their strengths and weaknesses in their value proposition and how it fits with ours. I mean, fortunately, we're, as I mentioned, recycling first provider, and that's got a superior economic model. And we think that's going to keep us to be very competitive in this market, kind of regardless of what happens. The system we built out, I mean, we were fairly early in building out a robust system across Lea and Eddy County, and that's helped us become the market-leader in total water management in the Northern Delaware. And so I think that's going to be a real value add and something that will be attractive to our customers regardless of their consolidation and help us be competitive in the market regardless of what our competitors are doing. Operator: The next question is from Jeff Robertson from Water Tower Research. Jeffrey Robertson: If I could go back to the beneficial reuse concepts. John or Michael, if you think about commercializing beneficial reuse, is that an arrangement between Select and the upstream customer who's putting water into your system or is it an arrangement between Select and a downstream customer, excuse me, who's taking water for beneficial reuse? Michael Skarke: I think -- I mean, it's a market that hasn't fully formed, Jeff. And so we're going to have to see the way it plays out. I suspect overtime it will be both. But I can tell you that initially, my belief is it's going to be a direct relationship between Select or someone like Select and an operator partner. Chris George: I would add that ultimately, the first stage of that, that Michael is referencing, that's really alternative disposal. So finding a way to treat that barrel to a usable quality to discharge back into the environment as a form of alternative synthetic disposal or alternative disposal outside of typical injection. That's going to be the first one. Longer term, those barrels do have a recognizable value in the marketplace that could go into other non-oil and gas markets. And I think that's where you're going with it, Jeff. And obviously, to the extent we get there, that's obviously alternative or additional revenue potential. And it also provides the ability to solve water challenges in other markets as well. So the industry could be a net added contributor to the water supply chain versus a consumer. So that's ultimately where we think it goes long-term. But obviously, it's going to probably have a staged trajectory over the next couple of years. John Schmitz: I'll let Mike talk a little bit about it. But actually, it's very interesting. We're actually finding our customers that could be on both sides of your question. They have produced water as a waste stream. It actually is an area that they need water for other operations and we can put beneficial reuse application to work to convert a portion of that waste stream and replace freshwater sources they're using in their other operations. But Mike, you? Michael Lyons: Yeah. I think John is referencing, I think, a couple of current real opportunities that we're chasing. And in both of those, we've worked very hard with our operator partners to find the right spots to apply this. And typically, the right spot will be an area where there is some waste heat available, where there is disposal or our own disposal or recycling solutions to take the concentrated brine, but then a natural home for the clean water. It could be as a part of a chemical process in one example, it could be part of a cooling water need. All these systems require water and water is increasingly hard to come by, especially at the quality spec that you need for industrial and chemical applications. So I think -- and it is easier from a regulatory standpoint because that water can be used by an industrial or chemical customer out of the gates. So those are the right now opportunities that we are chasing. Of course, we'll say more on them as they become commercially solidified. But we continue to even find opportunities where it's a chemical plant, a data center, gas plant, like these are the kind of customers that we're actively engaging in. And then beyond that, as you think about land application, whether it's for irrigation or direct into -- on to land for tributary release, et cetera, I think those are the longer puts, but those are the puts that the industry needs to make, and we're playing actively in that space to make sure water quality specs are clear to make sure that we're aligned with regulators. It's a big material shift for the industry, but it's a high priority, and it's absolutely a long-term goal to achieve that scale, and it fits exactly within our company and our networks. So I think we're very uniquely positioned in this space. Jeffrey Robertson: I go back to the Haynesville. I think, Chris, you and Michael talked about it, but you've talked about increasing utilization on your existing assets there in the past. At what point do you -- or are you starting to see opportunities for new growth projects in that basin over, say, '26, '27 type timeframe? Chris George: Yes. We -- Jeff, we had some growth opportunities when gas was higher a couple of years ago, and then it's cooled off the last two years, and those conversations have started back up with the outlook that we discussed earlier today. I mean we have a pipeline gathering and distribution system that can't be replicated, leading to the market-leading position in that basin. And so we're logically the first conversation when operators are looking to expand their platform, the drilling completion schedule and looking to manage that water. And so those conversations are being had. We are talking about expanding our network, and it's a good time to be the market leader in the Haynesville. Operator: The next question is from John Daniel from Daniel Energy Partners. John Daniel: Thanks for keeping the call going. I want to dig a bit deeper into Don's earlier question. But I guess -- and it's a 2-part question. Just how much more incremental infrastructure do you think the Western Haynesville is going to require? And then second, when we look at recent Select press releases, there are all sorts of awards and contracts for Permian projects. I'm just curious, do you think when we read your press releases 12 to 18 months from now, we're going to see a similar level of contracts awards in Haynesville development -- Western Haynesville development? Michael Skarke: I'll maybe start on it, John. I think that the Haynesville has obviously seen a lot of consolidation and I would say, acreage shuffling and positioning here over the last couple of years. And I think that you're going to continue to see folks try and figure out what the opportunity set looks like to continue to expand out from what was historically the Tier 1 acreage and the more mature parts of the basin into other areas that I think are proving to be expansively economically viable. So I think there's definitely going to be continued application of need. I think that the benefit of our existing asset footprint is the challenges that are undertaken on disposal in Louisiana. And as you move Westward, that gets it into our network efficiently and into our system. I think the Western Haynesville is definitely underdeveloped compared to some of the other areas. And so it's going to have an additional need and ultimately an expansion effect on water as well. Chris George: And maybe, John, to address the second half of your question just more broadly. So as I look at the press releases, I think back on the press releases from this year, we've been more successful than I thought we would be coming into the year, particularly given that it's been a flat to down year. So I'm really excited about the success we've had. Obviously, we can't continue to have this level of success indefinitely. I mean, there's a point where that rolls. Our backlog is still strong. We still announce some deals on a quarterly basis, seemingly every quarter. But at some point, that is going to roll and the CapEx will curtail materially and then the cash flow flips. And so it's still a little unclear exactly what month or quarter that happens. But this -- the excitement we have right now with aggressively chasing the really intrinsic value proposition we have around recycling and building that out to support total water management disposal. I mean, there is a finite window there. Michael Lyons: One thing I would maybe add is as that asset footprint gets developed and you move from those large greenfield chunky build-out footprint projects and get into the brownfield development opportunity set and the economics continue to improve over time as you benefit from that invested capital profile. So we're already fairly mature in that investment in that traditional Haynesville area. And so I would say the return profile of incremental capital deployed in the basin is going to be very attractive compared to greenfield development. Operator: This now concludes our question-and-answer session. I would like to turn the floor back over to John Schmitz for closing comments. John Schmitz: Yes. Thanks, everyone, for joining the call. We appreciate your continued support and interest in learning more about Select Water Solutions. We look forward to speaking to you again next quarter. Thank you. Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: " Michael Castagna: " Christopher Prentiss: " Olivia Brayer: " Cantor Fitzgerald & Co., Research Division Unknown Analyst: " Andreas Argyrides: " Oppenheimer & Co. Inc., Research Division Yun Zhong: " Wedbush Securities Inc., Research Division Brandon Folkes: " H.C. Wainwright & Co, LLC, Research Division Anthony Petrone: " Mizuho Securities USA LLC, Research Division Operator: Good morning, and welcome to the MannKind Corporation Third Quarter 2025 Financial Results Earnings Call. As a reminder, this call is being recorded on November 5, 2025, and will be available for playback on the MannKind Corporation website shortly after the conclusion of this call and available for approximately 90 days. This call will contain forward-looking statements. Such forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from these expectations. For further information on the company's risk factors, please see the Form 10-Q for the quarterly period ended September 30, 2025, the earnings release and the slides prepared for this presentation. Joining us today from MannKind are Chief Executive Officer, Michael Castagna; and Chief Financial Officer, Chris Prentiss. I'd now like to turn the conference over to Mr. Castagna. Please go ahead, sir. Michael Castagna: Good morning, and thank you for joining our Q3 2025 earnings call. Let me start with the Q3 highlights. We delivered a record revenue quarter of $82 million. We also strengthened our portfolio with the acquisition of scPharmaceuticals. On the pipeline side, Afrezza supplemental BLA was accepted for review with a PDUFA date of Q2 2026. We also saw strong performance from Tyvaso DPI, which contributed $59 million in royalty and manufacturing-led revenue, reinforcing the durability of our revenue streams. Chris will review the details of our third-quarter results shortly. We're excited to have completed the acquisition of scPharmaceuticals and are pleased to welcome their talented team to MannKind. Together, we're focused on unlocking the full potential of FUROSCIX as well as the advancement of inhaled bumetanid, Aka MNKD-701 for fluid overload in CKD and heart failure as our target indications. We are encouraged by the momentum across our clinical development programs that we've been working on the past 5-plus years in terms of MNKD-101 and 201, which I'll discuss at the end of our call. Now let me bridge to our near-term growth catalysts. Building on the hard work and dedication of the entire MannKind team, we have a unique near-term opportunity to accelerate growth and deliver meaningful value through catalysts across our commercial products and pipeline programs. I'll point to a few of these milestones. The sNDA for FUROSCIX auto-injector was submitted to the FDA in Q3 as planned, with an expected PDUFA date of Q3 '26. The Afrezza sBLA was accepted for review, and if approved, will be the first new insulin for pediatric patients in 100-plus years of diabetes therapy. We've also completed enrollment into our midterm target for ICoN-1- NTM Phase III ahead of schedule, allowing us to confirm the sizing of the trial mid next year. Now I want to bridge over to our commercial highlights, starting with Tyvaso DPI and our collaboration with United Therapeutics. In Q3, we recorded our highest revenue quarter for Tyvaso DPI, earning $33 million in royalties and $26 million in manufacturing-related revenue. As UT noted on its call, we have developed and produced an 80-microgram cartridge, which allows patients to take 15 nebulizer equivalent breaths in a single dose, improving convenience for patients. Following UT's positive TETON 2 data, we anticipate that the company will pursue a DPI bridging study in IPF, which would have the potential to expand the Tyvaso DPI label to include IPF and/or PPF contingent upon FDA approval. Additionally, UT recently exercised their option to expand our collaboration, and we've begun formulating a second investigational molecule as a dry powder platform using MannKind's proprietary Technosphere technology. In Q3, Afrezza grew 31% in new prescriptions and 27% in total prescriptions year-over-year. As we shifted our focus to type 1 diabetes in preparation for pediatrics, our units per script have declined by about 15% year-over-year, as the average person with type 1 diabetes requires less insulin than the average type 2. The impact you can start to see it reflected in the difference between our net revenue growth being lower than our TRx growth. On the revenue side, Afrezza grew 23% in Q3 2025 compared to Q3 2024. We're focused on driving prescribing among top prescribers and continue to see strong engagement from health care providers, especially with the potential to expand into pediatrics if approved. Ahead of that opportunity, we've enhanced our messaging and expanded our field force, which includes medical science liaisons, local field salespeople, as well as key account managers who will be focused on the top 50 pediatric centers. I'll now turn to FUROSCIX, a product we're very excited about. FUROSCIX is a high-potential brand that expands our footprint into cardiorenal medicine, and we now have the opportunity to merge scPharma's experienced team with the MannKind team. This addition enhances our commercial scale, accelerates growth, and aligns with our strategy to expand into adjacent therapeutic areas while delivering innovative patient-focused solutions. Fluid overload remains a significant burden, and FUROSCIX addresses a critical gap in care by helping break the cycle of hospital admissions and readmissions. scPharma invested heavily in building a high-performing sales organization, expanding from about 40 representatives to more than 80 by early 2025. Establishing a sales force is a substantial undertaking that requires a significant financial and operational commitment. That investment laid the foundation for the strong adoption we've seen in 2025. The expanded sales team, combined with more focused territories and stronger engagement with healthcare providers, is driving broader coverage and deeper prescriber interactions. These strong results are reflected in Q3 performance with over 27,000 doses dispensed, up 153% from the same quarter last year, reflecting continued prescribing adoption and growing confidence in FUROSCIX. With the demand continuing to rise, let's turn to the financial impact. For the year-to-date period, FUROSCIX revenue reached $47.1 million, a 95% increase over the same period in 2024, indicating the investment in driving share of voice is accelerating product adoption. For the third quarter of 2025, unaudited FUROSCIX revenue was $19.3 million. FUROSCIX revenues will be included in MannKind's financial results commencing with the close of the acquisition, i.e., Q4. Now I want to focus on a large unmet medical need in heart failure and CKD, which is what we saw as we evaluated the scPharmaceutical acquisition. To put the growth we're seeing in perspective, let's look at the size of opportunity in heart failure and CKD, areas with significant unmet need. Heart failure is a large unmet need, and market research shows 80% of heart failure costs are tied directly to hospitalization. There are 2.1 million addressable heart failure episodes in the U.S., mostly driven by congestion from worsening heart failure. And for patients 65 and older, heart failure is one of the top reasons for hospital admission. This represents a large addressable market and a significant portion of the Medicare Part A and Part B spend. This is where FUROSCIX makes a difference. Its key feature is to allow patients to treat edema at home and reduce hospital admission time and/or readmissions. Now I'd like to talk about the FUROSCIX opportunity for intervention. scPharma achieved success in FUROSCIX by focusing on community physicians who treat CKD and heart failure often before a patient shows up to the ER, which is on the left side of the slide. By intervening early, physicians have the potential to reduce hospitalizations and break the cycle of hospital readmissions. As we look post integration, we're now expanding our focus to the post-discharge period, where readmissions risk is the highest, creating a significant opportunity for FUROSCIX to improve outcomes and reduce costs. This approach aligns with CMS's proposed ambulatory specialty model for heart failure care, which begins in January 2027 and introduces mandatory 2-sided risk for cardiologists in select regions with performance tied to quality, cost, and care coordination. These changes underscore the importance of early intervention and strengthen FUROSCIX's role as a key enabler for providers to meet quality and cost targets under CMS's new risk-based payment model. Beyond revenue growth, we remain focused on innovation to enhance patient experience and drive long-term value. Building on FUROSCIX's momentum, we will expand our hospital strategy by adding key account managers critical to helping ensure discharge protocols will include FUROSCIX and enable local access with the major health systems through meds to bed programs. This positions FUROSCIX for far greater utilization in hospitals and post-discharge settings. We're also planning to increase our share of voice in cardiology and nephrology to raise awareness amongst clinicians and patients, supporting sustained adoption in the community prescribing level. A key milestone this quarter was the sNDA submission for the FUROSCIX ReadyFlow auto-injector. If approved, this device will simplify admissions, expand treatment options, and reduce cost of goods significantly freeing up capital to reinvest in growth, strengthen our portfolio, and improve margins. Additionally, we're advancing bumetanid DPI MNKD-701 into preclinical development, another example of our commitment to innovation and long-term growth, as we believe FUROSCIX will be the standard of care, but a subpopulation may prefer to inhale versus inject. Our Technosphere technology should provide comparable bioavailability based on our historical development programs in insulin, treprostinil, and migraine, where we get IV-like onset and sustained efficacy in the short term. A DPI formulation of bumetanid could offer a rapid noninvasive, and highly portable solution, enabling patients and providers to manage flute overload without hospitalization. I'll now turn the call over to Chris to review our third quarter results. Christopher Prentiss: Thank you, Mike, and good morning, everyone. In the third quarter, total revenues grew 17% over the prior year to $82 million, driven primarily by royalties earned on Tyvaso DPI. These royalties increased 23% to $33 million, reflecting the continued strong performance of Tyvaso DPI under our collaboration with United Therapeutics. Collaboration and services revenue was $27 million, up 14% from the prior year, and consists primarily of manufacturing revenue based on production volumes sold through to UT, as well as the recognition of deferred revenue. During the quarter, we announced a new collaboration with United Therapeutics and received a $5 million upfront payment. We will begin to recognize revenue related to this agreement in the fourth quarter as the development activities progress over the next several quarters. Afrezza net revenue rose 23% to $18.5 million, while VGo contributed $3.8 million, down 19% over the prior year period. The performance of VGo is consistent with our expectations as we no longer actively promote the product. On the expense side, quarterly research and development expenses increased $1.1 million or 9% over the prior year period, driven by the enrollment ahead of plan in the ICoN-1 trial of inhaled clofazimine and preparations for the INFLO Phase II IPF study, which is expected to begin enrolling in Q1 2026. These increases were partially offset by the completion of the INHALE-3 and MNKD-201 Phase I studies in 2024. Selling, general, and administrative expenses increased $5.2 million or 22% in the third quarter versus the prior year period. As we continue to invest in Afrezza to support the potential pediatric launch, we have higher headcount and personnel-related costs, including the deployment of the medical science liaison team, as well as additional sales reps. SG&A for this quarter also included $3.7 million of acquisition-related expenses. Q4 SG&A expenses will include costs related to our October key account manager team build-out to support the Afrezza pediatric call point. Additionally, transaction costs associated with the close of the acquisition of scPharmaceuticals will be reflected in the fourth quarter. As a reminder, our fourth quarter results for our commercial product sales will include sales of FUROSCIX as of the deal close, as well as expenses incurred in their respective categories. Related to the transaction, I'd like to note that we utilized $133 million of our $286 million of cash and investments as of September 30 to fund the transaction and have borrowed an aggregate of $325 million on our 5-year term loan facility with Blackstone. For the year-to-date period of 2025, total revenues reached $237 million, representing 14% growth compared to the same period last year. Our commercial product sales, consisting of Afrezza and VGo, account for 27% of our total revenues for the year-to-date period. With the addition of FUROSCIX in Q4, our commercial product sales will be a more meaningful component of our growth. On a pro forma basis, if FUROSCIX was included for the year-to-date period, commercial product sales would have been 39% of our total revenues. Considering the continued growth we anticipate in royalties we earn on Tyvaso DPI as well as meaningful and stable revenues from our collaboration and services, we have never been more excited about our revenue growth potential. I'd like to finish with GAAP net income for Q3, which was $8 million compared to $11.6 million in the prior year. After adjusting for noncash and one-time items, our non-GAAP net income was $22.4 million, up from $15.4 million last year, and non-GAAP EPS of $0.07, up from $0.06 in Q3 of 2024. This reflects strong operational performance of our business lines even as we are making significant investments in future growth drivers. I'll now hand it over to Mike to discuss clinical updates, starting with our Afrezza pediatric indication. Mike? Michael Castagna: Thank you, Chris. As we broaden our impact across cardiometabolic care, we're also advancing innovation in diabetes, starting with Afrezza's potential to offer the first noninjectable insulin for pediatric patients in 100-plus years of diabetes therapy. We're extremely excited about this opportunity that lies in front of us. Now let me bridge to inhale. First, our naive treatment for pediatrics. We're focused on generating additional clinical evidence to support Afrezza's role in children with type 1 diabetes. This is why we're initiating the inhaled first study, which positions Afrezza as the very first choice bolus insulin for youth aged 10 to 18 who are newly diagnosed with type 1 diabetes, either upon discharge in the hospital or arriving at the doctor's office within 7 days. This study will evaluate the safety and efficacy of inhaled insulin plus basal and up to 100 patients across 10 leading sites, including the Barbara Data Center in Denver, as well as the Joslin Diabetes Center in Boston, who will be our first 2 sites to dose patients to ensure our dosing protocol and training materials are meeting expectations. This is what we did in our gestational trial, and the first 10 test patients confirmed our expectations, and that trial is expanding to full enrollment. In the inhaled first trial, we plan to introduce a 2-unit cartridge for titration and utilize MannKind's BlueHale tracking dose in this trial. Some of you haven't heard from BlueHale in a while, and I want to show you the updated version of the product as well as some screenshots that you can start to see how this is going to absorb the dose, integrate with CGM and remind you when you took your last dose and how much Afrezza is on board and start to show you your time and range by day, night and time of week. We're looking forward to testing this device here and having this ready for the pediatric launch. We're also advancing programs in orphan lung indications that leverage our inhalation technology to address serious unmet medical needs. I'll first discuss our ICoN-1 global Phase III study in NTM, where the market is expected to exceed $1 billion by the end of the decade. We achieved our interim enrollment target ahead of schedule in the study. Our focus will be on the U.S. and Japan, which have the largest populations and the greatest growth potential. It's also the 2 markets that we've seen the highest enrollment rates in our trial. This is a global health concern and a real issue in these 2 countries. I'd like to remind you that this trial is a co-primary endpoint in the U.S. of sputum culture and patient-reported outcomes, but for the ex-U.S. market, it's just sputum culture conversion. Our next trial, Nintedanib DPI, is our INFLO Phase II study, also known as MNKD-201. We have initiated the INFLO Phase II with the first patient enrollment expected in Q1 '26. This randomized placebo-controlled trial will include 210 patients with IPF and will evaluate 2 dose regimens totaling 8 milligrams of nintedanib a day over 12 weeks, followed by a 6-month open-label extension. The primary objective is safety and tolerability with FVC as the key efficacy endpoint. Doses are designed to achieve exposure levels consistent with or above prior studies, supporting our confidence in this program. More importantly, based on the positive TETON-2 results, we've modified our trial design to include a QID arm instead of a TID arm, which preserves the option for future combination approaches and simplification for patients who will likely be on multiple products to manage their IPF in the future. Before we move to Q&A, I want to highlight the upcoming scientific medical, and investor conferences where we'll have a presence. These events are important opportunities to showcase our progress and strengthen our relationship with key stakeholders. As we look at our pipeline, I'll close with the updated pipeline slide that reflects the addition of FUROSCIX into our portfolio, as well as 3 additional programs we discussed today: MNKD-102, a DPI formulation of clofazimine, Bumetinib DPI, also known as MNKD-701, and our new collaboration with United Therapeutics. Consistent with our DPI license agreement, this program, if successful, will generate $40 million in total milestones and earn a 10% royalty on net sales of the product, providing yet another exciting growth opportunity for MannKind. With that, I'll turn the call over to the operator to answer your questions. Operator: [Operator Instructions] Our first question comes from Olivia Brayer with Cantor. Olivia Brayer: Can you share any thoughts on the recent approvals from FUROSCIX competitors? And if you could help contextualize the pricing differences and how that actually funnels down in terms of actual out of cost. Or out-of-pocket cost to patients? And then just in terms of FUROSCIX growth, when do you think we'll actually start to see a bigger inflection in growth from all of the different initiatives that you're doing to help drive greater adoption? And then I've got a follow-up question on IPF. Michael Castagna: So I think on the competitors, when we were going to due diligence, we knew these 2 competitors were in the wings. And I think we felt the product differentiation stood on its merits, along with the life cycle management of the auto-injector. So that's been the key focus for us. And then I think in terms of the nasal one that got approved, we could see how skinny that package was and how quickly that could get to market, which played into our decision to advance an inhaled butmetinide on our FTKP platform. And the reason is we know our platform has IV-like responses and good bioavailability. And we felt that's exactly what you're looking for in this fast onset of diureysis, especially as you read the VuMex branded label, you can see the quick onset with IV, and the diuresis starts pretty much within 15 minutes or so. So that really allowed us to create another differentiated product as a part of this acquisition, which we wouldn't have done had we not bought scPharma. So I think from a competitive viewpoint, we'll be able to compete nicely with the new people come on the market. I think just like we see in the case of Liquidia launching in treprostinil, the market size grows with more share of voice, more noise, and more reminders of this opportunity. The market is severely underpenetrated, and scPharma had to fund all this on their own. So having more noise out there and more options, I think, ultimately is going to the market and the believability of this opportunity. In terms of pricing, I mean, these companies have stated a price, but they have not yet actually publicly loaded their prices to my knowledge. And I think let's see what happens when they do. But the pricing of the product is not going to change the biggest barrier in Medicare, which is somebody's out-of-pocket cost. So whether it's $500 or $1,000 or -- the out-of-pocket cost and the deductible is the same on Medicare, which is the majority of these patients in treatment. So the real issue is not the WACC price of the product, but it's the net price to the patient. Unless somebody is doing smoothing, the payers aren't going to just cover any of these products really, nearly because they're going to be up against generics in the marketplace. So you're going to need reimbursement support. You're going to need to figure out the smoothing and the prior refill. So I think I like the SC model. I like that we know where our patients are. We know when they get a refill. We know when the prior auth expires. So I think the system that they have in place is good. You'll hear some complaints that people want to access locally, and that's a lot of the IDN contracting. So I think that we'll continue to watch it. We'll be competitive if we got to make changes. But I think in the end, we feel pretty good about our price point and our net pricing. On the growth inflection, I mean one of the things you'll start to see next year is increasing the share of voice. And I think you could see in the 6 months plus of their sales force expansion, you started to see that kick in, in Q2, but really kick in, in Q3, and ultimately Q4. So I think from the time we make these investment decisions, you can expect to start to see impact 6 months -- within 6 months there. So hopefully, you'll see the TAM expansion that will take at least 6 to 9 months in terms of really starting to make impact in the health system. They don't change overnight. But in terms of rep share of voice, I think we could see an impact on prescribing sooner. And I think that will be our focus is to kind of minimize disruption with customer relationships, but expand the share of voice on cardiologists and nephrologists as we go into '26. Olivia Brayer: And then for the Tyvaso bridging study in IPF, what can you guys tell us at this point? It sounds like it maybe is confirmed that a bridging study will be run, but any sense of timing and whether you still expect it to look similar to the BRE study? Michael Castagna: I don't want to speak for you, T. So I think they've said it could be a BreezE-eng study. So I think with that communication, go to the FDA now, they have the TETON 2 results, and I expect them to move this as quickly as possible to the FDA for clarification and discussion. Operator: Our next question comes from [indiscernible]. Unknown Analyst: Just wanted -- I had 2 questions. One, just on thinking about the scPharma acquisition and FUROSCIX. Could you comment a little bit on the integration process with respect to the field force, how that's been going? And if you have any updated thoughts on kind of what the field force composition will look like across your kind of multiple commercial brands now? That's the first one and then I have a follow-up as well. Michael Castagna: Sure. I'd say, first, as we got to integration, it's only been closed about 3 weeks, and it feels like we've already met most of the employees once or twice. I personally was at 5 of the regional sales meetings. Nick, our President, was at the other 3. We had multiple days of integration calls getting ready for '26. So I think the integration is going very smooth. Culturally, the companies are very similar. So there's not a lot of friction. We already have put some of their people in key positions on our side. and integrating them into our leadership team and our processes. So I think overall integration, we don't see much disruption. Sales continues to look strong in Q4 here. So we're very happy to date with the teams and the integration as it goes. You'll see scPharma continue to be independent through the end of the year in terms of their name and job postings, things like that. You'll start to see that integration fully in '26 starting in January, all the way through any packaging changes, et cetera. So we're trying to make sure we're smart about it. We're not looking to waste money on changing the name on a box for no reason. So we'll try to phase those things in as we think about like the autoinjector launching, things like that. So I think that answers the integration question. Unknown Analyst: And then just on the balance sheet, how should we think about sort of your guys' kind of like relative priority between like investing in the launch of Afrezza and Peds, FUROSCIX, delevering the balance sheet, and kind of maintaining operational profitability? How do you kind of balance like these 3 different goals? Michael Castagna: Yes. I think if we see -- we're already preparing for the Afrezza peds launch, you're seeing some increase in expenses this year with MSLs, key account managers, some commercial prelaunch investments. So I think you'll see that tick up. I think on FUROSCIX, we're also going to place a few bets here to grow the brand faster as we go into '26. So we feel like these are the right decisions, and we think investors want faster growth, and we think we can deliver that in '26 with what we have coming. I'll let Chris comment just on the deleveraging and some of the that we're thinking about. Christopher Prentiss: Yes. The key item to deleverage is really on our convert. We have a $36 million stub that's due March 1, 2026. So we'll certainly be addressing that in the near term. And in terms of what Mike said, I think the priority right now is investing in growth. And so you're seeing us make that a priority, but still doing that in a sustainable way and making sure that we are in a good position to certainly continue to pay our obligations with our new debt facility. Operator: Our next question comes from Andreas Argyrides with Oppenheimer . Andreas Argyrides: Congrats on the progress in the quarter and the closing of the scPharma deal. Just following up from some previous questions, how are you thinking about the peak sales opportunity for FUROSCIX? And then on NTM, what do you attribute to the faster pace of enrollment? And can you remind us of the powering assumptions for that study? Michael Castagna: I think on the peak sales for FUROSCIX, we looked at the deal, there was not guidance by the company, but there was analyst reports out there, and put it in the $500 million-plus range. And I think that until we give guidance there, I wouldn't quote anything beyond what we've seen out there in the public domain prior to the acquisition. Chris, I don't know if you have anything else to add before. Christopher Prentiss: I think Andreas was asking about the pediatric opportunity. Michael Castagna: Sorry. On the pediatric side, we are just finishing up some research right now to get us ready for next year. And I think that will -- one of the things we know what the peak upside could be. We said roughly 10% market share is about $150 million in net revenue. And we've gotten research that would indicate up to 25% could be possible. I think the question is how fast is that trajectory going to happen? And we haven't yet given guidance on that. So I think that's really what I'll be focused on to get ready for '26 is we look at some of the competitive pump launches that happened this year, and they're seeing nice, significant uptake in those markets. And so I think there is an opportunity to grow Afrezza meaningfully faster post peds, but I think we got to make sure our market research triangulates what we're thinking before we go public. A question on NTM and then a follow-up on that one as well. Yes. I think on the NTM, a lot of -- Japan was going nicely. I think in the U.S. starting to pick up a little bit. The team has met at several conferences year, just raising awareness amongst KOLs to continue enrollment. So I think that's there. And then we just got recently the FDA to re Lucen the EKG monitoring requirements on entry in terms of the screening criteria so that we're implementing as we speak. And then in terms of powering, I think we're 90% powered, and that's why we have the interim is to really make sure that we would be on track as we look at the patients. Remember, we're seeing people roll over to the open-label extension. So these will all be important aspects as we go out. What are the -- and just a follow-up there. Andreas Argyrides: What are the different outcomes for the interim readout, like the potential for increasing sample size, for example? Can you give us some color there? Michael Castagna: Yes. I mean one is the sample size. So if we're close and you want to increase the sample size, that could be it. The other one is the safety database, making sure we're continue to go in that direction. Then you'll have the futility, meaning it just is not delivering what we expect, and that could also be an outcome as well as just you're on track to meet the 180. And that said, in Japan, we only need 180 in the U.S., we're evaluating the total safety database required still with FDA. Operator: Our next question comes from Yun Zhong with Wedbush. Yun Zhong: scPharma acquisition, did I hear correctly that you said there was going to be ongoing sales force expansion? Is that mainly on the scPharma side on the commercialization of FSI? And then once you report sales starting from fourth quarter, how -- can you remind us how do you expect the addition to impact the SG&A line in the income statement, please? Michael Castagna: I'll let Chris take the second one. I'll start on the first one. So I think we'll be a little quiet on the sales force expansion and share of voice, but what we expect -- one of things we looked at is last year when SC split some territories, how quickly did you start to see that growth rebound? How disruptive was that to the sales force? And you could see in the first quarter, some of that disruption was true, but I think the bigger part was the co-pay resets from Q4 to Q1. So as we look at this year, we'll expect a similar phenomenon is that patient resets happen and then the co-pays pretty much go to 0 as people hit their deductible. So we want to get that sales force share of voice up as we go into the new year and really prepare for that Medicare transition period. But that will be important. I think we can definitely see share of voice does increase sales per customer per territory. So we feel like that track record is there from when they went from 40 to 80, and we won't comment yet on the expansion because we're still finalizing some of that, but we do have some plans we met with the team prelimarily, you'll see -- the #1 thing is the key account manager expansion. We think that's the nearest term low-hanging fruit. And then there'll be some additional ways that we can incorporate FUROSCIX in the increased share of voice. Christopher Prentiss: Yes. In terms of the expense line for Q4, if you think about the selling side, I would just emphasize that this is a bolt-on acquisition from a commercial perspective. And so I would expect most of those costs to be that they have experienced previously on the commercial side is what we'll be reporting in Q4 as well, plus the investment in CAMS that Mike just talked about. On the G&A side, you're seeing quite a bit of synergies are realized right away as we think about public company costs, as we think about systems and tools that we all use in common. Yun Zhong: Okay. Then on Afrezza, you talked about this sales not growing as fast as TRx. Do you expect the same pattern in fourth quarter? And at some point, would you expect sales to catch up with the TRx? Michael Castagna: I would -- Q4 should be pretty strong. A pattern may exist because of the NRx trends impacting TRx. But in general, in Q4, we see a lot of refills. So a lot of those baseline patients in our business will refill before the end of the year, co-pays reset. So I think it will be pretty decent in Q4, but I would expect the trend to bottom out sometime over the next 6 months and then start to be stable, more in line as we get through Q1 next year. But I think that as we look at the growth, the growth in outflows, growth in scripts plus any price changes, once that volume per script starts to even out, we'll be there. But it dropped -- I don't see it dropping much more, but I'm sure it will drop another quarter or 2 a little bit. So it's not another 20%, but it's probably single digits. Operator: Our next question comes from Brandon Folkes with HCW. Brandon Folkes: Congratulations on the results. Maybe just for me on Afrezza, can you just help us think about the potential tailwind you expect from the Afrezza conversion dose label update and how you expect to leverage that label expansion to drive Afrezza growth? You put a lot of good context around the peds side of Afrezza. But just any help in terms of that label expansion? Michael Castagna: So the label expansion was kind of 3-month delay from November to January. We expect the draft label in December based on the latest communication. And that's fine. I mean we were going to launch the label change anyway in January. So that timing is not that far off. The key thing about the label expansion is it really allows us to talk about the postprandial control. And our #1 adverse event is lack of effect, and that's because doctors do not titrate up fast enough or they don't convert at the appropriate dose. So our top prescribers, this is generally an issue, and that's what drives most of our business. But as we expand the sales force, those new prescribers who don't have a lot of experience, that's where we see the mistakes happen. That's where we see the patient dropouts happen faster. So as we continue to expand, we want to get this fixed. We want to get this right so that patients start up on the right dose the first time. And so that's really our goal. The data is published, so we can still disseminate it through our medical liaisons through medical response letters and through reactive responses with the sales force. So we do feel our top prescribers know the information, but it's really the new prescribers that will be important. And that sales force expansion for Afrezza is just getting out there over the next month or so, so call it, December, January, when the label change happens, the timing still mirrors up nicely. So if people start off better, they'll stay on the drug longer, they'll be happier, and the doctors will write more, right? So it's got a self-going prophecy here in the end. Brandon Folkes: And then one more for me, if I may. Can you just elaborate a little bit on the development path you're thinking about Nintedanib DPI? Michael Castagna: Yes. So when you -- I think at a high level, what got us excited is you can -- it looks like you can choose to -- first, the tox studies won't be chronic because it's an acute drug. So call it 28 days of tox roughly. And then you'll have a PK study, which will not be -- need to be multiple time period. So you probably look at single maybe multiple days, but not a 10-day or like that. So the PK studies are pretty straightforward. And then the only thing about bmetinide that we like is you can give it, I'll call it, it works -- it's got a very short half-life. So you could give it really quickly get a quick diarysis going, and then decide 6, 8 hours later, if they want to give another dose, you'll have more flexibility in the way VuMax' label is written versus today in the nasal, you don't look like you have that flexibility because a max daily dose. But on an inhaled version, which will have -- should have greater bioavailability, we should have more flexible dosing as we look at the labels. And FUROSCIX, I think, does get you that 24-hour diarysis and looks strong, whether it's in the auto-injector or the infuser. So we feel like we'll have 2 products out there in this space. So depending on how people want to treat, we'll be competitive on both angles here over the near term. But we don't look at this as a very long development program. Probably the long palls in the will be scaled up and stability more than the trials themselves. So the team is just starting to get the formulation work moving. And as soon as we feel pretty good, we'll be able to formulate it relatively quickly. But then we got to meet with FDA in parallel and try to get that alignment, which we think we know what that's going to look like, given the history of 06. Operator: Our final question for today comes from Anthony Petrone with Mizuho. Anthony Petrone: A few on scPharma, just on the SCP-111 sNDA submission that's already taken place. Just want to know if there's any early questions from FDA. The bioabsorbability profile looks good. Maybe just probability of success on getting that through. And then I'll have a couple of quick follow-ups on the Fur 6 to SCP-111 transition. Michael Castagna: Yes. I think on the FDA, I can tell you they're full stream active despite the government shutdown, whether it's factory inspections or inquiries on the various programs we have in front of them. So we feel they're -- they're on top of the submissions. I'm glad we got the submission in September, we didn't do anything. But that is allowing IRs to come in already, and the ones that have come in seem like they're pretty minor, and they're not uncommon questions. We've either gotten them on Afrezza or we're getting them on SC. So it does look like they're checking the boxes going through the file. And so far, there's no red flags. And that's true for the pediatric filing as well when we got the -- the PDUFA letter, they identified the same thing we already knew, which is that one outlier in the trial. And so that we feel is pretty straightforward as we go forward. I'm sure there'll be more inquiries as we review everything. But in general, it seems like the reasonable request so far from everything we can see. Anthony Petrone: And if we think ahead to a positive outcome here, the ReadyFlow injector dramatically reduces the admission time. What do you think could happen to unique prescribers if you get this on market? And when you think about that auto-injector relative to the current delivery device, what do you think it could actually do to margins for this product again? Michael Castagna: It's been a few weeks, so I don't want to comment too much still working with the team to think about the right segmentation. But I think we look at this as market expansion. So when you look at the audience today, some may like the infusion for various reasons, and we'll make sure we understand those targets and the reasons to support that. But the real opportunity is the expansion, right? There's a lot of people, whether their nursing homes or in discharge protocols or elderly patients being taken care by their kids, where people would much rather use an auto-injector. And so that to me is the upside that we're looking for in an inflection that could spark faster growth. That's one reason we want to get the share of voice up, right, is get the awareness up of the product. And we still see -- I want to say there's like 40,000 cardiologists. So the team is targeting 5,000 to 7,000. So we think we can boost up the number of cardiologists aware of the product and the conferences and education. This is still, I think, the first inning of a baseball game, hopefully not an 18-inning baseball game, but a baseball game that I think is going to be well played and competitive, but I think the patient demand and the unmet need in CMS, all the things are going in the right direction and our ability to compete, whether it's going to be anetinide day or the FUOSC auto-injector or OModDyFuser, I think we'll be able to provide a lot of solutions to the various patient types. So I wouldn't look at one replacing the other as much as we're looking at how we can grow it faster. Operator: That concludes the question-and-answer portion of today's call. I will now hand back the call to the MannKind team for closing remarks. Michael Castagna: I just want to say thank you to everyone in the company for working on the integration, preparing for the call. It's obviously a little more complex with the integration. But overall, the company is operating in every facet you can imagine. Thank you for all the investors and your belief in the management team and the direction we're going, and I look forward to seeing many of you at the Jefferies Conference in London, as well as the scientific people at the conferences coming up. So thank you again, and we'll try to close the year strong and talk to you next year.
Operator: Good day, and welcome to InMode's Third Quarter 2025 Earnings Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Miri Segal, CEO of MS IR. Please go ahead. Miri Segal-Scharia: Thank you, operator, and everyone, for joining us today. Before we begin, I would like to remind our listeners that certain information shared on this call may contain forward-looking statements and the safe harbor statement outlined in today's earnings release also pertains to this call. If you have not received a copy of the release, please visit the Investor Relations section of the company's website. Changes in business, competitive, technological, regulatory and other factors could cause actual results to differ materially from those expressed by the forward-looking statements made today. Our historical results are not necessarily indicative of future performance. As such, we can give no assurance as to the accuracy of our forward-looking statements and assume no obligation to update them, except as required by law. With that, I'd like to turn the call over to Moshe Mizrahy, InMode's CEO. Moshe, please go ahead. Moshe Mizrahy: Thank you, Miri, and to everyone for joining us. With me today are Dr. Michael Kreindel, our Co-Founder and Chief Technology Officer; Yair Malca, our Chief Financial Officer; and Rafael Lickerman, our VP of Finance. Following our prepared remarks, we will all be available to answer your questions. The third quarter progressed in line with our expectation, even as we navigated a complex economic environment. Our performance this quarter reflects the strength in our diversified portfolio and the disciplined execution of our strategy. We remain focused on expanding our presence in high-growth markets and position the company well into the future. This quarter, we expanded our global footprint with opening a new subsidiary in Argentina, an important milestone, our regional growth strategy. Establishing a local presence in this key market will allow us to better serve customers through direct engagement and localized support. We are now focused on obtaining final clinical clearances and expect to begin generating internal initial revenue by the end of 2025. Following the earlier launch of our subsidiary in Thailand, we are actively building strong local team to drive sales, laying the groundwork for sustainable growth across both regions. As we noted in our Q2 update, we conducted a soft launch of the men wellness platforms to introduce it to selected users and early adopters, so we can gather initial clinical feedback. The full commercial rollout event took place during the third quarter and we expect the beginning of revenue contribution toward the end of the year. Finally, I'm excited to share some important news about a key leadership addition to our team. We recently appointed Michael Dennison as our President of North America. Michael is an entrepreneur-driven and award-winning sales leader who has built an impressive career in the medical aesthetic device industry, holding nearly every sales role along the way with over close to decade at InMode. Michael advanced from District Sales Manager to Vice President of Sales, helping to grow revenue nationally, expand market share and build a strong distribution network across North America. Looking ahead, we recognize the challenges in the marketplace, but remain confident in our competitive advantages, including our strong financial position, diverse and innovative portfolio and trusted global brand. These strengths position us as the global leader in the minimally invasive aesthetic and wellness industry. Now I would like to turn the call over to Yair, our Chief Financial Officer. Yair, please. Yair Malca: Thanks, Moshe, and hello, everyone. Thank you for joining us. I would like to review our Q3 2025 financial results in more detail. InMode generated revenues of $93.2 million. As a reminder, when comparing year-over-year results, last year's quarterly revenue of $130.2 million included $31.9 million in preorder sales. Even with the traditional Q3 seasonality, consumables and service revenues were $19.9 million, up 26% year-over-year. This growth in consumables was driven primarily by markets outside of the U.S. Our minimally invasive platforms accounted for 75% of total revenues this quarter. Sales outside of the U.S. increased slightly to $40 million or 43% of overall sales, a 10% increase year-over-year. The United States was the largest geographical revenue contributor, reaching $53.2 million. GAAP and non-GAAP gross margins in Q3 were 78%, down from 82% reported in Q3 2024. As expected, our third quarter gross margins were lower due to the anticipated impact of tariffs, which we had incorporated into our outlook. As part of our global expansion, we currently have 284 direct sales reps and distributors coverage in more than 73 countries. Sales and marketing expenses decreased to $44.9 million from $51.9 million in the same period last year. The year-over-year decrease primarily reflects the reduction in sales between the 2 periods. GAAP operating expenses in the third quarter were $51.4 million, an 11% year-over-year decrease. On a non-GAAP basis, operating expenses were $49.1 million this quarter, down from $54.4 million, a 10% decrease year-over-year. GAAP operating margin was 22%, down from 37% in the third quarter of 2024. On a non-GAAP basis, operating margin reached 25% compared to 40% last year. GAAP net income was $21.8 million, down from $50.9 million in the third quarter of 2024. On a non-GAAP basis, net income was $24.5 million, down from $54.9 million. GAAP diluted earnings per share for the third quarter were $0.34, down from $0.65 in Q3 of 2024. Non-GAAP diluted earnings per share was $0.38, down from $0.70 per diluted share in the third quarter of 2024. Share-based compensation declined to $2.7 million from $3.9 million in the third quarter of 2024. We ended the quarter with a strong balance sheet. As of September 30, 2025, the company had cash and cash equivalents, marketable securities and deposits of $532.3 million. This quarter, InMode generated $24.5 million in cash from operating activities. Before I turn the call back to Moshe, I would like to reiterate our guidance for 2025. Revenues to remain between $365 million to $375 million, non-GAAP gross margins to remain between 78% to 80%, non-GAAP income from operations to remain between $93 million and $98 million, non-GAAP earnings per diluted share to remain between $1.55 to $1.59. I will now turn over the call back to Moshe. Moshe Mizrahy: Thank you, Yair. Thank you very much. Operator, we are ready for the Q&A session. Please. Operator: [Operator Instructions] And your first question comes from Danielle Antalffy with UBS. Danielle Antalffy: Congrats on a good quarter here. Just curious, Yair, as you look at the Q4, the implied Q4 guidance based on what you provided at the midpoint, you did beat Q3. So it implies a little bit of a lower Q4 number. But I was wondering if you could level set us, sort of, as we think about the exit rate here in 2025 and look ahead to 2026, how we should be thinking about sales growth next year given the lingering uncertainties out there, I think consensus is sort of in the mid-single digit range? Yair Malca: I think it is a little bit too early for us to discuss guidance 2026. We would like to see how Q4 plays out before we discuss 2026. I think we would want to be somewhat conservative when we go into next year because of all the uncertainties, as you have mentioned. That's all I can say about 2026 at the moment. Danielle Antalffy: Okay. That's totally fair. I hear you. And then just the capital equipment environment, it looks like in Q3, international was weaker, U.S. not as weak. But in the U.S. specifically, we are in an environment now where interest rates are coming down. I mean, does this make you a little bit more optimistic as we look ahead to 2026, appreciating you want a conservative starting off point, but just maybe comments on hearing from customers? Is there increased interest now to purchase capital equipment as interest rates come down? Yair Malca: So the interest rate has come down, but not enough to see that trickle in a meaningful way into the financing of the capital equipment in the U.S. as hopefully it will continue to come down, then we will start see a more meaningful impact. And then hopefully, this will translate to additional or increase in capital equipment sales. And Moshe, go ahead. Moshe Mizrahy: No. What I wanted to say, it's not just in the United States. We don't see the end -- the light at the end of the tunnel as regard to financing capital equipment, especially medical equipment to clinics. I'm not talking about hospital and hospital is probably different. But as far as clinics who are buying capital equipment like for medical aesthetic or any other medical community, I mean, the interest rate on leasing are still very high. I know that the interest rate went down twice in the United States, 0.5%. In Europe has not yet. So we believe that sometime in 2026, when the U.S. will lead the reduction of interest rate, it will come up to other territories, but we don't see it yet. Operator: [Operator Instructions] Your next question comes from Matt Miksic with Barclays. Matthew Miksic: I had one question on the ophthalmology initiative that you've been sort of pushing forward over the last couple of years. It ran into some of your folks at AO and the general sentiment around the conference and around those specialties is significant upswing in dry eye treatment and significant interest, particularly in the optometrist channel. I'm just wondering any color or updates you have on your strategy there, the progress, contribution, if you want to go there? And then I had one quick follow-up. Moshe Mizrahy: Okay. Hi, this is Moshe. Well, let me answer your question on a couple -- 2 things. One, as regard to commercial and salespeople, we are separating the salespeople for the Envision from the rest of the aesthetic and starting 2026, it will be managed by a director who is responsible only for the Envision and the sales team will sell only to Envision to optometrists and also to ophthalmologists. We are making some progress with the American Optometrists Association. We have some agreements with them to do together some workshop in different state. And we started that at the second quarter, we continue on the third quarter and we have at least 3 events coming on the fourth quarter. In addition to that, as far as the ophthalmology, as you probably know, we still do not have the final clearance from the FDA to say that we're treating dry eye. We hopefully will -- we're still -- we negotiated with the FDA. I don't want to call it negotiated. It was a discussion with the FDA as regard to the protocol that we will do during the study to get the indication. We are in the last stage. We're doing some safety tests right now on [ Revit ]. Hopefully, they will approve it before the end of the year and we will start the study next year. It's not going to be a very long study, because you need to show some immediate effect. Hopefully, sometime towards the second quarter of 2026, we will finalize the results of the study, submit the FDA. So sometime towards the second half of 2026, we will be able to clear the indication and claim dry eye. But right now, not only in the United States, we have enough data that show the significant competitive advantage of any other modalities that deal with dry eye and we sell it without the clearance, just because we're explaining how it's worked. We do have the FDA clearance to the handpiece, either the Lumecca, the IPL or the bipolar RF. The 2 handpieces are already approved. So we sell it without the clear indication, but we have enough clinical data to show to the doctors and to the optometrists, they are also doctors, but they are ODs, to show them the advantage. And we are making progress. And hopefully, next year, once we have a distinguished and separated sales team, we will show better momentum. Matthew Miksic: That's very helpful. Just one, maybe zooming out to the broader business in aesthetics. Similar kind of question. When we all sort of, I think, have a sense of where you think the market is and waiting for sort of like this general sort of uptick or upswing in the cycle in the U.S. But in terms of new products, anything that you would call out in addition to this initiative and follow-through in optometry and ophthalmology that could start to kind of drive incremental growth in, say, early first half of '26, back half of '26? Any color on the pipeline would be super helpful. Moshe Mizrahy: Well, we have some products coming to the -- we will launch early next year, mainly in the aesthetic, some new lasers that we bring to the market. I don't want just to reveal the type of lasers and what exactly these lasers do, but they are very complementary to our aesthetic, I would say, portfolio. Two of them will be introduced during the national sales meeting in the U.S. sometime at the end of January '26. We will also present those 2 devices at IMCAS, which is the main conference in Europe, again, sometime in the beginning of February next year. Yes, we currently have enough projects on the R&D pipeline, aesthetic and wellness and we will launch them 2 at a time. Operator: [Operator Instructions] Your next question comes from [ Caitlin Roberts ] with Canaccord Genuity. Unknown Analyst: It's [ Michelle ] on for Caitlin. Can you maybe talk more about your rationale for picking Michael Dennison for the new role of President of North America and what he is working to drive in the early days in the new position? Moshe Mizrahy: Yes. Michael worked with us for more than 10 years. And before that, he used to work for Cynosure, which is another major company in medical aesthetics. He is relatively young, in the 40s. Basically, before he took the President position, he was Vice President for the East Coast of the U.S., doing very well. I would say the reason why we nominated him is because we didn't have -- we didn't want to have the East and West in the U.S. We want to combine all the territories under one management. And we thought Michael is the right guy to do it for InMode. And therefore, right now, we are combining all the territories under one manager, including Canada -- including Canada. And anything else that you want to know about him? I mean, he's well known. He knows the market, he knows the doctors. He knows everything about sales and marketing, many years of experience. As part of his taking the position of President, 2 VPs left. One was the VP West, which wanted to be a President, but we had to select only one; and also, the VP of Canada, and we're not hiring another VP for the West and VP for Canada. We rather have some sales director in every territory. We divide the U.S. into 6 territories and Canada is the seventh one and they all report to Michael at that point. Next year, we might appoint some other position for strategic planning and other, but we want to keep the entire North America operation under one roof. Unknown Analyst: That's great. And maybe one more from us on urology. How did the user meeting in late August go on the urology side? And have you begun rolling out the products or seeing revenue contribution? And then any commentary or directionality you could give us for your expectations for the urology business in 2026? Moshe Mizrahy: Urology, I understand you mean the men wellness. Yes, I mean, the August event was a user meeting that we had in Chicago and it was with something like 800 doctors. And we introduced that with the 2 lectures and presenting some clinical data that we had at that time, which was good clinical results. And now we are launching it and every aesthetic rep can sell this device as well. We are not separating yet. We want to see what will be the results until the end of the year and the beginning of 2026 and we'll make the decision later. Operator: And your next question comes from Sam Eiber with BTIG. Unknown Analyst: It's [ Alex ] on for Sam. So I just had a quick question on the OUS business. And so you mentioned that you guys opened a new subsidiary in Argentina this quarter and also have been expanding your efforts in Thailand. So can you just talk more about the strength in OUS this quarter? And how can we think about it moving forward? Moshe Mizrahy: You mean about the 2 subsidiaries that we opened this year? Unknown Analyst: And just OUS in general, like what are the trends there? Like how should we think about it, like for the end of the year and going into like '26? Like will it be more of the same or different? Moshe Mizrahy: Okay. If you're talking about OUS in general, currently, we have -- we're selling in 88 to 90 countries, out of which in Europe, we have 5 subsidiaries that cover 10 countries, Italy; Spain that cover Portugal as well; Germany cover Austria as well; France is covering Belgium as well; and U.K. is covering Ireland and Scotland. So these are all direct operations that we have in those countries, something like 10 countries. In Asia, we have 4 countries: Australia, India, Japan and the new established Thailand. And we are currently not planning to -- in 2025, we are not planning to add more countries, not in Europe and not in Asia. The only one country that we have direct right now in Latin America is Argentina. And the base we build in Argentina is also responsible to manage all the distributors in Latin America. As far as managing the distributors in EMEA, Europe, Middle East and Africa, we have a base in London with the VP sitting there and he is responsible for all of this area. In North America, you know we have Michael Dennison managing all the North American operations, Canada and the U.S. And Israel is also a country where we are considering now going direct. We used to have 2 distributors, but we want to go direct starting 2026, because it's a home base and we want to sell direct here. It's important for us. I don't know which country will develop in 2026 to become direct operation. We have not yet decided. We have several alternatives and we're exploring several opportunities, but we are just now focusing in the last 2 that we established in the last 6 months. Operator: And your next question comes from Mike Matson with Needham. Unknown Analyst: This is [ Joseph ] on for Mike. I guess apologies if this was already asked, as I hopped on from a different call. But just looking at noninvasive growth, obviously, you guys had a really large quarter in the second quarter and dropped back down this quarter. I'm just kind of wondering how should we think about the lumpiness of this division? Is it -- was there just large orders in the second quarter and it's more stabilized from here out? Yes. Any color there would be helpful. Moshe Mizrahy: You mean on the noninvasive and non-ablative. That's correct? Unknown Analyst: Yes. Moshe Mizrahy: Okay. Let me say something before. I would say that except 1 or 2 platforms that we sell, almost every platform that we sell has at least one invasive or ablative handpiece, either Morpheus body face or the Ignite or the BodyTite. What we sell noninvasive, it's what we call the commodity type product like all the other competitors, diode laser, IPL, noninvasive RF, hands-free devices. We don't have -- we have a competitive advantage in this field and we would like it to grow, because we want to be one-stop shop to every doctor. So if the doctor needs a complementary technology to our minimally invasive and ablative, we wanted to buy from us. So this is -- and currently, we are developing some new lasers which are noninvasive. So this doesn't mean that we are now doing only things that are ablative and invasive. Everything is getting the same attention and we're developing the noninvasive as well. I don't know if I answered your question, but I believe that... Yair Malca: I would like to add that this year, Joseph, we -- the 2 new products that we added happened to be noninvasive, the CO2 that we added in the beginning of the year and men health that we added after. So this is the reason for the increase that you see in the noninvasive category for us. Unknown Analyst: I see. So just a lot of orders for customers that were waiting for those new platforms and a lot of that was realized in the second quarter. No, that's helpful. And then maybe just one quick one, just touching on the consumables growth. I'm curious how many handpieces you guys sold in the quarter and just how you're thinking about growth there in procedures. Moshe Mizrahy: In the third quarter of 2025, we sold about 230,000 disposable, which means onetime use tips, either for minimally invasive or ablative. Unknown Analyst: Okay. Great. That's helpful. So it looks like a sequential increase in the quarter. Okay. Yes. That's all very helpful. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Moshe Mizrahy, InMode's CEO, for any closing remarks. Moshe Mizrahy: Thank you, operator, and thank you, everybody, who attended this call. I want to thank the InMode team, especially in all the territories. And we hope that the fourth quarter, as always, will be the strongest one and we're looking forward to 2026. Thank you very much. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by, and welcome to the BlueLinx Holdings Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Today's call is being recorded. We will begin with opening remarks and introductions. At this time, I would like to turn the conference over to your host, Investor Relations Officer, Tom Morabito. Please go ahead. Thomas Morabito: Thank you, operator, and welcome to the BlueLinx Third Quarter 2025 Earnings Call. Joining me on today's call is Shyam Reddy, our Chief Executive Officer; and Kelly Wall, our Chief Financial Officer and Treasurer. At the end of today's prepared remarks, we will take questions. Our third quarter news release and Form 10-Q were issued yesterday after the close of the market, along with our webcast presentation, and these items are available in the Investors section of our website, bluelinxco.com. We encourage you to follow along with the detailed information on the slides during the webcast. Today's discussion contains forward-looking statements. Actual results may differ significantly from those forward-looking statements due to various risks and uncertainties, including the risks described in our most recent SEC filings. Today's presentation includes certain non-GAAP and adjusted financial measures that we believe provide helpful context for investors evaluating our business. Reconciliations to the closest GAAP financial measures can be found in the appendix of our presentation. Now I'll turn it over to Shyam. Shyam Reddy: Thanks, Tom, and good morning, everyone. Although soft market conditions are pressuring our margins, we are pleased with our overall sales growth efforts, our acquisition of a high-end specialty products distributor and our Portland greenfield expansion. I am especially proud of the team's efforts to grow our EWP volumes by low double digit percentages and our outdoor living product category by low-single digits during a challenging quarter. On to our Q3 performance. Our third quarter results were highlighted by an increase in sales as we continued to positively execute on our product and channel strategies to grow through challenging market conditions. Net sales and volumes improved for specialty products as overall pricing for this business continued to improve, while our product and channel strategies drove volume gains. Structural products also saw year-over-year pricing improvements for the overall business, which were offset by slight volume declines this quarter. When you adjust for the duty-related matter that Kelly will discuss later, our specialty product gross margins were relatively good at 17% in a tougher-than-expected quarter. Importantly, we announced the exciting acquisition of Disdero Lumber Company, a specialty products distributor. Operating since 1953 and based just south of Portland, Oregon, Disdero is a value-added distributor focusing on premium and higher-margin specialty wood products. I will offer some additional details on this transaction in a moment. We're continuing to create demand for our products through builder pull-through programs and value-add services, along with dedicated efforts focused on national accounts and multifamily opportunities. This strengthens our value proposition for customers and suppliers, helps us deepen our market presence and supports our product and channel expansion strategies. We believe that our strategy, when coupled with our strong balance sheet and liquidity position, provides resilience while positioning us well for better-than-market long-term success. Market-driven price deflation for specialty products continues to stabilize with pricing flat for the third quarter versus being down high-single digits this time last year. We were able to offset the relatively neutral pricing impact in Q3 with volume growth in engineered wood products and outdoor living products, in particular, as our channel and product strategies continue to generate positive momentum to grow sales and gain share in these product categories despite housing starts being down year-over-year through August. Our focused efforts are causing large national builders to convert from other well-known EWP brands to our high-quality onCENTER brand, which is a terrific win for our customers as we accelerate our demand creation efforts for their and our benefit. We're also supporting build-to-rent projects with our targeted builder pull-through programmatic efforts, a segment of the housing market that we believe will continue to gain momentum in light of housing affordability issues. Pricing for the overall structural products business was up slightly this quarter, which partially offset the impact of volume declines. Strategically, we are maintaining our commitment to expanding our 5 main specialty product categories: engineered wood, siding, millwork, industrial and outdoor living across all customer segments. Although our mix shift strategy remains unchanged, we are prioritizing strategic channel growth when making decisions about new product launches and working capital investments. We are also continuing our efforts to expand our multifamily business, our builder pull-through efforts and our national accounts business, all areas where we are seeing positive results. We expect to see solid rebounds in the multifamily segment, which efficiently addresses housing demand and affordability over the long run. Recent housing data shows year-over-year improvement, supporting our strategy for long-term growth in this channel. Our multifamily focus is creating demand for our products in tough single-family market conditions, though these sales often involve longer inventory turnover and direct sales, which have lower gross margins. This channel also provides a smoother path for product conversions to the brands we carry, such as our onCENTER engineered wood products and Allura fiber cement siding. Our digital transformation work remains on schedule with Phase 1 set to be completed this year. We have strengthened our master data foundation. We have converted more than 2/3 of our markets to our new Oracle Transportation Management system, and we have successfully processed e-commerce transactions in our pilot market. Our learnings from Phase 1 will inform future investments in our digital transformation journey. We're also advancing our AI work to improving efficiency and boosting productivity. We've gone from piloting AI with a group of BlueLinx associates to providing most of our associates with the ability to build agents via the Microsoft platform to streamline their work and to help improve their productivity. We believe our technology modernization will help us stand out and accelerate profitable sales growth and operational excellence. In addition, M&A and greenfields remain important elements of our profitable sales growth strategy, so we continue to explore and evaluate opportunities in both areas in order to expand our geographic reach and to support our specialty product sales growth initiatives. We are now coming up on 1 year since we announced our Portland, Oregon greenfield, which continues to perform very well. Last quarter, we significantly expanded our product offerings and doubled our warehouse space in that location due to better-than-expected demand. Along these lines, and as we announced on Monday, we are very excited about the acquisition of Disdero Lumber Company, a specialty products distributor. Disdero focuses on higher-margin premium specialty wood products, which are used primarily in the construction of high-end custom homes and decks as well as upscale multifamily residential projects. With customers in nearly all 50 states, we are looking forward to growing this business, not only as part of our Western expansion, but also by distributing Disdero products out of several BlueLinx locations across our footprint. We also plan to offer many of our core specialty products to Disdero's existing customers. The acquisition directly addresses several of our key strategies, such as shifting our product mix increasingly toward higher-margin specialty products, supporting growth in the multifamily channel and to expanding our business in the Western United States. We are also pleased that the highly experienced Disdero team will be staying on with BlueLinx. Combining Disdero with BlueLinx's long-standing customer and supplier relationships, nationwide scale and overall financial strength should result in a significant expansion of this successful business. Now turning to our third quarter results. We generated net sales of $749 million and adjusted EBITDA of $22.4 million for a 3.0% adjusted EBITDA margin. Adjusted net income was $3.7 million or $0.45 per share. Specialty products continued to account for approximately 70% of net sales and over 80% of gross profit for Q3. Specialty product net sales increased slightly year-over-year due to strong volumes in engineered wood products and outdoor living products. Unfortunately, price deflation in EWP partially offset the benefits of our net sales and volume increases in this category. Gross margins for specialty product sales came in at 16.6%, which, as reported, was below our expected range and due in part to a duty-related adjustment that Kelly will discuss in a moment. Excluding that duty-related adjustment, our gross margins would have been 17%. Our commitment to business excellence ensures solid gross margins even in challenging markets. By leveraging our diverse customer base, broad geographic reach, product assortment, multifamily and builder pull-through capabilities and large scale, we can deliver greater value to our customers and suppliers and remain well positioned for long-term success. It is important to note that while industry-driven specialty products price deflation in certain categories continues to adversely impact our top line and our cost of goods sold, the price declines overall continued to improve and were flat in Q3 compared to prices being down high-single digits this time last year. We are optimistic that specialty pricing volatility will continue to stabilize. Despite our success, higher profitable sales growth may be adversely impacted by tariffs, high mortgage rates and general economic uncertainty, which I will briefly discuss in a minute. Structural product revenues decreased slightly year-over-year, largely due to price declines in panels, combined with modest volume declines in both lumber and panels. These volume declines were due to continued challenging market conditions. For the quarter, industry average lumber prices were up 6%, while panel prices were down 14% year-over-year. We once again leveraged our disciplined approach to inventory management and our centers of business excellence to effectively manage margins in our structural product categories. Our financial position remains strong, and our significant liquidity gave us the flexibility to return capital to shareholders by repurchasing $2.7 million of shares in Q3. Combined with our new $50 million share repurchase authorization announced last quarter, our total current availability is $58.7 million. Now let's turn to our perspective on the broader housing and building products market. As you all know, the housing market continues to be soft, which is impacting the building materials and distribution sector. Broadly speaking, housing affordability, elevated mortgage rates, short-term interest rates, construction labor availability, inflation, consumer confidence and other factors continue to affect the housing and repair and remodel markets. The uncertainty being generated by government policies and the adverse impact of the macroeconomic environment on building materials should be short term in nature as the long-term fundamentals of housing are strong enough to drive demand when the market recovers. Currently, the U.S. is 4 million homes short on supply, which is clearly positive for the building products sector. And with the average age of a home at 40-plus years old, it's clear that homeowners will need to make improvements to their existing homes or buy new homes, which will drive greater repair and remodel activity. August total housing starts, which is the latest data available due to the government shutdown, were down nearly 6% year-over-year, and single-family housing starts were down nearly 12% from August 2024. Builders' confidence and consumer sentiment levels are also down significantly compared to this time last year. By comparison, multifamily housing starts were actually much higher on a year-over-year basis, serving as a catalyst for our strategy. Although the total starts are down, our product and channel strategies are leading to gains in a contracting market due to sales growth tied to success with our product expansion, builder pull-through, multifamily and national accounts efforts. While interest rates have been improving and thus helping with the affordability issue, consumer sentiment being down over 20% year-over-year remains a real concern. During the quarter, I spent a great deal of time meeting with customers and suppliers in markets all across the country, and the general tone continues to be one of near-term uncertainty, coupled with longer-term optimism. As we have said before, several sources have estimated that more than 1.5 million homes need to be built every year for the next 10 years to meet the anticipated housing demand, and that may be a conservative number. Repair and remodel spending continues to be soft due to low existing home sales. Despite this softness, our strategic focus on national accounts is enabling us to grow this segment of pro business at scale. As housing activity increases, we believe the investments we're making today will accelerate our growth efforts in the repair and remodel pro business when it recovers. Despite difficult market conditions and uncertain government policies, we believe the market will improve in the back half of next year if interest rates continue to decline and housing starts and repair and remodel activity improve as a result. Regardless, we will continue to emphasize our product and channel growth strategies and, in particular, our builder pull-through, multifamily, national accounts and product expansion efforts to grow in an otherwise challenging market. Our enterprise-wide product and channel strategies position us well for long-term success as they are designed to fully leverage our scale to drive profitable sales growth, not only in challenging markets like the one we're currently in, but more so when the housing market recovers. In summary, although our Q3 results were solid given challenging market conditions, we are most proud of our continued success executing our strategic initiatives as evidenced by our specialty product expansion efforts, multifamily channel growth, national accounts growth, capital allocation initiatives, Portland greenfield expansion and the Disdero specialty products distributor acquisition. We look forward to finishing the year on a high note and to setting ourselves up for success in 2026. I want to express my appreciation to all BlueLinx associates for their ongoing commitment to our customers, suppliers and one another. Our teams remain focused on driving profitable growth in both specialty and structural products sales, ensuring we are prepared for long-term success even as we navigate current market challenges. Now I'll turn it over to Kelly, who will provide more details on our financial results and on our capital structure. Christopher Wall: Thanks, Shyam, and good morning, everyone. Before I review the consolidated results for the third quarter, I'd like to offer a few more details on the Disdero acquisition. We purchased the company for $96 million. The acquisition was funded with cash on hand, and we expect it to be immediately accretive to adjusted EBITDA and adjusted diluted earnings per share. When adjusting for the net present value of expected tax benefits related to the acquisition of approximately $8 million, the net transaction value is approximately $88 million. Pro forma for the funding of the acquisition, our net leverage remains within our previously stated targeted range and our available liquidity remains strong at approximately $680 million between cash on hand and the unfunded revolving credit facility. For the last 12 months ended September, Disdero generated just over $100 million in net sales. Pro forma, after expected cost synergies and including the tax benefit, the purchase price was approximately 7x EBITDA. I would like to reiterate Shyam's thoughts that we are very excited about purchasing a specialty products distributor that fits squarely within the M&A component of our capital allocation strategy and believe it will significantly benefit both our customers and suppliers as we offer the Disdero products across the existing BlueLinx branch network and continue expanding in the Western part of the U.S. We are also excited about the talented and experienced group at Disdero that is joining the BlueLinx team. Turning now to our third quarter results. Overall, our specialty products business delivered solid volume growth in a challenging macro environment, while structural products volumes were lower year-over-year. Net sales were $749 million, up slightly year-over-year. Total gross profit was $108 million and gross margin was 14.4%, down from 16.8% in the prior period. Our results for specialty products reflects an adjustment for import duty-related matters incurred in prior periods. During the third quarter of 2025, the adjustments resulted in an increase to cost of products sold of $2.2 million. Excluding this item, total gross margin would have been 14.7%. SG&A was $89 million, down $3 million from last year's third quarter. This decrease was mainly due to lower incentive compensation expense in the current period related to our year-to-date financial performance, partially offset by increased sales and logistics expenses driven by our strategy to grow sales in the multifamily channel and expenses associated with our digital transformation initiatives. Given the challenging demand environment, we continue to focus on rigorous expense management and opportunities to further operational efficiency. Net income was $1.7 million or $0.20 per share, and adjusted net income was $3.7 million or $0.45 per diluted share. We had an income tax benefit for the third quarter of $300,000 due in part to deductions related to stock-based compensation. For the fourth quarter, we anticipate our tax rate to be between 27% and 31%. Adjusted EBITDA was $22.4 million or 3% of net sales and includes the unfavorable duty-related matter. Not including this adjustment, adjusted EBITDA would have been $24.6 million or 3.3% of net sales. Turning now to third quarter results for specialty products. Net sales for specialty products were $525 million, up 1% year-over-year. This increase was driven by volume increases in engineered wood and outdoor living, partially offset by price declines in EWP and other categories. As Shyam mentioned, given current market conditions, we are optimistic that specialty pricing volatility will continue to subside in the coming quarters. Gross profit from specialty product sales was $87 million, down 13% year-over-year. Specialty gross margin was 16.6%, down from last year's 19.4%, primarily due to price deflation in certain product categories as well as the duty-related adjustments of $2.2 million. Not including these duty-related items in the current and prior year third quarter, specialty products gross margins would have been 17% and 18.7%, respectively. Through the first 4 weeks of the current fourth quarter, specialty product gross margin was in the range of 17% to 18% with daily sales volumes down low-single digits from the third quarter of 2025 and flat with the fourth quarter of 2024. Now moving on to structural products. Net sales were $223 million for structural products, down 2% compared to the prior year period. This decrease was primarily due to lower panel pricing and lower volumes for both lumber and panels when compared to last year. Gross profit from structural products was $21 million, a decrease of 17% year-over-year, and structural gross margin was 9.3%, down from 11% in the same period last year. In the third quarter of 2025, average lumber prices were about $409 per thousand board feet and panel prices were about $443 per thousand square feet, a 6% increase and a 14% decrease, respectively, compared to the average in the third quarter of last year. Sequentially, comparing the third quarter of 2025 with the second quarter of 2025, both lumber and panel prices were down about 9%. Through the first 4 weeks of the current fourth quarter, structural products gross margin was in the range of 8% to 9%, with daily sales volumes up low-single digits versus the third quarter of 2025 and down mid-single digits compared to the fourth quarter of 2024. Turning now to our balance sheet. Our liquidity remains very strong. At the end of the quarter, cash on hand was $429 million, an increase of $43 million from Q2, largely due to improvements we drove in working capital and, in particular, our inventory balances. When considering our cash on hand and undrawn revolver capacity of $347 million, available liquidity was approximately $777 million at the end of the quarter. Total debt, excluding our real property financing leases, was $380 million, and net debt was a negative $49 million. Our net leverage ratio was a negative 0.5x adjusted EBITDA, given our positive net cash position, and we have no material outstanding debt maturities until 2029. Additionally, given the strength of our balance sheet and continued strong liquidity, we remain well positioned to support our strategic initiatives. These strategic initiatives include continued growth in the multifamily channel, demand pull-through efforts to benefit our customers, continued specialty product expansion, our digital transformation efforts and other organic and inorganic growth initiatives. Now moving on to working capital and free cash flow. During the third quarter, we generated operating cash flow of $59 million and free cash flow of $53 million, primarily due to lower CapEx and effective working capital management, particularly as it relates to driving our inventory levels lower to be in line with the current demand environment. Turning now to capital allocation. During the quarter, we incurred $6.4 million of CapEx, primarily related to our digital transformation investments, normal replacement of aging components within our fleet and the typical maintenance and investment in our branches. For the remainder of 2025, we plan to manage our CapEx in a manner that reflects current market conditions and allows us to maintain a strong balance sheet. Our remaining capital investments will focus on facility improvements, further replacement of trucks and trailers and the technology improvements previously discussed. Also during the third quarter, we repurchased $2.7 million of stock, and we had $58.7 million remaining at the end of the quarter from our previous $100 million share repurchase authorization, combined with our more recent $50 million authorization. Year-to-date, this brings our total share repurchases to $38.1 million. Our guiding principles for capital allocation remain consistent with prior quarters. We intend to maintain a strong balance sheet, which enables us to invest in our business through economic cycles, expand our geographic footprint and pursue a disciplined greenfield and M&A strategy as demonstrated by our acquisition of Disdero and opportunistically returning capital to shareholders through share repurchases. We also plan to maintain a long-term net leverage ratio of 2x or less. Overall, we reported solid third quarter results in light of current market conditions, and we were pleased to have driven higher volumes in EWP and outdoor living within specialty products and delivered slightly improved pricing for structural products. And in addition, our strong balance sheet and liquidity enable us to execute our strategy and support our long-term success. Operator, we will now take questions. Operator: [Operator Instructions] Your first question comes from Greg Palm with Craig-Hallum Capital Group. Danny Eggerichs: This is Danny Eggerichs on for Greg today. Maybe just digging into the Disdero acquisition a little bit more and how that came to be. Looking at the kind of acquisition multiple, the 7x post synergy, quite a bit higher than what your stock trades at. So maybe just rationalize that purchase price here versus buying back your own stock. How this going to be? What it brings to the table? And what makes you excited and willing to pay a bit more of a premium for Disdero? Christopher Wall: Yes. So Danny, it's Kelly. Shyam will hit on what we see in terms of the excitement around Disdero going forward. But what I would point out is that this transaction is clearly in the specialty products space. The gross profit margins are in the high 20s. And then we see an opportunity not only on the cost synergy side of about $1 million, but we've got $1 million to $3 million of cost synergies that we –- or, excuse me, revenue synergies that we see over time as we roll their products out across certain of our branches. So the fact that this is a higher-margin business that fits well within our strategy to grow specialty products and then the upside potential that we see in this business going forward is what helped us ultimately be comfortable with the purchase price we paid. Danny Eggerichs: Yes. Okay. And is that kind of consistent with some of your M&A strategy going forward? You're fine with paying those kind of multiples as long as it brings some of these characteristics to the table? Or how should we think about it moving forward? Christopher Wall: Yes. So yes. I mean, if you recall, when we developed the M&A strategy, the idea was, okay, let's get more focused on what's going to support the overall strategy of the business in order to leverage -- expand upon our scale. So first and foremost, geographic expansion. Some deals that would support that would obviously be inherently -- they would inherently minimize disintermediation or consolidation-related risk or integration-related risk. Secondly, when you look at the specialty mix shift, we started going after primarily specialty products distributors, and Disdero fits right in that. Their specialty product offering is very much two-step distribution friendly, has high stickiness with customers and supports high-end builders and high-end repair and remodel projects through our customer base. What we -- what this multiple does not take into account is -- are the commercial synergies that we expect to generate over time. We took a very conservative approach on our expression of the pro forma multiple post expense synergies. But once we start taking full advantage of the BlueLinx network in order to expand the Disdero business, that in and of itself will help accelerate our mix shift while also making the purchase price we paid for this business a pretty fair deal. And to your question around -- look, as you shift the specialty mix, the multiple expansion associated with that over time makes sense for this business in the long run. So we will continue to look at specialty-oriented businesses given the long-term benefits we'll generate. Danny Eggerichs: Okay. Got it. I appreciate that color. Maybe on SG&A. We saw some good operating leverage this quarter with OpEx taking a step down. So maybe how should we think about that moving forward? I know you mentioned there was some lower incentive comp, but there's still some ongoing expense management. And how should we think about it relative to the levels we saw in Q3? Christopher Wall: Yes. I'd say that the levels in Q3 as a percentage of sales are lower than what we would expect going forward. We have continued investment in some of our initiatives around multifamily as well as our digital transformation efforts. With those and just kind of a continued flow-through of increased kind of merit costs and other things through the course of the year, we expect that SG&A as a percentage of sales will be slightly elevated year-over-year, year-end '25 versus year-end '24. And then we continue to take actions that are impacting the current quarter that will have some benefit into 2026. Operator: The next question comes from Zack Pacheco with Loop Capital. Zack Pacheco: Maybe to start, just any more color you guys can provide on how specialty volumes trended throughout the quarter. Curious if you saw any deceleration in demand as the quarter progressed given single-family demand fundamentals continuing to soften during the back half of the year? Christopher Wall: Yes. I think on the specialty volume side, we saw some -- a slight kind of increase led by our EWP product, engineered wood product. And so yes, we've seen that decelerate some in Q4, but we had a good quarter kind of year-over-year in Q3 on the volume side. Shyam Reddy: Yes. So just to highlight that a little bit more. So clearly, there's a seasonal decline as you come into the Q4 cycle because you're coming off season. But if you look at EWP broadly speaking and also outdoor living products, those were 2 specific areas where we were up year-over-year on volumes. And even though we were down on pricing year-over-year, it was still tempered at mid-single digits. So if you look at our double –- low-double digit volume growth in EWP and single digit volume growth on outdoor living products as the market contracted in Q3 as we look at housing starts through August, it's a pretty remarkable story. Like if you look at our structural volumes, for example, they actually track the housing start decline. Yet on the EWP front, we were -- we went against that trend, which I think shows the merit of the various strategies we've employed to grow our private label business and otherwise grow the channel with respect to some of these strategic focus areas with builder pull-through programs, multifamily, also national accounts as well. Zack Pacheco: Okay. That makes sense. Yes. And then maybe just more generally speaking, what you guys are seeing from the regional and independent builders, again, assuming they continue to trail the large publics, given they're more sensitive to higher rates. But I guess on that, just any internal initiatives or thoughts on how to increase share with the large publics. Shyam Reddy: Yes. I mean, look, we have -- one of the ways -- one of the reasons we know we're gaining share or winning on the EWP front, in particular, is we've developed programs with large publics as well as regional builders. And in head-to-head match-ups, we're preserving existing business and winning new programs. And then if you think about that in the context of our overall pricing only being down kind of mid-single digits, which we believe is better than what we've seen publicly and what we're hearing privately relative to our competitor set shows that we are doing -- we're continuing to progress our efforts with these builders. So although they are contracting to some degree, we are actually performing very competitively and picking up more of that overall wallet across multiple regions with some regions being higher than others. So for example, in the South, we've been fairly successful. In some regions like the Northeast, you have a much lower big builder or regional builder presence or more custom homebuilders. But again, given the economics up there, that market is actually doing well because custom homebuilders are still doing well. Operator: The next question comes from Reuben Garner with Benchmark. Reuben Garner: So if I'm understanding it correctly on a kind of a clean basis, the specialty gross margin was 17% in the third quarter. You're seeing a little bit higher than that to start the fourth quarter. What exactly is driving that uptick? I think -- and correct me if I'm wrong, but at least in recent history, the fourth quarter tends to have a lower gross margin profile in specialty than the third. Is there anything kind of unique that happened in the third quarter or to start the fourth that's driving that dynamic? Christopher Wall: Yes. I think in the fourth -- or in the third quarter, we saw rebate and kind of deviation activity a bit lower than prior periods as well. And what we're seeing in Q4 is that at more normal levels going forward, right? So that uptick in Q4 is just as we are ending the year, right, and we're kind of recognizing those benefits to our cost of products on the rebate side, it's helping us get back in line with our -- the levels that we saw through the course of the year, we're trending towards. Shyam Reddy: Yes. And just from a strategic perspective, as we continue to try and differentiate ourselves from our competitors, we are really leaning into value-add services, whether they be much faster turns on EWP plans and takeoff services in order to drive sales of our own products and get greater stickiness with builders so we can pull our products to our customers and help generate business for them. Obviously, on the multifamily side, too, from some of the value-add services we're providing, that's helping us grow. And so ultimately, all things being equal, the goal for us is to demonstrate the value and then get paid for the value because in the long run, that's obviously better for our customers as they grow their businesses more profitably. Reuben Garner: Okay. And then kind of a bigger picture question. There's definitely been some movement in both probably some of your customers and suppliers, whether it's consolidation or just different ownership. Have you seen or do you see any opportunities, whether it's picking up new brands on one side or working with customers differently as they kind of evolve their businesses. Just curious if you're seeing any impact yet or what the likelihood is that, that comes in the months ahead? Shyam Reddy: Yes, absolutely. I do think that some of the consolidation you're seeing in the marketplace, especially with respect to suppliers, could open up some new opportunities for us. At the same time with customers, I mean, we're the value-add services we're providing, let's take multifamily, for example, many of our smaller customers and medium-sized customers, they don't have multifamily capabilities, whereas we do. I mean we've made investments across the network on top of what we've done at corporate to really drive demand for our products through their business because we will not break channel, but we will -- we are determined to help our customers succeed. And to the extent we can leverage our -- the investments we make at scale to do that, the better off everybody else is. So I think that -- and by the way, that multifamily channel also allows us to take advantage of some of the disruption you're referring to, whether it be on the customer side from a consolidation perspective or on the supplier side from a brand perspective. Reuben Garner: Okay. I'm going to sneak a couple more in, if I can. Your inventory is pretty consistent with a year ago in terms of what percentage of revenue it is. There's been some talk of destocking across various categories within building products as things kind of softened throughout the year. How are you guys thinking about it? Have you been kind of staying consistent? Is there any categories, whether it's outdoor living or commodity or any others where you're staying invested because you believe that there's a recovery around the quarter? Can you just talk about your thoughts there? Shyam Reddy: Yes. Generally speaking, we are trying to adapt and adjust to the market. I mean we have a very strong philosophy here of not taking positions, no matter the category. I mean we are -- we have very strong -- I mean, we're constantly working with the business to make sure we have optimal inventory levels. Obviously, heading into the summer, the spring/summer seasonal upside of normal building products and housing. I think we all built inventory to expecting more business than actually materialize, and that was -- I mean that's everybody, right? And so over the course of the summer heading into the fall, we have been very disciplined around our inventory management and taking into account what we had planned for. So we will not -- there is no build it and they will come. I mean I think we have a very smart strategic approach that's very disciplined around both specialty and structural inventory management. Reuben Garner: Okay. Last one for me. Engineered Wood Products. have you seen the sequential price pressure there yet? Shyam Reddy: Yes. Well, it's stabilized, right? It's definitely stabilizing. And again, as we -- some of the things we're trying to do in order to demonstrate our value, right, is quicker turnaround times on EWP plan designs, for example. We're doing some other value-add services with key customers to help them for us to be a more powerful extension of their business. So there are a number of things we're doing to not only get on the front end of that stabilization of price, but also get paid on the margins for incremental value we provide that others don't. But yes, a long-winded way of saying, yes, it's stabilized, continue to see stabilization. Reuben Garner: Great, thanks. Thank you and good luck through year-end. Congrats on the acquisition. Shyam Reddy: Thank you. Christopher Wall: Thank you. Operator: The next question comes from Adi Madan with D.A. Davidson. Aditya Madan: Maybe first off with -- you kind of hit on this earlier, but what specifically drove down specialty gross margin sequentially on an adjusted basis? And specifically, what like go-forward impacts or have about this segment to end the year and into 2026? Christopher Wall: Yes. We saw across primarily on the specialty side, just a net higher cost of products sold. The duty-related item we called out and we've also seen in terms of some of our rebate activity and a lower benefit in the quarter than prior periods. Again, we've addressed that and expect and are seeing that at a more normalized level in the first 4 weeks of the current quarter. And again, are experiencing margins in that 17% to 18% range currently and expect to achieve that in Q4 as well. Aditya Madan: Okay. Got it. And maybe about the run rate SG&A on a go-forward basis? And are there any structural cost reductions underway that might have been baked into the 3Q numbers? Christopher Wall: Yes. So no structural changes kind of baked into the Q3 numbers. We are taking some actions in Q4 that we expect to see benefits from that, some in Q4, but also mostly on an annualized basis next year. As a percentage of sales, as we go into 2026, I think for the full year, we expect some slight pressure kind of increasing that, but we're in the tune of kind of somewhere between 0 and 25 basis points. Aditya Madan: Okay. Yes, that sounds good. And maybe lastly about capital allocation after the Disdero deal, are you more inclined towards share buybacks at these levels? Shyam Reddy: So we're going to continue to be opportunistic as we look at buying back shares. When we look at the acquisition of Disdero combined with last quarter's activity, that was about $100 million of capital that we put to work. So we'll be disciplined going forward. The level of activity may be lower here as we end this year and go into next year. But we continue to see the share repurchases as a key way for us to continue to return free cash flow back to our investors to the extent we're not putting it to work elsewhere. Aditya Madan: Perfect. Sounds good. Good luck to end the year guys. Shyam Reddy: Thank you. Operator: This concludes the question-and-answer session. I'll turn the call to Tom for closing remarks. Thomas Morabito: Thanks, Sarah. Thank you again for joining us today, and we look forward to speaking with you in late February as we share our fourth quarter and full year 2025 results. Operator: This concludes today's conference call. Thank you for joining. You may now disconnect.
Operator: Good day, everyone, and thank you for standing by. My name is RG, and I will be your conference operator today. At this time, I would like to welcome everyone to the Q3 2025 Seres Therapeutics Results and Business Updates. [Operator Instructions] Thank you. I would now like to turn the call over to Dr. Carlo Tanzi of Investor Relations. Please go ahead. Carlo Tanzi: Thank you, and good morning. Today, before market opened, we issued a press release with our third quarter 2025 financial results and business updates available on the Investors and News section of our website. We've also posted an updated corporate presentation. Before we begin, I'd like to remind everyone that we will be making forward-looking statements, including statements around the results of our current or planned clinical trials, studies and data readouts, our product candidates and their potential benefits, development plans and potential commercial opportunities, interactions with and feedback from the FDA, our ability to secure an R&D or other partnership and/or generate or obtain additional capital, financing or other resources, our planned strategic focus and operating plans, cost reduction actions and anticipated benefits and cash runway, the timing of any of the foregoing and other statements which are not historical facts. Actual results may differ materially due to various risks and uncertainties and other important factors described under Risk Factors in our recent SEC filings. We undertake no obligation to update these statements, except as required by law. On today's call with prepared remarks are Marella Thorell, our Co-Chief Executive Officer and Chief Financial Officer; and Dr. Matthew Henn, our Chief Scientific Officer. Additional members of the management team, including Tom DesRosier, Co-CEO and Chief Legal Officer; Terri Young, Chief Commercial and Strategy Officer; and Dr. Dennis Walling, SVP of Clinical Development, will be available during the Q&A portion of the call. And with that, I'll turn the call over to Marella. Marella Thorell: Thank you, Carlo, and good morning, everyone. We made good progress during the quarter. Our immediate priority remains advancing SER-155, our lead investigational, oral, live biotherapeutic for the prevention of bloodstream infections, or BSIs, in adults undergoing allo-HSCT into a Phase II study. We believe that results in this study, if positive, could represent a very meaningful value creation event for the company. SER-155 represents a first-in-class mechanistically differentiated approach to address infections, including bloodstream and antimicrobial resistant infections, which are among the causes of mortality in medically compromised patients. In the Phase Ib study, treatment with SER-155 led to an impressive 77% relative risk reduction in bacterial bloodstream infections, along with decreased antibiotic exposure and febrile neutropenia. The therapy is designed to decolonize gastrointestinal pathogens, improve epithelial barrier integrity and restore immune balance, addressing root causes to prevent BSIs and therefore, reduce antibiotic use, antimicrobial resistance and often severe or fatal outcomes. Based on our analysis of the commercial opportunity, we believe that SER-155 could transform how allo-HSCT patients are managed and result in meaningfully improved patient outcomes. In September, we obtained further constructive feedback from the FDA on the SER-155 allo-HSCT program, which has received Breakthrough Therapy designation Phase II protocol. Based on the feedback received, we are pleased to have alignment on multiple key study parameters, including study size, dosing regimen, primary efficacy endpoint and the interim analysis plan. We do not believe there are any gating items to commencing the study from a protocol standpoint and are incorporating FDA feedback into the protocol. Notably, given the planned study design and our experience in this therapeutic area, we expect to be able to efficiently generate Phase II data in allo-HSCT patients, and we estimate that we will obtain meaningful placebo-controlled clinical results from a planned interim analysis within 12 months of study initiation with commencement being funding dependent. Beyond the initial allo-HSCT indication, we see significant expansion potential across other medically vulnerable populations, including autologous-HSCT patients, cancer patients with neutropenia, CAR-T therapy recipients and other medically compromised patients such as those in the ICU who face similar infection risks and unmet needs. Collectively, these represent a multibillion-dollar commercial opportunity in patients facing high unmet need and where there has been limited therapeutic innovation. As Matt will discuss, we also have an ongoing investigator-sponsored study at Memorial Sloan Kettering Cancer Center, evaluating SER-155 in an indication beyond infection that is of high interest, and we look forward to obtaining initial clinical results in early 2026 that may highlight the potential of SER-155 in immune-related negative clinical outcomes. While we advance SER-155 Phase II study start-up activities, we continue our efforts to seek capital in order to initiate the study and support our broader portfolio of product candidates with applications in inflammatory diseases. Advancing SER-155 is our top priority, and we continue to strive to obtain the resources needed to move the program forward. During the quarter, we also implemented targeted cost reduction measures, including a workforce reduction of approximately 25% to extend our cash runway and focus resources on core development priorities. We believe that the cost reduction actions, the resultant operating runway extension will provide us with additional opportunities to advance our strategic priorities. With that, I'll turn it over to Matt. Matthew Henn: Thank you, Marella. Seres continues to execute its R&D strategy with efficiency and discipline with a focus on expanding the reach of SER-155 and building on key clinical insights to advance our broader biotherapeutic pipeline. Our recent successes in clinical translation and leveraging external collaborations as well as securing non-dilutive funding allows us to evaluate important new opportunities for SER-155 in additional patient populations. We are thrilled to have recently announced that Seres has received a non-dilutive award from the Combating Antibiotic Resistant Bacteria Biopharmaceutical Accelerator or CARB-X, of up to $3.6 million. This award represents the second CARB-X grant to Seres and will support the development of an oral liquid formulation of SER-155, which is intended to expand future access to this biotherapeutic in medically vulnerable patients who cannot easily swallow capsules, including patients in intensive care units and some pediatric and elderly patients. Furthermore, we believe that this CARB-X award underscores the global recognition of the potential of our biotherapeutic approach to address antimicrobial resistance, a major global public health issue and a top strategic priority for CARB-X. Additionally, at the recent IDWeek conference, Seres presented new post-hoc analyses from our SER-155 Phase Ib study in allo-HSCT, which provided deeper insights into bloodstream infection patterns, antimicrobial resistance and clinical outcomes across treatment groups. These data further support SER-155's differentiated mechanism and its potential to reduce serious infections in patients with limited therapeutic options. Also notably, our collaboration with Memorial Sloan Kettering Cancer Center on an investigator-sponsored trial initiated by a clinician evaluating SER-155 in patients with immune checkpoint inhibitor-related enterocolitis, or irEC, continues to progress, and the study is currently enrolling subjects. irEC is among the most frequent and severe immune-related adverse events in recipients of immune checkpoint inhibitor therapy and can be observed in up to 50% of patients with rates varying based on cancer drug and treatment regimen. Immune checkpoint inhibitors can cause a wide range of immune-related adverse events with links to T cell biology and epithelial barrier inflammation, biological functions shown in our preclinical studies and clinical pharmacology data to be positively impacted by SER-155. irEC can be a serious condition characterized by diarrhea, abdominal pain, cramping, dehydration and blood in the stool and may progress to more serious complications such as bowel perforation, toxic megacolon or death. Management of irEC includes corticosteroids and other immune-suppressive drugs and can require withholding immune checkpoint treatment. We expect data will be available from this study early next year. We also continue to explore potential R&D partnerships to advance the development of our investigational live biotherapeutics in inflammatory and immune diseases, including ulcerative colitis and Crohn's disease. These represent large patient populations with a continued need for new mechanisms of action, in particular, therapies that can target epithelial barrier-driven inflammation and that are not immunosuppressive. Clinical and preclinical data generated through support from the Crohn's & Colitis Foundation support the potential use of our biotherapeutics to address these unmet medical needs and provide a new approach to treat these conditions, either as a monotherapy or combination therapy. We continue to advance our novel biotherapeutics using highly focused data-driven approach and look forward to continuing collaboration with our clinical and academic partners to bring important new therapies to patients in need. Marella Thorell: Thank you, Matt. I'll now turn to the third quarter financial results. As a reminder, Seres has classified all historical operating results for the VOWST business within discontinued operations in the consolidated statement of operations for the comparative periods presented, and there was no ongoing activity in this quarter related to the discontinued operations. Seres reported net income from continuing operations of $8.2 million in Q3 2025 as compared to a net loss from continuing operations of $51 million in the third quarter of 2024. The results this quarter are comprised of a $22.5 million loss from operations, offset by a $27.2 million gain on the sale of VOWST, resulting primarily from the $25 million installment payment received as expected from Nestlé during the third quarter. R&D expenses for this quarter were $12.6 million compared to $16.5 million in the third quarter of 2024, reflecting lower personnel and related costs, a decrease in platform investments and a reduction in clinical expenses resulting from the completion of the SER-155 Phase Ib study. G&A expenses were $9.5 million in the quarter compared to $12.7 million in Q3 2024, driven primarily by lower personnel and related expenses, including IT-related expenses. As of September 30, 2025, Seres had $47.6 million in cash and cash equivalents. Based on the company's current cash position, remaining VOWST transaction-related obligations and current operating plans, we expect to fund operations through the second quarter of 2026. To summarize, we are disciplined in managing our expenses and continue to work towards securing additional capital to support development activities. In early 2026, we expect to obtain additional SER-155 clinical results, which could highlight therapeutic opportunities in a new patient population. We have also made progress advancing SER-155 preparation activities to conduct a robust Phase II study, commencement of which is funding dependent. Based on the design of the Phase II study and the scope of the opportunity, we believe that positive study results, if achieved, could lead to tremendous value creation. Operator, you may now open the call for questions. Thank you. Operator: [Operator Instructions] Your first question comes from the line of John Newman of Canaccord. John Newman: You have some really interesting commentary on this IST at Sloan Kettering for immune checkpoint-related enterocolitis. I wonder if you could just talk to us a little bit more about anything you can tell us regarding the study design and also how you view the commercial opportunity there? Marella Thorell: Sure. John, thank you for the question. We're very excited about the study as well. MSK initiated this study, and we're pleased to be looking at one of what could be potentially many different applications for SER-155. As you know, there is a significant unmet need in this patient population, and so we're eager for the results as well. To elaborate a little bit more on the design of the study, I'd like to turn it over to Dennis, and he can share a little bit about the significant impact to patients who are on ICI of the irEC side effect. Dennis? Dennis M. Walling: Yes. Thank you, Marella. irEC is one of the most frequent and severe immune-related adverse events that patients experience in immune checkpoint inhibitor therapy. Up to 60% of patients with rates varying depending on the cancer treatment and regimen used can experience irEC. irEC can be a very serious condition, as Matt previously described, characterized by symptoms, including diarrhea and abdominal pain, cramping, dehydration, blood in the stool and can progress to more serious complications such as bowel perforation, toxic megacolon or even death. And the patients who experience irEC are treated with corticosteroids and other immunosuppressive drugs and also have to withhold their immune checkpoint inhibitor therapy. So the impact of this condition is significant and affects a significant number of patients undergoing this type of treatment. So this is the importance of why the study was originally designed and set up by the collaborator at MSK. The study is a small Phase I open-label study. The readout from this study is expected to occur in early 2026 and will be comprised primarily of safety data, drug pharmacology data and diarrhea symptom response data, following these patients through approximately 6 weeks on the study for those who have received SER-155 for irEC. Our hope is that we could see an impact on the diarrhea symptoms. And certainly, patients who would have improvement in the diarrhea symptoms without needing additional immunosuppressive therapy medications would be a very meaningful finding. So that type of a clinical outcome paired with the safety data and the drug pharmacology mechanistic data would be extraordinarily useful for us to help us plan and inform for any future development -- clinical development opportunities in this new indication. Marella Thorell: John, I just want to spend a minute to ask Terri to comment on the second aspect of your question regarding the commercial opportunity. Teresa Young: Thanks, Marella. John, thanks again for the question. As Dennis outlined, and this is a very common side effect of a very commonly used class of medications across many tumor types in oncology, perhaps best evidenced by KEYTRUDA net sales last year of almost $30 billion and growing at 18% versus 2023. So these are highly used agents growing, will continue to grow, particularly as biosimilars become available in the class. In terms of the patient impact, just double-clicking a little bit on what Dennis said, it's not uncommon for patients to have to either pause or discontinue their cancer treatment altogether to go down this detour of addressing the enterocolitis. It frequently drives them into the hospital. It's also a key limitation on physicians' choice of using combination therapies, which may be highly effective for treating the different tumors they're trying to address. But there's this nervousness or anxiety about using combination therapy or even increasing the dose to address the cancer. So we feel like we have a big problem here and a very nice solution to address it. We're very eager to get the data. Operator: Your next question comes from the line of Joseph Thome of TD Cowen. Joseph Thome: Maybe just a couple on the potential partnership deals. Can you talk a little bit about how much capital you would need to get to that initial SER-155 data within the 12 months of study initiation? And then I guess, secondly, anything that you can do to kind of convey confidence that you'll be able to achieve something within the next 6 months within your targeted cash runway? And then maybe last, if you're able to comment, there obviously was a report during the quarter that Nestlé made a takeout offer. Are you able to comment on if that was authentic and maybe why that wasn't an appropriate choice at that time? Marella Thorell: Great. Joe, thank you for the question. So first of all, just to talk a little bit about the design of the Phase II study. Importantly, that interim analysis 12 months after the study start will allow us a capital-efficient and timely recovery of data, and we are pleased to get feedback from the FDA that they were in alignment with that approach. As to the specific capital needs, we haven't guided on that other than to say that the timing of that and the way that we've designed the study, we do feel that we'll get meaningful safety and efficacy data given the patient count in this study at that IA point. We continue to make obtaining a partnership or another source of capital as our highest priority for SER-155, our lead candidate. So we are continuing to have interactions and looking at a variety of different sources from which that capital could be obtained. So while we can't comment on any specifics as to status, it remains our most important priority. With respect to your last question, we just make it a practice not to comment on rumors, Joe, so I can't comment specifically on that. Operator: That ends our Q&A session, and we appreciate your participation. I will now turn the call back over to the management for closing remarks. Please go ahead. Marella Thorell: Thank you. Thanks, everyone, for joining us this morning, and have a great day. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Good morning, and welcome to the Green Plains Inc. Third Quarter 2025 Earnings Conference Call. [Operator Instructions] I will now turn the call over to your host, Phil Boggs, Chief Financial Officer. Mr. Boggs, please go ahead. Phil Boggs: Good morning, and welcome to the Green Plains Inc. Third Quarter 2025 Earnings Call. Joining me on today's call is Chris Osowski, President and Chief Executive Officer; and other members of our leadership team. There is a slide presentation available, and you can find it on the Investor page under the Events and Presentations link on our website. During this call, we will be making forward-looking statements, which are predictions, projections or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ because of factors discussed in today's press release and the comments made during this conference call and in the Risk Factors section of our Form 10-K, Form 10-Q and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statements. And now I'd like to turn the call over to Chris Osowski. Chris Osowski: Thanks, Phil, and good morning, everyone. This has been a milestone quarter for Green Plains, one defined by operational excellence, discipline and execution. I want to first thank our employees for their hard work and dedication through what has been a very, very busy quarter. Also to our Board of Directors for their confidence in me and our leadership team and finally, to our shareholders for their continued support of Green Plains. I'm proud of what we have been able to accomplish, and I'm confident that we can and will continue to deliver sustainable, profitable results. For the first time in years, we entered the fourth quarter with no near-term debt concerns. Our balance sheet is restructured. Our carbon capture systems are up and operational in all 3 Nebraska locations, and our plants continue to perform at record levels. We built a simpler, fundamentally restructured business, allowing us to focus on value creation and strong consistent cash flows. In order to recap the major activities since our last call, we want to highlight the following. The first, we executed on the sale of the Obion, Tennessee facility and concluded our strategic review process. We used those funds to fully repay approximately $130 million of high-cost debt. And next, we refinanced most of our 2027 convertible debt with a new $200 million facility due in 2030. We also executed on our first 45Z clean fuel production tax credit monetization agreement. And finally, we commissioned and started up the carbon capture facility at York, Nebraska with the Wood River and Central City, Nebraska locations currently in the process of ramping up capture rates as we speak. Operationally, we're continuing to deliver record performance with our network of plants hitting over 101% capacity utilization, the highest level we reported in over a decade. This has been driven by our operational excellence programs that have been working in the background to improve fermentation yields and reduce plant downtime. We are seeing the results of what a focused effort can do with record or near-record yields for this group of plants in ethanol, corn oil and protein. Financially, this quarter's results, including $52.6 million in adjusted EBITDA and $11.9 million in net income reflect the new foundation we've laid, and this is just the start. During the quarter, we began realizing benefits from the 45Z clean fuel production tax credit, and we recognized $25 million of production tax credit value, net of discounts and costs during the quarter, and we anticipate another $15 million to $25 million of benefit in the fourth quarter. As we look to 2026, we anticipate these values to grow as we expand the program to all of our plants and see the impact from policy changes going into effect January 1. We're proud of the progress that we've made to deliver on what we said we would do, which is positioning us to provide solid transparent results in the fourth quarter and beyond. With that, I'll hand it back over to Phil to review the detailed financial results, and then I'll come back with a strategic update and commercial outlook. Phil Boggs: Thanks, Chris. For the third quarter of 2025, we reported net income attributable to Green Plains of $11.9 million or $0.17 per share versus Q3 of 2024 of $48.2 million or $0.69 per diluted share. This quarter includes $35.7 million in nonrecurring interest expense tied to the extinguishment of our high-cost junior mezzanine debt. The result also includes $2.7 million in onetime restructuring charges related to our cost reduction and efficiency improvement programs. Adjusted for restructuring charges, noncash charges and inclusive of the production tax credit benefits, Q3 2025 adjusted EBITDA ended at $52.6 million compared to Q3 2024 of $53.3 million. During the quarter, we strengthened our balance sheet and liquidity through the sale of our Obion asset in Tennessee. We used the proceeds to fully retire the junior mezzanine debt and enhance our liquidity. We also refinanced most of our 2027 convertible notes through a new $200 million convertible note due in 2030 and used $30 million from that transaction to buy back stock. We now have no significant debt maturities for the next several years. Revenue for the quarter was $508.5 million, down 22.8% year-over-year. Like last quarter, our Q3 revenue was lower because we exited ethanol marketing for Tharaldson earlier this year and placed our Fairmont ethanol asset on care and maintenance in January of this year. These items naturally reduced the gallons we had to market. SG&A totaled $29.3 million, which is $2.6 million higher than the prior year Q3. Last year's results benefited from some onetime true-ups related to compensation-related adjustments and payroll tax incentive refunds, while this quarter's results included some onetime expenses related to the final earn-outs at our FQT business. We continue to expect SG&A to improve on a go-forward run rate and remain on track to exit the year at a corporate and trade SG&A target of the low $40 million area with full company consolidated SG&A run rate in the low $90 million range, significantly improved from the $133 million and $118 million we incurred in 2023 and 2024. Q3 2025 depreciation and amortization finished at $25 million compared to $26.1 million in the prior year quarter. Interest expense rose to $47.8 million, including onetime charges totaling $35.7 million tied to the extension and then the retirement of the mezzanine notes. With that behind us now, we anticipate our recurring interest costs will fall significantly in Q4 and into 2026. We had an income tax benefit of $25.6 million. Our 45Z clean fuel production tax credits are recorded here under ASC 740 as deferred tax assets and then adjusted with the valuation allowance to recognize the likelihood of monetization resulting in the benefit. As a result, we recorded year-to-date production tax credits in the third quarter of $26.5 million, net of discounts. To match our view of operating performance, we've included the production tax credits in adjusted EBITDA. At the end of the quarter, our federal net operating loss balance of $200.5 million will provide future tax efficiency. Our normalized tax rate going forward is expected to remain in the 24% to 25% range. On the balance sheet, our consolidated liquidity at quarter end included $211.6 million in cash equivalents and restricted cash, $325 million in working capital revolver availability, which is designated primarily for financing commodity inventories and receivables within our business. We had $136.7 million in unrestricted liquidity available to corporate. Capital expenditures in Q3 were $4 million, including maintenance, safety and regulatory investments. For the remainder of 2025, we expect capital expenditures to be approximately $5 million to $10 million, which excludes the carbon capture equipment for our Nebraska operations, which are already fully financed. Our balance sheet reflects the increase in the carbon equipment liability as anticipated as a natural result of progress that is occurring on the project. This now stands at $117.5 million, up from $82 million in the prior quarter. As the project reaches full completion, this will be reclassified to debt in future periods. With that, I'll turn the call back to Chris to provide some strategic updates and the commercial outlook. Chris Osowski: The balance sheet transformation we executed on earlier this year has fundamentally changed how this company operates. The sale of the Obion plant allowed us to fully retire high-cost mezzanine debt and simplify our capital structure. In October, we completed $200 million in privately negotiated exchange and subscription agreements to extend the maturity of our converts and further derisk the business. We ended the third quarter with $353 million in total debt, down over $220 million from year-end 2024. While our carbon capture liabilities will move to debt in the near future, we have no near-term debt maturities on the horizon other than the small remaining balance of the 2027 converts, leaving us plenty of runway to focus on operational excellence initiatives and delivering value for our shareholders. One of the significant operational excellence initiatives where we recently implemented is an overhaul of our CapEx policy and requirements for project justification and returns. This new rigor is aligned with our desire to be a data-driven organization that measures twice and cuts once. Going forward, we will apply these new processes as we prioritize our capital allocation strategy, which will be focusing on: number one, strengthening our plant assets and maintaining or improving throughput, reducing our plant's carbon intensity through projects such as low energy distillation or combined heat and power, debottlenecking plant assets are incrementally expanding capacity, delevering the balance sheet through targeted debt reductions and also options for returning capital to shareholders over time. We're developing a clear capital allocation matrix that weighs returns across each of these options so we can deploy capital where it drives the most long-term value. This is just one of the significant operational excellence initiatives we executed on during Q3. We've also completely revamped our plant financial models, taking into account all production scenarios and corresponding carbon intensity and P&L impacts. At the same time, we implemented a cross-functional sales and operations planning process and updated forecasting process that has equal involvement from our commercial, operations and finance teams. While in Q3, we delivered results marked by strong operational execution and one of our core expectations is continuous improvement. Previously, we mentioned in Q3, our plants achieved above 100% capacity utilization, and we feel it's time to raise the bar. As we complete our budget cycle, we will be reviewing the capacity of our fleet with an eye towards updating our baseline capacity numbers for 2026. With a focus on operational excellence, we are happy to be in a position to have to make this change. From the commercial perspective, the overall margin structure improved significantly through the second half of the third quarter and early part of the fourth quarter, driven by tighter ethanol supplies, lower input costs and stronger corn oil values. Ethanol prices rallied roughly $0.25 to $0.30 per gallon in August and September off of the early summer lows, while corn prices stayed subdued despite earlier expectations of a tight balance sheet. Favorable weather ultimately supported larger yields and a more balanced corn outlook. Corn oil prices increased early in Q3 following the 2026 RVO ruling before moderating late in the quarter. By contrast, DDGs and high protein values remained under pressure through much of the quarter given ample supply and typical seasonality. Looking ahead, with fall maintenance and peak summer driving behind us, ethanol prices have returned to more historical levels. Margins in the fourth quarter still remain attractive, and we are set up for a solid Q4 performance. We're about 75% hedged on crush in the fourth quarter and have put positions on for Q1 and 2026 following our disciplined hedging strategy that we've been executing on for several quarters now. Demand drivers are in place with healthy export volumes and a growing acceptance of E15, although we do expect to see typical seasonal volatility as we move through the back half of Q4 and into traditional weaker margin winter months. Before we move on to Q&A, I want to leave you with this perspective. Green Plains is no longer approaching an inflection point. We're right in the middle of it. With all 3 of our Nebraska facilities, Central City, Wood River and York now capturing CO2. This isn't a future of promise anymore. It's happening today. The equipment is running across all 3 locations, carbon is delivered to the pipeline, and we're generating credits. Our Advantage Nebraska strategy is operational and our overall decarbonization strategy has expanded to our entire operating platform. In closing, a lot of the heavy lifting has been done. We are entering a new chapter built on operational excellence, discipline and execution. We've simplified our business, strengthened our liquidity and have proven our ability to deliver. Our carbon strategy is now a reality. Physical CO2 is being captured and monetized and the earnings power of Green Plains is being transformed. We're confident in the path ahead as we finish 2025 on a strong note and look forward to 2026 and beyond. Operator, we'll now take questions. Operator: [Operator Instructions] Our first question comes from the line of Manav Gupta with UBS. Manav Gupta: You came in at a very challenging time, and you have seemed to turn this boat very quickly and very efficiently. I want to congratulate you on that. My question here is, sir, as you look forward for the next 9 to 12 months, what are your key challenges that you still think you have to encounter to get GPRE back at a run rate where it was probably 3 or 4 years ago? Chris Osowski: Yes, and thank you for the question. We really feel good about the actions taken over the last 6 to 9 months to manage costs in our network. We're really focused on making sure that our plant assets are competitive and the results of the operational excellence initiatives are really coming to fruition, whether it be looking at improved plant yields or reduced plant OpEx, we see these plants coming into a very competitive position. And in terms of other obstacles going forward, we are going to focus on the things that are within our control, and we need to deliver on the opportunities the carbon program is going to provide us. So we still have to run the plants, we still have to put gas in the pipe, and we still have to monetize the tax credits on top of being great at what we do day-to-day, which is buying corn, running plants efficiently and marketing our products to our client base. Manav Gupta: Perfect. My very quick follow-up is, as you move along this journey, it's becoming increasingly clear you are going from a state of cash burn to probably significant cash generation once all these plants start up and there is more policy clarity. Help us understand what could be the uses of some of those cash. As you said, you do not actually have any near-term maturities. So help us understand what could be the possible uses of this cash as you generate it in '26 and '27? Chris Osowski: Yes, sure. And first and foremost, we are going to maintain the health of our operating assets. So we're going to ensure that our plants can produce at a competitive position. And we want to drive those plants into the top 25% quartile of the industry. Next, we have numerous opportunities to further reduce our carbon intensity scores in plants, whether it be moving toward low-energy distillation technologies to further reduce natural gas or electrical consumption in plant or considerations for combined heat and power in plants. There are a lot of opportunities that are still available to us. And then debottlenecking and adding capacity where it makes sense. So these are some of the opportunities, along with further debt reduction and returning value to shareholders. Manav Gupta: Congrats on a very strong quarter. Operator: Your next question comes from the line of Pooran Sharma with Stephens Inc. Pooran Sharma: Just wondering if maybe we could talk about some of the incremental unlocks beyond your Advantage Nebraska strategy. And apologies if I missed the details in your prepared remarks. But I think the last time -- last quarter, the plan was to get about $50 million of EBITDA contribution from these assets that are non-Nebraska. And so you kind of went into detail on some of the initiatives you're working on. Now that we've gotten some visibility into 45Z contribution on Nebraska. I was wondering if you could maybe peel the onion a little bit in terms of what can you do to unlock 45Z credits in your other assets beyond Nebraska? And how do you get to that $50 million essentially? Chris Osowski: Yes, that's a good question, and I appreciate that. For the non-pipeline plants or let's say, non-Nebraska locations, we have worked very diligently to improve the efficiency of those operations. and effectively lower their CI scores to the point where we expect them to be [ sub-50 ], effectively earning 5 points of CI reduction going forward. So there are opportunities to further make those plants more efficient with additional technologies that we have opportunities to implement. And we previously gave guidance around a $50 million P&L impact for those locations. We need to adjust that now that the Obion plant is not part of the fleet. So our adjusted number is around $38 million of P&L impact just based on 120 million gallon plant with 5 points of CI reduction. So that's really where we sit, and there is just opportunities to grow that here going forward. Pooran Sharma: Great. Great. And I guess for my follow-up, just maybe wanted to see if you could walk through the rationale on the converts. I mean, I imagine there's a tad bit of like a tug and pull between potential dilution, but then also just cleaning up your balance sheet and making sure that you all have a good runway to operate. So I was just wondering if maybe you could just provide some rationale on that move? Chris Osowski: Yes. I mean I think in general, we talked about Green Plains being at an inflection point and with the desire to eliminate debt overhang and then provide the organization the opportunity to focus on execution and running the day-to-day business. We want our employees focused on being great at buying corn, being great at running plants and being great at selling products. And the rationale behind the finance moves are really just to give us the opportunity to focus on the day-to-day business operations. Operator: Your next question comes from the line of Matthew Blair with TPH. Matthew Blair: Congrats on the strong utilization, 101% in the quarter. Could you talk a little bit more about the changes you are making at the plants? We're noticing that your CapEx is pretty low here. So it seems like this is more process changes rather than throwing a lot of new money at the plant. Chris Osowski: Yes. And that's a great question. I think what you're seeing is the results of a focused effort. We are not in the process of starting up new technologies or adding complexity to our business. Our teams are focused on the blocking and tackling of running and operating the plants and driving higher yields. So we're operating at higher yields than historically would have been anticipated when these plants were built. At the same time, a focused effort on reliability-centered maintenance to reduce planned and unplanned downtime and putting in technical solutions to the things that cause us to shut down. And that's really what's driving the improvements in capacity utilization to the point now where we want to rebaseline the performance of the plants for the future. But it's a lot about setting expectation and improving the technical capabilities of both our corporate operations team and the plant management teams to run the assets as best we can. Matthew Blair: Sounds good. And then for the $15 million to $25 million of 45Z credits in the fourth quarter, is that all coming from the Trailblazer plants? Or is there some contribution from the non-Trailblazer plants as well? And then also, why the range seems a little wide. What would put you at the lower end of the range versus the upper end of the range for the fourth quarter here? Chris Osowski: Sure. That's also a great question. And it's important to note that we still need to execute on the remainder of the fourth quarter. We've got the York, Nebraska plant up and fully operational at a very high capture efficiency. And we are in the process of getting Central City and Wood River ramped up in terms of capturing all the CO2 produced and putting it into the pipeline. So we still -- it's still a work in progress, but we are very confident in our ability to execute on that piece. We just have to deliver here the remainder of the fourth quarter. And to comment on the non-pipeline plants contributing to 45Z, we are working through PWA compliance for those locations that are currently operating at a sub-50 CI score. And it's really just about executing on that piece and managing the energy consumption for those plants to drive those credit values higher. Operator: Your next question comes from the line of Eric Stine with Craig-Hallum. Eric Stine: So you're just talking about the other plants, the non-pipeline connected plants, and you mentioned the $38 million in potential 45Z. But can you give an idea of just what the investment might be? I know you're considering a number of things. I know some of those plants are already sub-50. But just some thoughts, maybe I know it's early days, but some thoughts on what that investment might look like. Chris Osowski: Yes. Good question. And we don't have a specific investment planned for any of those plants, but we do have numerous technologies we can deploy at any location now because effectively, starting January 1 with the removal of the ILUC or the indirect land use calculation on the CI score, we're going to see all of those plants effectively capturing 45Z value. So each technology that is available to our plants has an equal footing regardless of pipeline status in terms of how it can deliver. So we have a lot of options in front of us. And we're just focused on delivering this fourth quarter, generating free cash flow to give us the opportunity to then reinvest into the business. Eric Stine: Got it. So I mean, just as the calendar turns to 2026, it sounds like you do anticipate that you will start to capture some of that $38 million. It's just that there would be additional steps that you would need to take to fully capture it. Is that the way we should think about it? Chris Osowski: No. We expect to get the $38 million. That is our expectation for a 2026 run rate, independent of any additional CapEx to drive CI scores lower. Eric Stine: Got it. Got it. That is very helpful. Maybe second one for me. This is -- I mean, gosh, the balance sheet and the flexibility you've got, you haven't had for a long, long time. I know you sold Obion. I mean, any thoughts, do you kind of feel like now with your 9 plants, this is where the platform should be? Or I mean, is it still kind of -- you've got a portfolio and depending on your options, there may be other asset sales? Chris Osowski: Well, with respect to our portfolio of plants, I mean, we feel good about the assets that we have, especially with respect to the rate of improvement we're seeing in those plant assets. At the same time, we've done a lot of work to manage our total corporate SG&A. And I feel like we've gotten the organization to its fighting weight, so to speak, such that we can be competitive in the ethanol space with the assets we have. And in terms of whether it be growth of business, we have opportunities to grow volume in our existing footprint if and when we make that sort of decision. But no really anticipation of significant changes at this point in time. Operator: Your next question comes from the line of Salvator Tiano with Bank of America. Unknown Analyst: This is [ Hakim ] on for Salvator. Quick question on the 45Z agreement on with Freepoint this year. Is it subject to any contingencies and how these credits will be finalized and audited in? And lastly, have you received any cash? And if not, when do you expect to receive cash flow? Chris Osowski: Yes. Thanks for the question, Salvator. Yes, we earlier announced the completion of the 45Z production tax credit monetization agreement with Freepoint. And this is for effectively all of the carbon credits that we would generate during 2025. And we are actively marketing credits for 2026, and we feel good about the relationship with Freepoint. In terms of the cash flow, I mean, that is one that is at our discretion depending -- based on our relationship with Freepoint, and we'll leave it at that. Operator: Your next question comes from the line of Laurence Alexander with Jefferies. Chengxi Jiang: This is Carol Jiang on for Laurence Alexander. Could you add a bit more color on the status of clean sugar technology? Like what is the status and the near-term monetization path for CST given the prior comments about wrapping up the effort? And what are the 2026 cash cost implications if commercialization is kind of like deprioritized? Chris Osowski: Yes. Very good question. With respect to CST, as previously mentioned on earnings calls, the CS technology does work, and it is functional. The issue we have is additional CapEx requirements to debottleneck the technology to get the full earnings potential out of that process. And with the recent policy changes with respect to 45Z, now we see a shift in focus in terms of putting any available cash that we have to the places where it can generate the best possible returns. And as it pertains specifically to the Shenandoah plant, we expect to -- we're in a position of capturing 45Z tax credits today based on how efficiently that plant is operating in terms of ethanol yields and total plant throughput. So we have to take that into account when it comes to justifying additional CapEx in CST. And as we mentioned, I think in the last earnings call, we're going to reevaluate that mid-2026 in terms of the path forward. But once again, that additional capital investment is going to have to compete with all the other opportunities we have to invest in our plant network. Operator: Your next question comes from the line of Andrew Strelzik with BMO. Andrew Strelzik: I'm sorry if I missed this, but in the prepared remarks, you closed with a comment about the earnings power being transformed. And so I was just curious with the operational improvements you've done, the cost savings, these tax credit benefits, how do you think about the earnings power going forward? How would you frame that? Chris Osowski: Yes. If I think of -- to frame up the ongoing earnings power, a couple of comments. We've talked about the Advantage Nebraska program delivering $150 million of P&L impact on a run rate basis. And just recently, we discussed the non-pipeline plants providing around a $38 million P&L impact. So that's a significant shift for us. At the same time, we also discussed reductions in SG&A on a year-over-year basis that are significant. And we talked earlier in this year about achieving over a $50 million cost reduction target. That on top of plant OpEx is reducing by more than $0.03 in 2025 relative to 2024. We've got a lot of good news to share, and we're very excited about being able to bring it to fruition here in 2026. Phil Boggs: And Andrew, this is Phil. Just to add to that, on the balance sheet front, forward interest expense for next 12 months looks to be more in that $30 million to $35 million range with the restructuring of the balance sheet that we've done. So much improved from that standpoint as well. So as Chris noted, significant improvement in core operational expenses with that $50 million and then that combined $188 million of carbon-related 45Z production tax credits and voluntary tax credit earnings power for the full year of 2026, we do believe that we're in a significantly transformed earnings position going forward. Andrew Strelzik: Okay. That's good color and super helpful. My other question kind of on the core underlying ethanol fundamentals. I think you said you're 75% hedged for the fourth quarter. How hedged are you for the first quarter? And in addition to that, how are you guys thinking about potential contributions next year from ethanol exports and E15? Obviously, a lot of headlines, trade agreements, those types of things. Can you kind of frame what a reasonable expectation around those 2 dynamics would be? Chris Osowski: Yes. And with respect to position taking, we don't want to get into too much detail on where we sit, but we've talked about having a disciplined strategy. And effectively, we're going to be in the market every day looking for opportunities to lock in margin when the market provides that to us. So we're active in Q4 and Q1 of 2026. With respect to questions around demand drivers, we see export demand strengthening on the basis of strong numbers, 2 billion-plus gallons in 2025. We expect that to grow with, in particular, demand coming from Canada, the EU and India based on government mandates in those countries. And also with respect to E15 acceptance in all 50 states is also an important driver of demand, but we don't really anticipate that to materialize until probably the second half of 2026 into 2027 based on the needs of developing infrastructure in that part of the world. Operator: Final question comes from the line of Craig Irwin with ROTH Capital. Craig Irwin: So you were very clear that the sequestration equipment is working and you're putting carbon in the pipeline. But can you clarify for us whether or not Trailblazer is injecting the carbon in the sequestration wells? And is there any uncertainty around some of the delays there impacting the value of credits that you announced the sale of today? Chris Osowski: Thanks for the question, Craig. With respect to status of pipeline, just to recap, we have the York asset fully operational, we've got Central City and Wood River, where we've fully commissioned all of the equipment and are in the process of ramping up capture rates. And right now, the pipeline team is working on basically operationalizing the entire pipeline, sending the gas to Wyoming. So there's a little bit of a time delay between getting equipment commissioned on the capture side of things and the actual sequestration well itself. So like I mentioned, there's a little bit of time delay, but we are confident in our partners' ability to execute on the start-up and commissioning of that equipment. So we really feel good about where we're positioned. Craig Irwin: Okay. So the second question then is, do you face a potential limit on the inventory of the carbon that you're putting into the pipeline given that there is a little bit of uncertainty around the injection at those wells in Wyoming? Or is there a fairly substantive potential to continue to put carbon into the pipeline? Chris Osowski: Yes. There's plenty of capacity for all of our plants to put the gas in the well. And the range we provided in terms of carbon anticipated value in Q4 is really based around the timing and the capture efficiency of our assets and also the execution of our base plant operations through the balance of Q4. Operator: Thank you, everyone. That concludes our Q&A session for today. I will now turn the call over back to Mr. Chris Osowski for closing remarks. Please go ahead, Mr. Osowski. Chris Osowski: All right. Thank you, everyone, for your time today, and we look forward to updating you on our operational performance and financial results next quarter. If you have any follow-up questions for us, please reach out, and we'll find time to connect. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect. Have a nice day ahead, everyone.
Operator: Good day, and thank you for standing by. Welcome to Ashland's Fourth Quarter Fiscal Year 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Sandy Klugman. Sandy, please go ahead. Sandy Klugman: Thank you. Hello, everyone, and welcome to Ashland's Fourth Quarter Fiscal Year 2025 Earnings Conference Call and Webcast. My name is Sandy Klugman, and I recently joined Ashland as the company's Director of Investor Relations. I'm excited to be stepping into this role at a pivotal time for Ashland and our stakeholders, and I look forward to connecting with many of you in the months ahead. Joining me on the call today are Guillermo Novo, Chair and CEO; William Whitaker, CFO; as well as our business unit leaders, Alessandra Fassin, Life Sciences and Intermediates; Jim Minicucci, Personal Care; and Dago Caceres, Specialty Additives. Please note that we will be referencing slides during today's call. We encourage you to follow along with the webcast materials available at ashland.com under Investor Relations. Please turn to Slide 2. As a reminder, today's presentation contains forward-looking statements regarding our fiscal 2026 outlook and other matters as detailed on Slide 2 and in our Form 10-K. These statements are subject to risks and uncertainties that could cause future results to differ materially from today's projections. We believe any such statements are based on reasonable assumptions, but there is no assurance these expectations will be achieved. We will also reference certain adjusted financial metrics, both actual and projected, which are non-GAAP measures. We present these adjusted figures to provide additional insight into our ongoing business performance. GAAP reconciliations are available on our website and in the appendix of these slides. I'll now hand the call over to Guillermo for his opening remarks. Guillermo Novo: Thanks, Sandy, and welcome to everyone joining us. Today, I'll provide an overview of our fourth quarter performance, discuss our strategic priorities and share our guidance for fiscal 2026. Please turn to Slide 5. Let's begin with a summary of our recent performance. Ashland's fourth quarter results reflect our disciplined approach and ability to deliver in line with expectations despite ongoing macroeconomic challenges. We maintained strong margins and achieved revenue and EBITDA consistent with our prior guidance. Our continued focus on execution, along with momentum across our globalize and innovate initiatives helped offset areas of competitive intensity and muted demand. Q4 sales were $478 million, down 8% year-over-year, primarily due to portfolio optimization initiatives. Excluding these actions, sales declined 1%. Adjusted EBITDA was $119 million, down 4% year-over-year, including an $11 million impact from portfolio optimization. On a comparable basis, adjusted EBITDA increased 5% with margins expanding to roughly 25%. Importantly, these results reflect the early benefits of our strategic actions and position us well to improve performance. Please turn to Slide 6. Now let me briefly summarize the performance of our business units. Life Science delivered steady performance, reflecting the benefits of our sharpened focus on higher-value pharma. Demand remained resilient with continued strength in cellulosic excipients, tablet coatings and injectables. There was some weakness in nutrition in the quarter, but the team has recently secured share gains that support a return to growth next year. Our innovate and globalize strategies are supporting quality growth and strong margin durability. Personal Care generated broad-based gains across end markets and regions while maintaining strong profitability. Disciplined execution and a sharpened commercial focus are driving results in a muted environment. Investments in bio-functional actives and microbial protection delivered momentum with both lines returning to healthy growth in Q4. Specialty Additives executed well in a mixed market, increasing quarter-over-quarter EBITDA. All end markets outside of coatings improved, including performance specialties, construction and energy and resources. Our gains were more than offset by weaker coatings in China, India and Middle East and North America. We continue to direct resources towards high-value applications, strengthening our position ahead of the coatings recovery. Intermediates faced headwinds from lower pricing and production volumes, which impacted profitability. The team remains focused on optimizing its operations against a challenging market backdrop. Stepping back from the segments, I want to highlight how our transformation efforts are shaping Ashland's path forward. Portfolio optimization and restructuring are complete, and the organization is focused on consistent delivery. As we've discussed before, approximately 85% of our portfolio serves consumer-facing end markets. These areas tend to be more stable and less exposed to economic cycles, providing a measure of consistency and resilience in the face of the broader macroeconomic volatility. The $60 million manufacturing optimization program is helping margins, though the timing of the P&L impact is later than what we initially expected. William will discuss the drivers later. In the quarter, Life Science and Personal Care each delivered EBITDA margins close to or above 30%. Specialty Additives achieved its highest margins of the year, while Intermediates continued to face margin pressures in a challenging market. On a comparable basis, adjusted EBITDA increased year-over-year across all business units, except Intermediates. Our globalized platforms returned to healthy growth in Q4, and we outperformed our innovation targets. In summary, even as external conditions remain unpredictable, we continue to drive results through disciplined execution and clear focus on our priorities. With our focused portfolio, cost actions gaining momentum and growth initiatives taking hold, Ashland is well positioned to deliver resilient long-term value. I'd like to now turn over the call to William to provide more detailed review of the fourth quarter financial performance. William? William Whitaker: Thank you, Guillermo. Please turn to Slide 8. Sales were $478 million, down 8% from last year, with portfolio optimization actions accounting for a $38 million reduction. Excluding those changes, sales were essentially flat, down 1% with steady demand in most areas. We saw volume gains in Personal Care, which helped balance softer results in Specialty Additives, while Life Sciences held steady. Pricing was down about 2% overall, mainly reflecting targeted pricing adjustments in Life Sciences from Q2 and continued pressure in Intermediates. Excluding Intermediates, pricing was down just 1% and foreign exchange provided a modest 1% lift. Adjusted EBITDA came in at $119 million, a 4% decrease year-over-year. Portfolio actions accounted for an $11 million headwind. But if you set those aside, underlying EBITDA improved by 5%, marking a return to growth on a comparable basis. Lower SARD from restructuring actions contributed to margin expansion alongside improved mix. These gains were partially offset by lower pricing and production volumes, while raw material costs remained stable. Our adjusted EBITDA margin expanded to 24.9%, up 110 basis points from last year. This was our most profitable quarter of the year and in line with our long-term margin target of 25%. Adjusted earnings per share, excluding acquisition amortization, was $1.08, down 14% from the prior year, disproportionately impacted by a higher effective tax rate in the quarter. The increase reflects jurisdictional tax changes and limited use of foreign tax credits. We expect our effective tax rate to be in the mid-20s next year. We delivered another quarter of solid cash generation with ongoing free cash flow totaling $52 million. That's a healthy conversion of adjusted EBITDA, reflecting our disciplined approach to capital spending and working capital. While Q4 ongoing free cash flow is down year-over-year, primarily due to higher accounts receivable from strong September sales, they remain consistent with recent expectations. At quarter end, our total liquidity stood at just over $800 million, providing us with plenty of flexibility. Net leverage was 2.9x and with the $103 million tax refund received in October from our nutraceutical sale, net leverage is now closer to mid-2s. This positions us well to continue investing in our strategic priorities while maintaining discipline in capital allocation. Now let's turn to our business unit leaders for a closer look at segment performance. Alessandra, over to you for Life Sciences. Alessandra Assis: Thank you, William. Good morning, everyone. Please turn to Slide 9 for Life Sciences. Life Sciences sales were $173 million in the fourth quarter, down 10% from last year. The decline was primarily driven by the divestiture of the nutraceuticals business and exit from low-margin nutrition offerings. On a comparable basis, sales were generally stable, declining 2% year-over-year, reflecting a mix of volume and price. Turning to demand trends. Pharma remained resilient across most regions, achieving low single-digit sales growth year-over-year. This momentum was driven by innovation and demand for high-value cellulosic excipients and sustained growth in our globalized business lines, tablet coatings and injectables, in line with our long-term strategy and growth objectives. Nutrition end markets were softer, but recent business wins are expected to support a return to profitable growth in fiscal 2026. On pricing, year-over-year headwinds narrowed sequentially with pricing generally stable throughout the quarter. Foreign exchange provided a $3 million tailwind to sales. We continue to advance pharmaceutical innovation, highlighted by the launch of vialose sucrose, a high-purity excipient for injectables and the expansion of our low-nitrite excipients to help customers mitigate nitrosamine risk. The new offerings reinforce Ashland's commitment to delivering high-quality solutions for the evolving needs of the pharma industry. Now let's look at profitability. Adjusted EBITDA was $55 million, representing a 32% margin and a 2% decline versus $56 million last year. The year-over-year decrease primarily reflects a $3 million impact from portfolio optimization actions, which shifted the segment's portfolio towards high-return applications. Excluding this impact, adjusted EBITDA increased $2 million, driven by mix and reduced SARD expenses, which more than offset lower pricing compared to last year. As Guillermo mentioned, reaching an adjusted EBITDA margin above 30% for the full year is a first for Life Sciences. This is a milestone that highlights our strategic focus and disciplined execution and the strength of our margin foundation. Please turn to Slide 10 for Intermediates. Intermediates continued to face pricing and volume pressure in the fourth quarter with merchant sales and NMP and BDO volumes broadly lower year-over-year. Lower production volumes also impacted profitability and competitive intensity from Chinese overcapacity and exports remain a key market factor, particularly in Europe. BDO pricing remains near a cyclical low. Sales were $33 million, down 8% from the same period last year. This included $23 million in merchant sales and $10 million in captive BDO sales. The year-over-year sales decline was primarily driven by lower overall pricing and merchant volumes. Intermediates generated $5 million in adjusted EBITDA, representing a 15.2% margin, down from $10 million and a 27.8% margin in the prior year. Margins compressed both sequentially and relative to the prior year, reflecting lower pricing and production. The team continues to manage the business with discipline and a focus on efficiency as we navigate a challenging market environment. Now I will turn the call over to Jim to discuss Personal Care. Jim? James Minicucci: Thank you, Alessandra. I'll now highlight our Personal Care results. Personal Care sales were $151 million in the fourth quarter, down 7% year-over-year, primarily reflecting the divestiture of the Avoca business. On a comparable basis, Personal Care delivered 5% sales growth with strong volume gains, outperforming a stable, but muted market environment. The team executed well and delivered broad-based growth across all end markets and regions. As expected, both globalized business lines delivered robust growth this quarter and are set to continue their performance as strategic investments, innovation and a renewed commercial approach continue to gain traction. In biofunctional actives, sales were up double digits. Performance was driven from a stable base and multiple new customer launches utilizing our innovative actives. Microbial protection delivered its fourth consecutive quarter of sequential growth and resumed healthy year-over-year expansion. Europe delivered robust growth and all regions converted major customer wins. In addition, our commercial excellence efforts in the care ingredients portfolio continue to deliver performance in both hair and skin care across regions. Personal Care advanced our innovation pipeline with 2 new product introductions based on the transformed vegetable oils platform. Turning to profitability. Adjusted EBITDA was $43 million compared to $47 million in the prior year, representing a margin of 28.5%. The year-over-year decrease was primarily due to portfolio optimization, which reduced EBITDA by $7 million. Excluding this impact, adjusted EBITDA increased $3 million, driven by higher organic sales, partially offset by lower pricing. In summary, Personal Care delivered strong growth, resilient profitability and visible traction in our strategic priorities, setting a solid foundation for continued improvement in fiscal year 2026. Now I'll hand it over to Dago to review the results of Specialty Additives. Dago? Dago Caceres: Thank you, Jim. Please turn to Slide 12. Specialty Additives sales were $131 million in Q4, down 9% year-over-year and consistent with Q3. The exit of low-margin construction business reduced sales by approximately $4 million or 3%. Excluding these actions, segment sales declined 6%, reflecting continued coating weakness in China, competitive intensity in export markets, such as the Middle East, Africa and India and softer demand in North America. Most of the volume decline was due to last year's share loss in China, where overcapacity and weak demand continue to weigh on volumes and intensify competition. While coatings demand remained soft, most regions saw stable sales sequentially. Performance specialties, construction and energy outperformed the market supported by share gain initiatives. Pricing remained stable year-over-year and foreign exchange contributed a favorable $2 million impact to sales. Adjusted EBITDA was $29 million, consistent with the prior year and up $3 million sequentially as favorable cost offset lower volumes, resulting in the strongest margin of the year at 22.1%. Portfolio optimization actions reduced EBITDA by $1 million. Excluding this, adjusted EBITDA increased $1 million with improved cost efficiencies, driving the year's strongest margin performance. Following the HEC production closure in Parlin, we rebalanced the network and prioritized high-value applications to stabilize margins in a lower demand environment. Looking ahead, Specialty Additives is well positioned to capitalize on a coatings recovery, driving outsized margin gains as demand improves. With that, I'll turn the call back over to William for some additional commentary. William? William Whitaker: Thanks, Dago. Please turn to Slide 14. As we close out fiscal '25, I want to highlight the meaningful progress our teams have delivered. We completed our $30 million restructuring program, realizing $20 million in savings this year with another $12 million expected in fiscal '26. Our $60 million manufacturing optimization initiative is well underway with $5 million in savings this year and $18 million projected next year. A major milestone was the full closure of Parlin, consolidating our HEC operations. VP&D cost actions continue to progress, and we remain on track to achieve our fiscal '26 run rate target. We have also closed 2 smaller plants as a part of our consolidation efforts and expect to complete the process in fiscal '26. Productivity improvements continue across the VP&D manufacturing chain. As continued throughout the -- as communicated throughout the year, while strategic initiatives are largely on track, P&L realization is extending beyond initial expectations, reflecting current operating realities. First, cost improvements are flowing through more gradually due to weighted average inventory accounting and elevated inventory levels tied to consolidation and tariff mitigation. Our initial assumptions on timing proved ambitious, and we are adjusting accordingly. Second, higher costs at our consolidated site, partially tied to the accelerated HCC time line are impacting unit costs. We're actively addressing these pressures. Third, lower Asia Pacific volumes have reduced plant loading. While we've shifted network volume to maintain utilization, this has lowered U.S. production and additive savings. Overall, manufacturing network optimization benefits are expected to range from $50 million to $55 million under current conditions. We continue to target the full $60 million opportunity, which remains achievable as China volumes recover. Despite timing adjustments, the program is already supporting margins and remains a key lever for future improvement. These actions are strengthening our cost position and support margin expansion. We remain agile in responding to market shifts and our restructuring actions are already helping offset softness in select end markets. In addition, we are enhancing our financial systems and forecasting capabilities to improve accuracy, drive accountability and strengthen performance in operations. Looking ahead, our priorities are clear: finalize the cost savings program and continue to drive productivity and operational excellence through our streamlined footprint. With that, I'll now turn the call back over to Guillermo. Guillermo? Guillermo Novo: Please, turn to Slide 15. As we wrap up fiscal 2025, I'm proud of the resilience and agility Ashland has demonstrated. Our teams exceeded our innovation targets and advanced our globalized agenda, which began delivering visible results in Q4. We saw steady sequential momentum in our globalized platform throughout the year as investments took hold. While the base business was down on the year in Personal Care globalized segments, Q4 marked a turning point, growing double digits in the quarter. We have clear goals to sustain and accelerate this momentum in fiscal 2026. Regarding our innovate strategy, our teams outperformed our innovation targets driven by core technology advancements. As showcased at the recent Innovation Day, we continue to strengthen our new technology platforms that are central to Ashland's long-term potential. The energy around our innovation pipeline is growing, and we're pleased with the traction we've established. These achievements reinforce our confidence in the long-term value of our portfolio. Looking ahead, we will continue to disclose targets transparently. We believe openness around the goals is essential as we pursue high-quality growth. We are committed to sharing both successes and challenges openly. This approach is fundamental to building credibility and confidence in our strategy, ensuring you have a clear view of our progress and the path forward. For fiscal 2026, we are targeting $20 million in incremental globalized sales and $15 million in innovation-driven growth as we scale platforms and advance recent launches. Please turn to Slide 16. As we look ahead to fiscal 2026, our focus remains on disciplined planning and consistent leverage. This marks our second consecutive quarter of meeting EBITDA commitments, an important step in building credibility going into the new year. Our guidance is grounded in prudent assumptions and reflects a continued emphasis on execution, consistency and transparency. Importantly, our planning reflects a return to growth, signaling a constructive shift in trajectory and renewed momentum across our businesses. Ashland expects full year sales of $1.835 billion to $1.905 billion, representing organic growth of 1% to 5%. Portfolio resets are minimal, roughly $10 million due to owning Avoca for Q1 of fiscal 2025, making this year's result easier to baseline. Adjusted EBITDA is projected between $400 million and $430 million, with free cash flow conversion of 50% and CapEx near $100 million. This supports an attractive free cash flow yield and provides flexibility for capital deployment. Next year, we expected adjusted EPS to grow double digits plus and meaningfully faster than EBITDA, driven by operating improvement and lower depreciation from portfolio optimization. Our assumptions reflect current market realities. Life Science and Personal Care remain resilient, supported by innovate and globalize momentum. Specialty Additives and Intermediates, Specialty Coatings continue to face pressure. While macro factors like interest rates and housing turnover could support recovery, we've tempered upside in our outlook. We expect to outperform underlying markets through share gains, innovation and disciplined execution. Tariff-related uncertainties persist. We're actively managing sourcing, production and logistics and pricing. Input costs remain stable with steady raw materials and well-functioning supply chains. On the cost side, our manufacturing network optimization program continues to advance. Most plant actions are complete, and we remain on track to deliver $50 million to $55 million in savings under current conditions. The full $60 million opportunity is still intact and achievable as China volumes recover. As William noted, timing shifts will reduce the impact in fiscal 2026, but the contribution remains meaningful. Key factors included in our 2026 guidance, approximately $30 million of restructuring and network optimization from our $90 million program. About $20 million related to resetting performance-based compensation and merit increases, approximately $10 million impact driven by repairs and network-wide operational and working capital efficiency measures following the Calvert City outage. We're also increasing our R&D investment by $4 million to accelerate innovation in some of the leading disruptive opportunities. Overall, our fiscal 2026 guidance reflects a prudent view of market conditions. We remain focused on advancing innovation, scaling globalized platforms and driving cost and productivity initiatives to support high-quality growth even in muted markets. With consistent execution, mix improvement and disciplined capital allocation, Ashland is well positioned to deliver resilient performance and long-term value creation. Please turn to Slide 17. In closing, I want to highlight a few key priorities as we look ahead. Fiscal year 2025 ended on a healthy note with our teams delivering on operational and strategic goals despite the challenging macro. The completion of portfolio optimization and network consolidation has made Ashland more focused, resilient business, well positioned for growth in high-value markets. We enter 2026 with momentum. Cost actions are yielding early margin gains with full P&L impact expected to follow. Innovation remains a growth catalyst. We're focused on accelerating commercial success. Recent investments are driving renewed progress in our globalized platforms, reinforcing our confidence in the long-term opportunities. Our priorities for fiscal 2026 are clear: delivering on safety, profitable growth, free cash flow and asset returns, advancing network optimization and inventory performance, accelerating innovation, scale globalized platforms and foster a productivity culture, strengthen systems such as S&OP, costing, planning and leveraging AI, prioritizing talent and organizational stability and engaging our investors through transparent and consistent execution. Fiscal 2026 will be about converting transformation into sustained performance. With a focused platform and resilient core, Ashland is positioned to deliver greater value across stakeholders. Our core businesses have demonstrated stability through challenging periods, and we've strengthened our margins and improved our asset returns. The foundations we've built give us confidence as we pursue our strategic priorities. Thank you to the entire Ashland team for your resilience and teamwork. We're focused on translating opportunity into performance. Operator, let's open the line for Q&A. Operator: [Operator Instructions] Our first question comes from the line of David Begleiter from Deutsche Bank. David Begleiter: Guillermo, just on volumes, what were volumes in Q4? And why are your volume assumptions at the high and low end of the EBITDA guidance range for next year? Guillermo Novo: Thanks for the question. So on the volume side, we had pretty nice pickup in volume. If you look at our Life Science and Personal Care, those were the biggest drivers. If you look at SA, the coatings side specifically, you probably -- it was a mix by region. The coatings business, we have to look at it region-by-region. Some were up, some were flat and some were down. China obviously being the most down year-on-year. And Intermediates did not recover. It stabilized. I think pricing has been the biggest challenge there, some volume, but pricing has been a bigger issue. As we look forward, what's going to be on the lower end or the higher end? On the higher end, I mean, half the growth in our target, if you look at our midpoint, is globalize and innovate gets you around 2%. So we're only looking at about 1% at the midpoint of market growth or share gains within the market. So on the low end is that the market gets muted and the competitive intensity increases that we would cannibalize our growth in globalize and innovate. And on the upside that we get a more robust recovery in some of the markets. David Begleiter: And just on the cadence of next year or this year, should Q1 EBITDA be up versus Q1 last year? William Whitaker: Yes, David, it's William. So a couple of the moving pieces as you compare to last year. In fiscal '25, we pulled forward a lot of maintenance activity, if you recall. So that was a $25 million headwind last year. Q1 is typically where we'll do a lot of our annual compliance shutdowns. So we have about half of that this year, about $12 million. But then we've also shared that Calvert City outage. So that's a $10 million impact in Q1. So as you look at the puts and takes on the manufacturing side, I would expect sales volume to be in line with how we've talked about the guide in terms of year-over-year. Life Sciences should have a nice comp in terms of the sales volume in Q1 as compared to last year. And then pricing trends have been stable. And so year-over-year pricing should be a more modest headwind. So if you put that all together, we're roughly flat, flattish versus the prior year. But I would say that the key element of that is the Calvert City action that we've shared late last month. Operator: Our next question comes from the line of John McNulty from BMO. John McNulty: So in Life Sciences, you spoke to some weakness in the nutrition side and then also spoke to some wins that will help to offset that. I guess, can you flesh out both of those a little bit more? Where was the weakness on the nutrition side? What were some of the business or parts of the business that were a little bit softer? And then also speak to what drove the wins? Where should we be thinking about that in terms of some of the traction that you're getting there? Guillermo Novo: John, let me ask Alessandra to answer this question directly. Alessandra Assis: Yes. So the weakness, it was mostly in North America and Europe. in Europe with a customer of ours, them losing market share. But as Guillermo mentioned and I also commented on the prepared remarks, we are -- we are gaining some traction with share gains. And this is -- it's mostly on the Klucel, and we will see that reflected in our results in the coming quarters, but we expect to see the recovery showing in the first quarter already. Guillermo Novo: And the share gain we got already, it already started this -- it's already -- we've already gotten orders and it's already impacted. So it's not to come. It's already gained. John McNulty: Okay. Got it. No, that's helpful. And then just a question on the cash flow side. You've got CapEx set for $100 million now. I guess how much of that is growth CapEx? And you had the big Innovation Day where you highlighted a bunch of pillars where some of them are going to need some capital, some of them aren't. I guess, how much should we be thinking about in terms of growth CapEx tied to some of those innovation pillars that look like they're pretty close to turning the corner and starting to commercialize? Guillermo Novo: So let me just quick comment and William, you can give a little bit more detail. But the big drivers are going to be things around globalize that we're still investing in India and even just finishing some of the projects in Europe. And I would say also, as we look at the HEC projects that we've done getting out of Parlin, there are investments we're pacing them because just the demand is a little bit softer, but there are some capital projects that we're going to be adding to increase capacity in the U.S. Given it's a little bit more muted, we're going to be managing through that at a slower pace, but those are part of the plan. But William, do you want to give a little bit more detail? William Whitaker: Yes, John, it's a good question. It fits really into the strategy of what we're doing on the asset side. So first, from a CapEx perspective, maintenance CapEx is coming down. So as we've rightsized the footprint, stay-in-business capital is probably down $15 million. So $55 million will be staying in business of that $100 million. From there, there are some things that we like to do from a cost savings perspective that debottleneck the plan. So that's probably another $15 million. And then on top of that to get to the $100 million is the growth projects. And to Guillermo's point, that's supporting the globalized initiatives. So specifically microbial protection as well as the OSD tablet coatings business gets us to the $100 million. And then going forward, to your question on the new technology platforms, that's something that we've contemplated in the plan. I think a key element of that for us is, right, as we rightsize the footprint, what can we be doing to repurpose the assets in the future in terms of optionality. And so we're not at any point now where we're making a meaningful -- what I'd say, a meaningful bridging item because we're able to efficiently access that capacity with the internal assets that we've rightsized. Operator: [Operator Instructions] Our next question comes from Chris Parkinson from Wolfe Research. Christopher Parkinson: Just when we're taking a step back and look at the Personal Care markets, the results are pretty good for skin and hair. However, some of your customers are speaking positively about high-end customers, negatively about lower-end customers. In some cases, there are signs of life in Asia for the first time in several years. But it just seems like the overall outlook is still pretty mixed. Is that what you're generally hearing? And how are you thinking about that in the near term versus how are you thinking about the growth algo relative to market for your portfolio over the intermediate to long term? Guillermo Novo: Chris, I'll ask Jim to comment on that in more detail. But there is a lot of difference depending on where -- what segments you're on and the regions. So there is a lot of variation. And you can see that in some of the earnings calls of other players, some are up in North America, down in Europe. So there's a lot of variation going on. It really depends on your business profile, what customers, what segments you're in. So for us, Jim, if you want to comment on how it affects us. James Minicucci: Sure. Thanks, Guillermo. Chris, so maybe starting with the last part of your question in terms of near term and then medium to long term. So as we look at our business and what we've shared around our activities and globalize and innovate, we feel we have a lot of levers in the portfolio. We have a very broad product portfolio across different segments where we can outperform the market. That's our medium to long-term view. Specifically, in terms of what we're seeing in the market right now, I think you captured it well. It is a mixed environment where your position with customers can really play into the performance that you're seeing. And if we do maybe a quick walk around the world, North America is a bit of a mixed environment. In Q4, we saw stable performance versus prior year there with skin and hair continuing to hold up quite well. In Europe, we've seen a continued acceleration in Europe throughout the year, and that continued in Q4, especially in skin and in sun. If you look at sell-in versus sell-out, that channel has really improved in the sun care market as inventories have come down, and we've seen nice growth in our film formers within sun care. Within Asia and in China specifically, we've continued to focus on local regionals. As you mentioned, we are seeing stabilization and some growth in the prestige segment as well. And so there, our biofunctional actives business performed really well in our other segments within skin and hair. In Latin America, I would say Brazil is a bit of a mixed environment right now. Skin was quite strong and hair is a bit mixed. And Mexico and Argentina were both strong in personal care and home care. When you look at our business specifically, what I'd say is, and we've talked about this throughout the year, our 2 globalized business lines, biofunctional actives and microbial protection, we've done a tremendous amount of work. The team has done a great job really driving the commercial activities there, and we have been very successful having new customer launches with our biofunctional actives and share gains in our microbial protection. Specifically in biofunctional actives, as we've shared, that part of the business has been impacted by some customer-specific headwinds. We've lapped that. As we said in the last call, that has stabilized, and we do expect some incremental growth there. And now you're starting to see the new customer wins really come through externally, where it was masked in the past. And then similarly, microbial protection, the base has stabilized and the new wins that we've converted throughout the year are coming through in our results, and we expect that to continue as we go into fiscal '26. Christopher Parkinson: Got it. And just a quick follow-up on some of the questions. For Life Sciences. You mentioned in your remarks, I mean, low single-digit growth, and it seems like a two-part question. One, can we confirm that we finally lapped a lot of the other kind of headwinds that we are looking at with a European competitor? And two, you do mention that growth came from both cellulosics as well as injectables. Is that just off of a very, very slow base? Or is there a new product that's contributing to that? And just how to think about the bifurcation of the growth of cellulosics versus injectables over the intermediate to long term would be very helpful. Guillermo Novo: So Chris, the cellulosics have always been strong. So there's variations. There's probably more around customer orders and inventory, but not -- I mean, those businesses have been performing. Our issue was more on the VP&D side, and that has stabilized. But Alessandra, do you want to give a little bit more color? Alessandra Assis: Yes. And both, I mean, the cellulosics and tablet coatings and injectables, this is pretty much aligned with our strategy, focused on positioning to globalize and innovate. So that's our growth strategy. If you look at injectables, starting with the injectables, so we are consistent -- consistently performing above market growth. We launched -- last quarter, we talked about the medical resorbable polymers for medical devices that we launched now just last month. We launched for injectables, vialose sucrose to expand our offering on -- with high-purity stabilizers for critical biologic applications. So basically, injectables as part of our globalized has been outperforming market, and we have been growing nicely, not only showing the results from a revenue standpoint, but also very important, our pipeline, our sales pipeline in terms of dollars and in terms of customer programs has been increased over 30% in the last year compared to the year before. Then on tablet coatings, we are seeing the momentum and also operational gains with our manufacturing facility. So we announced we are making -- we made the investment in Brazil. We started that new facility in April. We have a facility in China. We have a facility in the U.S. We are building a new facility in India. And so we are seeing the momentum with double-digit year-over-year growth, specifically in Q4. That was for both injectables and film coatings, we think globalized, it was very strong and also the pipeline growing nicely for film coatings. And as Guillermo mentioned, I mean, cellulosics is part of our innovate. It's part of our innovation metrics, and we have been growing nicely with that as well. So overall, Life Science, we exceeded our targets from an innovation standpoint, and it's really was driven by adoption of high-purity solutions across not only OSD with cellulosics, but also on injectables. Guillermo Novo: Can you comment on the VP&D stability? Alessandra Assis: Yes. So VP&D, we are -- you asked the question compared with the competitor that years ago, there was some disruption in the market. Yes, we have seen that stabilize. So it is currently, both from a volume and price standpoint, it is currently stable. We are entering the contract season in Europe. So there could be some plus and minus some movement, but it's -- currently, it is stable. Operator: Our next question comes from the line of Steven Haynes from Morgan Stanley. Steven Haynes: I wanted to, I guess, follow up on the Life Sciences pricing piece. Are you able to, I guess, just provide a bit of color around what percent of your, I guess, book or however you want to frame it is coming up for renegotiation each year in terms of the price contracting? Guillermo Novo: We don't talk about the exact business mix and by customers. But I would say most of it -- the bigger thing is Europe. Europe is where some of the bigger players, they tend to do it at the same time. So it would cover everything, VP&D, cellulosics. So it's the entire portfolio. You do contract with all the products there. And obviously, from a sales perspective, the cellulosics and VP&D are the biggest part of the mix. Tablet coatings and injectables would be the newer stuff with very different technology. Steven Haynes: Okay. And then maybe as a follow-up, the $4 million of the incremental R&D spend that you flagged in the guide, was that R&D spend kind of originally in your plan? Is it being pulled forward? And are you able to kind of provide a bit of color on where that incremental spend is going in terms of the kind of several platforms that you highlighted at Investor Day? Guillermo Novo: Yes. As we highlighted at Investor Day, the two things as we launch these and work with customers and developing the two questions is investment for manufacturing, the CapEx. And fortunately, we have capital that we've idled that we can repurpose, and that's the focus. But the other part, just a recognition that, hey, as these things really start moving, we probably will need to add resources to really develop the products depending on what the customer wants or the applications. Right now, most of that is on the new technology platforms. The TVO, the transformed vegetable oil is the one that has the broadest legs. If you look at it, it's going into almost every business in Life Science, in tablet coatings, in ag, it's hitting a lot of areas in many, many applications in personal care and in coatings. So we're adding both resources. We're trying to add resources so that we can scale this capacity. So not every business needs to double the work. So right now, part of it is going to be in the coatings area. We have some really exciting technology developments with TiO2 efficiency and with alkyds and a few other areas. So on the polymerization side, we're adding some of the capabilities that will help all the businesses, but we're centering it there because that team is a little bit more focused and we have more capabilities there. And then another part of it, we're doing on our central R&D, again, to support there's more requests for -- from customers for modifications. The core technology, we're getting validation. The issue now is converting them into specific products that our customers want. And that will take a much greater engagement with customers. So that's what we're going to add. But we're going to pace ourselves. As we said, we're not going to just throw R&D. We want to see where things are advancing and then we will drive the investments. I think on the other areas like super wetters and pH neutralizer and all that, we are -- we've added resources, but it's really been more shifting within the businesses of people that they had on other projects supporting them as they go. So we'll be providing more color on the innovation side. Operator: Our next call comes from the line of Jeff Zekauskas from JPMorgan. Jeffrey Zekauskas: I think you expected $100 million from your innovation pipeline in 2027. What do you expect from it in 2026? Guillermo Novo: For the '26, what we've outlined right now is it was $15 million of new innovation and mostly still core. The launches, as we said in the Innovation Day for the newer technologies would probably be starting more in the '27 and beyond range just based on the developments with customers. William Whitaker: And Jeff, it's a cumulative target in terms of incremental sales. So we did $13 million this year plus the $15 million, so roughly $30 million in terms of -- since the Strategy Day in terms of the cumulative commitment at this point through '26. Guillermo Novo: And just to be clear also, Jeff, is just -- we've kept it very simple on the globalized side. So the globalized, we just put everything in there. So it does like injectables. There is a lot of innovation there. We just wanted to make a very clear story because we're investing differently in the globalized. There's assets. There's other things that we need to do. They're very unique for all the areas. So that sort of you get the full -- the net picture, this is how that's doing. Tablet coatings and biofunctionals and microprotection all have a lot of R&D and technology going. So right now, when we're calling innovation, it's core and then the new technology platforms that don't fall in those 4 segments. Jeffrey Zekauskas: Okay. On your cash flows, I think you said that you expected 50% conversion in 2026. Does that include the $100 million that you received as tax refund? And as far as your inventories go, they've sort of moved up from about, I don't know, $530 million at the beginning of the year to $570 million or so at the end of the year, even though your sales are down, I don't know, 15%. So do you have to cut your production to get your inventories to a more reasonable level? Guillermo Novo: Do you want to answer on the... William Whitaker: Yes. So Jeff, in terms of the 50%, that does not include the $103 million tax return. So just to give you a sense of the bridge, right? So it's the EBITDA midpoint. There's not a lot of movement on cash tax and cash interest working capital for the full year. There's certainly an opportunity, right? VP&D in Q1, there's going to be an impact of $16 million to $18 million release because of the Calvert City outage. But then also in HEC, right? We closed Parlin and in advance of that, we build inventory to facilitate that transition. And so we do think inventory is an opportunity. We've traditionally been at 2.5 turns over the last couple of years. But in terms of hitting the 50% commitment, it roughly equates to maintaining working capital at a consistent level. So as sales grow, we'll have an investment in accounts receivable, of course, but then there'll be some offset on some of the actions that we're taking on inventory. Guillermo Novo: And Jeff, on the inventory side, the 2 big areas that went up a little bit is, one, HEC. With the closure of Parlin, we had -- we have to -- it was part of our plan. We had to build inventory because we need to transition as we start up. We got to qualify the new plant. So we built enough inventory. So it will be coming down. It's not about shutdowns now. The HEC network, just to be very clear on the total because that's probably on the network optimization, the pushback dollars to next year, it's really around the HEC network. And it's several things that are happening. One, our flow-through average accounting, I mean, our calculation is probably -- we're a little bit too aggressive on some of that. That's part of it. I think the inventory build impacts that. So it delays a little bit. But more importantly, I think it's going to be, one, the benefits are there. The plant is closed, right? So we have the benefit. Part of it is probably 2/3 will come through flow-through this year and next year as we move forward. The 1/3 will come, I think, later. It's not that it's gone. That's the part that with the lower demand in China, we have rebalanced our network. The network now is pretty full in a down market. So we're much more stable in how we run. But we shifted volumes that we were inclined to make in the U.S. to China, and China now is -- our plant in China is exporting now to other parts of the world. So we've rebalanced the network. From my view, the one I'm looking at is about 1/3 of their goal in HEC is probably going to be delayed until China recovers and we can take that volume back into the plants that we had planned originally. China is bottoming. It's still soft. It's still hypercompetitive, but we are starting to see opportunities to gain share to move some volume up, but it's going to take -- it's going to be a journey up there. Operator: Our next question comes from the line of Laurence Alexander from Jefferies. Laurence Alexander: Two things. One, with the comments about competitive intensity, particularly from Chinese competitors, are you seeing that focused on the same consistent areas? Or is it broadening out to more parts of your portfolio? And secondly, on the innovation pipeline, can you give a little bit of a sense of the horse race in terms of which platforms your customers are saying are most important even if they're on a slower burn? Guillermo Novo: Yes. So on the first question, the China competition, it's really the same areas for us. I mean I know that this is a broad theme for many companies. For us, it's really mostly been VP&D and HEC. They're different, I think, for us. One is our global competitors actually are supplying from China. They have multiple plants. And so when we say China, it's not just Chinese players, it's China sourcing. We're the -- of the big volume of the market, we're the last non-China producer really of size in a lot of these areas. So that's what we see in VP&D. In HEC, I think it is a combination of overcapacity in China, but also the down market that the exports have been pretty aggressive. Most of it we're seeing in Middle East, Africa and India is where we've seen most of it. So the pressure for us and where we're going to be exporting from China is we'll keep China to support China, but also to play in the Middle East, Africa and India type segments. If you look at the innovation side, the interest is everywhere. I think the issue of the technology of the transformed vegetable oil has the greatest functional flexibility. So we're going to really a number of very different directions. If you look at what Life Science or pharma or ag is looking at versus what personal care and coatings are looking at. As we -- each of them advances their technology, what they're doing in terms of functionality, we can apply it into other markets, and that's very helpful. I think that's going to be the one that we're really most focused on, on how do we drive scale. And that means we've got to focus on a few of the bigger opportunities to create scale because longer term, this is something that, like I've said in the Innovation Day, this is more a technology akin to acrylics or whatever, something that can be much broader. And so that's the one that attracts a lot of interest. I think the additive side of things in terms of the super wetters, those are more additives. I've been personally very surprised on how many new applications the teams -- they've modified it. We're going into ag. We launched just now in Brazil into -- as we presented into the bioprocessing, personal care with some really exciting opportunities in both skin and hair. And in coatings, these could be really scalable opportunities of size. So those are areas that I think we're very excited about. The starch is another one that's very good, mostly for personal care, but I think it will have a home later on as we look into the Life Science space. Operator: Our next question comes from the line of John Roberts from Mizuho. John Ezekiel Roberts: Maybe help us separate seasonality in the Specialty Additives business from trend line here. The 6% decline that you just reported for the September quarter, and that's essentially all volume. If things have stabilized kind of to normal levels, we would be down 6% in the -- I know you don't want to give guidance for the December quarter specifically, but is that an easy comp that minus 6% that normalizes? Or are we still trending down below trend line? Guillermo Novo: So the -- let me make some comments and then I'll ask Dago to comment. The answer is going to be vary by region, as I said. So clearly, the North America is where we've seen -- it's not that the market is coming down, but the expectations have come down from our customers, both in DIY and contractors. I think China is different. It's down, and it's not picking up. Those are, I would say, are the 2 big ones. But Dago, why don't you give some color? Dago Caceres: Yes. I mean that's a very good question. So what I would say, I mean, if I look at where we are, in China, we don't see a recovery, quite frankly, I wouldn't say in the next 1 or 2 years. The reason for that is that China needs to go through structural issues that they need to fix on the property sector, and we continue to see actually deacceleration on the investment in the property sector, which very much drives the coatings market in China. So we will continue to see some. I think it's stabilizing more at the bottom, but we will continue to see some softness, I would say, into 2026. And then when you think about North America, I mean, the key drivers in the coating markets, I would say is two. Is the sales of homes and those can be existing homes or it can be new construction and, let's call it, repaint, remodel kind of market, right? And when you look at sales of existing or sales of homes, that's driven by interest rates and that's driven by housing prices. And interest rates are still relatively high and housing prices are also relatively high. So I don't think that it's going to be -- there is -- that's why there is some conservatism in the market about those two. But then when you look at the repaint and remodel, the do-it-yourself market, that one continues to be pretty flat. And the price is slightly better, but not really picking up momentum a whole lot. If you look at our customers, if you look at what the market is saying, I mean, they tend to kind of follow this view that maybe the first half of 2026, calendar year 2026 is going to be soft because of these conditions. Now having said that, I've been surprised in the past, the market can recover, can pick up if the construction market picks up, and we'll have to be ready for that. But for now, what we're seeing is Europe is pretty stable. North America is stable. China, we know the story. And then we'll see some competitive pressure in Middle East, Africa, India and rest of Asia that we've been managing kind of throughout the last year. Guillermo Novo: And I think, John, the upside that everybody has to not kill the hope is North America that there is a pent-up demand for homes, construction, all that kind of stuff, but it's a macro that we don't control. So we're going to follow what our customers are saying at this point in time. Operator: Our next question comes from Josh Spector from UBS. Joshua Spector: First, I wanted to just ask on the pricing side. I mean you kind of hit it on the Life Sciences side earlier, saying that you're seeing stabilization there. But on the Specialty side, I mean, year-over-year, you said pricing was flat, but I think you alluded to potentially increased pressure. Do you think about that more on the volume side of things? Or do you still see some downside risk on pricing as you're looking into fiscal '26? Guillermo Novo: Let me -- just one comment and -- my personal view is pricing and where to see the pressure is China and exports is so low now. Nobody is making money. There is a bottom at the end of the day. You can't go down, it's not worth it after a while. So I do think it's -- there is some stability. The issue is going to be more export markets, and this is the whole issue, I think, in the impact in exports to Europe and all that, that we're seeing in different products, not just SA, but in other areas. But you want to comment a little bit more? Dago Caceres: The way I would look at this is, in general, the United States, it's going to be -- North America is going to be a pretty stable market from the pricing standpoint. And I would say it is the same case for Europe. So those are our 2 largest markets. And there, we see the typical normal kind of performance in terms of volume and pricing equation, but I would say relatively stable versus what we saw in fiscal year 2025. And again, that's by and large our 2 key markets. Then when it comes to the rest of the world, we're just being very careful and we always do the volume price balance to determine where it makes sense for us to hold prices, and we do that on a regular basis. That's why you didn't see our pricing come down in the last quarter or if we want to selectively go after certain share gains, right, if we want to balance the network better. So I would say we will continue to see some pressure in 2026, again, especially areas like Middle East, Africa, India, but I would say it's pretty similar to what we are seeing so far. And the good news continues to be that customers value very much what we bring to the table. They value quality, they value innovation. They value our overall value proposition. So we believe that with the right mix, I mean, we'll be able to hold on to what we have. Joshua Spector: And just quickly, Guillermo or William, I mean, what are your thoughts around capital allocation here? Do you need to get leverage down before you think about resuming buybacks? Or is that something you think about doing more near term? Guillermo Novo: So I'll let William give the more detail. But we have flexibility right now. I think as William said in his comments, we can do both. I think we will be pragmatic as we've been in the past. I mean there is a value side right now and where the share price is. But we also -- in this uncertain environment, we want to make sure that we're balancing that out with how we manage our debt. But do you want to comment a little bit more? William Whitaker: Yes. Thanks, Josh. So the capital allocation priorities are unchanged. First, we're going to fund the high-quality organic growth investments that's included in the $100 million CapEx and the productivity agenda as well. That's a key area for us to improve the cost structure at the plants. The other piece is leverage is important. We want to keep that within our target range and preserve balance sheet flexibility. Thereafter, we return the excess capital -- excess cash to shareholders. We have a stated dividend policy at 30% payout. We're a bit above that. So I'd expect dividend increases to be more moderate from here. Post dividend, we'd look to be balanced in our capital deployment like we've done in the past with episodic share repurchase activity. I think one thing that you can gather from the outlook is we do expect to generate good free cash flow in the year ahead. So as you roll forward the tax return that we just talked about plus the free cash flow, we'll be down in the low 2s if you roll that forward and deliver the midpoint of the EBITDA guide. So plenty of flexibility, and we'll continue to be balanced and disciplined in how we approach it in the year ahead. Operator: Our next question comes from the line of Abigail Edwards from Wells Fargo. Unknown Analyst: I just wanted to confirm timing on portfolio optimization headwinds. When should we expect to see those fully lapped? William Whitaker: I can take it. Yes. So Abigail, I think that's the good news is going into next year, it's -- there's a little bit of an impact in personal care in Q1. It's about $10 million in sales, $1 million in EBITDA, and then that's it. And so for the first time in quite some time, it's a very clean baseline and our reporting should be if we grow 2%, we grow 2%, and there's not necessarily this adjustment on things that we've rationalized or sold in the past. So it's a very clean setup going into next year. Unknown Analyst: Okay. Great. That's good news. Also, just another timing question. You expect a recovery nutrition mid- FY '26, maybe later, maybe earlier? What's the timing on that? Alessandra Assis: So nutrition, as Guillermo mentioned, it's already happening as we speak in the month of October. So we -- those wins, specifically with Klucel, it has happened. We started to receive orders towards the end of fiscal year Q4 and have already been delivering products in October, now in November. So it's real. It's happening already, and we expect to see nutrition coming to closing the gap that we saw in Q4. As I mentioned, it was a share gain of our customer in Europe. And of course, as a consequence, we ended up losing share as well. But it's Klucel coming with new wins, and it's a profitable win. Guillermo Novo: And I would highlight that the mix that what we lost is more lower margin material. What we're gaining is better quality material in terms of the margin profile. So net-net, it will be positive. Operator: Our final question comes from Mike Harrison from Seaport Research Partners. Michael Harrison: Just wanted to follow up a little more on the network optimization. My question is more on the time line of the benefits that you kind of pushed out here. But I'm just curious, what needs to happen in order to realize some of those benefits more quickly? Is it as simple as better demand? Do you need better demand in specific regions or product lines? Or are there any other actions? I know you mentioned it sounds like maybe some incremental VP&D actions. Are there other actions you can take to maybe help accelerate some of those benefits? Guillermo Novo: Yes. So if you look at the actions, Mike, the small plant, it's a smaller number. Most of that are done within the first half of this year. Those will be done, and they'll just flow through. HEC, as we discussed, is the one that's creating more of the flow-through timing issue. And that one is those 3 stages of, hey, the action is done. The assumption on the flow-through from an average accounting was probably too optimistic, more delayed. But the inventory and the revenue. So sales will be the big issue and the big catalyst. If sales pick up, we can move a lot more of the material. So that flow-through just accelerates. The part that we do want to be transparent is part of it, about 1/3 of the HEC volume. I'm glad we did it, but it's holding up our position in China. It's now -- instead of being incremental, we would have had a deterioration of our business in China, and this action has helped it already, right? So we're getting a benefit. It's just not incremental. For it to become incremental, that's what we say that China has to pick up where somebody else needs to pick up to offset that so that we can rebalance the network. So that's the one that has the most timing issues because it's done. I think the VP&D, we're working across. We have several -- 2 plants. We worked on one. We're going to start working on the other one through a lot of actions and timing. So that one, the conclusion of the events will dictate the timing of those things. Michael Harrison: Right. And then the other question I had was for Dago. I was hoping you could give an update on some of the efforts to expand your applications or opportunities in industrial coatings I think most of your commentary addressed the architectural side. And I was just wondering, are there some new business wins or applications that you're pursuing? Dago Caceres: Yes, absolutely. And a very good question and very much at the heart of what we're doing at the heart of this strategy, which is innovation. We're doing a couple of things. First, we're looking at quick wins. And what we mean by quick wins is that we already have a pretty robust portfolio where what we really needed was application data that can be used into industrial coating applications. So we're doing a lot of that. And with the portfolio that we have, we want to go after those industrial customers. We know who they are, we know how to get there, and we have an existing portfolio. So that for us is really a quick win an area that we're looking into a little bit more to accelerate the monetization of our innovation efforts. And then longer term, it's twofold. It's also the core business. It's also the core portfolio. But then we have areas like easy-wet. For instance, easy-wet, we just launched another product a couple of weeks ago, and it's ready to go, and we are already seeing pretty good traction from our customers. It's one customer at a time. It's talking to the customers, making sure we're meeting their needs. But I would say that area is advancing quite well. And we continue to find opportunities. I think the challenge that we're going to have moving forward is to make sure that we focus and we allocate the resources we have into the right opportunities where we can get a bigger bang for our buck. But it's going pretty well and hopefully more to come on that one. Thank you for the question. Operator: This concludes the question-and-answer session. I would now like to turn it back to Guillermo Novo for closing remarks. Guillermo Novo: Well, thank you, everyone, for your participation and interest. As I said, I want to congratulate the team, a lot of a very dynamic external environment. And I think we've delivered on a lot of the things that we committed to. So we feel very good about that. We still expect the external environment to remain volatile and with a high degree of uncertainty. Positive and negative. So there could be some positives as well. I don't want to be just looking at the negative. There is just uncertainty. I think this really drives us to focus on the things that we can control. We go back to our strategy is relevant for this environment. I think the actions we took on our execute, the portfolio optimization, even if they're delayed are helping us in driving performance in the near term, making us more competitive in all our core businesses. So we're focusing on the things we can control. That's about the execution of our portfolio optimization and productivity and operating discipline. It's about driving globalized and driving innovation to really drive top line growth. And if we do that, we feel very confident about the future even in these environments. If things get better, we have a huge potential for higher leverage of our manufacturing assets and all that. So that would be really the bigger catalyst that we would see in terms of momentum if we see some market recovery there. But with that, we look forward to seeing you in the coming weeks, and thank you. Operator: Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.
Operator: Thank you for standing by. This is the conference operator. Welcome to the Ero Copper Third Quarter 2025 Operating and Financial Results Conference Call [Operator Instructions] The conference is being recorded [Operator Instructions] I would now like to turn the conference over to Farooq Hamed, VP, Investor Relations. Please go ahead. Farooq Hamed: Thank you, operator. Good morning, and welcome to Ero Copper's Third Quarter Earnings Call. Our operating and financial results were released yesterday afternoon and are available on our website, along with our financial statements and MD&A for the 3 and 9 months ended September 30, 2025. A corresponding earnings presentation can be downloaded directly from the webcast and is also available in the Presentations section of our website. Joining me on the call today are Makko DeFilippo, President and Chief Executive Officer; Wayne Drier, Executive Vice President and Chief Financial Officer; Gelson Batista, Executive Vice President and Chief Operating Officer; and Courtney Lynn, Executive Vice President, External Affairs and Strategy. Before we begin, I'd like to remind everyone that today's discussion will include forward-looking statements, which involve risks and uncertainties that may cause actual results to differ materially. For a detailed discussion of these risks and their potential impact on our business, please refer to our most recent annual information form available on our website as well as on SEDAR and EDGAR. Unless otherwise noted, all figures discussed today are in U.S. dollars. With that, I'll now turn the call over to Makko DeFilippo. Makko Defilippo: Thank you, Farooq, and thank you all for taking the time to join us this morning. Speaking for everyone on this side of today's conference call, it is an exciting time over here at Ero. During our last quarterly update and in conversations with many stakeholders since then, we have been speaking to the fundamental transformation that has been underway at Ero this year. This work has continued to drive sequential improvements in quarterly performance and unlock new value drivers across our portfolio. These efforts are clearly evident in our Q3 results and in our Xavantina release yesterday. I will speak to both on today's call while ensuring we have sufficient time for questions. Yesterday, before market opened, we announced the result of a dedicated behind-the-scenes effort we initiated late last year to create value from within our portfolio, specifically at the Xavantina operations. This work entailed sampling, metallurgical testing, characterization and commercialization of stockpiled gold concentrates that have been produced in small but high-grade quantities since processing operations began over a decade ago. These efforts have culminated in the announcement of a maiden inferred resource of 24,000 tonnes grading approximately 37 grams per tonne, containing 29,000 ounces of gold. The estimate was based on detailed sampling of approximately 20% of the concentrate stockpile volume. Late last month, just shy of 1 year since we laid out the initial work plan for this initiative with our teams, we commenced shipping gold concentrate, resulting in our first invoice this week, which Wayne will speak to in more detail. Looking ahead, we expect to sell between 10,000 and 15,000 tonnes of concentrate during Q4 2025 at an operating cost of approximately $300 to $500 per ounce of gold. At approximately 90% to 95% payability after deductions and treatment charges, this means in practical terms that we expect to significantly accelerate the deleveraging of our business, one of our core objectives for 2025. Sampling campaigns are ongoing to better quantify the remaining gold concentrate in stockpile, and we expect to sell the full volume over the next 12 to 18 months, resulting in what we expect to be a significant boost to gold sales and financial performance. Before I jump back into the quarter itself, I'll just address what is likely the first question many of you have. How did October go? And how does that compare to underlying operational guidance ranges. While 1 month doesn't make a quarter, and we have a considerable amount of daylight between now and December 31, I am pleased to report that every single operation in our portfolio achieved not just 2025 calendar year monthly records for productivity and production, but they achieved all-time historic monthly records in October, beating some set many years ago. Starting at Caraíba, we built on the momentum of a solid Q3 and during the month of October, achieved all-time record mine tonnages from each of the Pilar, Vermelhos and Surubim mines. New high watermarks across all of our mines at Caraíba supported all-time record monthly mill throughput of just over 400,000 tonnes, implying an annualized run rate well beyond our installed capacity. We achieved this result on the back of a successful debottlenecking exercise that was initiated early this year and completed during the third quarter at effectively 0 cost. Q4 at Caraíba is off to a good start with over 3,500 tonnes of copper produced in October, on par with our best month so far this year. At Tucumã, sequential improvement in throughput volumes and grades following another sequential quarter of nearly 20% growth in copper production drove a new monthly record in October of approximately 3,300 tonnes of copper produced. Last but not least, at Xavantina, we produced just shy of 7,000 ounces of gold in October, excluding any benefits from our new concentrate sales operation. This is a particularly noteworthy result when you consider that our average quarterly production during the first half of the year was also 7,000 ounces. This result reflects the considerable effort we have put into successfully mechanizing Xavantina to make it safe and more productive. I'm very proud of what Rodrigo Fidelis and his team and the whole broader team at Xavantina have been doing to achieve these results. More broadly speaking, we have spent a lot of time this year changing the way we do things, challenging the status quo, incentivizing improvement and optimization across our organization and focusing on health and safety in order to drive productivity and operational excellence. The build we saw from a challenging first half of the year across the group, the green shoots in July and August, momentum from August into September and breaking all-time records in September and October has been energizing, and we expect many more production records to be broken over the coming months and years. I'm deeply proud of the work we are doing to achieve these results, proud of our global leadership team for their commitment and thankful to our operational leadership for achieving these results while consistently improving our consolidated safety performance. That was a long detour to our third quarter results, but hopefully, that clears up the question queue. Getting back to the quarter itself, Q3 was another record for Ero on consolidated copper production due to increased contributions from Tucumã, up nearly 20% for the second consecutive quarter. As we look to Q4 and as evidenced by my commentary on October, we continue to build on our strengths here and are expecting Q4 to be the strongest production quarter of the year across all 3 of our operations. At Caraíba, plant throughput levels reached a quarterly volume record, supported by sequentially higher mining rates across all 3 mines in the complex, momentum we have carried so far into Q4. Grade declined as expected in the quarter as we switched our center of mass to the upper levels of the Pilar mine and received more ore from the Surubim pit, a strategy shift that was discussed at length last quarter. We expect to continue to benefit from higher throughput levels going forward, the result of a multi-quarter debottlenecking effort in order to drive higher copper production. We expect strong production in Q4 to allow us to achieve the low end of our annual production guidance, and we expect cash costs to decline from Q3 levels during Q4, supporting our full year C1 cash costs in the lower half of our range. At Tucumã, production in the third quarter increased 19%, driven by the continued ramp-up of throughput at the mill, up approximately 37% quarter-on-quarter, partially offset by lower planned grades. As we look to Q4, we expect continued progress in increasing throughput levels, along with higher grades in the mine to drive the strongest production of the year. We're off to a good start in October and expect strong production in Q4 to allow us to achieve the low end of our annual production guidance. We have adjusted our full year C1 cash cost guidance at Tucumã to reflect higher-than-expected maintenance and freight costs incurred during Q3, which will be partially offset by the expected improvements in underlying costs in Q4. At Xavantina, production increased by approximately 17% quarter-on-quarter as the mine began to benefit from our investments in mechanization during the first half of the year. We mined over 50,000 tonnes of ore in Q3, a level we haven't achieved since 2022. Looking ahead into Q4, as I touched on in my October commentary, we expect higher mine tonnage, higher tonnes processed and higher grade stopes to significantly drive higher gold production in Q4, which will allow us to achieve the lower end of gold production guidance and meet full year cost guidance ranges at Xavantina. At Furnas, a central part of our growth strategy, physical work streams on site progressed well through the end of October. We have now completed approximately 50,000 meters of drilling, completing the drilling obligations set out in the agreement for both the Phase 1 and Phase 2 programs. The Phase 1 program completed early this year was drilled in support of an updated mineral resource estimate and preliminary economic analysis. Technical work streams to support the preliminary economic analysis remain ongoing, and we are on track to complete this study during the first half of next year. The drilling completed under Phase 2 of the agreement will be used in time to support the development of a pre-feasibility study. We currently do not anticipate slowing the drill program at Furnas based on the success of these programs and early insights into potential project economics. We set out this year to turn around and stabilize our operations, achieve commercial production at Tucuma, delever our balance sheet, aggressively advance long-term growth initiatives at Furnas and in due course, initiate returns to shareholders. Transformative work is nonlinear, but seeing the momentum we have carried and the results flow through to an incredible September and October makes me confident we are on the right path. Every area of our business is doing its part to achieve these goals and create additional value for all of our stakeholders out of what we believe is a truly remarkable asset portfolio. I am thankful as ever for the continued support and belief in our vision for Ero. To ensure we have sufficient time for Q&A, I will leave it there and pass the call to Wayne, who will provide more detail on our financial results. Wayne Drier: Thank you, Makko. Our third quarter financial results reflected a 24% increase in copper concentrate sales at Tucuma, which, together with stronger copper and gold prices during the period drove revenue to $177 million or $14 million higher when compared to the second quarter. At the same time, operating costs increased due to expected lower mined and process grades at Caraíba and a change in the accounting treatment at Tucuma following the declaration of commercial production on July 1, 2025. As a reminder, ramp-up costs are no longer capitalized and depletion, depreciation and amortization began to be recognized at the operation. As a result, adjusted EBITDA totaled $77.1 million in the third quarter and adjusted net income attributable to owners of the company was $27.9 million or $0.27 per share. Our liquidity position at quarter end stood at $111 million, including $66.3 million in cash and cash equivalents and $45 million of undrawn availability under our revolving credit facility. We continue to deleverage our balance sheet, paying down $9 million on our copper prepayment facility during the quarter. Combined with higher 12-month trailing EBITDA, this resulted in further improvement in our net debt leverage ratio, which decreased to 1.9x at the end of Q3 from 2.1x in Q2 and 2.5x at the end of 2024. With performance expected to be strongest across all 3 of our operations in the fourth quarter and additional cash flow from Xavantina's gold concentrate sales, we expect to materially accelerate deleveraging in the coming months. Since the beginning of Q4, we've already shipped 3,000 tonnes of gold concentrate at an invoiced value of approximately $10 million, providing early momentum towards that goal. As for our foreign exchange hedge program, our total notional position at quarter end was $290 million, consisting of 0 cost collars with a weighted average floor and ceiling of BRL 5.59 and BRL 6.59 per dollar, respectively. These extend through December 2026. The real trended stronger and below our collar range during the quarter, resulting in a realized gain of $2 million on these hedges. I'll now pass the call back to Makko for some closing remarks. Makko Defilippo: Thank you, Wayne. Before we move into the Q&A session, I want to take a moment here to reiterate our commitment to delivering on our strategy at Ero, the one that we set out in January of this year. Thank you for your continued support in our company. We look forward to speaking with you in the new year. With that, I'll now turn the call back to the operator to open the line for questions. Operator: [Operator Instructions] The first question comes from Fahad Tariq with Jefferies. Fahad Tariq: On Xavantina, on the gold concentrate, maybe it's too early to tell, but how should we be thinking about the remaining 80% that has not been sampled yet? Is the assumption -- would it be a fair assumption to assume that the concentrates are homogenous and that it could be maybe close to 144,000 ounces of contained gold? Makko Defilippo: Yes. Thank you for the question. I think everyone in this call is capable of dividing the 29,000 ounces by 0.2. We're very excited about the opportunity and what it means for our company, but I think it's too early to say exactly what that remaining volume will be. We fundamentally just need to do the work. As I -- as we outlined in our prepared remarks and in the news release yesterday, we do expect to sell the full volume over the next 12 to 18 months, which should be a very significant boost to our financial performance. But in terms of outlining specific densities and grades for the volumes that have yet to be sampled, very difficult to do. Fahad Tariq: Okay. And then maybe just switching gears to just Brazil costs in general. One of your maybe mining peers, but more on the gold side has talked about significant labor contractor inflation -- yes, labor and contractor inflation in Brazil specifically. Just curious if you've seen anything that's been popping up on that. Makko Defilippo: Yes. Look, also a great question. Let's take a step back and look over the last 8 years because I think context is important. What we saw from effectively 2017 until last year is that the rate of inflation in Brazil was outpaced by the depreciation of the currency. So I don't know what commentary or what company that came from. But it's fair to say that in U.S. dollar terms, inflation is still running high in Brazil. We do see that in our labor agreements. We see that in our contractor pricing. And over the last 2 years, we have not benefited as much from a depreciating BRL as we did in prior years, right, from 2017 to 2022. As Wayne outlined, one of our strategies to help mitigate that is to put in cost of collars on the foreign exchange, which we have put in place for a portion of our spend next year with a floor that's higher than this year or at a weaker level than this year to help offset some of the inflation that we're seeing. But again, I think whenever we talk about inflation cost in Brazil, it's important to overlay what's happening in the currency and our efforts to help mitigate that. We have a number of initiatives that we spoke to in the past that we call our full potential exercise. It's a combined effort from operations and procurement to continually seek as our business has grown over the past 2 years with integrating Tucuma and now the mechanization of Xavantina to enter into longer-dated contracts across the group. And we have seen cost reductions on a -- at a -- I don't want to say at a significant level, but at least enough to offset the inflation that we're seeing in our business. So we're going to continue that work. Again, it's fundamental to the long-term protection of our operating margins, and we'll continue that work in the future. Operator: The next question comes from Guilherme Rosito with Bank of America. Guilherme Rosito: So my first one is on the value creation strategy in Xavantina. I just want to understand like regarding the timing, why have you guys announced it now and not before? Just given when you look at the cash OpEx of these concentrates, they look super accretive even under lower gold prices. Of course, it is even more now that prices are close to $4,000. So maybe just if you could expand on why doing it now and not before, it was a matter of time and having the capability to take a look at that. And also, if you guys see potential for doing that to your other operations, which especially Caraíba, which has been running for some time and maybe has something in terms of concentrate stockpile or maybe the waste on the dams. And then finally, on Tucumã, just a quick question. How are you guys seeing the operating rates throughout 2026 between quarters? When are you expecting now to reach nameplate capacity in throughput? Makko Defilippo: Perfect. Thank you. We'll go through those one by one. Thank you very much. So the value creation opportunity at Xavantina, it's worth stressing this is not an initiative that began in earnest when gold price hit $4,000 an ounce. This is something that we've known about for a few years. I was involved in my prior role in an engineering exercise to recover value from this material. We did quite a bit of engineering work a few years ago. and we had mixed results during that time. And so we -- as you'll probably appreciate, we're fairly busy over the last few years building Tucumã. And so they sat on the back burner. With the change in leadership that we had this year, both on site and throughout our technical group, there was a few key initiatives that we outlined in late last year that were chased down in earnest. This was one of those initiatives. Again, the work that to unlock the value wasn't simply a matter of selling concentrate. It involved a significant effort in sampling, material characterization, metallurgical testing and a big effort from our commercial team to arrive at the point that we did just a few weeks ago. So I would say that the -- as a value creation initiative, it looked great when we started this and gold price was at $3,000 an ounce. It looks obviously fantastic at $4,000 an ounce, but the run-up in gold price was circumstantial with respect to timing. As I said, we started this in [ earnest ] late last year. So hopefully, that answers your first question. With respect to other opportunities across our portfolio in terms of creating value, I'd say we have a number of opportunities in terms of creating value from our operations. We're looking at a few things, one of which I'll talk about in a minute, which is at Tucuma. At Caraíba, look, we need to do the work. It's it's hard for me to say what other opportunities we have there. We need to do the work to determine if there's residual value at that operation. Obviously, we've spent the first half of this year focused on health and safety, operational excellence, detailed planning, health and safety across that -- across all of our assets and some of the value initiatives that we're working on, we're pretty excited about include some activities at Caraíba, but too early to say if that will be something similar. I don't expect the same level of opportunity. But for sure, we're chasing a few other high-value opportunities across the group. Tucuma 2026, the last question that you asked there. Look, -- we are seeing a continued ramp-up in our production rates and throughput levels at Tucuma. We're really encouraged by the progress coming out of September and October. We have a lot more work to do, as I outlined, until December 31 at midnight. It's fair to say that our -- the improvements that we've been able to make since January, February, March to now are significant. But we see those improvements as reaching terminal velocity on throughput volume because of our filtration system. So we are looking right now at adding additional filtration capacity to help alleviate that bottleneck or at least take the step-up in the rate of improvement. That work is happening right now. I wouldn't expect there to be a reaching design capacity until the second half of next year at this stage, but we'll talk about that more in January when we come out with our guide for the year. We are working on a lot of initiatives. In fact, last week, we had a mobile filter press arrive on site. And so we're pretty excited about getting that operating to help us break through some of the last challenges. It's important to note, we're not talking about large dollar investments, number one. Number two, I think silver lining here is that when you look across the rest of the asset, our crushing circuit, our grinding circuit, our flotation circuit is performing exceptionally well. And so with Gelson here and the whole team, we're looking well beyond the 4 million tonnes a year and how we can maximize the installed asset that we have as part of a debottlenecking exercise. That is an important factor when you think about the longer-term production profile at Tucumã coming off later in the mine life. If we can increase throughput levels with a relatively modest investment, that will obviously go a long ways to stabilizing production volumes over the long term. So stay tuned, more information on that to come. Hopefully, that answers your question on Tucumã. Operator: The next question comes from Emerson Vieira with Goldman Sachs. Emerson Vieira: I have 2 sets of questions. The first one on the gold concentrate sales. Can you guys please share with us what is the expected time line to sample the remaining 80% of the total stockpile volume, please? And the second one on the gold side, I just want to understand if this concentrate sales is also subject to the same conditions that the company has with Royal Gold. By that, I mean, should we assume that 25% of those 24,000 ounces shall be delivered at 40% of spot prices? And moving on to Tucumã. Can you guys share with us what has been done? And what are the next steps on the ongoing improvement of the tailings filtration circuit? And also following on Tucumã, looking at the guidance and taking recoveries and grades from [ 3Q ] as a reference, the company's throughput -- I mean, Tucuma's throughput actually should almost double in the 4Q, so you can reach the 30,000 tonnes guidance. But I understand that grade should improve and throughput has been ramping up through the quarter. So can you share with us what was the throughput figure for September maybe or any latest update on throughput figures, please? That's it. Makko Defilippo: One second, I'm just writing down your last question, so I get them all. I think we're -- yes, thanks for the question, Emerson. So starting to go through your first question, gold concentrate sales, what's the timing on the remaining volumes on sampling. But the practical reality here is that we did a large amount of work on the volume that was available to be sampled. We need to sell that volume before we continue sampling, and that's obviously what we're doing, as Wayne alluded to. Our objective is to do that as fast as possible. The reality is that we have a planned resource and reserve schedule. We believe at this point that our sales of concentrate volumes will supersede the rate of our resource update timing. And so what that means from a practical perspective is that we'll provide clarity on a quarterly basis in arrears for the concentrate volumes that we've sold next year. And we'll talk about that more next year in our guidance with respect to giving some more directional levels on the quarterly cadence of concentrate sales. As Wayne said, and I mentioned, the first sale occurred this week. So we'd like to get a few more weeks and months of sales here going before we talk about the cadence for next year. So stay tuned on that side. But as I said, the practical reality is that we're going to ship and sell as much and as quickly as we can and do that safely. And that means that we'll be providing updates quarterly in arrears as we go forward. But again, provide some additional forward-looking information on our guidance for next year in January. Are the -- second question, are concentrate sales subject to the stream? Yes, they are. That's a pretty conventional term across all streaming agreements, so nothing unusual there. But the stream gold from concentrate sales or the gold from concentrate sales will be subject to the streaming agreement. We have a great relationship with Royal Gold. They've been an incredible partner for the growth and vision of Xavantina over the years, all the way from their first investment. And so we're really pleased that these deliveries will help to accelerate the effectively pay down to the Stage 3, which is an effective 6% stream tail. And if you want more information on that, you can look at the streaming agreements that we have filed on SEDAR. But effectively, it will help accelerate to the next phase, which is a step down from the 25% gold deliveries. And then Tucumã filtration capacity, what planned -- what is planned, what's been done, what's ongoing and throughput level clarity. So as I mentioned early on, we do see this continued rate of improvement. It is slowing down, as I said, reaching terminal velocity on the rate of change, and that's just a function of requiring -- it looks like we'll require some additional filtration capacity. As I mentioned, a few months ago, we mobilized the mobile filter press on site. So that's being ramped up and operating now, which should help relieve a little bit of additional capacity. Gelson and the team are doing additional engineering work and looking at alternative sources for incremental tailings capacity to help break through that rate of change and get throughput volumes up. As you mentioned, we're still looking ahead on the back of a solid October, as I mentioned, we see that grades and recoveries are performing well. We expect that to continue into Q4, helping us to achieve the low end of our guidance range at 30,000 tonnes of copper for the year. On the throughput level itself, as I said, we are seeing continued improvement. We saw improvement in September, October. We expect to have a good month in November and December as well. I think on the last conference call, I mentioned sort of exit velocity around 80% of our design throughput. We might undershoot that by a little bit, but we've been able to continue to have high-grade feed from the mine that will help support production levels in Q4. Gelson, I don't know if there's anything you want to add on the specific work streams for the filtration capacity. Gelson Batista: Well, thanks, Makko. Thanks for the question as well. I mean you've mentioned before about sequential improvement in Tucuma. I think this is the progress for the entire year. There are various things on debottlenecking. We engage experts. They've been helping us for some time now and also optimization in the plant, but it varies from mostly on the filtration plant, but small things in the mill as well and the grinding system and also the thickener. So this is ongoing, and we'll see the results in 2026. Operator: The next question comes from Craig Hutchison with TD Cowen. Craig Hutchison: Just on Xavantina, it sounds like it's a good start to Q4. But can you give us some guidelines in terms of what the mining rates are maybe on a quarterly basis? And as you kind of move into next year, what is your capability now that you have the mechanized equipment? And maybe just as a follow-up question, what should we think about in terms of the grades as we kind of move into next year given the updated reserves you guys have, which I think is just under 7 grams a tonne. Makko Defilippo: Yes. Thank you, Craig. When it comes to Xavantina, there's a few things to note there. Maybe step back just a minute before I talk about specific rates. One of our objectives for the strategy at Xavantina this year, obviously, unlock value from gold concentrate sales. So check that mark, check that off the list. The second was to really extend the known limits of mineralization in the mine. And I think that was reflected really well in our resource update, specifically with the very significant increase in measured indicated resources and inferred resources. Our target was to uncover 1 million ounces. That was our objective. And when you look at what we put out yesterday, I think it's fair to say that we achieved that objective of 1 million ounces. Some of the last drill holes in the underground mine. We're looking at a recent intercept this morning that came out a few weeks ago, 15 meters at 11 to 12 grams per tonne. So we're seeing a significant increase in the potential for Xavantina, and that makes us very excited. So again, coming back to the strategy for the year, mechanize the mine, make it safer, extend the limits of mineralization. Obviously, over the next few years, we've started this work now. We need to do additional infill drilling to confirm those resources, which are not yet mineral reserves. But we've been really happy with the effort on mechanization and what that means for Xavantina. We talked a little bit about mining rates in Q3. Obviously, you can see that from an ore process perspective, big increase, right? So going up to 50,000 tonnes mined and processed during Q3. That implies a rate just over 15,000 tonnes. We've been able to at least match that in October, much higher grades, just a function of where we are in the ore body coming in at -- coming in at about 17 grams per tonne in October. So very high grade. When we think about the variability in that deposit still exists, the mechanization has allowed us to increase the mining rate substantially and do it at a lower cost while making it more productive and safer at the same time. Craig Hutchison: Okay. 17 grams per tonne in October, well, okay. And then, I mean, obviously, probably not sustainable at those grades, but into next year, I guess, we'll look for updates with respect to those grades as well. Makko Defilippo: Yes. Look, Craig, I mean, I think if you go back in history and you look at what we've been able to do, again, we do get volatility month-on-month that tends to smooth out over a quarterly basis. So we're still expecting high grades in Q4, just as -- in particular, as a result of the excellent performance in October, some of the areas that we have available to mine. Again, we're doing at a lower cost today. We're doing it safer. And so I'm incredibly proud of the team at Xavantina for what they've been able to do this year. Operator: The next question comes from Anita Soni with CIBC World Markets. Anita Soni: Just a couple of follow-ups to Craig's questions on Xavantina. So in terms of the -- I guess I was just looking for a split in the new reserve estimate, how much of it is sublevel stoping and how much of it is your typical room and pillar as a percentage? Makko Defilippo: Yes. Thank you. There is very little remaining room and pillar mining. It's going to be immaterial in the context of our total reserves. We're 100% focused on sublevel stoping. There's a little bit of residual room and pillar, but the overall majority is going to be sublevel stoping. Anita Soni: Okay. So then when we look at the cutoff, I guess, in the cutoff analysis on resources, which is generally a little less conservative than what you would have on reserves, I think you used a consolidated mining and processing number of USD 107 -- is that a -- I mean, what should we be thinking about in terms of mining costs and processing -- I mean processing costs, I guess, will be the same, but the mining cost, what kind of savings would we get versus the mining costs that you're delivering right now? Makko Defilippo: Yes. Thanks. Good question. We look at this in detail. I'd say that we're early days on mechanization. [indiscernible] back to, the original plan was to complete the mechanization of the mine by June of next year. It was such a resounding success. We accelerated that time line. Our last Jack Lake mining crew left site in September, and so we're 100% mechanized. I think to give a specific cost reduction number is probably a bit immature given that we're still optimizing. But what we've seen so far, again, I wouldn't peg this for the long term, but something in the order of 30% to 35% reduction in mining costs is what we've seen so far in terms of BRL per tonne. Obviously, it's going to impact by FX and a few other variables there, but so far, about a 30% reduction in mining unit cost. Anita Soni: Okay. And so can you just tell me what the processing costs are right now? Makko Defilippo: I don't have that right in front of me. We can certainly follow up on the call, yes after the call. Anita Soni: Okay. And then just one last question. A bit on the -- it's on the Matinha vein. As I look at what -- how the resource went to reserve, it's more than the 23% dilution that you were -- that I think you guys were using in the estimate. Can someone provide some color on what happened with that specific vein? I think the other vein looks -- the San Antonio vein looks kind of in line with the 23% dilution that you were talking about. But this one went from 11 gram per tonne in resources down to 6.65. So that's kind of close to half or 40% down. So is there anything in particular there that I should be thinking about? Makko Defilippo: Yes. Obviously, the right, the 23% is average across. I think when you get to specifics, and we can address this offline, too. I think it's probably a better form. But when you look at the planned stopes that we have with sublevel stoping, they're obviously larger than room and pillar. And so that tends to increase planned dilution when you look at any kind of variability in the ore body in terms of its orientation, dip, any contours, you tend to pull in more planned dilution when you're using larger stopes. And so again, that 23% is the average across the ore body. So we can talk more specifically about the Matinha vein and some of the impacts there in the update offline. But hopefully, that gives you kind of a rough sense of what we're looking at. Anita Soni: Yes. And then just a last question. Are you going to file a 43-101 on this one? Or did you do it already? I'm sorry, I'm on the road right now. Makko Defilippo: Yes. No worries. No, we will within 45 days of the -- when the news release went out yesterday. So expect that before year-end. Operator: The next question comes from Roald Ross with Clarksons Securities. Roald Ross: Congrats also on the record production. I wanted to ask about the costs this quarter and maybe some commentary if there are any cost pressures in the business right now. So on Caraíba, it appears to be an 8% increase in mining costs and 28% increase in processing costs, while at Xavantina, there seems to be a jump in sustaining CapEx, so is there a trend of increasing costs or any color to add to that increase? Makko Defilippo: No, none other than what we outlined in the call. Obviously, we did increase production volumes a lot at Caraíba, which had an impact. But if you normalize that for volume, I think you see that it's pretty comparable quarter-on-quarter. Obviously, we had a higher grade in Q2. So Q3 was a bump up. We expect that to come down in Q4, as I outlined on the call at Caraíba. Xavantina, I think there's some timing differences there on capital. So I wouldn't read too much into that in terms of increasing cost. I think I commented on one of the earlier questions about inflation in Brazil. That's a reality of all operations, I think not just in Brazil, but globally, quite frankly, and we're working hard to make sure that we offset that -- those inflationary pressures with hedges on the BRL so we can protect our operating margins going into next year. Roald Ross: Okay. Great. Second and final question also. It appears that the company is in a phase now where everything is sort of centered on getting Tucuma at the nameplate capacity. But after sort of achieving that later next year, how would you describe the vision of the company and sort of the next phase of the company? I expect that the furnace growth leg is a bit further into the future. How would you describe sort of that next phase for Ero? Makko Defilippo: No, that's exactly right. I mean I know we don't get asked a lot about it a lot anymore. But when you look across our portfolio, we still have a number of value-generative projects that are ongoing or in process. Gelson and I were on site at Caraíba over the weekend and reviewing the progress on our shaft project to access a higher-grade zone in the Pilar mine, which we think will transform the productivity and obviously, margins for that asset when that comes online in 2027. That's a big investment that we've committed to. We've been working that over a number of years. The shaft right now is about 870 meters below surface. And right now, it takes about 5 minutes to get down to that level in the kibble compared to almost an hour driving down the ramp. So that will make a very significant improvement in our company later on in 2027. Xavantina to that part of the portfolio. Obviously, big value creation exercise, incredibly proud of what we've been able to do there, not just in terms of unlocking value from gold concentrates, but also the mechanization of the mine. If you look at the planning and effort and execution of that -- those investments and that project, it's been a big success this year. And again, very proud of the work that we're doing there. We do see with keeping that 1 million ounce target in mind, we see opportunities there to eventually increase production. Obviously, that needs additional studies. There's ventilation, there's drilling, there's development involved in that and some infrastructure. And so we're working on studies to help support that for the future. But clearly, with 1 million-ounce potential and growing. Again, I mentioned some of those deeper drill holes and the very strong mineralization we continue to see in San Antonio. We for sure see opportunity to expand that operation. That's something that we're working on for the next year. And then you hit on the head for us. It looks like a very compelling opportunity. Obviously, we're working hard right now on the preliminary economic analysis and the drilling, which we remains on track for the first half of next year. So if I take a big step back, I've had the distinct privilege of being the first employee at Ero Copper 9 years ago and to watch what's happened this year and see our teams firing on all cylinders here at the end of Q3 and early into Q4. It's been an incredible year of transformation and pretty exciting to see the results that we've been able to produce. As I said, nothing is a guarantee or a layout for sure. We have a lot of daylight between now and December 31. But when I look at beyond December 31 in this year, I'm incredibly excited about the legwork that we've done and where we're heading. Operator: [Operator Instructions] Since there are no more questions, this concludes the question-and-answer session. I would like to turn the conference back over to Makko DeFilippo for any closing remarks. Please go ahead. Makko Defilippo: Yes. Thank you, everyone. Thank you for participating. For those of you that are traveling back from various site visits, safe travels. I look forward to following up over the coming days and weeks and giving an update on our outlook for 2026 early in the new year. Thank you very much. Operator: This brings to a close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
Mateo Toro: [Audio Gap] [Operator Instructions] And we will answer your questions at the very end of this event. Next slide, please. Joining us today are Jorge Andrés Carrillo, President of ISA; Jaime Falquez, VP of Corporate Finance; Gabriel Melguizo, VP of the Energy Transmission Business; Patricia Castaño, VP of Corporate Strategy; and Natalia Pineda, VP of Road Concessions. The conference begins with Jorge Carrillo explaining the highlights of the third quarter of 2025. Next, Jaime Falquez will present the financial results. And lastly, Jorge will give some closing remarks and lead the Q&A session. Next slide, please. So we can leave you with Jorge. Jorge Carrillo Cardoso: Thank you, Mateo. Good morning, and thank you all for joining us today. Next slide, please. Let's look at the highlights of the quarter. Let's begin with the great news, which is the commissioning of the Cuestecitas-Copey-Fundación interconnection in Colombia, which is key for energy transition. It's the first connection in La Guajira at 500,000 volts to transport solar and wind energy of the region towards the main consumption centers. This project cost $147 million and included 270 kilometers of transmission lines and the expansion of 3 substations for the northern area of the country. The project has high social commitment and includes the latest technology to optimize space, minimize losses and reduce the environmental footprint. Next. Aligned with our strategy to be a relevant player in energy transition, in Colombia, we enabled 2 solar farms contributing to reliability and capacity of energy supply in the Colombia Caribbean. In the Atlantic Coast, we connected the Guayepo III Solar Farm to the Sabanalarga substations. It's of 200 megawatts and will generate enough power to supply about 766,000 people. While in Valledupar, we connected 3 solar farms of 19.9 megawatts each to add almost 60 megawatts of clean energy for the country and the region. Both cost about COP 55 billion. Next, let us look at expansions, reinforcements and improvements. We are constantly implementing reinforcements and improvements of the grid to keep it at optimum levels and to continue providing reliable service. During the quarter, we commissioned 22 reimbursements for the grid of ISA ENERGÍA BRASIL, and we were awarded 2 projects in Colombia. We were awarded 2 expansions. Next, please. We chose the Colombian Atlantic Coast to drive the new business of energy solutions, one of the fundamental pillars of our ISA2040 Strategy, which can represent about 23% of our investments, we have more than 40 years operating in the region and more than 100 municipalities. So with this new bet, we aim at the segment of energy solutions with solar farms for large consumers and to store energy, which has high potential in the country. Next. We will be resetting the energy business to focus and consolidate in a single subsidiary, the energy transmission in Colombia. This plan has to do with the challenges of the business and opens new opportunities to consolidate our new business, Intercolombia. Transelca will continue being the owner of transmission assets and obtaining the approval from CREG, while Intercolombia will be in charge of the construction, administration, operation and maintenance. These changes will give us benefits such as consolidation of capabilities, a new Intercolombia that will exclusively focus on the transmission business for the operation and maintenance of high-voltage infrastructure and a new Transelca for the new businesses from the Colombian Atlantic Coast, as I mentioned before. We are beginning a transformation business that will allow us to have the biggest capacities and implement efficiencies to become leaders in energy transition. Next. Moving on to sustainability. We were awarded 2 first places in the Regional Energy Integration Commission, CIER, 2025 awards in Colombia. Conexión Jaguar won the first place in the decarbonization category, and we got another award in the innovation platform category. The CIER awards recognize initiatives that transform the energy sector through innovation, social and environmental impact and value for society. During this quarter, we were included in the list of Forbes of the 50 companies leaders in sustainability in Colombia in 2025. In this list, Forbes recognize the companies in Colombia that have shown their commitment to sustainability, show concrete operations, and they consider that sustainability is an opportunity to create value on a long-term basis. Next, honoring as well the commitment we made at the COP16, we implemented the first of 2 -- more plants and native species at the Moorland of Chingaza to host 4,500 seedlings. Now let's talk about investments. During the third quarter of 2025, investments for COP 1.7 trillion were made to reach investments of COP 4.4 trillion to date, 38% more than what we invested in the same period of 2024. The graph in the middle shows the distribution of CapEx by geography and the one on the right-hand side, the distribution by business segment. So far this year, 90% of investments were in the energy transmission business, 8% in roads and 2% in telecommunications. Brazil represented 60% of CapEx with an execution in 5 projects bidded and awarded by ANEEL in the prior period and advancements of 192 reinforcements, improvements and renovations through the power grid of ISA ENERGÍA BRASIL. Colombia instead represent 18% of the investments ISA with physical developments made in 6 projects awarded by UPME, 5 currently executed by Intercolombia and 16 renovation expansion projects of the installed capacity of ISA. Peru executed 8% of investments, developing projects to enhance the grid and accelerate energy transition. Chile represented 10% of the investments made. In energy transmission, we advanced building 6 projects, including 4 expansions of the grid and 2 bidded, plus it entered the portfolio construction of the Palmas-Centella project, which was awarded the prior quarter. In roads in Chile, we still have the Orbital Sur Santiago Road as well as complementary roads. To end, 4% of the investments were destined to Panama to developments to revamp and maintain the Panamericana Este road. Next. Investments to execute from 2025 to 2030 rise to COP 31.1 trillion. On the left, we can see the distribution by geography and by business segment. It's important to highlight that we expect that these investments once commissioned, will have additional revenue of about COP 1.8 trillion. The investments consist of commitments of investment of bids and awards given in each country where we operate as well as improvements of the ISA grid in Brazil, among others. On the right-hand side, you can see the annual projections of the execution of these investments. The total of 2025 of COP 6.5 trillion includes the COP 4.4 trillion that we invested until September. Today, we advanced in the construction of 34 projects distributed at 31 projects for energy transition and 3 on roads, which add to about 5,153 kilometers of lines and interventions of 296 kilometers of roads. So now let's give the floor to Jaime Falquez, who will explain the financial results. Next slide, please. Jaime Falquez: Thank you, Jorge. Let's look at the next slide, please. Good morning, everyone. It's a pleasure to be with you again sharing with you the results of this quarter. I'd like to begin this financial chapter, highlighting the positive performance of our operating indicators, highlighting as well several special events that impacted the financial figures of the quarter and accumulated, but that do not commit the financial soundness of the company nor the execution of its investments framed in meeting the strategy. Let's remember, which were the special events. We have one that took place in the third quarter of 2024, which had an impact that was positive like in Brazil, which recognized the effect of the regular tariff revision, which had a positive net impact in 2024 of COP 875 billion and also an impact on the net profit of COP 207 billion in 2024. In that same quarter of last year, in Peru, we made an adjustment in the estimate of the reserve for major maintenance, which implied a higher EBITDA of COP 173 billion. Now if we look at the third quarter of 2025, we also have a series of special events but with an effect that's different. We see that at the ANEEL Board of Directors, this year, they decided to reconsider the calculations presented to pay the financial Basic grid (sic) [ Network ] of the Existing System component. We talked about this last quarter, which had a negative impact on the EBITDA of COP 594 billion, an effect also on the profit of ISA of COP 140 billion. Also, we still update the reserve of Air-e for a total accumulated COP 233 billion in these 9 months of 2025. Remember, the intervention of Air-e was in September last year. And therefore, in the third quarter, the reserve was much slower. As Jorge mentioned, in addition to these special events, we still increase our pace of investment to honor our commitments to 2030, reaching a total of COP 4.4 trillion from January to September of this year, 38% higher than the same period of the year before. In terms of capital structure, we keep the debt at optimal and efficient levels within the ranges suggested by the rating firms to keep our international investment degree. This is reflected in indicators like the EBITDA debt, which closed at 4.1x. To complement the above, this third quarter, Moody's ratified the risk rating of ISA as an international issuer at a rate of Baa2 with an outlook that's Stable. And it's an international rating. And remember that Fitch in March already ratified the rating of BBB also on the international scale. So with these relevant events, let's look at the next slide, please. When we look at the results on this slide, we can see the main figures for the first 9 months of the year. where we can see the EBITDA on the top of the slide and net profit on the bottom. When it comes to the same period compared to last year, the EBITDA was at COP 6.6 trillion, which shows a reduction of 13%. And in the middle, you can see the operating performance without keeping in mind the special events of 2024 and '25 that I just mentioned in the highlights. In this context, it's important to highlight the EBITDA that grew from 13% compared to the same period of 2024, explained by the commissioning of new projects, new revenue, also the positive effect of the contractual scalers, which is the update of rates in different countries and concessions because of macroeconomic effects and index that recognize the inflations, also higher revenue from co-controlled companies and higher revenues also from road concessions. In terms of the distribution of EBITDA accumulated by segment, we can highlight that Energy Transmission has a share of 83%, Roads 15% and Telecommunications, 2%. As far as the net profit, earnings of the semester added up to COP 1.9 trillion, reflecting a decrease of 17% compared to the same period of the year before because of the special events that I just explained. Excluding these events, the net profit generated by the operation would have increased 7%, explained mainly by the higher EBITDA, which I told you about and contrasted by the higher income tax and more financial expenses because we financed projects underway. On the bottom right of the slide, you can see the distribution of net profit by country. I'd like to add this slide that our operations have a positive performance. We are driving our projects, generating new revenue and updating our revenue according to applicable contractual scalers. So let's look at the next slide, please. In terms of the balance sheet, at the end of September, we can see our sound financial situation with assets COP 77.7 trillion, which showed a slight increase compared to December of 2024. Net movements of the asset are explained by the development of the construction of projects, higher yields of the concessions, which are partially compensated by the conversion effect to the Colombian pesos from the results of different countries, the decrease of cash flow as a result of the payment of dividends, the debt -- service of the debt and CapEx disbursements made. In terms of liabilities, these decreased 0.5% compared to the end of 2024, mainly explained by the lower effect by conversion and compensated with higher financial liabilities, which support the new projects to finally have an equity of COP 17.8 trillion with a stable performance compared to what we saw in December 2024. And this really obeys the -- because of the dividends decreed and the compensation of profits that we're seeing this year. Also, the minority interest grew 8%, driven by the results of Brazil and Peru so far this year, added to the effect by conversion. Next slide, please. So we could talk about the debt. As of September 30, 2025, the consolidated financial debt ended at COP 34 trillion, COP 1.5 trillion below what we saw at the end of 2024. The net movement of the debt of COP 506 billion is mainly explained by the effect of conversion, amortizations according to the schedule of payments, the issuance of debentures in Brazil, remember that the debentures are papers of debt in the capital market local and disbursements received according to the investments plan. Among the main operations of debt during the first semester of this year, we can summarize that ISA ENERGÍA BRASIL issued debentures to cover needs of investments for a total of BRL 1,980 million, which is equivalent to COP 1.4 billion. In Colombia, disbursements for the investments plan for COP 400 billion. In Peru, disbursements of bank loans of $22.5 million. And lastly, in Chile, ISA Vías Chile received a banking loan disbursement for an equivalent in Colombian pesos to COP 350 billion, mainly for contributions to new projects, especially Rut del Este in Panama. With regards to the indicator of the net profit over EBITDA, it closed at 4.1x, showing that we have proper indebtedness levels with a mean life of our debt of 9.03 years. And this is really aligned with the nature of our businesses on a long-term basis, keeping this way the stability and strength of the company's equity. So with this, let's give the floor to Jorge, who will give us some closing remarks. Jorge Carrillo Cardoso: Thank you, Jaime. Let's look at the next slide, please. I'd like to end this call highlighting that we are strengthening our structure and capabilities in Energy Solutions to prepare to be major players in energy transition. We keep a sound and growing operating performance, gaining new bids and executing our investment commitments. So far this year, we have an EBITDA of COP 6.6 trillion and a net profit of COP 1.9 trillion. We are still recognized because of our management and actions in favor of sustainability, which is fundamental for our strategy. We've increased the investment pace according to our strategy and meeting the commitments, which by 2030 will add to COP 31.1 trillion. We have financial health to continue growing and to have an investment degree rating. Thank you again for joining us today. So let's begin our Q&A session. Mateo Toro: Thank you, Jorge. Let's begin then the Q&A session. And let's begin with a question made by Florencia of MetLife. Could you give us an update on INTERCHILE and the sale of the telecommunications business? And for this, we'd like to thank Jorge Carrillo, if you could begin talking about the telecommunications business and then Gabriel Melguizo to give us an update on the Chile. Jorge Carrillo Cardoso: Sure, Mateo. In terms of telecommunications, we're still following our 2040 strategy. And as an update to date, we have not accepted any offer that we've received. Mateo Toro: Thank you, Gabriel. Could you talk about INTERCHILE? Gabriel Melguizo Posada: Thank you, Mateo. Good morning, everyone, and thank you, Florencia, for your question. Florencia, and for all, we have an update of INTERCHILE in several fronts. First, regarding the shutdown, we're convinced as we've said -- as we've heard the National Coordinator of Chile say that the assets of transmission of ISA ENERGÍA CHILE or ISA INTERCHILE was not the cause of the massive shutdown on February 25, 2025. On August 4, the superintendency of Energy of Chile charged against the national grid and 8 companies of transmission energy because of their very eventual responsibility of the massive shutdown in February. In this process, the superintendency made 2 charges against ISA ENERGÍA CHILE, and we presented our discharges. The other players involved also presented their defense. And with this, the superintendency should issue resolutions and eventually determine the sanctions. And there is no date for that yet. That's when it comes to the shutdown of February 25 of this year. Now when it comes to the business, INTERCHILE continues growing. You know that we have a big project there. And it's going very well underway. We have other projects with new technologies, Palmas-Centella is a project with new technologies with flow deviators, which really helps for the energy transition. And let's not forget that we are also part of a consortium in Chile that we're building the line of direct current that goes from Santiago to Chile to the north to the Atacama Desert. And it's assumed that it's the largest energy transmission project there. So we could update you on this, this way, Florencia. Thank you for your question, again. Mateo Toro: Thank you, Gabriel, and thank you, Florencia, for your question. We have a first question from Andrés Duarte. He says, you reserved COP 234 million of Air-e. What is the -- what do you expect for next quarter between you, ISA Colombia and Transelca? Let's listen to the answer. Jaime Falquez: Thank you, Andrés, for your question. The pace of invoicing of Air-e consolidated of the companies in Colombia is of about COP 33 billion by month, of which 14%, which corresponds to Conexión has been paid. So the accounts receivable monthly that we've reserved is at COP 28.4 billion. We're saying that by quarter, we're reserving about COP 85 billion, which is, if we continue with the trend, potentially, we can be accumulating this figure by the end of the year. Mateo Toro: Thank you, Jaime, for your response. Next question from Andrés as well, and it's for Jorge Carrillo. Can you please repeat or expand on what was said early on that 33% of the CapEx could be represented. He wants to see if he understood well. Jorge Carrillo Cardoso: Thank you, Andrés. Yes. When we created the 2040 strategy, we talked about a figure close between $25 billion and $30 billion, of which 42% of that will be destined to the energy businesses, which consists of self-generation, photovoltaic and storage and on large scale. So the percentage is correct. Mateo Toro: Thank you, Jorge. Next question, also from Andrés. He asks, when do you expect to make the first bid of storing -- of electrical storage in Colombia? How have you been doing with that technology in Brazil? Jorge, could you give us -- help us here with these questions? Jorge Carrillo Cardoso: Let me begin talking about Brazil. This is one of the best projects because of its effectiveness and its execution. This project is set in Registro in Brazil, and it was going to help with the peak demand, and it was very, very effective to the point that's become a place where everybody is visiting, regulators and even competition because they want to see the storage in operation. This was done very quickly, and it surpassed the regulators' expectations, and we're very happy to be pioneers using this technology in Brazil, and we plan to do it in the region. In 2021, this bid was not given to ISA. However, we are aware that it hasn't been able to begin the execution. There is a new project, however, from the CREG to regulate the storage. And this, of course, will open new opportunities for ISA and its companies at least in Colombia. Mateo Toro: Thank you, Jorge. We have another question from Jorge. Sorry, I'm not giving the name of the company, and it's in 4 parts. Let me just read one by one. The first, are there news of the sale of the roads business? Jorge, this -- let's hear your answer first. Jorge Carrillo Cardoso: Sure, again. First, remember what's part of the strategy? Let me begin by saying -- or the businesses that have a disinvestment were declared like in that case, in telecommunications. In the 2040 strategy, we have 2 pillars that are in effect to increase the road business strategically and to dynamically move our portfolio that includes vehicles and businesses. We're working on both pillars. We do observe that there is a particular interest to explore or that we've heard at least interest to explore in the roads business. But right now, we're just listening to their interest, but we're still determined to strategically expand this business. Mateo Toro: Thank you, Jorge. Second question, at what stage is the possible commissioning or operation of the energy transition in Argentina buying Enersa? Jaime, could you help us? Jaime Falquez: Thank you, Jorge, for your question. Within our 2040 strategy, it's important to highlight that indeed, the energy transmission business is still one of the pillars in terms of the region. So we're always evaluating opportunities and new geographies. Now for this case that you're asking us about, Jorge, we have nothing specific right now on that opportunity. Mateo Toro: Perfect. Jaime, thank you. Next question, also from Jorge. We have others, but let's answer his. Tell us about the development phase of the project in Panama. Jorge Carrillo Cardoso: Jorge, thank you for your question. When it comes to Colombia Panama, there are several things to say. First, for a project like this overall, in all of the regional integration processes, we need the will and commitment of the governments at very high level. So what we can say since 2024, the presidents of both countries have been confirming not only the strategy of this project, but explicitly, they've agreed to elevate this initiative and turn into a high-level political mandate. And this is in a major role for all the energy authorities. And we've had bilateral meetings throughout the year. The last one was made -- held in September. When it comes to that mandate and commitment, the next topic required to make a project like this is regulatory. And what's happened so far, I think you've seen in the media that both -- regulators of both countries enacted an agreement, which basically determines the frame in which we can develop the harmonized scheme. We're working together to have specific definitions and particularly to determine the interconnection, keeping in mind what was enacted in 2011, which will have some amendments. That's something we're working on. And thirdly, has to do with the technical studies made on this matter. As we've said in other calls, the basic studies have been completed. And now we are making an assessment, especially in Colombia, we have the environmental impact study. We're replying from the authorities with several requirements. And in Panama, they are answering some preliminary comments that their Ministry of Environment is making, and this will be turned in, in November. The expectation with the studies completed and discussions made with the authorities to have the environmental license next year. Mateo Toro: Thank you, Andrés, for your answer. Let's continue with the next question from Juan Felipe from Credicorp. He says, could you tell us about the schedule when it comes to your role in Energy Solutions? When do you see the changes between Transelca and Colombia? And why did you choose this business? Jorge, could you give us an answer? Jorge Carrillo Cardoso: Thank you. There are several things here. We are waiting for an authorization from the CREG, and it's a proceeding that shouldn't have any problems. And we hope to have news from this soon. No matter when we get the answer from the CREG, again, we're optimistic because it's well backed technically. This decision will be materialized as of January 1, 2026. So after that date, we'll have a single company for transmission that will represent the assets of Transelca and ISA, and it's called Intercolombia. So Transelca, in this case, will change its mission and will prepare to be our vehicle or executor for new energy businesses. Why in the Atlantic Coast? Because that's the base of Transelca. It's in Barranquilla, but also the Atlantic, it's a hub of renewable energies today in Colombia. So it made strategic sense to place it there. The business began already, although it's part of the 2030 strategy, and it was ratified in the 2040 strategy. Now we are presenting offers to different clients, and we are waiting to announce them to the market on a short-term basis. Mateo Toro: Thank you, Jorge. Let's continue with the next question from [ Simón Díaz ]. He says, thank you for the information. Although the levels of leverage are at optimal -- are optimal, what do you expect from the company's debt level? Jaime? Jaime Falquez: Thank you, Simón, for your question. It's important to highlight here that we have access to all of the financing sources, and that opens opportunities to keep financing ourselves in all the markets because we have a lot of access to the capital market. And this gives us alternatives of terms that adjust to the profiles of the different projects that we'll be financing. Also, we have the chance to finance ourselves in the currency of the revenues in each of the geographies. And along with the financing growth, we have operations to handle debt, and we'll be anticipating the maturities to always have an amortization profile that's healthy and proper. We're closing operations of refinancing in the capital market this week in Peru, we'll see operations in Chile and the different geographies that will always allow us to have a healthy profile for financing. Indeed, in terms of the balance, less than 10%, I would say, 7% of the total debt is current. The rest is long term. Mateo Toro: Perfect. Jaime, thank you. Next question from Simón Díaz. Could you give us an update on the ISA's businesses in Peru? Mr. Melguizo, could you give us a hand with this? Gabriel Melguizo Posada: Yes. Thank you, Mateo. And thank you for the question. Well, in Peru, we are doing well overall. You know that we are incumbent in electric energy transmission with a long infrastructure of energy transmission and with a global performance. Now if we look at projects, there's one that's very important that we're building right now, which is known as the 12 Yapay, which goes from Tocache to Celendín and from Celendín to [ Trujillo ]. Those are -- that's a substation. It's a project of about 1,000 kilometers, about $1 billion worth. And it's a project that right now is being built in terms of designs and contracting. In Tocache-Celendín, we completed the environmental impact studies at Celendín [ Trujillo ], we will present the study in the first quarter of 2026 with the resolution of a new environmental conservation area that is part of the phase -- the first phase. So you can say that this one is one of the main projects of transmission in the region. It's firm. And we also continue with the other projects like [ Grupo Uno ]. So we're doing very well in Peru in transmission. Thank you so much for your question. Mateo Toro: Gabriel, thank you for your answer. And with this question, we end the Q&A session. We'd like to thank you so much for joining us in this presentation of the earnings call of the third quarter of ISA and its companies. Again, thank you. See you soon. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Operator: Good day, and thank you for standing by. Welcome to the Summit Hotel Properties Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Kevin Milota, Senior Vice President, Finance. Please go ahead. Kevin Milota: Thank you, operator, and good morning. I'm joined today by Summit Hotel Properties' President and Chief Executive Officer, Jon Stanner, and Executive Vice President and Chief Financial Officer, Trey Conkling. Please note that many of our comments today are considered forward-looking statements as defined by federal securities laws. These statements are subject to risks and uncertainties, both known and unknown, as described in our SEC filings. Forward-looking statements that we make today are effective only as of today, November 5, 2025, and we undertake no duty to update them later. You can find copies of our SEC filings and earnings release, which contain reconciliations to non-GAAP financial measures referenced on this call on our website, www.shpreit.com. Please welcome Summit Hotel Properties President and Chief Executive Officer, Jon Stanner. Jonathan Stanner: Thank you, Kevin, and good morning, everyone. We were pleased with our overall execution in the third quarter despite the challenging operating environment, highlighted by our ability to grow market share, prudently manage expenses and strategically invest capital across the portfolio to drive future operating performance. In addition, subsequent to quarter end, we completed the sale of 2 hotels at attractive valuations to further reduce debt, fund the accretive share repurchase activity we executed in the second quarter and enhance corporate liquidity. On today's call, we will provide details on our third quarter results, update our outlook for the remainder of the year, which incorporates sequential improvement in operating trends and highlight our recent balance sheet activities. Our third quarter operating results were largely in line with the overall demand and RevPAR trends we experienced in the second quarter as the lodging environment remains generally stable. However, performance is mixed across segments. We continue to experience meaningful year-over-year reductions in both government and international inbound travel, which has required some remixing of business to lower-rated demand segments. For the quarter, same-store RevPAR declined 3.7%, which was in line with our second quarter results and driven predominantly by a 3.4% decline in average daily rate as occupancy remained essentially flat year-over-year. The pricing sensitivity we first started experiencing in March persisted through the summer, though the majority of the rate decline across our portfolio is being driven by the unfavorable shift in room night mix to lower-rated business. In certain markets, this remixing of demand has been intentional as we strategically targeted discount-oriented segments, including advanced purchase offers to build a stronger base of business and reduce exposure to cancellations and rebookings that tend to occur when pricing softens. While individually, government and international inbound demand represent smaller segments of our overall demand mix, collectively, they account for approximately 15% of occupied room nights in our portfolio. Consistent with the second quarter, demand in these segments was down approximately 20% year-over-year in the third quarter, which combined drove nearly 50% of our year-over-year RevPAR decline. While these segments have been a drag on performance for the past couple of quarters, demand trends have largely stabilized prior to the recent government shutdown, which has driven some incremental pullback in government demand in the fourth quarter. Thankfully, strong midweek demand trends in October have been able to offset much of this softness. And with the successful resolution to the shutdown, we expect a more stable foundation for next year when we will benefit from easier year-over-year comparisons. Hurricane activity in the third quarter of 2024 also created comparison headwinds this year, particularly in our Houston hotels that benefited from Hurricane Barrel-driven demand in July of last year. RevPAR in our Houston hotels declined 17% in the quarter, which reduced our overall third quarter RevPAR growth by approximately 50 basis points. Our portfolio once again delivered strong market share performance during the third quarter as our RevPAR index increased 140 basis points year-over-year to 116%, reflecting solid gains in both occupancy and average daily rate. Our focus on driving out-of-room spend through food and beverage sales, resort and amenity fees and parking charges continues to be successful as non-rooms revenue increased 5.6% in the third quarter and has grown 4.3% year-to-date. Driven by some of our recent capital investments, most notably the transformational renovation of our Oceanside Fort Lauderdale Beach Hotel, we expect non-rooms revenue growth to continue to outperform. Our operating teams also continue to do a terrific job managing expenses in a challenged top line growth environment, particularly related to labor costs. Trey will provide additional details on expense trends and margin performance later in the call, but we were pleased with our ability to manage operating expenses again in the third quarter, which increased only 1.8% year-over-year or approximately 2% on a per occupied room basis. Year-to-date, operating expenses have increased a modest 1.6% on relatively flat occupancy, which has mitigated EBITDA losses. On the capital allocation front, we closed on the sale of 2 noncore hotels subsequent to the end of the third quarter, the 107-room Courtyard Amarillo Downtown Hotel, which was owned in our joint venture with GIC and the 123-room Courtyard Kansas City Country Club Plaza Hotel. These divestitures generated combined gross proceeds of $39 million, which reflects a blended yield of 4.3% based on trailing 12-month net operating income and after consideration of approximately $10 million of foregone near-term capital expenditures. The asset sales represent a continuation of our successful capital recycling strategy that has enhanced the overall quality and growth potential of our portfolio, reduced balance sheet leverage, eliminated significant capital expenditure needs and funded our recent accretive share repurchase activity. Since May of 2023, we've sold 12 noncore hotels, generating over $185 million in gross proceeds and eliminated nearly $60 million of capital expenditure requirements. On a blended basis, the assets were sold at a 4.5% net operating income capitalization rate and had a combined RevPAR of $85, which represents a 30% discount to the remaining portfolio. Over that same time period, we've acquired 4 hotels for approximately $140 million with a trailing 12-month NOI yield of 8.5%, including required near-term capital needs. The blended RevPAR of our acquisition portfolio was $143 at the time of purchase, which represents nearly a 20% premium to the current pro forma portfolio. In addition, these assets were all acquired within our joint venture with GIC, which produces asset management fees that further enhance our return profile. As I alluded to in the opening, our outlook for the fourth quarter incorporates sequential improvement in operating trends compared to the second and third quarters of this year. As we shift out of the leisure-heavy summer travel months, we are benefiting from relatively stronger business transient trends, which have helped drive -- helped to drive midweek RevPAR growth, particularly in key urban markets. Fourth quarter pace for our pro forma portfolio is tracking approximately 2.5% behind last year, which notably incorporates several difficult special event comparisons that benefited the fourth quarter of 2024 and incremental headwinds driven by the government shutdown. For context, pace for the third quarter was approximately 10% behind last year at this time 90 days ago. October RevPAR on a preliminary basis declined between 2% and 2.5% year-over-year, which represents our best monthly performance since February of this year. It's worth noting that historically, October represents approximately 40% of our fourth quarter revenue and 50% of hotel EBITDA. We currently expect fourth quarter RevPAR growth to actualize down between 2% and 2.5% year-over-year, which would result in a full year RevPAR decline of between 2.25% and 2.5%. These expectations should be caveated by the uncertainty created by the U.S. government shutdown. While we have experienced limited negative effects across our portfolio quarter-to-date, the longer-term implications of the shutdown create additional risk for lodging demand broadly, including disruption to air travel. Looking ahead to 2026, we believe the setup is more favorable than it has been in the past several years. Industry expectations remain low and year-over-year comparisons for government travel eased significantly after March 1. In addition, the 2026 World Cup is expected to create robust demand in several of our key Sunbelt and Gateway markets, providing a unique tailwind in June and July next year as we have exposure to 6 post markets, which will feature nearly 60% of the matches to be held in the U.S. Finally, we continue to emphasize the benefits that the cumulative effect of the lack of new hotel supply growth will have on industry fundamentals. With construction and financing costs still elevated, we expect this constrained supply environment to persist, supporting healthy future supply-demand dynamics across our markets. In summary, we remain optimistic on the outlook for our industry generally and Summit more specifically. The progress we have made on several of our key strategic initiatives over the past several quarters has enhanced our portfolio, strengthened our balance sheet and created meaningful embedded future earnings growth as demand trends normalize. With that, I'll turn the call over to Trey to discuss our financial and operating results, recent capital markets activities and guidance in more detail. William H. Conkling: Thanks, Jon, and good morning, everyone. Third quarter same-store RevPAR declined 3.7% year-over-year, driven primarily by average daily rate declining 3.4% as reductions in inbound international travel and government demand resulted in a shift in our room night mix to lower-rated segments. Third quarter adjusted EBITDA was $39.3 million, and adjusted FFO was $21.3 million or $0.17 per share as the company continues to benefit from lower interest expense and a lower share count resulting from our accretive share repurchases consummated in the second quarter. From a market perspective, Summit has significant exposure to 3 of the 5 top 25 U.S. markets that generated positive RevPAR growth in the third quarter, Chicago, San Francisco and Orlando, where we own 7 hotels in total. Chicago generated strong growth despite the difficult comparison to last year's Democratic national convention as a solid convention calendar and multiple special events resulted in 8% ADR growth for the quarter. We expect that Chicago will continue to outperform as it has done all year. Orlando remains a standout performer, supported by robust leisure demand and the continued strength of the theme park ecosystem. The recent opening of Universal's highly anticipated Epic Universe Park is driving increased visitation among both new and repeat visitors, a trend we expect to continue for the foreseeable future. Combined with a robust convention calendar and recent renovations at 2 of our Orlando hotels, we anticipate 2026 to be a strong year for our Orlando portfolio, supported by a healthy balance of leisure and group demand. In San Francisco, hotel performance continues to benefit from ongoing public and private efforts to enhance the city's overall environment and improve traveler perception. While inbound international and tech-related demand remains below pre-pandemic levels, we are encouraged by improving convention trends, a gradual return of business travel and event-driven leisure demand. We expect these trends to continue into the fourth quarter, which will see outsized RevPAR growth given the calendar shift of the Dreamforce citywide event. Our newly renovated Hilton Garden Milpitas also continues to perform well, reflecting ongoing momentum in corporate transient demand, particularly from technology sector accounts concentrated in the Silicon Valley submarket. Finally, our Nashville hotels delivered a very strong third quarter, with RevPAR increasing by over 6% on the strength of an 11% increase in ADR. This significantly outperformed the overall market for which RevPAR declined nearly 4% year-over-year and reflects the positive momentum created from renewed revenue strategies at our 2 hotels in the market. Food and beverage and other non-rooms revenue outperformed in the third quarter with same-store revenue growth of 5.9% and 5.5%, respectively. Food and beverage revenue continues to benefit from the re-concepted bar and restaurant offering at the Oceanside Fort Lauderdale Beach, our recently introduced pay-for breakfast program at certain hotels and other ongoing initiatives to drive better breakfast and beverage sales. Other non-rooms revenue was driven by strong growth in resort and amenity fees as well as parking income. We are pleased with the growth of these ancillary revenue streams and are working with our asset managers to identify additional opportunities to continue these successes. As John previously mentioned, we remain intensely focused on expense management with third quarter pro forma operating expenses increasing 1.8% year-over-year or approximately 2% on a per-occupied room basis as the company continues to identify operational efficiencies. Our asset management team and hotel managers have successfully focused on managing wages, reducing reliance on contract labor and improving employee retention. Hourly wages, excluding contract labor, increased 2% compared to the third quarter of 2024. The company also continues to benefit from reductions in contract labor, which declined by 8% on a nominal basis versus the third quarter of 2024. Contract labor represents 10% of total labor costs, and we believe there is opportunity for incremental improvement given the softening of the labor market. Finally, we continue to see improvement in employee retention, which results in improved productivity, reduced training costs and greater guest satisfaction. Turnover rates in the third quarter have declined 40% from peak COVID era levels, which highlights the ongoing stabilization of the labor market. As it relates to our nonoperating expenses, we benefited from lower interest expenses in the quarter, which was offset by higher property taxes. We expect that trend to continue through year-end, given the difficult comparisons to 2024 when we benefited from a number of successful property tax refunds. Overall, we are encouraged by our ability to control operating expenses and expect to manage operating expense growth to low-single-digit increases, which we believe further highlights the strength of our efficient operating model. From a capital expenditure standpoint, through the first 3 quarters of the year, we invested $56 million in our portfolio on a consolidated basis and $49 million on a pro rata basis. Recently completed and ongoing renovations include the Scottsdale Oldtown Hyatt Place, Residence Inn Atlanta Midtown, Hampton Inn Dallas, Homewood Suites Midland and the Residence Inn Mede. It is worth noting that over the past 3 years, we have invested over $260 million in capital expenditures on a consolidated basis as we are committed to maintaining a best-in-class portfolio. Furthermore, this capital investment affords us the flexibility to preserve optionality on certain renovations without risking meaningful downward pressure on overall operating results. Turning to the balance sheet. We continue to be proactive in extending maturities, reducing borrowing costs and enhancing corporate liquidity. During the third quarter, we refinanced our $396 million GIC joint venture term loan that funded the acquisition of the Newcrest image portfolio in January 2022. The new $400 million term loan has a fully extended maturity of July 2030 at an interest rate of SOFR plus 235 basis points, which represents a 50-basis point reduction in spread versus the prior loan. After closing the loan, we entered into a forward-dated $300 million swap that fixes SOFR at 3.26%, which will accretively replace the $300 million of existing swaps priced at 3.49% and set to expire in mid-January 2026. In February, we intend to fully draw our $275 million delayed draw term loan to retire the $288 million of convertible notes maturing in the first quarter of 2026. Pro forma for this refinancing, we have no debt maturities until 2028. Due to our interest rate management efforts, our interest rate exposure continues to be effectively hedged with a swap portfolio that has an average fixed SOFR rate of approximately 3% and 75% of our pro rata share of debt is fixed after consideration of interest rate swaps. When accounting for the company's Series E, F and Z preferred equity within our capital structure, we were 80% fixed at quarter end. With ample liquidity, an average interest rate of 4.5% and an average length to maturity of nearly 4 years when adjusting for our recent refinancings, we believe the company is well-positioned to navigate near-term volatility in operating fundamentals as well as to take advantage of potential value creation opportunities. On October 31, 2025, our Board of Directors declared a quarterly common dividend of $0.08 per share. which represents a dividend yield of approximately 6% based on the annualized dividend of $0.32 per share. The current dividend rate continues to represent a modest payout ratio of 38% based on the company's trailing 12-month AFFO. The company continues to prioritize striking an appropriate balance between returning capital to shareholders, investing in our portfolio, reducing corporate leverage and maintaining liquidity for future growth opportunities. While we remain confident in the long-term fundamentals in our portfolio, near-term results are being negatively affected by increased price sensitivity and continued macroeconomic volatility. We currently expect fourth quarter 2025 RevPAR to range from minus 2% to minus 2.5% as operating trends demonstrate sequential improvement from the second and third quarters of this year. Operating expense growth is expected to range from 1.5% to 2% for the full year. It is worth noting that the recent sales of the Courtyard Amarillo and Courtyard Kansas City will result in approximately $400,000 of foregone pro rata hotel EBITDA in the fourth quarter, representing the date of sale through year-end. From a nonoperational perspective, we expect full year pro rata interest expense, excluding the amortization of deferred financing costs to be $50 million to $55 million, Series E and Series F preferred dividends to be $16 million and Series D preferred distributions to be $2.6 million. From a capital expenditure perspective, we are targeting a full year 2025 spend of $60 million to $65 million on a pro rata basis. The previously referenced nonoperational estimates do not include any additional acquisition, disposition or capital markets refinancing activity beyond what we have discussed today. Finally, the GIC joint venture results in net fee income payable to Summit covering approximately 15% of annual pro rata cash corporate G&A expense, excluding any promote distributions Summit may earn during the year. And with that, we will open the call to your questions. Operator: [Operator Instructions] Our first question comes from Austin Wurschmidt with KeyBanc Capital Markets. Joshua Friedland: It's Josh Friedland on for Austin. I wanted to ask about leisure demand trends across your portfolio. Do you expect further normalization or softening? Or has it reached a point of stabilization in your view? Jonathan Stanner: Josh, this is Jon. Look, I think we definitely felt some softness on the leisure side over the course of the summer. It does feel to me like it has stabilized. And I think one of the things that we called out in our prepared remarks is that part of what's driving better results in October, and I think a more constructive outlook for the fourth quarter is better midweek performance, particularly in urban markets. And some of that is the transition outside away from leisure towards a more BT-oriented customer. I do think that leisure demand trends are largely stable, and I wouldn't expect any further deterioration of those trends in the fourth quarter. Joshua Friedland: That's helpful. And as you look into next year, I know you called out a couple of markets in the opening remarks, but which markets are you most optimistic about? And kind of what factors are driving that confidence? Jonathan Stanner: Yes. I mean I think as we look into 2026, I mean, clearly, I think we believe the World Cup is going to be a large driver of demand. And as we alluded to, we've got 6 markets that will benefit from the World Cup, Atlanta, Boston, Dallas, Houston, Miami and San Francisco. San Francisco is also going to host the Super Bowl next year. We think that Boston will benefit from kind of the America's 250 celebration. We'll host the Final 4 in Indianapolis next year. So, we do have a portfolio that has a fair amount of exposure to some of the special event-driven demand that we think will be tailwinds to our performance as we look into '26. Operator: Our next question comes from Chris Woronka with Deutsche Bank. Chris Woronka: I guess my first question was kind of related to government and I guess you say government adjacent or government contract. Can you give us a sense, how does that -- what are the booking windows on that? What does the pricing look like versus kind of your, I guess, you want to call it blended portfolio or corporate, whatever you use the best comp for? Just trying to square up what -- how that's going to -- when things open up again is how immediate and how significantly you might feel the impact on the upside? Jonathan Stanner: Yes. Look, government -- the answer on rate is really a market-specific question. And so, there are certain markets where per diem rates are really attractive and we take as much business -- as much of that business as we can take. There are other markets where it ends up getting yielded out when you've got stronger demand. I'd say, overall, our government rates are attractive. And I don't think that the booking window from a transient perspective is any different than the other transient -- the rest of our portfolio's transient window. And I would say the same thing on the group side. I think what's important to point out is it's really the pullback in demand more than it is the pricing dynamics that are forcing this remix. And so, when you look at channel mix or you look at segmentation mix, what you're seeing in the second and third quarter is a heavier emphasis and more business being driven through discounted channels. And some of that is being driven by, again, the lack of demand we've seen from government and international inbound demand. Those 2 -- we said this in the prepared remarks, but those 2 segments have accounted for about half of our RevPAR reduction year-over-year. And so, not only did we lose the demand, but again, it's forcing this remixing of business towards more discounted channels. And again, that's putting some pressure on rates year-over-year. Chris Woronka: And then as you think about World Cup next year, I mean, we understand that a lot of the negotiations are already done, hotels are booked or soft booked in these markets pretty full. You guys have 6 markets, I think 20-some hotels. Is there any way -- how are you guys thinking internally about the, I guess, RevPAR uplift from that. But also, I think on the other side, we've also heard that FIFA requires pretty loose cancellation policies and then there's kind of the debate about what happens in the market before and after the matches come through. So just how are you kind of constructing that internally in terms of potential upside and how much you might underwrite when you give us your initial guidance in, I guess, February or March? Jonathan Stanner: Yes. Look, I think the first thing I would say is we do expect a really nice lift in many of these markets from the demand that's created. Obviously, there's uncertainty on who's going to be playing in which markets. And so that will feed into some of our revenue management strategies around the event. And similar to how we've handled Super Bowls in the past, what we often will do is we'll create a base layer of group demand. I'll give you an example in Dallas, it's going to be the media headquarters for the event, and we've got 4 hotels really proximate to the convention center in downtown Dallas. We'll be able to layer in a base layer of group demand around that event that will insulate us a little bit around who's playing and what games there are. I think without question, you're going to see pretty significant lift in all of these markets in and around the games and in and around kind of all of the pre-game festivities. There certainly could be some demand patterns that change depending on who's playing. And so, we're going to want to revenue manage around those dynamics. And part of that strategy is going to be based on creating a base layer of demand that's in-house prior to getting closer to the actual matches. I want to be careful around trying to quantify what we think that lift is. We're obviously going through our budget process now other than to say, again, we think the setup in those 6 markets where we do have meaningful exposure is going to be meaningful for us next year. Operator: [Operator Instructions] Our next question comes from Michael Bellisario with Baird. Michael Bellisario: Jon, do you want to dig into business transient in October, maybe just more specifically, any commentary or color about Tuesday, Wednesday nights, the rate or occupancy pickup? And then any -- excuse me, also commentary on November and November base, what you're seeing so far looking out 30 days, that would be helpful. Jonathan Stanner: Yes, sure. Look, as we said before, despite the fact that there's been some incremental demand challenges on the government side related to the shutdown, our October results are going to finish between 2% and 2.5% down year-over-year, which is a sequential improvement from what we saw really all through the third quarter. A lot of that, as you alluded to, Mike, is driven by the strength of midweek demand. And if I look -- if I isolate Tuesdays and Wednesday nights and just look at occupancies and RevPARs year-over-year, we've actually inflected positively in October, and we were running down 200 or 300 basis points in both the second and third quarter. So, there are some really positive demand trends. A lot of that is really driven by our urban markets. And again, I think speaks to at least the relative strength of business transient travel. As it relates to November, and I'll talk about fourth quarter pace more generally, our pace for the quarter is tracking about 2.5% behind last year. It's fairly evenly balanced between November and December. I'd highlight a couple of things, some of which we highlighted in our prepared remarks, October represents about half of our EBITDA for the quarter. So, a lot of our quarter has been baked with what has been, again, a relatively more positive October. But we are seeing kind of stability of demand patterns and better pacing trends than we have seen over the last several quarters. When I think about what 2.5% means with 60 days left in the quarter, if I go back and look at where we sat 90 days ago for the third quarter, we were down about 10% in pace and actualized, obviously, plus or minus 4% for the quarter. So, we are much less reliant on in the quarter for the quarter pickup and in the month for the month pickup in the fourth quarter than we were, again, 90 days ago. Michael Bellisario: That's helpful. And then just switching gears in terms of transactions and the balance sheet. Just remind us of your near-term capital allocation priorities, maybe how many assets are left to be sold? What are the parameters for buybacks? And then maybe when you think about being even more aggressive on the asset sale front? And that's all for me. Jonathan Stanner: Sure. Yes. Well, look, we're pleased with how we've been able to recycle capital. And I think the 2 assets that we sold in October further demonstrate our ability to be really strategic, but also tactical in how we've gone about asset dispositions. Over the last couple of years, we've sold 12 assets. We're doing it mostly onesie-twosies where we're finding the right often local owner operator that has been a little bit less yield sensitive. And so, we've been able to transact at yields that are sub-5% yields. We've obviously eliminated a lot of capital that was going to need to go into those assets. That has been kind of a common thread that's been consistent across all of those dispositions. There will always be more. There will always be assets in our portfolio that we believe it will be time to recycle that capital into something that's a higher and better use. We've done that really historically through -- since the company has gone public as we've been a very active recycler of assets. And I think you should expect that to continue as we get into 2026. As you alluded to from a share repurchase perspective, obviously, we're very pleased with the execution of where we bought the shares back in the second quarter. The stock is up 20-plus percent since we bought those shares back. We were clearly very focused on getting the asset sales closed in October, but it is nice to have that tool available to us for periods where there's more meaningful dislocations in the equity. Operator: Our next question comes from RJ Milligan with Raymond James. R.J. Milligan: Jon, I wanted to follow up on your comments just now about continued portfolio recycling. Just curious, how much is left to sell or to recycle through? And can you maybe provide a little bit more color on the asset sales in the quarter and what the buyer pool looks like and the buyer pool expectations for 2026? Jonathan Stanner: Sure. Look, I think, RJ, we always have viewed that there's kind of a bottom 10% of the portfolio. And I think when we think philosophically about capital allocation, what we want to make sure we do is we always have a portfolio, a real estate portfolio that is -- that's consistent with where guest expectations and what guests -- where they want to stay. And so, we feel like we constantly have to evolve the portfolio. That's what we've done historically. That's what you can expect from us going forward. And again, I think without quantifying it or identifying specific assets, you should always expect us to be an active recycler of capital. One of the things that we have prioritized is identifying slower growth assets that have significant capital needs. And again, if you look at the dozen assets we've sold over the last couple of years, you'll see lower cap rate deals and assets that needed pretty significant capital expenditures over the next several years. And so again, we've been very pleased with that execution. It is still a very soft transaction market generally. As everyone is well aware, there have not been a lot of deals that have gotten done. A lot of that, I think, has been driven by some of the uncertainty on the fundamental side of the business and the lack of RevPAR growth that we've seen over the course of the second and third quarters. We do expect that to improve as we get into the later parts of this year and into next year. But again, our efforts have really been very focused on finding the right buyer in the right market, and I think we've been successful doing that. R.J. Milligan: And then a follow-up on -- I may have missed this, but clearly, government and government-related demand was low post Liberation Day. But I'm curious if you could quantify what the impact was in October with the incremental government shutdown and how much that contributed? Jonathan Stanner: Yes. Government has been running down about 20% year-over-year really since Liberation Day. Our October numbers are down more than that. They're probably down 30% year-over-year, plus or minus in October. It's off of a smaller base, obviously. And so, we haven't felt -- what we haven't seen is a lot of significant cancellations or lack of check-ins on the government side. We are pacing down. But as we've alluded to a couple of times, thankfully, a lot of that softness has been offset by better midweek trends, particularly related to business transient demand. Operator: I'm showing no further questions at this time. I would now like to turn it back to Jon Stanner for closing remarks. Jonathan Stanner: Well, thank you all for joining us this morning. We look forward to seeing many of you at the various industry conferences we have scheduled for later this year. I hope you have a nice day. Thank you. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Hello, and welcome to the Q3 2025 Teva Pharmaceutical Industries Limited Earnings Conference Call. My name is Alex, and I'll be coordinating today's call. [Operator Instructions] I'll now hand over to Chris Stevo, SVP, Investor Relations. Please go ahead. Christopher Stevo: Thank you, Alex. Good morning and good afternoon, everyone. In a moment, I'll hand the call over to my CEO, Richard Francis. But before I do that, it is my duty and my honor to remind you of our forward-looking statements. Today on this call, we'll be making forward-looking statements, and we undertake no obligation to update those statements after today's call. If you have any questions regarding forward-looking statements, please feel free to see our SEC filings under Forms 10-Q and 10-K in the relevant sections. And with that, Richard Francis. Richard Francis: Thanks, Chris, and good morning, good afternoon, everybody. Thank you for joining the call today. On the call today, I will be joined by Dr. Eric Hughes, Head of R&D and Chief Medical Officer; and Eli Kalif, the CFO of Teva Pharmaceuticals. So starting with, as I always do, the pivot to growth strategy. This is a strategy that have guided Teva for the last 3 years, a strategy based on the 4 pillars: deliver on our growth engines, which is all about driving AUSTEDO, UZEDY and AJOVY, our innovative portfolio, stepping up innovation, which Eric will talk to you about, with the great progress we're making across our innovative pipeline, sustained generics powerhouse and the work we've done to stabilize our generics business and then focus the business, and I'll give you an update on where we are with our transformation of Teva, our $700 million cost savings programs as well as an update on TAPI. Now moving on to the actual results. Pleased to say this is our 11th quarter of consecutive growth, up 3% in revenue to $.5 billion, and adjusted EBITDA up 6% and our non-GAAP EPS up 14%. These all compared to Q3 2024. And our free cash flow is just above $0.5 billion. I'm really pleased to say that our net debt to EBITDA is now below 3x for the first time since 2016. Now moving on to the next slide, one of my favorite slides, I have to admit. This is our 11th quarter of consecutive growth after many years of sales decline. And it's worth noting that Q3 '24 was a particularly difficult comparison year where we had growth of 15%. And so to grow 3% over that comp, I think, is a testament to the work we've done on our portfolio and a testament to the teams. Now this puts us on track for our growth targets we set for 2027 to have mid-single-digit growth. So congratulations to the whole team that have made this happen over the last 11 quarters. Now going down a bit more detail, what's behind this $4.5 billion revenue and 3% growth. This growth was spearheaded by our innovative products, and I'm really pleased to say that they are now worth over $800 million for the quarter, and the growth is 33% year-on-year. AUSTEDO grew an impressive 38%, reaching $618 million. UZEDY performed strongly, up 24%, reaching $43 million and AJOVY performed well, up 19% to $168 million. Global generics revenues was up 2% and TAPI was down 4%, reflecting some seasonal volatility. So now I'm going to double-click and go into a bit more detail on all of these areas, starting with AUSTEDO. Now as you know, AUSTEDO was selected earlier this year for CMS for the 2027 price negotiation. And I'm pleased to say that agreement that we've concluded is consistent with our midterm expectations for AUSTEDO that we first laid out back in May 2023. And this means that we can confirm with confidence our 2027 revenue target of $2.5 billion and our peak sales target of over $3 billion. Now let's talk a bit more about AUSTEDO in Q3. It was another strong quarter for AUSTEDO, where the team continues to perform incredibly well. The U.S. reached $601 million in Q3 '25, growing at 38% year-over-year. And this is the first time we have passed $600 million. So congratulations to the team for all their hard work in making this happen, and it really reflects the understanding this team has of the market. We grew TRx 11%, and we continue to see the increasing penetration of AUSTEDO XR. And it's worth reminding everybody again that AUSTEDO XR requires fewer scripts compared to the original AUSTEDO, and that's why it's equally important to look at the milligrams dispensed. And as you can see, these were up 25%. Now as you see on this slide, we've highlighted that with 2026 approaching, we have a good sense of AUSTEDO's 2026 formulary position, and we continue to reflect the balance between preserving value and maintaining access. So based on these strong results in Q3, we can increase our revenue outlook for AUSTEDO to $2.05 billion to $2.15 billion for the year. Now moving on to UZEDY, another exciting member of our innovative family. UZEDY continues to perform well. Momentum remains strong as we continue to address the needs of the mild-to-moderate patients and those beyond who take risperidone. Revenues were up 24% year-over-year, and TRx was up a strong 119%. It is worth noting that revenue growth was partially impacted by a onetime Medicaid gross to net adjustment. Now this does not impact our long-term LAI franchise expectations, and we reiterate our peak sales target of $1.5 billion to $2 billion for the franchise. Now this confidence is rooted in the data. UZEDY's NBRx is significantly above the TRx. As you know, in Q3, we also had an expanded indication for bipolar I disorder. Now to give you more guidance on how to forecast UZEDY going forward, the Q4 implied guidance of $55 million to $65 million provides a cleaner run rate for forecasting going forward due to that gross to net adjustment in Q3. But I want to take a couple of slides just to talk about the excitement we have around our LAI, our long-acting franchise in schizophrenia. And why do we think this $1.5 billion and $2 billion is achievable? Well, it really comes down to the great work that's been done with UZEDY already. The team here has created great traction, as you can see, with 119% TRx growth. We have a great product profile with UZEDY, and we anticipate having a similar strong product profile with olanzapine. But more importantly, the capabilities and the knowledge that has been built here, we have the same people in front of key payers, the same people in front of these key physicians, these key nurse practitioners, health care providers, patient associations, the people who look after the formulary committees. That puts us in a very strong position. And we know and believe there's a significant unmet need in the olanzapine for long-acting treatment. And if you put those 2 together on this slide, we have the ability with UZEDY and our long-acting olanzapine to treat up to 80% of patients who suffer from schizophrenia, whether that's mild to moderate with UZEDY or moderate to severe with long-acting olanzapine. And just to highlight, unfortunately, 4.7 million people suffer from schizophrenia in the U.S. and Europe. So the opportunity for both brands is significant. That's hence the reason why our confidence in the $1.52 billion remains strong. Now moving on to AJOVY. I do love AJOVY. It continues to grow strongly across all regions in what is still a very competitive market. And there's some nice data points here. We are the #1 preventative CGRP injectable in new prescriptions among the top U.S. headache centers, and we are the #1 preventative CGRP injectable in 30 countries across Europe and international. And so we confirm our guidance of $630 million to $640 million. Now staying on innovation. I'm going to touch briefly upon the innovative pipeline, as I know Eric will talk to you about this later, but I'm super excited about this. Why? Because it's near term. These are late-stage assets. Olanzapine, I'll talk to you about the filing of that this year. DARI, the good recruitment that we're seeing to bring that to the market in '27. Duvakitug, starting our Phase III study. Emrusolmin, great recruitment there. But then I look across the right-hand side of the slide, and I see the potential of peak sales, and it's over $11 billion. And I'll remind you, that's just for the indications on this slide. We know that duvakitug and anti-IL-15 will be pursued in multiple indications. So we really have strong growth drivers for the future for Teva. Now moving on to our generics business. Our generics business grew 2% over 2024, and this is fueled by launches as well as the growth of our biosimilar and our OTC business. Now as I reminded you before, we tend to look at this business over a 2-year CAGR just because of the inherent timing of new launches that we have in this business. Now looking at the regions, we had a very strong quarter for the U.S. It grew 7% in Q3, and that was driven by several launches and particularly strong performance of biosimilars as well as some phasing patterns for our generic Revlimid, which I would like to point out, these will not be repeated to the same magnitude in Q4. Europe declined 5%, mainly due to some tough comparisons to the prior year where we had a number of launches and a number of tender wins, which are for 2-year periods. So it's a 1% CAGR for the 2 years. International markets grew at 3% or 12% on a 2-year CAGR. But now I'd like to talk to you a bit about our biosimilars because we're entering an exciting period for our biosimilars portfolio. We have -- now have 10 in-line assets globally and the potential to launch 6 more through 2027. So we're well on track to add another $400 million by 2027 as we forecasted back at the start of the year. And I want to remind you that today, we're growing strongly in biosimilars without substantial launches or revenues in Europe, which is the largest region in the biosimilar market. And our European pipeline will start to convert into launches and revenues and biosimilars will be a more significant driver for Teva overall after 2027. Now moving on to the fourth pillar, focus our business. We made significant progress with the Teva transformation program, and this is something we started at the start of this year. And we made a commitment to realize 2/3 of the $700 million by the end of 2026. And I can tell you we're on track to do that. The reason why I can tell you that is because we're on schedule to hit our 2025 goals, and that sets us up well for the start of next year. But I'll leave Eli to go into a bit more detail later on in this presentation. Now before I hand it over to Eric, I wanted to give you an update on how we're tracking for the 2027 targets, which we are reiterating today. So from a revenue point of view, with the IRA negotiations now finalized, our upcoming launches and the stabilization of our generic business, we estimate that 2025 will end the year with a 3% to 4% growth range, consistent with our '23 to '27 mid-single-digit average growth. On OP, because of the work we've done of driving our innovative portfolio, I remind you, up 33% as well as the progress we made on organizational effectiveness, we are on track to our 30% margin. And this year, we will end around the 27% margin overall. And the net debt-to-EBITDA dropped below 3x, as I mentioned earlier. By the end of this year, we should be around 2.8x, well on track to hit the 2x by 2027. And with that, I will hand over to my colleague, Eric Hughes. Eric Hughes: Thank you, Richard. Now as Richard said, we have a healthy late-stage development programs in our innovative medicines. And we're doubling down on our efforts to execute these studies on time and efficiently. Now beginning with olanzapine LAI, we're on track for our FDA submission later in this quarter. Our DARI program for both adults and pediatric patients is on target for enrollment by the end of this year. Our duvakitug program in partnership with Sanofi has now initiated both our ulcerative colitis and Crohn's disease Phase III studies. Our emrusolmin program has now enrolled the 100 patients that we'll need for our futility analysis by the end of next year, and then enrollment continues to do very well. And finally, our anti-IL-15 program, very exciting program with multiple potential indications in the future, where be reading out our celiac and our vitiligo studies, proof of concepts in the first half of next year. So exciting late-stage programs. But before I go on to those in more specific detail, I do want to have a celebration for the UZEDY team for bipolar I disorder. We had an approval and an expansion of our label, which we're very proud of. This is an innovative approach by the team using the known and well-characterized pharmacology of UZEDY plus the safety database that we have in conjunction with efficacy using a modeling and simulation approach to expand that label for patients suffering from bipolar I disorder. So a great innovative approach, very efficient execution and a great opportunity for patients to get treatment for their bipolar disease. Now on to olanzapine LAI. As we've mentioned, we've actually presented the data, both the safety and efficacy of the full program in Phase III at the 2025 Psych Congress Annual Meeting. It was very well received. Both the safety and efficacy was right where we expected it. And most importantly, we had no cases of PDSS. And that submission is planned for the late half of this quarter. So on track and exciting opportunity for patients in the future. Moving on to our dual action rescue inhaler program for asthma, our ICS/SABA Phase III program. This is the largest study we've run at Teva to date. Right now, we're on track for full enrollment of our adults and our pediatric patients at the end of this year. And remember, the real value here is the fact that in our label, we anticipate to get the pediatrics included, which is 25% of the market. And also, we'll have a dry powder inhaler, which is a simple device to use, simply open, inhale and close. This makes it much more convenient for both adults and particularly the pediatric patients. So a great program right on track. And as I mentioned before, we're very excited to announce that we have now initiated both the ulcerative colitis and Crohn's disease Phase III programs with our partner, Sanofi, for our duvakitug program. This is a very exciting program, very large effort by many people. The ulcerative colitis study is called SUNSCAPE and the Crohn's disease program is called STARSCAPE. And what we're really excited about with this program is the way we've designed Phase III. It includes an open label feeder arm that will enroll patients very rapidly since it's open label and they know they get treatment, but that gets to our safety numbers very rapidly in the maintenance. We have a favorable randomization ratio for the patients to active. We have a rerandomization design, which is really a more feasible or favorable design for multiple doses and is more reflective of clinical practice. And finally, but possibly most important of all, the entire program is based on subcutaneous injections. That's loading dose, induction rate and then maintenance throughout the entire program. So it's a really patient-friendly program, and it's designed to execute quickly. I would add, we were the fastest to transition this MOA from Phase II to Phase III. So it's all about execution now with a great program. So kudos to the team. And on to emrusolmin. I always like to start by saying emrusolmin is enrolling a patient population that is a real unmet medical need. This is multiple system atrophy. And our differentiated molecule is targeting the very beginning of the alpha-synuclein aggregates. We have a very efficient design. Here, you can see it's a 48-week design against placebo. And I mentioned enrollment is going very well, and we've already got the first 100 that will be involved in the futility analysis at the end of next year. So we're right on track, and it's going quickly. We're proud that this has received fast track designation, and we've already got the orphan designation. So more to come. And finally, I just want to touch base on the anti-IL-15 program. This is another great homegrown antibody and program from the Teva laboratories. Right now, we've got it in proof-of-concept studies in celiac disease and importantly, also in vitiligo, which will read out in the first half of next year. But the upside possibility here is multiple different indications. Remember, IL-15 is a key cytokine in the activation and proliferation of NK cells and T cells that's believed to be involved in many different indications that you can see here. So a lot to go with IL-15, but very exciting program, and that also received fast track designation. And with that, I'm going to pass it off to my colleague, Eli Kalif. Eliyahu Kalif: Thank you, Eric, and good morning and good afternoon to everyone. I would like to start today with the following key messages that demonstrate our consistent execution over the last few quarters, including in Q3. First, Q3 results were above solid, driven once again by our fast-growing innovative portfolio. As Richard said earlier, this was our 11th consecutive quarter of revenue growth. Second, we continue to strengthen our balance sheet and specifically reduced our net debt to below $15 billion and expanded our EBITDA, leading to the net debt-to-EBITDA of below 3x for the first time since Q3 2016. Third, we have made significant progress in our transformation programs with approximately half of our planned savings of $70 million for 2025 already achieved by Q3. We are on track to deliver approximately $700 million of net savings by 2027 and achieve our 30% operating margin targets. And lastly, the outcome of the IRA negotiation for AUSTEDO is largely in line with our model expectation and further emphasize our conviction in achieving our revenue target of $2.5 billion in 2027 and more than $3 billion at peak for AUSTEDO. Now moving to Slide 30 to review our Q3 2025 financial results, starting with our GAAP performance. Please note that throughout my remarks, I will refer to revenue growth in local currency terms unless otherwise specified. Similar to the last quarter, I will also refer to certain results from Q3 2024 that exclude any contribution from the Japan business venture, which we divested on March 31, 2025, to help you with the like-to-like comparison of our financial results. Our Q3 revenue were approximately $4.5 billion, growing 5% in U.S. dollars or 3% in local currency. Revenue growth was mainly driven by continued strong momentum in our key innovative products, AUSTEDO, AJOVY, and UZEDY as well as our generics products in the U.S., including biosimilars. This was partially offset by some softness in European generics as well as lower proceeds from the sale of certain product rights compared to Q3 2024. GAAP net income and EPS were $433 million and $0.37, respectively. FX movement during the quarter, including hedging effects positively impacted revenue by $106 million and operating income by $21 million compared to the third quarter of 2024. Now looking at our non-GAAP performance. Our non-GAAP gross margin increased by 120 basis points year-over-year to 55.3%. This increase was slightly higher than our expectation, driven mainly by strong growth in AUSTEDO leading to an ongoing positive shift in our portfolio mix. Gross margin also benefited, although to a lesser extent from a shift in ordering patterns for generics Revlimid in our U.S. generics business, leading to some volume shift from the second quarter to the third quarter as well favorable FX. This strong performance in non-GAAP gross margin largely carried through the non-GAAP operating margin, which increased by approximately 70 basis points year-over-year to 28.9%. This was partially offset by higher planned investment in OpEx and impact from foreign exchange movements. Overall, we ended the quarter with a non-GAAP earnings per share of $0.78, an increase of $0.10 or 14% year-over-year. Total non-GAAP adjustment in the third quarter of 2025 were $478 million. Our free cash flow in Q3 was $515 million compared to $922 million in Q3 2024. This decrease was mainly due to timing of sales and collection as well as higher legal settlement payments, which we have planned for this year and is reflected in our full year free cash flow guidance. Moving to Slide 31. We are making significant progress in our Teva transformation programs through a well-defined and targeted efforts to deliver sustainable margin improvements without compromising our ability to innovate and invest in our long-term growth. These programs are expected to deliver approximately $700 million of net savings between 2025 and 2027, with roughly 2/3 of these savings to be realized between 2025 and 2026. We are well on track to achieve approximately $70 million of initial savings in 2025 with half of it already achieved by end of Q3, demonstrating solid momentum and execution. It's important to remember that the transformation we are driving is not just about reducing the spend. It's part of the journey to transform and modernize Teva into an innovative biopharma company and prioritizing resources towards areas that drive growth and innovation. These transformation efforts, along with the ongoing portfolio shift towards high-growth and high-margin innovative products provide a clear and credible path to achieving our 30% operating margin target by 2027, even as we continue to invest in the business. In relation to these programs, we have recorded approximately $190 million year-to-date in restructuring costs and expected an overall cash outflow of $70 million to $100 million in 2025. Our guidance for 2025 already incorporated the impact of both expected savings and this cash outflow. Now moving to the next slide for an update regarding our strategic intent and the progress and the process to divest TAPI. As we have consistently and transparently shared with you all, we have been in exclusive discussions with a selected buyer for the sale of TAPI. At this time, we have decided not to move forward with those discussions as we were unable to reach an agreement aligned with Teva long-term priorities and interest of our shareholders. While this process did not result in a sale with this initial buyer, recent shift in the geopolitical environment and market conditions reinforce TAPI attractiveness for potential buyers. We continue to view TAPI as a valuable asset, but it's nonstrategic to our pivot to growth priorities. We are now initiating a renewed sale process to explore alternative options and maximize potential value creation. We will provide further updates pending a transaction or other determination. Moving on to our 2025 non-GAAP outlook in Slide 33. Our performance year-to-date reflects consistent execution across our pivot to growth priorities with a solid revenue growth, margin expansion and cash flow generation despite the tough prior year comparables in our generics business. Based on our year-to-date results and with the 2 months left in the year, we are tightening our 2025 outlook range for revenue, operating profit, adjusted EBITDA and EPS. Starting with revenue. Consistent with the direction we shared last quarter, we are tightening the full year guidance range to be between $16.8 billion and $17 billion. Our innovative portfolio continues to perform very well, specifically AUSTEDO, driven by strong demand and our commercial execution. With the strong year-to-date performance, we are increasing our full year outlook for AUSTEDO by $50 million to $100 million to a new range of $2.05 billion to $2.15 billion, reflecting a full year growth of 21% to 27% year-over-year. However, as we discussed last quarter, we expect our global generics revenue for the full year to be flat in local currency compared to 2024. This is mainly due to the tough year comparison deals in the timing of certain launches as well softness in certain markets. Moving to the other elements of our financial outlook. With a strong year-to-date performance, we now expect our non-GAAP gross margin to be at the higher end of our guidance range of 53% to 54%. This implies a slightly lower margin in Q4 compared to Q3, mainly due to generic Revlimid seasonality as the majority of our volume allocation was sold by the end of Q3. We're also increasing the lower end of our non-GAAP outlook range for adjusted EBITDA, operating income and EPS, consistent with our year-to-date results and expected ongoing strength in our innovation portfolio, along with the savings from our transformation programs. While we continue to wait for clarity around potential U.S. tariffs on pharmaceuticals, including the outcome of the ongoing 232 investigation, we are encouraged by the statement so far from the administration regarding possible generics exemptions. Our 2025 guidance continue to already reflect confirmed tariffs that are in place. We continue to expect our operating expenses to be between 27% and 28% of revenue. Our free cash flow guidance range remains the same between $1.6 billion to $1.9 billion. I would like to reiterate that our full year guidance does not include the development milestone related to the Phase III initiation of duvakitug UC and Crohn's indications. That said, to assist you with your modeling, we want to highlight that the expected contribution from this development milestone is dependent on the timing of each of these 2 studies. Based on the current time lines, we expect to earn one development milestone in Q4 2025, with the remainder expected in Q1 2026. For Q4 2025, we expect the first development milestone to contribute $250 million to revenue and approximately $200 million to EBITDA and free cash flow, net of certain transaction-related costs. This first development milestone is expected to contribute approximately $0.14 to the EPS. Now turning to the next slide on capital allocation. Our capital allocation approach remains disciplined and focused on supporting our pivot to growth strategy and strengthening our balance sheet. As I mentioned in the beginning, we are consistently reducing our debt while investing in our go-to-market capabilities and innovation. With the ongoing improvement in our free cash flow, we are on track to reach our net debt-to-EBITDA target of 2x by 2027 and then to sustain around that level thereafter. In addition to our ongoing deleveraging and progress towards an investment-grade ratings, our disciplined execution also position us well thoughtfully evaluate additional ways of returning capital to our shareholders. Finally, before I conclude my review of our third quarter performance, I would like to reaffirm our 2027 financial targets. The outcome of the IRA negotiation for AUSTEDO further emphasize our conviction and provides additional clarity to deliver on these midterm goals. With that, I will now hand it back to Richard for his closing remarks. Richard Francis: Thank you, Eli. Before I conclude, let me remind you of some of the growth drivers that we have here at Teva. As you -- as we expect our innovative portfolio to continue to drive growth beyond 2027, you can see that we have a significant amount of opportunity to do this. Currently anchored on AUSTEDO, which we reiterated our target of reaching more than $2.5 billion in '27 and greater than $3 billion in peak sales based on the conclusion of our IRA negotiations with CMS. Along with the innovative products UZEDY, AJOVY, we will continue to drive our product mix and profitability. But also to build on Eric's remarks, we are preparing for exciting innovative product launches in the next few years, which should set a foundation for growth in years to come. If you move on to my final slide, just some final thoughts. In Q3, in '25, we continue to deliver on our pivot to growth strategy with the 11th consecutive quarter of growth, growing our innovative franchise at 33%. We have a clear path towards our 30% operating margin and our other 2027 targets. We're advancing our innovative pipeline with near-term and long-term catalysts and Teva transformation is well on track to deliver the $700 million in savings we committed to. And with that, I would like to open the floor for the Q&A. Thank you. Christopher Stevo: Thank you, Richard. Alex, if you could -- sorry, Alex, if you could please go ahead with question queue and we ask if you could limit yourself to one question and one brief follow-up, and of course if there's additional time, we're happy to let you back in the queue for more questions. Go ahead, Alex. Thanks. Operator: [Operator Instructions] Our first question for today comes from Dennis Ding of Jefferies. Yuchen Ding: Maybe one on AUSTEDO and IRA. Thanks for the comment and glad to see that you're reiterating the long-term AUSTEDO guidance. I'm curious what additional color you can give in terms of your own internal expectations going into the negotiations and how the negotiated price relates to the current Medicare net price. Richard Francis: Dennis, thanks for the question. Well, as I mentioned on the call, how it met with our expectations, it was in line with what we had forecast when we set the forecast back in May 2023. So we had anticipated that we would be in the list, and we would be negotiating with CMS. And so because of that, that's why we remain very confident about hitting our $2.5 billion revenue. With regard to the latter part of your question about, I think it was net price, we're not going to comment on that, obviously, for competitive reasons. But I'll just reiterate the fact that we believe that we have the ability to hit our $2.5 billion in revenue, one because it's in line with what we forecasted, but I would also like to remind everybody that tardive dyskinesia remains a highly underdiagnosed and undertreated condition. 85% of patients who suffer from this condition are not on therapy. And so we see a great opportunity to help those patients and continue to keep growing AUSTEDO in '26 and beyond, hence, reiterating the $3 billion -- greater than $3 billion peak sales for AUSTEDO. And so I think those are the things I keep in mind as you think about the future for AUSTEDO. Thank you. Operator: Our next question comes from David Amsellem of Piper Sandler. David Amsellem: I had a question on AUSTEDO as well. So your competitor talked on its call about this dosing creep, if you will. In other words, the per milligram pricing structure and higher doses mean more revenue per patient. And what they've said is that health plans are essentially catching on to that and that there is a potential migration over to the competitor product. So I was just wondering if you can give us some color on the pricing structure of AUSTEDO XR and if that's having ramifications in terms of access to AUSTEDO XR. That's number one. And then secondly, how is that going to inform how you're thinking about commercial contracting for '26 and the extent to which you might make more concessions on price just to get into a better access position vis-a-vis your competitor? Richard Francis: Thanks, David. Thanks for the question. I'm not going to talk about what the competitors are saying. I'll focus on what we do here at Teva. And just to highlight, AUSTEDO's growth is much more about treating this underserved market, as I've said in the past, and our ability as a team to constantly execute. And I'll remind everybody, when we started this journey back in 2023, peak sales of AUSTEDO were forecast to be $1.4 billion. And as you see, we're going to exceed $2 billion this year. And that is down to what we've done as a company and the capability we have built. But when it goes to talking about the milligrams per dose, we've been very clear about the benefits of patients taking AUSTEDO XR and how that helps them with compliance and adherence. And this is very much in line with also what was put in our Phase III trial to allow physicians to have the flexibility to get to the patients on the optimal dose. So what we're seeing is just a natural progression from moving from BID to AUSTEDO XR and the physicians having that flexibility to get patients on the right dose. The final part of your question, I think, was about access. And I think I highlighted in my presentation the fact that we're always very thoughtful about how we manage access with value. We've continued to do that with AUSTEDO. We've done that very successfully, by the way, with our other brands in UZEDY and AJOVY. And I think we have a really strong capability for doing that. But I'll go back to what is driving our confidence in AUSTEDO is 2 things. The capability that we have within this team within Teva and the underserved market, 85% of patients who could be on therapy are not on therapy. And those are the 2 things that we focus on. But thank you for the question, David. Operator: Our next question comes from Jason Gerberry of Bank of America. Jason Gerberry: So my question is just on OpEx in 2026. And it looks like the consensus has combined R&D and SG&A kind of at around $4.8 billion, so pretty much flat on a year-on-year basis. Is that consistent with how you see the cost optimizations flowing through the P&L to navigate the Revlimid roll-off? And then my brief follow-up is just, can you comment at all if AUSTEDO XR was included or excluded in IRA? I know that there was a litigation tied to that. And so I'm just wondering if you can offer any clarity there. Richard Francis: So I'll hand the OpEx question -- so thank you, Jason, for the question. I'll hand that to Eli to answer. Eliyahu Kalif: Thanks, Jason, for the question. So the way to think about the development of the OpEx for '26, we always mentioned that from now onwards, as part of the $700 million savings, part of them will go into COGS and -- but the majority will go into the OpEx. And as much as we actually keep growing and able to fuel our profit, you will see us in the range between 27% to 28%. That will not change. But we will actually be able to expand our OP as well our EBITDA. So the way to think about it is that around 2/3 of the $700 million on savings we'll be able to accomplish by end of '26 already, but we will start to see also part of it impacting our COGS. But the main element that will move with the COGS will be actually in '27. But I can tell you that most of the savings we'll be able to accomplish by end of '26 and most of them related with OpEx. And therefore, you should think about the 27% to 28% as a run rate. Richard Francis: Thanks, Eli. And to answer your second question with regard to AUSTEDO XR being included in the IRA negotiations, the answer is yes. Operator: Our next question comes from Chris Schott of JPMorgan. Christopher Schott: Just to shift gears a little bit. Can you talk a little bit about your EU generic dynamics? I know you're facing some tougher comps there this year. But I was wondering if anything has changed in those underlying markets we should be thinking about as we think about kind of the growth going forward? And just a quick follow-up. I know the TAPI process. Just a little bit more color in terms of why restart the process here versus just deciding to keep the asset. Just maybe talk a little bit about just kind of the broader appetite for these API assets in the market right now. Richard Francis: Thanks, Chris. Thanks for the questions. So going to the EU Generics business. If I can take you back to when we started talking about Teva and our generics business back in '23, I can remember explain to everybody, this is a market leader of scale in Europe. And so the ability to grow this business, we should think of it growing around a 2% CAGR rate just because of its scale and size. Now obviously, I was proved wrong in the last 2 years as the business grew higher than that. But that was down to a couple of factors. One is we had more launches over those years as well as we had competitors struggling to supply and because of our manufacturing capability, we could step in. And so those 2 things happen. And I think what you're seeing versus this quarter versus the last year is sort of a similar theme. What we have is more launches that we had in 2023 -- sorry, in Q3 2024. We also had some tender wins, which are 2-year tender periods. And we also had supply issues from competitors. Those were no longer the case. So that's how I think about it. And that's why I go back to think about our generics business over a CAGR -- 2-year CAGR because if you think about a 2-year CAGR, these things smooth out, and that's how we think about it. And as we've had conversations, I always remind people that we think about our generics business going forward in that 2% CAGR period, one, because just of the scale we have. Now that said, one thing I do want to reiterate is our biosimilar business, while getting traction in the U.S., we will start now to launch and we have launched some products and biosimilars in the EU, and that will start to build momentum, more so post 2027, but we have a good pipeline coming through in Europe. And we know that's a mature biosimilar market. And so those are things that are going to start to maybe add to that growth in Europe going forward. But I hope that answers your question. With regard to TAPI, I'll give that question to Eli to talk about why restart it and not keep it. So over to you, Eli. Eliyahu Kalif: Yes. Chris, thanks for the question. So look, we were -- during all the process, we were very transparent, and as we mentioned, we actually decided not to progress with exclusive discussion that we had with a certain buyer. And the reason for that is that we see TAPI as a strategic going forward for Teva in terms of our ability to keep sourcing API when it's actually moving as a stand-alone. You need to remember, it's not just kind of a business that we have on the shelf and you divest it and you move forward, this is strategic for us going forward and our ability to make sure that we are providing additional value on short term and long term to our future progress and growth. It's super important. Turn out that certain elements in terms of the discussion didn't went according to the terms that we view how the deal should move on. And therefore, we made that decision. And also, we need to remember that the market condition now changed. Since we launched this sales process. Recent geopolitical development, as I mentioned, and some trade policies highlight some continued attractiveness for TAPI in terms of the landscape. So therefore, we decided to initiate revised strategic review and review the sales process. And as I mentioned, we'll keep all updated and provide further updates pending the transaction or any other determination around this process. Christopher Stevo: Maybe if I can add, just so Eli is not misunderstood there. When he says it's strategic, what he means is they're one of our largest API suppliers, and we need to ensure that any contract we have has the right terms, not just for the purchaser, but also for Teva going forward, both for our in-line products and our pipeline. Operator: Our next question comes from Ashwani of UBS. Ashwani Verma: Congratulations for the strong update. Maybe just like quickly on the 2026 revenue EBITDA, I wanted to understand like if you can continue to deliver growth on both these metrics just as a part of your long-term goals. We have Revlimid phasing out, but you have pretty meaningful cost savings outlined and also talked favorably about AUSTEDO formulary. And then just as a quick follow-up. So the 3Q AUSTEDO looks pretty strong. Is this primarily like regular way underlying demand? Or is there any type of a onetime benefit in this? Normally, you have like a pretty strong 4Q, but with this reiterated guide, it seems like it's indicating a down quarter in 4Q. Richard Francis: Ash, thanks for your question. So starting on the EBITDA, just to sort of remind you, and I think Eli touched upon this in his remarks, the EBITDA is driven by a couple of things next year. And I think it's important to understand this. One is our innovative portfolio has real momentum. As I said, it was up 33% in Q3. And these are products were all growing. So we continue to see great growth rates in those. And by the way, we've spoken about this in the past. These are very high gross margin products. So that really does help impact the EBITDA. So that's one. And then on the -- one of the slides that Eli and I both showed is on the transformation of Teva and the organizational effectiveness. We are on track to do exactly what we set out to do in '25, and that means that our guide to 2/3 of the $700 million net savings for 2026, we feel highly confident about. So if you just put those 2 things together, that really gives us confidence about our EBITDA. But I would probably take this opportunity to then talk about, well, we have some other things around our generics business where now we've lost generic Revlimid. There are 3 components which help us drive our generics business going forward, and that is our generics, our complex and our OTC. And as we've mentioned in the past, we have the ability to compensate for that generic Revlimid by the end of 2027 because we have those 3 different growth drivers and the scale we have in those 3 different businesses. So I think that answers that part of the question. With regard to the one on AUSTEDO, and I think you talked about the strong Q3 and how does that impact Q4? And was there anything behind that? I think there's just a couple of dynamics in that. Firstly, the fundamentals of AUSTEDO are really strong. It's really important to understand. So as you see with regard to our TRx, our milligrams, our growth rates, I think the team has continued to execute at a high level consistently. And I think we've seen that for quarter on quarter on quarter. Now one of the things I just would mention, and I think I mentioned on the last call, in Q3 2024 and Q2 2024, there was some channel stocking with regard to AUSTEDO XR. So that created a slightly different comparison as well as we had some slight gross to net adjustments in AUSTEDO, which are favorable in Q3 of this year. But if you take those out, it doesn't really change the directory much of AUSTEDO. And so I always think about looking at AUSTEDO over a yearly period, a multi-quarter period because I think we've been consistent in hitting our numbers and hitting our targets, and we're very accurate about that. So that's the way I think about it. So I don't anticipate anything very significant in quarter 4. The one thing that we always manage as well as we can, but it's not completely down to us is the channel. And we've been very disciplined in making sure the channel has the right stock, but obviously, that's something which we don't have complete control over, but we've shown good discipline there. So I hope that answers your questions, Ash, and thanks for the questions. Operator: Our next question comes from Les Sulewski of Truist Securities. Leszek Sulewski: So we saw the FDA propose new guidance around biosimilars to reduce comparative efficacy study and potentially speed up the approval process. So 3 questions on this for you. One, how will this updated guidance impact your long-term biosimilar strategy? And then two, on the opposing side, do you see a scenario of additional competition where we'll ultimately see biosimilar price erosion curves resemble traditional generics? And then third, what further investments do you think are needed to give you a more competitive edge? And I guess, ultimately, do you see a scenario where the U.S. reaches a point where the BLA process and the patient access becomes just as favorable versus the EU? Richard Francis: Okay. Yes, that was a multidimensional question. So thank you for that, Les. I think I'll start it off, but I'll also lead into my colleague, Eric here, who obviously is close to that because of the pipeline we have. So firstly, we're pleased with the FDA and that initiation of removing Phase III studies. I think that's the right thing to do. I think that helps. And that's based on data. We have a substantial amount of data now in the development of these biosimilars across many, many products as an industry, and I think this is the right thing to do. Does it change our strategy? Absolutely not. I think it reinforces the quality of the strategy we set out for biosimilars in 2023. And to remind you what that strategy was, our strategy was to have the largest -- one of the largest portfolios of biosimilars going forward, and we're going to do that through partnerships. We do that through partnerships because it allowed us to have the largest portfolio because it allowed an efficient allocation of capital. We also believe at the time that there was going to be uncertainty around what the future regulation was going to be. And so we didn't want to be initiating and allocating capital to things that may no longer be needed. An example is starting Phase IIIs, which are -- they're no longer needed going forward. So I think we sort of thought about where the puck was going. We made a strategy to where the puck was going, and I'm pleased to say I think we've been proven right on that. But ultimately, our strategy is about having a large portfolio. As I've just highlighted, we have 10 in the market. We have 6 we're going to launch by '27, and then we're going to have more going forward. With regard to price erosion, I think a good analog is to look at Europe. And Europe is a very mature biosimilar market and, one, I know particularly well. And what you see there is good penetration. You see that there is some price erosion, but it hits a steady state at a certain time, which allows a high level of profitability still within this category. What I'd also highlight in that market because you did talk a bit about whether the U.S. will replicate it, is you also see an expansion of these molecules and these biologics used in patient population because they are less expensive, they're used earlier in the treatment of these diseases. So you get an increase in volume and obviously offset some of the decrease in price. So those are just some of the dynamics. And I do believe the U.S. will catch up to that. But when you have a broad portfolio and we're launching more in Europe, we're not necessarily beholden to exactly when that happens because of the scale and the size. But maybe, Eric, you could give a bit more detail on your views on this. Eric Hughes: Yes, I can just give a few points to support what you just said. We work closely with the FDA and have frequent communications with regards to a pretty large biosimilars portfolio. We really anticipated the fact that they were going to be removing Phase III from the requirement for most programs and agree with this decision. The technical assessment really has been proven to be the most important thing when it comes to biosimilars, something we do very well. And this is going to decrease the cost of production and approval of biosimilars. It fits perfectly and facilitates the pivot to growth strategy that we put together in the past and really, it supports a lot of the good decisions we've made over the years about how we will do biosimilars at Teva. So it was a welcome decision. It was something we were looking forward to and really fits perfectly into the plan. Richard Francis: Thanks, Eric. And maybe one thing I'd just like to add on, and I forgot it obviously, removing the Phase III need reduces cost significantly. But I would also like to highlight the cost for developing a biosimilar are still high, a lot higher than any other generic, any other complex generic. So I just think that the capital allocation doesn't disappear and the cost of it doesn't disappear. So hence, the number of people coming into the market will I still think be restricted based on that. And the ultimate is not just can you develop it and manufacture it, do you have an efficient go-to-market capability. And I think what we're starting to show in the U.S. and we'll show in Europe is we do have that. And that front end is very important when maintaining a growth and profitability in your biosimilar portfolio. So thanks for the question, Les. Operator: Our next question comes from Umer Raffat of Evercore ISI. Umer Raffat: You said CMS agreement is in line with your modeling expectations. Is it reasonable to assume that's about 50% or so in the ballpark? And then secondly, to get to your 2027 $2.5 billion in sales, are you assuming volume gains because of this IRA cut versus Ingrezza to get to that number or not? And then finally, obviously, olanzapine, I feel like it's taking a bit longer than we all anticipated. But at this point, is there any possibility that you could get a commissioner voucher to accelerate that? Or should we not be thinking about that? Richard Francis: Umer, thanks for your questions. So with regard to CMS, it was in line with our expectations that we set out in 2023. You threw out a number there, which I'm not going to comment on because I think that was maybe trying to tease me out to give you a number, and I'm not going to do that. I'll just say it's in line, and that's why we remain very confident about our $2.5 billion in '27. And I remind people, greater than $3 billion peak sales. You did touch a bit about do we see volume gains within this. And this is not something we've -- without going into the detail of our forecasting model, we go back to capturing more patients, making patients more adherent and compliant and all of those fundamentals. I think what though you have touched upon is something that we're going to understand a bit more in January as the first wave of drugs that were negotiated and CMS start to come through and play out. And we'll see what are the dynamics that happen there, and we'll use that to adjust our modeling as we go forward. And I hope, you, as others will agree, we're very thoughtful about how we model and how we forecast. And at least over the last few years, I think we've been pretty accurate in what has been quite a dynamic environment. Now with regard to olanzapine, I'll hand that one to Eric to comment on whether we could get a Commissioner's voucher. Eric Hughes: Yes. Thank you for the question, Umer. And to start off with, we're right on track with what we plan for the submission of the olanzapine LAI in this quarter. With regard to your question on the Commissioner voucher, that's one of the things we've been reviewing within Teva. One of the great things about Teva is we have biosimilars, a whole portfolio of generics and innovative medicines. So the potential for where we could see a Commissioner voucher is broad. So we're reviewing that now and looking to see what the most optimal -- optimally timed and valuable program is that we seek one of those out for, but more to come on that in the future. Richard Francis: Thanks, Eric. Operator: Our next question comes from Matt Dellatorre of Goldman Sachs. Matthew Dellatorre: Congrats on the quarter and the AUSTEDO agreement. Maybe first on duvakitug, now that the Phase III IBD studies are up and running, how are you thinking about enrollment time lines and potential data readouts there? And then could you comment on any progress on the indication expansion strategy beyond IBD? For instance, could we see proof-of-concept studies announced over the near term? And then maybe just as my follow-up on capital allocation, could you talk about the key priorities in 2026? And as we think about the free cash flow inflection, what are the key points of focus to achieve that full year '27 guide? Richard Francis: Matt, thanks for the questions. I'll hand the first one straight over to Eric on the Phase III and the potential Phase IIs. Eric Hughes: Yes. So thank you for the question. This is one of the things I'm most excited about the design that we've put together with Sanofi. It's all about execution now. As I said it earlier in my comments, this has been the fastest transition from Phase II to Phase III with regards to this MOA of all the programs out there, which we're very proud of. So it speaks to our executional abilities in this partnership. The design itself is really designed to make sure that we maximize the enrollment with the feeder arm that it will get to our maintenance and increase our safety numbers in the program. It's a very convenient and patient-centric design with regards to subcutaneous treatment and the rerandomization. These are all things that will make it ideally suited for patients. And we're also putting a lot of effort in on how we execute the program with regards to the logistics and our vendors that we use. So it's been a really great collaboration with Sanofi. I think we're building upon a lot of momentum and success that we have going into a Phase III program with a Phase II program that was probably had the highest numbers with regards to its efficacy and it's the data set that we produce, these are all good signals of starting a Phase III program. So when it comes to execution, that's what we're going to focus on right now. And I think that we're set up very well to be in the horse race, if not in the middle of it, but hopefully coming up very close to the beginning of it. So that's very well suited. Now with regards to your question about other indications, it's great to see the excitement around this MOA. I mean one of the things about it is the fact that it could touch so many different pathway cytokine signaling pathways in multiple indications. You can see many different Phase II programs initiating now. We have a plan with Sanofi, and we'll let you know when those studies start. For now, we're going to keep it close to the chest. But that, in addition to the excitement around different combinations in the future is also something we've been thinking about heavily. But right now, to begin this discussion is all about the execution of the study, enrolling the study and making sure that we show the value in ulcerative colitis and Crohn's disease now. Richard Francis: Thank you, Eric. And now on the next 2 questions on capital allocation and free cash flow inflection. I'm going to hand those to Eli. Before I do, I do like the fact that you've highlighted our free cash flow inflection because that is something which we are starting to communicate and people are starting to see with the growth of the company, the growth of the innovative, the decrease of the debt, the growth of the EBITDA that this ultimately changes our free cash flow position. So thanks for highlighting the Matt and seeing that. But I'll hand on to -- hand over to Eli to talk about our capital allocation going forward. Eliyahu Kalif: Yes. Matt, thank you for the question. So first of all, I'll start with the free cash flow. You mentioned about how we should think about that trend that we mentioned beyond '27. There are 3 main dynamics there. First of all, it's the mix, right? If you look on the top line and how we're progressing with the top line and how it's going to flow through and convert both profit into free cash flow with the innovative, I would say, portfolio that we have, and we are keeping on investing in our growth driver. The fact that the $700 million of savings is going to actually enable us to drive more efficient COGS with high gross margin as well, I would say, to optimize our OpEx. Those 2 elements are already in progress. There are another 2 that we need to remember. One, we paid for our debt this quarter. From now until October 26, like 13 months, we don't have any maturities, there's $1.8 billion in October, and there is a $2.8 billion in March, May in '27, early '27. If you think about $4.5 billion, $4.6 billion with our current weighted cost of capital of our outstanding debt of 4.8% you get $200 million to $250 million that we're going to take out from a run rate, both from financial expenses going forward and pure free cash flow impact. And then on top of it, our progress on our working capital, you can actually see ourselves running below 4% going from '27 onwards on our revenue. All these actually enable us to convert high free cash flow. As far as related to next year capital allocation, we're actually looking on more, I would say, ability to be able to compete on certain opportunities related to business development that align strategically to our portfolio and to make sure that we are able to provide value to our shareholders. And as we move forward to make synergetic activities around that piece, we'll keep looking on, of course, reducing our debt. And as we move forward, we might also look on some -- certain other elements related to capital and shareholder returns. And we will, for sure, during '26, and we hope also in our next earnings calls, provide some more colors around that kind of capital returns to shareholders. Richard Francis: Thanks, Eli. Thanks, Matt, thanks for your question. Operator: At this time, we currently have no further questions. So I'll hand it back to Richard Francis for any further remarks. Richard Francis: So thank you, everybody, for participating in the call. We do appreciate your interest in Teva, and we look forward to giving you update on our full year results early next year. Thank you. Operator: Thank you all for joining today's call. You may now disconnect your lines.
Operator: Greetings. Welcome to the Atlanta Braves Holdings Third Quarter Earnings Call. [Operator Instructions]. As a reminder, this call is being recorded. At this time, I would like to turn the call over to Cameron Rudd, Vice President of Investor Relations. Cameron Rudd: Before we begin, we'd like to remind everyone that on today's call, management's prepared remarks may contain forward-looking statements. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today. A number of factors could cause actual results to differ materially from those anticipated, including those set forth in the Risk Factors section of our annual and quarterly reports filed with the SEC. Forward-looking statements are based on current expectations, assumptions and beliefs as well as information available to us at this time and speak only as of the date they are made, and management undertakes no obligation to update publicly any of them in light of new information or future results. During this call, we will discuss certain non-GAAP financial measures, including adjusted OIBDA. The full definition of non-GAAP financial measures and reconciliations to the comparable GAAP financial measures are contained in the Form 10-Q and earnings press release available on the company's website. Now I'd like to turn the call over to Terry McGuirk, Chairman, President and CEO of Atlanta Braves Holdings. Terence McGuirk: Thanks for joining the call today, and we appreciate your continued interest and support. In a rare year where we did not make the playoffs, the strength of our brand and the passion of our fans remain strong. That gives us great confidence as we enter the offseason and look ahead to 2026. We did have some notable highlights that will help build momentum going into next season. Rookie Drake Baldwin had a breakout season hitting 274 with 19 home runs and 80 RBIs. He became the first Braves' Catcher ever to debut as an opening day starter and then go on to win nationally Rookie of the month in May. Drake is now a top contender for Rookie of the Year, which is an exciting milestone for our organization. Chris Sale, despite dealing with a nonthrowing injury while covering first base remained one of the top performers in the league and achieved a major career milestone by becoming the fastest pitcher in MLB history to reach 2,500 strikeouts. He finished strong and is ready for 2026. Matt Olson showcased remarkable consistency and durability and became 1 of only 5 MLB players to appear in all 162 games. He led the team with a 6.1 WAR and ranked among MLB's top defensive first basement. And earlier this week, he was awarded a Gold Glove Award, his first as a Brave and third in his 10 season MLB career. He also represented the Braves in the Home Run Derby during the All-Star week here in his hometown. While our pitchers lost a lot of time due to injuries, it did give us an opportunity to see some of our young talent and how they perform and we were greatly encouraged by that. Newcomer, Hurston Waldrep, a 2023 first round pick out of Florida, seized the opportunity and ended up with a 6 and 1 record with a 2.8 ERA intense game started. You will likely see him again in 2026. Now that we're in the offseason and our focus is shifting towards our strategic priorities which include adding a couple of key players to a veteran win-now squad that has so many years of success ahead. Turning to our field manager position after 10 seasons, Brian Snitker transitioned from our manager to a senior adviser role. Brian led our team to a World Series championship in 2021 and has spent his entire career with our organization, 49 years and all. We are grateful for his dedication to our franchise, and we look forward to having him around to advise us on baseball matters into the future. This past Monday, Walt Weiss was named the 49th Manager in franchise history, after spending the previous 8 seasons as the club's Major League bench coach. Walt who previously served as a manager for the Colorado Rockies has twice been a World Series champion first as a player with the Oakland Athletics in '89 and then as a Braves' bench coach in 2021. He has been a part of the Braves organization for 11 seasons as both a player and coach. Since joining the staff, the Braves have made 7 postseason appearances, earned 6 National Leagues East Division titles and won the 2021 World Series. On the MLB front, there remains a lot of positivity on the broader state of baseball as we look to the 2026 season. Across Major League Baseball national viewership continues to grow, ESPN's MLB coverage is up roughly 21% year-over-year. TNT Sports is up 29% and MLB.TV consumption has grown by 24%. These trends further reinforce the growing engagement across the sport and underscore the strength of baseball's fan connection. We continue to see positive momentum following the regular season, including the highest postseason viewership since 2017 and an increase of 13% year-over-year. This all culminated in one of the most exciting World Series finishes in recent memory only a few days ago, which saw an extra innings come back in Game 7. Early indications have this as one of the highest-rated World Series games since 2017 with over 25 million fans tuning in to watch the finale. The global audience was on full display as well, welcoming millions of viewers from Japan and across Asia that coupled with our domestic audience, highlight the state of baseball, which is an exciting upwards trajectory. Total MLB attendance for 2025 exceeded 71 million fans, making the third consecutive year of growth for the first time in 18 years and reaffirming MLB's position as the most attended sports league in the world. This is a testament to America's favorite pastime, and the Braves Country continues to play a major role in that success. So what we're doing within this organization is truly unique, not only in baseball, but in all of professional sports. The continued momentum and strategic interplay between our baseball and real estate segments remains remarkable and really reflects the long-term vision that has set the Atlanta Braves organization apart. Most every sports organization is trying to emulate our success in combining a stadium environment with a large bustling mixed-use development. And with that, I'll turn the call over to Derek, who will discuss in more detail how our season has shaped up and share more on our outlook heading into next year. Derek Schiller: Thanks, Terry. Although this season has brought its challenges, our team played their hearts out until the very end, and we're extremely proud of their achievements. The Atlanta Braves have a history of success on the field, and we remain focused and optimistic on returning to our winning ways and getting back to the postseason again next season. Despite the challenges on the field, we continue to provide great times for our fans and their families, and we accomplished a great deal as an organization. First, despite the inconsistent season on the field, we've navigated adverse feat to deliver record-breaking ticket sales and sponsorship revenue, underscoring the enduring strength of the Braves brand and the unwavering passion of our fans and partners. The Braves sold the fourth highest number of tickets in the past 25 years, highlighting both the depth of our fan base and the effectiveness of our sales and marketing strategies. Similarly, secondary market activity and ancillary revenues in retail and concessions remain strong, and our team remains disciplined and adaptive in driving demand and maintaining engagement. We also added and renovated several areas of the ballpark as part of a continuing innovation of the Gameday experience, which resulted in new and enhanced revenue streams. Lastly, we extended our partnership with FanDuel Sports Networks to include our first-ever direct-to-consumer streaming opportunity for fans. In addition, our new arrangement with Gray Media provided enhanced broadcast opportunities and more fans able to watch games in our territory. The result of the revised media approach resulted in strong ratings and allowed our entire Braves country television territory among the largest in sports to follow their favorite team. Ticketing remains a top priority for us as a meaningful driver of revenue, and we are proud to have our premium and full season ticket inventory sold out through the end of the season, our third straight year of doing so. While attendance moderated slightly in late August and September, primarily from lower single-game tickets, demand for season, group and hospitality package offerings remains robust. We sold out 24 games this year and had high record revenue from a number of those games. We sold over 2.9 million tickets in 2025, a level that puts the Braves inside the top 10 highest in MLB for the fifth consecutive year. As we transition into the offseason and begin the planning for next year, our team is still actively evaluating pricing and inventory strategies to further optimize our ticket mix. These changes will better optimize how we manage our ticketing process from start to finish, and we are hopeful that this will make a meaningful change in our operations. We remain committed to our growing and loyal fan base and are focused on enhancing the fan experience, including more innovative changes to the ballpark while driving continued growth around Truist Park and the Battery Atlanta. Elsewhere around Truist Park, we recently announced an extension with our incumbent food and beverage partner, industry-leading Delaware North for an additional 10 years beyond our current term. Over the last 10 years, we've worked with Delaware North to elevate the fan experience through high-quality, locally inspired food options. They share our vision of perfecting the ballpark classics, while also offering innovative food, beverage and premium hospitality and putting a creative Braves Country spin on fan favorites. I'm excited about this extension and expansion of our partnership which will enable us to further leverage Delaware North. As part of this renewal, we will also lean into Delaware North's restaurant and premium experience division, Patina, to provide best-in-class food options for every guest in the Battery Atlanta and Truist Park. In addition, our recent master planning projects completed throughout the end of the 24 season and into the start of the 25 season are performing particularly well, both in terms of generating significant additional revenue but importantly, further enhancing our fan experience here at the ballpark. This multiyear capital improvement process uses a proprietary ROI evaluation process to ensure successful implementation which drives both a better fan experience and, in most cases, more revenue to our top line. We have a truly unique fan experience on and off the field, and we continue to be grateful for the support we received from our fan base as well as our many corporate partners. Our park operates as much more than just the baseball field and including events already booked in the fourth quarter, we expect to host over 150 separate events this year within Truist Park. These events include conferences, corporate seminars, client entertainment and company celebrations, among others. Some use the field and some use our variety of premium and expanded facilities to create memorable events. In addition to the park itself, we held over 195 events in the Battery through the end of September, including movies on the lawn, concerts at the Roxy, Yoga mornings, 5Ks, farmer markets and more. We believe that our unique business model remains the gold standard across professional franchises, and we have seen countless organizations attempt to replicate what we have built here. This was on full display in this year's successful Major League Baseball All-Star week, where thousands of fans and industry executives from across the globe were able to see our entire project in action, many for the first time. This campus is not only home to thousands of employees, that work in the approximately 1.7 million square feet of office space we operate but a destination for millions of visitors who grace the Battery each year, which continues to grow. And with that, I will now turn the call over to Mike, who will provide an update on this growth and the developments within our extending and strong real estate portfolio. Mike Plant: Thank you, Derek. As you all know, the Battery Atlanta were conceived to not just be a destination for Braves games, but a year-round lifestyle, entertainment and commercial campus built to complement and derisk the dependence on Gameday revenue. And now that we are outside of the baseball season, it's becoming more evident just how important this is to our organization. As Derek mentioned, we have hosted and activated 195 events at the Battery Atlanta, in addition to 81 baseball games through the end of September, including a variety of concerts and common airing events. Of this number, Roxy has held 72 concerts this year including 28 concerts in the third quarter alone. The total events hosted at the Roxy are expected to exceed 150 by year-end. As we head into the fourth quarter, we are looking forward to the Battery's presence in the community highlighted by our various holiday events. These events include our tree lighting ceremony as well as our New Year's Eve celebrations, which saw over 33,000 attendees across both events last year. I'm pleased to report that our mixed-use development revenue continues to perform well and represents approximately 11% of the company's total revenue year-to-date. Notably, in the third quarter of 2025, we saw an impressive 56% increase in mixed-use development revenue compared to the prior year period reaching $27 million driven by the performance of our recent acquisition, Pennant Park, strong leasing activity and enhanced tenant engagement. On a go-forward basis, we are now generating more than $100 million annually in revenue from our real estate holdings, an incredible achievement as we grew this from 0, less than only 8 years ago. One of the most significant moves this year was our strategic acquisition of Pennant Park. This acquisition greatly expanded our office footprint and brought significant leasable square footage to our existing 100% lease battery office space. We continue to receive incredible positive responses from the Pennant Park tenants since taking over the complex earlier this year. With relative minimum capital improvements, we anticipate Pennant Park being 90% leased by year-end, a substantial improvement from the sub-85% occupancy the building was at when we acquired it back in April. This is a testament to our team and brand as we attract top tenant profiles and companies who wish to partner with us and know the operational expertise we bring to our campus. Our purchase has reinvigorated the market in this area, we have seen the results of this catalyst and our existing tenants who continue to expand and extend as well as new tenants who are looking to work with us for the first time. Looking ahead, we will continue to focus on improving tenant experience and operational efficiency with amenities such as fitness centers, conference facilities enhanced security and recreational options that make our properties highly attractive. Our ability for tenant improvements allows us to further optimize our footprint. And as an example of this, we are excited to welcome J. Alexander's, a high-end American cuisine restaurant to the Battery next year, replacing the space of a tenant who was underperforming in their location. Additionally, our ongoing partnership with local and regional stakeholders ensures we maintain strong community ties and continue to position the Battery Atlanta as a premier destination. Elsewhere around our extended campus, The Henry development across from Truist Park is well underway as construction ramps up for the 2 tower complex, which will bring additional apartments, hotel rooms and condos adjacent to the Battery to be connected with a newly constructed pedestrian bridge. In closing, I want to thank our leasing, property management and development teams for their execution this quarter as well as the broader Braves organization for their support. The success of the Battery Atlanta is a testament to the vision of embedding a mixed-use destination adjacent to the stadium, and our Q3 results reflect that strategy bearing fruit. Our portfolio of high occupancy assets also brings a level of stability and certainty to the far more seasonal nature of baseball and our financials. We remain a beacon in the market and region for continued expansion opportunities, which allows us to be thoughtful about the best future for our campus. I'm proud of what we have done, and I'm excited for all that is to come. With that, I'll turn the call over to Jill to discuss our financial results in more detail. Jill Robinson: Thanks, Mike. Before I begin, I want to remind everyone that a majority of our revenue is seasonal and is aligned to the baseball season. During the third quarter of 2025, we placed 41 home games. Despite on-field performance, we continue to be encouraged with our revenue growth. In the third quarter, total revenue was $312 million, up over 7% from $291 million in the third quarter of 2024. As a reminder, the company manages its business based on the following reportable segments, baseball and mixed-use development. Total baseball revenue was $284 million in the third quarter of 2025, up from $273 million in the third quarter of 2024. Baseball net revenue increased to $176 million during the third quarter of 2025 compared to $173 million during the corresponding period in the prior year primarily due to contractual rate increases on seasoned tickets and existing sponsorship contracts as well as new premium seating and sponsorship agreements, offset by attendance-related reductions in concessions revenue. Broadcasting revenue increased to $79 million in the third quarter of 2025 compared to $71 million during the corresponding period in the prior year due primarily to the impact of our renegotiated local rights agreement signed at the end of 2024. Next, our mixed-use development revenue was $27 million in the third quarter of 2025 up over 56% from $17 million in the third quarter of 2024. This was primarily driven by a $9 million increase in rental income, which includes revenue from our Pennant Park acquisition, and new lease commencements, including the Truist Securities building and to a lesser extent, sponsorship and parking revenue. Adjusted OIBDA was $67 million in the third quarter of 2025, an increase of over 113% from $31 million in the same period last year. This improvement was due to an increase in both baseball and mixed-use development revenue and a reduction in baseball operating costs partially offset by increases in mixed-use development operating costs and SG&A expenses. Baseball operating costs decreased primarily due to lower-than-expected Major League player salaries and variable concession and retail expenses. This decrease was partially offset by increases in MLB's revenue sharing plan, expenses for events held at Truist Park and Minor League-related expenses. Our operating income was $39 million in the third quarter of 2025, up from $6 million in the third quarter of 2024, primarily due to increased revenue. As of September 30, 2025, the company had $115 million of cash and cash equivalents. Nearly all of our cash and cash equivalents are invested in U.S. treasury securities other government securities or government guaranteed funds, AAA-rated money market funds and other highly rated financial and corporate debt instruments. As of September 30, 2025, we have $215 million of untapped liquidity in the form of 2 baseball revolvers, which we believe provides us flexibility for the future. And with that, operator, let's open the line for questions. Operator: [Operator Instructions]. Our first question today comes from the line of Barton Crockett from Rosenblatt. Barton Crockett: Okay. Great. And I guess 1 of the things I was just wanting to drill into a little bit is you mentioned you're doing some work on tickets and ticket pricing. And really, I think there's a little bit of interest from this from a number of quarters. And I was wondering if you could address a couple of things. One is, there's been some reports about some people having to pay much higher season pass prices. I just wonder if you could address just what's going on there? And just more generally, how should we think about kind of average kind of revenue per ticket trajectory for you guys in the upcoming season in 2026? And how do you guys think about kind of pricing in terms of your leverage and how you think about delivering incremental value relative to incremental pricing and whether kind of on-field performance has any kind of role in that or whether it's more kind of amenities driven? Derek Schiller: Hi, Barton. It's Derek. Thanks for the question. Yes. So first off, that last part, yes, there is a relationship between team performance and ticketing and attendance. And we saw that a little bit. But I would remind you and everybody that our revenue is relatively stable and predictable. A substantial amount of our revenue is in -- whether it be a full season package or a premium seat, which, in many cases, most cases, is multiyear. So the commitment is longer term. So that's why we can predict what that revenue is going to be over a period of time. As it relates to the seasoned pricing, we, like all teams are studying what our pricing is each and every year and trying to understand what's the best pricing options than products that we can go into the marketplace with. Many years, we make changes to that. In some cases, we go up a little bit. In some cases, we go down a little bit. One of the important parts for us is that we have packages and offerings that are available at every price point. We're continuing to be proud of that. And so you might see certain packages that are well below $20 and on par would say, going out to a movie or something like that. And if you're interested in a premium offering, you can certainly pay more than that, but the amenities and the location and other things are going to be different. We are continuing to watch about how the average ticket price looks and how we compare, contrast with other teams across Major League Baseball or even in our marketplace. And I would still say there's room for growth in that while still protecting some of those lower price points as we talked about. Barton Crockett: Okay. But is it reasonable to presume that there's going to be some inflation plus kind of growth in average revenue per ticket in the upcoming season as part of a base plan? Matthew Harrigan: I think if you obviously, you, like others, have watched us and seen what's happened with the event revenues over the course of the past few years, number of years, our goal is going to be to continue to grow that because the cost of running a baseball team. In most cases, it doesn't go down every year. So we're trying to keep up with that and trying to make sure that we again have prices available for everybody. But I think it's fair to say we're continuing to monitor that. And also looking at how secondary ticketing continues to influence that. I think that's really important when you -- when we get the data from a secondary ticket, we understand not just what we sell the ticket at, but what the ticket ultimately gets sold at in the marketplace. That informs of what the supply and demand is, if you will, of that. And so what we've continued to see is that the secondary ticketing marketplace is very strong for our tickets has been for the past several years. And that does a really good job of helping us understand what we're capable of ultimately pricing our product at. Barton Crockett: Okay. And then just 1 other kind of topic I wanted to ask about, and that is how to think about player salaries. Now that you've completed this season, and we've seen the Dodgers "run baseball" by winning 4 more games with a high kind of player salary. You guys are in a place of kind of maybe able to rethink how you approach the upcoming year. How would you think about kind of positioning player salary spending? I mean, is there any argument for a substantial change in your approach to what it's been historically? Or any thoughts about that as we look at the upcoming year? Terence McGuirk: Barton, this is Terry McGuirk. Well, I won't comment on the expenses that the Los Angeles Dodgers had. But back to the Braves, we've always professed to try and be a leader in player compensation from a team standpoint. I think I've stated in the past that our goals are to be a top 5 salary team. We're currently a top 10 and haven't been out of that in quite some time out of that range. I think aiming back to the top 5 is a place that I want to get to. I think we're capable of doing that. This is a very fluid decision-making concept last year, as you've seen from our financials, we were below where we were the previous year -- previous year, but I think it's a good aspiration to get back to those goals in the coming year and years. And I think you'll see us quite active in the free agent market and the trade market. As I stated in my remarks, we're a win-now team we want to fill in the places where we might have players that need replacing. But the majority of the reason for last year was injuries, as we know and even back into the previous year. So everybody is back at full speed, except Smith-Shawver, who's coming back probably about midyear from Tommy John. So we're very, very optimistic about what the team looks like for next year. Operator: Your next question comes from the line of Steven Sheeckutz from Citi. Steven Sheeckutz: I just wanted to get your general thoughts on ESPN's appetite to take on some of the local media rights deals, both media rights and just the potential implications this might have for your next renewal cycle? Terence McGuirk: So the next major national media deal for MLB is in -- is 1/1/29. And I do think that's going to be a major inflection point for the industry and the values created. Between now and then, I think MLB will be in lots of discussions with their teams with the 30 teams about how the best way to structure our offerings into the future. And we certainly know that local games rate, incredibly high compared to national games and that a component of that offering in '29 will include local games. And I think that will be very attractive to many like ESPN and to the entire digital streaming universe. And be assured that we're going to spend a lot of time in this rapidly evolving media environment, trying to tailor how we structure our offering to meet that contract term. And who knows what the media business will look like in 2035. And so it's very hard to say exactly how we'll structure today, but we'll be a lot closer to understanding that in as we lead into 1/1/29 when we have to make that deal. So we're -- it's a fluid set of decisions, and we will be ready to make those good decisions at that time. Operator: And that concludes our question-and-answer session. I will now turn the call back over to management for closing remarks. Derek Schiller: Well, on behalf of everybody here at the Atlanta Braves, we appreciate you listening in. Thank you and look forward to seeing you and talking to you next time around. Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good morning. Welcome to Wesdome Gold Mines' conference call to discuss the company's financial and operating results for the 3 and 9 months ended September 30, 2025. As a reminder, this call is being recorded. Your host for today is Trish Moran, Wesdome's Vice President of Investor Relations. Ms. Moran, please go ahead. Trish Moran: Thank you, operator, and good morning, everyone. Before we get started, I'd like to point out that during today's call, we may make forward-looking statements as defined under Canadian securities law. I ask that you view our slide presentation for cautionary language regarding forward-looking statements and the risk factors pertaining to these statements. Please note that all figures discussed on this call are in Canadian dollars, unless otherwise noted. Our press release, MD&A and financial statements are available both on SEDAR+ and on our corporate website, wesdome.com. With us on today's webcast is Anthea Bath, Wesdome's President and CEO; Philip Yee, our Chief Financial Officer; Guy Belleau, Wesdome's COO; Jono Lawrence, SVP, Exploration and Resources; Raj Gill, SVP, Corporate Development and IR; and Kevin Lonergan, SVP, Technical Services. Following management's formal remarks, we will then open the call to questions. And now over to Anthea. Anthea Bath: Thank you, Trish. Good morning, everyone. Financially, it was a strong quarter, our best yet. Exceptional production performance amplified by accelerating gold prices translated into record revenues, net income, EBITDA, net cash from operating activities and free cash flow, which at almost $80 million boosted our cash balance to more than $265 million. Eagle River is having an outstanding year. Annual production is projected to be the highest in the mine's 30-year history. There is strong momentum across the operation. Ramp development in the 300 Zone is running a full year ahead of production plan, an outstanding achievement by the team. We've also seen a meaningful reduction in dilution, and that's having a direct positive impact on grade and productivity. Costs continue to trend downward, and we're now in a solid position with more than a month's worth of ore stockpile on surface, supported by almost 3 months of developed underground inventory. The Eagle River team is seasoned, capable and they know what great performance looks like. While 2025 results are tracking well, the journey continues on what remains a multiyear transformation. The team's focus is firmly on building the next chapter of success. Kiena has had its own wins this year, despite its challenges. I'm pleased to report that we are now in 3 mining horizons a little ahead of what we told you before, giving us more operational flexibility. As well, as a safeguard, we have temporarily increased operational redundancy by bringing on additional labor and equipment on an interim basis. Step by step, we're resolving the challenges. October was Kiena's best month of the year so far with production of more than 9,500 ounces. Despite progress made, we're adjusting Kiena's full year guidance again this quarter, because we need to ensure the consistency remains there. In mid-August, our outlook suggests we could recover the shortfall stemming from July's infrastructure downtime. While Kiena Deep delivered strong performance through August and September, we couldn't catch that gap completely as contractor execution challenges and underperformances at Presqu'ile limited our ability to fully close this gap. Importantly, there are no new issues. Our focus remains on executing against the known challenges, particularly around operational discipline and flexibility and driving performance to the levels that we expect. October results demonstrate that we're making clear progress in the right direction. Our commitment to the market remains clear. We're strengthening how we plan, manage and mitigate operational risk. And we're maintaining transparency so you have a clear view of the steps we're taking and our progress. In terms of guidance for 2025, on a consolidated level, we're comfortable that we will achieve the mid- to upper end of our new production range of between 177,000 and 193,000 ounces. To achieve our guidance, it is anticipated that Eagle River will finish the year near the top end of its production guidance, which, as you remember, was raised in August. Kiena is now expected to come in between 72,000 and 78,000 ounces and cost guidance has been increased to reflect the short-term fixes to create redundancy. With ore from 3 mining horizons, Kiena Deep, Presqu'ile and the 136-level and more than 9,500 ounces in October being mined, we believe that we've been very prudent with our revised production guidance. With respect to 2026 guidance, we're in the middle of the budget process and we'll issue an update in mid-January. In terms of CapEx next year, as part of the work for the upcoming technical report, we're looking at the infrastructure at both Eagle River and Kiena through a long-term lens to ensure we are well positioned for the future. Some of those capital requirements may be reflected in the 2026 guidance. Looking ahead over the next 6 to 12 months, there are major initiatives underway that will enhance our future success. At Kiena, the advancement of the Presqu'ile ramp towards the Kiena ore body is a top priority. The July hoist disruption demonstrated just how critical it is to have a secondary way to move material and people. The breakthrough of the ramp is scheduled for completion in Q1. The main ramp at Kiena Deep continues to advance towards level-142, which will open another new mining horizon in 2027. At Eagle River, the global model work is progressing rapidly with drilling underway to convert the first batch of targets. We're very encouraged and excited by what we're seeing. We're moving as quickly as we can ahead of the December '26 drilling cutoff date for the technical report. We split the drilling into 2 phases. The first phase will finish this year, just highlighting the scale of the opportunity that we have ahead of us. On the exploration front, the excitement is just beginning. And remember, we're only in the first year of our 5-year program. Both exploration results and the global model work will go into next year's updated technical report as we look to showcase the potential of our very special mines. Lastly, we have taken an important step in our commitment towards delivering long-term value and returning capital to our shareholders. A couple of weeks ago, we announced a normal course issuer bid, and we've now received TSX late last week. And now I'd like to introduce our new Chief Financial Officer, Philip Yee. Although Phil really needs little introduction as he's well known to many of you. Phil has many years of senior financial experience and he is highly respected in the industry. We're absolutely thrilled to have him on our team. With that, over to Phil to walk you through the quarter's financial highlights. Philip Yee: Good morning, everyone. Thank you for the warm welcome, Anthea. After serving as an independent director and Audit Chair of Wesdome, it's a pleasure and certainly a big change to be here as part of the executive team. The company has substantial growth potential, and I look forward to helping advance our strategic initiatives and continuing our long record of creating value to shareholders. Now let's go to Slide 8, which provides a summary of Wesdome's key financial highlights for the 3 and 9 months ended September 30, 2025. It was another record-breaking quarter for the company, driven by all-time high quarterly production, together with an average realized gold price of more than USD 3,500 per ounce. The result was a significant improvement in Q3 2025 financial KPIs over the comparative quarter in 2024. Revenues increased by 57% to $230 million. Net income more than doubled to $87 million, or $0.58 per share. EBITDA grew by 77% to $150 million. Net cash from operating activities nearly doubled to $118 million, and free cash flow grew by 2.5x to $79 million, or $0.52 per share. We have one of the highest free cash flow yields in the gold industry, clear proof of our ability to generate meaningful cash while fully self-funding our organic growth. And one more point on cash generation. It's especially relevant with the recent surge in spot gold prices. For every USD 100 increase in the gold price per ounce, our annualized free cash flow rises by roughly CAD 15 million to CAD 20 million. Moving now to Slide 9. On a consolidated basis, for the third quarter of 2025, cash costs increased by 7% year-over-year to USD 944 per ounce, while AISC averaged USD 1,419, essentially unchanged from the same period in 2024. Eagle River is beginning to make meaningful progress in transforming its cost structure, delivering AISC of USD 1,203 per ounce, a 29% reduction in just 1 year. In contrast, Kiena's AISC increased to USD 1,899 per ounce, primarily due to the cost of interim measures taken to enhance operational redundancy on a short-term basis and a significant decrease in the number of ounces sold. As we work to improve execution at Kiena, we expect elevated costs to continue through to the end of the year. Likewise, we expect Eagle River's AISC to increase in Q4 due to the timing of planned sustaining capital expenditures. Turning to Slide 10. As at September 30, 2025, our cash balance was $266 million, an increase of $143 million since the end of 2024. Including our revolving credit facility, Wesdome's total liquidity now exceeds $600 million. With a strengthening balance sheet and a commitment to disciplined capital allocation, we've developed a framework to guide spending decisions. First and foremost, we will continue to fund high-return organic growth initiatives such as mine life expansion, exploration and asset optimization to ensure our infrastructure is ready for the next phase of growth. Next, while still retaining financial flexibility, as announced on September 21, our plan is to return capital to shareholders through opportunistic share repurchases. To sum up, Wesdome's financial position is solid. Our return on invested capital ranks in the top 3 across both our peer groups and the seniors. We intend to protect that position by continuing our long record of disciplined capital allocation. With that, I will now turn it over to Guy to review our operations. Guy Belleau: Thank you, Phil. Good morning, everyone. Let's move to Slide 12. Eagle River continues to perform well. The team produced over 34,000 ounces in the third quarter, beating its previous production record by more than 10%. More tonnes were mined and processed than in any other quarter in the operations history, driven by improvement in extraction efficiency. Eagle River is also delivering strong grades, thanks to significant reduction in dilution and positive grade reconciliation. Year-to-date, development over grade and stope dilution are down more than 10 and 20 percentage points, respectively, compared to 2024. For context, a 20-point reduction in stope dilution boost average grade by over 10%, directly supporting stronger operations and the bottom line. Eagle River is strategically positioning itself for future success. We are a full year ahead in ramp development within the 300 Zone. Underground, we're maintaining a healthy 3 months of developed inventory. On surface, our 25,000 tonne stockpile is helping us balance production volumes and optimize grades. At the same time, we're making measurable progress on cost improvement and operational efficiencies and the results speak for themselves. Eagle River's all-in sustaining costs for the third quarter were USD 1,203 per ounce, the lowest of the year so far. While absolute costs increased with higher tonnage, they were more than offset by stronger gold sales and efficiency gains from our continuous improvement program. One of the more impactful of these initiatives has been the gradual shift to bringing more development meters in-house. Our goal was 50%, and I'm proud to report we've now exceeded that mark for 3 consecutive quarters. This move not only reduces our cost per meter as our crews are more cost effective than contractors, but also ensures we maximize the return on the capital invested in our equipment. Eagle River has evolved into a stable, reliable operation, and it's now starting to reap the benefits of the last 12 months working, optimizing costs and improving efficiency. The team is on track to achieve the top of its production guidance, which was revised upwards last quarter. As Anthea mentioned, the team is already focused on taking steps towards its next phase of growth. Now let's move to Kiena on Slide 13. In mid-August, our forecast indicated we were on track to meet revised guidance of 80,000 to 90,000 ounces with high-grade material actively being milled. Actual performance did not align with the forecast. Kiena's production of approximately 16,200 ounces was the lowest of the year despite the fact that Kiena did operate well during the month of August and September. This trend continued into October, Kiena's best month of the year so far as production surpassed 9,600 ounces. Additionally, only 1 high-grade stope was delayed from Q3 in the sequence and was successfully mined in October. So all this to say, the problem in Q3 was not Kiena Deep. The problem was at Presqu'ile due mainly to underperformance by the development contractor. They were under-resourced, resulting in lower process tonnage and ounces produced. There are 2 takeaways. First, we're currently transitioning from contractors to in-house teams and will be there within this month. This will improve productivity rates and get our development meters back on track. Second, we've factored the delay into our updated guidance. Overall, we're comfortable with our updated guidance at Kiena to 72,000 to 78,000 ounces, supported by contribution from Kiena Deep and Presqu'ile as well as development ore from our 136 level. With respect to cost during the third quarter, Kiena's all-in sustaining cost was USD 1,899 per ounce. These elevated unit costs reflect temporary increases in resourcing and equipment as well as a lower number of ounces of gold sold. Turning now to Slide 14, I'd like to reiterate what we're doing to improve Kiena. As of today, we're mining across 3 different areas, a vast improvement from just a couple of months ago. We're progressing with our independent review of critical infrastructure. Maintenance practices and equipment availability have improved to the levels required to maintain the plan going forward. By the first quarter of next year, there will be 2 major advancements, a new ramp to surface to augment our shaft, providing 2 independent ways to move people and materials to surface, plus 3 new exploration platform. Towards the end of next year, the ventilation upgrade is expected to be completed. Several improvement initiatives are underway at Kiena, and we look forward to sharing the results as they materialize. And now over to Jono to discuss exploration. Jono Lawrence: Thank you, Guy. Good morning, everyone. Starting on Slide 16, Eagle River. Drilling at the 6 Central Zone has progressed well and is delivering exactly what we hoped it would. Since we started drilling this zone late in 2023, we have extended the deposit to over 600 meters down plunge. What's exciting is that the high-grade results we're seeing are reminiscent of early day results at the top of the high-grade 300 Zone at similar depths. The location of the 6 Central near existing infrastructure makes drilling very efficient. During the third quarter, we also continued drilling the 720 Falcon and 311 zones from underground to evaluate the lateral and up plunge continuity at 720 and down plunge continuity at 311. Initial results have been positive in both zones and drilling will continue through year-end. Now over to Slide 17. The global model is central to our fill-the-mill strategy, evaluating Eagle River holistically while reviewing differential cutoff grades. The global model initiative targets incremental underground material near existing infrastructure. While high-grade ore in the current plan remains untouched, this material offers a chance to add incremental tonnage at attractive margins due to its location. Initial work identified 32 targets and ongoing analysis continues to reveal additional opportunities. Since quarter 3, 4 drill rigs have been dedicated to the first phase of drilling, a 40,000-meter program testing approximately 60% of these targets. Progress has been strong. 45% of the planned meters completed on 20 targets and encouraging results so far. Drilling will continue through year-end with results feeding into the updated 2026 technical report. The second phase of drilling will commence early next year on the remaining targets. Slide 18 shows how our regional exploration program is shaping up. In quarter 3, drilling wrapped up at Dorset. Data processing is underway with an updated resource estimate expected early Q1 2026. The Dorset rig has moved to Magnacon, where it is verifying historic underground surveys, assessing potential mineralization beneath existing workings, twinning historic holes, and evaluating continuation of higher grades. At Mishi, drilling to test logical, geological and structural concepts is nearing completion. This includes deeper targets for high-grade mineralization beneath the open pit. The proximity of Mishi and Magnacon to the plant, combined with limited down plunge exploration and potential for higher grades highlight strong upside potential. Mishi/Magnacon area is emerging as a prime target for further significant mineralization, especially reinforced by recent structural and lithological mapping along the Mishibishu deformation zone that has identified fold-related controls on mineralization. Next steps include additional mapping as well as pole-dipole IP surveys and follow-up drilling. At Cameron Lake, drilling continues to test the continuity of higher-grade zones and extend non-mineralization along trend and at depth. So far, the zone has been traced over 1,000 meters at surface, with previous results highlighting broad lower grade bulk tonnage potential. Regional exploration is in full swing and excitement is building around the potential. We expect to issue an exploration news release before year-end, showcasing updates from our work. Now let's turn to Slide 19. As highlighted last quarter, the completion of new underground drilling platforms is unlocking exciting opportunities at Kiena. Drilling is now underway from the new Level 134 platforms, including much improved angles to test both Kiena Deep and the B Zone. At Kiena Deep, drill results continue to better define the Footwall zone, extending known lenses and increasing confidence in the validity of the geological model and high-grade nature of the lenses. Drilling at B Zone continues to support the interpretation of multiple mineralized lenses with some localized visible gold. The area presents an important opportunity to advance Kiena's fill-the-mill strategy, as it has potential to provide incremental tonnage near existing infrastructure. Development of the 109-level exploration drift extension commenced in the third quarter and drilling of the VC Zone and nearby North zone targets are scheduled to commence in the first quarter of 2026 after the new development is completed. The VC Zone remains a top priority as it historically returned a high-grade intercept at the base of the mineralization wireframe, is open at depth, and it demonstrates mineralization style analogous to Kiena Deep. The standout development at Kiena this quarter was our summer barge drilling program. With a short window to execute, it was critical to hit the ground running, and the program has exceeded expectations. In Q3 alone, we drilled 23,000 meters from barges, targeting the Northwest zone, the 134 Zone, the West Zone deposit along the Northern Corridor and Dubuisson. Beyond drilling, we have also completed a high-resolution drone magnetic survey across the entire Kiena land package that will give us more granularity into the geology and structures on the property and their association with gold mineralization. Zooming into Dubuisson on Slide 20, our summer drilling program focused on a couple of key objectives, completing infill and geotechnical drilling to support an updated mineral reserve in 2026 and testing lateral and down plunge continuity of the ore body. The surface rig at Dubuisson completed 30 holes in Q3, leading to 2 critical outcomes. First, the new drill core analysis shows Dubuisson veins dip shallowly to the north, meaning past underground drilling potentially ran parallel to these veins, not across, limiting the effectiveness of prior testing. Second, surface drilling intersected a new mineralized zone located between and below the Dubuisson North and South zones. This discovery is exciting given the thickness and grade and it underscores the potential for bulk tonnage mineralization at Kiena. Along with the Shawkey South Zone, Dubuisson now represents 1 of 2 significant diorite hosted systems identified to date. Additional drilling is underway to confirm these 2 findings and if validated, future drill programs at Dubuisson will be redesigned to target the deposit from north to south at optimum angles from surface. Given these new insights, drilling Dubuisson from underground has been paused to refine our geological model with resources retasked to support the Shawkey drill programs. The Shawkey 22 mineralized area and the potential link between Shawkey Main and the Wish zones are becoming a key focus area for exploration drill testing from the level-33 exploration drive. The general area presents an opportunity to find significant mineralization with the potential to provide incremental tonnage near infrastructure. More assay results from the summer program are pending, and we anticipate releasing an updated press release on Kiena before year-end. To wrap up, our long-term exploration strategy is just getting started. Over the next 3 to 5 years, we'll be focused on growing resources and making new discoveries. The momentum is strong. The opportunities are significant, and we can't wait to share more results as we drive forward. Operator, you may now open the line for questions. Operator: [Operator Instructions] Your first question comes from the line of Ralph Profiti with Stifel. Ralph Profiti: Two questions for Anthea and Guy on Kiena, if I may. There was one particular stope that was given us issues in Q2 as it related to poor delineation and dilution. Just wondering what's become of that particular stope? Has it now been delineated to give us some predictability on dilution? And is it still in production over the next several quarters? And how are we looking overall on Kiena Deeps as it pertains to getting ahead on delineation? Anthea Bath: Thanks, Ralph. Great question. And just on that stope, that stope is no longer in production. And we've used that stope to understand a little bit more about our practices and procedures and ensure that the procedures are strong going forward. So that stope is no longer in mined and hasn't been mined since Q2, if I'm not mistaken. Guy Belleau: Correct. Anthea Bath: In regards to our delineation program going forward, I'm going to let Jono just give you an update quickly. Jono Lawrence: Yes. So delineation has been completed for Q4, and we're starting to drill the stopes in the budget for 2026 programs commenced. Anthea Bath: It will be ready by when? Jono Lawrence: We've commenced now. We should be finished by about January on those programs. Anthea Bath: So it will be fully delineated at that point. Ralph Profiti: Great. Very clear. I appreciate that. As a follow-up, you mentioned in some of your prepared comments about some of the steps that you've been taking at Kiena looking into 2026. And I'm just wondering, over the last several months, have you tried to get ahead of the preliminary findings of the external infrastructure review? Or do you expect incremental steps need to be taken? And I'm just wondering where do you expect that independent review to take us on issues like ventilation and development? Anthea Bath: Another really good question. I think the program itself is holistic. I mean I think what it's going to tell us is short-term opportunities to improve infrastructure beyond. We're obviously getting results on time likely. Guy Belleau: Correct. Anthea Bath: In the program itself and taking into consideration. I think the last one has taught us that we're learning too much around our infrastructure where we don't like to. So we need to get to the bottom of really understanding criticality and the risk associated with current infrastructure setup. So I think the answers will come out, but I don't expect it to be something that's going to be profound or I don't believe it will be. It will probably encourage us on accelerating and improving the robustness of the systems relative to the risk profile we'd like to operate at. Guy Belleau: Yes, it's part of continuous improvement. We don't expect any major findings. I think that we're already aware. It's part of continuous improvement and looking forward to the conclusion of the investigation. Operator: Your next question comes from the line of Wayne Lam with TD. Wayne Lam: Maybe if you could just provide maybe a bit more detail on the progress made with the development of the Presqu'ile ramp. And has there been a delay in the access to the level-33? And then if so, is the prior guidance at Kiena for 2026 that you guys had provided still achievable next year? Or will that be reevaluated? Anthea Bath: Wayne, thanks for the question. Presqu'ile ramp itself will break through in quarter 1, but it hasn't delayed access to the entry into the Presqu'ile ore body, which is developing, which we mentioned to everybody we're a bit behind on. Kiena 136 level we have come in when we said we would come in, in fact, maybe a little bit ahead of what we said to you before. So that's continuing as it is. Regarding the guidance for 2026, we're currently reviewing all the plans. We're going through the mine planning right now and doing a more detailed risk review with the team on that, and we'll get back to the market with an update. Wayne Lam: Okay. Great. And then just want to confirm in terms of the additional mine fronts coming online and the development having been spent on that now, as we look to next year on the growth capital spend at Kiena, should we be modeling something like a much more meaningful reduction relative to the $65 million spent this year? Anthea Bath: Yes, I would believe so. I would believe that with Kiena, Presqu'ile ore body coming into production, commercial production at some point in the year, and then it will -- we should see the growth capital reducing as there's no -- we're not starting significant development anywhere else on a new ore body. Wayne Lam: Okay. Great. And then maybe just last one. Just wondering at Kiena, whether you have been seeing greater turnover at the mine. And just wondering if you had just a bit more detail on the cost pressures you're seeing on the labor side there? Anthea Bath: Yes. I think that's a great question. Turnover is one of our biggest concerns at Kiena and we've seen high turnover. In fact, you saw it in other contracts. Our contract experiencing the same. Yes, it's something we continue to work on. It's something that we worry about all the time. But yes, it's nothing different from what we've seen before. We just sort of keep assuring that -- your second question, Wayne was on the bottleneck? Wayne Lam: No, it was just on labor cost pressures. Anthea Bath: I think from a labor cost perspective, the thing is when you don't have your -- when you've got high turnover and you're having to fill vacancies you're using contractors, which is higher cost obviously for the operation. And then also you're building site redundancy as well when you're managing this change. So it certainly has impacted us. We've seen it in our numbers. But I've got to say all the efforts that are going in, understanding the people strategy and how we actually differentiate Wesdome hopefully will come into play and we'll get more stickiness from that perspective and enhance this going forward. Operator: Your next question comes from the line of Don DeMarco with National Bank Financial. Don DeMarco: Welcome to Phil. So congratulations on the continued buoyant free cash flow another quarter. But my first question, I think I'll just continue on with the -- some of the labor challenges that you've commented on. What do you think the root cause is there? I mean is Agnico -- is it just a competitive place to be with respect to Agnico or are there other industries that are pulling labor away? And what is the source of that competitiveness in the labor? Anthea Bath: I think the market is extremely competitive as a whole for labor across the country, Don. And I think we're seeing it very strongly in Val d'Or at the moment. I think there's also a challenge there on sort of accommodation those things that you’re building this out. Challenges are getting a bit harder. So I don't believe it's unique to Val d'Or alone. I think the market is buoyant as we know across multiple industries. I don't know if that helps at all. Don DeMarco: Okay. Yes, that's understood. So to my next question then, Phil, you mentioned Wesdome's strong free cash flow yield. And we see this quarter, cash and liquidity is increasing again. Can you share your strategy with respect to capital allocation? Like I see the NCIB that was announced post quarter. Are you looking to build up a kind of a war chest to cash? Or what are you thinking here in terms of going forward in the next 12 months or beyond? Philip Yee: Don, I think the NCIB is really, I think, a very practical and relevant strategy to return capital to shareholders, and it's limited at 2%, which at today's share price, it's around $60 million. So that's a reasonable percentage of the free cash flow generation. And we also have to be in a good position to support the growth strategy. So a lot of the cash, the free cash flow buildup and liquidity will be available to help this company grow internally as well. So I don't think that's really changed in terms of the overall strategy going forward. Don DeMarco: Okay. And with respect to that growth strategy, particularly looking at M&A, can you provide some color on maybe the type of assets that you might consider in terms of jurisdiction, stage, underground or open pit? And we saw recently that Core put a bid in for Probe. Was Probe an asset that might have fit Wesdome's M&A selection criteria? Anthea Bath: I think as we've always said, we do things that are going to be accretive and value adding to our shareholders. We don't need to do anything urgently. Our focus, as we've said to the market has to date to Canada and mostly playing to the strength of Wesdome largely. We obviously review this consistently as well. I'm going to hand over to Raj to add a couple more comments here. Rajbir Gill: Yes, Don, I think what you can see is the general trend of Canadian assets trading at a premium. And I think Wesdome is well positioned from that standpoint, right? We continue to be conservative and really focusing on industrial logic and want to act from a position of strength, ultimately, right? Operator: [Operator Instructions] Your next question comes from Allison Carson with Desjardins. Allison Carson: I think most of the questions around Kiena have been answered. I just had one more remaining. The mining permit at Presqu'ile hasn't been received yet and it's expected in Q4. Is there a chance you don't get it going into Q1? And what does that mean? Does it mean you can't take stope to Presqu'ile? Or can you continue to use the bulk sample permit? Anthea Bath: Yes. I mean the bulk permit as we told the market before was around 17,000 tonnes, and that's what's going to be mined in this year. So we -- as you know, it's going through its normal process and it's following. It will continue. We were hoping to get it at the end of October and it's obviously slightly delayed. Does it affect Q1? Yes, it would. Certainly affect Q1 because we would have really mined through the bulk permit at that point in time. So it is definitely a risk, but something we're not unaware of and something we're working hard to keep doing whatever we need to do to make sure we get it through. Operator: That concludes our question-and-answer session. Ladies and gentlemen, this concludes today's conference call. Thank you all for joining. You may now disconnect.
Operator: Good day, and welcome to the California Resources Corporation Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Joanna Park, Vice President of Investor Relations and Treasurer. Please go ahead. Joanna Park: Good morning, and welcome to California Resources Corporation's third quarter 2025 conference call. Following prepared remarks, members of our leadership team will be available to take your questions. By now, I hope you have had a chance to review our earnings release and supplemental slides. We have also provided information reconciling non-GAAP financial measures to comparable GAAP measures on our website and in our earnings release. We will also discuss our pending Berry merger. We encourage you to read our Form S-4 filed on October 14, 2025, as it contains important information. Copies of this and other relevant documents are also available on our website and the SEC's website. Today, we will be making forward-looking statements based on current expectations. Actual results may differ due to factors described in our earnings release and SEC filings. As a reminder, please limit your questions to 1 primary and 1 follow-up as this allows us to get to more of your questions. I will now turn the call over to Francisco. Francisco Leon: Good morning, everyone. CRC delivered another strong quarter, reinforcing the disciplined performance and strategic focus that set us apart as a different kind of energy company and also positioning us at the forefront of California's energy revival. We have a lot of good news to share this morning. Here's how we're going to structure the call. First, we will open with a list of accomplishments and summarize important recent events. Next, Clio will discuss our third quarter results. Lastly, we will share some early thoughts around 2026. Let's start with the highlights. California's energy and regulatory environment is improving in meaningful ways and CRC is well positioned. The recent passage of key legislation has created the most constructive framework we've seen in more than a decade, strengthening oil and gas permitting, authorizing CO2 pipelines and extending the Cap-and-Invest program through 2045. Together, these laws help support reliable in-state production while encouraging investment in the state's rapidly rising energy demand. CRC's E&P, CCS and Power businesses can support California's need for energy security and clean energy solutions. Our E&P business continues to perform exceptionally well. Our teams are executing safely, and our assets are demonstrating strong production performance and low base declines. With our successful Aera integration behind us, we can now move our annual base decline assumption to 8% to 13%, which is down from 10% to 15% previously. This significant change strengthens our cash flow generation, improves our capital intensity and enhances the value of our large PDP reserve base. CRC's conventional reservoirs are advantaged with significantly higher estimated ultimate recoveries, when compared to shale resource plays. As many of the Lower 48 producers are moving towards lower quality locations, we are well positioned with long duration, high-quality, low-decline reservoirs. We believe that this will allow us to effectively replace reserves, maintain production with less capital and deliver consistent results through the cycle. Strong execution and smooth integration remain key strengths of our operating teams. We recently announced our merger agreement with Berry Corporation. Like Aera, this deal was well timed is progressing as planned and will add assets that are adjacent to our current positions, creating meaningful synergies that further enhance our leading operational scale in California. Through Aera, we demonstrated our ability to effectively integrate assets, improve operating efficiencies and rapidly capture value. We plan to apply that same approach to Berry. Turning to our Carbon TerraVault business. Momentum continues to build. We are well ahead of the competition and close to making history at Elk Hills with our first CCS cash flows. Our first carbon capture and sequestration project at our Elk Hills cryogenic gas plant is advancing with construction underway and first CO2 injection expected in early 2026, pending regulatory go ahead. This will be California's first commercial-scale CCS project and a critical step towards realizing the state's decarbonization goals. Now that the CO2 pipeline moratorium has been lifted, our strategically positioned CTV reservoirs across the state have the potential to provide storage solutions for existing brownfield emitters that don't have the benefit of colocation, creating a true statewide framework for emissions reduction. We are also advancing our regulatory efforts in permitting inventory to expand our statewide storage network. We currently have 7, Class VI permits under active review with the EPA and are preparing additional applications totaling 100 million metric tons across Central California. As we focus on the most attractive markets for CCS, one thing is clear, California's biggest opportunity lies in delivering clean, reliable power. The California Public Utilities Commission estimates that incremental power capacity in the state will need to double by 2035 to meet demand. Later on, the projected investment in AI inference targeting major population centers, and it's clear that California is heading towards a substantial power shortfall. While renewable resources and scalable battery storage have a role, they will not be enough to satisfy demand. California needs clean, reliable baseload power to enable data center growth, while ensuring a reliable grid. State leaders recognize this challenge and have proposed several pathways to address it. With CCS, CRC and CTV are well placed to be part of the solution. Google recently announced plans to deploy natural gas generation with carbon capture for their Illinois data centers. Here in California, the Energy Commission recently issued a report highlighting that pairing natural gas generation with CCS is a practical and scalable path to the carbonized baseload power across the state's legacy assets. It's clear that leading innovators share this vision, and so do we. CRC and CTV have an unequal portfolio of assets located in the heart of the nation's largest economy. We can readily pair existing power generation with carbon capture to rapidly unlock firm, clean baseload power in proximity to major demand centers. We are evaluating multiple opportunities today in this rapidly expanding market. First, utility and wholesale markets, where front of the meter sales could provide decarbonized baseload power directly into the grid to support system reliability and reduce emissions under the CPUC's newly proposed reliable and clean power procurement program or RC BBB. Second, we can help meet demand from existing large technology and data center operators. Based on PG&E's interconnection queue, data center request in California have now exceeded 10 gigawatts, reflecting surging energy needs tied to AI, cloud computing and electrification across the state. As the AI revolution advances from training to inference, data center sites are expected to shift from prioritizing areas with cheap abundant electricity to low latency areas near major population clusters. As the largest state in the nation with nearly 40 million people and 4 of the top largest U.S. cities, California screens extremely well. As we evaluate our options, it's important that we do the right deal at the right time to create the most value for our shareholders. We're focused on turning an evolving market opportunity into real progress. And earlier today, we took another important step in our natural gas power with CCS strategy in Kern County, as we announced a new partnership with Capital Power to develop carbon management solutions for the La Paloma power facility. This builds on our previous announcements with Hall Street and our own project, CalCapture and Elk Hill. These partnerships validate market demand expand scale from front or behind the meter data centers and highlight CRC's ability to connect firm power generation with carbon storage. With strong execution, disciplined growth and a constructive policy environment, CRC is well positioned to lead California synergy come back, one that values both reliability and responsibility. Clio, over to you. Clio Crespy: Thanks, Francisco. This quarter's operating performance once again exceeded expectations, underscoring CRC's consistent execution operational strength and financial discipline, the hallmarks of our strategy. For the third quarter of 2025 we delivered net production of 137,000 BOE per day, 78% oil, roughly flat quarter-over-quarter on a $43 million D&C and workover capital program. Realizations remained above national averages. Oil at 97% of Brent, NGL at 60% of Brent and natural gas improving to 113% of NYMEX. We generated adjusted EBITDAX of $338 million and free cash flow before changes in working capital of $231 million, reinforcing the durability and efficiency of our operating model. G&A and operating costs were within guidance and our hedge portfolio continued to provide downside protection, while preserving margins. Capital investment for the quarter totaled $91 million, squarely within plan. In October, we raised $400 million on attractive terms to refinance Berry's debt ahead of the pending merger. This financing demonstrates our ability to quickly capitalize on favorable market conditions, strategically enhance our balance sheet by lowering costs and extending duration and maintain leverage below 1x. These proactive steps kick start our synergy capture and position us well for a seamless integration once the merger closes. Our balance sheet remains a key strength. At quarter end, net leverage is at 0.6x and total liquidity exceeded $1.1 billion, including $196 million of cash and an undrawn revolver. In October, we used available cash to redeem the remaining $122 million over '26 senior notes at par. Since then, we've rapidly rebuild our cash balance, ending October with more than $170 million, excluding the high-yield proceeds reserved for the very closing. We have no near-term debt maturities. The next comes due in 2029. Rating agencies have taken notice. Moody's upgraded CRC's corporate family rating to Ba3 and Fitch assigned a positive outlook, citing our consistent cash flow generation, low leverage, disciplined capital allocation and the improving regulatory environment in California. In addition, our borrowing base was reaffirmed in October at $1.5 billion, while existing and new lenders increased their elected commitments by $300 million to $1.45 billion, further enhancing our financial flexibility. CRC's balance sheet and capital framework remain among the strongest in our sector, giving us flexibility to fund disciplined growth, while sustaining meaningful shareholder returns. During the quarter, we increased our dividend by 5%, reflecting continued confidence in our business and cash generation. Year-to-date, we returned more than $450 million through dividends and share repurchases. Under our current authorization, we have over $200 million of remaining capacity for share repurchases through mid-2026. The fourth quarter is shaping up extremely well. We expect to benefit from continued stable production, lower costs and new efficiencies. Capital spend will be modestly higher than in the third quarter, mainly reflecting the catch-up of deferred projects and a strategic scope change to our CCS project at CRC's Elk Hills cryogenic gas plant. As we've advanced this project, we've identified an opportunity to upgrade facilities to serve both Belridge and Elk Hills. Improvements that enhance NGL recovery and increase operational efficiency as we prime the facility for carbon capture. This once again demonstrates our team's innovative approach and our focus on value-enhancing initiatives through integration. Importantly, full year capital expenditures are still expected to remain within our previously disclosed annual guidance range of $280 million to $330 million. As we look ahead, CRC is poised to enter 2026 with a premier balance sheet, a flexible capital structure and a resilient production base, all supporting durable free cash flow and long-term shareholder value. Furthermore, roughly 2/3 of our expected 2026 production is hedged at a Brent floor price of $64 per barrel, ensuring the stability of our cash flow. Our preliminary 2026 plan assumes an average of 4 rigs supported by our strong hedge position and our inventory of existing permits. We plan to operate these rigs using both current permits and those expected following SB 237 enactment. As always, we will remain disciplined and agile, adjusting our capital program as commodity prices and market conditions warrant. Importantly, our current outlook does not yet include the impact of the pending Berry merger, where we anticipate meaningful synergies once the transaction closes. CRC remains focused on consistent performance, disciplined growth and competitive shareholder returns as we move into 2026. And with that, I'll turn it back to Francisco. Francisco Leon: Thanks, Clio. 2025 is proving to be a remarkable year for CRC with strong momentum as we head into 2026. We're posting wins across multiple fronts. Robust reservoir performance, the structural improvements in our portfolio, lower cost, a more resilient capital structure and greater alignment between industry and the state to achieve common goals. For the second consecutive year, we will grow our production through strategic transactions and disciplined reservoir management. More importantly, we expect these actions to position us for sustained cash flow per share growth in 2026 and beyond. We're excited about what lies ahead from closing and integrating Berry to advancing Carbon Teravault and CalCapture and expanding our power and CCS partnerships. Together, these initiatives will allow us to unlock meaningful value for our shareholders. Our focus remains clear, creating considerable and sustainable value for shareholders. We believe California is entering a new era for locally produced energy, one defined by abundance, affordability and sustainably produced solutions. California's energy landscape is improving and CRC intends to play a leading role in that transition. CRC is a different kind of energy company. Operator, we're now ready for your questions. Operator: [Operator Instructions] Our first question comes from Kalei Akamine from Bank of America. Kaleinoheaokealaula Akamine: I want to start with the MOU on -- with Capital Power. It's been our view that brownfield emitters power plants in your vicinity would need to get involved to underwrite the CTV development. So yesterday's announcement in our view was a positive step. My question concerns your PPA efforts from this going forward. 200 megawatts, one could argue that maybe it's not big enough, but if you're collaborating with others and presumably, there's more megawatts on offer. So as you think about developing in this business, there are others in the area that you can perhaps pull into this joint effort. So maybe just kind of stepping back, can you talk about maybe next steps for the PPA? Francisco Leon: Kalei, thanks for the question. Yes, we -- the market is getting hot. We're seeing far more opportunities today than we did 12 months ago. And I think the -- as we mentioned in the remarks, having 1 of the hyperscalers, Google going into natural gas powered with CCS is similar to when you hear the hyperscale is going into nuclear, right? So it's a big moment. It's a big market signal. So the vision that we've had for Kern County, which is on Slide 7 on our deck, is to build a hub for -- to serve their data centers or the grid but at big scale. And yes, our CalCapture project, our excess power at our own plant is a big component to that. It's an anchor element to it. But now we're -- as we move with partnerships with both Capital Power and Hall Street, we're putting a significant scale on the map. So as these hyperscalers are looking now for more inference, low latency you have a site here that can serve the LA market at scale and decarbonized. So it's coming together. It's coming together nicely and it's the story of not only building data centers or increasing power, which is what everybody is looking for. But we're particularly well positioned on both the gas supply, natural gas supply that we have in basin. But also take away the CO2 emissions and store them on our side. So it's a nice integrated project and with great partners like Capital Power is a fantastic independent power producer. I think the signal is CCS is here, and this site is going to be an attractive place for us to grow that power demand. So excited about the next steps. And yes, there's a lot more to come. I think the site continues to -- we continue to find ways to grow different power elements to it and the things are coming together nicely. Kaleinoheaokealaula Akamine: I appreciate that, Francisco. Maybe for the next question, going to your '26 soft guide you highlight a 2% entry to exit decline. When I think about your assets, projects like floods require some time to activate a production response. So I'm wondering about the cadence of that decline. Is it isolated to maybe the first half of the year, while second half of '26 firms up as those projects come to bear? Francisco Leon: Yes. It's really been building an exceptionally good 2025 in terms of reservoir delivery and the team's performance in managing the assets. We will have -- our plan is to have 4 rigs on 1/1. So January 1, by then, we would have 4 rigs running and no, we expect that to be the entry to exit plan as we lower our base decline assumptions, we're putting capital back to work, primarily in the form of workovers and sidetracks permits that we have in hand. We expect that to be a fairly steady performance throughout 2026. Operator: Our next question comes from Betty Jiang with Barclays. Wei Jiang: It's really great to see the momentum across the portfolio. My first question is on the upstream side on the PDP decline. It struck me that your PDP decline improved from 10% to 15% to 8% to 13% since like this natural decline don't typically change. So can you just speak to what's driving that improvement? Is that a function of the portfolio or anything else you're doing operationally? Francisco Leon: Yes, it's a combination of things. It really is an answer that has several components, Betty. But it's first of all, it's owning great assets and conventional assets are just good rock in assets that our team knows how to manage really well. So as we move the decline rates and now that we are a year plus with the Aera assets, and we can see that this team can really bring the most out of it, we feel comfortable changing the corporate assumption. In terms of tangible things that the team is doing, if you look at 2025 and the composition of our activity, a lot of it was focused on injection and injection at Belridge. So with pressure support in these great reservoirs the oil flows nicely. So the Belridge field is performing extremely well, an asset that we acquired from Aera. We also, on Elk Hills, it was more about technology, and it's about remote surveillance. So it's -- I mean, it's an AI component of being able to identify wells when they fail and quickly repair those wells, right? So any well that's down, it's cash flow. So our team has been seeing some improvements in that surveillance and that leads us to be able to manage the down list that you have in conventional assets and manage that more effectively. So and those are the 2 biggest fields. So Belridge and Elk Hills, if you're able to move those reserves, those decline rates shallower that cascades to the rest of the portfolio, right? So -- and it's really just -- I mean, I really want to comment on the team's performance. I mean, they are just completely on the ball and doing the right things in terms of managing the asset base. So that's how you get conventional assets to perform better. It's just this blocking and tackling, it's things like surveillance, things like injections that ultimately pay off big dividends. Wei Jiang: Great. My second question is on the Kern County decarbonized power opportunity. As you highlighted in Slide 7, it's really great to see the capital power MOU. But what strike me also is this emerging hub of opportunities that's in Kern County with multiple power plants on top of the CO2 reservoir. So can you speak to the vision that you see that's emerging in this area? How could a potential hub decarbonized power scenario could look like? And what needs to happen to really catalyze that development? Francisco Leon: Yes, Betty. So a lot of things have come together very nicely. So -- but it's also a reminder that the California market operates different than other parts of the U.S. Here, you have a lot of the infrastructure already exists. And it's been -- natural gas fired generation has been sidelined as more and more renewables have come in. But then if you take the growth expectations of California power, right? So where we're looking to double in 10 years and triple in 20 years, that growth is not going to be all served by renewables and batteries. So you're going to have to bring in baseload, you're going to have to bring baseload at scale. So we have the ability to take these plants in retrofit for CCS to make them decarbonize so they can participate in this growing market. So in Kern County alone, and this is all very close to our -- either within our field boundaries or next to it, we see 2.4 gigawatts of power generation that could serve a growing market. Now when we also saw pipelines, the more autonomous CO2 pipelines being lifted, that brought forward that brownfield idea that we had and b, we're now able to connect -- we'll be able to connect these power plants with our storage sites. And as you see on the map, these are very short distances and some 5 to 20 miles for all these power plants to be able to get to one of our reservoir. So we're building scale on power. We're building scale on emissions. On an aggregate basis, we see about 5.5 million tons of emissions from these plants. And if you look at our inventory of permits, we're up to about 9 million tons that we are in some part of the permitting process all in the Central Valley. So it's all coming together. The big part that we were waiting for is that market signal. And the market signal already talked about Google, but also California is looking for decarbonized power, understanding that we're going to have to bring incremental sources. And we feel retrofit of existing plants that are already there producing power is going to work much better and faster than having new build of any power generation in California, right? So really well positioned to create this hub. L.A. is within 100 miles, 100 miles is important because of latency requirements as you look for inference. So this is all starting to take shape, where before we talked about a single site with single pore space. Now you can see that it's multiple sites, multiple plants and third parties are coming -- looking for a solution that only CRC can provide. Operator: Our next question comes from David Deckelbaum with TD Cowen. David Deckelbaum: Francisco, Clio and Omar and team on several of the milestones achieved to date. I'm probably going to ask you more questions around a lot of things you're going to be asked on today. I want to go back to just the PDP decline. Curious like as we approach sort of year-end reporting for Francisco or Omar, how you think about are we recovering more oil in place at this point with performance revisions? Or are we shifting more recovery into earlier parts of the reservoirs economic life at this point? Francisco Leon: David. I'll turn it to Omar to give any incremental highlights. But yes, these are some of the largest oil fields in the country. And if you look at oil in place, they are in the billions of barrels of oil in place. If you look at the ultimate recovery factors, these are sandstones that have both good permeability and porosity. So the ability to, in a lot of cases, maintain pressure support or to go through a bypassed oil enhances those recoveries. But -- so this is different than shales, right? Shales is all about drilling and completion and about how effective can you make that single event of drilling. Here, you're managing the reservoir and now that we have both permits and a very strong backdrop or from our ability to allocate capital to these projects, we're able to really work on life of field plans to maximize that output, bring a lot of that production forward. But maybe I'll turn it to Omar to see if he wants to add anything. Omar Hayat: Yes. Thanks, Francisco. And thanks for the question, David. One thing I would add to Francisco's comments is just where we are with these reservoirs in their life cycle. We have a long history of operating these reservoirs. So we have steamfloods that started steaming back in '70s, waterflood back in '80s. And the point I'm making is that we understand the behavior very well. So there are very little surprises as you manage PDP. And then you can look for incremental opportunities to shallow the decline. And it's basic blocking and tackling with the EOR projects, you're not going to get 2,000 barrel wells, you have a lot of 20, 30 better wells that you manage well and you work on them to gain another barrel or 2? And just given the number of wells they add up to a shallower decline. So the 2 things that Francisco mentioned earlier, we have been focused on improving the injection side of EOR, both in steamfloods and waterfloods. That was most of the work we did in the first half of the year. And then we are focused on getting to the wells that fail quicker through technology. And AI is a big help. It's eliminating a lot of human error. It's eliminating a lot of human lag and we are getting to those opportunities faster. So it's never a single silver bullet. It's a combination of all these factors. Where we are in the reservoirs life cycle where the declines are very predictable. Application of basic blocking and tackling and leveraging technology. David Deckelbaum: And then maybe Francisco, can I ask on just the high-level thoughts on the '26 plan, which I think was a pleasant surprise for everyone, just given the capital efficiency. It appears as you kind of approach a maintenance level, I'm curious as with the pending opportunity now for increased permits. It seems like your approach to capital allocation is still very much rooted in maximizing free cash per share, if I have that correct. And I guess how do you think about that in the context of now more or less receiving a call from local governments to increase production in the state? Francisco Leon: Yes, David. It's a great question. So you're absolutely right. Our focus is on growing cash flow per share. And so you do look at production as 1 of the components, but it's not the only one. So the way we're thinking about 2026 is a disciplined ramp-up on capital and we have a lot of flexibility. And 1 of the things that we talked about, the type of assets that we have, but the ownership of the assets, it's also create a key advantage that we have. We own 100% of our fields. And so we controlled the spend depending on the commodity cycle. So it allows us to be very efficient. And as you make these assets better, as we've talked about, then your capital deployment becomes 1 of the highlights -- so the way we thought through it is, as we look for the best and optimal way to grow cash flow per share, it's really through a combination of drilling and also leaving cash to that we can opportunistically buy back shares, right? So I think the combination of 2 -- of the 2 with a foundation of a very, very strong hedge book, we have 64% of our oil hedge into 2026. And that's only going to improve once we close the deal with Berry. So that gives us a really good place to start delivering we need to showcase the inventory, and we have a significant runway of great inventory to go after. But we've been in a permitting constrained scenario, right? So the reactivation needs to be measured, thoughtful discipline in a way that we can showcase what this business is capable of. But you're right, in terms of the signal from the government is we need more California production. We need more Kern County production in particular. So as the state is looking for increased activity in Kern County, we will look to participate as we look to, first, grow cash flow per share and look for inventory that gets developed. We will look to participate and our contribution is going to be to effectively double our rig count for now. But we'll continue looking and we'll obviously have to see where oil prices are. We'll have to see where our share prices are as we continue to think about capital allocation. But the way we are leaning into 2026, it's a good balance between buybacks and investing in our business. Operator: Our next question comes from Josh Silverstein with UBS. Joshua Silverstein: Maybe just sticking on the decline rates. You had previously discussed around a 6 to 8 rig, $500 million capital program in order to keep production flat. Now that you've had this reduction in the base decline rate I was curious if you could just kind of give us some color as to what that new maintenance level may be for CRC going forward? Francisco Leon: Josh. Yes, I mean, we're below $500 million, clearly. I think with our 2026 preliminary guide. That's the number that you can triangulate around. Now as we mentioned, these numbers do not include the Berry assets. So as we bring -- we closed the Berry merger, we'll refresh that number inclusive of their assets and we'll provide a full corporate number to maintain -- the maintenance capital to keep production flat. But on a stand-alone basis, so CRC and Aera assets given the improvements that we showcased in the earnings call today, we're clearly now below $500 million. We've seen Berry be able to maintain their production, total capital, and that's all of the capital with about $70 million, but we need to be able to close the transaction and provide a refresh to the market, but the baseline assumption is improving. Joshua Silverstein: Got it. And then it's been a while since we've gotten an update on the Huntington Beach assets and what you guys are doing there and what the permitting and that process looks like. If you could just provide an update, that would be great? Francisco Leon: Yes, absolutely. So things continue to progress well with Huntington Beach. We've made a number of public filings around preliminary development plans, 800 units that could be ultimately built at the site, once it's fully approved. That's all part of the process of engaging with the City of Huntington with all the local and regulatory agencies around the project. So things are marching forward. We have a dedicated rig abandoning the wells there as we go. We continue to produce, we have abandoned the wells as we get all the permitting lined up. As we said before, we think this project is going to be ready 2028 time frame. That doesn't mean that there's not a monetization sooner. But as we looked at this project in the past, the -- as you re-entitle the land for its best use, which is residential housing and you are able to abandon the -- abandon the wells, you're going to get to an optimal price, where the market appetite will be there. We provided guidance on the cost around $200 million to $250 million to abandon the property. That was a 2023 number. We have already made number of abandonments. So that number will come down as we look for that point to monetize the asset in 2028, but things are progressing well. Operator: Our next question comes from Nate Pendleton with Texas Capital. Nathaniel Pendleton: Congrats on yet another strong quarter. Looking at Slide 8 with your existing power generation portfolio and with some of your investments to date, can you talk about your willingness to lean further into the power generation space beyond Elk Hills such as additional plan ownership or additional investment in some more leading-edge power generation solutions? Francisco Leon: Nate. So I would say for right now, the focus is going to be on the feedstock, which is natural gas, low methane emissions gas and certified -- third-party certified gas, which we think is going to be very attractive and we're the largest natural gas producer. And then on offering a CCS solution on the back end. And that's the way we're positioning the company. I don't anticipate owners of -- ownership of natural gas combined cycle plans beyond what we have at this point. We are looking for other ways to bring power forward, things like fuel cells and geothermal, there's a lot of prospectivity in California for -- for geothermal, there's a lot of appetite on fuel cells to have a CCS solution. So we're looking to see what's the right mix of providing this both the carbonized, but also baseload power that we need to be able to serve the growing market. So -- but we are the solution on CCS, and we are the feedstock on natural gas. That plays to our strength, and that's where we're going to continue to advance. And as we continue to bring some of these ideas forward more and more technologies, more and more hyperscalers. I think we'll start looking at what we have and to build that vision for a Kern County power platform that we talked about earlier. Nathaniel Pendleton: And as a follow-up from an earlier question on connecting the emitters on Slide 7 with the recently passed legislation. Are there any underutilized pipelines right of way around those assets that could be brought in-house or repurposed to serve as the connective tissue there? Francisco Leon: Yes, absolutely. So as you look at Slide 7, and you can see that we showcased the footprint fairly well that has both the fields and the current pipelines. So you can see that this is -- these are right of ways that are owned either by CRC or by other E&P companies. These fields are adjacent to ours sort of these power plants are also adjacent to ours. So it's a particularly good place to be able to decarbonize this whole kind of micro grid. And so definitely, there's advantages as we talked about, we own a lot of land. We own a lot of surface ourselves and that we have partnerships with others that own that land as well. So -- so this is something that -- now that we have the moratorium on [ pace ] lifted, that's what we were really waiting on to be able to connect all of these assets, and that's what we're working with Capital and Power and others to try to figure out. Operator: Our next question comes from Noel Parks with Tuohy Brothers Investment Research. Noel Parks: I have a couple of questions. So sort of as a reality check, how long has it been, since you've had the activity levels at Elk Hills that you're going to be ramping up into starting next year? Francisco Leon: Yes. We've been in a permitting constrained environment, since the beginning of 2023. So the improvements that we've had in the past few months around the regulatory framework is a significant milestone for the company. Now we have been able to execute capital workovers and sidetracks effectively over that time, but it's new well bores that we haven't had permits to pursue. But now we have SP 237, so a brand-new law that not only allows for permits in kern County, but it also gives us duration. So it's effectively a 10-year tied to the Kern County EIR. So a 10-year runway -- so how much -- when the last time we had as much support and as big of a runway, it's been a very long time. So as we mentioned in our slides, and I think we mentioned publicly before, the state is looking for local production to ramp back up to about 25% of the supply of the state. We've been trending down over the years. We used to be 40%, 50% of the local suppliers, local E&P companies to the state. That's trended down to about 22%. So the call from the government is to bring more of that California low CI production. And so meaningful changes and meaningful improvements and in terms of the stage view towards local production and as the leading producer in the state. We have -- we want to do our part to help stabilize the fuel markets and look forward to bringing more production forward. Noel Parks: Great. And I'm just sort of thinking that there are so many irons in the fire and different types of catalysts you have at work right now. And with sort of the message of trying to the need to double the state's power production by 2035. So when do you foresee a ramp-up in production for your gas assets as you look ahead? Francisco Leon: Yes. It's a function of capital allocation, where the best returns are. And if we look at our 2026 plan with the 4 rigs, we're going to focus on primarily oil. About 80% of the anticipated contribution from '26 activities is oily. So that means 20% gas and NGLs. So that's just a matter of where we are in terms of the returns, again, supported by a very strong hedge book. We see great returns in the projects, the returns that we've outlined before. So natural gas will come if we get either stronger natural gas prices or we have supply agreements to all these groups that need power. Certainly, that will be the call to drill more gas. We have a lot of prospectivity. We have -- we're sitting on these great basins. And depending on what you are in the state, you could have heavy oil in the shallow reservoirs and then deep gas, a few thousand feet below that, right? So -- you have a lot of stacked pay and a lot of flexibility in how you can run the assets and allocate capital. So we're looking for where the best returns are. And right now, we're seeing them in oil. But as again, as the market demand changes or increases in particular for natural gas, we will be ready to also pursue some gas on a go-forward basis. Operator: [Operator Instructions] Our next question comes from Leo Mariani with ROTH. Leo Mariani: I wanted to ask a little bit about on the capital plan for 2026. So as you're talking about running 4 rigs continuously for roughly $280 million to $300 million of D&C plus workover capital -- but if I just look at your kind of E&P spend in 2025, it was 200 -- I think it's $245 million to $275 million for kind of 1.5 rigs. So just the proportion seems a little bit out of whack there. So can you kind of help me just kind of square up the numbers a bit there? Francisco Leon: Yes. I think you may be mixing Leo total capital versus D&C. So the D&C for '25 is lower. We have like you said, 2 rigs, and we didn't start the year with 2 rigs. We stepped into 2 rigs later. We do have a different facility spend and the facility spend that we talked about in this quarter, which is to bring the NGL project forward from Aera. And so what we're doing is we're building a pipe from Aera to Elk Hills to bring rich wet gas to Elk Hills run it through our cryogenic plant and extract the 1,000 barrels of NGLs. It's a particularly good project because it just follows the natural gas that's already in place. It's just a more efficient way to extract incremental value from the project. But in terms of the D&C numbers, they're definitely lower for 2025. I don't know, if -- what is the number, Clio? Clio Crespy: Yes, absolutely. Leo, you're comparing, obviously, our total capital versus what we're disclosing here related to the activity pickup. But for 2025, capital, we're effectively lining up to stay within our guidance. We haven't changed that. And that spend is all encompassing. It includes, obviously, the oil and gas spend as well as our carbon management spend and so that's where you're seeing the delta here as well as our corporate level spend. But going forward, there's definitely significant capital efficiencies those gains have been through the merger with Aera, consolidating those gains has been the story for 2025. And in 2026, you're seeing that come through in the numbers and the efficiency that we're able to get from that capital spend in the $280 million to $300 million range, that's really yielding a very significant arrest of the decline. Leo Mariani: Okay. And is that largely going to be workovers, which maybe are less capital intensive? Is there kind of a component of new drilling there? Do you have an estimate of that? Just trying to kind of get this a little bit apples-to-apples here? Francisco Leon: Yes, 2026 will be -- will continue to be primarily workovers and sidetrack. Roughly speaking, 60%, 70% of the D&C will be in that category. So the rest would be in new wells as new permits start coming in for those. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Francisco Leon for any closing remarks. Francisco Leon: Thank you. Thanks, everybody, for joining us today. We really look forward to seeing you in upcoming investor conferences during the winter season. Thank you so much. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.