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Operator: Good morning, and welcome to the Par Pacific Third Quarter Earnings Call. [Operator Instructions] I would now like to turn the conference over to Ashimi Patel, Vice President of Investor Relations. Please go ahead. Ashimi Patel: Thank you, George. Welcome to Par Pacific's Third Quarter Earnings Conference Call. Joining me today are William Monteleone, President and Chief Executive Officer; Richard Creamer, EVP of Refining and Logistics; and Shawn Flores, SVP and Chief Financial Officer. Before we begin, note that our comments today may include forward-looking statements. Any forward-looking statements are subject to change and are not guarantees of future performance or events. They are subject to risks and uncertainties, and actual results may differ materially from these forward-looking statements. Accordingly, investors should not place undue reliance on forward-looking statements, and we disclaim any obligation to update or revise them. I refer you to our investor presentation on our website and to our filings with the SEC for non-GAAP reconciliations and additional information. I'll now turn the call over to our President and Chief Executive Officer, William Monteleone. William Monteleone: Thank you, Ashimi, and good morning, everyone. We are pleased to announce strong third quarter operating and financial results. The organization fired on all cylinders as we safely and reliably throughput a near record 198,000 barrels per day, maximized logistics system utilization and delivered above industry trend retail results. This crisp commercial and operational execution drove core financial results of $170 million and $2.10 in adjusted EBITDA and adjusted EPS, respectively. In addition, we captured the benefit of small refinery exemptions, resulting in an earnings boost of approximately $200 million. In total, third quarter adjusted EBITDA was $372 million and adjusted net income was $5.95 per share. As we enter November, we are optimistic about the market outlook. Product margins are rallying in response to tight fundamental supply and demand balances and heightened geopolitical disruptions. Our fourth quarter combined index averaged $15.55 per barrel in October, up from the third quarter. While we typically expect fourth quarter seasonal market conditions to taper off due to lower gasoline margins, our distillate production orientation is lifting our combined index. The Retail business continues to deliver exceptional results, reflecting encouraging trends from improved focus on inside sales and gross margin. In particular, we're seeing improving food top and bottom line results. Quarterly same-store fuel and in-store revenue increased by 1.8% and 0.9% compared to the third quarter of 2024. Looking forward, our development pipeline is expanding with the recent groundbreaking on our second new-to-industry store in the Pacific Northwest and an expanding list of attractive redevelopment or new-to-industry opportunities in Hawaii. We've made considerable progress on our key strategic objectives this year. In Montana, we're pleased with a strong third quarter result, reflected both by record quarterly throughput and OpEx per barrel under our ownership. As throughput increases, we're quickly debottlenecking new constraints. Like our other acquisitions, we have developed an attractive list of low-capital, high-return projects that will allow us to increase the mid-cycle earnings power of the Billings asset from our original expectations. These projects focus on improved logistics flexibility and efficiency, lighter crude processing, expanded hydrotreating capacity and enhanced jet and diesel production capabilities. The Hawaii SAF project continues to progress towards startup. We've achieved mechanical completion and startup of the pretreatment unit and are encouraged by the early results. Focus has turned towards completing construction of the remaining reactors and associated systems. We are targeting mechanical completion by the late fourth quarter and startup shortly thereafter. We are also pleased to announce the closing of the Hawaii Renewables joint venture with Mitsubishi and ENEOS in late October. We've received $100 million in proceeds and are excited by the prospects of this newly formed partnership. Our balance sheet continues to strengthen, and we expect further improvement as we convert this quarter's strong earnings to cash and record the inflow associated with the Hawaii SAF joint venture. The combination of our strong financial position and solid operating momentum positions us to pursue growth and continue opportunistic share repurchases. I'll now turn the call over to Richard to discuss Refining and Logistics operations. Richard Creamer: Thank you, Will. Third quarter combined throughput was a strong 198,000 barrels per day, reflecting exceptional performance across all of our locations. We also achieved a new record low in Refining production costs at $6.13 per barrel. In Hawaii, throughput was 82,000 barrels per day. In September, the team set a new monthly throughput record of nearly 90,000 barrels per day, partially offsetting crude delivery delays that occurred in July. Production costs were $4.66 per barrel. Washington throughput was 39,000 barrels per day and production costs were $4.31 per barrel. Washington continues to excel in reliability and efficiency, capturing the benefits of a strong market environment. Shifting to Wyoming, throughput was 19,000 barrels per day and production costs were $8.11 per barrel. The strong operating results and return to normalized production costs are reflective of the Wyoming team's execution and resilience to operational challenges earlier this year. Finally, in Montana, third quarter throughput was a record high 58,000 barrels per day and production costs were a record low at $8.76 per barrel. This quarter's performance is an example of the Billings refinery potential. Effective reliability investment and the team's strong execution is yielding operational and cultural benefits that are consistent with our acquisition objectives. In the fourth quarter, we do anticipate lower throughput and increased costs associated with routine [ coker ] maintenance. Looking further into the fourth quarter, we expect system-wide throughput between 184,000 and 193,000 barrels per day. Hawaii throughput is expected between 84,000 and 87,000 barrels per day and Washington between 35,000 and 37,000. Wyoming is forecasted to be between 15,000 and 16,000 barrels per day and Montana between 50,000 and 53,000. Both are reflective of seasonal market demand conditions. And Washington's lower Q4 throughput guidance reflects crude unit inefficiencies that will be addressed during the Q1 2026 planned outage. I'll now turn the call over to Shawn to cover our financial results. Shawn Flores: Thank you, Richard. Third quarter adjusted EBITDA and adjusted earnings were $372 million and $303 million or $5.95 per share. The Refining segment generated adjusted EBITDA of $338 million compared to $108 million in the second quarter. Third quarter results include a $203 million gain associated with the full and partial small refinery exemptions granted for the 2019 through 2024 compliance periods. This gain reflects the expected cash benefit based on September 30 RIN prices and is included in our adjusted results since the related obligations were expensed in prior periods. For comparability, our regional commentary on margin capture will exclude the impact of the SRE benefits. Starting with Hawaii, the Singapore 3-1-2 averaged $16.34 per barrel and our crude diff was $6.07, resulting in a Hawaii Index of $10.27 per barrel. Hawaii margin capture was 111%, including a combined $11 million impact from product crack hedging and price lag. Excluding these items, capture was 125%, reflecting lower purchase product costs and steady clean product freight rates. In Montana and Wyoming, margin capture was 93% and 91%, respectively, consistent with our target range and reflecting a return to normal operations following the second quarter turnaround and maintenance activity. Lastly, in Washington, our index averaged $16.66 per barrel, margin capture was 69%, reflecting the widening discount of jet relative to diesel during the third quarter. Looking to the fourth quarter, our combined Refining index averaged $15.55 per barrel in October, up nearly $1 per barrel compared to the third quarter, primarily driven by strength in the Singapore market. The Singapore 3-1-2 Index averaged $20.52 per barrel in October, an increase of over $4 per barrel compared to the third quarter average. We expect our fourth quarter Hawaii crude differential to land between $5.50 and $6 per barrel. In the Rockies and the Pacific Northwest, distillate margins remained strong, partially offset by seasonal declines in gasoline and asphalt netbacks. Unplanned outages on the West Coast have narrowed jet to diesel spreads in October with prompt jet now trading at typical spreads to diesel in the Pacific Northwest. Moving to the Logistics segment, third quarter adjusted EBITDA was a record $37 million, up $7 million from the second quarter. The improvement reflects the return to normal summer operations in Montana and Wyoming and higher system utilization in Hawaii. In our Retail segment, third quarter adjusted EBITDA was $22 million compared to $23 million in the second quarter. Retail results continue to outperform our mid-cycle target, supported by strong in-store sales growth, improved cost control and solid fuel margins. This marks the third consecutive quarter of record LTM retail adjusted EBITDA, which now stands at $86 million. Turning to cash flow, cash provided by operations was $219 million, including a working capital outflow of $147 million, primarily driven by higher RIN inventory associated with the small refinery exemptions. We expect the working capital impact to reverse over the next few quarters as we monetize our excess RIN position. Additionally, our federal tax assets continue to enhance the cash conversion of our earnings. We began the year with an NOL balance of approximately $1 billion and have utilized over $375 million year-to-date, reducing our cash tax payments by $80 million. Cash used in investing activities totaled $32 million in the third quarter. Year-to-date, accrued CapEx and deferred turnaround expenditures totaled $204 million with our full year outlook trending toward the upper end of our $240 million guidance. Cash used in financing activities totaled $197 million, driven by an ABL paydown of $147 million and share repurchases of 16 million. Year-to-date, we've repurchased 5.7 million shares, reducing our basic share count by over 9%. Shifting to the balance sheet, gross term debt as of September 30 was $642 million or 3x our LTM Retail and Logistics EBITDA, positioning us at the low end of our 3 to 4x leverage target. Quarter end liquidity increased 14% to $735 million, reflecting an excess capital position relative to our minimum liquidity of $300 million to $400 million. Looking ahead, cash proceeds from the Hawaii Renewables JV and future monetization of excess RINS are expected to further bolster our liquidity position. With a strong balance sheet and constructive outlook, we're well positioned to pursue strategic growth and continue opportunistic share repurchases. This concludes our prepared remarks. George, we'll turn it back to you for Q&A. Operator: [Operator Instructions] Our first question comes from Matthew Blair with Tudor, Pickering, Holt. Matthew Blair: Congrats on the strong results overall. I would say that Washington capture might have been a little bit lower than our expectations. Was that primarily due to the dynamics on jet versus diesel in the quarter? And if so, would you expect that to reverse out in the fourth quarter? Shawn Flores: Matt, it's Shawn. That's correct. We sell a fair amount of jet fuel out of our Tacoma facility. Our index really reflects the diesel market dynamics. And we saw, at least in the Pacific Northwest, jet to diesel spreads north of $20 per barrel. And as I mentioned in my prepared remarks, this spread is now compressed down to more typical levels. I think this morning, it's trading $4 to $5 per barrel discount to diesel. So we estimated that was about a 15% capture impact to Q3. I think adjusting for that, we're right sort of within our range of 85% to 95%. Matthew Blair: Sounds good. And then could you also discuss the turnaround schedule for 2026? I think you might have mentioned some upcoming work at Washington. Are you also expecting any work at Hawaii or Wyoming? And what -- any further comments on the timing and total capital cost of this planned activity next year? William Monteleone: Matthew, it's Will. I think consistent with our prior disclosures, we're planning to conduct a turnaround in Hawaii next year. And we're going to have a small planned outage in Washington, as Richard referenced, to address some of the crude unit inefficiencies that we're seeing. And then we have elected to defer the Wyoming turnaround, given the time we had inside the units during the outage earlier this year. So that's the main update on that front, and we'll be back in front of everybody in December with our expectations on capital requirements. Operator: Our next question comes from Ryan Todd with Piper Sandler. Ryan Todd: Maybe one first on cash. You should see a significant influx in cash over the next few quarters in the form of JV -- the payment from the JV and the reversal of the 3Q working capital headwind as you monetize the RINS from the SREs. And that's on top of the organic free cash flow that you're generating. During the third quarter, you were more active strengthening the balance sheet compared to share buybacks. How should we think about your priorities for the use of all this cash going forward? William Monteleone: Sure, Ryan. It's Will. You're correct. I mean I think our balance sheet is improving quickly and is in good a shape as I've seen it. And again, I think that really positions us to both pursue growth as well as consider and weigh that against our share repurchase opportunity. And so I'd say over the near term, we're focused on completing the construction on Hawaii Renewables project. And then as we kind of look into the future, we're looking at projects that can propel the Montana business mid-cycle EBITDA generation higher. I'd say we see a mix of low capital and high-return implant projects as well as some enhanced logistics capabilities and market access opportunities that we see as most attractive in that area. And I would say, as always, we'll weigh that against the opportunity to repurchase shares. And I think given our capital position, we can really do all of the above. Ryan Todd: Great. And then maybe just a follow-up to some of your comments earlier. I mean you're seeing quite a bit of strength in the Singapore margin environment. Can you maybe talk about what you're seeing there in terms of drivers, sustainability of that strength? And how you think about the sustainability outlook there at the Hawaii refinery? William Monteleone: Sure. You're correct, Ryan. I think we're seeing the Singapore margin environment at levels that would be almost consistent with, call it, the third quarter of 2023. So I think this morning, we saw gas, oil cracks at $30. It's the first time I've seen that in a long time. And again, I think the drivers of this are you've got really -- you do have existing tight and low inventories across the OECD kind of major tankage positions. And then I think you overlay that on top of the disruptions that you're seeing from sanctions and the potential impacts on crude flows into both India and into China, and again, I think that's what has the market really focused on overall availability and supply of distillate as we head into the winter and as we work through pretty elevated and strong demand that we're seeing on the harvest side. So I think those are the key things that we're seeing. And again, it is a strong backdrop, particularly for our distillate-oriented refineries. Operator: [Operator Instructions] Our next question comes from Alexa Petrick with Goldman Sachs. Alexa Petrick: I wanted to ask, can you provide some color on early thoughts on how Q4 is shaping out? How should we think about captures quarter-over-quarter? You talked a little about the jet diesel differential, but maybe if you could expand on some of the moving pieces. Shawn Flores: Alexa, it's Shawn. Yes, I think the Refining index overall, as we mentioned, at $15.55 per barrel up relative to the Q3. I would expect some seasonal dynamics to take hold as we get into the latter half of the quarter, particularly in the Rockies, as it relates to gasoline and asphalt netbacks. But as far as capture, I'll maybe just take through the different regions. In Hawaii, our guidance is still around that 110% capture level. I think when you look over the last 2 to 3 years, we've averaged between 110% and 120%. And the elevated capture has really been linked to the elevated clean product freight rates, and we haven't really seen that change. So I think the one thing I'd call out in Hawaii is we do have a small crack hedge book position. We typically layer that in 2 to 3 months in advance. And so like in Q3, I think it's fair to assume it's a marginal headwind going into Q4. But again, we typically only hedge about 15% to 25% of our Singapore exposure. So pretty minor impact in Hawaii. In Tacoma, our mid-cycle guidance continues to be in the 85% to 95% range, should expect to see some favorable impacts on the jet to diesel dynamics. And partially offsetting those dynamics will be the asphalt netbacks worsening as you get into late November and December. I think Montana and Wyoming, the market conditions are strong. Diesel margins, in particular, north of $45 per barrel in the upper Rockies. But again, I think as you get into December, we would expect some seasonal dynamics to take hold. Alexa Petrick: Okay. That's helpful. And then maybe to follow up, I mean, you guys have a high distillate yield relative to a lot of your peers. So curious as we think about incremental heavy barrels entering the market, how are you thinking about distillate going forward maybe relative to gasoline cracks? Or -- I'll kind of turn it to you on how you're thinking about the products. William Monteleone: Sure. Yes, we're typically in max diesel mode, I would say, across the majority of our refineries. I would say, max distillate mode. pretty much 100% of the time. And again, that's been the case in each of the markets that we're serving. And I don't think we see a significant incentive to move to heavier barrels. And generally speaking, we're ensuring the crudes we're buying have adequate amounts of intermediates to fill up our downstream processing units, so we maximize the overall distillate yield. So I don't see any major changes. And in general, the average barrel in the world definitely continues to get lighter, given our complexity configuration and location that tends to match up pretty well with what we do. Operator: Our next question comes from Jason Gabelman with TD Cowen. Jason Gabelman: I wanted to ask about the RINS received from the small refinery exemptions. Are you going to pursue additional opportunities there for exemptions that you didn't receive in your refinery? Some of your peers have discussed trying to submit additional petitions for 2018 to 2024 on refineries they think should have received RINS. So wondering if you're going to do the same or if you're satisfied with the outcome. William Monteleone: Yes, Jason, I mean, I think I'd tell you, we will avail ourselves of all opportunities that we think are consistent with the law and what the EPA is proposing and how the DOE is scoring the exemption petitions. And again, we've spent significant time on this over the last 7 to 8 years and I think have generally a good feel for how the EPA approaches and the DOE is approaching the scoring here. So I wouldn't point out anything that I think is material to us right now. I think there are probably some things where we've -- we'll see clarifications over time, but I don't think it's anything I'd point out as material. Jason Gabelman: Okay. And connected to that, are you going to change the way that you go about managing your RIN liability moving forward and more directly ask just purchasing less RINS to cover your liability than you have in the past? William Monteleone: Yes. I think I'd prefer not to get into our commercial strategy and positioning on RINS. That said, I would tell you, at the end of the day, I think the law and the approach that the EPA and the DOE have taken or the approach they've taken is consistent with the law. I think we'd expect that approach to continue forward. That said, I think in this area, as history would tell you, you have to be prepared for a wide range of outcomes. And again, I think we manage our commercial position as such, recognizing that there are, I'll just say, tail risks out there that we have to constantly be thinking about how we want to manage it. But I'd say, our system gives us a fair amount of flexibility to ensure we can capture the benefit of the smaller refinery exemptions over time and certainly see this as a benefit and consistent with the law. Jason Gabelman: Yes. Understood. My follow-up is on Montana, which seem to run very well out of its turnaround. As you look forward, do you expect it to sustain these lower operating costs that are below, I think, your base case assumptions? Or do you view this more as a onetime benefit and OpEx should kind of move back above that $9 per barrel range? William Monteleone: Yes. Thanks, Jason. And I think you're right, it was a great and strong performance of the Montana team. I think you should expect seasonal improvements on OpEx per barrel as we ramp rates in the summer. And then I think as you get into the softer quarters, you'll see that start to taper down. In general, what I'd tell you is we still think the $10 per barrel annual target is the right number for the Montana team. And again, I think we feel confident we're moving in the right direction to achieving that. Operator: Ladies and gentlemen, this was our last question. I would like to turn the conference back over to William Monteleone any closing remarks. William Monteleone: Great. Thank you, George. With a high distillate yield and strong balance sheet, our enterprise is well positioned to grow and thrive in the current market environment. I want to congratulate our entire team on a strong operational and financial quarter. I hope everyone has a great day. Thank you. Operator: Ladies and gentlemen, the conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Goodbye.
Operator: Ladies and gentlemen, thank you for standing by. My name is Christa, and I will be your conference operator today. At this time, I would like to welcome everyone to the Everus Third Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Paul Bartolai. Please go ahead. Paul Bartolai: Thank you. Good morning, everyone, and welcome to Everus Construction Group's third quarter 2025 results conference call. Leading the call today are CEO, Jeff Thiede; and CFO, Max Marcy. We issued a news release yesterday detailing our third quarter 2025 operational and financial results. This release and the accompanying presentation materials are publicly available on the website at investors.everus.com. I would like to remind you that management's commentary and responses to questions on today's conference call may include forward-looking statements, which, by their nature, are uncertain and outside of the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results could differ materially. For a discussion of some of the factors that could cause actual results to differ, please refer to the Risk Factors section of our latest filings with the SEC. Additionally, please note that you can find reconciliations of historical non-GAAP financial measures in the news release issued yesterday in the appendix of today's presentation. Today's call will begin with prepared remarks from Jeff, who will provide a brief review of our recent business performance, followed by a financial update for Max. At the conclusion of these prepared remarks, we will open the line for your questions. With that, I'll turn the call over to Jeff. Jeff Thiede: Thank you, Paul, and good morning to everyone joining us today. We are very excited to be here with you all as we report our third quarter 2025 results. It is hard to believe it has been almost exactly one year since we reported our first quarterly results as a stand-alone public company. It has been a tremendous year, and I'm extremely proud of our team and everything we have accomplished. We have a team of top industry talent, and Everus is well positioned for many more years of success. During our call today, I will provide a brief overview of our results and highlight some of our key accomplishments against our strategic priorities before I turn it over to Max for his financial review. Beginning with Slide 4, I'm pleased to report that we delivered another quarter of exceptional financial performance, demonstrating the strength of our business model and our outstanding execution capabilities. I'm incredibly proud of our employees across the organization whose dedication, skill and hard work enabled us to generate record quarterly revenue, net income and EBITDA. For the third quarter, revenue increased 30% from the prior year period, driven by continued strength in our Electrical and Mechanical segment, including sustained momentum in our data center submarket. Our strong revenue growth was complemented by excellent margin performance. Third quarter EBITDA increased 37% from the prior year period, driven by our revenue growth and solid execution. As a result, our EBITDA margin was up 50 basis points. Our team's ability to execute complex projects while maintaining our high standards of safety and quality continues to set us apart in the marketplace. Our total backlog at the end of the third quarter was $2.95 billion, up 2% from the same period last year and up 6% from the end of 2024. This is solid growth given our record third quarter revenue performance. The strength of our backlog reflects our established reputation as a trusted partner for the most complex and demanding projects in our industry. Our clients continue to turn to us because they know we have the expertise, resources and track record to deliver exceptional results on schedule and within budget. This trust translates into repeat business and long-term relationships that form the foundation of our sustained growth. Looking ahead, I'm confident in our ability to continue building this backlog momentum. The underlying demand drivers across our key markets remain robust, and our competitive positioning has never been stronger. We're seeing healthy pipeline activity, and we will remain disciplined in our approach to project selection, focusing on opportunities that align with our strategic objectives and offer attractive returns. I would now like to spend a few minutes discussing some of the trends in our key markets. We remain encouraged by the favorable trends in our T&D business, where strong spending plans by many of our key customers continues to drive our momentum. We think our recent revenue results are largely a timing issue as evidenced by our year-to-date backlog growth. Our utility customers are accelerating their infrastructure programs, and we're actively evaluating a healthy pipeline of opportunities that positions us for continued growth in this segment. The broader context driving this momentum cannot be overstated. The United States faces an unprecedented need for power transmission infrastructure upgrades, driven by projected loan growth from multiple sources, including data centers, electric vehicle adoption, industrial reshoring, undergrounding and the ongoing energy transition. This creates a multiyear tailwind that we believe will sustain demand for our specialized T&D services well into the future. As we evaluate larger projects, we will remain disciplined in our approach, carefully considering each opportunity against our strategic criteria and risk parameters. This measured approach ensures we're selecting projects that align with both our growth objectives and our commitment to operational excellence. Looking at our data center submarket, we continue to experience very strong demand with no signs of weakening and urgency around data center infrastructure development seems to only have intensified. Our deep involvement in long-term planning with key customers provides us with visibility into future projects and revenue opportunities. From a competitive standpoint, we've strategically positioned ourselves in key geographic locations where data center development is active. We've established ourselves as one of the select few service providers in the industry with the proven track record, technical expertise and skilled workforce necessary to successfully execute these increasingly complex jobs. Data center projects demand precision, reliability and the ability to work with an extreme tight tolerances, requirements that play directly into our core strengths. Additionally, opportunities in our industrial end market continue to provide work opportunities for us. We are expanding our offering into other regions of the country to build upon our expertise. We have recently started work outside of our core geography at a semiconductor manufacturing facility. We believe more opportunities like this will come as we execute successfully. Now let me shift gears a bit and provide a quick update on some of our key accomplishments during the quarter regarding our 4EVER strategy, which continues to serve as the foundation for our sustainable growth and competitive differentiation. The cornerstone of our long-term success is our people. During the third quarter, we maintained our focus on attracting and retaining key talent, and I'm proud of our ability to secure and develop qualified labor in support of our strong top line results. Our ability to grow our employee base is critical to supporting our growth objectives and enabled us to generate nearly $1 billion in revenue during the third quarter. What makes me particularly proud is not just our success in attracting new talent, but our continued focus on developing and retaining our existing workforce. We've invested significantly in training programs, career development pathways and competitive compensation packages that recognize the value our skilled craft people bring to our organization. In an industry where skilled labor is increasingly scarce and competition for top talent is intense, our ability to both attract and retain the best people in the business gives us a sustainable competitive advantage. We had another quarter of efficient execution, which, once again, positively impacted results during the quarter. This is a direct reflection of our tremendous team throughout the organization. We had favorable variances and project pull forward across certain large projects that were spread across multiple end markets, highlighting the strength and depth of our team. Our focus on project selection, bidding discipline, training, safety and execution are core to everything that we do. We are extremely proud of our track record of superior execution and work every day to maintain our success. In summary, I'm extremely proud of our third quarter results and everything we have accomplished in our first year as a stand-alone company. We are excited about the opportunities ahead and expect ongoing strong momentum into 2026, while we continue to execute on our 4EVER strategic priorities with a focus on providing long-term value to our shareholders. With that, I'll turn it over to Max. Maximillian Marcy: Thank you, Jeff, and good morning, everyone. I will provide additional details on the quarter and give an update on our liquidity and balance sheet and wrap up with our guidance. Beginning on Slide 10 in today's presentation, revenues for the third quarter were $986.8 million, an increase of 30% compared to the same period last year. The increase was driven by strong growth in E&M, where revenue increased 43% versus last year. Total EBITDA was $89 million during the third quarter, an increase of 37% from the same period last year. That was driven by solid revenue growth and increases in segment level margins in both E&M and T&D, including continued strong project execution. Our stand-up costs continue to trend in line with our expectation for full year run rate incremental costs of $28 million. As a result, our third quarter EBITDA margin was 9%, up 50 basis points from 8.5% in the prior year period. At September 30th, total backlog was $2.95 billion, up 2% from September 30, 2024, even while we had a strong revenue burn during this current quarter. Our T&D backlog was up 19% from last year due to increases in the utility end market, specifically undergrounding and substation work. While our E&M backlog was relatively consistent, reflecting the strong revenue burn during the quarter. We remain confident in our ability to generate continued backlog growth. Our orders during the quarter were strong and bidding activity remains healthy across most of our key markets, including commercial, industrial and utility. Now turning to our segment results. Let's first look at E&M, where our third quarter revenues increased 43% to $767.3 million. The increase was driven primarily by growth in our commercial and renewables markets, with the continued strength in our data center submarket, once again a key driver. Our E&M EBITDA was $66.9 million in the third quarter, an increase of 64% compared to last year. The increase was driven by our strong revenue growth and higher gross margin due to project timing and efficiency gains on certain projects across several end markets, partially offset by higher SG&A expenses. As a result, our E&M segment EBITDA margin was 8.7%, up 110 basis points compared to 7.6% in the third quarter of 2024. Our third quarter T&D revenues were $223.4 million, down modestly from $228.5 million last year, driven by growth in the transportation market, offset by a modest decline in utility. While our T&D revenues were down nominally, we attribute this mostly to timing and less storm work. We remain encouraged by the broader demand trends as evidenced by the recent momentum in our T&D backlog. We continue to see strong opportunities across our long-term customer relationships and are confident in the growth outlook heading into 2026. T&D segment EBITDA increased 11% to $33.8 million in the third quarter, driven primarily by a higher gross margin due to solid project execution and more favorable project mix. As a result, T&D segment EBITDA margin was 15.1%, up 180 basis points compared to 13.3% in the same period last year. Turning now to our balance sheet and liquidity. As of September 30th, we had $129.9 million of unrestricted cash and cash equivalents, $288.7 million of gross debt and $207.4 million available under the credit facility, net of $17.6 million of standby letters of credit. Net leverage, defined as net debt to trailing 12-month EBITDA, was approximately 0.5x. Operating cash flows were $108.6 million for the first 9 months of 2025, up from $82.7 million in the same paid last year, driven by our strong operating results, partially offset by changes in working capital to support our revenue growth. CapEx was $42.1 million for the first 9 months of 2025, up from $34.5 million in the first 9 months of last year. The increase in CapEx reflects our strategy to increase investments that support our organic growth including the purchase of our new prefab facility we discussed in the first quarter as well as additional vehicle and equipment purchases in TV to support the growth of our business. We continue to expect CapEx for 2025 to be in the range of $65 million to $70 million. We generated free cash flow of $74.8 million for the 9 months ended September 30, 2025, up from $57.8 million last year. Wrapping up with guidance. We are very pleased with our strong results for the first 9 months of the year, which reflect the attractive demand drivers in our business, excellent project execution and the pull forward of revenues and profits on certain projects. Based on our elevated backlog position and strong business momentum balanced against our typical fourth quarter seasonality, we expect a solid finish to the year. As a result of these factors, we are raising our 2025 guidance. We are now forecasting revenues for the full year in the range of $3.55 billion to $3.65 billion, which is up from our prior range of $3.3 billion to $3.4 billion. And we now expect EBITDA in the range of $290 million to $300 million, up from $240 million to $255 million previously. At the midpoint of our updated range, our revenue and EBITDA forecast represent growth of 26% and 40% adjusted for the incremental standalone costs versus the prior fiscal year. Our revised guidance implies a fourth quarter EBITDA margin below our year-to-date EBITDA margin. As we have discussed in recent calls and again this quarter, we have benefited from some very strong execution during fiscal 2025 with a few jobs where we recognize meaningful upside. At this point, we believe our fourth quarter projected margin is a good starting point for our 2026 outlook. We will, of course, continue to strive for execution upside, but that is not our based on assumption as we start a year. Overall, we are very proud of our strong performance through the first 3 quarters of the year, and we are extremely excited by the trends in our core markets and the momentum in our business. Our backlog remains at elevated levels, which provides a degree of visibility into revenue expectations for 2026, and we feel confident in our ability to deliver on our long-term financial targets. That completes our prepared remarks. Operator, we are now ready for the question-and-answer portion of the call. Operator: [Operator Instructions] Your first question comes from Ian Zaffino with Oppenheimer. Ian Zaffino: Very good quarter, congratulations. Question would be on margins, and how do we think about margins going forward? I know initially, there was talk about not getting so much margin expansion going forward or maybe just kind of leveraging some of the cost structure. But we're actually seeing some really nice margin improvement in this quarter. How sustainable is this? And how do you kind of rethought maybe the potential margins that you guys could eventually reach? Jeff Thiede: Thanks for the question, Ian. Our execution upside is really hard to forecast. And when things go right, most things on projects that we do, we have that uplift. We certainly strive to execute well as we have for many years through our repeatable playbook. And in this fiscal year, we saw really strong execution benefits more than in previous years. The upside in margins is not always possible. But when we've got labor materials and schedules, all lining up for us to be able to perform, we'll continue to focus on margin uplift on our projects going forward. Ian Zaffino: Okay. And then maybe as a follow-up on the data center side. But can you maybe talk about what regions or where you're seeing particular strength, because also as far as your inbound, you're getting. And then also maybe can you talk about like the time line for delivering some of these larger projects? I mean are you still kind of seeing them come into the backlog earlier? And how do you think about that just in general? Jeff Thiede: We've got quite a few data center projects in the Upper Midwest part of the country, also in the Midwest and the Southwest and Pacific Northwest, those are our primary regions, where we're doing data center work, and we've been asked to go to other regions as well. The data center work is a real important part of our business. As you've seen, it's grown in our revenue, but also in our backlog. Operator: Your next question comes from the line of Brent Thielman with DA Davidson. Brent Thielman: Jeff or Max, I mean, look, you've got a year here of pretty tremendous organic growth kind of 25% or more. And on the other side, bookings a bit are inherently lumpy, but year-to-date, you're sort of pacing. What you did last year, backlog kind of more flattish, albeit at elevated levels. And I guess in that context, and to the extent that you can provide maybe some high-level views around next year, I mean, can you -- do you still expect to be able to grow the business organically off this really great year with all that you see in front of you, I think, would be just kind of help with -- give us a sense what the starting point could be? Jeff Thiede: Yes. Thanks for the question, Brent. We're still seeing a very strong demand for the services that we provide. And as you know, backlog in our business could be lumpy. Now our ability to secure the backlog is strong. And we'll continue to get the backlog that's going to support growth of our business. So we're looking at our diversified end markets and our submarkets and try to navigate through any cyclicality. We do that by being anticipatory, close communication with our operating companies and, of course, being disciplined in our project selection. Operator: Your next question comes from the line of Brian Brophy with Stifel. Brian Brophy: Congrats on the nice quarter. Last quarter, you guys talked about having several projects in the preconstruction phase in Electromechanical. Is that still the case, or did many of those projects convert into backlog this quarter? Jeff Thiede: Yes. We've seen an increase in large-scale projects. We talked about previously that our revenue is divided up into the 1/3, 1/3 and 1/3. But if you take a look at the large and mega projects, that has increased. So the projects that we have in preconstruction, they sometimes extend as we've seen in the past, but also we had some projects that came forward where the material, the labor and all the decisions and constructability reviews were completed earlier. So that contributed to our pull forward. So we're very excited about our ability to position ourselves for additional work and create the backlog to support our growth. Max, do you want to add to that? Maximillian Marcy: Yes. So Brian, I would say, yes, some of those projects that we're in early phases did accelerate and help us deliver some solid revenue this quarter. So some of those convertible we also still have a lot of projects in the kind of preconstruction or early construction phases, which help us get some visibility into next year. Brian Brophy: Yes, that's great. I appreciate it. And then, I guess, one other one for me. Obviously, there's been headlines around foot traffic slowing down in Vegas. I guess, can you talk about what you're seeing in that local market? How have conversations with some of your customer base been going there as it relates to activity over the next year or so? And then I guess related, assuming there was some sort of seasonal or theoretical slowdown there, can you help us understand your ability to work through that given the fungibility of the workforce and obviously, the strength we're seeing in other end markets like data centers? Or is a slowdown kind of like late '23, early '24 possibility, or how do you feel about your ability to move around resources if needed? Jeff Thiede: Thanks for the question. We've got 4 great companies in the Las Vegas market, and we're very well positioned to do hospitality work. Nevertheless, we've diversified those businesses. We're doing data center work in Las Vegas. We're also doing correctional institutional work. And we've pivoted with some of our resources to other parts of the country. And we moved data center talent down to Arizona and also to the northern part of Nevada to be able to capitalize on our expertise in building data centers. So we're diversified. We're in a really good position for the projects that are available. And our work that we have this year 2025 for Las Vegas is up over the prior year. And if you look at our backlog in hospitality and, of course, data center, those are up since the end of last year. Maximillian Marcy: Yes. So Brian, I'd just add, I mean, we are a premier operator in that Vegas market, right? And we will continue to be a premier operator. I think we saw the slowdown from like '22 to '24, and now we're seeing some opportunities in '25, as we've been talking about. But the important part, which you asked is the diversification, right? So we're a premier operator in the hospitality space, but we'll also be a premier operator outside of that data centers and other markets. So we feel good about our positioning there. Operator: [Operator Instructions] Your next question comes from the line of Chris Senyek with Wolfe Research. Christopher Senyek: Great quarter. Within E&M, could we unpack some of the data center end market revenue in terms of thinking about how that's progressed over the years -- over the year, I guess, meaning, has anything changed in terms of the mix or size or length or timing of the contracts or customer demands or even potentially geography that might change how we should model this business in E&M as we think about things forward. Jeff Thiede: I appreciate the question. Data centers have become a very big part of our business. It's in our commercial end market, and it's also the largest part of our backlog. And we're getting that work because of our relationships that are based upon our execution and the available labor and management to be able to accomplish those jobs. So we're still seeing a very strong demand in that market. Nevertheless, we're trying to keep ourselves diversified and capitalize on the hot markets, but also to be anticipatory and cross-train our people so we can capture additional work should that market cool, but we're not seeing that. We're seeing very long runway on data center opportunities, and we're very well positioned in the markets that we serve. And when it makes sense, we will travel and meet the demands of our customer request to do projects outside of our core markets. Christopher Senyek: And then in terms of where that businesses today versus, let's say, the start of the year, is it -- that's been a gradual acceleration of conversations and bidding and things of that nature, or has it sort of been up and to the right like many of the stocks in the space, or has that been more lumpier than what we might think in terms of the pace in that business in terms of conversation. Jeff Thiede: It's grown for us, and we continue to see that as an opportunity going into next year. Christopher Senyek: Got you. And then totally separately, leverage is down around 0.5 net leverage. I know Tim is now on board leading corporate strategy. Can you remind us and update us on how you're evaluating M&A opportunities, what the opportunities look like out there, areas that would be adjacent, or how to think about the pace and scale of potential deployment of the excess capital, if you will. Jeff Thiede: The strength of our balance sheet is putting us in a good position to be able to do a meaningful acquisition. And earlier this year, we added to our corporate development team. So we're really excited about continuing to be very active in the M&A space, but we see more opportunities than we did a year ago. Our funnel is broader and deeper. And if you think about our strategic priorities to be able to get the right company in the right location for the right price, that is something that we're spending a lot of time and effort in working on. We want a company that's going to have high integrity, of course, also provide the same or similar services to what we currently do and provide that geographical expansion in both the T&D segment and also the Electrical and Mechanical segment. Operator: That does conclude our question-and-answer session. I will now turn the conference back over to Jeff Thiede for closing comments. Jeff Thiede: Thank you, operator, and thank you all again for joining us today. We are very excited about the opportunities ahead for Everus, and we are confident that we have the right strategy in place and the right team to execute on our plan. We will be attending several investor events during this quarter, including the Baird Industrial Conference in Chicago, the Oppenheimer Industrial Summit, the Jefferies E&C Conference and the Goldman Sachs Energy Conference in Miami. If we are not able to connect during the quarter, we look forward to speaking with you on our next quarterly earnings call. Thank you for your time and interest in Everus. This concludes today's call. Operator: Ladies and gentlemen, you may now disconnect.
Operator: Greetings, and welcome to Aurora Cannabis Inc. Fiscal Second Quarter 2026 Results Conference Call. [Operator Instructions] The conference is being recorded today, Wednesday, November 5, 2025. I would now like to turn the conference over to your host, Simona King, Chief Financial Officer of Aurora Cannabis. Please go ahead. Simona King: Hello, and thank you for joining us. With me is Miguel Martin, Executive Chairman and CEO. Earlier this morning, we filed our financials for the fiscal second quarter 2026 period ending September 30, 2025, and issued a news release containing these results. This news release, along with our financial statements and MD&A is available on our IR website as well as via SEDAR and EDGAR. We have also posted an investor presentation to our IR website for reference purposes. Our discussion today serves as a reminder that certain matters could constitute forward-looking statements that are subject to risks and uncertainties relating to our future financial or business performance. Actual results could differ materially from those anticipated in those forward-looking statements. Risk factors that may affect actual results are detailed in our annual information form and other periodic filings and registration statements. These documents may similarly be accessed via SEDAR and EDGAR. Following our prepared remarks, we'll conduct a question-and-answer session with our covering analysts. With that, I'll turn the call over to Miguel. Please go ahead. Miguel Martin: Thanks, Simona. Aurora's sustained strategic focus on global medical cannabis, the highest margin segment of the industry, combined with exceptional operational execution has once again delivered standout financial results. This performance is further reinforced by a strong cash position and the absence of cannabis business-related debt. In our view, Aurora is highly differentiated for the following reasons: First, we are Canada's largest medical cannabis company. Second, we are Canada's leading exporter of medical cannabis with world-class GMP facilities in Canada and Germany that enable us to supply global markets with high-quality premium products. Third, we are market leaders in Germany, Australia, Poland and the U.K., the 4 biggest nationally legal medical cannabis markets outside of Canada. And fourth, we are best positioned to gain a strong foothold in emerging markets as they develop, drawing on our proven successful commercial execution and global regulatory expertise. We will explore these themes in greater detail momentarily. But first, here are key highlights from Q2 2026 compared to Q2 2025. Net revenue rose 11% to $90 million, which included record global medical cannabis revenue increasing 15% and record international revenue increasing 22%. Consolidated adjusted gross margin improved 700 basis points to 61% as we benefited from higher cannabis margins due to increased international revenue. Note that we had originally set a 60% adjusted gross margin target for our medical cannabis business and have consistently exceeded that target over the last 3 years, reaching 69% during the second quarter. And finally, adjusted EBITDA rose more than 52% to $15 million, exceeding our top line growth by a factor of 5. Stepping back from the quarter, we have grown our net revenue over the last 5 years from $68 million to $90 million with adjusted EBITDA increasing $73 million from negative $58 million to a positive $15 million. These results illustrate our continued focus on profitable and sustainable growth. Over the past decade, we have built a competitive moat that continues to fuel international revenue gains and adjusted gross margin expansion, momentum we expect to sustain well into the future. Traction in global medical cannabis is a long-term proposition. And through our investment in science, technology and people, coupled with supporting patient access and physician engagement, we have built the foundation for continued success. The capital we have invested in our European and Australian GMP-certified manufacturing and distribution facilities positions us to lead amongst the select few cannabis companies with both regulatory certifications that most markets require. 90% of our annual manufacturing capacity is within multiple GMP-certified facilities, and our products comply with these increasingly stringent international standards. Beyond manufacturing our own products, we are also able to distribute them compliantly and profitably around the world. We view vertical integration as a structural advantage for us, primarily for 2 reasons. First, we sell medical products and consistency of supply is critical. Being out of stock or substituting cultivars due to fragmented sourcing is neither optimal for prescribers nor patients. Longevity with cultivars, quality and reliability build confidence with both constituencies. Second, we have lower production costs than others, made possible by our focus on yield, potency improvement and operational efficiencies. At our manufacturing site in Germany, we are doubling production as we prepare for further growth in the market and adjacent countries. This investment will allow us to significantly increase capacity while also targeting yield and operational efficiencies to more closely align that facility with our Canadian sites. The bar for recertification keeps rising, especially in Germany, and we are pleased to have recently been GMP certified for another 3 years. Having EU GMP production in Central Europe provides regulators and stakeholders the ability to depend on the same genetics and product consistency that we have in Canada. Let's now dive into a discussion on individual medical cannabis markets. Australia is our largest medical cannabis market outside of Canada, where we currently hold the second largest share. The Australian market offers one of the broadest ranges of product formats beyond North America, allowing us to fully leverage our diverse portfolio. Over the past 2 years, it has experienced rapid expansion, now representing a $1 billion market opportunity according to the Pennington Institute. Turning to Europe. Germany is the largest market and growing with expanding mainstream acceptance. We increased our revenue during the second quarter, supported by a broad set of core and premium products and are gaining share based upon our strong reputation amongst wholesalers, distributors and pharmacists. Imports, as reported by the German regulators has increased rapidly from 8 metric tons in 2018 to 72 metric tons in 2024 and is currently on track to more than double in 2025. The new German government is exploring changes to the descheduling of cannabis first enacted about 18 months ago with the potential for modifications to the current telehealth framework. We support reasonable access to high-quality medical cannabis and await further details of the proposal. We are confident in our ability to adapt to potential changes in the telehealth framework, drawing on our successful experience in Poland. However, modifications to home delivery regulations could present greater challenges, particularly for patients in rural areas. Ultimately, we believe that established operators with a proven track record like Aurora will be able to successfully navigate any potential regulatory changes. Germany is also carefully observed across Europe and its potential impact on neighbor European countries is significant. Let's now discuss Poland, where we are already the established leader in advancing medical cannabis. This market size has more than doubled from a little over 2 tons annually in 2023 to approximately 5 tons in 2025. Further growth is expected following the increase in the annual import limits. We generated robust revenue growth during the second quarter as we benefited from our launch of 2 proprietary cultivars a few months ago. To our knowledge, these are the highest potency medical cannabis products available in the country. We look forward to continuing to deliver a sustained pipeline of innovative, high-quality and premium products for the Polish market, all manufactured in our GMP-certified Canadian facilities. Poland's regulatory standards include a lengthy registration process, which has concentrated 80% to 90% of the market share in 4 cannabis companies, including Aurora. We have a dedicated commercial and regulatory team on the ground there focused on executing on our growth strategies while also maintaining solid relationships with the regulatory authorities, which has enabled us to navigate the shift in prescriptions from telehealth platforms to clinics. Our experience and expertise in the market have benefited us compared to others as we were better prepared to succeed in this evolving marketplace. Success in both Germany and Poland will influence surrounding countries. And as medical cannabis succeeds, more countries will establish their own frameworks. Our facility in Leuna, Germany and our regulator engagement across the EU represent differentiated advantages for us to capitalize on these opportunities. The U.K. is an exciting and growing market where we are expanding our distribution and clinic relationships through new partnerships and successfully launched proprietary cultivar-specific inhalable cannabis extracts, also known as vapes that are performing well. The U.K. permits products other than dried flower and oil, which has enabled us to expand the variety of high-quality medical cannabis available. There is also a strong subset of prescribing physicians and lighter competition in the premium and super premium segments where we operate. Let me now talk about other opportunities across Europe where there is already broad support for legalization of medical cannabis. In Spain, applications are very restricted, but slowly opening up, which we view positively. In France, we have partnered with the government since the start of its tender. A permanent medical framework is expected to take shape in 2026, and we stand ready to serve patients from day 1. Both Switzerland and Austria are now online, while Turkey and Ukraine are showing positive developments for medical cannabis as well. Interestingly, more than half of EU member countries are integrating medical cannabis into health care, including reimbursement. So the momentum is promising. These developments are leading towards greater international alignment on regulatory approaches, an obvious advantage for compliant EU GMP-certified companies like Aurora. Physicians and patients increasingly recognize and appreciate our medicinal quality, and our Leuna facility in Germany has provided us with the opportunity to host regulatory and governmental visits. Turning to Canada. We are #1 in medical cannabis and the largest provider to Canadian veterans. Net revenue grew year-over-year as we benefited from higher revenue from both insurance covered and self-paying patients. While the overall market is relatively steady, we have grown market share as we have benefited from investments in world-class talent, facilities and experience. Our priorities remain enhancing our online marketplace, product innovation and increased product assortment, operational excellence and, of course, ensuring a high-quality patient experience, especially for our veteran communities. To sum up, we are pleased to have reported yet another great quarter at Aurora that illustrates our steadfast execution of our strategic priorities. We feel confident about our future because we believe we are ideally positioned for profitable growth as the leader in global medical cannabis. Let me now turn the call over to Simona for a detailed financial overview of fiscal Q2, followed by a discussion of our fiscal Q3 outlook. Simona King: Thank you, Miguel. The profitable growth achieved in Q2 is a strong testament to the strength of our medical cannabis strategy and our consistent ability to translate vision into results. Let's review Q2 2026 compared to the prior year quarter and then discuss our Q3 2026 outlook. First, net revenue of $90.4 million represented 11% growth, supported by significant contributions from our global medical cannabis and plant propagation segment. Second, consolidated adjusted gross margin rose to 61%, 700 basis points higher, while adjusted gross profit increased to $51.8 million, a 22% increase. Both our global medical cannabis and consumer cannabis segments generated higher margins than the prior year quarter. Third, adjusted EBITDA grew 52% to $15.4 million from $10.1 million. And fourth, we ended the quarter with $142 million in cash and cash equivalents and no cannabis business debt. In medical cannabis, net revenue rose 15% to $70.5 million due to 22% growth internationally, combined with continued strong contributions from Canadian Medical. Medical cannabis comprised 78% of net revenue compared to 76% in the prior year quarter and approximately 94% of adjusted gross profit. Adjusted gross margin for medical cannabis was 69%, up from 68%, driven by increased revenue in higher-margin international markets. Consumer cannabis net revenue was $6.9 million, down from $10.4 million. The year-over-year change was the expected result of our continued decision to prioritize sales to our higher-margin medical cannabis business. Adjusted gross margin for consumer cannabis was 27% compared to 15% in the prior year quarter. The margin increase was due to sales of higher-margin products and cost improvements through spending efficiency. VIVO's plant propagation net revenue increased to $11.6 million, up 34% from $8.6 million in the prior year quarter. This improvement is due to higher orchid sales, which is an exciting and evolving market in North America that offers strong margins. Adjusted gross margin for plant propagation revenue was 10% compared to 19% in the prior year quarter. This decrease is from costs incurred related to inventory write-offs caused by nonrecurring quality issue as well as some surplus crops that were not sold during the first quarter of fiscal 2026. Consolidated adjusted SG&A increased 12% to $35.5 million compared to the prior year quarter and supported year-over-year net revenue growth of 11%. The increase relates to higher freight and logistics costs, notably from increasing sales to Europe and investments in our commercial teams in Europe and Australia. Adjusted EBITDA increased to $15.4 million from $10.1 million. This 52% improvement from the prior year quarter was due to a substantial increase in gross profit resulting from higher net revenue before fair value adjustments required under IFRS. Adjusted net income was $7.1 million compared to $3 million in the prior year period. The improvement relates to an increase in an adjusted gross profit before fair value adjustments of $9.2 million, partially offset by an increase in adjusted SG&A of $3.8 million. Our balance sheet remains one of the strongest in the global cannabis industry. We held $142 million in cash and cash equivalents as of September 30, and our cannabis operations are completely debt-free. Our plant propagation business holds nonrecourse debt that is secured by a significant fixed asset base held at VIVO. Free cash flow was negative $42.3 million compared to negative $26.4 million in the prior year quarter, reflecting the expected cash outflows that typically occur in the second quarter of the fiscal year as referenced in our last earnings call. Let me now provide some thoughts on what we expect for Q3 2026, which ends on December 31. Consolidated net revenue is expected to increase year-over-year, driven primarily by 8% to 12% growth in our global medical cannabis segment. Plant propagation revenue is expected to perform in line with traditional seasonal trends as 25% to 35% of revenues are normally earned in the second half of the calendar year. Consolidated adjusted gross margins are expected to remain strong, driven primarily by industry-leading margins in our cannabis business with plant propagation adjusted gross margins expected to mostly perform in line with historical trends. Continued strength in our adjusted gross margins and higher global medical cannabis revenue should lead to year-over-year annual adjusted EBITDA growth. And finally, free cash flow is expected to be positive in Q3 2026 due to continued strong performance and improved operating cash yield. Thank you for your time. I'll now turn the call back to Miguel. Miguel Martin: Thanks, Simona. The global medical cannabis market is expected to exceed $9 billion, and we have built a strong competitive position around the world based upon our proven commercial execution, combined with our regulatory and scientific expertise. Our near decade of investment and march to profitability has given us a considerable head start in fully capitalizing on this opportunity. We are fully committed to strengthening our leadership position in Canada, Europe and Australia through consistent revenue generation and positive adjusted EBITDA growth. These advantages are the building blocks to enhance long-term value for our shareholders. We look forward to sharing further developments and strategic plan updates with you. Operator, please open the lines for questions. Operator: [Operator Instructions] Your first question comes from Bill Kirk with ROTH Capital Partners. William Kirk: Miguel, you talked about the previous goal of 60% medical gross margins and obviously, how you're running well above that at 69% recent quarters. What do you think a realistic goal is? And I guess, why are the margins structurally better than you expected? Is it less competition than you envisioned? Is it better demand for your offerings? Or is it maybe surprises in the cost to produce? Miguel Martin: It's a bit of all of the above. So let me start where you ended. Our production costs continue to go down. Yield in genetics and what we're getting out of our facilities has created an advantage. I think the second part is increasingly business outside of North America or in Europe or in different parts of the world where you do have higher margins. Now the discrepancy between the target and where it's at, we do see different markets getting a little bit more expensive, whether that's funding for partners in the distribution network or telehealth or even on the clinic side, where I see some investments. But I think it's a mix of all the above. And then lastly, and you did mention it, is execution. We are finding efficiencies in our execution using common medicinal cultivars around the world, gives us production efficiencies. The execution that we have of similar execution, say, in Poland, Germany and the U.K. creates some efficiencies. So I think all of that comes together for these industry-leading margins. William Kirk: And then you mentioned the production assets in Germany as an advantage. Right now, are you enjoying those advantages with competitors maybe having some difficulties getting some product through Portugal into Germany? And I guess, what's the status of some of those delays and investigations that folks are experiencing in that route to Germany? Miguel Martin: Yes. I mean the first thing is, as you mentioned, Germany is a very difficult place to get certified product into and increasingly so. So it's an EU GMP standard with audits. We just had ours, as we mentioned, so we're good for 3 years. Others have had different issues. I'm not here to sort of speak negatively about that situation. I can tell you, though, that our Canadian facilities and the German facilities that are certified are solid. That vertical integration that we have, growing the vast majority of the products we sell in certified EU GMP facilities creates an advantage for us. I mean there's no disruption. And as we mentioned in our comments, is lost, this is medicine. And so for patients and practitioners, they value that consistency of high-quality certified supply. And more and more so, so are the regulators and other key stakeholders. So I think that advantage is going to continue to grow for us and not only be in Germany, but also be in other markets. William Kirk: And if I could sneak one more in for Simona. There was a big drop in accounts payable in 2Q from 1Q. And as far as I can tell, it's the lowest absolute level in a long time. So why the change quarter-over-quarter in accounts payable and why so low? Simona King: Yes. Thank you for the question. And typically, what we see in Q2, a lot of the outflows, cash outflows occur in that quarter as a result of various activities that historically have occurred in Q2. So that's the reason that the accounts payable has gone down. And again, this is in line with historical trends that we generally see in the second quarter of the fiscal year. Operator: Next question, Frederico Gomes with ATB Capital Markets. Frederico Yokota Gomes: First question is on the proposed change to the budget in Canada regarding the, I guess, the price ceiling for reimbursement for medical cannabis veterans. So how do you see that? What could be the impact to your business in Canada? Miguel Martin: So let me first say that this came out last night, but we're disappointed that the federal government has proposed these changes without consultation from the cannabis industry or medical cannabis companies like Aurora. Importantly, veteran patients depend on a clinically supported system that ensures for them safe, consistent access to their cannabis medications. Lowering and this potential lowering of the reimbursement rate puts that entire support system at risk, could disrupt continuity of care, clinical oversight or even push patients to higher-risk alternatives. So given the newness of this announcement and really the uncertainty of the timelines of implementation and lack of consultation, which hasn't happened yet, we're in the process of evaluating the impact and our next steps, and it would be premature for me to comment. But it's early days. It just came out last night, and a lot is going to happen until we see where this lands. Frederico Yokota Gomes: Perfect. I guess one other question. Did you see any impact in Germany regarding that period in which I think they halted the cannabis import permits there because they had reached their quota. Did you see any impact in the market, or for Aurora specifically? And secondly, just to follow up on Germany. Could you comment on price compression in that market? Miguel Martin: Yes. I mean, so what you're referencing is that the German government had hit their import limit and they had to get -- which is very common, and it happens throughout the year as they want to raise the overall limit. And so it was about a 3 or 4-week process. Didn't disrupt us. We have a great relationship with the regulators and the staging of our permits for that market were fine and started back in January, it will go back to the higher number and everything should be there. I can't speak to others. In terms of pricing in Germany, like a lot of markets, we're seeing compression mostly on the value side. And so we operate mostly in the core and the premium piece and so baseline pricing for where we operate really hasn't been that affected. Now as I mentioned with Bill's question, with the implementation of telehealth and some other sort of aspects of that distribution chain, there are some additional costs that are coming in on that side. But overall, we've been pretty happy with the way the pricing has landed for core and premium products. Operator: Next question, Derek Lessard with TD Cowen. Derek Lessard: Congrats on a very solid quarter there. Miguel, just a question on the German investment that you recently announced. Curious what you're seeing in the market that led to that decision. Miguel Martin: Yes. I assume you're talking about the Leuna production facility? Derek Lessard: Yes. Miguel Martin: Yes. So we've got 2 very large EU GMP facilities in Ontario. We built a facility in Leuna, Germany. And for indoor GMP, similar genetics, similar setup to what we do in Canada. We've been really happy with it, and thus, the announcement to double production. Even with a bit of higher energy costs, it's still a very compelling proposition to have that facility straight up producing. So we added upgrades to very innovative lighting and irrigation systems to mirror what we're doing in Canada, again, being able to use the same world-class practices and genetics in that facility, doubling the overall production in there. And importantly, having an EU GMP certified modern indoor facility in Mainland Europe has been great. We've had delegations from countries that are in the cannabis system. We have had delegations from countries that are not in the cannabis system. Regulators and a lot of other key stakeholders visit that facility, and it's been very additive for us. And so we like it. It works as a stand-alone production facility, but it works even better as sort of a showcase of everything that we're doing in that key market. Derek Lessard: Okay. And maybe just one question on Australia. It looks like sales were a little bit softer in the quarter. Can you just maybe talk about that? Miguel Martin: Yes. So Australia is the only market we have where a majority of our sales are in the value segment. And that goes back to the history of the company before we bought the remaining 90%. And the majority of those sales were in a concession system for value products. That's a market where it's been inundated with a lot of value products. And so that's had a bit of an impact on our business there. We are transitioning that market to the same world-class core and premium products we sell everywhere else, and we're very bullish on that. But it's going to take a little bit of time before that portfolio is properly allocated to value being a smaller segment and into core and premium. We're still very bullish on it. It's the biggest market outside of Canada. There are advantages there because you can sell other formats beyond flower and oil, and we've launched edibles and some other things there. So we're bullish on it. It's just as we work through this transition in the portfolio, there's been a little bit of pressure. Operator: Next question comes from Pablo Zuanic with Zuanic & Associates. Pablo Zuanic: Miguel, 2 questions related and the same type of question related to the U.K. and Poland. I think you said you're the market leader in both markets. Do you need to invest downstream there? For example, buying clinics or online pharmacies or brick-and-mortar pharmacies in the U.K., it seems that that market is forward integrated like Australia, and that may be necessary to win in that market. But correct me if I'm wrong. And in the case of Poland, is downstream integration even a possibility or the regulations do not allow that? If you can talk about that, please. Miguel Martin: Sure. We're not the market leader in the U.K., just for clarification. We're one of the top companies, but not the market leader. Let me talk about Poland first. So Poland, we are not allowed to be the wholesaler or distributor. So we can be the manufacturer. There are some companies that also own or have relationships with clinics. As the telehealth system in Poland changed, clinics became very important. And so we partner with clinics, and we continue to look at that. Each and every market, we do look at do we need to own pieces of that vertical structure or can we partner? And there are a lot of great partners out there that want premium, high-quality products from Aurora. So we have a lot of advantages in being able to do that. So right now in Poland, we're the manufacturer. We've got a very substantive team on the ground from selling to prescribing physicians, and interacting with key stakeholders. We are not the wholesaler, and we work with clinics. In the U.K., similar situation. To your point, clinics are very important as a way to onboard and connect with patients, both those coming into the system. So today, we produce the products. We have a very strong network of partnering with wholesalers that's actually expanding. And we have a network of clinics that service it. If it looks like there's an opportunity to change that and actually acquire one part of that vertical, we will. But in some cases, you don't want to compete against your customers. And so I think you sort of have to be careful. But we're very flexible. We have different models in different countries depending on what works for us. Obviously, by our margin structure and the results, it's working, but we stay flexible. Pablo Zuanic: That's good color. Look, I mean, just a follow-up in terms of the timeline for the potential changes in Germany and Australia. In the case of Germany, the way I understand it, the cabinet already approved the changes that have been proposed. Now that has to go through parliament. What's the timeline there? How long could that take? And the same question regarding Australia, the TGA is going through a consultation period. How long could that take? I'm not asking in terms of how things play out, but what are the key milestones that we should be looking for? Miguel Martin: Well, I mean, it's a proposal in Germany from the Health Minister, needs a lot of alignment from a lot of different constituencies. So in terms of timing, we'll know more at the end of this month in terms of what gets put forth. There's going to be a lot of debate on it. So you're going to go into the spring until you know anything about where that's going to land. As we've talked about, there's 2 parts of it. The first part has a lot less impact, which is a change in the telehealth components, not dissimilar to Poland. The second component potentially around the prohibition of delivery of these products, which is completely contrary to how all other medical products are delivered and the impact to rural patients, that's going to be the more controversial one. So we'll see, but end of November, then into the spring in terms of Germany. In Australia, there really isn't a timeline. You've got 2 regulatory agencies that are looking at a variety of different things. I will say we recently saw an interest by the regulatory authorities in Australia to start testing products and looking at some of the adulteration that may be happening in that market to these medical products, and as a company, takes the regulatory responsibilities and production responsibilities seriously, we look forward to that. So Australia is a little bit more open-ended, but you're not hearing things that would have, say, the same impact on the prohibition of delivery through the mail like you hear in Germany. Operator: I would like to turn the floor over to Miguel for closing remarks. Miguel Martin: Well, listen, we're really excited about communicating this quarter to everyone and sharing the work that we're doing. And obviously, we'll continue to do that. We want to thank everyone for their interest in Aurora, and we wish everyone a great day. All the best. Operator: This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.
Operator: Good morning, and thank you for standing by. My name is John, and I will be your conference operator today. At this time, I would like to welcome everyone to the Triple Flag Precious Metals Third Quarter 2025 Conference Call. [Operator Instructions] I would now like to turn the conference over to Sheldon Vanderkooy, CEO. Please go ahead. Sheldon Vanderkooy: Thanks, John. Good morning, everyone, and thank you for joining us to discuss Triple Flag's third quarter results. Today, I am joined by our CFO, Eban Bari; and our Chief Operating Officer, James Dendle. 2025 has been an exceptional year so far, and Triple Flag has achieved another record quarter in Q3. We recorded 27,000 GEOs in the quarter, which drove record adjusted EBITDA of $79 million and record operating cash flow per share of USD 0.39. Shareholders are directly benefiting from the higher gold prices through higher cash flow per share. We should continue to benefit in Q4 and beyond as well as current gold prices are well in excess of the average gold price realized in Q3. We expect to achieve 2025 GEOs between the midpoint and the high end of our 2025 guidance range. I am very pleased with the additions we have made to the portfolio year-to-date. Year-to-date, Triple Flag has now deployed over $350 million of capital over 5 investments. In H1, we announced our investments in the Tres Quebradas lithium mine in Argentina, the Arcata silver mine in Peru and an additional interest in the Johnson Camp copper mine in Arizona, all of which have now started production either in line or ahead of our investment case. Early in the third quarter, we completed our acquisition of a 1% NSR royalty on the Arthur project in Nevada operated by AngloGold Ashanti. And most recently, we have acquired a royalty package on Pan American's producing Minera Florida gold mine in Chile for $23 million. James will provide further details on Minera Florida later in the presentation. This is exactly the sort of royalty that drives shareholder value over time in the royalty sector as we have open-ended exposure to top line revenues and resource expansion over time. Together, our investments year-to-date are providing near-term increasing cash flows as well as longer-dated optionality. They are also located in the right jurisdictions. The bulk of the value is in the Western United States and the remainder is in Chile, Peru and Argentina. I will now hand over to Eban to discuss our financials for the third quarter of 2025. Eban Bari: Thank you, Sheldon. As noted by Sheldon, we had an excellent third quarter with just over 27,000 GEOs. This puts Triple Flag on track to achieve between the midpoint and high end of our 2025 GEOs guidance. These strong volumes in Q3 were delivered in the backdrop of strong metal -- precious metals prices, which reached a record quarterly average of nearly $3,500 per ounce for gold and nearly $40 per ounce for silver. Accordingly, we are pleased to highlight that operating cash flow per share, the single most important metric we focus on as a company, has increased by over 25% year-over-year. Lastly, I'd like to comment on our balance sheet. We exited the quarter with essentially 0 net debt despite deploying significant capital during the third quarter for the acquisition of the Arthur Gold royalty and the Minera Florida royalty. Today, we're in a net cash position. Overall, strong balance sheet, record operating cash flow and total liquidity available of nearly $1 billion provides us with the capital to continue deploying dollars into accretive opportunities to drive future growth for our shareholders. It also allows us to continue returning superior returns to shareholders, and we're pleased to declare a quarterly cash dividend of USD 0.0575 per share. Triple Flag remains focused on top-tier precious metals assets with revenue that's nearly 90% sourced from mining-friendly jurisdictions in both Australia and the Americas. Northparkes and Cerro Lindo continue to be 2 largest contributors to revenues in the third quarter with Northparkes achieving another record quarter due to continued processing of higher open pit grades from stockpiled ore. Triple Flag sales mix remains 100% derived from precious metals, including nearly 3/4 from gold. We do not expect this to materially change, and this will continue to provide investors with exposure to the strong gold and silver price environment. I will now turn it over to James to discuss the producing Minera Florida gold mine in Chile. James Dendle: Thank you, Eban. Minera Florida is located approximately 75 kilometers southwest of Santiago in Chile and is owned and operated by Pan American Silver. It's an underground mine that produces gold and silver ore with the zinc concentrate byproduct. During the third quarter, we were pleased to acquire a package of 3 net smelter return royalties on Minera Florida, ranging from 0.8% to 1.5% for a total cash consideration of $23 million from a third party. Minera Florida has a long history of consistent performance, continuous operation and reserve replacement and has produced over 2.5 million ounces of gold and 14 million ounces of silver since commissioning in 1986. The mine has always operated with a relatively short reserve life. Over the last 20 years, the mine has had approximately 0.5 million ounces of gold in reserves at any one time, which equates to about 4 to 5 years of visible reserve life. Historic annual production at Minera Florida has ranged between 75,000 and 100,000 ounces of gold per annum. Driven by mill expansion potential to increase the nameplate capacity, Triple Flag expects GEOs for Minera Florida to increase to approximately 1,000 ounces by 2028. The exploration potential of this mine is significant. And given Minera Florida's impressive track record of reserve replacement since 1986, we see this asset continuing to perform for decades to come. I'll pass it back to Sheldon for closing remarks. Sheldon Vanderkooy: Thank you, James. In closing, Triple Flag is performing very well and is positioned to continue this performance going forward. Our shareholders are benefiting from our strong current production and the increase in gold prices, which are translating into record cash flows per share. I am very pleased at our success in reinvesting those cash flows in further streams and royalties, which will benefit our shareholders for decades to come. There are a number of near-term catalysts across our portfolio. First, Johnson Camp mine, Tres Quebradas and Arcata have all recently started production and will continue to ramp up into 2026. Second, on the project front, economic studies for Arthur and Hope Bay are on track for completion in the first half of 2026, and we look forward to ongoing exploration updates on the Fletcher zone from Beta Hunt. And finally, the Koné project continues to make good progress, targeting production in 2027. That concludes our presentation. Operator, please open the floor to questions. Operator: [Operator Instructions] Our first question comes from the line of Fahad Tariq with Jefferies. Fahad Tariq: Just on the deal pipeline, maybe talk a little bit more about how the Minera Florida transaction was sourced. Was this -- I mean, it was a third-party royalty from a family. Just curious if there was any sort of process? Or was this a relationship that was like preexisting? Any more color there would be helpful. James Dendle: Yes, I can take this. Yes, it was, I think, a fairly concentrated process. We developed a bit of a report with family over the course of negotiating the deal. And that was good because we actually were able to undertake a site visit. And very often, as you know, with these third-party royalty sales, you can't do that, whereas we actually have a team down in Chile earlier on in the year, spending a couple of days at site. So we had access to Pan American Silver in this instance and the whole mine sales team. Fahad Tariq: Okay. Great. Yes, that's helpful. And then maybe just switching gears to the ATO stream. It looks like there was an international arbitration that was started in early October. Can you maybe just give us an update on how the discussions are going with Step Gold? And what's Triple Flag's expectation for a potential resolution? Sheldon Vanderkooy: Fahad, it's Sheldon. I'll take this one. We tried to be really transparent in the press release and give everyone like direction on the legal proceedings we've started. I'm a little limited in what I can say, but I can provide some background and direction to you in the market. First of all, I'm going to start by saying we're just extremely confident in our legal position. We're owed about USD 10 million. STEP's market cap is a little over CAD 500 million. They have production, they have cash flow. They clearly have the ability to pay. We are in dialogue with Steppe's controlling shareholder. There is no doubt in my mind that they are building Phase 2. And the last thing I'd note is we're going to land in the top half of our guidance range even if we don't receive a single ounce from Steppe Gold here to the end of the year. I really can't go any further into how this is going to get resolved, but we are in discussions, and we are very confident in our legal position. Fahad Tariq: Okay. And then just -- sorry, just maybe a follow-up, if you can answer this part. You're in discussions with the largest shareholders. Are you in discussions directly with Steppe Gold? Sheldon Vanderkooy: I would take the largest shareholder as being in discussions with Steppe Gold. Operator: Your next question comes from the line of Sam Overwater with Scotiabank. Sam Overwater: I just had a question on the transaction opportunities. I think the last time we spoke, you guys were evaluating opportunities between $100 million and $300 million. I just wanted a little bit more color on that. Like what geographies and jurisdictions are these opportunities in? What are the structures of these deals, debt equity stream, et cetera? Is there any royalty opportunities -- and then on top of that, too, like what are the -- a lot of the purposes on the transactions in terms of asset sales, construction funding, et cetera? Sheldon Vanderkooy: Yes. Thanks, Sam. I appreciate that. Yes, the opportunity set, I think, still is squarely in the $100 million to $300 million. Obviously, we've done deals that are smaller than that. We'll look at those. There are larger ones as well. It's probably instructive to look at what we've done already year-to-date. We've done $350 million of deals year-to-date. It's a pretty good mix of smaller royalties than we had the larger Arthur transaction, which is actually a corporate transaction, which is just another way to find good assets at reasonable prices for our portfolio. The opportunity set, it's a real mix. I mean, it's streams, it's royalties. I would say it's concentrated in jurisdictions that investors will be very happy with, I would say, like the Americas traditional mining jurisdictions. And the use of proceeds or what's driving it, it really runs the gamut. I think you kind of summed it up pretty well. It's -- people need money for various things, and that creates the opportunity for companies like ours to step in with financing. Sam Overwater: Great. And then just on top of that as well, corporate transactions. How are you guys assessing corporate transactions relative to sort of other opportunities in the current landscape? Is there anything you're currently considering? Sheldon Vanderkooy: Yes. I mean I don't view a big distinction between corporate transactions and other transactions. I mean we acquired that Arthur royalty. It was via an acquisition of Origin and then a spinout. The Maverix acquisition was a way to acquire a great portfolio at a reasonable price. So we're always looking for ways to add good assets to our portfolio at returns that are attractive and accretive to shareholder value. Sam Overwater: Great. And then lastly, does Triple Flag currently have like an equity portfolio to sell? Are you considering any sales in an equity portfolio or anything like that? Sheldon Vanderkooy: No. Operator: Your next question comes from the line of Brian MacArthur from Raymond James. Brian MacArthur: I just wondered if you can comment a little bit on Prieska and what's going on there. I mean there's a statement Orion looks like they've signed a term sheet with Glencore. But what actually needs to happen there for you to move that forward post -- other than the South African regulatory approvals? James Dendle: Brian, it's James. I'll pick that up. So as you'll recall, Prieska was always contemplated as a single integrated project comprising 2 zones, what they refer to as the Uppers, which is the upper remnant areas of the historical mine and the Deeps, which is the sort of untouched sulfide ore body. The Deeps is of great interest to us because it hosts the precious metals. It also has the exploration upside and it's the part of the ore body we're most focused on. The company through looking to stage their capital expenditures has disaggregated the project to the Uppers, which they'll develop first and the Deeps that they'll develop progressively thereafter. There is a dewatering component to that. And as you noted, they've received, I think, a very supportive nonbinding letter of intent from Glencore, which they're working through at the moment. So that is all very positive. Given our primary economic interest is in the Deeps, we will be evaluating the right but not obligation to fund the stream into the Deeps when they actually are at the stage to make a final investment decision on that project. So we expect the company to make an investment decision on the upper this year and an investment decision on the Deeps next year. So as a reminder, we have no obligation to fund the stream, but we like the asset. So it's a funding decision for Triple Flag in 2026. Brian MacArthur: But just to be clear, so can you -- I mean, do they develop the upper, if you think of it that way with the money they have and you just get the option to wait and then just come in on the lower? Or do you have to execute once they make a decision to do the upper, if I want to look at it that way. That's what I'm trying to figure out is when you're I get it, you've got -- you have the option to do it or not do it, but I don't know if there's a drop dead part of the contract that makes you decide or whether you can wait and see how the second part goes if you see what I'm saying? James Dendle: Yes, we can wait until the second part is ready to go. The nice thing is that the company will be progressing with the dewatering of the Deeps while mining the Uppers, so that they continue to derisk and develop the project whilst we get the opportunity to wait to make the investment decision on the Deeps. So there's no drop debt in that sense. We just have the opportunity to wait a little longer. You'll recall we have a small royalty on the project as a whole. So when the upper start producing, obviously, the royalty will pay because that applies to both zones. Operator: Your next question comes from the line of Derick Ma with TD Cowen. Derick Ma: On the El Mochito stream disposal, you got a fair amount of consideration to perhaps a win-win situation for both parties. But could you discuss how the situation arose and how you evaluate these types of situations versus retaining optionality in the portfolio? Sheldon Vanderkooy: Yes. Sure, Derick. It's Sheldon. I'll speak to that. El Mochito, it's a fairly small mine. It's based in Honduras. We acquired as part of the Maverix portfolio. It was undercapitalized and they were having difficulty servicing the stream as part of their operations. Eventually, what we did, and we're close to the operator. They're a private company, and we were looking for ways to get additional capital that was not our capital into that project so they could be in a position to start paying out on the stream. Basically, I think this is a win-win-win situation where we found the outside capital, they're bringing that in, and then we're structuring ourselves to come out on these terms. It's good value for us, and I think it allows them to move forward without the stream in place. Derick Ma: Okay. And how do you kind of evaluate these type of situations versus retaining optionality when you look across your portfolio when other opportunities come up like this? Sheldon Vanderkooy: I mean every situation is different. I think -- I put it this way, I'm very happy with the structure of this -- and the way this is being resolved. It's getting us good value out. It allows them to go on. Generally, we're not looking at selling streams, but this is essentially a structured sale of a stream, but it's really based on an asset-by-asset basis. Operator: [Operator Instructions] Our next question comes from the line of Cosmos Chiu with CIBC. Cosmos Chiu: Maybe my first question is on Minera Florida. James, you mentioned that you were on site. My understanding is that this past quarter or this past year, there's been some issues in terms of negative grade reconciliation, unplanned mine sequencing into lower-grade ore zones. I think you mentioned that as much as well in your guidance. You said, I think Minera Florida long term was capable of doing 75,000 to 100,000 ounces. This past year, 78,000 to 90,000. So the top end is lower. So I guess my question is, James, how much of that have you factored in into your valuation? And is it just really a one-off and it's really going to bounce back? Or how do you look at it? James Dendle: Yes, Carl, good question. The valuation and the production assumptions over a short period of time, of course, you consider what's actually happening on the short term as a guide for the long term. But the interesting thing is, as you know, about Minera Florida is there's a very long history of operations here. So we actually had access to the full history of production records that gave us great confidence in the forecast. And at the end of the day, quarterly variance in a gold mine is not a new thing. So for sure, there's quarterly variance on-month scale that exists, and I'm sure it will occur in the future. But in the long term, we think the mine will operate in accordance to how it's operated historically, which is in the range we stated. Cosmos Chiu: Maybe switching gears a little bit, bigger picture. Sheldon, as you mentioned, you reiterated in your release as well, 2029 guidance outlook. Outlook is you're still looking for 135,000 to 145,000 ounces GEOs. That's a very good increase from what level you're at today. Could you maybe summarize for us what goes into that thinking? What needs to come on for you to hit that growth into 2029? James Dendle: Yes, sure. Carlos, I can take that. We've got a few assets ramping up. There's some new assets, too. Sheldon mentioned the Arcata silver mine, that has literally shipped concentrate for the first time this week. That will be ramping up into 2026. There are other assets, obviously adding Minera Florida is a small addition, 3Q, Johnson Camp all ramping up. Montage is building Koné, which will be additive to that outlook. But there's also -- we expect production increases from some of the operating mines. We expect after a lower year next year from Northparkes that to start building back up again. We expect increased volumes from [indiscernible], although incremental. Same with Beta Hunt, Westgold has been very public with an expansion to Beta Hunt 2 million tonnes per annum, which is on track. So all of those additions build up to the outlook number. So there isn't one specific asset that drives that increase. It's actually nicely diversified across a large suite of well-positioned assets. Cosmos Chiu: Great. And then maybe one last question, the 2025 GEOs. The gold/silver ratio you've used is 85:1 in terms of the calculation of GEOs converting silver into gold. I just want to confirm, silver has actually outperformed a little bit compared to gold into 2025. That benefits Triple Flag. Am I correct in the sense that I think there's a good percentage of your revenue actually coming from silver. That's number one. Number two, it also benefits your GEO calculation, if I'm not mistaken, if you can confirm that as well. And then third, when do you consider, I guess, changing that ratio? Or I guess, it's not too late in 2025, it's not needed in 2025, but how do you consider that into 2026? Sheldon Vanderkooy: Carl, it's Sheldon. I'll take that. 85: 1, that's pretty close to what it is right now. Obviously, it's volatile. It moves around. It's been various places during the year. I think year-to-date, and you're right, obviously, as the silver price is stronger relative to gold price, that helps GEOs and the opposite when the opposite occurs. The year as a whole, we've actually had a bit of a headwind on the average silver price because of just the timing of when the silver price ran. And I think that's come across in ourselves and all our peers. We always make an allowance for that. We're pretty conservative when trying to set our guidance. And so we just accommodated that within our production. Right now, it's coming in line. And in terms of assessing it, I mean, we just -- every time we put out a new guidance or anything like that, we look at what the current gold/silver ratio is and make sure we're not too far out of line and that is properly conservative. Obviously, when we do our 2026 guidance, we'll look at what the conditions are at that time and react accordingly. Cosmos Chiu: Yes. Sounds like a good plan. And I guess the important part, Sleldon, as you mentioned, is that you're now aiming for the top end of guidance for 2024. Sheldon Vanderkooy: That's right. silver prices all the way through. Cosmos Chiu: Congrats on the solid Q3. Operator: At this time, we have no further questions. I will now turn the call over to Sheldon Vanderkooy for closing remarks. Sheldon Vanderkooy: Yes. Thanks, everyone. Q3 was another good quarter, and we're actually having just a great year in 2025. Really appreciate the support from all of our investors. Thank you all. Bye. Operator: Ladies and gentlemen, this concludes today's conference call. You may now disconnect your lines. We thank you for your participation. Have a pleasant day.
Operator: Good morning. Thank you for attending today's O-I Glass Third Quarter 2025 Earnings Conference Call. My name is Jerry, and I will be your moderator today. [Operator Instructions] I would now like to pass the conference over to our host, Chris Manuel, Vice President of Investor Relations. Please go ahead. Christopher Manuel: Thank you, Jerry, and welcome, everyone, to the O-I Glass Third Quarter 2025 Earnings Conference Call. Our discussion today will be led by Gordon Hardie, our CEO; and John Haudrich, our CFO. Following prepared remarks, we will host a Q&A session. Presentation materials for this call are available on the company's website. Please review the safe harbor comments and disclosure of our use of non-GAAP financial measures included in those materials. Now, I'd like to turn the call over to Gordon, who will start on Slide 3. Gordon Hardie: Good morning, everybody, and thank you for your interest in O-I Glass. Today, we will review our third quarter performance, examine recent market trends and highlight the progress we have made on our transformation journey. We will also share our improved outlook for 2025 and an early view on key business drivers for further improvement in 2026. Before we begin, I want to acknowledge the dedication and determination of the entire O-I team. Your commitment, teamwork and execution are the drivers behind our ongoing transformation. Last night, we reported third quarter adjusted earnings of $0.48 per share, delivering strong results that exceeded both last year's performance and our own initial plans. Our top line remained stable, supported by higher average selling prices and favorable FX, even as overall consumer demand remained subdued. We saw revenue growth in non-alcoholic beverages, food and RTDs, while beer and wine experienced declines due to softer consumer demand. Importantly, the execution of our strategic initiatives is leading to a higher quality of revenue as we strip out waste and inefficiencies, expand in growing categories and exit some unprofitable business. As a result, segment operating profit rose by more than 60% year-over-year, and margins are up a robust 570 basis points, propelled by significant benefits from our strategic program and increased production levels following last year's inventory reduction. Fit to Win contributed another $75 million in the third quarter and $220 million year-to-date. We now expect to surpass our original 2025 savings target, and this program is strengthening our competitiveness, enhancing performance and enabling durable profit improvement. Despite ongoing macroeconomic headwinds, our strategy is delivering results. We have raised our full year 2025 guidance and now expect adjusted earnings per share to nearly double versus 2024. Momentum is building, and we anticipate continued growth in adjusted earnings and free cash flow in 2026 as we advance towards the target set out at our recent Investor Day. Let's now move to Page 4. As we review our quarterly results, it is important to consider current trends within the broader market context. Packaging dynamics are evolving. short-term cyclical pressures, including inflation, consumer price resistance and elevated supply chain inventories have temporarily dampened demand. However, we anticipate these headwinds will ease over time. Longer-term factors such as lower per capita alcohol consumption and increased substrate competition will persist in certain markets, yet these challenges are expected to be offset by growing interest in premiumization and sustainability. Furthermore, rising consumer health awareness is driving growth in no, low alcohol beverages as well as food and water. These trends suggest a more balanced and sustained demand for glass over the long term. In the interim, our focus remains on eliminating waste and inefficiencies, building higher quality revenue streams, delivering a more profitable portfolio and positioning the business for future shifts in consumer demand. O-I has navigated market volatility effectively, maintaining stable net sales in recent years. As we address near-term cyclical pressures, we are carefully balancing price and volume to achieve a relatively stable top line. For the full year, we now expect pricing to be flat and sales volumes to be down about 2%, which is consistent with softer consumer demand. Despite this, our Fit to Win initiative is delivering a higher quality business mix and strengthening our competitive position, as evidenced by improved margins and segment profits. Looking ahead, we anticipate O-I will achieve 1% to 2% annual sales volume growth post 2027, as markets stabilize, strategic initiatives enhance our cost position, and we drive profitable growth in the next phase of our strategy. Let's now turn to Page 5 to review the progress of our Fit to Win initiative, which I'm pleased to report is ahead of schedule. Fit to Win is significantly reducing costs across the enterprise as well as optimizing our network and value chain to enhance competitiveness and support future growth. In the third quarter, we achieved another $75 million in savings with benefits of $220 million through the first 9 months of the year, well ahead of our initial plans. With this momentum, we expect 2025 savings will range between $275 million and $300 million, which exceeds our current year goal. So we are well on our way to at least $650 million of benefits by 2027 on a cumulative basis. We are making excellent progress in Phase A, which focuses on streamlining SG&A costs and initial network optimization actions. We've already secured $100 million in SG&A savings in 2025, and we are on track to reach our 3-year target ahead of schedule. Our network optimization is also moving quickly. We have communicated the closure of 13% of capacity to align supply with demand. 8% is now complete and all remaining actions should be completed by early next year. Phase B centers on transforming our entire value chain. The first wave of our total organization effectiveness rolled-out across 15 plants is completed, and each location has met or exceeded expectations. The second wave covering another 15 plants is in progress, and we should complete the remaining plants by the end of next year with benefits continuing into 2027 and beyond. Our teams are driving strong results in procurement and energy reduction, further boosting savings and resilience. New supplier agreements are set to enhance productivity and competitiveness over the next 3 years. Overall, the Fit to Win program is delivering results faster than planned. We are well ahead of our targets for 2025 and are positioned to unlock even greater value through 2027, despite challenging market conditions. Now, I'll hand it over to John, who will start with a review of our third quarter results on Page 6. John Haudrich: Thanks, Gordon, and good morning, everyone. Let's begin with our third quarter top line results. Net sales held firm at approximately $1.7 billion with modest improvements in gross price, especially in the Americas. Favorable FX provided a helpful tailwind even as consumer demand remained muted. Shipments in tons declined by 5% as modest growth in the NAB food and RTD categories was more than offset by lower performance in beer and wine. Keep in mind, this headline figure does not fully reflect underlying trends as several factors which are not indicative of actual consumption impacted volumes by approximately 3 percentage points. These factors include: a major capital project commissioning in Europe, which we discussed during last quarter's call; inventory correction in the Mexico and North America beer category related to changes in U.S. trade and immigration policies; and mix changes as we exited some unprofitable business lines, consistent with our focus on increasing economic profit as well as the ongoing trend towards container lightweighting. Excluding these factors, shipments were down about 2%, which is more in line with softer underlying consumer consumption trends. Importantly, overall volumes improved over the course of the quarter and shipments were nearly flat with the prior year in September. While revenues were stable, margins improved significantly and O-I delivered third quarter adjusted earnings of $0.48 per share, exceeding both last year's results and our own plans. This achievement was driven by favorable net price, significantly lower costs, thanks to Fit to Win initiatives and higher production levels despite softer sales volumes. A lower tax rate also benefited the bottom line. Overall, O-I has delivered strong third quarter results, outperforming expectations through disciplined execution, cost reductions and continued momentum from our strategic program, positioning the company for ongoing success. Moving to segment profit on Page 7. The momentum is clear as segment operating profit improved more than 60% from 2024 with robust gains in both the Americas and Europe. In the Americas, segment operating profit rose nearly 60%, propelled by higher net price and continued Fit to Win benefits. Volumes were down 7%. We believe underlying consumer consumption represented half of this decline, while specific factors drove the other half, namely lapping new business wins in 2024, inventory adjustments in the beer value chain across North America and Mexico as well as mix change as we exited some unprofitable business. In Europe, segment operating profit surged by 70%, reflecting contributions from strategic initiatives and higher production following last year's inventory reductions. Net price was a headwind and sales volumes dipped due to a major capital project start-up. Importantly, volumes were about flat, excluding this event. In summary, segment operating profits increased significantly with strong gains in both the Americas and Europe, reflecting the continued success and disciplined execution of our key initiatives. Now let's turn to Page 8 for our updated business outlook. Looking ahead, our outlook for 2025 has improved. Given our strong year-to-date performance and the momentum of Fit to Win, we have raised our full year earnings guidance. We now expect adjusted earnings in the range of $1.55 to $1.65 per share, nearly double our 2024 results. This meaningful increase reflects stronger initiative benefits and better net price, partially offset by slightly lower sales volume. Free cash flow is projected at $150 million to $200 million, an improvement of approximately $300 million versus last year and closer to $400 million increase prior to restructuring costs. Although the adjusted earnings outlook has improved, our free cash flow guidance remains unchanged due to higher-than-expected restructuring opportunities and the settlement of a legacy environmental liability, which together totaled more than $25 million. Higher restructuring is a result of O-I's accelerated network optimization initiatives, which are expected to deliver benefits in 2026 and beyond. Excluding these temporary and elevated charges, our free cash flow is nearing the 5% of sales benchmark, which is our 2027 target. We successfully refinanced our bank credit agreement last month at favorable economics, which also extends out maturities. Leverage improved over the last quarter, and we continue to expect our leverage ratio will land in the mid-3s by year-end. Despite a challenging macroeconomic backdrop, we are executing effectively and our self-help initiatives are delivering results that exceed our original expectations. As a result, we are increasing our full year adjusted earnings per share guidance and expect this positive momentum to continue into next year. Now let's turn to Page 9 for our early perspectives on key business drivers for 2026. Looking ahead to 2026, we anticipate continued momentum with higher adjusted earnings and free cash flow as we advance towards our 2027 objectives outlined at Investor Day. Revenue is expected to remain stable or increase modestly, supported by better mix, fairly consistent sales volume and higher gross price, reflecting the pass-through of 2025 inflation. This aligns with our strategy to maintain a stable top line while executing Fit to Win to further strengthen our competitive position and lay the groundwork for profitable growth after 2027. Adjusted earnings are projected to improve, fueled by another year of strong initiative benefits. These gains should more than offset the impact of lower net price as we reset favorable energy contracts in Europe, which are expiring at the end of this year. Free cash flow is expected to rise, driven by increased earnings and disciplined capital allocation. Cash restructuring costs should be at or below 2025 levels as we complete key initiatives by mid-2026. Our balance sheet should continue to improve with financial leverage in the low 3s by year-end 2026. With strong execution, ongoing transformation and a clear strategic direction, O-I is well positioned to deliver lasting value to all stakeholders. Now back to Gordon on Page 10. Gordon Hardie: Thanks, John. As we wrap up today's call, I want to emphasize the significant progress O-I has achieved and the solid competitive foundation we are establishing for the future. Our strong year-to-date performance driven by the ongoing success of our Fit to Win program has enabled us to raise the 2025 adjusted earnings guidance once again. Looking ahead, we anticipate continued growth in both earnings and free cash flow in 2026. We are delivering on the commitments made at our recent Investor Day, maintaining a stable top line, enhancing our quality of revenue and advancing our transformation despite a challenging environment. Our efforts to realign our network and supply chain are supporting mix improvement and positioning us for long-term profitable growth. Our cost transformation initiatives are generating substantial savings and increasing our competitiveness, and we have streamlined our organization to be more agile and focused. As a result, margins and earnings are up, free cash flow is increasing, and our balance sheet continues to strengthen. Most importantly, we are executing well, building momentum and expect to create sustainable value for our shareholders. Thank you for your continued support and confidence in O-I. We look forward to building on this momentum and achieving even greater success together. We're now happy to take any questions you may have. Operator: [Operator Instructions] We will now take our first question from Ghansham Panjabi from Baird. Ghansham Panjabi: Gordon, as you think about the demand environment -- as you sort of think about the demand environment and the variability we've seen over the years, et cetera, how much of this most recent decline is influencing your view as it relates to what's actually a cyclical decline versus some sort of secular change because of changing consumer preferences and so on and so forth? Because if you go back to 2019, volumes are down roughly mid-teens, you're aligning your capacity down by pretty much a comparable amount. And I'm just curious as to what you think is the right baseline for volumes going forward or is this the new starting point? Gordon Hardie: Yes. Thanks, Ghansham. It's quite a dynamic demand environment. And depending on where -- what segments and categories you look at and what part of the world, there are probably different dynamics. I think it's fair to say that beer across the board, and wine across the board are declining. And certainly, we've seen that in most of the markets. But within beer, there's a dynamic where premium beers are showing some growth. But it's mid-tier and maybe lower equity brands, if I can put it that way, losing share to private label. So, there definitely is a piece around beer and wine that we see because consumers are challenged, right? I hear that. I'm in the market a lot. I hear that quite a bit. What we are seeing, though, is a growth in non-alcoholic beers. And interestingly, we're hearing in different markets that up to 60% of new users of the non-alcoholic category are Gen Z-ers. So, they're coming into the beer category via non-alcoholic ranges. So, I think there's a piece there, quite a large chunk around beer that's, I would say, cyclical. And then the shift, people -- health and wellness accessing beer through low and non-alcoholic beverages, which I think will kind of grow. I very much think we're still in the midst of the implications of COVID and how it disrupted supply chains and behaviors and the stages of -- with particularly Gen Z-ers enter different kind of categories. So, I think there's very much a part in beer, which I think is cyclical. Wine, I think some of it is structural. Younger consumers, what you hear is finding it difficult to access wine. It can be a complicated category to access with different appellations and labels and so on. But what we do hear is the wine industry saying, "Okay, how do we make it easier for consumers to access the category?" So, I think there's some work being done there that should help that over time. The way we look at it, Ghansham, is, as I've mentioned before, we have about 1.7x the volume of our nearest competitors. And in this period of kind of volatile demand, I think the most clear path for us to create value is to increase the profitability and the returns and the cash on the volumes that we have and really strengthen the portfolio and strengthen the core business and generate higher returns and higher cash flow from what we have and shedding volume that doesn't deliver economic profit or a cash for us. And you'll see that starting to come through in the results where volumes are down, but margins are up very significantly, cash will be up significantly for the year. So, what is the right base? That's a $64,000 question. But what I am clear on is that we are only focused on volume that delivers economic profit for us. Now we are in that early stage of that 3-horizon strategy where we said we got to get Fit in order that we access growth. There is volume available in the market if you wanted to chase really low margins and give up a whole bunch of terms that will destroy cash. That's not our game plan. So, we are getting Fit in order that when the market turns, then we can access the kind of growth. And we have a very clear view on the kind of growth we're looking for, what categories, what segments, what markets, what customers. That's very clear to us internally. But there's a timing issue. We've got to work through the Fit to Win, getting much more competitive than we have been when the market turns, access that growth. As we said going forward, just to close out, we would then expect 1% to 2% volume growth that would be EP accretive and cash accretive for us going forward post 2027. So that's a long answer, Ghansham, but that's kind of how we look at it, yes? Ghansham Panjabi: Okay. Just one quick follow-up. On the 13% capacity cut, how does that skew between the regions? And I'll turn it over. John Haudrich: Ghansham, this is John. On the balance, there is probably a little bit more going on in the Americas than in Europe. But what I would say is where we stand right now, the Americas is substantially advanced, and the final stages are going to be over in Europe. Operator: We will now take our next question from Josh Spector from UBS. Joshua Spector: I was wondering if you could talk a little bit more about the volume kind of cadence and the results in the quarter. I think you explained a decent amount of it, particularly within the Americas between some of the beer headwinds in the quarter and the exits that you guys did. Just wondering if you could bucket those 2 pieces apart a little bit for us. So, should we expect more exits on a go-forward basis? Does that matter for profitability since there's maybe some offset there? So just helping to pick that apart would be helpful to start. Gordon Hardie: Sure. So, if you take a look at the 5%, I'd break it out about 2% is just softer consumer demand and consumers being more challenged, I think, and kind of price resistance in the market. And then between network optimization and a deliberate decision to exit volume that did not make sense for us from an EP point of view, and then also some very deliberate strategies around lightweighting, that's about 3%. So, the underlying, we think, is about 2%, right? And we probably see that holding to year-end. John Haudrich: Yes. I would add, just looking at the numbers here, Josh, the exiting of unprofitable business probably was 1 percentage point of that 3-percentage point that we would say is not specifically due to consumer consumption trends, and that will episodically continue for the business. I think we flagged this back at Investor Day, there is a low single-digit -- kind of mid-single-digit kind of portfolio of our business that is deeply economic profit negative. And we are either going to raise prices in that market or we're going to exit that business. And that's the process that we're going through as we go over the next year or so. Joshua Spector: I appreciate that. And I also appreciate some of the kind of early overview here of '26. I don't know if there's -- if it's too early to frame this in a real quantifiable way. But I guess the easy math that you've kind of laid out is you expect at least a couple of hundred million benefit of cost savings. You guys earlier sized that the energy contract reset. I think it was $130 million, I guess. Correct me if I'm wrong. I guess if you think volumes are flat, is the bogey that you should have earnings up $70 million in that context if we go sideways from here? Or are there other ways that you would think about puts and takes we should be adding? John Haudrich: One is, we probably don't want to get into quantification just yet. We expect a nice increase next year as we move our way towards that $1.45 billion in 2027. Of course, we have to absorb that energy credit reset -- energy reset. That number, as we mentioned back even at Investor Day, is about $150 million. That still remains to be very much in line with that right now. So, as we look at the puts and takes of the business, kind of stable volume, we'll have gross price up against low single-digit kind of normalizing inflation, but then we'll absorb the energy reset, as we mentioned, that mark-to-market and then very robust -- continued robust Fit to Win benefits. But we'll come back at the end of the year with quantification, but we expect a nice bump next year. Operator: We will now take our next question from Francisco Ruiz from BNP. Francisco Ruiz: I have 2, if I may. The first one is on the restructuring, it's kind of a follow-up on the previous question. Out of the 13% capacity reduction that you are aiming, how much is already announced? And how much is pending apart from the French announcement that you made at the beginning of the year? The second question is in Latin America, more specifically in Brazil, with a very bad quarter in terms of volumes overall. Some of your competitors are increasing capacity. How do you see the area in the coming quarters? John Haudrich: Yes, Francisco, this is John. I'll touch base on the -- and cover the first one. On the restructuring, if we go back to 2024, we were carrying about 13% excess capacity, and that was costing us about $250 million of unabsorbed fixed costs. We have since then announced closure of 13% of our capacity, which would ultimately get us substantially out of that fixed cost absorption. Right now, as of the end of the third quarter, we have completed 8 percentage points of that 13%. And as I mentioned earlier, that is substantially more skewed to the Americas. We have a remaining 5% left to go, which will be done by the early part of next year, and that is going to be skewed towards Europe, including what we've announced in France. We anticipate restructuring charges this year of around $140 million to $150 million, a little bit on the high end of what we originally anticipated because we're moving faster in certain areas. But we anticipate a carryover of restructuring costs next year that will be at or below that level. And we should be out of that exit range of that cash activity by mid-2026. So, really, the fundamental cash flow moving -- momentum going forward in the back half of the year will be better. Gordon Hardie: Yes. Francisco, with regard to Brazil, I was actually in Brazil a couple of weeks ago and spent a week touring the market and meeting with customers. A couple of -- on the positive side, we're seeing very strong growth in non-alcoholic beverages, so waters and juices in Brazil. We're seeing strong growth in wine in Brazil and strong growth in spirits. Where the big declines came were in beer. And I know it's easy to blame the weather, but everywhere I went, people spoke about it being probably the coldest winter in 30 years in Brazil, and that's definitely had an impact on consumption, and also people being challenged in terms of spending power and a bit of trading down going on in beer for sure. What we are seeing is customers launching new offerings to the market. There were also some sizable price increases went into the market that impacted volumes, I think, in the short term. And then on the food side, for us, we saw a decline in volumes. That was very largely driven by raw material shortages, particularly kind of olives, and that impacted our business. But the main piece around beer was largely weather-driven and some mid- to-high single-digit pricing going in on shelf, which I think put a bit of pressure on consumption. That's starting to sort of come back, and we're obviously heading into the summer months in Brazil and would expect better volumes going forward. Francisco Ruiz: Just another question. I don't know if you have mentioned, but as you did in other quarters, can you give an idea of the current trading in October? John Haudrich: Yes. I would say as we take a look at -- going back to what Gordon had indicated, we think the full year is going to be down about 2% now, consistent with that underlying consumer consumption. Fourth quarter is kind of playing out in that low single-digit territory. So, nothing particularly new against the consumer consumption trends. Operator: We will now take our next question from Mike Roxland from Truist. Michael Roxland: Congrats on a strong quarter in a tough environment. Can you hear me? Gordon Hardie: Yes. Michael Roxland: Perfect. Okay, great. Just wanted to follow up on the pruning of unprofitable business. I realize you mentioned in response to an earlier question that in the Americas, that amounted to about 1%. Can you comment on what that was in Europe? Because when I look at some of your peers, your peers had volumes that increased low-single-digits. Your European volumes declined 4% in 3Q. So, I'm just wondering how much of that volume decline in Europe was you guys walking away from unprofitable business, which your peers then possibly picked up versus, let's say, underlying consumer weakness? John Haudrich: Yes, Mike, as we had indicated, overall, the number -- the shipments were down about 3% in Europe overall. We attribute that substantially to that major project that was underway. We talked about that last quarter. It was primarily in the spirits category. So that was the biggest impact. Yes, we were walking away from some business there, but I think it was more skewed towards that major project. Gordon Hardie: Yes. And just to add a bit of color on Europe for us, Mike. We kind of look at this in probably 3 parts. Southern Europe was very strong for us actually and strong growth in all categories and particularly waters, food, RTDs. In Western Europe, we were impacted a bit by wine with wine exports down and spirits, some of the French spirits not picking up yet in terms of shipments to either the U.S. or to China. Northern Europe was good, was strong for us across food and spirits and beer. And then, as John said, we had that commissioning, which was slower than we had anticipated. So, yes, we're pretty happy where we are in Europe, given the context there. We're very focused on improving the profitability of the volumes we have, and we're not chasing volume just for the sake of volume, and we're being very disciplined around that. As I said, there is volume out there that can destroy your margins and eat your cash, and that's not our game plan. John Haudrich: One thing to add, Michael, on the question about the walking away from unprofitable business, and you can see that in our revenue and earnings [ recs ]. Yes, the revenue is down as a result, but the decremental margins on the lower volumes were half of what you would normally expect. So, you see us walking away from unprofitable business, and it's very visible in the bottom line performance of the business. Michael Roxland: Got it. Great color. Really appreciate it. And just one follow-up. Just wanted to ask you about the cost spread to aluminum cans. And given where aluminum prices are today in the U.S., where does the spread currently stand relative to the 25% you cited at your Investor Day? And do you think you could gain share next year if aluminum remains elevated and as hedges -- alumina hedges roll off? And I also realize it's early stages, but can you comment on how much your actions thus far have reduced the cost spread to cans? John Haudrich: Yes. Mike, I'll kick off on the first part of that is, if you take a look at the elevated cost of aluminum right now, we would say that, that has moved that cost differential, for example, in the U.S., which was between 25% and 30%, more into that zone where we believe that historically, glass can compete well, which is 15% or lower premium to aluminum. So, it's early days, obviously, and as things flush through in the system, -- but that's what we're seeing as far as the competitive position of the product. Gordon Hardie: Yes. And then, Mike, as you've said, and I think as we've said in our Investor Day, we can't be reliant on the price of aluminum to be competitive to cans. We've got to find our own path there to 15% or less spread between cans and glass, which we are focused on. But it does give us a bit of extra time if aluminum prices rise. But we've got to get there irrespective of where aluminum is over the journey between now and 2027. But just as a close out on that, the closer we are, the more competitive we are, then the more choice our customers have in which substrates to use and indeed consumers, which one they choose on shelf. Operator: We will now take our next question from George Staphos from Bank of America. George Staphos: Congratulations on the progress and on the decremental margin. It was a nice job this last quarter, guys. Three questions. I'll ask them in sequence for time. First of all, if we go to Slide 7 and your -- if you will, your bridging or waterfall chart, on the items that were controllable, where did you perform best and where did you perform least well relative to the increase in your guidance for the year? Related question, I remember from last quarter, there were some operations that you were studying when and how you might be able to close, restructure, but there were some timing factors that determined whether that would wind up remaining on the books, so to speak, in terms of downtime or whether you could actually move it to non-operating and restructure and potentially have a better result. How did that play out? Is that still playing out? Is it still downtime? And then the last question, as we look to 2026, recognizing, again, there's a lot of water that still needs to flow under the bridge, we get it. It would suggest given that you're at least expecting good results for next year, good being defined by up earnings or up cash flow, that at least your initial commercial discussions with customers on pricing resets is going favorably. Can you talk about where that process stands earlier than normal, later than normal? Any qualitative commentary would be helpful. Gordon Hardie: Yes. I might take the last question first, George, if you don't mind. I mean we're heading into that season. As John said, we would expect sort of gross pricing to probably be up. Your capacities are tight, but it's early days yet. And -- but we're focused on being very disciplined in terms of improving the profitability of the volume we have. Anything that doesn't make economic sense for us in any contract negotiations going forward, we would shift that out of the business and dedicate our assets to that volume that is delivering the kind of margins and cash targets we have. John Haudrich: Yes, George. And to the other questions as far as what changed in performance as we -- in the quarter and then as we look to the guidance going forward. Obviously, Fit to Win in the cost performance is exceeding our expectations. We increased our full year guidance of that by $25 million to $50 million for the full year. At the same token, you also see that net price has been positive relative to what we thought going into the year, and that has offset some of the softer sales volumes that we have. So, when we look at it, the commercial performance net-net of price and volume is right where we expected it overall, a little bit different componentry. But really the driver of increased performance in the quarter, expectation for the fourth quarter better performance and for the full year is largely driven by Fit to Win improvements, okay? On your next question, you had asked about operations and closures and restructuring opportunities. As you may recall, last quarter, we said we had announced about 10% capacity closures, and now we're at about 13%. So, we, in fact, have been able to identify those additional 3 percentage points of capacity that, again, balances supply with demand at the end of the day and are moving towards closing those out on a permanent basis. And again, 8% of it was done at the end of the third quarter. So, we were still carrying some restructuring charges, I mean -- sorry, LOB or temporary downtime charges through the quarter, and we will through the end of the year. But once we get out from underneath that in the early part of next year, that will substantially be out of the system. George Staphos: John, recognizing it's the same pair of pants. It's just different pockets. Does that help the fact that you're able to close that incremental capacity help your guided EBIT and EBITDA for the year? And if so, is there a way to quantify that? John Haudrich: Yes. Yes, I think it is. And keep in mind, when we talk about our Fit to Win numbers and benefits, the $270 million to $300 million this year, we are taking an accounting in for their -- those permanent closures. And so, as we do better on that and make more progress on that, that is driving in part the upside of the performance on the cost performance. In addition to that, what we call Phase B, which is also doing better, which is the more accelerated total organization TOE projects and other cost-related things. So Fit to Win is going up because of a lot of things, but partly because of the ability to close out capacity. Now, keep in mind, the activity in Europe is going to shift a little bit into the early part of next year from maybe our original expectations, but we've been able to pull forward some activities into the Americas. So, net-net, we're able to backfill some of that time. Operator: We will now take our next question from Anthony Pettinari from Citi. Bryan Burgmeier: This is Bryan Burgmeier on for Anthony. Just following up on maybe the volume discussion from earlier. You talked about growth in non-alcoholic beer and maybe some younger consumers staying away from wine. Just maybe from a high level, how would you frame kind of O-I's ability to maybe capture some of these new product launches? Do we expect that to maybe be more of a 2027 item once you're through Fit to win? Or are you may be seeing some early traction with new product launches and kind of new business in '25 and '26? Gordon Hardie: Yes. We actually are seeing customer's response to consumer softness by introducing new products. If I take a look at our -- or what we call our funnel, I'd say it's up about 8% to 10% this year already. And our total NPD, so that's products that are new to the portfolio or products that are renovated already in the portfolio but might be value engineered or designed to look -- stand out on shelf, they're running at about kind of 10% of our volume. So, we absolutely are seeing more NPD. And as we simplify our plants, as we make them more flexible and as we work on the strategy of best at both, which we outlined at Investor Day, we're able to respond more rapidly. We're also in the process of reshaping the NPD organization and ways of working, which was very -- I would say, it was decentralized to a point where it was wasteful. We've now reshaped that, and that new kind of NPD go-to-market organization will kick off in January. And we expect to be able to slash our time to market by at least 50%. So being able to respond more quickly to customers and their marketing teams and bringing products to market. And we see growing demand for that, particularly as new consumers kind of maybe are not engaging with older brands in the same way and there are need for new offerings. That's absolutely a feature driving the market. And I think we've -- with our Fit to Win approach and the organization being much more agile, working with customers differently and working with suppliers differently, where we've been able to ramp up the speed at which we can get to market. And again, I think there's kind of a narrative out there that Gen Z are walking away from certain categories, and we actually see them just coming into categories in a different way. As I said, 60% of non-alcoholic new consumers are Gen Z-ers in many of the markets we're operating in. So, there's no question that NPD is a key part of our value shift strategy as we go forward, because typically, we would have better margins in new products. John Haudrich: I would -- building on that, I mean, even though the market has been a little soft out there, the NAB non-alcoholic beverage category in North America and Europe is up mid-single digits. And so, we are seeing a bright spot in those categories. And in particular, waters in that categories have been doing very well. And we've gotten some notable wins in those categories. We're seeing people come over to that. And it's interesting, you can even Google it. There is articles out there saying about how people go out to dinner and they might have had a glass of wine, but now they prefer sparkling water or something like that on their table. So, it's an interesting set of dynamics that are playing through that also benefit the business. Gordon Hardie: Yes. And I think glass is very well placed with these younger consumers because across the world, they are far more sustainability aware and are -- have a very, very positive view on glass packaging. And so, we're seeing that come through in these categories as well. So that's -- they're positive trends for us. Bryan Burgmeier: Got it. Got it. Really appreciate all the detail. It's really helpful. And then, just a quick follow-up, John. I think you mentioned a charge from an environmental liability during the quarter. I guess, is that a new item? I didn't recall hearing that before, but maybe I missed it. Just any detail you can provide on that. John Haudrich: Yes. I mean, we've flagged this up for the last several quarters in the 10-Q, but there was a former subsidiary that had an old paper mill that stopped operation in 1967. It's now on federal land, and we had -- there was a settlement with the federal government. So, it's something 58 years old, but we did make a payment on that in the quarter. It was a little bit over $15 million as part of that $25 million plus number that I was referring to. Operator: We will now take our next question from Arun Viswanathan from RBC Capital Markets. Arun Viswanathan: Congrats on the progress as well. I guess, I just wanted to go back to the volume and understand maybe some of the cushioning that you have. So, I think in the past, you've noted that each point of volume is maybe $0.07 in EPS, which we could potentially gross up to maybe $14 million of EBIT and each point of production is $0.13, which is maybe, I don't know, $25 million of EBIT. So, I think you went in the year expecting this year was going to be flattish on volumes. You're up low to mid-singles in the first half. I know you're up 4% in Q1, but it does look like you're now maybe down 1% on the year or so, maybe could end up the year down 2% or 3%. So, does that kind of imply that you have $40 million to $50 million of EBIT cushion within Fit to Win benefits that's offsetting that greater than expected weakness in volumes? Maybe you can just kind of frame out how you're finding extra savings to offset the volume weakness. John Haudrich: Yes, Arun, I'll take that one. From a commercial performance standpoint, I think we're almost exactly on where we expected going into the year, okay? So, yes, volumes are down, what we said about 2% for the year, and that has the cost that you referred to. But also, net price has been more favorable than anticipated going into the year. Those 2 have generally offset each other, okay? So, when you think of the net effect -- and Gordon had said in the prepared comments, we're really trying to manage these levers between price and volume in a pretty soft environment, right? And so, we're trying to find that balance of -- that provides the best reasonable financial outcome to the business as we try to manage a stable top line. So, with those 2 essentially offsetting each other, really the improvement in the year is Fit to Win. And that's where -- that's driving the upside, and that's driving -- this is the second time now that we raised guidance for the year, and it's really driven by the momentum on what we can control. Gordon Hardie: Yes. And just as a point on that -- sorry, go ahead. Arun Viswanathan: No, that's fine. Sorry, Gordon. Gordon Hardie: Yes. No. And as I've said since the [ out start ], we're focused on better quality revenue and not chasing what I call kind of profitless prosperity volume for volume's sake. And we really are strengthening the quality of the portfolio we have and improving the returns on the portfolio we have. And you can also see that coming through in the margin expansion and obviously seeing it coming through on the cash side as well. And that's going to be an ongoing feature for us, right, really improving the quality of the revenue we have going forward. Arun Viswanathan: Great. And then given this volume performance, do you think you'd have to take additional downtime as you go into '26? Maybe you can also just update us on inventory levels and -- especially related to maybe Europe and some of those wine markets and spirits and areas that you're seeing weakness. And if that -- if you do have to take that downtime, again, would you have other levers to pull on to offset those headwinds? John Haudrich: As far as our -- currently, I mean, we are balancing supply with demand, and we have -- we still are carrying some lack of business downtime. But keep in mind, we did increase our permanent capacity closures, which we anticipate to be done by early part of next year. As a result, we think that we are going to be reasonably balanced between supply and demand once that's done, and it will be substantially out of that LOB category for the business or the temporary downtime category for the business. As we look to the inventory management, I think we ended the third quarter in the low 50s, maybe 52 or 53 days. Our goal is around 50 days this year, which would be about a 15% decrease on a year-over-year basis. The softer sales volumes that we're seeing right now, we may end up in the 50 to low-50s-somewhere range, but very close to the overall goal that we anticipated. Gordon Hardie: So, I think we have time for one more question. Operator: We will now take our next question from Gabe Hajde from Wells Fargo. Gabe Hajde: Two questions. I guess, looking at the model and just thinking about kind of how you're describing commercially things shaking out the way you wanted, competition a little bit different. I know you can't necessarily dictate and manage this quarter-to-quarter, but price accelerating pretty heavily in the Americas and not -- maybe I think [indiscernible] might have already answered this, but can you parse out for us maybe the intentional business moves that's flowing through on the mix side, maybe the formulary price adjustments that are flowing through in the Americas and then intentional price that you're taking in North America, if that makes any sense? John Haudrich: Yes, Gabe, I can take a stab at that, and Gordon can build on if he has any additional comments. Our price, gross and net price is obviously softer in the first quarter. It's better -- I mean, soft first half of the year and it's better in the second half of the year. What you are seeing in the Americas is -- keep in mind, for example, North America, we pass through energy on a monthly or quarterly basis. And so -- through the PAF process. So, you pick up a little bit more there. I would also say the Americas, from a capacity standpoint is probably in the mid-to-high 90s as far as capacity utilization. So, it's a pretty tight environment in the Americas overall as a backdrop. Compared to Europe, it is probably mid-90s to low 90s to give you just a relative comparison. But keep in mind, Europe should improve as a number of different capacity closures are completed. Gordon Hardie: And then on the portfolio piece, Gabe, I mean, we have a very clear sort of process for how we make those decisions. And I think in previous calls and certainly at Investor Day, we mentioned that we have visibility now in the business right down to SKU level on what the economic profit is by SKU in effect. And I also mentioned that there's a bunch of things you can do internally to improve the economic profit of a particular product or a particular range. And we take a look at those and we say, okay, we can get that done. Does that make sense for us? Even having done that, or even if we were to do that on some ranges, we would still need significant price increases from the customers. And some customers would say, yes, okay, the price and quality and what you give and service and so on is worth it. Some say, no, yes, that's not for me. And then we make a view that, that piece goes out because what we find as well is, those pieces of business add a lot of complexity into our supply chain. A lot -- there's a lot of hidden costs in there as well or there can be. And it brings complexity to the lines. And as part of our operation strategy of best at both, that relies on us having less complexity, particularly on the big furnaces on the big lines. And that has been a feature of the business over the years that the lines that were built for much longer runs ended up too complex. So, we're cleaning up all of that. And so, there's a very intentional process of how we do that, and we understand what the financial implications are for that. And getting that non-economic volume out of the business is good, and you can see it coming through. And then it frees up capacity for power SKUs where we make a lot more money. And that's really the thinking behind it, Gabe. Gabe Hajde: Got it. Maybe that kind of feeds into my second question. Most of the capacity adjustments, I think you talked about in the U.S. or in the Americas. By our math, maybe 0.5 million tons or so that's been identified in Europe. What about the tons and closures, and really, I think you talked about 40% of that business that gets exported out of your European operations into some other part of the world, and it's still relatively depressed. So, I guess what's enabling you to service that business as you talk about having the potential to come back with those capacity adjustments? Gordon Hardie: Yes. I think if you look at spirits largely in China, the 2 core markets for spirits out of Europe are the U.S. and China. And I think what we're going through in the U.S. with some -- I'll call them short term in the context of years, there's some pricing that consumers are coming up against. We think that's a cyclical thing. And we also think the inventory in the system will work its way out. And the U.S. will continue to take large quantities of spirits out of Europe. And China at the moment is experiencing the same thing and where demand is suppressed there. And again, we see that working its way out over time and those markets coming back. And then you see the growth of markets like India and South Korea growing strongly. We're seeing the start of green shoots in travel retail, which is up about 3% in volume year-to-date, but still not back, particularly on a value basis, to where it was pre-COVID. So, I think these are cyclical things that are going to work itself out. And we see ourselves having the capacity to match that when it comes back. John Haudrich: And to build on that, Gabe, yes, we are closing out excess capacity to balance supply with demand. But keep in mind, our TOE, Total Organization Effectiveness program is intended to unlock trapped capacity in the system. That will allow us to grow, and that is by far the cheapest way to get capacity within the system with great operating leverage when you enable it. Gordon Hardie: And so, getting the operations a lot fitter and then sweating them a lot harder than they were in the past, Gabe. Operator: I will now pass the conference back over to Chris for any additional remarks. Christopher Manuel: Thank you. That concludes our earnings call. Please note, our year-end and fourth quarter call is currently scheduled for Wednesday, February 11, 2026. And remember, make it a memorable moment by choosing safe, sustainable glass. Thank you. Gordon Hardie: Thank you. John Haudrich: Thanks all. Operator: That concludes the O-I Glass Third Quarter 2025 Earnings Conference Call. Thank you for your participation. You may now disconnect your lines.
Operator: Good morning, everyone, and welcome to the Trulieve Cannabis Corporation Third Quarter 2025 Financial Results Conference Call. My name is Danielle, and I will be your conference operator today. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Christine Hersey, Vice President of Investor Relations for Trulieve. You may begin. Christine Hersey: Thank you. Good morning and thank you for joining us. During today's call, Kim Rivers, Chief Executive Officer; and Jan Reese, Chief Financial Officer will deliver prepared remarks on the financial performance and outlook for Trulieve. Following the prepared remarks, we will open the call to questions. This morning, we reported third quarter 2025 results. A copy of our earnings press release and PowerPoint presentation may be found on the Investor Relations section of our website, www.trulieve.com. An archived version of today's conference call will be available on our website later today. As a reminder, statements made during this call that are not historical facts constitute forward-looking statements, and these statements are subject to risks, uncertainties and other factors that could cause our actual results to differ materially from our historical results or from our forecast, including the risks and uncertainties described in the company's filings with the Securities and Exchange Commission, including Item 1A, Risk Factors of the company's most recent annual report on Form 10-K as well as our periodic quarterly filings. Although the company may voluntarily do so from time to time, it undertakes no commitment to update or revise these forward-looking statements whether as a result of new information, future events or otherwise, except as required by law. During the call, management will also discuss certain financial measures that are not calculated in accordance with the United States Generally Accepted Accounting Principles or GAAP. We generally refer to these as non-GAAP financial measures. These measures should not be considered in isolation or as a substitute for Trulieve's financial results prepared in accordance with GAAP. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measures is available in our earnings press release that is an exhibit to our current report on Form 8-K that we furnished to the SEC today and can be found in the Investor Relations section of our website. Lastly, at times during our prepared remarks or responses to your questions, we may offer metrics to provide greater insight into the dynamics of our business or our financial results. Please be advised that we may or may not continue to provide these additional details in the future. I'll now turn the call over to our CEO, Kim Rivers. Kimberly Rivers: Thank you, Christine. Good morning, everyone, and thank you for joining us today. First, I'd like to extend a warm welcome to Jan Reese, our new Chief Financial Officer. Jan brings a wealth of leadership experience and has already made impactful contributions since joining the team. We're thrilled to have him on board. Turning to the third quarter, we are pleased to report results that highlight the continued strength of our core business. Despite seasonal pressure in the quarter, the team delivered robust margins and strong cash generation, while also expanding our customer base. As we prepare for the busy holiday season, we remain encouraged by the momentum behind meaningful cannabis reform. Trulieve continues to lead the industry forward, pushing for impactful change, while reducing the stigma surrounding cannabis. Moving to our results. Third quarter revenue of $288 million was in line with guidance and typical seasonal trends. Industry-leading gross margin at 59% reflects pricing compression, partly offset by operational efficiencies. Adjusted SG&A expense declined by $9 million compared to last year, demonstrating the team's commitment to reducing expenses in our core business. Adjusted EBITDA of $103 million improved by 7% versus last year to 36% margin, underscoring tight expense control. Operating cash flow of $77 million contributed to cash of $458 million at quarter end. Yesterday, we announced the planned redemption in December of our notes due in October 2026. Depending on terms, we may issue new notes were up $250 million. During the third quarter, retail traffic and units sold increased by 6% and 7% year-over-year, highlighting strong demand for cannabis. Consumers continue to lean in towards value and mid-tier products, reflective of general economic conditions. Wholesale revenue grew 16% compared to last year, highlighting continued execution. Outperformance in wholesale was driven by strength in Maryland, Ohio and Pennsylvania. We are expanding our wholesale business as conditions permit with careful monitoring of the credit quality of customers and industry development. In our core markets, October traffic has improved compared to September, in line with historical seasonal patterns. We are continuing to monitor consumer behavior closely for any changes in preferences and spending. As we approach year-end, our team remains focused on 4 key areas: reform, customers, distribution and branded products. I'd like to start by discussing federal and state cannabis reform given the importance for our industry. We remain optimistic that the Trump administration will address cannabis reform by rescheduling marijuana to Schedule III. This important milestone would acknowledge the medical value of cannabis and open the door for additional research. Millions of Americans rely on medical cannabis for relief, a fact that contradicts the current Schedule I classification. Rescheduling would not legalize cannabis, but it would remove the punitive tax burden on state legal operators, enabling greater conversion from the illicit market. We believe Rescheduling represents the first major domino in federal reform. Additional steps are needed to address challenges with banking and the growing divide between federal and state laws. SAFER Banking enjoys widespread bipartisan support as elected officials from both parties recognize the need to remove excess cash from dispensaries to ensure safety for workers and discourage criminal activities such as money laundering. In our home state of Florida, Trulieve continues to support the Smart and Safe Florida campaign for adult-use legalization. The 2026 ballot language includes revisions to address concerns raised during the 2024 campaign, which narrowly missed the 60% threshold required for passage. The new ballot language prohibits products and packaging that could be attractive to children, prohibits smoking in public, direct issuance of new nonvertical licenses and expressly clears the way for the state legislative body to allow homegrown marijuana. Signature gathering efforts are ongoing, and the campaign expects to reach the required number of validated signatures prior to the February 1 deadline. As of November 1, more than 1.1 million raw signatures have been submitted with over 675,000 signatures validated. We expect Florida Supreme Court review of the ballot language and summary will be concluded as required by April 1 of next year. To date, Trulieve has been the primary financial contributor to this effort, leading this charge for change in Florida. While we firmly believe in the potential for Florida to serve as a model for successful state cannabis programs, we are preserving optionality in deciding whether to contribute meaningful financing to the 2026 campaign. Trulieve's ongoing support of the campaign will be determined based upon data and the political landscape heading into the 2026 election. In Pennsylvania, we remain optimistic that a compromise can eventually be reached to enact adult-use legalization. We believe state legislators recognize the potential for adult-use to satisfy constituent demand for cannabis, while generating revenue for the state. Several bills have been filed this year, and many constructive sessions and hearings have been conducted. If adult-use is launched in Pennsylvania, Trulieve is well positioned given our established retail footprint, strong brand in retail and wholesale and scale production capabilities. With the adult-use programs already launched in 5 of 6 neighboring states, we expect Pennsylvania will enact adult-use in the near-term. In addition to reform efforts, we are driving operational improvements in 3 key areas: customers, distribution and Branded Products. Since inception, Trulieve has grown with customers at the forefront of everything we do. By providing a normalized retail environment alongside superior service, we strive to deliver exceptional customer experiences throughout the customer journey. Personalized customer messaging and engagement continues to evolve as we add new capability to our customer data platform and analytical tools. During the third quarter, we implemented new product recommendation schemas, including prompt for suggestions and repurchases. Similarly, we added enhanced customer segmentation features to allow predictive modeling for shopping patterns, frequency and anticipated order dates. These tools allow identification of customers and personalized timing of recommendations to drive reengagement. Our generous Rewards program continues to grow, reaching 820,000 members at the end of September. We continue to see greater retention and monthly spend among members, who spend on average 2.5x more than nonmembers. Rewards members completed 77% of third quarter transactions. We recently introduced new monthly rewards statements, that highlight key milestones achieved to enhance program engagement and visibility. Building upon the success of our Rewards program, today, we launched a new mobile app available for download in the Apple App Store. The Trulieve mobile app is uniquely designed to deliver a best-in-class experience that centralizes shopping, deals, gamification and rewards. The app gives customers an effortless and engaging way to browse and reserve products, push notifications to learn about special promotions or when orders are ready for pick up provides a more seamless experience compared to e-mail and text messaging. We are excited to bring these new features to our Apple customers in Florida, and we look forward to launching the app in additional markets and on Android devices in 2026. Personalized messaging, loyalty rewards, and seamless digital experiences all contribute to customer retention. Third quarter retention improved by 1% sequentially to 68% company-wide with 76% retention in medical-only markets. While customer retention metrics are strong, we are amplifying the Trulieve brand through local engagement to attract new customers. Across our markets, we are recalibrating community events to focus on 4 key areas: helping patients, serving veterans, assisting seniors, and promoting restorative justice. Through community activities, partnerships and charitable work, we are directly addressing the needs of these stakeholder groups. In October, we raised awareness and funding to fight breast cancer through register roundups, specialty products and charitable locks. This month, we are supporting veteran organizations to serve those who have sacrificed so much for our country. This weekend, Trulieve is sponsoring a weekend retreat for operation resilience led by the Independence Fund, which is an event designed to help veterans who are at high risk for suicide. We are proud to give back to these worthy causes and partner with groups that support our mission to expand access to cannabis. Alongside engagement efforts, we are investing in retail and wholesale distribution to reach new customers and drive sustainable growth. We met our 2025 retail target by opening 10 new stores in Arizona, Florida and Ohio, expanding our network to 232 stores. In September, we relocated 1 Arizona store from Scottsdale to Bisbee, broadening our reach by entering an underserved area. We are on track to refresh or remodel up to 45 stores this year. In wholesale, Maryland and Pennsylvania continue to outperform. In Ohio, our production partner continues to ramp sales of branded products, including Modern Flower and Roll One. With over 4 million square feet of production capacity, our scaled platform provides a meaningful competitive advantage, including strong gross margins and the flexibility to adapt to evolving market conditions. Our production team continues to identify operational efficiencies, driving costs lower, while delivering great products. Consistent product quality differentiates our brands in an increasingly competitive landscape. During the third quarter, we sold over 12.5 million branded product units. In-house brands, Modern Flower and Roll One continue to resonate with customers, representing almost half of the branded products sold. In Florida, we recently launched a new Roll One Clutch All In One vape. This new compact disposable vape card sold out in less than 2 weeks. We plan to launch additional Modern Flower and Roll One SKUs, including new All In One vapes in several markets. Turning now to the beverage category. Last February, we launched a new line of Farm Bill-complaint THC and CBD cocktail alternative beverages called Onward. Throughout the year, we have added new flavors and expanded distribution. In July, we added a line extension of CBD and THC energy drinks called Upward. In September, we launched new 10-milligram flavors for Onward and Upward. Onward Berry Smash, Cosmopolitan, Lemon Drop Martini and Paloma, and Upward Half & Half iced tea and Lemonade flavors are performing well, enjoying positive customer feedback. These Farm Bill-compliant THC beverages provide an opportunity to reach new customers with approachable products in familiar outlets. Onward and Upward beverages are available online and in more than 440 stores, including ABC Fine Wine & Spirits and Total Wine in Florida and specialty grocers and convenience stores in Florida and Illinois. We recently launched distribution through Anheuser-Busch in Florida and Romano Beverages in Illinois, and we are actively working to expand distribution with new and existing partners. Visit drinkonward.com to find a retail location near you or order online. Overall, we are making real progress across our focus areas, reform, customers, distribution and branded products. With continued momentum and significant flexibility in our core business, we are set to expand our leadership position while pushing for cannabis reform. With that, I'd like to turn the call over to our CFO, Jan Reese. Please go ahead. Jan Reese: Good morning, and thank you, Kim. I'm thrilled to join Trulieve, and I'm focused on driving profitable growth at a leading company and industry pioneer. Third quarter revenue was $288 million, up 1% year-over-year, driven by new store openings, adult-use in Ohio, and wholesale growth, partially offset by pricing compression and wallet pressure. Gross profit was $170 million or 59% margin. Margin performance driven by increased pricing compression, loyalty point redemption and product mix, partially offset by lower production cost. We continue to expect quarterly fluctuation based on product mix, market mix, inventory sell-through, promotional activity and idle capacity costs. SG&A expenses were $99 million or 34% of revenue, a significant improvement driven by reduced operating expenses and lower campaign support. Adjusted SG&A declined to 30% of revenue, 34% last year due to ongoing operational efficiencies. Net loss in Q3 was $27 million or $0.14 per share versus $0.33 last year. Excluding non-recurring items, net loss per share would have been $0.07. Adjusted EBITDA was $103 million, up 7% year-over-year or 36% margin, reflecting expense leverage in our core business. Turning now to our tax strategy. As a reminder, we have filed amended returns starting 2019 and continue through today. Challenging the applicability of 280E to our business. To date, we have received refunds totaling over $114 million, while we are confident in our position and strategy, final resolution may take years. We continue to accrue an uncertain tax position, while realizing lower tax payments. Important to note, rescheduling to Schedule III would have removed 280E burden, the -- and Q3 and year-to-date results would show positive net income under those conditions. Moving now to the balance sheet and cash flow. We ended Q3 with $458 million in cash and $478 million in debt. Cash flow from operations totaled $77 million with capital expenditure of $12 million with -- and free cash flow of $64 million. Turning now to our outlook, we expect low single-digit sequential revenue growth in Q4. We expect full year gross margin will be comparable to 2024. We anticipate at least $250 million in cash from operations for the full year. CapEx of $45 million, up to prior target of $40 million, reflects investments to relocate stores and minor cultivation upgrades in Ohio and Pennsylvania. We remain focused on finishing the year strong, delivering results aligned to our strategic priorities. With that, I will turn the call back over to Kim. Kimberly Rivers: Thanks, Jan. Cannabis has gained widespread support across the U.S. with public opinion shifting significantly over time as more Americans recognize its therapeutic benefits. Today, nearly 90% of Americans favor some form of legalization for medical or recreational cannabis. Currently, 40 states have established programs for medical cannabis, providing millions of patients access to relief from chronic pain, anxiety, sleep disorders, epilepsy and symptoms associated with serious illnesses, including cancer, multiple sclerosis, and PTSD. While federal and in some cases state policy lags public opinion, momentum for reform is gaining traction. The Trump administration can deliver on campaign promises to address cannabis reform by rescheduling cannabis to Schedule III. In Florida, we remain supportive of signature gathering efforts for the Smart and Safe Florida ballot initiative to legalize adult-use. With over 23 million residents and 143 million tourist visits per year, we believe Florida could be the strongest market in the U.S. striking an appropriate balance between individual freedom and responsible consumption. In Pennsylvania, we are hopeful that bipartisan adult-use legislation can pass in the coming years. We believe both Florida and Pennsylvania will eventually enact adult-use programs. As an industry leader, we remain firmly committed to pushing for meaningful reform and expanded access to cannabis. Given the strength of our core business and flexibility across our platform, Trulieve is poised and ready to define the future of cannabis. Thank you for joining us today, and as I always say, Onward. Christine Hersey: At this time, Kim Rivers and Jan Reese will be available to answer any questions. Operator, please open up the call for questions. Operator: [Operator Instructions] The first question comes from Luke Hannan from Canaccord Genuity. Luke Hannan: Kim, you touched on in your prepared remarks there, you continue to generate an industry-leading EBITDA margin. There's a couple of things underscoring that. Obviously, you have a very efficient cultivation footprint. But then also, as you pointed out, you were a little bit more efficient when it came to adjusted SG&A as well. So if we just think about those 2 components, I'm not necessarily asking for guidance here. But when it just comes to opportunities, I suppose to potentially improve on that margin, what do you see as sort of the lower-hanging fruits going forward? Kimberly Rivers: Yes. So I'm very, very proud of the team for continuing to be laser-focused on bringing as much of that top-line down all the way through the P&L. And of course, I think that we stand out among our peer set for our consistency, as it relates to being able to do that efficiently and effectively kind of regardless of what's happening at the macro level. I would tell you that really in terms of what we're seeing coming into Q4, it's going to be somewhat dependent on what happens with the customer, right? And certainly, obviously, the holiday season is something that we've got our eye on, which is typical this time of year. But given, I would say, we have a little bit of opaqueness candidly, as it relates to the consumer, at the end of Q3 coming into Q4, we saw some trading down and some price compression. I want to tell you to answer your question, the fact that we have the ability in our platform to meet the consumer where they're at, and be strategic in how we do so. I am confident in our ability to continue to deliver a strong margin. But that has to be, again, coupled with the reality, again, of the consumer profile, it will be impacted by product mix and promotion. But again, also keeping in mind that we have an amazing and flexible and modular production footprint that we're able to flex again to meet the consumer where they're at. And so I would say that, again, in line with what we've said all year, we expect that full year to be consistent with again last year as it relates to margin. And I think given the sort of differences in this year's consumer profile, I think that's pretty -- I'm very, very happy with that. Luke Hannan: That's great. And then for my follow-up here, you touched on the launch of the mobile app and then also some of the benefits associated with that. It sounds like more customer engagement is chief among them. But you also place Trulieve places emphasis on data and analytics and being able to use that effectively when it comes to the entire sort of go-to-market strategy. So I guess I'm curious, does the app make you any more efficient when it comes to being able to gather insights from that data? Or does it give you a richer set of data points to be able to sift through as well? Kimberly Rivers: Yes. Well -- so certainly, we are excited about the ability to connect in a more personal way to our customers. And I would tell you that the ability to, again, have more of an interactive platform with our customers will be important as we continue to develop our strategies around consumer personalization. So I mentioned that even on our existing web platform, we're now able to more suggestive sell based on someone's past buying patterns, as well as to be more predictive in terms of when he or she may be coming back into the store based again on past behavior. And so, which is very exciting and being able to bring those features into an app landscape, but again is a bit more real time and then to be able to also seamlessly integrate our loyalty platform into an app shopping platform is, I would say, the best of both worlds. And really, we think that it's critical as we think about getting away from the confines, and -- because we are in cannabis, we're restricted in terms of what we can do via text messaging. And given the fact that we're all mobile these days, the ability to have push notifications to remind folks when they have points available, to remind folks when there are certain things happening within our stores that, that particular shopper may be interested in, I just think it's going to be very dynamic as we move forward into this next stage of our connectivity journey here. Operator: The next question comes from Russell Stanley from Beacon Securities. Russell Stanley: First, just around retail. You've refreshed and remodeled a significant number of sites this year. Can you -- I don't know if you have this handy, but can you provide any data points regarding the impact of those efforts on traffic or basket size, what you've seen relative to expectations? And any lessons that you've learned through the process that will inform your Refresh, Remodel plans next year? Kimberly Rivers: Sure. So I, for one thing, it's very important for companies to keep an eye on the aesthetics and -- of their stores. I think there's lots of lessons that we can go over on companies that did not do that, and where they ended up with their customer base. So that's going to be, I would say, something that you should expect from us on a pretty regular basis. We'll be analyzing and it's a constant review of stores across the platform, especially with our business since many stores, as everyone will recall, were initiated in a different regulatory landscape where there were different restrictions. In Florida, for example, at the very beginning, we had to have, there were very strict rules about where we could be located, and the types of lobbies we had to have, the security features between showroom and lobby et cetera. And so opening up those floor plans as those regulations have changed to make a more welcoming environment for customers and improving customer flow, vault size, how product moves from back of house to front of the house, et cetera, is certainly important from an efficiency standpoint, and then, of course, from a customer experience standpoint as well. And so we're going to always be looking for those types of opportunities across the platform. And then again, I think it's just good hygiene to make sure that you've got welcoming fresh, bright environments for our customers that are adapting to what the expectations of a premier retail experience would be. Russell Stanley: And maybe just on the balance sheet, given the redemption -- plan of redemption, and you talked about another debt issue for up to $150 million, I think. I guess, can you talk -- it's a relatively modest amount given what you're redeeming, but can you talk about what you're seeing in terms of appetite out there, especially given the recent seemingly short-lived blip in credit spreads? Just wondering what kind of the environment you're seeing from? Would it be lenders and the appetite that you're seeing relative to 3 months, 6 months ago? Kimberly Rivers: Sure. So we haven't gone to market yet, Russ. So, I think that color on that should be probably reserved for future commentary. And I can tell you that, again, we have flexibility in our ability to whether to complete or not complete depending on terms and depending on appetite. Again, I think that our balance sheet is strong, our cash generation is strong, our core business is very solid. I think our consistency in our core business is very solid in terms of our ability to generate cash and bring that -- again, like we talked about before, bring that revenue down to bottom line profitability. So I would say stay tuned, but I feel pretty confident that we'll have optionality there, and then we'll be in a decision along, of course, with the Board to make a determination as to how much or if we decide to move forward with the race. But again, we're generating cash every quarter and feel good about where we sit. Operator: The next question comes from Bill Kirk from MKM Partners (sic) [ Roth Capital Partners]. William Kirk: In 2024, the Florida initiative didn't seem to get the kind of deserved monetary support from other MSOs. Do you expect those other MSOs to better contribute either monetarily or in other ways this time around? Kimberly Rivers: Yes. So I would say that certainly, I would love for -- you guys to asked that question on the earnings call. I have been in talks with the other CEOs. And I think that we're going to have some pretty robust conversations after Supreme Court review, once we have -- just like we said in our prepared remarks, once we have additional data and visibility into the political landscape, pulling right all the things, I do think that folks are certainly at the table in a different way than they were the last cycle. But I also think, right, that some of it is going to be dependent on where everyone sits as it relates to available cash. And of course, 280E is a big contributor there. So we shall see. But I would say that I think that the MSOs at least are working together as it relates to reform. And I think that that is a positive. And definitely, we could see that also come over to the Board effort. William Kirk: Awesome. And then are you seeing any increased momentum for regulating intoxicating hemp differently or possible closing of any -- what people call the Farm Bill loophole? And I guess if we step back, how would you like to see intoxicating hemp treated by the federal government and states? Kimberly Rivers: Yes. I mean, certainly, it's -- as you know, it's a checkerboard out there, as it relates to the states, and how they're treating intoxicating hemp. We have a little bit of a front race seat to it, not only, of course, from the regulated cannabis side of the business, but also from the beverage side of the business. In Florida, there were new rules that were issued midyear this year, and a big crackdown across the state. Products in Total Wine -- beverage products in Total Wine and ABCs were taken off shelves, because of labeling challenges among some other regulatory concerns, our branded beverage products Onward and Upward were actually able to stay on shelf. We are -- and we're compliant, which I think is actually becoming a little bit of a differentiator for us, because we're very used to, right, having to have all of our testing back up and making sure that consumers can scan back to a finished product test and that the labeling is accurate and all of those things. So certainly, we have seen a step-up in enforcement, I would say, across markets. And I think that's in line with sort of an increase in attention that it's getting, again, at both state and at the federal level. I think I hear what you hear as it relates to the federal differences in terms of potential pathways for regulating intoxicating hemp. And I think we'll see where that lands. But it does seem to me that similar to the states, the intensity of the conversation is increasing both at the state level and at the federal level. Operator: The next question comes from Brenna Cunnington from ATB Capital Markets. Brenna Cunnington: It's Brenna on for Frederico. And congrats on the results this quarter. Just continuing on the theme of the Florida ballot measure. We all know that Florida legalization would be a game changer. But the 60% approval threshold does seem to be a bit of an issue, since we saw that the majority of Floridians do actually want to legalize. So just trying to understand here, theoretically speaking, what about this time could be different? Do you think it's more of a factor of raising more voter awareness? Or was there a specific verbiage that needed to be changed last time to address potential voter issues or perhaps something else? Kimberly Rivers: Sure. So I think there's a couple of main differences. Well maybe actually 3. One, I think that there will be a big component of this that centers around just, again, the political landscape. We're in a gubernatorial race this time as opposed to a presidential race. And so the dynamics in Florida in particular, shift sometimes dramatically in terms of profile of voters that turn out between those 2 different types of races. So I think that's an important thing that we'll certainly be analyzing and watching. Two, the ballot initiative itself had some changes, as mentioned in the prepared remarks that were very -- that were specifically responsive to pulling and feedback from the last campaign, particularly voters indicated that they wanted more certainty around what the legalization program would look like in the state of Florida, specifically around confirmation that these products would not be attractive to children, that there is, of course, age gated for adults over the age of 21, that there would be no smoking allowable in public, and that there would be additional licenses that would be issued for additional competition in the marketplace as well as a pathway for home-grow. And so really by addressing those specific concerns, it does -- and early polling indicates that that does change the chances on a just plain ballot read perspective. And then I would say the third thing is really about the -- just the landscape. There's been obviously quite the news cycle around what happened in the last campaign as it relates to some public dollars being spent and taxpayer money, et cetera. The legislature passed a package of laws last legislative session that clarifies, and candidly locks down that activity, such that we believe that there will not be that same level of opposition at least from those particular paths in this next election, which we think is very important. And at the end of the day, right, I think that just a fair and straightforward election process could definitely be a game changer as well. So I do think that at least early indicators are that it's going to be a more positive backdrop. But again, we want to make sure that, that's confirmed by, again, the data and the political backdrop before we decide to move forward. Brenna Cunnington: Understood. And then our second question is just regarding the hemp and beverages, which we do know is a small category. But we would just love any additional color you could add on how sales are ramping in Florida and Illinois? And also specifically how online sales are doing? Kimberly Rivers: Yes. So it's ramping candidly ahead of what our initial expectations were. We -- I think as we have developed our partnerships with both Total Wine and ABC, they have grown pretty dramatically since inception. In addition, right, our ability to successfully land additional distribution partnerships has also been a positive, and there'll be more announcements from us on that in the near-term. We are being thoughtful in terms of how we ramp, and simply because we want to make sure -- I mean, we believe very strongly at Trulieve, and this goes back, it's in our DNA since inception, that it's important to launch and penetrate. And make sure that you're understanding and getting as much data as possible about the consumer and making pivots early to get it right, so that we're able to, again, really have lasting brand equity with those customers. And so we -- I could tell you that we -- candidly, we could be ramping faster, but we want to make sure, again, that we've got the opportunity to really have a presence in those stores and in those markets by doing things such as tasting events, trainings with the employees in those stores to make sure that they're actually educated on THC and how our beverages are different than all the other brands that may be on shelf, why they should feel comfortable recommending our beverages to consumers, what is [Technical Difficulty] as it relates to our beverages, et cetera. And so we are making sure that we do this the right way, which I think will pay dividends for the long-term. Operator: [Operator Instructions] The next question comes from Aaron Grey from Alliance Global Partners. Aaron Grey: Congrats on the quarter. First question for me, just on some of the consumer engagement initiatives, loyalty program, now mobile app. Obviously, it would seem like you're most able to leverage that in states where you might have more of an existing moat like Florida as well as Arizona. But also curious to know how you might be looking to leverage that? And build a larger presence in markets where smaller today, and maybe you rely more on wholesale. So maybe just some more color in terms of how you're able to leverage some of these products and learnings to build out a market share where you're smaller today? Kimberly Rivers: Sure. So again, our loyalty program has had incredible success across all the markets in which it's launched. And so I wouldn't say, of course, in our bigger markets like Florida, you're going to have more of an adoption rate. But I will also tell you that some of our other markets like Arizona, for example, it's been a huge tool for us, because -- and really the big learning there is, to your point, Aaron, as markets go adult-use, right, we don't necessarily have as much required data on a particular patient. So when you think about it in a market like Florida or Pennsylvania, we have a lot of information, because they have to have a patient identification card, and we have to allocate and make sure that we've got the tracking of the product that's dispensed across their recommendation from their physician. So there's a lot more already known component of those purchases and of those customers. But you contrast that with an adult-use market where someone is just -- we have to age gate, of course, and take their license information, confirm that they are an adult age 21 and up. But aside from that, you can really be more anonymous in those markets. And the loyalty program has been phenomenal in terms of having those customers actually voluntarily, right, engage with us in a more regular way, so that we can again begin to get to know them, and have that truly reciprocal relationship where we're understanding their buying patterns. We're able to offer them additional product suggestions or deals that they may be -- they may have not known about, right, because there's no reason for -- previously, there would have been no necessary reason for them to connect with us in that way. We think the app is going to take that to a completely different level. So right, you'd have the ability to preorder online, track your order, push you a notification just like Starbucks or other places where we all use apps across our normal retail experience to say, hey, your order is ready for pick up. In addition, we can talk about as it relates to our wholesale business, hey, we just launched this new all-in-one, just find it near you, right, we saw that you purchased an All In One vape previously. It's available a mile from your house at this particular location, right. So there's all kinds of capabilities that are going to be available through the app. Initially, we are definitely using it to reinforce our in-store branded products through branded retail being our core, right, our core business driver. But Aaron, to your point, in a state like Maryland, for example, where we only have 3 stores, but we have a bigger wholesale business, being able to leverage things like an app to offer gamification, et cetera, of products that are available -- and our in-house brand products that are available throughout the state and certainly is something that we'll be looking forward to as we further develop that. Aaron Grey: Really helpful color there, Kim. I appreciate that. Second question for me, just on Florida and store saturations and opportunities. Any color you could provide in terms of how you're feeling about the Florida market today additional opportunities for you to open up stores, both for the -- at the level of Trulieve and more broadly where you're seeing that? And then how that might differ for the different store model types that I know Trulieve has? And whether or not that would be dependent on adult-use becoming legalized in the state? Kimberly Rivers: Sure. So I would tell you that in Florida, we certainly -- it's interesting, because it's a little bit of a mixed bag right now. And as I mentioned, we're certainly seeing across the entire system, not just in Florida, but we're certainly seeing some price compression and some wallet pressure, and some trade-down activity. Florida is a big state. And I would tell you that one of the things we've been focused on is really ensuring that we can manage down to that specific store level, and that we understand, because not every store is positioned the same, right? And we have some stores that have very little competition around them. We have other stores that are in highly competitive environments, we have some stores that cater more towards maybe a more higher-end kind of store crowd, other stores that are more value-oriented crowds. So being able to strategically differentiate and ensure that we have the right product mix, we have the right promotional cadence, we have the right messaging techniques on a store-by-store basis is something that we have been -- we're really excited about, and that we have been really focusing on. And thankfully, we have the -- maybe the correct investments through our customer data platform and other tools that we are able to segment more specifically and effectively down to that store level. And so we look at it in Florida as really a store-by-store landscape. And you'll be seeing us launch different strategic initiatives to further lean into that. I would say that as it relates to new stores, I'll answer that as it depends, right. And I think what we are seeing in Florida is we're seeing some of our competitors actually close stores and shutter stores, which we believe is a tremendous opportunity for us to absorb those customers and let them rediscover Trulieve, and hopefully bring them into our fold. But also, right, gives us an opportunity to reevaluate the landscape and see if there are areas where we feel like we need to reposition or even potentially open additional location. So I would just say stay tuned on that, that analysis is ongoing. And absolutely, it will depend on the specifics of the location, to your point, as it relates to whether or not we would consider opening a full service, a flagship or a express type model. And as well as, of course, if adult-use is on the table, and obviously, that does change the narrative a bit as it relates to where store attractiveness -- the attractiveness of certain stores may change depending on that. Operator: The next question comes from Andrew Semple from Echelon Capital Markets (sic) [Ventum Financial Corp]. Andrew Semple: Start off with a pair of questions on capital expenditures. Just want to hone in on the capital budget of $45 million for the year. I believe you're already at $40 million in the first 9 months. So just want to check in on that, anticipate if you're seeing -- expecting to see a slowdown in the fourth quarter here on capital spending? And then just secondly on the -- on capital budgeting, I'm wondering if you have a capital budget for next year, just kind of directionally, how much you would think to spend, maybe whether it's higher or lower or roughly the same as what we're about to see in 2025? Jan Reese: Thank you. Let me take this question, Kim. First off, yes, we do have a very robust capital expenditure process and [ review ] process. We do take opportunities though, when we do have the opportunity to relocate stores to a more customer service, customer-facing program. So if you look at the $45 million that we have currently in the forecast, you can divide this in 2 main buckets. One is relocation store in Arizona, and the other one is the cultivation in Pennsylvania and Ohio, both investments long- and short-term will yield a much better return. So we went forward and make this investment. As we always do with our review process, the good things we will execute and we will do yield higher returns as we promise ourselves. Andrew Semple: Okay. And then maybe just pivoting to inventory balances. The inventory levels continue to inch higher. Do you have any color or thoughts about your inventory balances? Are you happy where that sits today? Just any thoughts around that would be appreciated. Kimberly Rivers: Yes. So as we've said consistently, our inventory is going to fluctuate a little bit from quarter-to-quarter. I think that it was $2 million increased in a -- $1.8 million in Q3. So to us, that wasn't really anything to cause any sort of alarm. And again, we believe that it's going to fluctuate quarter-to-quarter. Yes, we are happy with it now. I mean I think a couple of things just to note that we will, of course, ramp inventory prior to some store openings, which we've had in Ohio. And then additionally, as we mentioned in the prepared remarks, we've got in some markets, some new products launching as well as in Ohio, some of our brand portfolio coming through for the first time. So like we said, there's going to be a slight swings, but I don't think that there's really anything out of the ordinary there for us as it relates to inventory. Operator: This concludes our question-and-answer session. I would like to turn the call back to Christine Hersey for closing remarks. Christine Hersey: Thank you for your time today. We look forward to sharing additional updates during our next earnings call. Thanks, everyone. Have a great day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Greetings, and welcome to Aurora Cannabis Inc. Fiscal Second Quarter 2026 Results Conference Call. [Operator Instructions] The conference is being recorded today, Wednesday, November 5, 2025. I would now like to turn the conference over to your host, Simona King, Chief Financial Officer of Aurora Cannabis. Please go ahead. Simona King: Hello, and thank you for joining us. With me is Miguel Martin, Executive Chairman and CEO. Earlier this morning, we filed our financials for the fiscal second quarter 2026 period ending September 30, 2025, and issued a news release containing these results. This news release, along with our financial statements and MD&A is available on our IR website as well as via SEDAR and EDGAR. We have also posted an investor presentation to our IR website for reference purposes. Our discussion today serves as a reminder that certain matters could constitute forward-looking statements that are subject to risks and uncertainties relating to our future financial or business performance. Actual results could differ materially from those anticipated in those forward-looking statements. Risk factors that may affect actual results are detailed in our annual information form and other periodic filings and registration statements. These documents may similarly be accessed via SEDAR and EDGAR. Following our prepared remarks, we'll conduct a question-and-answer session with our covering analysts. With that, I'll turn the call over to Miguel. Please go ahead. Miguel Martin: Thanks, Simona. Aurora's sustained strategic focus on global medical cannabis, the highest margin segment of the industry, combined with exceptional operational execution has once again delivered standout financial results. This performance is further reinforced by a strong cash position and the absence of cannabis business-related debt. In our view, Aurora is highly differentiated for the following reasons: First, we are Canada's largest medical cannabis company. Second, we are Canada's leading exporter of medical cannabis with world-class GMP facilities in Canada and Germany that enable us to supply global markets with high-quality premium products. Third, we are market leaders in Germany, Australia, Poland and the U.K., the 4 biggest nationally legal medical cannabis markets outside of Canada. And fourth, we are best positioned to gain a strong foothold in emerging markets as they develop, drawing on our proven successful commercial execution and global regulatory expertise. We will explore these themes in greater detail momentarily. But first, here are key highlights from Q2 2026 compared to Q2 2025. Net revenue rose 11% to $90 million, which included record global medical cannabis revenue increasing 15% and record international revenue increasing 22%. Consolidated adjusted gross margin improved 700 basis points to 61% as we benefited from higher cannabis margins due to increased international revenue. Note that we had originally set a 60% adjusted gross margin target for our medical cannabis business and have consistently exceeded that target over the last 3 years, reaching 69% during the second quarter. And finally, adjusted EBITDA rose more than 52% to $15 million, exceeding our top line growth by a factor of 5. Stepping back from the quarter, we have grown our net revenue over the last 5 years from $68 million to $90 million with adjusted EBITDA increasing $73 million from negative $58 million to a positive $15 million. These results illustrate our continued focus on profitable and sustainable growth. Over the past decade, we have built a competitive moat that continues to fuel international revenue gains and adjusted gross margin expansion, momentum we expect to sustain well into the future. Traction in global medical cannabis is a long-term proposition. And through our investment in science, technology and people, coupled with supporting patient access and physician engagement, we have built the foundation for continued success. The capital we have invested in our European and Australian GMP-certified manufacturing and distribution facilities positions us to lead amongst the select few cannabis companies with both regulatory certifications that most markets require. 90% of our annual manufacturing capacity is within multiple GMP-certified facilities, and our products comply with these increasingly stringent international standards. Beyond manufacturing our own products, we are also able to distribute them compliantly and profitably around the world. We view vertical integration as a structural advantage for us, primarily for 2 reasons. First, we sell medical products and consistency of supply is critical. Being out of stock or substituting cultivars due to fragmented sourcing is neither optimal for prescribers nor patients. Longevity with cultivars, quality and reliability build confidence with both constituencies. Second, we have lower production costs than others, made possible by our focus on yield, potency improvement and operational efficiencies. At our manufacturing site in Germany, we are doubling production as we prepare for further growth in the market and adjacent countries. This investment will allow us to significantly increase capacity while also targeting yield and operational efficiencies to more closely align that facility with our Canadian sites. The bar for recertification keeps rising, especially in Germany, and we are pleased to have recently been GMP certified for another 3 years. Having EU GMP production in Central Europe provides regulators and stakeholders the ability to depend on the same genetics and product consistency that we have in Canada. Let's now dive into a discussion on individual medical cannabis markets. Australia is our largest medical cannabis market outside of Canada, where we currently hold the second largest share. The Australian market offers one of the broadest ranges of product formats beyond North America, allowing us to fully leverage our diverse portfolio. Over the past 2 years, it has experienced rapid expansion, now representing a $1 billion market opportunity according to the Pennington Institute. Turning to Europe. Germany is the largest market and growing with expanding mainstream acceptance. We increased our revenue during the second quarter, supported by a broad set of core and premium products and are gaining share based upon our strong reputation amongst wholesalers, distributors and pharmacists. Imports, as reported by the German regulators has increased rapidly from 8 metric tons in 2018 to 72 metric tons in 2024 and is currently on track to more than double in 2025. The new German government is exploring changes to the descheduling of cannabis first enacted about 18 months ago with the potential for modifications to the current telehealth framework. We support reasonable access to high-quality medical cannabis and await further details of the proposal. We are confident in our ability to adapt to potential changes in the telehealth framework, drawing on our successful experience in Poland. However, modifications to home delivery regulations could present greater challenges, particularly for patients in rural areas. Ultimately, we believe that established operators with a proven track record like Aurora will be able to successfully navigate any potential regulatory changes. Germany is also carefully observed across Europe and its potential impact on neighbor European countries is significant. Let's now discuss Poland, where we are already the established leader in advancing medical cannabis. This market size has more than doubled from a little over 2 tons annually in 2023 to approximately 5 tons in 2025. Further growth is expected following the increase in the annual import limits. We generated robust revenue growth during the second quarter as we benefited from our launch of 2 proprietary cultivars a few months ago. To our knowledge, these are the highest potency medical cannabis products available in the country. We look forward to continuing to deliver a sustained pipeline of innovative, high-quality and premium products for the Polish market, all manufactured in our GMP-certified Canadian facilities. Poland's regulatory standards include a lengthy registration process, which has concentrated 80% to 90% of the market share in 4 cannabis companies, including Aurora. We have a dedicated commercial and regulatory team on the ground there focused on executing on our growth strategies while also maintaining solid relationships with the regulatory authorities, which has enabled us to navigate the shift in prescriptions from telehealth platforms to clinics. Our experience and expertise in the market have benefited us compared to others as we were better prepared to succeed in this evolving marketplace. Success in both Germany and Poland will influence surrounding countries. And as medical cannabis succeeds, more countries will establish their own frameworks. Our facility in Leuna, Germany and our regulator engagement across the EU represent differentiated advantages for us to capitalize on these opportunities. The U.K. is an exciting and growing market where we are expanding our distribution and clinic relationships through new partnerships and successfully launched proprietary cultivar-specific inhalable cannabis extracts, also known as vapes that are performing well. The U.K. permits products other than dried flower and oil, which has enabled us to expand the variety of high-quality medical cannabis available. There is also a strong subset of prescribing physicians and lighter competition in the premium and super premium segments where we operate. Let me now talk about other opportunities across Europe where there is already broad support for legalization of medical cannabis. In Spain, applications are very restricted, but slowly opening up, which we view positively. In France, we have partnered with the government since the start of its tender. A permanent medical framework is expected to take shape in 2026, and we stand ready to serve patients from day 1. Both Switzerland and Austria are now online, while Turkey and Ukraine are showing positive developments for medical cannabis as well. Interestingly, more than half of EU member countries are integrating medical cannabis into health care, including reimbursement. So the momentum is promising. These developments are leading towards greater international alignment on regulatory approaches, an obvious advantage for compliant EU GMP-certified companies like Aurora. Physicians and patients increasingly recognize and appreciate our medicinal quality, and our Leuna facility in Germany has provided us with the opportunity to host regulatory and governmental visits. Turning to Canada. We are #1 in medical cannabis and the largest provider to Canadian veterans. Net revenue grew year-over-year as we benefited from higher revenue from both insurance covered and self-paying patients. While the overall market is relatively steady, we have grown market share as we have benefited from investments in world-class talent, facilities and experience. Our priorities remain enhancing our online marketplace, product innovation and increased product assortment, operational excellence and, of course, ensuring a high-quality patient experience, especially for our veteran communities. To sum up, we are pleased to have reported yet another great quarter at Aurora that illustrates our steadfast execution of our strategic priorities. We feel confident about our future because we believe we are ideally positioned for profitable growth as the leader in global medical cannabis. Let me now turn the call over to Simona for a detailed financial overview of fiscal Q2, followed by a discussion of our fiscal Q3 outlook. Simona King: Thank you, Miguel. The profitable growth achieved in Q2 is a strong testament to the strength of our medical cannabis strategy and our consistent ability to translate vision into results. Let's review Q2 2026 compared to the prior year quarter and then discuss our Q3 2026 outlook. First, net revenue of $90.4 million represented 11% growth, supported by significant contributions from our global medical cannabis and plant propagation segment. Second, consolidated adjusted gross margin rose to 61%, 700 basis points higher, while adjusted gross profit increased to $51.8 million, a 22% increase. Both our global medical cannabis and consumer cannabis segments generated higher margins than the prior year quarter. Third, adjusted EBITDA grew 52% to $15.4 million from $10.1 million. And fourth, we ended the quarter with $142 million in cash and cash equivalents and no cannabis business debt. In medical cannabis, net revenue rose 15% to $70.5 million due to 22% growth internationally, combined with continued strong contributions from Canadian Medical. Medical cannabis comprised 78% of net revenue compared to 76% in the prior year quarter and approximately 94% of adjusted gross profit. Adjusted gross margin for medical cannabis was 69%, up from 68%, driven by increased revenue in higher-margin international markets. Consumer cannabis net revenue was $6.9 million, down from $10.4 million. The year-over-year change was the expected result of our continued decision to prioritize sales to our higher-margin medical cannabis business. Adjusted gross margin for consumer cannabis was 27% compared to 15% in the prior year quarter. The margin increase was due to sales of higher-margin products and cost improvements through spending efficiency. VIVO's plant propagation net revenue increased to $11.6 million, up 34% from $8.6 million in the prior year quarter. This improvement is due to higher orchid sales, which is an exciting and evolving market in North America that offers strong margins. Adjusted gross margin for plant propagation revenue was 10% compared to 19% in the prior year quarter. This decrease is from costs incurred related to inventory write-offs caused by nonrecurring quality issue as well as some surplus crops that were not sold during the first quarter of fiscal 2026. Consolidated adjusted SG&A increased 12% to $35.5 million compared to the prior year quarter and supported year-over-year net revenue growth of 11%. The increase relates to higher freight and logistics costs, notably from increasing sales to Europe and investments in our commercial teams in Europe and Australia. Adjusted EBITDA increased to $15.4 million from $10.1 million. This 52% improvement from the prior year quarter was due to a substantial increase in gross profit resulting from higher net revenue before fair value adjustments required under IFRS. Adjusted net income was $7.1 million compared to $3 million in the prior year period. The improvement relates to an increase in an adjusted gross profit before fair value adjustments of $9.2 million, partially offset by an increase in adjusted SG&A of $3.8 million. Our balance sheet remains one of the strongest in the global cannabis industry. We held $142 million in cash and cash equivalents as of September 30, and our cannabis operations are completely debt-free. Our plant propagation business holds nonrecourse debt that is secured by a significant fixed asset base held at VIVO. Free cash flow was negative $42.3 million compared to negative $26.4 million in the prior year quarter, reflecting the expected cash outflows that typically occur in the second quarter of the fiscal year as referenced in our last earnings call. Let me now provide some thoughts on what we expect for Q3 2026, which ends on December 31. Consolidated net revenue is expected to increase year-over-year, driven primarily by 8% to 12% growth in our global medical cannabis segment. Plant propagation revenue is expected to perform in line with traditional seasonal trends as 25% to 35% of revenues are normally earned in the second half of the calendar year. Consolidated adjusted gross margins are expected to remain strong, driven primarily by industry-leading margins in our cannabis business with plant propagation adjusted gross margins expected to mostly perform in line with historical trends. Continued strength in our adjusted gross margins and higher global medical cannabis revenue should lead to year-over-year annual adjusted EBITDA growth. And finally, free cash flow is expected to be positive in Q3 2026 due to continued strong performance and improved operating cash yield. Thank you for your time. I'll now turn the call back to Miguel. Miguel Martin: Thanks, Simona. The global medical cannabis market is expected to exceed $9 billion, and we have built a strong competitive position around the world based upon our proven commercial execution, combined with our regulatory and scientific expertise. Our near decade of investment and march to profitability has given us a considerable head start in fully capitalizing on this opportunity. We are fully committed to strengthening our leadership position in Canada, Europe and Australia through consistent revenue generation and positive adjusted EBITDA growth. These advantages are the building blocks to enhance long-term value for our shareholders. We look forward to sharing further developments and strategic plan updates with you. Operator, please open the lines for questions. Operator: [Operator Instructions] Your first question comes from Bill Kirk with ROTH Capital Partners. William Kirk: Miguel, you talked about the previous goal of 60% medical gross margins and obviously, how you're running well above that at 69% recent quarters. What do you think a realistic goal is? And I guess, why are the margins structurally better than you expected? Is it less competition than you envisioned? Is it better demand for your offerings? Or is it maybe surprises in the cost to produce? Miguel Martin: It's a bit of all of the above. So let me start where you ended. Our production costs continue to go down. Yield in genetics and what we're getting out of our facilities has created an advantage. I think the second part is increasingly business outside of North America or in Europe or in different parts of the world where you do have higher margins. Now the discrepancy between the target and where it's at, we do see different markets getting a little bit more expensive, whether that's funding for partners in the distribution network or telehealth or even on the clinic side, where I see some investments. But I think it's a mix of all the above. And then lastly, and you did mention it, is execution. We are finding efficiencies in our execution using common medicinal cultivars around the world, gives us production efficiencies. The execution that we have of similar execution, say, in Poland, Germany and the U.K. creates some efficiencies. So I think all of that comes together for these industry-leading margins. William Kirk: And then you mentioned the production assets in Germany as an advantage. Right now, are you enjoying those advantages with competitors maybe having some difficulties getting some product through Portugal into Germany? And I guess, what's the status of some of those delays and investigations that folks are experiencing in that route to Germany? Miguel Martin: Yes. I mean the first thing is, as you mentioned, Germany is a very difficult place to get certified product into and increasingly so. So it's an EU GMP standard with audits. We just had ours, as we mentioned, so we're good for 3 years. Others have had different issues. I'm not here to sort of speak negatively about that situation. I can tell you, though, that our Canadian facilities and the German facilities that are certified are solid. That vertical integration that we have, growing the vast majority of the products we sell in certified EU GMP facilities creates an advantage for us. I mean there's no disruption. And as we mentioned in our comments, is lost, this is medicine. And so for patients and practitioners, they value that consistency of high-quality certified supply. And more and more so, so are the regulators and other key stakeholders. So I think that advantage is going to continue to grow for us and not only be in Germany, but also be in other markets. William Kirk: And if I could sneak one more in for Simona. There was a big drop in accounts payable in 2Q from 1Q. And as far as I can tell, it's the lowest absolute level in a long time. So why the change quarter-over-quarter in accounts payable and why so low? Simona King: Yes. Thank you for the question. And typically, what we see in Q2, a lot of the outflows, cash outflows occur in that quarter as a result of various activities that historically have occurred in Q2. So that's the reason that the accounts payable has gone down. And again, this is in line with historical trends that we generally see in the second quarter of the fiscal year. Operator: Next question, Frederico Gomes with ATB Capital Markets. Frederico Yokota Gomes: First question is on the proposed change to the budget in Canada regarding the, I guess, the price ceiling for reimbursement for medical cannabis veterans. So how do you see that? What could be the impact to your business in Canada? Miguel Martin: So let me first say that this came out last night, but we're disappointed that the federal government has proposed these changes without consultation from the cannabis industry or medical cannabis companies like Aurora. Importantly, veteran patients depend on a clinically supported system that ensures for them safe, consistent access to their cannabis medications. Lowering and this potential lowering of the reimbursement rate puts that entire support system at risk, could disrupt continuity of care, clinical oversight or even push patients to higher-risk alternatives. So given the newness of this announcement and really the uncertainty of the timelines of implementation and lack of consultation, which hasn't happened yet, we're in the process of evaluating the impact and our next steps, and it would be premature for me to comment. But it's early days. It just came out last night, and a lot is going to happen until we see where this lands. Frederico Yokota Gomes: Perfect. I guess one other question. Did you see any impact in Germany regarding that period in which I think they halted the cannabis import permits there because they had reached their quota. Did you see any impact in the market, or for Aurora specifically? And secondly, just to follow up on Germany. Could you comment on price compression in that market? Miguel Martin: Yes. I mean, so what you're referencing is that the German government had hit their import limit and they had to get -- which is very common, and it happens throughout the year as they want to raise the overall limit. And so it was about a 3 or 4-week process. Didn't disrupt us. We have a great relationship with the regulators and the staging of our permits for that market were fine and started back in January, it will go back to the higher number and everything should be there. I can't speak to others. In terms of pricing in Germany, like a lot of markets, we're seeing compression mostly on the value side. And so we operate mostly in the core and the premium piece and so baseline pricing for where we operate really hasn't been that affected. Now as I mentioned with Bill's question, with the implementation of telehealth and some other sort of aspects of that distribution chain, there are some additional costs that are coming in on that side. But overall, we've been pretty happy with the way the pricing has landed for core and premium products. Operator: Next question, Derek Lessard with TD Cowen. Derek Lessard: Congrats on a very solid quarter there. Miguel, just a question on the German investment that you recently announced. Curious what you're seeing in the market that led to that decision. Miguel Martin: Yes. I assume you're talking about the Leuna production facility? Derek Lessard: Yes. Miguel Martin: Yes. So we've got 2 very large EU GMP facilities in Ontario. We built a facility in Leuna, Germany. And for indoor GMP, similar genetics, similar setup to what we do in Canada. We've been really happy with it, and thus, the announcement to double production. Even with a bit of higher energy costs, it's still a very compelling proposition to have that facility straight up producing. So we added upgrades to very innovative lighting and irrigation systems to mirror what we're doing in Canada, again, being able to use the same world-class practices and genetics in that facility, doubling the overall production in there. And importantly, having an EU GMP certified modern indoor facility in Mainland Europe has been great. We've had delegations from countries that are in the cannabis system. We have had delegations from countries that are not in the cannabis system. Regulators and a lot of other key stakeholders visit that facility, and it's been very additive for us. And so we like it. It works as a stand-alone production facility, but it works even better as sort of a showcase of everything that we're doing in that key market. Derek Lessard: Okay. And maybe just one question on Australia. It looks like sales were a little bit softer in the quarter. Can you just maybe talk about that? Miguel Martin: Yes. So Australia is the only market we have where a majority of our sales are in the value segment. And that goes back to the history of the company before we bought the remaining 90%. And the majority of those sales were in a concession system for value products. That's a market where it's been inundated with a lot of value products. And so that's had a bit of an impact on our business there. We are transitioning that market to the same world-class core and premium products we sell everywhere else, and we're very bullish on that. But it's going to take a little bit of time before that portfolio is properly allocated to value being a smaller segment and into core and premium. We're still very bullish on it. It's the biggest market outside of Canada. There are advantages there because you can sell other formats beyond flower and oil, and we've launched edibles and some other things there. So we're bullish on it. It's just as we work through this transition in the portfolio, there's been a little bit of pressure. Operator: Next question comes from Pablo Zuanic with Zuanic & Associates. Pablo Zuanic: Miguel, 2 questions related and the same type of question related to the U.K. and Poland. I think you said you're the market leader in both markets. Do you need to invest downstream there? For example, buying clinics or online pharmacies or brick-and-mortar pharmacies in the U.K., it seems that that market is forward integrated like Australia, and that may be necessary to win in that market. But correct me if I'm wrong. And in the case of Poland, is downstream integration even a possibility or the regulations do not allow that? If you can talk about that, please. Miguel Martin: Sure. We're not the market leader in the U.K., just for clarification. We're one of the top companies, but not the market leader. Let me talk about Poland first. So Poland, we are not allowed to be the wholesaler or distributor. So we can be the manufacturer. There are some companies that also own or have relationships with clinics. As the telehealth system in Poland changed, clinics became very important. And so we partner with clinics, and we continue to look at that. Each and every market, we do look at do we need to own pieces of that vertical structure or can we partner? And there are a lot of great partners out there that want premium, high-quality products from Aurora. So we have a lot of advantages in being able to do that. So right now in Poland, we're the manufacturer. We've got a very substantive team on the ground from selling to prescribing physicians, and interacting with key stakeholders. We are not the wholesaler, and we work with clinics. In the U.K., similar situation. To your point, clinics are very important as a way to onboard and connect with patients, both those coming into the system. So today, we produce the products. We have a very strong network of partnering with wholesalers that's actually expanding. And we have a network of clinics that service it. If it looks like there's an opportunity to change that and actually acquire one part of that vertical, we will. But in some cases, you don't want to compete against your customers. And so I think you sort of have to be careful. But we're very flexible. We have different models in different countries depending on what works for us. Obviously, by our margin structure and the results, it's working, but we stay flexible. Pablo Zuanic: That's good color. Look, I mean, just a follow-up in terms of the timeline for the potential changes in Germany and Australia. In the case of Germany, the way I understand it, the cabinet already approved the changes that have been proposed. Now that has to go through parliament. What's the timeline there? How long could that take? And the same question regarding Australia, the TGA is going through a consultation period. How long could that take? I'm not asking in terms of how things play out, but what are the key milestones that we should be looking for? Miguel Martin: Well, I mean, it's a proposal in Germany from the Health Minister, needs a lot of alignment from a lot of different constituencies. So in terms of timing, we'll know more at the end of this month in terms of what gets put forth. There's going to be a lot of debate on it. So you're going to go into the spring until you know anything about where that's going to land. As we've talked about, there's 2 parts of it. The first part has a lot less impact, which is a change in the telehealth components, not dissimilar to Poland. The second component potentially around the prohibition of delivery of these products, which is completely contrary to how all other medical products are delivered and the impact to rural patients, that's going to be the more controversial one. So we'll see, but end of November, then into the spring in terms of Germany. In Australia, there really isn't a timeline. You've got 2 regulatory agencies that are looking at a variety of different things. I will say we recently saw an interest by the regulatory authorities in Australia to start testing products and looking at some of the adulteration that may be happening in that market to these medical products, and as a company, takes the regulatory responsibilities and production responsibilities seriously, we look forward to that. So Australia is a little bit more open-ended, but you're not hearing things that would have, say, the same impact on the prohibition of delivery through the mail like you hear in Germany. Operator: I would like to turn the floor over to Miguel for closing remarks. Miguel Martin: Well, listen, we're really excited about communicating this quarter to everyone and sharing the work that we're doing. And obviously, we'll continue to do that. We want to thank everyone for their interest in Aurora, and we wish everyone a great day. All the best. Operator: This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.
Operator: Thank you for standing by. At this time, I would like to welcome everyone to the Fiverr Third Quarter 2025 Earnings Conference Call. [Operator Instructions] I would like to now turn the conference over to Jinjin Qian. Please go ahead. Jinjin Qian: Thank you, operator, and good morning, everyone. Thank you for joining us on Fiverr's earnings conference call for the third quarter that ended September 30, 2025. Joining me on the call today are Micha Kaufman, Founder and CEO; and Esti Levy Dadon, EVP, Finance. Before we start, I'd like to remind you that during this call, we may make forward-looking statements and that these statements are based on our current expectations and assumptions as of today, and Fiverr assumes no obligation to update or revise them. A discussion of some of the important risk factors that could cause actual results to differ materially from any forward-looking statements can be found under the Risk Factors section in Fiverr's most recent Form 20-F and other filings with the SEC. During this call, we will be referring to some key performance metrics and non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin, and free cash flow. Further explanation and a reconciliation of each of the non-GAAP financial measures to the most directly comparable GAAP measure is provided in the earnings release we issued today in our shareholder letter, each of which is available on our website at investors.fiverr.com. And now I'll turn the call over to Micha. Micha Kaufman: Thank you, Jinjin. Good morning, everyone, and thank you for joining us. We delivered another strong quarter with solid performance across the business. In Q3 '25, revenue grew 8% year-over-year, and we achieved a record high adjusted EBITDA margin of 22%. This is a clear reflection of our disciplined execution and the inherent leverage in our market-based model. Over the past several years, we've consistently prioritizing moving upmarket and investing in product innovation to support more complex use cases and larger customers. Q3 results clearly demonstrate our success on both fronts. Spend per buyer increased 12% year-over-year, our strongest growth rate since the COVID era and off a much higher base. Not only are we seeing wallet share expansion across the broader buyer base, but more importantly, thanks to the adoption of dynamic matching and managed services, we are witnessing strong growth among projects that are significantly larger than the average marketplace transaction. In Q3, GMV for Dynamic Matching grew 22% year-over-year with 15% of job briefs having a budget of over $1,000 and an average order value of $2,200. Managed Services is capturing even larger and more sophisticated engagements with a minimum budget of $3,000. In Q3, Managed Services GMV grew 65% year-over-year with average product size reaching $17,000. The success of these offerings marks a meaningful evolution in Fiverr's value proposition. We're no longer just a platform for fast, lightweight freelance tasks. We are increasingly becoming a trusted partner for businesses executing highly specialized multistage projects that often require depth of talent and orchestration. Another area where we are seeing tremendous growth is AI-related services. As AI is increasingly reshaping how work is delivered and being implemented across industries, demand continues to surge in areas such as AI agents, workflow automation, and vibe coding. Fiverr freelancers have become an essential partner for SMBs looking to turn AI, from potential into performance. This demand is directly reflected in the Programming and Tech vertical, which grew 14% year-over-year in Q3. We believe that this AI transformation cycle mirrors an early stage of the digital transformation and could provide a multiyear tailwind for broader tech investment. To lean into this secular tailwind, we are doubling down on our investment in AI-related categories from growing specialized talent communities and launching tailored AI solutions to expanding our go-to-market channels through strategic partnerships. Our ambition is to position Fiverr as the go-to destination for finding top-tier AI talent and deploying applied AI solutions. Despite a macro environment that remains uneven, we're seeing positive signals and gaining market share. Labor markets continue to show mixed trends and broader hiring recovery remains elusive. However, our growth strategy, which centers around upmarket expansion and AI enablement is built on long-term macro-agnostic trends. We believe these are the right bets to get us back on track for GMV acceleration regardless of macroeconomic scenarios. In that context, we announced a strategic restructuring in September to streamline our organization, sharpen our product focus, and accelerate our evolution into AI-first company. This means accelerating investments in building an AI-native team, upgrading our tech infrastructure to drive faster AI integration and operational efficiency and reimagining our marketplace with an AI integrated experience. From a product perspective, this transformation is anchored on 4 key pillars: One, strengthening our go-to-market execution. We're expanding our generative engine optimization, GEO, capabilities, integrating our catalog into native AI channels and building AI-powered catalog management systems. We're also investing in partnerships that drive growth across AI-related verticals. Two, building the next Gen AI-powered buyer experience. This includes expanding LLM-powered workflows across the buyer journey, advancing our Know Your Customer, KYC, capabilities through data and product innovation and investing in customer success to deepen trust. Three, evolving our matching technology. As we serve more upmarket clients and more complex projects, we're transitioning from traditional search to agentic matching, delivering a recruiting-like experience that surpasses human performance through deeper data, richer context, and advanced reasoning. Four, investing in talent and the talent community. Talent is at the heart of the entire marketplace experience. In a world where AI is rapidly transforming how work is done, our priority is to build a high-quality, trusted talent ecosystem. This means supporting human-in-the-loop workflows, creating pathways for professional growth and deepening our commitment to long-term community engagement. I am truly excited about the opportunities ahead and the strength of the roadmap we have built. As we enter the final stretch of the year, we remain laser-focused on execution. Our momentum in AI and upmarket expansion gives me confidence in the foundation we've built. I look forward to sharing more about our 2026 roadmap in our next call. With that, I'll turn it over to Esti. Esti Levy Dadon: Thank you, Micha, and good morning, everyone. We delivered a strong third quarter, with both top and bottom lines exceeding the midpoint of our guidance. Revenue for the third quarter was $107.9 million, up 8% year-over-year. We also achieved record adjusted EBITDA and adjusted EBITDA margin. Adjusted EBITDA for Q3 was $24.2 million, representing an adjusted EBITDA margin of 22%, an improvement of 260 basis points from a year earlier. We continue to generate strong cash flow, with free cash flow totaling $29.1 million in Q3. The strategic restructuring, combined with our continued discipline in expense management, contributed to strong profitability and robust cash flow generation. As always, we remain focused on balancing between growth and profitability, while maintaining discipline in capital allocation. Q3 saw solid performance across both our Marketplace and Services segments. Marketplace revenue was $73.6 million, driven by 3.3 million active buyers, $330 in spend per buyer, and 27.6% marketplace take rate. Within the Marketplace segment, we saw strong momentum driven by the tailwinds in AI-related categories and the success of our expanded Managed Services and Dynamic Matching. These channels continue to fuel higher-value, complex projects, which in turn result in higher average transaction values and increased in share of customer spending. We continue to believe the structural tailwinds within the Marketplace segment, particularly around AI and upmarket adoption, will help offset broader economic headwinds and serve as a sustained growth driver. Services revenue was $34.3 million, representing a year-over-year growth of 40% and accounting for 32% of our total revenue in Q3. The upside was driven by Fiverr Go increasing adoption of Seller Plus, which saw 20% year-over-year growth. Fiverr Ads maintained double-digit growth as a result of ad load expansion, and AutoDS benefited from enhanced synergies with Fiverr and continued success with the Shopify partnership. Looking ahead, we expect Services revenue growth to moderate as we lap the 1-year anniversary of the acquisition, but to maintain healthy double-digit revenue growth. We continue to expect Services revenue to represent a little over 30% of total revenue for the full year 2025. Now onto guidance. For the full year 2025, we expect revenue to be in the range of $428 million to $436 million, representing year-over-year growth of 9% to 11%. We are raising our full-year adjusted EBITDA guidance and now expect it to be in the range of $88 million to $93 million, representing an adjusted EBITDA margin of 21% at the midpoint. For the fourth quarter of 2025, revenue is expected to be between $104.3 million to $112.3 million, representing a year-over-year growth of 1% to 8%. The wider-than-normal revenue guidance for the fourth quarter reflects the elevated uncertainty in macro environment with mixed signals. Adjusted EBITDA is expected to be $23.9 million to $27.9 million, representing an adjusted EBITDA margin of 24% at the midpoint. During Q3, we announced a strategic restructuring plan, which resulted in a streamlined headcount and enhanced operational efficiency. These efforts contributed to the increased adjusted EBITDA guidance in Q4. While the pace of EBITDA improvement in Q4 should not be viewed as a steady-state cadence, profitability, margin expansion, and cash flow will remain key priorities for us, even as we redeploy some of our cost base savings into selective, high-impact investments in AI, and upmarket initiatives in 2026. We remain committed to our accelerated schedule to reach the long-term adjusted EBITDA margin of 25% in 2026. With that, we'll now turn the call over to the operator for questions. Operator: [Operator Instructions] Your first question comes from Ron Josey with Citi. Unknown Analyst: This is Jake on for Ron. Micha, I wanted to double-click on how you're reimagining the marketplace to be AI first, specifically the pillars around evolving the buyer experience and improving matching. Could you just double-click and help us better understand your vision here and why you believe Fiverr is uniquely positioned to be AI first? Micha Kaufman: Thank you for the question. I should clarify that Ofer is with us on the line. He's having a sore throat. So this is why Esti was coming with the opening remarks. But in case we have questions, he will be happy to answer them. As to your question, look, I think what AI is giving us is the ability to change the way people express themselves. And you see that in the market, the way search is being augmented or replaced by prompting, it gives us an opportunity to extract more -- a more accurate representation of the actual need from the customer, which in turn gives us better tools to be able to accurately match in a very precise manner the right expert to the right mission. The same applies for more complex projects that sometimes require multi-talent and sometimes require an orchestration of those multi-talent into the end result. So this is just one example, which is very robust because the primary function that customers are using is the browsing and searching. And this is the most fundamental thing that we can use AI for. The same applies for the rest of our solutions like the dynamic matching, as an example, the project management, and so forth. And I've alluded to it in my opening remarks with everything I said about the matching capabilities, the Know Your Customer aspects. And we're already reaping the benefits or starting to reap the benefits of this being able to deliver much better matching to our customers that, in turn, result in larger types of projects and with higher satisfaction. Unknown Analyst: Ofer, I hope you feel better. Just one quick follow-up for you or Esti. Kind of given the wider 4Q revenue guidance, could you just touch on the key assumptions that would get you to the low end versus the high end, maybe specifically around GMV trends? Ofer Katz: So this is Ofer. Thank you for the concern. The assumptions for the remainder of the year is that the revenue coming from Services will continue to grow. While the revenue coming from Marketplace dependent on GMV trend that currently seem to be flat, might decline by single digit. The assumption is that the trend that we have been seeing in the last quarter will continue into the fourth quarter. And based on the high volatility of the market in the last few quarters, we kept the guidance range wide to take into consideration that. Operator: Your next question comes from Jason Helfstein with Oppenheimer. Jason Helfstein: Obviously, the spend per buyer increase was nice. I think you highlighted that this really wasn't from like the SMB, but just the ability to move into more advanced projects and does show you more than a company. I guess how does the reorganization tie into the ability to ever get back like the SMB opportunity? Like is the assumption now that you are -- you've reorganized the business to focus on higher-value jobs, and hey, if SMBs ever come back, that's great, but like there's no assumption. Like do you think there's like just -- it's been so long since we've seen SMB demand that we just shouldn't assume that it ever comes back? Or any broad thoughts about that? Ofer Katz: Right now, since the dynamics in the macro economy that we've seen hasn't changed materially, then we don't assume those changes. And while we see the Fed has started to lower interest rates, which could be constructive for SMBs, we also continue to see weak job data across full-time and staffing sectors. So the macroeconomic conditions are still highly uncertain, to say the least. So when we think about our guidance or how it's being made off, it really assumes no change in the macro front. We talked about it in the full year basis that services will be a little over 30% and of the 2025 revenue. So that will give you some idea of how we think about the marketplace versus services revenue. But overall, we continue to expect the marketplace revenue to be flat or low single-digit decline and services revenue to exit the year with double-digit growth. And that assumes no improvement in the SMB side. That said, when we look at everything that has to do with the upmarket, meaning the larger types of customers, and the larger types of projects, this is where we do see an improvement, absolutely. And that contribution is very noticeable. And as much as that portion of the business becomes larger, the contribution is going to be larger, which means that by definition, the return to growth in active buyers is going to happen, period. We've been saying that for multiple quarters, and we're seeing this. So it converges to that point, okay? That is the assumption. That's the framework. And this is what we're seeing happening in reality. Operator: Your next question comes from Doug Anmuth with JPMorgan. Douglas Anmuth: I have 2, Micha. Can you just talk, I guess, first, just about the key investments you need to make in '26 to transform into an AI-first company? And how should we think about timing as you kind of progress along this shift? And then, I guess, secondly, can you talk more about the drivers of spend per buyer in the 12% growth? Kind of like beneath the hood, what are you seeing in terms of changes in types of projects and how buyers are really engaging with the platform? Micha Kaufman: So thanks for the questions, Doug. So the investment that we're doing is, one, on talent. And I think that this is true for everyone. Finding AI natives on the talent side within the company is one area of focus. The second is the improvements that we're introducing to our infrastructure. So some of the benefits of being able to use new development, coding, design, marketing allows us not to just put more people on problems or building things on our infrastructure, but actually finding new ways of moving much, much faster without paying the price of working on a 15-year-old infrastructure. The third is the marketplace experience. On everything we do, and we've highlighted things like dynamic matching and project management and orchestration. And we've highlighted also the aspects of having a much more nuanced and much more accurate matching technology and KYC. And I've mentioned those 4 pillars, which is the go-to-market with the investment in LLM engines, GEO and partnerships, the buyer experience, the matching and the talent. So across all of these areas that I've mentioned, these are the areas that we're putting focus. And the approach is AI-first mentality, meaning we want to make sure that we maximize the new possibilities that AI gives us both internally in how we work and how we develop and how we execute, but both in how we can make AI more involved in our core business to make that core business better. As to your second question about the spend per buyer, I think that this is -- when we think about spend per buyer, there are catalysts for it. And some of it is the ability to identify categories that are now growing, some of which thanks to our move upmarket and some of which is because of the technological transformation of AI. Now I've given some examples for it. Programming and tech vertical is one of them, which has a much, much higher project size, dynamic matching and its contribution and the fact that 15% of them are from briefs that are above $1,000, managed services that have grown 65% year-over-year with an average size of $17,000. So these are very, very different from our average transaction size of services. And we continue to drive very healthy deal flow on managed services. So the nature of these projects is very strategic, not just tactical. And there are a few examples, if you are interested in more examples in the shareholder letter. Operator: [Operator Instructions] Our next question comes from Matt Condon with Citizens. Matthew Condon: Just with these product catalysts across AI and moving upmarket and potentially decoupling you from the macro environment. Just what is your confidence level that these products can actually return the marketplace business to growth in 2026 as you just more deeply integrate them? And then my second question is just on AI displacing some of the commoditized jobs at the lower end of the market. Just have we seen those plateau at this point and become less of a headwind going forward? And just the placement of those types of jobs, is it less today than it was, say, a year ago? Micha Kaufman: Thank you for the question. So as these AI-driven products or needs grow, they grow much faster than the average. And so -- and the more they become a bigger portion of the total, they are driving us to change direction and go back to growth. We're seeing that. Still, it takes time for those types of customers and those types of projects to become the majority of our business. But as they grow, we are, by definition, going back to growth. And we see that, we see that on a constant basis, and you're seeing the numbers grow every time we meet here every quarter and they become larger and larger. Today, transactions over $200 is already the majority. They're over 50% of our market base, and they're growing double digit. And transactions over $1,000 is growing in the 20s year-over-year and more than 10% of the marketplace already. So this gives you some idea that they are already meaningful in the marketplace, and they continue growing, and this is where we draw our confidence from. The second part of your question about the job displacing, I've addressed that many times. The jobs that are being displaced are the very, very simplistic types of jobs. All of us are using AI for 2 years plus. We know its limitations. There's a lot of limitations to what AI can do to its accuracy and to its quality. And customers understand that as well. And they are -- we've seen a lot of our customers and talent, by the way, using AI. But the more they use it, the more they understand its limitations and their ability to trust the outcome to be production-ready and business ready. And so the things that we have seen being displaced are very low skill types of services. Those types of services have been very small in size anyway. So the fact that they are being displaced is not a big deal. The more we invest in larger projects, the more we grow. That's the bottom line. And this is where AI doesn't replace human beings. It doesn't replace human talent and high skills. Operator: Your next question comes from Josh Chan with UBS. Joshua Chan: I just have 2 questions today. The first one is on your comment about macro uncertainty. I was just wondering, the macro has obviously been choppy for a while. So are you seeing anything different now than before that kind of led you to make that comment and that wider guidance? And then the second question is on, could you just talk about the phasing of the restructuring benefits? To what extent some of the benefits are coming into Q4 and how that kind of layers into the rest of 2026? Ofer Katz: This is Ofer. On the first question, on the contrary, there is no change in macro, which is why we have kept the guidance pretty wide. And on the second question, definitely, there will be a bigger impact after restructuring into Q4. But as we look into next year, we do plan to fill up the lines with some of the needed talent so that I would expect next year to improve in terms of EBITDA, but not to the same cadence as we are expected to see as of Q4. Operator: Your last question comes from Marvin Fong with BTIG. Marvin Fong: I hope you feel better as well. Question, I don't want to be -- cover ground that we previously did, but I think I'd like to ask it just kind of on a category basis, you called out the 14% growth in programming and tech. I just would like to know if other major categories are, how are they benefiting from AI? Are you seeing the same trends? So perhaps you could comment on like design, creative, I think that's another large category for you. But any other major categories you'd like to kind of call out and how AI might be a tailwind for that? And then second question, just on the move upmarket, obviously, really great traction there. And I was wondering if there were other unlocks that you can do? Are you satisfied with the product suite or in the next 12 months, what are some new features that you might be able to launch to address other parts of the ecosystem. So for example, 1099 versus W-2, anything along those lines would be great. Micha Kaufman: Thanks for the question. So to highlight some of the areas where we're seeing growth. So programming and tech is growing fast, and it's becoming a very meaningful category with about 20% of our business. Alongside programming and tech, we have digital marketing, video and animation, which are also growing very strong. Some of it is due to AI and the possibility of bringing highly skilled people that know how to extract the most out of AI, which is kind of the case I mentioned where you have customers sometimes trying to use AI, understanding its limitation and their limitations is not being experts in how to make the most out of it, and they come to us in these cases, and we're seeing this as a very prominent case in these verticals. And also the nature of how customers come to us is very different from 2 years ago or even a year ago. So they -- in many cases, they come more educated. They do a little bit of work on their own. They're not clueless. They can better express their needs, which also changes the basic function of what we do, which is less of explaining them what they need, but more trying to address that need by giving them a really strong and very accurate high-quality match. As we think about the move up market, there is a lot to do. And I've already highlighted both in my opening remarks and in some of the answers and in the shareholder letter, some of these areas. But just to reiterate some of them, today, many customers are already enjoying dynamic matching and managed services, but many more don't yet know that Fiverr can do these projects that are in the tens of thousands of dollars. So there is a lot of opportunity that we can unlock there. At the same time, there is the LLM channels, which are another example of areas to invest in where the traditional search or the fact that Google was the Internet up until a few years ago, and now they're not playing there alone. There are also other ways to explore the Internet and a lot of it is going to LLMs, creates a challenge, which we prefer to look as an opportunity. And we're seeing how the LLM channels at the top of funnel is contributing more and more into the top of funnel traffic, which also makes us more motivated to continue investing along those areas. And lastly, I would say that is maybe to reiterate what I said before, which is customers are more accurate in how they share their needs. They're more explicit, which is good news for us because now we have more to work with and be able to match them with this incredible base of unbelievable talent that we have on our platform so that we can address their needs. Operator: That concludes our Q&A session. I would like to now turn the call back over to Micha Kaufman for closing remarks. Micha Kaufman: Thank you, Moore, again for moderating this conference. And thank you, everyone, for participating. Wishing you a great day, and talk to all of you soon. Operator: This concludes today's call. Thank you for attending. You may now disconnect. And have a wonderful rest of your day.
Operator: Ladies and gentlemen, good day, and welcome to the Grasim Industries Limited Q2 FY '26 Earnings Conference Call. [Operator Instructions] I now hand the conference over to Mr. Ankit Panchmatia, Head of Investor Relations at Grasim Industries. Thank you, and over to you, sir. Ankit Panchmatia: Yes. Hi. Thanks, everyone, and good evening, and thank you for joining everyone on Grasim's Second Quarter Financial Year 2026 Earnings Call. The financial statements, press release and presentation are already uploaded on the websites of stock exchanges and our website for your reference. For safe harbor, kindly refer to cautionary statement highlighted in the last slide of our presentation. Our management team is present on this call to discuss our results and business performance. We have with us Mr. Himanshu Kapania, Managing Director, Grasim Industries and Business Head, Birla Opus Paints; Mr. Hemant Kadel, Chief Financial Officer of Grasim Industries. Also from the business team, we have with us Mr. Jayant Dhobley, Business Head of Chemicals, Cellulosic Fashion Yarn and Insulators business; Mr. Vadiraj Kulkarni, Business Head of Cellulosic Fibers business; and Mr. Sandeep Komaravelly, CEO, Birla Pivot, our B2B e-commerce business. Let me now hand over the call to Himanshu sir for his opening remarks on macro and updates on key businesses. Over to you, sir. Himanshu Kapania: Thank you, Ankit, and good evening to everyone. We welcome you to Grasim Industries Earnings Call for the quarter ending 30th September 2025. Hope you had a good Diwali and New Year Vikram Samvad 2082. Also, as today's Guru Nanak Jayanti, may you be blessed with peace, happiness and love. Starting with macroeconomics, we have now entered the final lap of this calendar year 2025 with a global economy that is not in recession, but not in a synchronized expansion either. We are living in a world where trade is rewiring, capital is repricing and geopolitics has once again become a single order economic variable, not a background noise. On October 29, 2025, the Fed cut the target range for the federal fund rate by 25 basis points to 3.75% to 4%, the lowest in 3 years. This followed an earlier cut of 25 basis points in September. The rate cuts indicate balance of risks are now shifting towards risk of growth and employment. Add to that, the Trump administration's renewed emphasis on tariff-based negotiations, especially on Europe and key Asian blocks may amplify short-term noise. However, the structural drivers of demand, competitiveness and consumption momentum remains intact. China is the second spotlight. China's GDP growth slowed to 4.8% year-on-year in quarter 3 of this calendar year 2025, the weakest pace in a year. Data shows China is not in an acute crisis, but in a structurally lower growth orbit. Property demand is frozen, household confidence is weak and private entrepreneurs are holding back CapEx decisions. The upcoming 5-year plan will be closely watched as it will set national priorities through 2030. Just to summarize, the situation that global trade is seeing is more pressure points. It is not a collapse, but more friction and friction slows velocity. And then India. The country is the positive outlier in the sentimental spectrum, but even India cannot fully decouple from the global liquidity and global trade. In a landmark move in September 2025, the center rationalized GST slabs from 4 to 3, reducing taxes across essential and aspirational items. The reform simplifies GST rates, eases compliance, boost disposable income and supports long-term economic revival. India's GDP growth for FY '25, '26 was revised upwards, thanks to a strong domestic consumption, robust investment activity and resilient exports. Supportive government reforms and RBI's accommodative monetary policy has further boosted demand while moderate inflation provides room for sustained growth. So if I had to summarize the world in one line today, globally, this a low-speed economy with pockets of strength, intermittent confidence and policymakers for moving carefully, not boldly. The world is not constant. And in this environment, winners will not be those who bet on direction. Winners will be those who stay flexible on timings. It is an era where optionality has more value than certainty. We don't need to predict the future with 100% precision. What we need to do is stay prepared for multiple futures. Grasim's multi-segment presence create a synergistic engine of growth, combining resilience with opportunity. The growth continues to exhibit resilience with trailing 12-month revenues now nearing INR 1,60,000 crores, that is over USD 18 billion compared to approximately INR 95,000 crores, that is USD 11 billion in FY '22 when measured on equal currency rates, a remarkable growth of 14%. Moreover, the stand-alone business continues to gain share now at 24% in quarter 2 FY '26 in the overall consolidated revenues nearing its highest ever milestone of INR 10,000 crores per quarter. Our CFO, Mr. Hemant Kadel, will further touch upon these numbers in detail. However, as I said earlier, we do not live in a constant world, which is why 2 years back, we entered into 2 new high-growth businesses, and I'm very happy to say that both these businesses are on track to achieve their stated targets. I will start with our growth businesses, Paints and B2B e-commerce businesses. Birla Opus is now a distinctive force in India's decorative paints landscape, not as another brand in the shelf stack but a category pace setup. We are institutionalizing a, superior paint performance; b, quality assurance up front and in writing; c, tech-led contractor, painter and consumer engagement. This resetting expectations of what premium should actually mean in India. From application science to film durability testing to shade integrity to dealer enablement, we are building this new gold or should we say, platinum standard. This why Birla Opus is becoming integral in conversations across the value chain, whether it is with retailers, contractors, applicators, builders, institutions and homeowners because we have not just launched Decorative Paints, we are raising the reference benchmark for how paints should be engineered, sold and serviced in India. I'm happy to share that we have commenced production at our largest and sixth plant in Kharagpur, West Bengal on 15th October 2025. The plant has 236 million liters per annum capacity and is one of the largest paint plant in West Bengal and Eastern India. This plant can manufacture water-based paints, solvent-based paints, colorants and distemper paint. It will significantly improve our serviceability to Eastern and Central India markets and bringing network efficiency. With this plant's commercialization, the announced project phase of Decorative Paints concludes and the decorative paints installed capacity is now 1,332 million liters per annum across the 6 plants. This makes Birla Opus the second largest decorative paints company commanding 24% of the industry capacity, a feat unmatched around the globe for speed and cost. Now we focus all our energies to bridge the gap between our volume market share and capacity share. Coming to the performance of Decorative segment, Birla Opus continues to grow its market share and expand its position as #3 decorative brand with double-digit market share, including Birla Opus and Birla white putty revenues, similar to the revenue reporting by legacy companies of all paint majors. Despite the extended monsoon, Birla Opus hits its highest ever monthly sales in the month of September and saw an equally strong October month, indicating increasing brand salience across markets. Not only the primary sales at highest level, but also the secondary sales have been touching levels higher as a percentage of primary sales, indicating fast movements that is offtake from dealers to contractors or from dealers to customers from these counters. As per internal estimates, the organized decorative paint industry has grown in low single digits on Y-on-Y basis in quarter 2 FY '26, largely due to incumbents push for lower-end economy products. However, as per our estimates, excluding Birla Opus revenues, the organized decorative paint industry has degrown slightly on a year-on-year basis. Birla Opus continues to disrupt through innovation and launched 2 big consumer proposition in the second quarter. First one was the Birla Opus Assurance Campaign, the first ever written paint promise by any paint company to assure the customers of painting performance backed by superior product quality of Birla Opus products. This campaign was another disruptive and differentiated campaign in which we launched 4 films that you must have seen on print, television and digital media. The campaign has received overwhelming response from customers, contractors, painters, dealers and thousands of paint projects under Birla Opus Assurance program have been undertaken and continue to be executed. We expect the demand for Birla Opus Assurance to accelerate snowballing into basic consumer expectation doing painting beyond product warranty. The second one was expansion of Birla Opus painting services offered under PaintCraft brand through our dealer and franchise partners on a pan-India basis. This first of its kind differentiated painting services offering that leverages digital technology and integrates the platform for all stakeholders, including company, franchise, applicators, painters and consumers. PaintCraft is a win-win for all stakeholders as it offers, a, transparent consumer pricing; b, EMI financing on painting first time in India; c, end-to-end company oversight of dealer-led painting services through trained execution network; and d, a fully GST-compliant painting service. The network has appreciated these initiatives by Birla Opus to bring a standardized painting service in the market. We're happy to announce that PaintCraft has already scaled up across 170, 1-7-0 towns and expected to reach 300-plus towns by quarter 3 and through company's dealer-operated franchisees and high-performing dealers. We remain on track to build India's differentiated and largest painting service network serviced through the largest branded franchise network. Customers can simply log in to Birla Opus website and avail the benefit of these 2 unique programs. The success of these campaigns is reflecting in our brand scores as well. Our independent research shows the consumer love for Birla Opus brand continued to rise as Birla Opus has become the #2 brand in top of mind recall across India at the end of quarter 2 FY '26. Such brand recall within 18 months of our launch and 12 months of pan-India operation is quite unheard of in the marketing world. On the product front, the premium and luxury products revenue contribution was upwards at 65% of revenue, covering all categories across emulsion enamel, wood finish and waterproofing, including retail and institutional segment. The company has also launched an array of new products and crossed 190-plus products in this portfolio. Out of this, 13 new products were launched during this quarter, the company launched a new branded tools segment with a range of non-mechanized tools under the sub-brand known as Artist. Company is proud to launch in-house made in India, high-quality range of wallpapers, which has seen excellent network response. The other new products launched are pure elegant soft shine, aerosols, aluminum paints, clear varnish and few new bases in the existing product range. The Birla Opus products have been now applied by over 6 lakh painters and contractors, across lakhs of residential sites, making it one of the largest contractor painter network in India. On distribution front, the brand has crossed its earlier guidance and reached to over 10,000 towns on a pan-India basis, which is historic achievement in such a short time. The focus now shifts to depth of presence in each of these 10,000 towns. The company's branded franchise store network has crossed 500-plus towns presence and will soon cross 4-digit mark of branded exclusive store count, making it amongst the largest branded stores in the country. The total CapEx spend for Paints business stood at INR 9,727 crores as on 30th September 2025. Grasim applauds the Birla Opus team for flawlessly executing a large and global scale greenfield project, commissioning 6 state-of-art plants simultaneously, achieved without cost overruns with rapid scale-up and consistent first-time right quality across 190-plus products. This speed showcases exceptional physical -- financial discipline and manufacturing and supply chain excellence, a truly unparalleled achievement by a dynamic start-up. Finally, continuing on Birla Opus, our CEO, Mr. Rakshit Hargave has decided to pursue opportunities outside Grasim. Today, Grasim NRC has accepted his resignation and approved his request to exit the company effective 6th December 2025. Rakshit joined Grasim in November 2021 and has played significant role at the Birla Opus start-up stage and initial scaling of the Decorative Paints business. Today, the operations are stable, and we have built a high-performing team. In the last 4 years, this team has helped establish 6 integrated manufacturing facilities, scale distribution, build brand salience and supply chain network. I believe we have built a rock-solid foundation for next level growth in the Decorative Paints business, which has all the necessary ingredients to achieve #2 revenue market share and committed profitability in the 3 years of full-scale operations. The company appreciates Rakshit's contribution and wishes him the best for the future endeavor. Rakshit's successor will be announced in due course. In the interim, I as business head for the last 5 years of Paints business, and who helped conceptualize, strategize, plan and execute this large project will directly oversee the paints business until the new CEO is appointed. Moving on to other new business, Birla Pivot, which has been marching steadily and strongly. Birla Pivot has created -- was created to solve a pressing challenge in India's business landscape, simplifying building and other sectors raw material procurement for the companies that power the nation's growth. Today, it has evolved into a one-stop shop B2B platform covering the complete spectrum of procurement, fulfillment, assured quality and quantity with financing solutions of material needs from steel and cement to tiles and chemicals, all in one smart seamless ecosystem by enabling digital adoption across the B2B [Technical Difficulty] Operator: Participants, please stay connected. The line for the management has dropped. We're reconnecting them. [Technical Difficulty] Ladies and gentlemen, thank you for patiently holding your line. Line for the management is reconnected. Over to you, sir. Himanshu Kapania: Apologies to everybody. I'm going to start again on the new business. Moving on to other new business Birla Pivot, which has been marching steadily and strongly. Birla Pivot has created to solve a pressing challenge in India's business landscape, simplifying building and other sectors, raw material procurement for the companies that power the nation's growth. Today, it has evolved into a one-stop shop B2B platform, covering the complete spectrum of procurement, fulfillment, assured quality and quantity with financing solutions of material needs from cement -- and steel to tiles and chemicals, all in one smart seamless ecosystem. By enabling digital adoption across the B2B ecosystem, Birla Pivot is not just a procurement platform, it is a catalyst for efficiency, transparency and growth in India's industrial and construction sector. Post a successful foray into building materials, the business now expands its product portfolio to become full stacked raw material procurement platform. The platform has now added a diversified range of raw materials, including polymers, solvent, textile chemicals and nonferrous metals. For your reference, B2B e-commerce market is set to hit USD 200 billion by 2030, powered by strong demand from chemicals, metals, infrastructure and construction sector, et cetera. Birla Pivot's expansion is well timed to capture this momentum, enabling smarter tech-enabled procurement. As digital penetrations remain below 2%, India's B2B e-commerce trade is on the cusp of a major shift. What does such product additions give to us. First and foremost, growth momentum, which is what is -- it is visible in quarter 2 FY '26, where the revenues are sequentially higher by 15% in spite of monsoons. Secondly, it also gears up for new aspirations, which means newer targets to our businesses beyond its stated revenue guidance of achieving INR 8,500 crores or $1 billion mark by FY '27. To conclude, Grasim's diversified business model spans India's high-growth sectors from cement powering infrastructure, decorative paints, enabling urban aspiration, B2B commerce and financial services driving enterprise and inclusion to chemicals and sustainable fibers like cellulosic, linen, wool and cotton, addressing industrial and global demand. This multi-segment presence creates a synergistic engine of growth, combining resilience with opportunity, a true force for growth building India, enabling aspiration and driving sustainable progress. Let me now hand over the call to Hemant for discussing financial performance and highlight on our core business, which is cellulosic fibers and chemicals. Over to you, Hemant. Hemant Kadel: Thank you, Himanshu. Good afternoon and festive greetings to everyone. It is a privilege to address all of you on this earnings call in my capacity as CFO. I have been with the group for more than 30 years. And during this journey, I have been part of the core management team, leading several strategic initiatives and governance responsibilities. My experience spans across corporate finance, risk management, mergers and acquisitions and enterprise-level initiatives. As a CFO of a conglomerate like Grasim, my role is to ensure that our financial strategy and execution are fully aligned with the 5 pillars that has defined our organization's long-term growth journey, which is leadership, innovation, sustainability, capital allocation and cost leadership. Coming to our current quarter performance, Grasim has delivered consistent revenue growth for 21 consecutive quarters on a year-on-year basis with trailing 12 months consolidated revenues of INR 1,59,663 crores, up by 8% compared to FY '25 revenues. The stand-alone revenue grew at a faster pace, reaching a record high of INR 9,610 crores, up by 26% year-on-year. Let me now talk about business-wise performance. Firstly, cellulosic fiber business, the average quarter 2 FY '26 cellulosic stable fiber utilization rates in China have improved to 89%. And inventory days, though higher year-on-year, have sequentially reduced to 15 days. Total sales volume of CSF was lower by 5% year-on-year due to logistics-related issues that Vilayat, which is now normalized. Specialty fiber volume mix improved to 24%, led by higher exports of specialty fibers, improved product mix and currency depreciation supported blended realization of CSF. Cellulosic fashion yarn sales volume grew by 3% year-on-year, led by festive demand. However, the realizations continue to remain impacted by cheaper imports from China. The cellulosic fibers segment revenue were up 1% year-on-year to INR 4,149 crores. High input price of key raw materials impacted the EBITDA, which degrew by 29% to INR 350 crores. Coming to our Chemicals business, the business revenue stood at 2-year high levels driven by all-round performance across caustic soda, chlorine derivatives and specialty chemicals. While the global caustic prices have softened with CFR SEA down by 5%, domestic caustic prices stood higher due to stable demand and rupee depreciation. The improvement in caustic prices led to higher ECU, which was partially impacted by increasing negative chlorine realizations. Caustic sales volume for the quarter were flat due to constrained production on account of lower power availability. Specialty Chemicals revenue contribution improved to 30% versus 26% in quarter 2 FY '25 driven by volume growth of 34% year-on-year due to stabilization of newer capacity. Specialty chemical profitability remains impacted by elevated raw material prices. During the quarter, chlorine derivative capacity increased by 11 KTPA with addition of aluminum chloride capacities. Two key projects, CPVC in partnership with Lubrizol and ECH remains on track. The mechanical completion is expected by Q3 FY '26. Post completion of ongoing projects, chlorine integration is expected to reach 70% compared to current 64%. In our Cement business, UltraTech's capacity expansion continued to reinforce its position as the backbone of India's infrastructure build-out. With every incremental 1 million tonne added, the business is structurally strengthening supply to support the country's historic CapEx cycle across roads, ports, industrial corridors, logistics infrastructure and housing. The business has recently announced capacity expansion targeting total gray cement capacity of over 240 million metric tonne per annum by March 2028. Compared to its current capacity of 192.3 million metric tonne per annum for quarter 2 FY '26, the consolidated sales volume were up by 6.9% year-on-year to 33.85 million metric tonnes. Operating EBITDA per metric tonne grew by 32% year-on-year to 966 led by volume and realization growth, coupled with lower power, fuel and logistics cost. Coming on Financial Services business, Aditya Birla Capital's financial service portfolio continued to sharpen its focus on customer-first execution. While leveraging cross-business synergies to strengthen outcomes, revenue for Q2 FY '26 grew by 3% year-on-year, led by growth in NBFC, Housing Finance and Health Insurance segments. Total lending portfolio, that is NBFC and housing finance stood highest ever at nearly INR 1,78,000 crores, up 29% year-on-year. The NIMs have started to marginally improve quarter-on-quarter. Total assets under management of AMC, Life and Health insurance grew by 10% year-on-year at nearly INR 550,000 crores. Talking about Other businesses, firstly, textile revenue grew by 6% year-on-year to INR 586 crores. The business has demonstrated remarkable turnaround, returning to profitability with EBITDA of INR 24 crores due to normalization of input prices in linen segment. Just as a reference, this business historically demonstrated 8% to 10% EBITDA margins. Coming to renewable business, Aditya Birla renewables revenue nearly doubled on a year-on-year basis to INR 259 crores, led by newer capacities and onetime revenue of INR 50 crores on account of rate differential. The business current peak capacity stood at nearly 2 gigawatt and is laying the foundation for a greener, more resilient India. It is also playing its part in the group's collective transition to a sustainable energy future. Let me now briefly touch upon the CapEx. Grasim has outlined a CapEx outlay of INR 2,263 crores for FY '26, of which INR 941 crores was deployed in first half of financial year '26. The lyocell capacity expansion with the cellulosic fiber business is progressing as scheduled and remains on course for commissioning by mid-2027. On sustainability front, happy to share that Birla cellulosic -- Cellulosic Fiber division of Grasim has received the highest rating of dark green shirt in the Canopy's Hot Button Report for the sixth consecutive year, reflecting its focus on sustainability. We remain committed to continuously elevating our sustainability performance. A key thrust will be to improve the capacity share of renewable energy and increasing recycled water usage to structurally reduce our dependence on freshwater. These shifts are integral to embedding resources efficiency into our operating model and strengthening long-term environmental resilience. On the balance sheet side, net debt declined by INR 292 crores and stood at INR 6,861 crores as on 30th September 2025 as against INR 7,153 crores as on 30th June 2025. Stand-alone net debt to TTM EBITDA stood at 2.19x as against 2.41x. With this, we open the floor for question and answers. Operator: [Operator Instructions] First question is from Avi Mehta from Macquarie. Avi Mehta: Sir, my questions were on the paint business, especially wanted to better understand your thoughts post the resignation of Rakshit, in terms of the rough time line for the successor announcement, any change in growth strategy, aggression. I would love to hear your thoughts on that. And so the second question, if I can put it up front, is on the performance in the paint business in the quarter on a sequential basis. We did -- you did point towards market share gains, but the other peers have seen -- who have announced have seen almost a 10% decline given the weak monsoon -- weak environment, I would love to know how does the business stack up versus that? Those are the 2 questions. Himanshu Kapania: Thank you, Avi. In the life of a professional, individuals take their call on where they want to build their career. Rakshit has helped Birla Opus from the very start of the business to build the project and in the initial phase of launch. Now Birla Opus has a very strong, high-performing team and will continue to stay course on the vision that has been announced to the market. I'd like to remind you the vision that the company has announced to the market, we have committed to be #2 as well as profitable within 3 years of full-scale operation. We will stay course on that. As regards to the performance of quarter 2, this our first time that we have faced a full monsoon season. And the first time we saw that the overall industry on a quarter-on-quarter basis has had a double-digit decline. And it is our internal estimate on a year-on-year basis. If you were to eliminate the performance of Birla Opus, the industry is slightly negative in performance. Our Birla Opus on a year-on-year basis had a significant growth, but on a quarter-on-quarter basis, had a low single-digit decline, which was primarily during the periods of July and August. We turned back very strongly in the month of September as well as in the month of October, as I mentioned in my opening remarks. We are seeing very strong secondaries or movement of paint buckets from the dealer counter to the contractors and consumers and as well as return of the institutional business. We remain committed to growth, and we remain committed to the vision that has been articulated to the market. I forgot to tell that Rakshit be there with us until 5th of December. Operator: [Operator Instructions] We'll take the next question from Rahul Gupta from Morgan Stanley. Rahul Gupta: A couple of questions. First, just as a continuation on the Paints question earlier. Now that we are out of a pretty long and persistent monsoon season, how should one look at the industry demand for the second half? And to that extent, with Kharagpur now fully commercialized, how should we look at your ramp-up in second half from that perspective? So that's my first question. Himanshu Kapania: Thank you, Rahul. We are highly optimistic and results of September and October bear us out of a strong quarter 3, both on a year-on-year basis as well as a quarter-on-quarter basis. So our guidance is continued double-digit growth on a quarter-on-quarter basis and a significantly high growth on a year-on-year basis. As regards to our capacity, as we mentioned, we are at 1,332 million liters per annum, with Kharagpur arrival -- in the short term, it will help our -- managing our logistics costs and better servicing on the Eastern and Central India. But in the long term, our aim is to ensure that the volume market share and capacity market share converge and all efforts -- all investments and all efforts, whether it's advertising, manpower, distribution, servicing and any new initiatives will be directed towards to match the -- our volume market share closer to our capacity share. Rahul Gupta: Got it. Maybe we will revisit on the industry a quarter later. My second question is on B2B e-commerce. See, the business is growing at a very fast pace. And if I look at this quarter numbers, the revenues are annualizing more than INR 6,000 crores. Now you have guided for INR 8,500 crores for fiscal '27. Is there a case for this number getting revised up? Or will you be reaching this targeted number sooner than fiscal '27? So any color on this will be very helpful. Sandeep Komaravelly: Thanks, Rahul. This Sandeep here. I think your observation is right. Our growth has been compared to what our expectations, I think we've been doing very well compared to our plan. We are on track. And I think our earlier recommendation was that we will achieve $1 billion scale in FY '27. There is a likely chance that we will get there and hit that milestone sooner. But for now, we are not changing any of our direction as of now. Operator: Next question is from Amit Gupta from ICICI Securities. Navin Sahadeo: This Navin Sahadeo from ICICI Securities. So 2 questions. One on paints and the second on B2B commerce. On paints, if you could just give us more details about the number of dealers in this particular quarter versus the last quarter. And the reason I'm asking this because this time, Diwali was a little advanced. As you mentioned in your presentation, there is net addition to the number of accounts from 8,000 in the previous quarter to 10,000. The SKUs have gone up. The product portfolio has also expanded. But yet, sequentially, as you mentioned in your opening comments or to the previous question that there is a marginal lower single-digit kind of a drop in revenue. So how should one look at this in terms of the expanding network in the first place. Himanshu Kapania: Thank you, Navin. You're right. We have expanded our distribution network to beyond our original guidance of 8,500 towns to 10,000 towns. And we continue to be able to expand beyond urban into the rural and the small town category. As regards dealers, the way to look at it is either we measure dealers on a quarter-wise basis or we measure on a month-wise basis. Your concern has been how is it that we have been expanding our reach and it has not translated into revenue. To measure that, we should look at the number of dealers that have participated with us in September and October. And there have been -- we've had -- we've been growing dealer participation on a month-on-month basis. There was a lull in July and August, and it has returned back to a significant growth, almost a double-digit growth of dealer participation in September, and the same momentum has continued in the month of October. So the overall number of dealers have continued to grow, if I were to measure the total number of dealers who participated in quarter 2 over quarter 1. What is important is you will say the throughput may have fallen. The throughput may have fallen on a quarterly basis. But when we measure on a September basis, the throughput is back and both in September and in October, dealer throughput is at levels and slightly higher than what it was at quarter 1. So we are -- our focus is both expansion as well as depth of performance. And currently, if you -- while we are getting a lot of dealers to be able to sample our products and start using our products, there are dealers who have sustained with us now for more than 1 year. And almost 30% of the dealers are currently doing more than 40 to 80 products for us. And that number continues to grow. And the dealers, I'm very happy to report the dealers who have worked with us in the -- over 1 year, we've sustained a large percentage of them. So I hope that answers your question. Navin Sahadeo: Just to clarify, if you could give us the number of dealers? And second is the traction that you said or rather a spurt that you've seen in September and October, is it led by the consumer style financing or the EMI options that you introduced a couple of months back? Himanshu Kapania: So those are factors which help in secondary sales. So I'll not mix the 2 certain topics that we first focus on primary sales, that is sales from companies to dealers. The number of dealers participation has grown as well as number of products sold has grown, both in September and October. Now once this has grown, how has been the throughput from the -- different from our legacy companies, which have a track record and they are able to force dealers to stock. Most of our dealers prefer to buy and keep a very low stock. So for them, the most important is throughput or secondary sales. And what has been encouraging for us is, number one, we have a central monitoring system of our tinting. And we are finding that the secondary on our tinting for dealers in September and October has been almost 120% to 130% of the volume that they purchased in September and October, showing a very strong secondary or throughput from the dealers on towards -- on to customers as well as reducing their inventory significantly. That is part one. Second thing that has helped is assurance. So it is helping painters and contractors to be able to tell to customers of the assurance program. And we've had thousands of projects being registered are -- and in multiple stages of execution at this point of time, the Assurance plan. And the third is the new painting services. Both Assurance and painting services are secondary-based programs as well as dealer stocking and dealer purchase are the primary-based programs. So both are running strong. I hope that clarifies. Navin Sahadeo: My question second was on B2B e-commerce. So if you could just help us understand the private labels now are what percentage of our revenues. And in the same way then what's different from a technology or any other innovation that we are doing in this B2B e-commerce gives the confidence that we might be able to surpass the revenue target sooner. But that was my question. Sandeep Komaravelly: I'll answer your question on the innovation that we're doing and what gives us the confidence that we will grow and continue on this growth momentum. So look, as you're aware, we have built an integrated e-commerce platform, which fundamentally forms a digital backbone and connects pretty much every stakeholder in the entire ecosystem, starting from the brands, OEMs to our buyers who are consuming these products, logistics service providers who are actually moving the material to our lending partners who are providing financial solutions to all other network operators who plug into our -- into this backbone. And what this fundamentally helps us is in creating this end-to-end visibility, which is predominantly not there in most of the sectors or most of the materials that are fundamentally transacted today. And that, I think, is where our ability to provide bring in efficiency, ability to provide the best price, ability to provide the widest assortment, ability to provide a very reliable experience, all of that come into play. And this already showing up in the way our repeat transactions are happening in the way the buyers are coming back to our platform to keep buying. And just as an indication, all the buyers who we acquired last year, they've already purchased on an average more than twice the amount this year, giving us the confidence that whatever experience that we're delivering through both a combination of our assortment and our technology backbone is giving results. And I think that is one of the biggest reasons why we believe our growth momentum will continue. And to drive all of this, we've built -- these are custom-built tech modules that we've built from the ground up, and they are very specific in terms of addressing the use cases that are for B2B. There are a bunch of solutions that have come up in the past for B2C e-commerce, but B2B e-commerce is a lot more complex. There are a lot more stakeholders. To fulfill a single transaction, it requires more than 30, 40 touch points. and to orchestrate all of this in a system that is seamless is where our edge comes in. I hope that answers the question on innovation. On the second part or on the first part that you had asked about private labels, we are right now not breaking down our revenues into different product categories, and we will share that at the right moment. But I'll share this that our private label since the time of launch, they have seen very good acceptance. Most of the buyers who are coming to our platform to buy some of the bulk categories. As the project progresses, they have shown very good interest to continue that purchasing experience with us. They started buying behind the wall categories, and now they've also started buying the finishing categories. So we are currently operating in tiles, ply, bathware and faucetware, and we continue to increase our penetration there. What we've also seen is that we see great acceptance for these private labels in our retail channel. So we fundamentally have 2 channels. One is the projects channel where we are able to directly supply materials to the site locations. And the other channel is our retail channel wherein we work with retailers who further then sell a lot of these finishing products to individual homebuilders or smaller contractors or smaller retailers. We've seen great acceptance for these private labels in the retail channels because they are seeing a great way to diversify their portfolio without having to do higher investment or having to keep inventory at their location, and that is what is driving acceptance of these private labels. So overall, I'd say all indicators are towards good experience, reliable experience. [Technical Difficulty] Operator: We have the management reconnected. Over to you, sir. Himanshu Kapania: Yes. Sorry, Navin, I guess, apologies, the line got disconnected and -- but... Operator: Next question is from Percy Panthaki from IIFL Securities. Percy Panthaki: Can you just tell us the number of distributors, your target was 50,000. Have you achieved that target? Himanshu Kapania: Yes, we are there. Percy Panthaki: Okay. Okay. And how many of them would be monthly active distributors as in ordering at least once a month? Himanshu Kapania: We believe we are better than the industry standards. Percy Panthaki: In percentage terms? Himanshu Kapania: Yes, right. Percy Panthaki: Understood. Understood. And your guidance of INR 10,000 crores turnover by FY '28, does that remain valid? Himanshu Kapania: Yes. Percy Panthaki: Understood. Understood. Also, just wanted to understand what is the next push in terms -- see, when you started off, the first push was in terms of making the distribution available and increasing the number of distributors. Now more or less, that lever is sort of done. Of course, there will be some incremental growth there, but nothing major. So for the sales growth to continue double-digit on a Q-o-Q level, what is the next thing that you will focus on? What is the next lever which will drive this growth? Himanshu Kapania: I think this very typical of any business. Focus is on consumer. So you need a distributor or a dealer to be able to make sure the products are available at the right time at the right place. That activity, we have managed. So all our attention is moving to consumers. And those -- there are 2 types of consumers. One is a painter contractor and second is direct homeowners. That's the reason why we continue to be the most visible brand amongst the most visible brand. And we are really happy to report that within a period of 1 year, this the last World Cup, then we started to advertise. And this World Cup, this happens with Women's World Cup, and we won both the World Cup. And we have -- in the results, we saw that we have top of mind recall, we are #2 brand, which is the starting fact of consumers to be able to go and ask for Birla Opus at the dealer outlet. So that is the one step, and we believe 30% to 40% of the consumers make direct purchase of paints. Remaining 60% to 70% of the consumers do it with the help of the painters and contractors. So all our effort is be able to attract maximum number of painters and contractors, ensure these painter contractors are able to experience our high-performing products and superior products as well as able to offer to customers 2 very new services, number one, direct painting services from branded by us, which has transparent pricing, EMI as a GST bill and also Assurance where not only the customer gets product warranty, but he will get in the first year itself, if there is any problem, our commitment to not only replace product, but also cover his labor costs to be able to give assurance both to the painter and contractor as well as to consumers. So all the focus of the business is to be able to do consumer-related activities. And that will help us in what is happening is that is helping us dealers who first joined and took a small percentage of our 192 products. And now we are getting dealers who are increasing the number of products that they're buying and offering to consumers. Operator: Next question is from Manish Poddar from Invesco. Manish Poddar: So just wanted to get some sense, sir, let's say, because of this rainy season, has there been any sort of impact in this Q2 thing? And that is why you're calling out, let's say, the early part of the quarter was tapered. And despite you adding stores or adding distribution, you haven't seen performance to that extent. Because what is happening is the market always correlates individuals leaving at the top to the delivery of outcomes. And if that is, I'm just trying to get some sense on that. Himanshu Kapania: Understood, Manish. So let me first clarify. We believe that we have the best growth on a quarter-on-quarter basis. Obviously, when you measure on a year-on-year basis, we are a triple-digit growth. So that may not be so relevant. But on a quarter-on-quarter basis, we had a least decline when the industry had a double-digit decline. I had almost flat or slightly negative on decline basis. What is the reason for this decline? Broadly, whenever there is monsoons, the exterior products and institution business slows down. And that is our peak monsoons in July and August. So if a part of our business is not happening. That is the reason why the slowdown happens. And that is historic of industry. On a quarter-on-quarter basis, quarter 2 is amongst the slowest quarter for the industry, and we faced it for the first time. But having said that, we have to measure the overall industry on a year-on-year basis. If you were to remove Birla Opus performance, the industry has had a slightly negative growth is what our assessment is based on various feedback that we've got from the market. Not every company has yet reported their financial results. But whatever our study of the market is against -- but Birla Opus -- with Birla Opus, there has been a low single-digit growth that has happened and Birla Opus continues to help grow the market at this point of time. I hope that answers the question. Operator: Next question is from Nirav Jimudia from Anvil Wealth. Nirav Jimudia: I have 2 questions on chemicals. Sir, the first is when we see our EBITDA run rate for chemicals, like last year, we were at anywhere between INR 250 crores to INR 300 crores. And today, when we see we have inched up to anywhere between INR 350 crores to INR 400 crores. So just want to understand from you that when can we again start seeing the meaningful improvement in the EBITDA run rate for chemicals? And if you can explain this in context of, a, chlorine value-added products. So is there any scope for improvement in per kg margins here. B, newer capacities like ECH and CPVC and when it should start contributing meaningfully? And, c, whether the benefit of the power cost reduction with our shift to renewables is optimally achieved or there is a further scope of improvement? Himanshu Kapania: [Technical Difficulty] Renewable consumption rate of... Nirav Jimudia: Sir, your voice is not audible. Himanshu Kapania: Is this better? Nirav Jimudia: Yes. This better, sir. Himanshu Kapania: So I'll go in reverse order of your questions to the extent I remember all of them. So firstly, we are at about 24%, 25% renewable level as of now, right? If I look at all that we have and all the state-level regulations, we expect that in the next 3 years, we should be able to technically get to 40%. And I use the word technically because we have not yet envisaged those projects. We have not yet signed the PPAs, but that would be a kind of aspirational level for the next 3 years. I can't forecast because, as you know, every state has its own regulation on banking, billing, surcharges, et cetera. But we think that the current 25% has feasibility to reach the 40%. Then I think your second last question was ECL. Nirav Jimudia: Yes, when it should start meaningfully contributing in terms of the operating profits? Himanshu Kapania: So that ECH and CPVC would be meaningfully contributing from Q1 of next financial year. We will be mechanical complete by Q3, worst case situation in January, but the start-up times of these plants are long and complicated. And as you know that some of it are -- there are safety risks as well. So we expect that meaningful contribution will happen from first quarter of next financial year. Then I think you had a question on chlorine derivative profitability. Rather large basket of products, right? We have probably the largest basket of chlorine derivatives in India. And some of them are pretty seasonal because, for example, water treatment and monsoon has a higher season, right? Plastics has another high season. So I think these are mature products. It's not like you're going to see breakthrough profitability in any of these traditional chlorine derivatives, but it is necessary for us to do them so that we can get the caustic utilization rates that we want. And then your very first question was around what could be the catalyst for the next improvement -- step improvement, I think, in profitability. And Nirav, the honest answer to that is it essentially depends on [ chloride ], given our large exposure still to the chlor-alkali business. It's a combination of caustic prices and chlorine demand in India. That is the most meaningful factor that drives our results. And the business of predicting caustic prices for a long time is very tricky. So far, we can make our best estimates, but it's a tricky business. Operator: Next question is from Jai Doshi from Kotak. Jai Doshi: My question is generally on market share trends. Now last year, during the course of the year on a Q-o-Q basis, you were adding 100, 150 basis points of market share every quarter. It seems to have moderated to about 20 basis points starting this year. So is this entirely the difference between primary, secondary? That's my first question. Second is, is there a risk that it decelerates further? Or you think that you will be able to gain 20, 30 basis point market share Q-o-Q from here onwards over the next few quarters as well. And lastly, mathematically, for you to sort of INR 10,000 crores in FY '28 means 13%, 14% market share. So whereas if I understand correctly, you may be at 6.5% today, gaining 20, 30 basis points quarter-on-quarter. So what do you think from here can sort of drive acceleration in sequential market share trends for you? Himanshu Kapania: Thank you, Jai. I'm not sure how you're doing your calculations and how you're arriving at quarter 1, 20 basis point or quarter 2 at a slow market share growth. So first and foremost, I want to register the revenue reporting of paint companies has 3 broad components: decorative paints, putty business as well as industrial paints. Now we have a fair bit of idea of their industrial paints, some of them are also reporting a breakup between industrial and decorative paints. Now with decorative paints and putty business of the legacy players and decorative paints and putty business of Birla White, our assessment is we have grown very significantly. And last quarter, we had talked about reaching double digit, and we have grown more than 700 to 800 basis points in this quarter further. So we are there. And on a stand-alone basis, our assessment is we will be in quarter 4 to quarter 1 of next year, double digit. We are targeting -- we're trying to reach in this -- in the quarter 4. But we are between quarter 4 of this year or quarter 1 of next year, we should be in a double-digit number. And we are -- our degree of confidence remains solid around there. So you may have your own internal calculations and the number that you are giving us as the end market share is quite different from the numbers that we have on our internal calculation basis. Operator: Next question is from Prateek Kumar from Jefferies. Prateek Kumar: I have a couple of questions. Firstly, on PSF segment and caustic, the performance on a cumulative basis remains range bound like last few quarters. Do you see any figures which could provide any positive change in performance in this business. Some of it you have already alluded and like answered that. Unknown Executive: Yes. See, we expect a slightly better performance in Q3. But obviously, there are a lot of ifs and buts in terms of U.S. tariffs, in terms of global pulp prices. We expect stability and a slightly better performance for Q3. Prateek Kumar: Okay. Also, another question is on resignation of Rakshit, which comes as a big surprise to anyone who has been tracking Birla Opus closely. My question is, should investors view this -- should investor view this transition as a natural phase in generally difficult competitive business or as inflection point of any refreshed strategy? Himanshu Kapania: It's a natural phase of professionals growing in their career. This will have no impact on the business and business will be as usual. And there will be no change in the growth strategy. Operator: Next question is from Raashi from Citigroup. Raashi Chopra: I just had a clarification. When you're saying that the paints industry has grown at low single digits in the second quarter, and it's negative, excluding Birla Opus. This just decorative organized paints or adding putty as well? Himanshu Kapania: Yes, including putty. Operator: Thank you very much. Due to time constraints, we'll have to take that as the last question. On behalf of Grasim Industries Limited, that concludes this conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.
Britt Jensen: Hello, everyone, and welcome to this conference call presenting our Q4 and full year results from 2024, '25 for Ambu. My name is Britt Meelby Jensen. I'm the CEO of Ambu. And with me today, I have Henrik Skak Bender, our Chief Financial Officer. So let's get going. So we'll start with the highlights from the year that we just exited. And overall, we delivered a very strong organic revenue growth of 13.1% and if we look at our endoscopy business, that grew for the year, 15.4%. This underscores the continued momentum and potential of moving patients from using reusable endoscopes to single-use endoscopes. If we look at our margins, we delivered a margin of 13.0% for the year, and this is impacted positively by our operational leverage where we continue to drive scale and be more efficient. And then on the other side, we also -- given we are a growth company as the most important, we are, as we have previously communicated, continuing to invest in commercial resources and scale in order to continue to deliver that growth. At the same time, we had 2 external factors, and Henrik will come back to that in terms of FX and tariffs that had a negative impact on the results. What we also launched in this quarter was October 1, where we held our Capital Markets Day. We launched our next-era strategy, a strong testament to the progress we have made over the last couple of years, and I'll come back to talk a bit about that as well. In connection with this, we both extended, and we increased our long-term guidance towards '29, '30 and what we are delivering also that Henrik will present for our short-term guidance is in line with these ambitions. So if we dive into the specific results for the year, starting with the overview here, the 13.1% organic revenue growth for the quarter Q4, we delivered 10% and if we take a step back, this is well in line with what we said a year ago when we were up here that we were expecting to have higher growth in the first half of the year than the second half of the year, which is also what we have delivered. If we look at the split, and I'm going to comment on this shortly, we had almost 10% growth in anesthesia and patient monitoring 9.9% and then the 15.4% in our endoscopy solution business. Both of these being lower in Q4 compared to the full year, again, as expected. Then our EBIT margin before special items landed at 13.0%, and we ended up with a cash flow of DKK 407 million positive for the year. Let's look at the endoscopy solutions revenue, starting with the respiratory organic revenue growth where we saw, as we have also communicated throughout the quarter, a solid double-digit growth in this segment of 11.4% and then slightly lower 8.8% for Q4. Again, this is as expected, and it's related to the timing of order in particular, in the rest of world, and nothing that we expect is going to continue where if we look ahead for this segment, we believe that the coming years will be continuing to be solid double-digit growth in this segment, very much driven by the breadth that we have in our endoscopy solutions. And what has been driving the growth this year has very much been our bronchoscopy solutions, and that is continuing to drive our revenue growth in the coming period together with also starting to see increasing revenue from our newly launched video laryngoscope solution SureSight. If we then look at the rest of our portfolio, and this is the segments that we refer to as urology, ENT and GI. Here we also had a higher organic revenue for the year of almost 20%, 19.6%. And then in the quarter, slightly softer. And although we normally do not comment on these different areas, and this is very different therapy areas that we are covering in this group. I think it's fair to also explain a little bit this quarter to say that in Q4, in particular, we saw a significantly lower growth in ENT than we saw in urology and GI. Let me come back to that because this is well in line with our strategy of key focus on urology and respiratory as our 2 key segments. If we look at urology specific, we have now not only our aScope 4 Cysto, but we also have our aScope 5 Cysto. We have our aScope Uretero, which -- the 2 latter are contributing still with a fairly limited part of the overall urology revenue, but that is something that when we look ahead, we expect to continue to see good momentum on our aScope 4 Cysto but where we also would gradually see these solutions driving an increasing share of growth. And I think it's important here to pause and take a step back and say, if we look at the overall momentum that we see when we launch new solutions in the market and when we take a couple of years back, looking at our aScope 5 Broncho. It's very clear that it takes some quarters at the launch curve, and we have talked about this a number of times, is not steep as you will see in other areas, but it's relatively more flat, but then it will also continue to grow quarter-over-quarter for many years. As we have shown that we see still the primarily primary driver of the overall revenue in endoscopy is coming from solutions that have been on the market for quite some years. So this also makes us comfortable when we look at this segment that there's good momentum as we move into this year and the coming years in terms of generating growth in this specific business area. If we then look at anesthesia and patient monitoring, 9.9% for the full year. There's no doubt that this has been an extraordinary year. The revenue growth has been driven by price increases, which was also, as we had communicated, leading to a couple of quarters of very high growth. And then the growth in our last quarter of 6.4% reflects the good balance of where we actually see a lot of growth coming from volume growth and also some growth still coming from price increases. This is purely driven by the fact that we have growth in the market and that we are able to deliver on the demand from our customers. We have not launched any new solutions in this area. We have not added commercial resources. So it's basically our existing people driving the growth and also fueled by very strong customer loyalty and the acceptance and appreciation of our solutions. If we then take a look at our -- if we then take a look at our strategy and what we launched because a month ago, we launched a very strong ambition when we look ahead to achieve global endoscopy leadership. So this is basically on the back of a couple of very successful years with our ZOOM IN strategy where we were successful at a fairly high pace of doing the turnaround of Ambu and then looking ahead as a strong growth company based on the solutions, the market potential, we feel very comfortable of having an ambition of global endoscopy leadership, building on the momentum that we see in the market and acceptance of single-use endoscopy solutions. So our strategy includes some strategic choices that we have made and also a couple of strategic things. And then -- and let me briefly do a recap of those starting with the strategic choices. What we communicated in relation to our strategy is that there are 2 key areas that are our primary focus areas as we look ahead. And this is our respiratory business formerly known as pulmonology, but now also expanded as we also had strong airways management solutions, and then we have urology. Then when we look at our ENT, we still see some strong potential to continue to grow in ENT, although our portfolio is slimmer in this area, we are investing in new innovation to also meet a growing need for single-use endoscopy in this area. Then when we look at GI, we have a long-term ambition of unlocking gastroenterology, which is a very realistic ambition as we see it because there are some of the same dynamics and the same needs in this segment as we see in other segments, but we also acknowledge that this is something that will take time. And we are investing more limited right now, in particular, when it comes to the commercial side. But we do believe that we are the ones that will eventually lead the transition to single use in this segment. All of this is then combined in our EndoIntelligence, where we are continuing to advance the software, the AI solutions that supports our endoscopes and where we have the benefit of having 1 software platform for all our endoscopes combined as the only player in the field. Last but not least, we are also confirming that anesthesia and patient monitoring remains meaningful for our company. And we continue also in this area to grow. But here, we are more focused on the profitable growth, meaning that we are investing less, and we are expecting more scale, as you have seen in the recent results from the past year. If we then look at the strategic focus themes, let me recap this. We have 4 specific areas where we believe that we can continue to make a difference. The first one is very important around customer centricity making sure that we continue to focus on our clinicians but also expand that focus to the health systems where our broad endoscopy portfolio can play a role. And then we see opportunities here to accelerate our adoption of single-use as well also as creating more evidence both on the clinical solutions, health economic and not least sustainability which is also playing an increasing role for our customers. Innovation remains at the heart of what we do at Ambu. And we also believe that we can deploy new technology either in-house or through an increased focus on partnerships to simply be able to be on the forefront of delivering new endoscopy solutions that plays a real role and makes a real improvement for our customers. Then to succeed with both our growth, but also with our margin improvement, it's super high on our radar to continue to build a scalable, profitable platform. We continue to see a number of efficiencies that we can leverage over the coming years, which is part of the plan that we are fully executing and that we have slightly extended. And then last but not least, the most important in Ambu to deliver on our strategy to deliver on our plan is our people and the culture that we have built and that we really cater for in Ambu and this is where we see great opportunities to continue to fuel this culture of growth and of empowerment because we have a lot of highly motivated and highly capable colleagues all around the world. So this is, in a nutshell, our strategy. And let me talk a bit about the growth because -- and where we see our growth coming from. And instead of looking at the market size, which is huge, let's look at the growth in the single-use market because this is actually what matters. And there are a couple of important points here when we look at the market. Overall, if we start on the right side here, we expect that the single-use endoscopy market is continuing to grow with over 20% CAGR, at least in the period until 2029 to '30. If we look at where this comes from, there's the underlying endoscopy procedure growth, which is roughly around 5% which is very much driven by both the aging population, increasing chronic diseases and also an increasing trend towards minimal invasive procedures. But then there is the big transition from being -- from using reusable endoscopes to single-use endoscopes, where we see that growing at least around 15% on an annual basis. And this growth we see coming from both solutions that are already on the market, most of these solutions from Ambu and then also new solutions that are in development right now. But we do see a continued conversion where customers have agreed in many of the subsegments that we are in -- that single-use endoscopy is the solution to a lot of the challenges that they have in the hospitals. And this is something that they also see as a standard of care as we move ahead. We did a survey among customers earlier this year and among potential customers as well, where they said that in respiratory, urology and ENT, where we did the survey. The clinicians said that roughly 70% of their procedures can be done with a single-use endoscope. And we are far from that today. So that also explains the great potential. And let's look a little bit at what is driving this conversion to single use. And there are 4 main things that are the drivers. One is the higher efficiency that we see in the hospitals. So there's more and more evidence out there that customers can actually treat, or hospitals and clinics can treat many more patients when they use a single use endoscope. Because they don't have to wait for a scope being available or the reprocessing that needs to be done. And this one is super meaningful in the hospitals today where resources is a constraint. Then there are better economics. If you do the full budget model -- budget impact model from the hospitals, it's very clear that it comes out more economic viable to use single-use in most cases. We have the strong clinical performance where the quality of the single-use scopes have reached, in many segments, at a level where it is very strong and comparable to single-use and on some aspects, even better. And then we have sustainability, which, in particular, in Europe, and we are seeing also the trend in pockets of the U.S. where sustainability really plays a role in the choices of the hospitals. So if we have to take a step back and say what is really the potential of Ambu and how do we see it, it's basically a very attractive market that we are playing in. And we are, as market leaders, leading the structural shift to single-use solutions. We have the broadest single-use endoscopy and also a very strong proprietary platform to deliver this growth and the largest commercial footprint in single-use. Our solutions and our innovation is very focused on meeting and solving the problems that we see with the customers so they can treat more patients with better outcomes. We have a setup which is already very competitive and scalable when it comes to cost, and this is something that we are continuing to fuel by ongoing initiatives that we have -- and this is basically what brings us to a very clear path of solid double-digit organic revenue growth longer term and also a margin expansion towards 2030 that Henrik will come back to. So before I hand over to Henrik, let me just briefly talk about the EndoIntelligence where we have received a couple of questions. And basically, we are not sharing all the full programs that we have in development. But what I can say is that EndoIntelligence is building on the hardware platform that we have, where we are also working on a next-generation supported by the software that we are really continuing to improve across all endoscopy solution areas and then AI-enabled applications. So we are basically able to support the doctors, both in being more efficient before they do the procedures with the patients, during the procedures, enabling much better diagnostic support than they have been able to so far and then also after the procedure where there typically is an increasing level of documentation being done where we can support. So this basically also means that with us being present in respiratory, urology, ENT and GI with a strong offering when it comes to our endoscopes here exemplified by our respiratory solution, adding on then additional solutions that also plays a role in helping our customers such as the video laryngoscope that we launched. We have our VivaSight One Lung Ventilation as well as our Broncho Sampler Set, we are basically becoming a company that can help the full procedure that they do with the patients in terms of endoscopy, and this is the way that we are moving forward. And then we have the benefit of the portfolio when we are engaging with the health systems where it's very meaningful that they can go into a room and actually plug any endoscope in and then do a procedure, so they can also leverage the full hardware platform and the software that we have with our solutions. So with that, I'm -- I will pause, and I will hand over to Henrik and come back in the Q&A. But just by saying that we feel super confident around our new ZOOM AHEAD strategy, we are very excited about the potential that we have, and we feel we are very well positioned to also strongly differentiate ourselves in solving our customer needs better than anyone else. And this is also where with a high market growth in single use, transitioning from reusable, we are strongly positioned for high growth as we look ahead into the future. So with that, Henrik, over to you. Henrik Bender: Thank you, Britt. And like Britt ended, I also wanted to start before I get into financials by saying we stand here today on the back of what we feel are really solid results for '24, '25 with a lot of progress on our strategic initiatives. And we also stand here today super confident, as Britt just said, and with a high level of excitement with what we have ahead, with what we launched at the Capital Markets Day guided by now our ZOOM AHEAD strategy. And I'll also come back to that and talk a little bit about our long-term targets in connection with that. But starts with, of course, with viewing first our '24, '25 financial results. Starting with growth, we had an overall growth for the year, organic growth of 13.1%, impacted by FX, both for the full year, but in particular, for the last 2 quarters. So the full year reported growth landed at 12%. For quarter 4, specifically, we had an organic growth of 10%, as Britt also presented before. Adjusted for the FX impact that in reported currency landed at 5.7% and just illustrates how impactful the depreciation of the U.S. dollar DKK currently have been on our numbers in quarter 4. In terms of business, we had a strong growth still endoscopy, though lower than the previous quarters at 12.4% and still a solid growth also in our anesthesia and patient monitoring business with 6.4% growth, bringing the total growth across the year to 15.4% for endoscopy and 9.9% for anesthesia and patient monitoring. Very satisfactory results and in alignment with our long-term guidance and also with the ambition we set out exactly a year ago when we set the guidance. In terms of the geographical split, we continue to see very solid growth in North America and Europe, less growth in Q4 for rest of world, mainly due to timing of orders, but consistently across all of the areas, strong growth. And of course, our North American growth was in reported currency, particularly impacted by the U.S. dollar DKK depreciation. So overall, a good growth momentum and a growth momentum we also see continuing in now to '25, '26. Something that I'll come back to when I talk about the guidance for '25, '26. Then turning to margin. We also landed the year on a very solid foot, we feel, in terms of our Q4 but also in terms of the full year. For the full year, '24, '25, we landed at a EBIT margin of 13.0% for quarter 4 alone at 10%. Importantly to note, for quarter 4, as also communicated in our Q4 statement, we were impacted negatively by FX and also by tariff costs. And adjusting for that, we actually landed our Q4 and have corresponded to 13.4%, fully in line with our EBITDA margin expansion plan. As also communicated on our Q3 statement, the FX impacts are temporary. We are initially impacted by the U.S. dollar depreciation, but they will, over time, be compensated then by also lower costs. But it takes quarters to really see that offsetting effect and with a continuation of the U.S. dollar DKK depreciation, it did net-net impact us negatively for quarter 4. For tariffs, I will also come back to it later. We have seen an increased tariff regime globally but specifically for our manufacturing coming from outside of North America that has impacted us in quarter 4 and will also impact us in '25, '26, but we remain very confident that with the plans we have in place already, we can mitigate a lot of this impact. It takes time to implement, like we've said from the start, depending on the initiatives, 6, 9, 12 months. So there will be a gradual phasing. And therefore, right now here in Q4, we did see a negative impact, which in part will continue into Q1 and Q2 and Q3, particularly for '25, '26. Then looking more in detail on the margin and breaking up to gross margin first, and then secondary our OpEx costs. Gross margin continued a strong development, which we've been on now for 16 consecutive quarters almost with an increase versus last year of almost a full percentage point, landing the full year gross margin at 60.2%. This, despite the negative impact from FX, is something we are very satisfied with, substantiates our ability to grow the higher gross margin business in endoscopy solutions and also drive price increases particularly in anesthesia and patient monitoring. In addition to this, it's also illustrating how we've continuously managed to drive efficiencies in our manufacturing footprint with better utilization of our factories, but also better throughput. So a really good result and a good continuation also towards our long-term ambition. In terms of OpEx, there was an increase in OpEx in quarter 4, one, because we continued with the investments and Britt -- as Britt also said in her opening, investing in commercial resources. But two, in particular, also because we did see effects from tariffs, which are reported under sales and distribution costs, which made the OpEx costs go up in absolute terms. That being said, we continue to see further potential for operating leverage and continue to be committed and confident on the long-term margin expansion journey where OpEx will be the main driver of our further leverage. If we then turn to cash flow, we landed the cash flow within expectations of the updated guidance for full year cash flow of around DKK 400 million with for quarter 4 specifically DKK 130 million, landing the full year at DKK 407 million. This is a continuation of the efforts of driving strong cash conversion. And despite the negative impact from FX on EBITDA, in particular, a continued positive momentum on also how we manage our net working capital while still making sure that we have enough safety in our supply chain and also in our inventories locally to manage customer demands where needed. So overall, a really good result. If we then break down into some of the components of cash flow, as said, EBITDA had a drop in quarter 4, mainly driven by FX. Secondary on our CapEx, we did see a slight increase, mainly due to certain timing of investments in R&D. And last but not least, we did continue to see a slight decline in our net working capital as also guided in the last quarter, particularly managing our inventory, but also our accounts receivable in a slightly more tight manner, while still making sure that we have enough buffer in our inventory and supply chain to manage customer demands. In addition to that, we are, as part of our annual report, also proposing a further cash distribution, a process we started more explicitly last year with an updated dividend policy and one that we are now extending and expanding. This concretely will consist of: one, a dividend of proposed DKK 110 million, which will be finally decided at our AGM in December and secondary, a share buyback program of a total value of DKK 150 million. We intend to start the share buyback program after the AGM and executed in full before the end of the financial year with an expectation of canceling the shares when timely needed. We do this, one, because we believe that this is the right thing to do under our dividend policy and with a continued strong balance sheet. And now because we have a negative net interest-bearing debt, we also feel it's timely to increase the cash distribution. That said, it still leaves plenty of room for us to still have high ambitions on our M&A agenda, something that we certainly still do despite a slightly higher cash distribution than previous years. With that, let me look more specifically now at the '25, '26 outlook. We are guiding for '25, '26, a growth of 10% to 13% organic growth for the year in alignment with our ZOOM AHEAD strategy. More specifically, we are guiding for endoscopy solutions, a growth of more than 15% in part with accelerated growth in respiratory and secondary by continued growth momentum in urology and GI and we have come off to a good start on both dimensions. For anesthesia and patient monitoring, we're expecting mid-single-digit growth which is in the higher end of our long-term guidance and again, an illustration, as Britt described earlier, of the continued solid momentum both on volume and on price increases within anesthesia and patient monitoring. With the growth composition of our '24, '25 financial year, we are expecting that the total growth will be more back-end loaded, and we are expecting with very high comparables for quarter 1 that we will have a lower growth in quarter 1, perhaps even just below double digit. But it doesn't change that our full year guidance for the year is 10% to 13%, and we feel very confident with the start we already see right now. Turning to EBIT margin. We are, for the full year, guiding 12% to 14%, including an impact -- expected impact from tariffs, negative impact of 2 percentage points which means that adjusted for this, we would have been guiding 14% to 16%, exactly on the path of our EBIT margin expansion. Why do we see this impact from tariffs? Well, we do because despite our ability to mitigate tariffs, there is a timing of implementation of between 6, 9 or 12 months, depending on the initiative. And that does mean that in particular, in the early part of '25, '26 financial year, we will see higher tariff costs that will gradually decline across the year. And we're expecting tariffs to have much lower impact when we turn forward towards '26, '27 and further on, something that I'll also come back to later. That also means that with slightly lower growth -- organic growth momentum for the start of the year and a higher tariff impact that our EBIT margin will also be back-end loaded for the financial year '25, '26. Last but not least, we are also in continuation with our ambitions from the ZOOM AHEAD strategy, guiding a cash conversion of around 40%, a continuation of our ability to drive efficient growth, make sure that we still invest in the business, while we manage our net working capital in an appropriate way. And with that, let me look a little bit further ahead and come back to some of the direction setting we also gave at our Capital Markets Day as part of ZOOM AHEAD on EBIT margin more explicitly. We are, as you see on the left side on the slide, in a good position to manage the tariff situation as we've increased our manufacturing footprint in North America with our manufacturing site in Noblesville in U.S. and Juarez in Mexico substantially during the past years, with particular expanding our production in Mexico. This leaves us good flexibility to manage that, more and more of our products sold in U.S. will be produced at these 2 sites, which are completely tariff exempted. Mexico included under the USMCA tariff agreement or trade agreement. That means that with further transfers towards our Mexico factory, which we are ramping up further, we do, as I explained just before, see negative impact from tariffs of around 2 percentage points for the financial year '25, '26. But we see this gradually decline and be very, very minimal when we get beyond '26, '27, which also means that despite a lower guidance for the next year at 12% to 14%, we are very confident still on our ability to deliver around 20% EBIT margin by '27, '28 as we continue the operational leverage on OpEx in particular, and we implement the mitigation actions on tariffs. And that brings me to my closure reminding us of the targets we communicated as part of ZOOM AHEAD. We feel super confident, very excited, as Britt said, on the journey ahead, confident on the potential for the high-growth in endoscopy solutions, particularly within respiratory and urology, but also in ENT and GI with a much more clear path for how to deliver on this and a very strong market demand for more and more single-use solutions. We see an increased potential also in anesthesia and patient monitoring with a strong customer loyalty, strong product portfolio and a continued solid volume development at a 3% to 5% growth, meaning that our full combined organic growth ambition CAGR for the period is 11% to 13%. In addition to the target on delivering approximately 20% EBIT margin by '27, '28, as also communicated at the ZOOM AHEAD, we also lifted the EBIT margin guidance to plus 20% by '29, '30 and across the period, an average of more than 40% cash conversion. We feel these extended and increased targets is an important part of our ZOOM AHEAD strategy and really underlines the great confidence and high excitement we feel about the future for Ambu and for single-use in particular. With that, I thank you for your attention, and I hand it to the operator for questions. Operator: [Operator Instructions] And the first question comes from Jesper Ingildsen from DNB Carnegie. Jesper Ingildsen: I have 3 questions. First, on respiratory, you see a sequential decline in growth despite the easy comparables you have from last year. Could you maybe just elaborate what makes you confident that you can see growth accelerate in the coming financial year? And then on the other endoscopy business, it sounds like it's -- the lower growth we saw here in Q4, is that related to urology and the competitive situation we've previously discussed at Q2? So I just wondered if you could elaborate a bit what caused the growth to drop to as low as 16% and essentially what needs to happen to get back on track to the 20% growth you previously talked about for that specific segment and whether that's still the ambition. And then lastly, I think you indicated that in terms of the top line growth, that would obviously be sort of like slightly below the double-digit growth in Q1 due to tough comparables and because you have a back-end loaded year. So I just wondered if you could also provide a bit more information on sort of like how to expect or think about the EBIT margin in Q1 as well, whether that could go below the 10% EBIT margin here in Q4, especially considering that the tariffs are probably going to weigh a bit more. Britt Jensen: Thank you, Jesper, for good questions. Let me comment on the first 2 on growth, and then I'll hand over to Henrik to also comment on the Q1 and your EBIT question. So first, on respiratory, I think if we take a step back, we have had discussions and questions over the last 1 to 2 years, whether this was a segment where we would see double-digit growth. And I think this is what we feel very confident around. And also, as Henrik also commented on, when we look ahead, we actually think that we are quite solid in the double-digit range. Having said that, we do see fluctuations and now we are landing on 11.6% for the year, but we do also -- we do have quarter-over-quarter some specific orders that are timed and that where we are not able to fully control or we deliver, said in other words, we deliver when the customers have the demand. So this is why we went slightly below on the 8.8%. So we -- when we look into the pipeline that we have of orders and into the year, we feel quite confident around the solid -- the strong momentum and the solid double-digit growth that, that will continue. We are entering now not only the flu season, but I think with the portfolio that we have of continued strong aScope 5 Broncho sales combined with the aScope 4 and then with our SureSight solution, having received a very strong feedback and initial positive -- being positive received by the customers, we actually do look at a segment where we see continued very solid growth for the coming -- for this year and the years after. So this is how we look at this segment. Then the other segment, which is, of course, a little more difficult to look at the number because it is, I mean, GI, which is growing nicely, but from a low base. And then we have urology being the biggest part of that segment and then ENT. I think when we look at urology, we -- I mean, we still -- with the new solutions that we have delivered where our ureteroscope, as an example, is off to a good start. But given the nature of these procedures, this is something that is -- that has slightly longer sales cycles, as I mentioned, which we often see. But overall, when we look at this segment, I mean, we do feel quite comfortable around the -- being around the 20% range, which we have also seen in the previous quarter, which is why I commented on ENT specific because that's a segment where we have basically our rhinolaryngoscope, which has been on the market for 7 years now that is continuing to drive the growth in this segment. And while we expect that growth to continue, we see a slowing down of that growth, which basically, in particular, in Q4 impacted the total growth in this area quite a lot. So this is also why we wanted to single that out to be transparent and also to make sure that we aligned around the prospect for urology and the current performance. So overall, we do think that this is a segment where we continue to see good growth. And the 2 segments combined, we feel quite comfortable that we should deliver above 15% total endoscopy growth in the year that we have just started. And as Henrik said, we are off to a good start with October. So we don't have concerns that this will not be the case. Henrik Bender: Exactly. And building on that on growth -- on your question on growth for Q1 and my indication on where we expect to land and related to that EBIT margin. On growth, I just want to particularly underline that if you look at the quarter 1 for last year, we had a solid high endoscopy growth, but an exceptionally high A&PM growth. So in terms of the composition by the businesses, it's particularly in A&PM, where you will likely see very low growth because obviously, there, you're up against exceptionally high comparables. If you then translate that into EBIT margin, as I also said on my guidance, therefore, we will see lower growth. We will likely also see higher tariffs with what we are observing right now with the current tariff regimes. And therefore, those 2 combined means that we will also see a lower EBIT margin. I'm not going to guide exactly on what number that is, but it's mainly to say, if you look at our guidance and if you look at how the EBIT margin will look quarter 1 across quarter 2, 3 and 4, then quarter 1 will likely be the lowest quarter of the 4. Operator: And the next question comes from Thyra Lee from UBS. Thyra Lee: I've got 3, if I could, please. So the first is, I'm just wondering what is driving that delta to the lower end on that 10% to 13% revenue guide versus that midterm guide of 11% to 13% that you provided at the CMD last month? It would be really useful if you could speak to the moving parts that result in the lower end here. Really, I'm just wondering if there's anything new or different that we missed since we last heard from you. And then second question is just thinking about the run rate into Q1. You gave some soft guidance, but are you expecting any margin improvement in Q1 from the 10% in Q4 that you gave this quarter? And then lastly, obviously, you're a growth story, but I'll round up with margins. Could you just confirm that the 12% to 14% on the adjusted EBIT margin includes all possible mitigating actions that you can take? So aside from shifting production to Mexico, what other actions are being taken? And you gave us a good chart in that -- in the presentation. Could you just confirm that the impact of tariffs pretty much goes to 0 over the course of 3 years and that you still feel good about that kind of 20% margin by '28? Britt Jensen: Thank you for good questions. Let me take the first one, and then I'll let you, Henrik, comment on the second and third. So basically, as you rightly say, we guided on our long-term guidance of 11% to 13% when we look at -- as a CAGR for the coming 5 years. And we feel quite comfortable that we can deliver on that. Then you can say has not -- why are we then guiding 10% to 13%? I think I want to reemphasize and make it very clear. There's nothing new that makes us see the market, the world, the potential anyway different than we saw around 1 month ago. But again, this is a 5-year guidance, and we believe our guidance of 10% to 13% is a prudent guidance and that is a guidance that is even should we land on the lower end of this, which is not any speculation that I have right now, but then we should still be very well aligned to deliver on our long-term guidance. So we do feel still quite optimistic and quite confident around the potential that we see and also that our guidance is well aligned with our plans for 11% to 13% growth -- CAGR long term. Henrik Bender: And with that, to your margin questions, Thyra, also thank you for those. If we start with the run rate EBIT margin from now Q4 going into Q1 '25, '26, I think the clear answer is, yes, we see actually continued strong margin expansion excluding FX and tariff effects. And I think that is the big caveat we have to give today. I think learning from now Q3 and Q4, actually, the biggest negative impact on EBIT margin has been FX. And therefore, exactly where that Q1 will land depends on exactly those 2 dimensions, tariff and FX. With what we see right now, we feel very confident that taking those aside, we are on a continued margin expansion plan, both on gross margin and on OpEx ratio. If you then look at a 3-year period and you asked, will the tariff go pretty much to 0 by '24 -- '27, '28? I think what I want to remind us all that I think the days where tariffs disappear completely are likely not just around the corner. So we will have a smaller margin -- marginal impact from tariffs, but it will be very, very small. And that is really why I would say not that tariffs will disappear, but that we will manage them and stay within the long-term guidance we gave already back in ZOOM IN and the one we reiterated now with ZOOM AHEAD being by '27, '28, our EBIT margin target remains around 20%, subject to certain changes if there are opportunities along the way. That still stands, and we don't see the current tariff regime in the world impacting that because we can mitigate that between now and '27, '28. Thyra Lee: Okay. Very clear. And if I could -- you just missed that, aside from shifting the production to Mexico, are there any other mitigating factors that are being taken at the moment? Henrik Bender: So happy to cover that also. Thank you. I think besides moving production, which is the bigger impact, of course, we're looking at pricing mechanisms for certain products. We are looking at what are other mitigating actions we can take. The reason why we point out the production transfer is because that is by far the single biggest initiative that will impact and mitigate the tariff cost. Britt Jensen: Yes. And I think we cannot be fully transparent on all the different things that we are looking at. But we have -- we are well in progress in implementing a number of things that should also put us in a good position in relation to tariffs. Operator: The next question comes from Tobias Berg Nissen from Danske Bank. Tobias Nissen: I have a couple of questions, if I may. Just so you just concluded a solid CMD here a month ago, but it will come in a little bit softer here in Q4 and also with the EBIT margin at the low end of the guidance here coming in at least 13%. This can suggest you kind of have limited visibility here in the short term also with these more lumpy sales and with FX and tariff headwind higher also than what we had expected. Why should we trust you when you come out with this reiterated midterm guidance, but also your longer-term guidance on the margins? That would be my first question. And then just looking at tariffs and FX, it seems like the market is at least like not that good at calculating this. How should we model this over the next coming quarters? I hear you saying that the highest impact here in H1, but how do you see it also because you have like DKK 50 million here in Q4, 30 million FX, DKK 20 million from tariffs, but also like DKK 30 million in Q3, that's only FX, right? So if you can put some more clarity on that, that could help the modeling, would be great. And also, if you could provide more details on the time line and measures you're taking to mitigate some of these tariff costs, especially with the ramp of the Mexico's plant. And if you have baked in any like one-off like cost items related to this in the guidance for next year. I know you're not guiding any special items, but any color could be great. And then just on the ENT side, another follow-up. The slower growth, is this related to higher competition? I know you mentioned [indiscernible], that the product is now 7 years old, and I know you have a HD version in your pipeline. Is the HD launch what is needed to drive this up to prior growth rates? Britt Jensen: Yes. Thank you, Tobias. And I'll comment on your last question and let Henrik handle 1 and 2. But maybe also just a small comment. So I mean, clearly, as you say, we -- I mean, we were very confident in our future growth and in our strategy when we were at the Capital Markets Day. And I have to say we -- I mean, at that time, we obviously also knew and the Q4 results coming in around that time. And we were also actually very confident that these were in line with our own expectations for the year. And in terms of also some of the choices that we had made when it came to continuing to invest in growth as well. So overall, we -- I mean, we are equally confident when we look ahead at the great potential and our ability to also deliver solid growth. So I just want to make that super clear. Then in terms of ENT, I think you should look at this as -- I mean, as an area where there's actually still limited competition. And even we have a solution that is 7 years old. So it's not built on the latest technology that we use in some of the other solutions that will come with our next-generation rhinolaryngoscope. But our effort in terms of having, in many countries, some of the same commercial resources focusing on urology and ENT basically means that there's -- and in line with our strategy that we have launched with a stronger focus on urology, I think it's fair to assume that it's probably more driven and again, not to read too much into a softer quarter because we do see the fluctuations. But it's more to do with our internal commercial focus than competition because we do see still very limited competition in the ENT space. And we're also still quite confident around the growth that we see in this segment. But we are looking also at how is it we balance our resources in -- across the different segments. And we also do, again, see some structural or temporary fluctuations that drive this, such as timing of orders we talk about, which also is why we look more at the underlying trend and the details below that in terms of new customers and the existing customers buying more. So I think we remain confident about this segment. But again, that's where we are. Henrik Bender: Exactly. And then going back to your questions on CMD linked to now our quarter 4 and FX and tariff models. I think I will start out by saying, Tobias, 2 things. So why trust us? Well, we would say what we communicated at the CMD is in line with what we're also communicating today. And then you can argue, is it softer or as expected, as Britt also said, for Q4? I think we've been quite clear on both how FX impacted us. We spent quite a bit of time on that in Q3 and also that tariffs will have a negative impact, though temporary and then go away. And this is exactly what we are reiterating today. So I think that is my main argument that the story has not changed at all. And actually, if you look at the graph we also illustrated, it's exactly the same pathway. Obviously, at the CMD, we did not discuss guidance for '25, '26 because we had not closed Q4, and it was not the time to do that. I think secondly, of course, we always take feedback for how we can be more explicit. And one of the feedbacks we have taken from the community on the call here now, for example, is to be more explicit on FX and tariffs. And therefore, you will see across the quarters of the past financial year, which is a practice we will continue. We've been much more explicit about quantifying the FX impact and the tariff impact now also here with quarter 4 in a DKK million amount because that enables us to have this discussion on where are we actually with and without FX and tariffs. The last thing I will say on that is that -- that I think on tariff is obviously something that moves by the day but now is starting to fall into a slightly more stable regime, even though I think the past now 8, 9 months have shown stability is not exactly how to describe the situation. I think on FX, I would just call out again that, that is the biggest single impact across the last 2 quarters. And I think you all on the call know how much the U.S. dollar DKK has fluctuated. And remind you, if you go back a year ago versus today, it is a quite significant depreciation that very few, including all of the banks on the call, were not forecasting. So I think there, we are at the mercy of the FX market like you. And we follow the market. We have a natural hedge. But as part of -- as we communicated in Q4, there is a time lag in between, it impacts our top line and our gross margin and therefore, EBIT margin and when you actually see the counter offsetting effect coming, particularly through COGS with our international manufacturing footprint. Specifically, therefore, how should you model? And are there any specific one-offs you should think about for '25, '26? On FX, I'll put that aside. I mean, that follows the answer I just gave. On tariffs, we are not expecting any specific one-offs related to this. I think as a practice, we operate and manage the mitigation actions within the running business, partly because we were already on the journey of ramping up in Mexico and partly because we think that is the right thing to do. So unlike other companies, we will not start reporting bigger one-offs because we don't think that is relevant given it is a temporary situation. I think secondly, in terms of how you then model, I think my best input would be to now with the added specificity that we are giving in the quarterly updates with a more explicit FX, DKK million and tariff amount. That with that, hopefully, we can better adapt that also into your models in the right way because clearly, there was a difference here on Q4 with what was in consensus and where we landed, particularly on these external factors. Operator: And the next question comes from Martin Brenoe from Nordea. Martin Brenoe: Highly appreciate also that you are giving this detailed view, and you doubled down on your CMD strategy, much appreciated. I guess where the share price is today is reflecting maybe that we've seen management being bullish and confident on Ambu before and have also seen the analysis of how big the market is. And if you just take some of that market and penetrate that, then everything is going to be good. So maybe I think to provide a bit of confidence to the outsiders here, how do you foresee Ambu accelerate back if you look at it from a more bottom-up perspective? So you say ENT will remain a drag most likely. It will not be something that will reaccelerate. So can you maybe be a bit more clear on which drivers you see for the growth from a bottom-up perspective? And I'll let you decide how to do that. That will be the first question from my side. Britt Jensen: Yes. Thank you, Martin, and actually a very good and relevant question. Let me answer that, and then, Henrik, you can supplement. So if we take -- I mean, you're right that if we look at the market, I mean, it's huge, and we can say that out of the total market, it's only 3% to 4% penetrated. When we also look at -- I mean, the last many years, we were the first to enter this market with a single-use endoscope. And we have basically, I mean, as market leaders built this market. And then we have seen some competition come in, in the last couple of years. But what I will say is I think there's a couple of things that makes me very -- I mean, very confident. I mean one thing is that it does take time to build a market. It does take time to change habits in -- among physicians, in particular, in some areas more than others. And I do think if we look at it and maybe start with -- or if we look at it overall, you could say, I feel much more confident and I actually do feel that we are much more derisked right now compared to when I stood here 2, 3 years ago. Because back then and for many years, it was pulmonology, as we call it at the time, that was basically driving the growth where right now, we stand on, you could say, essentially 4 solid legs where we have actually proven that we have solutions that meet the customer needs, not only in respiratory, where we have expanded the portfolio, but also in urology, ENT and GI, where we are today very niche focused mainly with our gastroscope. So that actually makes me confident. And in particular, then looking at the potential and if we start with respiratory, we basically went in and delivered on the need of very simple procedures. And then we gradually expanded and with our aScope 5 Broncho also we were able to meet the needs of the very advanced procedures. And some of this has to do with the customers getting used to our solutions, but a lot of it also has to do with our ability to innovate and drive superior solutions also at an affordable price. And that is where our innovation effort continues and our scale continues to play a key role, not least also because technology is playing with us in making higher quality image cameras, sensors, as an example, available at much lower cost. So that basically means that we are also able to meet the needs at the customers at prices that are attractive to them. So that's where when we look at the momentum that we see in respiratory with our bronchoscope that -- I mean -- and the continued expansion into more and more complex procedures, continuing the trajectory that we see now in the markets where we are established, mainly in U.S. and Europe, that I'm confident that we are actually on to this momentum that is continuing. And the fact that customers even themselves says that we can use it for 70% of the procedures makes me actually quite confident because normally, customers will say a lower number than they actually end up using. Then if we talk about urology, I mean, we have been able to -- in cystoscopy, which is very much around bladder cancer screenings, we have been able to build a solid presence with our cystoscopes that basically with our first generation works for what they need. And this is then where we have also leveraged technology to bring a high-definition scope out expanding with the PCNL indication. So that can also be used in the field of kidney stone management. And then we have entered the whole kidney stone management space with our ureteroscope, which is a market where, as you know well, it's the first time, we are not the first to enter that market because there is actually a demand for single-use scopes coming from a slightly different angle in terms of the reusable breaking a lot, and they spend a lot of cost on repairing. And here, we have a solid scope that can then fit into our portfolio and some of the development that we make in innovation on the platform, on the software with -- latest EndoIntelligence actually helps us there. So we do also in urology, with our expanded portfolio, see a good momentum. And this is also why with our strategy, those 2 areas are the key ones. And we are also looking at how is it then we can consolidate even further and potentially add more solutions that helps address some of the needs that we are solving, which will come on top. And then ENT, it's a little more slim. It's still an area that -- and that's in line with our strategy where we see that we can continue to grow and meet more needs, and that's what we will do there. And then combined, you can say as more of the treatment is moving outside hospitals, that's also where -- I mean, the need for solutions like ours is just increasing. So that's really why we are quite confident that we have gotten to a meaningful penetration where there is acceptance that this is, I mean, a solid standard of care. So that's really why we are looking at the potential with great confidence. And then on the side, and I will not spend too much time on this, but just to say if we then take GI, it's very clear, and I've been out with a lot of GI physicians that a lot of procedures are done outside the GI suite. There's a lot of the similar needs that we are actually solving in the other segments. We don't have right now the solutions at an affordable price to be able to go large scale into this segment, but the technology is there to my earlier point. So this is also an area where we should, of course, be the ones entering this. And that's something that comes on top of some of what we talk about here at a completely different magnitude that we are not getting carried away here, but we are solid making progress and making sure that we also don't risk the company or don't risk too much, but still also deliver on our potential in a step-by-step approach. Henrik Bender: So if I can round off, and I know we already gave a lot of details, Martin. I would say, ironically, on your question, we stand here more confident than ever based on 2 main things: the feedback from customers and the fact that what is needed to deliver, on what Britt took us through now, is fully within, to a very, very large extent, our own control. So I think our advice back would probably be to say Q4 might have been a slightly different composition than you expected. If you look at the guidance for the year to come, it's fully in line with what we communicated at Capital Markets Day and the potential we see in all of the areas for all of the products with the feedback from the customers is exactly the same. Martin Brenoe: This sounds really good. I have 2 quick follow-up. One is I love good feedback. I also appreciate it myself. But unfortunately, you cannot put it on the P&L. So wondering when we should start to see that the good feedback starts to translate into sales. What's -- and you don't have to say what you expect for this for your products in terms of SureSight and Uretero, but maybe in terms of what the historical run rate has been for previous launches. And then just finally on margin, it's going to be a bit back -- or back-end loaded year on the margin side as well. For the past 7 years, the margin has been the softest actually in Q4. So just wondering what gives you confidence in Q4, the latter part of the year being the strongest margin all of a sudden. That would also be nice. Britt Jensen: And I'll briefly -- and I'll make it brief on the revenue. I think we have talked -- and I think, again, we appreciate feedback to Henrik's point, but we have tried to also explain our -- the whole selling process and the sales cycles. And when we bring new solutions out, how we also -- how we do the evaluations before the sale. But maybe I'll just jump to the conclusion and say, as we have seen with previous product launches where we have put an effort behind like the aScope 5 Broncho, I mean, this has come gradually. And it's -- I mean, when you build the momentum and get the solutions in, we will see a steady strong growth. And then that growth is building up and coming for many years ahead. So we are, of course, continuing this year on our new solutions, being SureSight, being our ureteroscope, a continued good momentum. And yes, and I think that's as specific as I can be. But I think it is promising for the coming years that we'll see that gradual improvement. Henrik Bender: And on margin, Martin, I think 2 things. One, you're right on the historical pattern, particularly, I would say, for the last 3, 4 years. The main answer is the -- are the external factors, particularly tariffs, which will gradually decline across the quarters with our implementation of the mitigation actions. So that is by far the biggest driver of why we feel confident that the EBIT margin will increase across the year. The second thing is more timing of our internal investments where we've had now for the couple of -- past couple of years, a certain timing where a lot of -- majority of those investments often end up at the end of the financial year. The composition will be a little bit different this year. So it's really things that are right now relatively clear line of sight to how we think it will impact our P&L. Operator: And the next question comes from Anchal Verma from JPMorgan. Anchal Verma: I have 3, please. Just again, touching on the phasing for next year. You have pointed to back-end loaded here, and we've kind of discussed that. But just trying to understand, is it all down to comps at the top line? Is that the key driver of the back-end loaded year? And on margins, you've touched -- similarly, you touched on FX, tariffs and some investments being more front-end loaded. Are these key elements that we need to be aware of in terms of phasing? And then the second one -- and apologies to fish a bit more on the long-term targets. On the margin guide of 22% by 2028, which you have reiterated this morning, how should we think of that bridge from 12% to 14%, let's assume 14% that from this year to 20% in the next 2 years? And what will actually be the drivers and that's despite the tariffs and FX headwinds, which we expect to continue? And then the last one is on FX. Are you able to quantify the FX impact assumption we should assume for the top line and margins for this year if current rates continue? Maybe putting it another way, from our math, we get around a low single-digit headwind to sales and margins. Is that fair? Henrik Bender: I couldn't exactly hear what you said, the last part of the question, but I think I got the gist of it, Anchal. So let me try to go through it from your second question first and then phasing and then FX. So I think I just want to reiterate on long term, as I heard your question on the impact of tariffs and the, you can say, journey towards the particular around 20% by '27, '28. I think in all honesty, back to the point that tariff costs are temporary with the mitigation plans that we're implementing. The more relevant number to look at in terms of the EBIT margin expansion for the year we're now entering '25, '26 is actually 14% to 16% because that is excluding the bigger impact from tariffs. And if you use that number, we will be exactly on the line also of consensus with what the EBIT margin expansion plan would have been without the current tariff situation. And with us being able to mitigate them, as I answered earlier in my presentation, we really see that the underlying operational initiatives we are taking, they are bearing fruit, and we're exactly on that journey still that we communicated at the CMD and a year ago in a similar meeting like this. So that is why we feel confident that is really because if you take the tariffs aside, we are really exactly on that journey. And that is also why we've been so explicit in our communication around it. If you then look at the phasing for the financial year that we're now in, revenue, it is mainly/purely comparables that drives this back-end loaded factor. As I said before, we see a solid start of the year and on endoscopy, the growing factors, as Britt said earlier, there are still effects from new products. Obviously, they are also building across the year, which means that we will see an uptick across the year, we expect at least from the impact from these new products, even though still smaller, it is growing. The second thing is really on A&PM. If you look at how A&PM grew quarter-by-quarter in '24, '25 and you look particularly how much A&PM grew in quarter 1 on '24, '25, this is where you see particularly high comp challenge that we're up against now with our quarter 1 sales here for '25, '26. And that brings me lastly to FX. I think now for the last 2 quarters, we've been more or less explicit on exactly the DKK million impact from FX. Obviously, we are impacted by a mix of the U.S. dollar depreciation and then partly some of our currencies in which we produce and source, the Chinese renminbi, the ringgit in Malaysia and the Mexican pesos, how they correlate with the U.S. dollar. As we described in the quarter 3, there is a time lag effect whereby when we are impacted by top line immediately and when we then see the cost of the production then going down typically of up to 3 months. And that's really also what we're seeing. So to answer the question, I believe you asked then what have we assumed for '25, '26. As you see in our outlook assumptions, you see there also what exactly are the FX assumptions we've made in terms of what will be the average FX rate across the financial year '25, '26. And these are what substantiate the guidance of the 12% to 14% EBIT margin. Anchal Verma: That's very helpful. Could we perhaps -- just on the long-term targets, could there be a scenario where you could amend your long-term targets on more of an underlying basis? I think that, yes, we'll get to the 20% margin by 2028, but this is on an underlying basis, excluding the effects of tariffs and FX. Could that be a potential scenario where we get to? Henrik Bender: I don't see that. We guide EBIT margin, including FX. And fundamentally, as I said before, even though tariff will not fully go to 0 back to one of the earlier questions, we believe that with the size of the company we are becoming, the impact that will still be left is something we can manage and still deliver on the target. Operator: The next question comes from Yiwei Zhou from SEB. Yiwei Zhou: I have 2 left here. Firstly, a question on the growth for the other endoscopy solutions. I mean the quarterly growth rates are getting more lumpy if you mean that the growth should accelerate, and you still expect to deliver the 20% -- around 20% growth. I was wondering in your guidance, was there any large order pipeline embedded here in your expectation? Britt Jensen: Yes. So I think the quarter -- I mean, so what we guide on the quarter. So the long-term guidance that we have is that we expect our endoscopy solutions to grow between 15% and 20%. And what we are saying specifically for this year is over 15%. So that's -- I mean, that's the range that we see. So just to specify -- you talked specifically the 20% for the other segment. Sorry. Sorry, Yiwei. Yes. So I think we -- I mean, we overall, again, believe that we have continued solid momentum. We don't guide specifically on this segment. I should just say we guide on the overall. But I think -- I mean -- and when we guide on the overall, we feel quite comfortable around the 15-plus percent. And then I also do believe, and that's also why we wanted to single this out. I mean, urology being the big -- I mean, we see very solid continuing growth. It's the biggest part of this segment, and it's also growing at a good pace. So overall, we feel quite confident. I will not comment again on the specific 20%, but we do feel confident that we should continue to see solid growth in the -- in this everything but respiratory. And then when we combine both of them that, that should still leave us with solid endoscopy growth as we look ahead. Yiwei Zhou: Yes. But my question was what is your visibility here for '25, '26? I was wondering if you have any large order pipeline embedded in your expectation. Britt Jensen: No. I think in this segment, I mean, we have a lot of customers. And then again, we do have large customers, NHS being one where we don't see these big large orders coming in. That is more spread out, of course, still big customers having bigger orders, but we don't see any specific big order coming in. This is basically driven by solid underlying growth in terms of customers transitioning from reusable to single-use and being at very different adoption levels, some at 100% specifically on the cystoscope and others at lower levels that are then gradually increasing. So the potential we have is coming from continuing, obviously, bringing new customers on board, but also continuing to increase the penetration of single-use of our scopes with existing customers. Henrik Bender: And to build on that, the confidence you said here is based on when we look at the pattern of new customers converted just in the last few quarters and the expectations of what the running volume should be on those, we feel very confident. And that's also what we see now in the early start of this financial year that, that continued conversion, that Britt is talking about, will drive us towards the growth levels that we are indicating. So we are not dependent on any major single bulky orders to deliver on this guidance. Yiwei Zhou: Okay. That was clear. And my second question, it has actually been asked but I want to try it again. I'm still a bit surprised that you see 1% downside to your long-term growth target this year. I mean it was only 1 month ago, you said 11% to 13%. Now it's 10% to 13% for this year. I mean if I understand correctly, this will be the year where you see a full year sales contribution from the new products like ureteroscope or video laryngoscope, where the growth acceleration should be higher in the beginning. But now you are talking about 1% downside. Could you elaborate here what is the risk you're seeing for this year? Britt Jensen: Yes. So I mean, I think -- and thank you also for -- I mean, for how you put it because I think the way we looked at this was, I mean, that, again, we are fully behind. And when we set the long-term target of 11% to 13% CAGR over 5 years, we actually do feel, I mean, very comfortable around that. And then when we are to look at this year and what we have in the pipeline, we are also actually quite confident around the year that we have and what we are able to deliver. But we do see a 3 percentage point margin in the world that we live in where there's a lot of things happening. So that's basically what is driving us towards what we believe is the right guidance for this year, which is 10% to 13% on an overall level. But it doesn't -- it's not -- as I said before, it's not that we are more cautious than we were a month ago and that we -- or that we see anything that has changed. And I -- so this is, I mean, in full honesty and transparency how we have thought about it as we laid out our guidance for next year of 10% to 13%. Operator: Ladies and gentlemen, this was the last question. I would now like to turn the conference back over to Britt Meelby Jensen for any closing remarks. Britt Jensen: Thank you very much, and thanks to everyone for good questions on this call today. We look forward to our continued interactions, and I wish everyone a great day. Thank you.
Operator: Ladies and gentlemen, thank you for joining us, and welcome to the Unity Technologies Q3 Earnings Call. [Operator Instructions] I will now hand the conference over to Alex Giaimo, Head of Investor Relations. Alex, please go ahead. Alex Giaimo: Thank you, Nicole. Good morning, everyone. Welcome to Unity's third quarter 2025 earnings call. Today, I'm pleased to be joined by our CEO, Matt Bromberg, and our CFO, Jarrod Yahes. Before we begin, I would note that today's discussion contains forward-looking statements, including statements about goals, business outlook, industry trends, expectations for future financial performance and similar items, all of which are subject to risks, uncertainties and assumptions. You can find more information about these risks in the Risk Factors section of our filings at sec.gov. Actual results may differ, and we take no obligation to revise or update any forward-looking statements. Finally, during today's meeting, we will discuss non-GAAP financial measures. These non-GAAP financial measures are in addition to and not a substitute for or superior to financial performance prepared in accordance with GAAP. A full reconciliation of GAAP to non-GAAP is available in our press release and on the sec.gov website. And with that, I'll hand it over to Matt. Matthew Bromberg: Thanks, Alex, and good morning. On behalf of everyone at Unity from across the globe, I'd like to thank each of you for joining us today. On our last call, we posited that the second quarter of 2025 would ultimately be seen as an inflection point in Unity's trajectory, the moment where it became clear that the company was poised to deliver sustainable long-term growth in the years ahead. Today, with the third quarter now behind us, it's clear that's precisely what was happening. In Q3, Unity showed strength across both our Grow and Create segments, driving results that once again meaningfully exceeded both our guidance and consensus for both revenue and adjusted EBITDA, including an 11% quarter-over-quarter lift in our Grow segment, driven by Vector AI. Progress in the Create segment has been equally exciting. After backing out the impact of nonstrategic revenue, our Create subscription software business increased 13% year-over-year, reflecting the fundamental improvements we've made in both the quality of our product and the connection we have with our customers. But this inflection point we're referencing is about so much more than just the financial results we're reporting because in the new Unity, we're not choosing between execution and vision. We need to achieve both. The video game industry has already overtaken Hollywood, music and linear video combined in scale. We believe social media and short-form video are the next targets. As consumers increasingly demand that their entertainment be interactive in nature and creators search relentlessly for ways to increase engagement and time spent, all roads lead to gaming as the solution. Unity has always been about democratizing access to technology. We aim to give every software developer the tools and the platform to become a game developer. That's in our DNA. Advancements in artificial intelligence will enable us to enhance and extend this mission. Soon Unity Software will empower any creator, not just any software developer, to build interactive experiences. We believe this new form of democratization will not only spark an unprecedented explosion of content creation and more time spent in games, it will also make user acquisition and personalized discovery through Unity Vector more vital than ever. Players will have more choices about how and where to play than at any other point in history with Unity uniquely positioned at the intersection of the creation, discovery and monetization of those games, all powered by Vector AI. For the most talented segment of developers, this increase in the efficiency of content creation won't just be about making more content; it will mean making more time, more time to build something truly different and great as the basic game elements increasingly become just table stakes. We believe the real metric for the skilled game developers of the future won't be time to market, it will be time to innovation. How long did it take not just to complete the basic requirements, but to ship something that changes the nature of the art. And Unity will continue to be the bridge between that creativity and the players who turn it into the next global phenomenon. For now, let's dive a little more deeply into some of the product improvements we delivered in the quarter. During Q3, we continued to make rapid fundamental advancements in Unity Vector, delivering stronger returns for our customers. These performance gains are broad-based, spanning client size, geography, operating system and genre. As we continue to ingest higher-quality signals and refine our models, Vector will keep learning, driving sustainable, healthy revenue growth well into the future. We expect these efforts to be further enhanced by the highly differentiated behavioral data available through our runtime, which should begin having a financial impact in 2026. In August, we rolled out the Developer Data Framework, a unified system featuring dashboards that allow our customers to control how data is collected, shared and used in the production and operation of the interactive applications they build with Unity. This framework is designed to enable developers to unlock the power of the runtime to better diagnose problems and to optimize the experiences they offer their players. We are pleased to report that over 90% of new projects built with Unity 6.2 are now utilizing the new Developer Data Framework. In October, we announced our expansion into cross-platform commerce with Unity IAP, enabling developers to manage their entire global commerce and catalog from a single dashboard within Unity. The scale of this opportunity is meaningful. Each year, more than $120 billion of in-app purchases are made in mobile gaming alone. The majority of these purchases are taking place in a made with Unity game. As the gaming ecosystem continues to open beyond the traditional app stores, providing developers with a central Unity-native commerce capability is a big win for our customers in the ecosystem. Alongside our announced partnership with Stripe, we also recently entered into a new partnership with Coda and are in active discussions with several other payment providers. With the Unity Engine and runtime at the core and our industry-leading distribution, we are uniquely positioned to help developers capture value from the generational platform shifts that are taking place. And we'll help them drive success through accessible, open, easily integrated commerce solutions. That's just the first step for us. Over time, you'll see us take every opportunity we can to provide content creators with the trusted, open, developer-friendly platform they need to develop, deploy and grow interactive entertainment. The increased velocity of our product release cadence is occurring against the backdrop of steadily improved quality, stability and performance of the Unity engine. Since the launch of Unity 6, customer reported issues are 22% less frequent. And with enhanced quality and features, we're seeing significant continued momentum and adoption. Unity 6 has now registered over 9.4 million downloads, a 42% increase from just last quarter. Developers of all sizes are using Unity to create many of the most popular games in the industry. In the last few months, we've seen a meaningful increase in high-quality Unity games hitting the charts from developers of previously modest scale. PEAK, a co-op climbing adventure game built by just a handful of developers in a few weeks, has sold well over 10 million copies worldwide since its launch in June. Megabonk just became one of the most played games on Steam of all time. Schedule I, a made with Unity game created by a single incredibly talented developer is one of the highest revenue-generating games over the last 6 months. Kenny Son and friends' BALL x PIT sold over 300,000 copies in its first 5 days, all made with Unity, all made with very modest-sized teams. This is the dream that Unity lives to serve. And each week, we're seeing new breakout hits like these. This is not an outlier. It's a trend. Before passing the mic to Jarrod, I do want to take a moment to highlight the advancements we're making with respect to emerging technologies like extended and augmented reality. We recently announced day 1 support for Android XR in close collaboration with Google and Samsung. This initiative enables teams across gaming, education, entertainment and enterprise to quickly build new games and apps or port existing Unity apps to the Android XR ecosystem. With shipments of AR and VR headsets expected to grow 39% in 2025, this is an area where we're fully leaning in and will ensure that Unity has the capabilities in place to support robust industry growth. And finally, we're incredibly excited to connect with thousands of creators and industry professionals at our upcoming user conference, which we call Unite, just 2 weeks from now in Barcelona. Unite offers us an opportunity to celebrate and showcase the incredible talent and success of Unity creators as well as to highlight some of the exciting new Unity products that are going to be pivotal to our vision and the future of gaming. Thank you again for your time and attention this morning, as always. With that, I'll pass over to Jarrod for an overview of our financial performance. Jarrod? Jarrod Yahes: Thanks, Matt, and good morning, everyone. The inflection in Unity's business we spoke about last quarter is rapidly translating into faster revenue growth and improved profitability. In the third quarter itself, we added $30 million of high-margin incremental Grow revenue on a sequential basis, resulting in $19 million of additional adjusted EBITDA, well in excess of the top end of our guidance range. Grow revenue in the third quarter was $318 million, up 11% sequentially and up 6% year-over-year. Revenue upside compared to our guidance was driven by the exceptional performance of Vector, which drove further acceleration of the Unity ad network even when compared to the rapid sequential growth we saw last quarter. We are proud of the turnaround in our Grow business, sparked by the launch of Unity Vector, and we're confident that this business will continue to grow strongly into the future. In Create, revenue was $152 million, up 3% year-over-year. As a reminder, we lapped $12 million in nonstrategic Create revenue from the third quarter of 2024 and $12 million of revenue from a large customer win recorded in the second quarter of 2025. Excluding the impact of nonstrategic revenue, our Create business grew 13% year-over-year, powered by strength in our subscription business. Growth was driven by ARPU improvements from ongoing price increases and continued momentum in China, which has been an extremely bright spot for us in 2025. Turning from revenue to non-GAAP profitability. Adjusted EBITDA for the quarter was $109 million, representing 23% margins, an improvement of 200 basis points year-over-year and versus the second quarter as both sales and marketing and G&A costs came down as a percentage of revenues. As a team, we're executing steadily around operating expense reduction opportunities, maintaining our cost discipline and increasingly leveraging automation and AI. Over a multiyear time horizon, we believe Unity has the potential for dramatically higher margins driven by extremely high flow-through contribution margins, combined with operating leverage resulting from faster revenue growth. Unity had record free cash flow in the third quarter of $151 million, representing an improvement of $36 million year-over-year. This represents our second straight quarter of record free cash flow, showcasing the success of the restructuring efforts we have taken over the last 2 years. While there are always quarterly movements due to working capital, investors should expect Unity to continue to convert an extremely high percentage of our adjusted EBITDA to free cash flow, highlighting the cash flow generative nature of our business. Our balance sheet remains strong with cash of $1.9 billion and convertible debt of $2.2 billion. With that, I'd now like to turn to guidance for the fourth quarter. We're expecting total fourth quarter revenues of $480 million to $490 million and adjusted EBITDA of $110 million to $115 million. In Grow, we're forecasting mid-single-digit sequential revenue growth. We expect Vector to continue to drive strong performance while also experiencing benefits from work we've done to leverage Vector in other Grow products. In Create, we're forecasting steady revenue growth. Excluding the impact of nonstrategic revenue, our guidance assumes high single-digit year-over-year revenue growth driven by continued strength in our subscription business. We expect adjusted EBITDA margins to remain stable in the fourth quarter. While revenue growth remains strong and flow-through margins highly attractive, we have some known expense items in the fourth quarter, including Unite, our global user conference. We are also seeing outperformance in Create bookings, resulting in end-of-year accelerators for Unity's sales force. With that, I'd like to thank you for joining us on Unity's third quarter 2025 conference call. Let me now turn the call over to Alex so that we can take your questions. Alex Giaimo: Thanks, Jarrod. Nicole, I'll hand it to you for questions. Operator: [Operator Instructions] Your first question comes from the line of Matthew Cost with Morgan Stanley. Matthew Cost: In terms of the faster revenue growth for Grow in the second quarter, I was wondering if you could break down a little bit more what the drivers of that were. Is this a function of Vector improving its ad targeting capabilities for people who are already using it? Is it about rolling Vector out to more customers? Were there new customers coming into your ad business entirely? I guess help us understand the moving pieces for that acceleration in Grow in the second quarter -- excuse me, in the third quarter. And then I do have one follow-up as well. Matthew Bromberg: Matt, thanks for the question. Vector AI is proving to be scalable and highly performant. When compared to our prior offerings, what's really important about it is it's able to ingest vastly larger quantums of data, more complex types of data with more features and respond to changes in the real-time marketplace more effectively, and then to learn from those changes. So the self-learning AI continues to improve as we continue to invest in its development and as we continue to invest in the development of the data sets to feed it. And we believe the road map we have in place, coupled with positive trends in overall mobile gaming advertising spend is positioning us really well for continued sustainable growth over the long term. I think as I mentioned in my comments upfront, it's important to note that we're seeing really broad-based strength across all geographies and platforms and game genres. It doesn't mean that that's always true with every single customer in any given day. There's always work to do to optimize, and we are investing and working really hard to do that. But there's nothing at all structural that we see standing between us and continued broad-based improvement for our customers, which is a really powerful dynamic, and it's really encouraging. We feel very good about having the infrastructure and systems in place to power continued sustainable growth over the long term with Vector. And we just -- we couldn't be more thrilled with the progress we're making. Matthew Cost: Great. And then on the Developer Data Framework and the runtime data, very encouraging to hear about the high uptake of the Developer Data Framework with new customers. I guess, how should we think through the impact in 2026 that, that data might have? Obviously, Vector in the absence of that data is clearly improving. How big of a sea change might that be? And how should we think through the timing and magnitude of that impact? Matthew Bromberg: The way to think about runtime data is as a multiyear growth opportunity, a long-term advantage for us and a moat. It's -- you shouldn't think about it as like a lightning strike that's going to happen on a particular day. I also think it's probably critically important here to emphasize for everybody that absent any contribution from runtime data, we remain really highly confident in the growth trajectory of Vector, and you could already see that from the progress we're making. Having said all that, yes, we're really pleased about the launch of the Developer Data Framework in August, as you mentioned. We're pleased with the opt-in rates and the developer reception, and we feel like we have the pipes and the processes and privacy in place. And as more and more games are built in Unity 6, these tools are all going to have an increasingly important impact. We also -- the really positive adoption trends, as you noted, will speed that. But listen, this is a marathon, not a sprint, which doesn't mean as the great Jeff van Gundy, the former coach of the Knicks once observed. It doesn't mean we're not running as fast as we can the whole race. We are, but it's a long-term race. And we're feeling really, really good about the progress we're making. Operator: Your next question comes from the line of Brent Thill with Jefferies. Brent Thill: Jarrod, on the guide for Grow at mid-single digit, you just put up 11% sequential. Maybe just talk through what you're embedding in the guide, why you're expecting the sequential slowdown. Jarrod Yahes: Sure, Brent. And thanks for the question. I think, firstly, just taking a step back and looking back, we're really excited about the progress we've made with Vector. This is sort of the second quarter where we've seen extremely fast, rapid sequential growth. There's nothing looking forward that gives us any pause about where we are with respect to the momentum, where we are with respect to leveraging data to help with model improvements and our product road map is really exciting as we look forward. Ultimately, the guide is a function of many things. It's a function of where we are run rating into the quarter. It's a function of the seasonality that takes place in the fourth quarter, and it's a function of the data that we expect to flow into the model. We outperformed our third quarter expectations based on where we were when we reported the second quarter. We feel great about where we are. There's nothing to say that our performance will not continue to improve over the course of the fourth quarter, and we'll end up in as phenomenal of a place as the third quarter. So again, on our side, there's no reservation. There's no hesitation. I think we feel really good about the guide and about where we came out vis-a-vis the third quarter. Matthew Bromberg: And just the one thing I'd add to that, Jarrod, and that's well said, is that like, keep in mind, we're not running this business to a quarterly earnings clock. New product rollouts, enhancements, these are things that are organic to the business. They come when they come. The quarter ends on whatever day it ends. It's just not how we're running the railroad. So I wouldn't read anything into where particular things happen to fall over the course of 1 month or another month. The long-term prognosis for this business is really, really good. Operator: Your next question comes from the line of Alec Brondolo with Wells Fargo. Alec Brondolo: With regard to the non-Vector Grow business, could you call out some specific points of improvement, maybe ways that you were able to leverage the learning from Vector into other areas of the business? I think you mentioned in the prepared remarks, there was some improvement in the third quarter driven by that, but maybe some specific examples might be helpful for us. Matthew Bromberg: Yes. Thank you very much for the question. We are really excited about the entirety of our ad business. And I appreciate your question because I think we rightly focus on Unity Vector a lot. That is the largest and fastest-growing segment of that business. But we're really excited about the opportunities across the whole segment. And we do have plans in place to incorporate some of the technology and learnings from Vector into our other ad businesses. Now that we are through the launch -- the first piece of the launch of Vector, we do have additional cycles to apply to that. It's something we've already begun. We're optimistic about some of the early results we've seen and the scale of the opportunity there over time. And ultimately, our goal is to drive healthy and sustainable growth across the entirety of that business, and we feel great about the opportunity to do that. Operator: Your next question comes from the line of Chris Kuntarich with UBS. Christopher Kuntarich: I want to ask on the Unity in-app payments initiative here. How should we be thinking about this from the perspective of an incremental monetization opportunity versus more of a value add for your customers? Matthew Bromberg: Chris, thanks for the question. We're super excited about this opportunity. And there was again some news this morning in this space, which underlines just the trend that globally app stores are opening up all over the world as a consequence of legal challenges and other regulations and just the trends that we're seeing. And that, combined with the increase in mobile in-app purchase spending is really exciting. As we noted upfront, there's this enormous -- there's just an enormous opportunity for Unity to be able to deliver value to its developers to enable them to manage cross-platform multi-store their full catalogs and manage payment providers all natively from inside the engine that they're already using to build and operate their live service business. So this is something that we're really excited about it. It's something that as we spend time with customers, I think they're really excited about it. I saw a recent survey that said they thought more than 3/4 of game developers would incorporate alternative app stores into their business model in the next few years. I think that's maybe even undershooting what we're going to see. So it's a real opportunity for us to provide value. The product is completely free to our users. We'll collect a modest fee that's negotiated with the merchant of record, but that's not really what it's about for us. We do think though that over time, we'll be able to build new commerce products that deliver more value to the developers, and we'll be able to enhance this offering over time, and that can grow into a meaningful product opportunity for us. But more than anything, the point that we're hoping that folks will take away in our customer set is this is just a perfect example of the kind of product that only Unity can provide, natively, deeply integrated into the tool you already use. And it's, we hope, one big, but not the final step in enhancing our role as a platform across the entirety of the video game space; mobile, PC, ultimately console and to be there for developers and to help them in what's going to become an increasingly complex, more open world. Christopher Kuntarich: Really appreciate that. Maybe just one follow-up. As we think about Vector and where it is bidding across various mediation solutions, you called out really strong scalability here. Is there any evidence that Vector is going out and bidding more into nonlevel play mediation solutions? Matthew Bromberg: At a high level, Chris, I'd just say that we've seen that Vector is really competitive across all platforms, and we're seeing that continuing. Operator: Your next question comes from the line of Vasily Karasyov with Cannonball. Vasily Karasyov: Congratulations. I wanted to ask for details on the Grow segment growth in Q3. Can you please tell us how the revenue from the solutions, excluding Unity Vector, did in the quarter? And what does the guidance -- your guidance for Q4 imply for that chunk of revenue? And also, if you could, how we should think about it longer term? Is it sequential growth, flat? What is like the rule of thumb for us to model it out? Matthew Bromberg: Vasily, thank you for the question. We are not reporting breakdowns in the ad revenue number. So we really can't get into that. I would say that in general, we couldn't be more thrilled with the progress we're making across the entire segment. We're seeing really positive trends across all of our ad businesses, and we expect that number to grow over time. But beyond that, I don't think we want to comment too much. Operator: Your next question comes from the line of Andrew Boone with Citizens. Andrew Boone: Matt, in your prepared comments, you spoke about empowering any creator, not just software developers. Can you flesh out that comment and help us understand kind of the bigger picture strategy and the product road map as generative AI becomes more impactful? And then, Jarrod, is there anything on the cost side that we should be aware of as we think about 2026? It sounds like you may have some opportunities here. What does that look like? Matthew Bromberg: Yes, I'll take the first part, and Jarrod, you can follow up, and thank you very much for the question. Yes, here's what I was getting at. The DNA of Unity is around this -- has always been around this notion of democratization of game development. What that meant 20 years ago was we provided a set of tools and technologies and the platforms that enabled any software developer to be able to get into the games industry. And our dream was that like -- and that was impossible before because you could not -- unless you were a really big, scalable business, you couldn't invest in what was required to make that real. And the dream of the founders of Unity was one day, an individual sitting in his or her living room could build a game that millions of people could play. And that dream has become more than a reality. And that's sort of the thing that's at the beating heart of what we do. And what we're seeing in the kind of next turn of the wheel here is that AI technologies are going to allow us to make that game development process ever more accessible, which is going to impact not just our professional game developers, who are going to be able to build more efficiently and effectively. And as I mentioned, especially for the professionals, will give them additional cycles to create great things as they spend less time mired in the just kind of getting to the start line, which is a significant challenge for game developers. When you're launching a new game and you look at what else is in the market, you often think, okay, first, I have to build all the features and functionality that exists in the competitor games in the marketplace, and then I have to go figure out how to innovate on top. And you spend so much of your time in that initial piece that you often have not much time left for the innovation piece. And so we think for the professional developer, we're going to be able to provide tools that help them move more quickly through some of those routinized tasks and enable them to spend more time on the innovation piece. We think that's going to have a really important and already has had a really important impact on the marketplace. At the same time, this dream of democratization is going to become more accessible. Whereas before we were just hoping that we have software developers come game developers, I think what we're going to see is the Unity tools that we're going to provide are going to make it more and more accessible for nondevelopers and just regular content creators to be able to create interactive experiences as an initial matter, and then take those experiences as far as they want them to go inside the Unity ecosystem. What I was talking about in the remarks about interactivity is one of the things we have learned, I think, from years of building interactive applications is that engagement is the coin of the realm, engagement and time spent. And whenever creators are looking to enhance engagement and time spent, ultimately, they move to interactivity as the solution. Interactivity creates more engagement, creates more social interaction. It's what content creation ultimately is all about. So the combination of the democratization of the tools plus more interactivity across more different content types is something that we're really, really excited about, and we think we have a really important role to play. Jarrod Yahes: And just following up on the second part of your question, Andrew, on the cost side, we're excited about the progress we've made so far this year. EBITDA margins are up 200 basis points year-over-year and sequentially in the third quarter. They're up 400 basis points from the beginning of the year. What we've seen is operating leverage across the business, and we are blessed with extremely high gross margins. Gross margins at Unity are about 82%, 83%. Contribution margins are dramatically higher than that. There's a significant portion of our cost of goods sold that are actually fixed. What that really means for us looking forward into 2026 is that we can expect to benefit from the revenue growth that we expect in the form of significant operating leverage. If you look back over the last couple of years, we've had to battle against operating deleverage from the simplification and streamlining of our business. The opposite is going to happen looking forward in 2026. When you combine that operating leverage with cost discipline and our ability to leverage AI and automation to improve our business, we really think there's the potential to both expand margins and invest in some of the really important product initiatives that Matt has been laying out. We think there's a huge organic growth opportunity in our industry. We think we're really blessed with the assets that we have. I think when you think about elements like IP, when you think about collaboration, when you think about some of the data that we uniquely have access to, we think that we can expand the margins of the business while also significantly investing in the product opportunity, really resulting in a nice setup for 2026 from a margin perspective. Operator: Your next question comes from the line of Dylan Becker with William Blair. Dylan Becker: Matt, maybe going back to the idea of in-app purchase monetization. I think the opportunity there is fairly clear. But wondering as well kind of the economics of that shift to a third-party payments provider, how that impacts your customers, the publishers, the studios themselves, right? Is that something that's going to be flowed through 100% to kind of their bottom line? Is that something that they're going to redeploy maybe lower ROAS threshold, maybe they accelerate content creation. It feels like there are other indirect ways that, that can be valuable and accretive to your business. Just wondering how you guys kind of think through the indirect opportunity there as well. Matthew Bromberg: Yes. I think from the perspective of the developer, Dylan, the way to think about this is they're going to recapture some margin taking over more responsibility for their own commerce. But they're not going to recapture all that margin because there are things to do, right? To your point, they've got to be more responsible for processing payments, and they've got to do some promotion to potentially encourage customers to move to their commerce solution. So there are ways that both costs and promotional costs that chip away at that. Having said all that, there's meaningful money left over. And we have, I think, on prior calls, talked about the fact that we believe that a lot of that leftover margin is going to be turned into a fuel for growth. That's what companies do. If they can continue to buy ROAS positive advertising to drive growth, that's what they're going to do. And when your business gets more profitable, that's the first thing you're going to think about. And so we expect that to be, over time, I think, a real positive for us and for the industry as a whole, frankly. And then as we talked about on the commerce side itself, we're excited about the opportunity to be an open partner to the developer and to help the developer navigate what is going to be an increasingly complex hybrid world as it relates to commerce and transactions going forward. Operator: Your next question comes from the line of Benjamin Black with Deutsche Bank. Benjamin Black: I'm curious, is there anything you're seeing in the performance of Vector and the Unity ad network today that may change your strategy to potentially go after the larger e-commerce or web-based advertising opportunity earlier? And then a follow-up on the runtime, just looking beyond data retrieval, what other steps are necessary for the data to be distilled, to be put to work? And when next year do you think we should start seeing sort of the early innings of the impact on the financials? Matthew Bromberg: Ben, thanks for the question. I think over the long term, we're really bullish about the opportunities outside of gaming in the advertising space. We are primarily focused on the gaming market. It's what we know best. We think it's what's most valuable for our customers and our partners. But we are mindful of the opportunity over time. As I think we've shared before, our first foray into non-gaming revenue is more associated with programmatic advertising. And we're excited about the opportunity in programmatic. We think we can create a more efficient, really transparent path for brands to bid on mobile gaming ad opportunities and to enrich that path with additional data that they have not had before to create better outcomes. Programmatic ads is something like a $700 billion in ad spend in 2026 is a projection. So there are real opportunities, and we think that spend is going to move more from the traditional open web into other environments like CTV and retail media. And we think with the scale that we're operating in, combined with the privacy safe way that we can help advertisers access the mobile customer, we think there's a real opportunity here. We made a really big hire in this space last month. We launched a product we call the Audience Hub, which is kind of our first foray into helping brands of all types reach this new audience. And we've recently seen that campaigns powered by our Audience Hub are delivering meaningful lifts in engagement rates. So we're pretty excited about that in non-gaming. And then we'll think about e-commerce potentially next, but it's not something that's really close in for us. Benjamin Black: The question on runtime? Matthew Bromberg: I'm sorry, go ahead. If you want to -- you want to reiterate? Or I can... Benjamin Black: Yes, go ahead. Matthew Bromberg: Listen, as I said, the runtime opportunity is going to be meaningful for us. We think it's unique to Unity. And it is something that is -- it's not a science project. It's -- although it is a little bit of a science project, but it is an applied science project. And it's one that we're working really diligently on, and we're really, really pleased with the progress we see. And we're very bullish on the idea at a high level that one of the things that makes Unity really interesting, by the way, in all parts of our business is that kind of unique among both gaming platforms, but also app platforms, we are operating horizontally, tens of thousands, hundreds of thousands of applications that are connected by our runtime, billions of consumers, and the opportunity to understand and help our customers -- our developer customers understand the game player customer, the app user customers better and to help make user acquisition more efficient, we think, is an extraordinary one. Operator: Your next question comes from the line of Eric Sheridan with Goldman Sachs. Eric Sheridan: Maybe ask one bigger picture one, and then I'll bring it back to the P&L. When you think about the scope to apply greater and increased levels of compute capacity to your business over the next 3 to 5 years, how do you think about your line of sight into that capacity and the step function changes that increased compute could actually lead to in terms of second and third derivative order effects of how the business could scale and grow in the years ahead? And the second part would be, with that potential on the revenue side, how do you think about any offsetting impacts on margin as compute capacity also scales as well? Matthew Bromberg: Thanks for the question, Eric. I think what's exciting about our business is that we see opportunities on all sides of that. As the cost of compute goes down and we become more efficient, despite the fact that we will do -- our business will grow, especially on the Grow side, we believe over time that as a percentage of the cost of our cloud costs are going to continue to go down and the efficiency that will enable that. Even though we'll be working with ever greater quantums of data and even though we'll be working on increasingly more inference that, that ultimately is going to be a real positive for our business. At the same time, that trend is also going to be, we think, long-term positive for our Create business as we talked about, as the expansion of the number of creators who are building games and using Unity, who are increasingly using compute-intensive solutions to do that. again, as that efficiency continues to rise over time, we hope and expect that there will be no sort of friction to more and more people using our tools and platforms to build content, which we think is going to be great for our business. Jarrod Yahes: Yes. Eric, I would just add on to that, which is to say that cloud costs for Unity today are the second largest cost in our business. You would have seen that in the third quarter, our cost of revenue would have increased, and that's really directly in line with the very significant growth that we experienced in our Grow business. We are not afraid of building our business where it is computationally intensive for a period of time because what we found is that over time, we are able to make that consumption of compute much more efficient, much more effective. The cloud providers are doing a great job of driving efficiencies over time, reducing unit prices to us and our developers on our side are becoming much more effective and efficient in terms of the way that they are consuming compute, effectively commoditizing layers of compute on a very regular and recurring basis. So we're not afraid of getting more advanced in terms of the consumption that we use because we know that this is going to go down over time in terms of cost to serve. Operator: Your next question comes from the line of Martin Yang with Oppenheimer. Martin Yang: I'm curious about your prepared remarks comment regarding China. Is there anything different that's happening in China where you see momentum? There are very unique aspects of the ecosystem in automotive and mini apps. Anything that worth elaborating on in China for our business? Matthew Bromberg: Yes, there's actually a lot to elaborate on there. So Martin, thank you for the question. China has been a real bright spot for us. And it's no accident. Unity is the only platform that works seamlessly with all of the Chinese platforms, including Open Harmony, which is increasingly becoming the standard for mobile in China. So we have a really important and growing business there. As I think you know, China is the largest market for gaming in the world, I think, at this point and is growing really, really quickly. And we're really well positioned there on the gaming side, having been there for quite some time and again, having worked really hard and well to ensure that our technology is compatible and will be compatible over the long term. Lots of big hit games in the Chinese market are made with Unity. At the same time, on the industry side, Asia has been a real bright spot for us, particularly with respect to automotive, where the vast majority of the automakers in Asia are using Unity's technology for development of their in-dash experiences, for example. We've also had a lot of penetration in our industry team across more manufacturing businesses in China, lots of work around visualization of factory floors and the like. So China has been and we hope will continue to be a real bright spot for our business. Jarrod Yahes: Martin, I would just add to that. When you look at our Chinese revenue, which we do disclose, it's improved from 15% of revenue to 20% of revenue over the course of the past year. That's a pretty broad-based increase in terms of the revenue growth. So that is both impacting our Create business, which Matt outlined in detail. But what we're also seeing is publishers of Chinese games leverage Unity for global user acquisition. And as Unity Vector improves its efficacy, that is a global phenomenon, and we are seeing that growth in China take place across both Grow and across Create. We're also seeing that as Unity is delivering a quality product, our ability to enforce our intellectual property is resounding with clients. Customers understand that we're providing a high-quality product. They're paying for that high-quality product, and that's also resulting in strong growth in China and globally in Asia. Martin Yang: I have a follow-up on the publisher experience because the Unity engine in China is a bit different from the Unity engine elsewhere. How do the publishers use Unity ads differently as they're on a different engine? Is there anything unique about their experience? Matthew Bromberg: No. From the ad perspective, it is pretty straightforward and for all important intents and purposes, the same. Operator: Your next question comes from the line of Tom Champion with Piper Sandler. Thomas Champion: I just wanted to pick up on the last question related to China. It did look like a lot of the year-over-year growth on a dollar basis came from China. I'm just curious, Jarrod, maybe you said that was balanced across Create and Grow. But if we looked at growth on the Grow side on a geographic basis, would that look a little more balanced than maybe it does in aggregate? So that would be the first question. And then, Jarrod, I'm wondering if you could just touch a little bit on capital allocation. It seems like you've gotten awful lot of cash and really nice free cash flow generation here. What's kind of the thinking on capital allocation going forward? Matthew Bromberg: Yes. Thank you for the question. I'll just make a brief comment, and then I'll pass it over to Jarrod. The revenue growth in Create really has 3 principal drivers in the third quarter. The first one was the impact, the ongoing impact of the price increases that we've had, which are beginning to roll through, now been a couple of quarters, so beginning to roll through the P&L and we'll continue to do so over the course of 2026. As you pointed out, growth in China is a meaningful piece. And then also more broadly, more generally outside of China, the growth in our industry business as well. And it's really those 3 that are driving the really positive results in Create. Jarrod Yahes: Yes. I think that's absolutely right. And I think when you look at -- we did talk about a very large customer win in the second quarter. So that's important to sort of call out with respect to China. You're correct on the capital side, Tom. I mean, we've been doing a great job in terms of generating cash. Cash has gone up by just about $0.5 billion over the course of the past year. Some small component of that is from financing and the refinancing transaction we undertook in February, but the vast majority of that is cash flow from operations and really high free cash flow conversion on EBITDA. Look, from a business perspective, what we're doing right now is focusing very sharply. We think that there are product opportunities that are organic to our business, that really require our full attention. We do have some refinancings prospectively that we will undertake and some converts that are coming due, but there's nothing we need to do in terms of additional capital raise to meet those obligations. And I think we are going to absolutely be keeping our eyes out for potential acquisition opportunities, but there's a very high threshold and a very high hurdle for us in consideration of the strong product opportunities and organic growth opportunities that we're seeing in front of us. So thrilled with the cash generation. I'm going to be very savvy with respect to how we think about that capital so as not to distract us from what we think is an improving and really attractive organic growth opportunity in front of us. Operator: Your final question comes from the line of Clark Lampen with BTIG. William Lampen: We've dug into a lot of sort of very specific things on the product side and sort of Unity specific. Maybe if we pull back and sort of talk about the mobile market for a second, I wanted to see if you guys could provide some perspective on the way that products like Vector and what some of your peers have released are really impacting the market and developer spend. It sounds like financing companies are stepping in to sort of provide more ubiquitous capital to the market. Are we in a phase right now where you think the market is improving, capturing momentum and that's likely to continue into 2026. Maybe help us think about, I guess, the sort of systematic backdrop and how that's improving alongside the product work you're doing. Matthew Bromberg: You bet. Thank you for the question, Clark. We're really bullish on the growth of the games business as a whole, not just the mobile business, which we feel really good about and we think is going to grow, but also the business as a whole. And I know there has been certain kind of targeted spots of difficulty in this market. I believe that we are at a fascinating mode of kind of creative destruction in which the games business is resetting and reimagining itself, but it's going to do that in the context of growth. And as I talked about upfront, the explosion of really amazing new games, which we're already seeing, which is going to accelerate markedly in the months and years ahead is going to put the importance of AI-driven discovery ever more in the forefront. So to the extent that we can help developers sort through and publishers sort through what is a difficult market from their perspective because there's going to be so much more content and it's going to continue to be more and more competitive. It's a very competitive marketplace. So we think we have a role to play in helping our customers take advantage of that growing pie by providing them better and more effective and more efficient tools, both to acquire new customers, but also to better manage the customers they have, which is why we're so excited about where we sit in the games industry right now. Everybody is -- most of the other participants in the games business are very vertically focused on one kind of game or on one platform or one set of devices. We exist horizontally across all of them. And our only interest is in doing everything we can to make sure the ecosystem is healthy and that developers can continue to build their businesses. And we're able to help them across the entire life cycle of their businesses from prototyping games through operating those games in live service, figuring out how to optimize revenue and engagement of the games that they're operating on an ongoing basis and then helping them acquire new users. And to the extent all those activities become increasingly driven by AI and increasingly driven by an understanding of consumer behavior, the fact that the pieces of what we offer are tied tightly together around those 2 things is going to be really meaningful for us over time. And so we're really excited both about the growth of the market and the role we think we have to play in it. William Lampen: Okay. And if I may ask, I guess, just a very quick sort of Vector-related follow-up. In prior quarters, you talked about sort of returns dispersion between your customers and some experiencing sort of better performance than others. Has that narrowed of late? Are you seeing sort of a tighter band right now and sort of higher ROAS on average for all customers? Or is it sort of maybe moving in the other direction and we should think about growth being driven by a smaller handful maybe of larger customers that are leaning into this a lot more aggressively. I'm just curious, I guess, how that's sort of evolved and what you've seen. Matthew Bromberg: You bet. No, we are seeing broad-based improvement across all of our customer sets, small and big geography, genre, the improvements are really quite broad-based. Operator: This concludes the question-and-answer session. I will now turn the call back to Alex for closing remarks. Alex Giaimo: Thanks, everyone, for joining. We look forward to connecting throughout the quarter. Have a great day.
Operator: Good morning. I would like to welcome everyone to Kennametal's First Quarter and Fiscal 2026 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Michael Pici, Vice President of Investor Relations. Please go ahead. Michael Pici: Thank you, operator. Welcome, everyone, and thank you for joining us to review Kennametal's First Quarter Fiscal 2026 results. This morning, we issued our earnings press release and posted our presentation slides on our website. We will be referring to that slide deck throughout today's call. I'm Michael Pici, Vice President of Investor Relations. Joining me on the call today are: Sanjay Chowbey, President and Chief Executive Officer; and Pat Watson, Vice President and Chief Financial Officer. After Sanjay and Pat's prepared remarks, we will open the line for questions. At this time, I would like to direct your attention to our forward-looking disclosure statement. Today's discussion contains comments that constitute forward-looking statements and as such, involve a number of assumptions, risks and uncertainties that could cause the company's actual results, performance or achievements to differ materially from those expressed in or implied by such statements. These risk factors and uncertainties are detailed in Kennametal's SEC filings. In addition, we will be discussing non-GAAP financial measures on the call today. Reconciliations to GAAP financial measures that we believe are most directly comparable can be found at the back of the slide deck and on our Form 8-K on our website. And with that, I'll turn the call over to Sanjay. Sanjay Chowbey: Thank you, Mike. Good morning, and thank you for joining us. I'll begin the call today with a brief overview of the quarter, including some end market commentary, followed by a spotlight on one of our growth focus areas, Power Generation. From there, Pat will cover the quarterly financial results as well as the fiscal year '26 outlook. Finally, I'll make some summary comments, and then we will open the line for questions. Turning to Slide 3. Let me begin by addressing some of the highlights from our strong first quarter. Our global commercial teams continue to advance our strategic growth initiatives. In the quarter, infrastructure secured 2 large project wins within our Earthworks end market. Both wins were a direct result of our team's efforts with those customers to deliver high-quality technical support and superior product performance. That combination has and will continue to be a winning formula for us. In Metal Cutting, we won projects in Energy, Aerospace and Defense and Transportation. For example, we increased our share of wallet with an aerospace customer to provide high precision tooling solutions for machining military components. As you know, we continue to prioritize above-market growth, and these wins position us well in markets that are benefiting from long-term secular growth trends. We also continue to respond to the evolving tariff landscape, and we remain committed to fully offsetting the impact of tariffs through various actions, including product moves, supply chain optimization and surcharges as appropriate. Separately, we have implemented pricing actions in response to the continuing rise in tungsten costs, which have increased since August and are at historically high levels. We remain confident in our ability to price to offset the rising tungsten costs. On the cost improvement front, we realized $8 million in restructuring savings this quarter, and we continue to execute our plans to lower structural cost by reducing employment costs and consolidating manufacturing operations. Now let's move to our quarterly results, which exceeded the sales and EPS outlook we provided last quarter. Compared to the outlook, sales were primarily driven by better-than-expected volume across all end markets. EPS benefited from the additional volume and a lower-than-anticipated tax rate. Year-over-year, sales increased 3% organically. That's our first quarter of organic growth in 2 years and reflects modest relief from the broad market weakness that has impacted our end markets for the past 8 quarters. As you may recall, historically, down cycles tend to last 4 to 8 quarters. Adjusted EPS increased to $0.34 compared to $0.29 in the prior year quarter. In terms of profitability, adjusted EBITDA margin was 15.3% compared to 14.3% in the prior year quarter. Cash from operating activities year-to-date was $17 million compared to $46 million in the prior year period. Free operating cash flow year-to-date was negative $5 million compared to $21 million in the prior year. And finally, we returned $25 million to shareholders through share repurchases of $10 million and dividends of $15 million. Today, we are raising our sales and EPS outlook for fiscal '26. This update reflects the modestly improved market conditions, additional price and tariff surcharges and our favorable performance in the first quarter. Pat will provide more details on our updated outlook shortly. In summary, we are pleased with this quarter's results, and we continue to focus on delivering our commitments throughout fiscal '26. Turning to Slide 4 and our end market update. As a reminder, our full year outlook reflects forecasts of specific market drivers and general market conditions. I will focus on the bottom half of the slide and address the 2 markets that have changed since our last call. First, IHS estimates for Transportation slightly improved from the previous estimate, while still being in the negative low single-digit range. Volumes in the Americas have improved from the prior estimate, partially offset by pressure that continues to impact EMEA. And secondly, for Aerospace and Defense, expectations are improving as the aerospace industry has recovered from supply chain challenges and will benefit from the recent approval that will increase OEM production. Market factors remain mostly unchanged within the other end markets. Turning to Slide 5. We are seeing emerging opportunities in Power Generation, driven by rising demand for both renewable and traditional energy sources to support the expansion of AI data centers. This is an expanding opportunity for Kennametal across both of our segments, and we are capitalizing on this trend. As we shared last quarter, we secured a key win in Metal Cutting connected to the backup generators that are providing energy security to those data centers. And it's our deep expertise in application engineering and machining complex engine components that is positioning us particularly well to support customers as they manufacture backup power generation systems and utility scale gas turbines. With respect to the gas turbines, these applications require the same capabilities that we have long applied in Aerospace and Defense. So this is also an area that we know very well. While this slide focused on Metal Cutting, the opportunity extends across both segments. In Infrastructure, our wear-resistant solutions and a strong position in oil and gas extraction aligns with the growing need for natural gas as a reliable fuel source for uninterrupted power. So while our recent wins are in backup power systems, the opportunity is much broader, and we are well positioned to capitalize on that as the trend continues. Now let me turn the call over to Pat, who will review the first quarter financial performance and the outlook. Patrick Watson: Thank you, Sanjay, and good morning, everyone. I will begin on Slide 6 with a review of the first quarter operating results. Sales were up 3% year-over-year on both a reported and organic basis. At the segment level, Metal Cutting and Infrastructure both increased 3% organically and by end market. On a constant currency basis, Aerospace and Defense grew 20%; Earthworks grew 5%; Energy increased 1%; General Engineering was flat and Transportation declined 1%. Regionally, on a constant currency basis, sales in the Americas increased 7%, EMEA was flat and sales decreased 1% in Asia Pacific. The sales performance this quarter exceeded the outlook we provided last quarter. Relative to those expectations, share gains in Earthworks, better-than-expected auto build rates and overall modest volume improvements were the catalysts for the outperformance. I will provide more color when reviewing the segment performance in a moment. Adjusted EBITDA and operating margins were 15.3% and 8.2%, respectively, versus 14.3% and 7.6% in the prior year quarter. The improved margin was driven by price and tariff surcharges and incremental year-over-year restructuring savings of $8 million, partially offset by higher compensation costs, tariffs and general inflation and a prior year benefit from net insurance proceeds of $4 million that did not repeat in the current year. Adjusted EPS was $0.34 in the quarter versus $0.29 in the prior year period. The main drivers of our EPS performance are highlighted on the bridge on Slide 7. The year-over-year effect of operations this quarter was positive $0.05. This reflects incremental restructuring benefits, favorable timing of price/raw material costs, tariff surcharges and the advanced manufacturing tax credit, partially offset by higher compensation costs, tariffs and general inflation. The headwind of $0.04 from the net insurance benefits received in the prior year due to the tornado that damaged our Rogers facility. You can also see $0.04 of transactional gains related to preferential Bolivia exchange rates. Slides 8 and 9 detail the performance of our segments this quarter. Reported Metal Cutting sales were up 5% compared to the prior year quarter with 3% organic growth and favorable foreign currency exchange of 2%. Regionally, excluding the effects of currency, the Americas increased 6%, EMEA increased 1% and Asia Pacific declined 1%. Looking at sales by end market, Aerospace and Defense increased 16% year-over-year from improved build rates in the Americas and easing supply chain pressures in EMEA. Energy grew 12% this quarter due to data center power generation wins. General Engineering was flat year-over-year from lower production activity, primarily in EMEA. And lastly, Transportation declined 1% year-over-year due to project timing in Asia Pacific and an overall slowdown in EMEA and the Americas. Metal Cutting adjusted operating margin of 8% decreased 20 basis points year-over-year, primarily from higher compensation costs, tariffs and general inflation. These factors are partially offset by higher prices and surcharges and incremental year-over-year restructuring savings of approximately $6 million. Turning to Slide 9 for Infrastructure. Infrastructure sales increased 3% organically with reported sales growth of 1%, which was negatively affected 3 points from the divestiture, which closed in June. Regionally, on a constant currency basis, Americas sales increased 7%, Asia Pacific was flat and EMEA sales decreased by 3%. Looking at sales by end market on a constant currency basis, Aerospace and Defense increased 28% from defense orders driven by continued execution on our growth initiatives in both EMEA and the Americas. Earthworks increased 5% due to mining share gains in the Americas and higher global construction demand, partially offset by Asia Pacific mining market softness. General Engineering was flat due to higher powder demand in the Americas and higher demand in Asia, partially offset by lower industrial activity in EMEA. And lastly, Energy declined 5%, mainly in EMEA, driven by project timing and from a lower U.S. land rig count. Adjusted operating margin increased 190 basis points year-over-year to 8.8%. Adjusted operating income of $17 million increased primarily due to the favorable timing of pricing compared to raw material costs, partially offset by prior year net insurance proceeds of $4 million and higher compensation costs and general inflation. Additionally, we recognized year-over-year restructuring savings of approximately $2 million. Now turning to Slide 10 to review our free operating cash flow and balance sheet. Our first quarter net cash flow from operating activities was $17 million compared to $46 million in the prior year period. The change in net cash flow from operating activities was driven by working capital changes, including a higher investment in inventory, primarily from rising tungsten prices. Because sales volumes declined less than normal from the fourth quarter of FY '25 and pricing and tungsten value was up, working capital was a more challenging comparison this quarter. Our first quarter free operating cash flow decreased to negative $5 million from positive $21 million in the prior year, primarily from the lower cash flow from operations. On a dollar basis, year-over-year, primary working capital increased to $660 million and on a percentage of sales basis, it increased to 32%. Net capital expenditures of $23 million declined modestly from $25 million in the prior year quarter. In total, we returned $25 million to shareholders through our share repurchase and dividend programs. We repurchased 475,000 shares or $10 million in Q1 under our $200 million authorization. And as we have every quarter since becoming a public company over 50 years ago, we paid a dividend to our shareholders. We remain committed to returning cash to shareholders while executing our strategy to drive growth and margin improvement. We continue to maintain a healthy balance sheet and debt maturity profile with no near-term refunding requirements. At quarter end, we had combined cash and revolver availability of approximately $800 million, and we're well within our financial covenants. The full balance sheet can be found on Slide 17 in the appendix. Now on Slide 11 regarding the full year outlook. We now expect FY '26 sales to be between $2.1 billion and $2.17 billion, with volume ranging from negative 1% to positive 3%, net price and tariff surcharge combined of approximately 7%, and we anticipate approximately 2% tailwind from foreign exchange. We now expect adjusted EPS to be in the range of $1.35 to $1.65. The increased outlook reflects additional pricing actions related to the rising cost of tungsten and additional surcharges in place to address the changes in policy since our August call. The adjusted tax rate for the year is now 27%. And as a result of the additional cash that we need to invest in inventory due to higher tungsten costs, free operating cash flow as a percent of adjusted net income is now 100%. All of the other elements of our outlook remain unchanged. Turning to Slide 12 regarding our second quarter outlook. We expect Q2 sales to be between $500 million and $520 million, with volume ranging from negative 4% to flat, price and tariff surcharge realization of approximately 7% and a 2% positive impact from foreign exchange. One comment regarding the adjusted effective tax rate this quarter. The rate of approximately 30% assumes a discrete item that is driving the rate higher in Q1 than our full year outlook. We expect adjusted EPS in the range of $0.30 to $0.40. The other key assumptions for the quarter are all noted on the slide. And with that, I'll turn it back over to Sanjay. Sanjay Chowbey: Thank you, Pat. Turning to Slide 13. Let me take a few minutes to summarize. We delivered a solid first quarter, thanks to modest improvements in a couple of end markets, project wins on commercial side and cost improvement actions. We continue to make steady progress on our strategic growth initiatives, lean transformation and a structural cost improvement while also exploring ways to strengthen our portfolio over time. In parallel, we are monitoring external drivers such as trade and monetary policies and raw material prices and taking timely and necessary actions. We remain confident in our plan for long-term value creation for our shareholders. And with that, operator, please open the line for questions. Operator: [Operator Instructions] Today's first question comes from Angel Castillo with Morgan Stanley. Angel Castillo Malpica: Congrats on a strong quarter here. I just wanted to touch base a little bit more on the end market outlook. I think, you noted a little bit on the kind of prepared remarks about what you're seeing across end markets. But I think it kind of stood out to me that some of the changes on Slide 4 for each end market were quite notable in terms of going from down to up or materially kind of more into the double digits, all the while some of the kind of market factors that are listed below seemed a lot more muted to unchanged. Can you just clarify, I guess, within each of these, what specifically is kind of driving the material kind of uplift? And in particular, maybe also from a regional standpoint, how should we think about the mix of which regions are driving kind of the improved outlook for each of these? Sanjay Chowbey: Yes. Thank you, Angel. Good question. So let me walk you through that slide, which is Slide 4. Just first of all, as a reminder, on that slide, the top half of the slide is basically reflecting our sales trend and the bottom half of the page reflects what is the external factor, which is the market. So in all of these end markets, there are 3 pieces: first one is, APT and surcharge -- APT-related price increase and surcharges; second is, market itself, whether the market improved or it stayed flat; and the third piece is, project wins and share gains. So as we discussed in our prepared remarks, there were definitely some markets where we had bigger benefit of project wins, for example, in Aerospace and also in Energy, especially in the Power Generation side. Now let me walk you through the other factors. So like I said, APT and surcharge-related price affects all end markets. Specific to where we saw changes in end market in Transportation and Aerospace where we saw the biggest change -- changes. Let me walk you through that a little bit. So for Transportation, we saw Americas coming out a little bit stronger in the Q1, and we have outlook at this point also for the full year and based on even IHS data that we expect while still being in the low single digit in a negative territory, the Transportation IHS forecast at this point is improved from the prior outlook we had 3 months ago. In Aerospace, the customer build rate and also supply chain constraint easing up and also from a Defense perspective, definitely, we are seeing market to be stronger in that regard. Earthworks, when you see the arrow going up on the top of the page -- half of the page, that is mostly driven by share win. Same thing in Energy. Energy is more or less staying flat with respect to oil and gas. If you look at the rig counts and all that, about the same as where we anticipated 3 months ago. But we have had good project wins when it comes to the Power Generation and that helped in the Energy. And in General Engineering, we are seeing improvements. In Q1, we have seen some. But for you look at -- when you look at the full year, other than China, more or less, I think we're seeing slight improvement or flattish type situation in the Gen Eng when it comes to IPI. So that's really what we have at this point. Again, in summary, APT and surcharge helping and share wins are also helping along with that and modest improvement in a couple of end markets. Angel Castillo Malpica: That's very helpful. And maybe just as my follow-up, just to kind of double-click on some of these numbers. But maybe on the market share dynamic, could you just give us a little bit more color as to -- is that because the kind of cadence of wins here maybe it's seemingly accelerating in some of these end markets. Is there something about either the product that's really resonating with customers? Is it more related to being competitive advantages to being a domestic producer? And then as it relates to this or maybe more to the price dynamic that's driving some of these improvements, any concerns here that as you look at tungsten prices or kind of you're passing through higher prices here, any concerns that people start to consider either trading to other non-tungsten equipment? Or I guess, anything that you would note as it pertains to kind of elasticity of the customer to be willing to continue to kind of take these higher prices? Sanjay Chowbey: Sure. So first of all, with respect to share gain, it is definitely driven by what we have discussed before, the 3 main drivers: first, innovative solutions; secondly, our commercial excellence, which includes our engagement with customers and application support; and third, operational excellence. Our overall operational performance at this point, including safety, by the way. Safety, quality, on-time delivery has been very good. We continue to make good progress on that. So I think all of those combinations are definitely helping us in share gain. With respect to -- I think just to confirm, your second part of the question was, can you remind me? Patrick Watson: Moving [ something ] away from. Sanjay Chowbey: Okay. Yes. Sorry, yes. Angel Castillo Malpica: Yes, so specific to the customers for the price increases in tungsten? Sanjay Chowbey: Got it. Yes. Tungsten, yes. We have looked at that -- from our perspective, what we provide in terms of the innovative solutions, I believe that the value customers get through our solutions has -- is very strong in terms of like even with higher tungsten prices, it will make more sense for them to continue using that rather than changing it to stainless steel or some other type because the performance that they receive from our solution will more than offset even the increase that they're going to see from the tungsten prices. So we don't see a big risk from that. But Angel, to your broader question, as you look at some of the end markets, they are still on the fence. Can things get worse? Yes. Like we know there is a monetary policies, trade policies and things like that. So things can get worse. But overall, we have taken a very balanced approach in terms of what we see from the market and also from price dynamics, and on top of that, overall our share gain initiatives. Operator: And our next question today comes from Tami Zakaria with JPMorgan. Tami Zakaria: Very nice quarter. I wanted to ask you about the $250 million TAM from engines, large engines, which I thought was very interesting. How much of this $250 million is simply volume? Or does it also include pricing? And I may have missed it, but what share of that $250 million do you realistically expect to gain over the next 3 years? Sanjay Chowbey: Yes, Tami, good question. So first, let me explain that the $250 million that we have carved out to show as a TAM for Power Generation, some of this used to sit within either Energy or Transportation. Now we have carved it out to say, what is it so that we can really focus on that? And then how much is the growth initiative here. At this point, as we pointed out there, if you look at last 2, 3 years, that market has been growing in the high single-digit range, and we are still projecting it to grow at 10% rate for the next few years. So that's how we see it. At this point, of course, the $250 million does include the latest price dynamics in that. But in the bigger picture, it does have -- like the historical trend is there from that perspective. And as far as we are concerned, market share-wise, we don't disclose at this point about that information. However, we are very confident that our solutions and our overall value proposition with application support and custom solutions that we are very well positioned to win in this. Tami Zakaria: Understood. That is very helpful. I wanted to ask you about the Energy end market outlook a bit. I think it improved to mid-single digits from flat, if I'm reading it correctly. What's really driving this improved outlook for Energy? Rig counts is still down. Is it well? So could you just elaborate on that a little bit? Sanjay Chowbey: Yes. As you look at that, again, Slide 4, in the bottom half of the page, we are clearly telling you that oil and gas stays about the same, right? It's not getting worse. That's good news. But overall sales, which is in the top half of the page, we are saying it's improving because we have definitely impact of APT-related price increase and also surcharges if applicable. And as you know, a lot of products that is used in oil and gas does have very heavy content or greater content of the raw material. Patrick Watson: And just to tack on to that, Tami, keep in mind that across our Energy portfolio between both businesses, it's pretty diversified. So beyond having the exposure in oil and gas, which we think of primarily in Infrastructure, Metal Cutting has some exposure there as well. Obviously, we've been talking about the opportunities we have in reciprocating Power Gen and more traditional power gen sources. And as you followed us over the last couple of years, the great position we have in wind power as well. Operator: And our next question today comes from Steven Fisher at UBS. Steven Fisher: Congrats on the quarter. Just to come back to the share gain dynamics a little bit. I know this is something you obviously embedded in your multiyear outlook since 2023. So it's nice to see it coming through. I guess just now that we're starting to see this a little bit more visibly and you started to talk about it more, what visibility do you have to anything else in kind of lined up that could materialize in some program wins over the next couple of quarters? Sanjay Chowbey: Yes. Again, good question, Steven. Let me start by first addressing some of the higher growth end markets that we see right now from Aerospace and Defense, we have had success in that for the last 2, 3 years. Actually, we have talked about it all the way back in the Investor Day. And we have a good pipeline of projects that we continue to work on. Then when it comes to Power Generation, we already talked about a little bit. So that also has good pipeline. When it comes to Transportation, we will position ourselves very well as the transportation industry was going through quite a bit of dynamic shift in terms of the powertrain. And we have solutions which will support whether a customer launches new internal combustion engine or hybrid or plug-in hybrid or battery-only electric vehicle, we have good solutions, and we have very good strong application support for that. So well positioned on that. And in parallel, we continue to work on Earthworks, as you saw some of the project wins we reported in Q1. And finally, coming to General Engineering, our strong relationships with our channel partner and really working together to do what's best for our end customers have also bode well for us, and we'll continue to work on all of these 5 end markets. Steven Fisher: That's really helpful. And then I guess just on the tungsten price, can you just talk about how much of that top line benefit and margin dynamic you saw in Q1 relative to what might still be ahead? What could you still see there in Q2? And then are you expecting to see things in balance between your -- what you're passing along and what you're experiencing by, say, Q3? Patrick Watson: Yes. If we think about that, [ that's a modest ] -- we saw a modest amount of tailwind, I would say, Steve, in the first quarter, right? And then what you're going to see here as we go into Q2 -- and in Q2, we'll see a little bit of ramp-up there. Price will go up. We'll get a little bit of tailwind from that. We did see a -- we saw a little bit of advanced buying here in Q1, call that low single digits that might be flopped between Q1 and Q2 from a volume perspective. And that's part of what's animating, I'll say, our volume outlook for Q2. But as you think about Q3, Q3, we should see a pretty significant step-up in price/raw. If tungsten prices were to stick around where they are currently, we probably have our strongest EPS quarter in Q3 as we get into Q4, get into basically price/raw neutrality at this point in time. And as we've talked about on prior calls, we tend to -- what flows through the P&L tends to lag the market by about 2 quarters. If we were to see increases in tungsten prices throughout this quarter, that would tell us that, that period of favorable price/raw would continue more into the fourth quarter. Obviously, if we were to see some of that tungsten price roll off, we would start seeing some of that fall through in Q4 as well. But right now, our outlook assumes stable pricing for the balance of the year from a tungsten perspective. Operator: And our next question today comes from Steve Barger at KeyBanc Capital Markets. Steve Barger: Going back to data center, you said some of that TAM used to sit in Energy or Transportation. So what is the incremental machining opportunity you see from data center? And can you frame up, does it add single-digit millions of revenue, double-digit millions? How are you thinking about that? Sanjay Chowbey: Yes, Steve, it's definitely built into that $250 million. At this point, over the last few years, we have seen that in the $100 million range, and then we're raising it to a 10% CAGR. Steve Barger: Got it. Okay. And then, Sanjay, going back to your comment on some higher expectations for General Engineering. I think everybody is looking for the turn there. So is your outlook based on expectations for improvement just due to how long this downturn has been? Or is it customers saying they want to restock? Or are they seeing actual demand pick up that they're either seeing it or they're planning for it? Can you just frame up that comment? Sanjay Chowbey: Yes, sure. Steve, when it comes to General Engineering, I think at this point, by region, I'll comment a little bit. In U.S. and Americas in general, we saw a slight improvement. And by the way, you'll hear the word slight quite a bit here just because we are on the fence. I can tell you that even if you look at our outlook, the way we have framed it, overall volume for the full year, we are saying at midpoint is 1%. So that gives you the idea that we're right on the fence, a slight bit of improvement in IPI will help us, and that's what we have built because that's what we have seen from external projection perspective. In recent months, we have seen some improvement in Americas. EMEA, in Q1, we saw, but the projection for the rest of the year is more flattish. And in China, we have seen positive projection, slight bit of positive projection. Operator: And our next question today comes from Chris Dankert at Loop. Christopher Dankert: I guess just to circle back to the earlier question, can you kind of help frame for us what the assumed price/cost impact actually is in the guide? Are we assuming dollar neutrality for the year? Is it dollar positive margin? Can you just kind of walk us through what's actually assumed in your guide from a price/cost perspective here? Patrick Watson: Yes. So I would say for the full year, there will be positive price/raw, right? And you just kind of have to look through where the volume is because, again, volume at this point in time on a full year basis, as Sanjay just talked about, it's up 1%, right, at the midpoint of the guide, right? In addition to that, I would just point out to you that think about some of the comments we had last quarter in terms of some of the tailwinds we had in the prior year that are just not repeating here this year. So when we just think about that overall profitability and EPS walk, yes, we're going to have a very modest amount of positive volume, not quite frankly, enough to write [ home about ] from a leverage perspective. We will have some benefits, obviously, from the restructuring coming through. We're going to have significant amounts of cost inflation here coming through in the business, whether that relates to tungsten tariff costs as well as, I would say, the normal salary inflation that comes about in addition to some of the headwinds that we've got in, in terms of $15 million that we talked about in the prior quarter in terms of net tornado benefits that occurred in the prior year and some additional tax credits that came through from a tungsten perspective as well as about a $5 million pension headwind. So we'll see that positive price raw here really in Q3. And as we just talked about previously, when we get out to Q4, we'll really get to a more neutral basis. Christopher Dankert: Okay. Okay. That's helpful. And then as we're thinking about those restructuring savings, any additional color either in terms of the ratability there or maybe just even how to think about what the key programs are inside that restructuring savings? Patrick Watson: Yes, I'd say it's pretty ratable throughout the year, maybe with a little bit of a trail off in Q4 as we start lapping some stuff. In terms of what's in that program, we've done some shifting of resources that what's been able to unlock some cost as well as in the last year, talked about the closure of 2 facilities, one here in the U.S. and the consolidation of 2 locations in Spain that are driving that. Sanjay Chowbey: Yes, we are on track for the $35 million that we have projected for the year. Operator: And our next question today comes from Julian Mitchell of Barclays. Julian Mitchell: I just wanted to try and dial in again a little bit on the sort of EPS guide change and the moving parts there. So I think the guide midpoint went up by sort of $0.40 or so. And maybe $0.05 of that is the lower tax rate. So are we right in thinking that sort of the price/cost part of that $0.40 is kind of more than half of it? So maybe, I don't know, $0.20, $0.30 tailwind from price/cost versus the prior guide? And then it sounds like a lot of that comes in the third fiscal quarter. And as we look ahead, simplistically, if the tungsten price stays where it is today, is it sort of neutral after this year? Or does it sort of flip to a kind of headwind as your COGS catch up? Just trying to understand that dynamic, please. Patrick Watson: Yes. Good questions, Julian. I would say the best way to think about the change in the outlook is you got outlook to outlook, there's really 2 primary changes. One is volume and the second one is price, right? And so there is some incremental volume in there in terms of the change, and you can probably call that in EPS terms, $0.20-ish, $0.30 -- $0.25, $0.30, right? I think that tax number is probably a little bit hot. So it's probably closer to about $0.03 of tax, ETR to ETR, when you do the math, Julian. And then so you'll have some remainder in that. And included in that is price/raw favorability that's in the year, but you've also got some muting of that is some higher variable comp, okay? That's also nestled in there. So as you think about Q4, and I'm going to switch now to talking about this sequentially because I think on a year-over-year basis becomes a little more difficult. Q4, effectively, what's in the outlook is neutrality. And unless there's a change in tungsten, right, we would expect to be price/raw neutral on that piece going forward from that as you think about the following fiscal year, right? As we think about that from a headwind perspective, yes, there is some favorability this year that we will have on price/raw that won't repeat next year, right? And when you do that from a year-over-year perspective, I appreciate that would be seen as a headwind. But if you think of it sequentially, we'll be on the same basis. Julian Mitchell: That's helpful. So you've got sort of that -- as you said, it's sort of $0.20 to $0.30 price/cost tailwind this year. Is that right? Patrick Watson: Yes. I go back to the math I just kind of gave you there, Julian, so. Sanjay Chowbey: Yes. I think, Julian, keep that in mind, as Pat said, that volume, which, again, if you look at prior outlook versus this outlook, has improved by 350 basis points. Price improved by 300 basis points. Average was 4%, now it's 7%. So it gives you an idea that volume is playing a role in EPS. And within the volume, you've got project wins, you've got some improvement in market. And then also, I think those are the 2 main components of that. Julian Mitchell: That's helpful. And then just my sort of second question would be around just the sort of Power Gen exposure, and you have that helpful kind of Slide 5 that you've touched on a couple of times already. Just wanted to understand what is your revenue sort of exposure as pertains to that Slide 5 material? What was your dollar revenue in the last 12 months or fiscal '25? Or just trying to understand what your sort of jumping off point is today in revenue as we look ahead to that TAM expansion. Sanjay Chowbey: Yes. Julian, we are not disclosing that deeper detail. But let me just tell you the information you have, if you look at the Metal Cutting slide, you will see that Metal Cutting Energy had improved by 12%, whereas Infrastructure Energy had a decline. This is Q1 by 5%. That will tell you, you can do some math in that, and you can see that some of the increase in Metal Cutting Energy revenue is driven by some of those projects. Operator: And our next question today comes from Joe Ritchie at Goldman Sachs. Joseph Ritchie: Yes. Nice to see the strong start to the year. Just a couple of quick ones. I know we've talked a lot about tungsten. It's interesting to me the -- look, tungsten prices were up materially this past quarter. And Pat, you kind of talked through the dynamics. It typically takes a couple of quarters. I was just wondering, has anything changed from a timing standpoint in your ability to pass through price earlier than you have historically? Just seems like the dynamics have gotten perhaps a little bit better on the margin there. Just any thoughts around that would be helpful. Patrick Watson: Yes. I think 2 things to think about there as it relates to pricing. We've got 2 semi-unique circumstances going on simultaneously here. One is where tungsten is sitting at today is a historical high, right? And then secondly, I would say we've got the tariff surcharges that are in place, which are a unique event for us and many other companies in terms of how they've had to deal with some of the tariff costs. So I think the situation is pretty unique that we're in at the moment. I do credit the commercial teams. They have gotten out there and been aggressive where they can be and been smart about where we can make sure we're raising prices to cover the costs. And that's never an easy conversation with the client. No client ever really wants to have their price raised. But as Sanjay talked about previously, we remain very confident in our ability to go out there and get the cost and make sure we're covering for it. We've had a track record of doing so. And I think some of the commercial capabilities that as an organization that we've developed over the last couple of years, not only do they help us in terms of going out and winning market share, but they also help us in terms of making sure we're accurately pricing for the product that we have and the value we're creating for the customer. Joseph Ritchie: Got it. That's helpful. And I guess just maybe following up on that tariff discussion. To the extent that you're putting surcharges through, how are you guys thinking about a situation in which tariffs are potentially rolled back? What does that ultimately mean for kind of like the price/cost equation that you have baked into the guide for the year? Sanjay Chowbey: Yes, sure. Joe, I think, first of all, tariff situation, as you guys know, has been very dynamic. And we have taken a very broad sets of actions, starting with like production move, supply chain optimization and where necessary, we did implement surcharges. And as things have changed, those surcharges also have been very dynamic from our side. For example, when the tariff for products going from U.S. to Canada, that was taken down, we took the surcharges out. So we are very quickly adopting and doing what we need to do to recoup the cost that we need to, but at the same time, being very, very competitive in the market. So we'll continue to do that. And in the long term, let's say, some of the tariffs that we get to a point where they become permanent, then we will make those changes in the permanent prices. So that's the way we are looking at it. Operator: Thank you. This concludes the question-and-answer session. I'd like to turn the conference back over to Sanjay Chowbey for closing remarks. Sanjay Chowbey: Thank you, operator, and thank you, everyone, for joining the call today. As always, we appreciate your interest and support. Please don't hesitate to reach out to Mike if you have any questions. Have a great day. Thank you. Operator: Thank you. A replay of this event will be available approximately 1 hour after its conclusion. To access the replay, you may dial toll-free within the United States (877) 344-7529. Outside of the United States, you may dial (412) 317-0088. You will be prompted to enter the conference ID of 7492050 then the pound or hash symbol. You will be asked to record your name and company. 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