加载中...
共找到 6,826 条相关资讯
Mark Flynn: Good morning, everyone, and welcome to Nova Eye's Investor Webinar for the September quarter. And thanks again for all of you joining, and some great interest in our recent results. Tom and I will cover the quarter's trading, the reimbursement update, the new 24-month clinical paper on the iTrack Advance, our guidance again for FY '26 and also an update on the drug delivery work stream. Very happy to take your questions. Please use the Q&A box. I have received some already from shareholders, and I will be asking those, but please submit the questions any time via the Zoom function. With that, we can kick off, and we'll get started and pleased to introduce Nova Eye's Managing Director, Tom Spurling. Over to you, Tom. Thomas Spurling: Thanks, Mark. Yes, over 50 people on the webinar. That's really pleasing that we always get good numbers. I want to, as I promised him, a particular shout out to Bilal Khan at New World Medical. He tells me that he listens intently to our story and reads everything we put up. I only wish that he was not a private company so that he could reciprocate the favor. So welcome, Bilal. Now just recapping our business, I'd like to remind everybody -- just to remind what we do have. So iTrack Advance is a leading minimally invasive glaucoma surgical device. We have FDA approval, we have CE approval, and we're nearly through our MDR process. And we're excited to announce this quarter NMPA, the Chinese government approval. And we've got strong reimbursement in the U.S. and in other major markets. There is 170,000 patients that have been treated with iTrack Advance. That is a lot -- I mean, you can say that's not that many, but that is -- there's longevity associated with our treatment, that means that it's safe and there's long-term safety data now. We are a participant in a large established global market that's growing. Now we only have 3.5% as we assess of the U.S.A. market. And -- but -- which means -- imagine if it became 7%. That's an exciting concept to me. We have a direct sales force in the U.S. and Germany. I know there's some questions about that. We have a large distribution partner in China. But in the U.S., we choose and very importantly, it's a major asset that we've got a strong footprint in the United States, dealing direct with doctors, which drives good gross margins. We have trailing revenues of nearly $20 million growing at -- growing more than 20%, and we're on track to be EBITDA positive. There is a lot of really good things happening with our business. Next slide. This is a reminder to us all, and a lot of you have seen this slide before about why doctors choose iTrack Advance. People ask, how do you separate iTrack from the rest of the field? It's this slide that is central to our pitch, particularly in the United States, but globally, as our sales team go out and talk to doctors. And as I say to everybody here that reads this, yes, well, of course, this is an Nove Eye deck, of course they're going to have green ticks across everything and where are the red ticks -- where are the red crosses? Well, if we had a red cross, the red cross would be on the right-hand side, it would say global footprint or footprint in the U.S., number of sales reps, number of investment in marketing and sales. We are carefully limiting that investment. We are not taking advantage of all those green ticks at the moment. We are progressing in accordance with what our shareholders demand, which is to improve the bottom line and grow the top line, and that's a balancing act I'm involved every day. FDA approved doesn't do any damage, a light to provide navigation and preserves tissue for future treatments. It is a wonderful procedure. Next slide. The wonderful procedure I described has most recently been put together in a 24-month results paper by our good customers, Simon Ondrejka and Dr. Norbert Koerber in Germany, where it was just recently published. The paper describes a study of 98 eyes, which is a good, as they say, end followed for 24 months. And the treatment with iTrack Advance showed high -- about a 20% reduction in IOP and near elimination of medication over the 24 months. We remember our pitch is, let's get you off drops a patient. A doctor says let's get you off those drops. And because the drops are what the manifestation of glaucoma to a patient is having to daily put drops in their eyes. Getting patients off drops is what patients are happy to do. And we've got some great data here that we are putting in the hands of our sales teams, and it will drive further adoption. Next one. The revenue, which we reported, it's now the -- so we have nearly got quarter-on-quarter growth in our direct markets. I highlight there the fact that Chinese revenue can materially change the amount in a quarter. Our delivery to China took place in October rather than September as scheduled, which is not unusual. It can be very lumpy. And our sales growth was good. I mean it was creditable, but it is a little lower than what we planned. Our commercial expansion of new salespeople in the Southeast of U.S.A. has been slower, and Canada was slower than we expected. They seem small matters, but every dollar, every sale, every day counts when we -- as we continue on our mission to grow our sales in accordance with the guidance we provided and in accordance with our mission of improving the bottom line and improving our operating cash flow. I'm really pleased to report that October 2025 was the biggest month in the history of the company. We will provide more color at the AGM, but that is a great milestone. Next slide. U.S. Medicare reimbursement over the years, the shareholders have been watching this, and we wait and there has been scares in this area. I wrote here during the third week of July that we got the proposed rates. And I write these rates are usually finalized in November. They were actually finalized yesterday. And well, the professional fee, there's 2 parts to reimbursement. One is the amount the doctors are paid and the amount that the facility is paying. And the doctors are paid depending on how they quote, either $542 for their labor or $724 for their labor. And doctors choose which one. And they don't always choose the highest one, believe it or not. But what's important is that, that proposed -- those professional fee rates, the doctors' rates were confirmed yesterday. We have not yet got the facility fee. So they were confirmed in accordance with the proposal, which is great news. We are halfway through making sure that -- more than halfway through, that our reimbursement for 2026 is solid. Facility fee will be expected any day now. Next one, Mark. Trading revenues are important. You can see we're up nearly $20 million. Our quote around across the globe, we're around that $1.3 million, $1.4 million per salesperson across the U.S.A. and Germany where we have sales team. And we -- our research indicates that this is a leading -- industry-leading statistic. Direct sales channels continue to deliver superior margins versus markets with distributors. I know we get questions about that all the time. Why don't you hand it over to a distributor? And I think I've used the term rather colloquially, distributors have no love. They will not look after you the way they will when they present to you at a nice dinner. They will lose interest. Our own sales reps owe us their time, their dedication, they deliver what we want. Next slide. Our FY '26 guidance, we can all study that. Our sales revenues are between $21 million and $24 million. We've got our trailing revenues nearly up there anyway. We expect breakeven in FY '26. That is a slippage against what we hoped, which was the first half, and we attribute that to the slower than below planned sales still ahead of everything, but just below where we wanted to be. And I've got to say that the timing and size of sales into China, which can be difficult to predict, and the timing, both timing and size, we're working on that, can impact breakeven as well. And cash flow from operations is expected to improve. Cash flow, of course, is impacted by working capital, not just EBITDA. So we will provide a little bit of story on that in a minute. Next one, Mark. A lot of questions about drug delivery opportunity. Now just let me recap what we're really here for. The primary mission of the business is to grow revenues and improve the bottom line of our interventional glaucoma business. We were approached by a large pharma, we are approached by large pharmaceutical, plural, companies and to talk about whether this catheter could do other things. We talked about -- we have had some feedback that during some -- feedback that the results are not any -- the results we got do not provide any definitive decision for us on timing. Just remember that because we're not spending our own money, it is not just about our device that's important. It's also about the drug efficacy that the pharmaceutical company wants to put into someone's eye. So the success of the project is not in our hands. The success of the project is in the hands of whether or not that drug -- that particular drug, and there's more than one involved, is important. So we'll continue to work with potential partners on this project, but we are not spending our own money on it. We are responding to requests because our mission is to -- I get lots of questions about your costs is to get bottom line in performance on our interventional glaucoma business. That's just to reiterate. Last slide, I think. Working capital facility. Some of you have noted that we now have working -- an unused working capital facility to fund inventory and accounts receivable. Our business has high-quality accounts receivable. It is nondilutive. It's secured by accounts receivable and the tangible assets of the company, not the intellectual property. We manage our cash very carefully. And before this meeting, we had our weekly working capital meeting. We look at inventory levels, accounts receivable, collections for the prior week, old accounts receivable and average daily collections and the payables that we need to make to keep our business going. That's a meeting that it's not just devolved to the lower levels of the Nova Eye business. We have a very thin management team. I'm directly involved in that working capital management. So I want to reiterate that this is a positive thing. We have sufficient funds to meet our objectives and the working capital facility is part of that. So that's what I wanted to present. There are some questions, Mark. Did you want to ask those? Mark Flynn: Some good questions coming through, Tom, and I've got a couple here, but I'll -- some received earlier and then some through the webinar now. So one question was, "What caused the Q1 expenses to be higher than in other quarters?" Now you may have answered this, but -- and a couple of these, but I don't think it's expenses, but can you answer that one? Thomas Spurling: Yes. We have never released expenses for the quarter. We have reduced cash. And I must admit that what I do know is that our company ratios are changing all the time because our sales are growing and there's leverage with our operating expenses against those sales. And there's nothing special about Q1. But all we really focused on was the key ratio of improving the EBITDA to sales ratio and ultimately cash flow from operations. We have highlighted our cash flow from operations, it continues to decline. And so I -- individual expenses in each quarter is we manage it on a ratio basis, I guess. Anything else? Mark Flynn: One through from Michael Youlden at MST, "What drove the strength in the record October sales?" Thomas Spurling: Well, October is a good month because it is, in ophthalmology, there is some trade shows. It's the end of summer. It's just a period in autumn before doctors want to get some surgeries done, in the northern autumn. And we just keep -- there's some seasonality to it. But we actually -- every month, our sales team has out in the -- and some of them have been here a long while and others haven't. And as the message gets across, the growth keeps happening. So there's no particular reason apart from the investments that we've been making, and the plan is to do that. And so we are just achieving what we plan to achieve. Mark Flynn: Okay. Where is the iTrack Advance gaining share? And who are our main competitors? Thomas Spurling: Well, I think our main competitors are listed on iTrack who -- on that slide I put up before that says why do we -- why is an iTrack-- why does a doctor choose iTrack? We're gaining share across general ophthalmologists and increasingly cataract surgeons. We had a good following with or we have a good following with glaucoma surgeons. The versatility of the device means that it's able to be used in a number of stages of the disease. Glaucoma surgeons tend to be treating patients with later-stage disease, cataract surgeons with earlier-stage disease and comprehensive kind of both. So as our mission, as our reps get into all the territories, and we are underpenetrated in those because we don't have enough reps to truly get to everywhere, we are increasing sales. And the market is growing. So it's not just about share. Mark Flynn: Continued questions on the U.S. sales strategy and potential partnerships. So again, I know you've answered this, but it's probably just a little bit more is, have we considered using partners to accelerate? Or is there any large direct sales teams that could benefit from a glaucoma treatment product portfolio? Thomas Spurling: Yes. So in one of our decks, we talk about -- in the deck I put out in August that we put out in August, we talk about the current cataract and glaucoma. 1 in 5 patients that have -- that need a cataract surgery also have glaucoma. That makes it interesting to those large cataract companies that I've cited in that list. But the direct sales model remains central to our strategy because it ensures we get proper engagement, proper take-up and good gross margins. It is expensive, and I get pointed out every day about why are the expenses so high, why are the expenses? It's because professional sales teams in America cost a lot of money. Now we're getting there. Our sales team is expanding. Partnerships, we have never -- we have not been able to locate somebody that could do a better job than our own sales team. And I think I've said before, we have a small company that helps us sell into the large states west of Minnesota and east of Seattle, east of Washington, D.C., those so-called big sky states because it's very sparse. But apart from that, it's our own sales teams, and that's why we think it's best for our shareholders. Mark Flynn: Something we've put out today, and what is the impact has the new 24-month clinical study had on adoption recently? Thomas Spurling: Yes. Well, I mean, I haven't -- that was released just a couple of days before our quarterly report. And so it's basically been in the hands of our sales reps, and we expect to have -- expect it to be positive. We think our German people because Germans like other German doctors. And so our German sales team have really grabbed it and they're out there doing something about it right now. Mark Flynn: China is obviously a big market opportunity for Nova Eye. What is the outlook now following that NMPA approval of the iTrack Advance? Thomas Spurling: Well, that NMPA approval was a hard one, and it's a major milestone. We had a really good approval in a very large market. Our investment in that market is still very low. To be really honest, it's a single person, helped by Kate Hunt and helped by me, where we are pushing our distribution partner, not pushing. We're working with our distribution partner. The ratio of cataract surgeries in -- to population in the United -- in China is very, very low compared to the ratios of cataract surgery to population in the United States. As health care improves in China, cataract surgeries will rise and the interventional glaucoma, which is mostly about concurrent cataract and glaucoma surgery, will become a bigger business, much like it is in the United States. In the United States, we're delivering 14,000, 14,500 units a year -- surgeries a year. We're currently at about 2,000 -- 2,500 in China. It is a large market opportunity, and it's a long-term value-creating market for us. Mark Flynn: Okay. Just on some research and development and obviously pipeline, but wrapping a couple of questions that have just come through now on IP and our patent strategy. So what's next for that R&D and how are we protecting that patent. Thomas Spurling: Yes. So we've got a constant work on issuing patents, freedom to operate, all those boring things that we have to do to make investments to protect our IP, both with patents and with first-to-market activities. But it's fair to say that our product development focus, and I would not call it research, it is development. We are not a research company. We're a company trying to -- we're a company that has a viable product that is working to increase sales and generate EBITDA. Having said that, the idea of the differentiation of our product to the rest of that space that is highlighted on the why surgeons choose iTrack slide is the central theme of our product development. All those things that make us better is where we see the investment and improvement in the product, giving us the opportunity to increase sales further. Mark Flynn: Sales across the rest of the world outside the U.S. ex China as well, but more around Germany or Europe, obviously moved around a bit. The reasoning behind that lumpiness of those sales in Europe? Thomas Spurling: Yes. So the sales in Germany are relatively smooth because of -- we have our own sales team. But in outside of Germany and the U.S., we use distributors. Obviously, we talk about how lumpy China is and that's its own case because it's materially lumpy. But the rest of the world markets can be lumpy. They're relatively small numbers. So just imagine if our distributor in the U.K. buys 50 catheters in September and then doesn't buy another one -- well, buys 50 catheters on the 29th of June and then buys another one on the 1st of October. It could miss a whole quarter. Now I'm making that number, it's more than 50 catheters, but $50,000 makes a difference on that slide. So it is about the timing of deliveries to our distributor markets. Mark Flynn: Okay. Probably a final question is, and back to China, which is obviously a growth market for Nova Eye, does Nova Eye -- is it the same competitors in the Chinese market as per our comp slide? Thomas Spurling: No. We're aware that Glaukos has a presence in the market. But apart from that is that's the main one that we come across. Mark Flynn: Okay. Thank you, Tom. With that, thank you very much. As Tom said, another record attendance on the webinar. If any further questions, there's a number have come through, and we'll look to answer those directly to others, but please e-mail Tom and I, and we'll endeavor to get back to you. But thank you very much for joining, and thanks, Tom. Thomas Spurling: Thank you. Thank you, everybody. Appreciate your attendance.
Operator: " Kurt Gustafson: " Matthew Foehr: " Michael Almisry: " Leerink Partners LLC, Research Division Unknown Analyst: " Alexander Xenakis: " Truist Securities | Matthew Hewitt: " Craig-Hallum Capital Group LLC, Research Division Brendan Smith: " TD Cowen, Research Division Unknown Analyst: " Operator: Good afternoon, and welcome to OmniAb's Third Quarter 2025 Financial Results and Business Update Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. And I would now like to turn the call over to Kurt Gustafson, OmniAb's Chief Financial Officer. You may begin. Kurt Gustafson: Thank you, operator, and good afternoon, everyone. This is Kurt Gustafson, OmniAb's Chief Financial Officer, and thank you all for joining our third quarter 2025 financial results conference call. There are slides to accompany today's prepared remarks, and they're available in the Investors section of our website at omniab.com. Before we begin, I'd like to remind listeners that comments made during this call by OmniAb's management will include forward-looking statements within the meaning of the federal securities laws. These forward-looking statements involve risks and uncertainties that could cause actual results to be materially different from any anticipated results. These forward-looking statements are qualified by the cautionary statements contained in today's press release and our SEC filings. Importantly, this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, today, November 4, 2025. Except as required by law, OmniAb undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call. Joining me this afternoon is Matt Foehr, OmniAb's President and CEO. During today's call, we will provide highlights on the company's business and operations, partner and technology updates as well as our recent financial results and outlook. At the conclusion of the prepared remarks, we'll open the call to questions. And with that, let me turn the call over to Matt. Matthew Foehr: Thanks, Kurt. Good afternoon, everyone, and thanks for joining our Q3 call. Starting now with Slide #4. We continue to have nice deal flow throughout the third quarter, and the number of new program additions this year is far outpacing last year. Our program adds as of the end of Q3 already equaled the program adds we had in all of 2024. We've also grown and diversified our base of active partners, reaching a record high level, now exceeding 100. We see this as further validation of our differentiated proprietary technology platforms and their proven value to enable the discovery of next-generation therapeutics for our partners. We're building the foundational momentum for our recently launched xPloration partner access program, which is designed to put our high-throughput single B-cell screening platform in the hands of our partners. The xPloration sales funnel continues to grow, generating strong interest and new opportunities for us. And as the latest example of our commitment to pioneering innovations and sector leadership, in December, we'll be launching a brand-new technology to add to our stack. We're excited to share a little preview today of OmniUltra, which is the first transgenic chicken that produces cow-like antibodies with ultra-long CDRH3s. OmniUltra has the potential to open new markets and new business opportunities for us and to expand our reach into enabling the discovery of novel peptide therapeutics. I'll provide more on this technology in a moment. While we continue to grow the number of partners and programs, we also realigned staffing levels in Q3 and further reduced operating expenses to drive efficiencies in our lean yet scalable operating model. In addition, we enhanced our financial flexibility and strengthened our balance sheet with the closing of a $30 million private placement in late August. I want to welcome our new shareholders and thank the existing shareholders who participated in the transaction for their support. Moving to a review of our key business metrics now starting with Slide #5. We ended Q3 with 104 active partners. During the third quarter, we've highlighted that we completed new license agreements with A*Star and the University of Leeds. The distribution of our active partners by type, including discovery, commercial and academic continues to hold steady. And the same holds true for our distribution of partners on a geographic basis with just over half of our partners based here in the U.S. And I note that our international reach has continued to grow as we make a concerted effort to expand and diversify our partnership base. With regard to new partnerships, increasingly, we also think there are innovative ways in which we can create value in a variety of time horizons, leveraging our technologies or assets that come out of our novel technology development and validation work. On Slide 6, the number of Active Programs leveraging our technologies increased to 399 as of the end of Q3. This includes a net addition of 36 programs year-to-date, of which 18 were added during the third quarter as we continued to see strong program addition momentum. During the third quarter, there were 6 programs that were terminated. And as I've said before, and I say often, program attrition is a normal part of our business and will continue to be due to shifts in partner priorities as well as budgetary and technical factors at our partners. The graphics on Slide #7 highlight growth of our post-discovery stage programs that are in our portfolio as well as the advancement of these programs into and through clinical development. The number of programs in the post-discovery stage increased by 15% year-over-year. A number of new programs progressed to the preclinical stage of development. And in Q3, one program moved to the registration phase. These 61 post-discovery stage programs have contracted remaining potential milestones to OmniAb of approximately $1.3 billion, including $700 million from small molecule ion channel programs. Slide 8 shows the number of active clinical programs and approved products, which totaled 32 at the end of Q3. As of September 30, 2 new partner programs had entered the clinic in the year and 2 came out. We are proud to report that subsequent to quarter end, the first OmnidAb -derived program entered into human clinical trials. As we launched the OmnidAb single-domain discovery platform less than 2 years ago, this is a significant milestone for a new technology, especially within such a short period of time. We also received confirmation that another bispecific antibody derived from our rodent platforms entered human clinical trials just last week. We'll talk more about both of those new clinical programs after our partners have disclosed more details publicly. Overall, given our latest discussions with our partners and our line of sight into their work, we see the potential for a total of 5 new entries into clinical development for novel OmniAb-derived programs this year. This is at the lower end of our previous range of projected clinical starts, primarily resulting from select partners simply shifting timing of clinical program initiations into early 2026. Also in regard to clinical programs, I note that we have multiple partners who will be presenting data at the ASH Annual Meeting in early December. So we're looking forward to that as well. Turning now to Slide 9. Here, we've highlighted select recent updates for partner programs that are leveraging our technologies. At the Annual Meeting of the American Thyroid Association, Immunovant presented 6-month durability data from its Graves' disease study showing sustained remissions with batoclimab. Their next-generation candidate, IMVT-1402, is advancing in 2 potentially registrational Phase III trials in Graves' disease with top line results expected in 2027. Moving to the right on this slide at ESMO, Arcus Biosciences reported median overall survival of 26.7 months from its Phase 2 EDGE gastric trial. The study combines domvanalimab with OmniAb-derived zimberelimab and chemotherapy in advanced gastric cancer, clearly reinforcing the potential for this treatment approach. Salubris Bio announced that China's NMPA accepted its NDA for SAL003, which is a recombinant fully human anti-PCSK9 antibody for dyslipidemia. So this program moved from our Phase III bucket to the registration stage in Q3. And lastly, Rondo Therapeutics abstract on its first-in-class CD28 and Nectin-4 bispecific antibody was accepted for presentation at the Society for Immunotherapy of Cancer Meeting, which is taking place this week. Turning now to Slide 10. Here, we highlight our clinical and commercial stage partner pipeline for Active Programs that carry downstream economics to OmniAb. Placement in this graphic is based on a program's most advanced status in any geography or indication. Our partners continue to advance OmniAb-derived antibodies into and through the clinic. And this latest update shows Salubris Bio's SAL003 moving to the registration phase, as I just mentioned. On Slide #11, I'd like to take just a quick moment to highlight progress with our xPloration partner access program. The early feedback we're getting from partners using the instrument is that xPloration is performing extremely well and that it's driving efficiencies in discovery workflows. We're really pleased with the response so far as xPloration continues to gain traction since its launch in Q2 with a strong demand for lab demos from partners throughout Q3. The efficiency and ease of use of xPloration are significant differentiators. This platform complements our core technology licensing business as we expect xPloration to be accretive to earnings and cash flow in both the short and the long term. As we grow our installed base of instruments, we expect to broaden our revenue channels with recurring single-use consumable sales, annual subscription services for software and maintenance contracts. Ultimately, we're clearly seeing that xPloration deepens engagement with partners, has the potential to drive new program growth and showcases OmniAb's innovation in integrating automation, AI-powered methods and discovery. Turning to Slide #12. Our internal innovation engine continues to strengthen our differentiation, especially with our growing suite of genetically engineered chicken-based discovery platforms. We've had an established history of pioneering the development of advanced discovery technologies that the industry needs. We talk a lot about the advantages that a chicken immunization host presents for novel molecule discovery as about half of all therapeutic targets are more than 90% conserved in mammals. So using a chicken as an immunization host species for discovery can be really important and really valuable in many instances. Our OmniChicken technology shown on the lower left of this slide remains the world's only validated humanized transgenic chicken for antibody discovery. Leveraging the evolutionary distance between birds and mammals, OmniChicken delivers robust immune responses and generates highly diverse antibody repertoires. This platform has become foundational to many of our partners' discovery pipelines. Building upon this, OmniClic incorporated a fixed light chain design, enabling seamless combinations of antibodies for bispecific and multi-specific applications. And OmnidAb, our single-domain antibody framework extends the utility of chicken-derived antibodies into small, stable therapeutic formats and opens up opportunities across a range of modalities. Molecules from OmnidAb are well suited for modular and multi-specific architectures while maintaining advantages in terms of manufacturability and stability. And as I mentioned, OmnidAb was launched less than 2 years ago, and it's attracted a lot of new partners and already has generated a program that has entered the clinic. And now as the latest entry in this stack, in December, we're launching our newest transgenic chicken platform, which we are branding as OmniUltra. Moving to Slide #13. OmniUltra represents the next evolution of discovery tools as it's the first and only transgenic chicken producing ultra-long CDRH3s, which is a structural feature of antibodies typically seen only in cows. Put another way, OmniUltra chickens are engineered to create antibodies with the physical characteristics that are found in cows, but with human features to make them suitable as human therapeutics. These ultra-long CDRH3s are designed to enable antibodies to reach unique heat or recess binding pockets and previously inaccessible epitopes, potentially unveiling therapeutic opportunities beyond the reach of conventional antibodies or conventional modalities. What's especially exciting is the potential ability of these ultra-long CDRh3s to be isolated as novel or autonomous binding fragments known as Pico bodies, which are the smallest known functional antibody fragment, roughly 1/3 the size of an antibody. Pico bodies could open up entirely new therapeutic applications and modalities. Turning now to Slide 14. So OmniUltra is not only expanding the boundaries of antibody discovery technologies, but also potentially opens up entirely new opportunities for us in peptide-based therapeutics. Along with its novel architecture, OmniUltra is engineered for in vivo optimization, allowing for the generation of molecules to essentially be preselected for specificity, affinity and structural stability. This process enhances the discovery of antibodies with unique binding domains with the potential to target previously inaccessible epitopes. And importantly, as I said, OmniUltra is also leverageable for peptide therapeutic discovery. Now peptides are obviously a class of molecules that have seen a substantial increase in attention by the industry, in large part as a result of the GLP-1 drugs that have been so important to patients and to the industry globally. That's led to significant growth and investment around peptide therapeutics from a discovery, development and downstream capacity and infrastructure perspective. And that's part of why we think OmniUltra is really well timed. Unlike traditional peptide discovery methods, OmniUltra uses a transgenic chicken host to biologically produce optimized structured peptides on a validated scaffold. This capability could establish new classes of biologically derived therapeutics with potential applications across modalities. OmniUltra highlights our team's innovation leadership and extends our platform advantage into new therapeutic spaces, further differentiating our technology platform and reinforcing our long-term growth potential. Slide 15 sets the stage for OmniUltra's formal launch, which is planned to be at the Antibody Engineering & Therapeutics Conference down in San Diego next month. At AET, we have 2 podium presentations and 2 poster presentations. There's a lot more to say about OmniUltra beyond today's little preview. So while at AET, we'll be holding an investor webcast related to the OmniUltra technology, discuss the potential market use and applications and review the potential business impact of this highly innovative and pioneering technology. The tech validation work that we completed with OmniUltra included a broad array of therapeutic targets, and we will touch on that work as well. We'll be announcing details of the webcast as we get closer to the event. But for now, please mark your calendars for Monday, December 15, at 5:00 p.m. Eastern Time. Moving now to Slide 16. We're excited about the prospects for OmniUltra as it significantly increases our potential universe of partners into the peptide discovery space and also obviously opens up new doors and opportunities in the antibody discovery space as well. As most of those who follow us know, our technology license deals generally have several components, including collaboration and service revenue, milestone payments and royalties upon commercialization of a program. I want to highlight that OmniUltra builds on our established transgenic chicken capabilities, which require a service contract as our partners cannot perform the discovery service work on their own. And we think the new OmniUltra platform can drive higher collaboration and service revenue in the near term. And with that, let me turn the call over to Kurt for a discussion of our Q3 financials. Kurt? Kurt Gustafson: Thank you, Matt. So on Slide 18, I'll start with a review of revenue. For the third quarter of 2025, we reported revenue of $2.2 million, and this compares to $4.2 million for the same period in 2024. The decrease was primarily related to a reduction in milestones achieved and lower service revenue. Service revenue declined primarily due to the completion of a couple of small molecule ion channel programs earlier this year. And as a small offset to this decrease, the 2025 third quarter included xPloration revenue derived from the sale of consumables and a modest increase in royalty revenue. On Slide 19, we show our cost and operating expense for the third quarter of 2025, which decreased to $20.4 million from $23.9 million for the prior year period. We saw decreases in both R&D and G&A expenses compared with last year, and this quarter also included a nonrecurring charge of approximately $800,000 related to a headcount reduction we made earlier in the quarter. Turning to Slide 20, I'll focus on a few of the operating expense line items, starting with R&D expense, which decreased to $10.4 million from $13.3 million in the year ago period, primarily related to lower headcount and stock-based compensation as well as a decrease in external expenses due to the completion of certain ion channel programs earlier this year. G&A expense was $6.8 million for the third quarter of 2025 compared with $7.1 million for the same period in 2024, with the decrease primarily due to lower legal fees and stock-based compensation expense. Net loss for the third quarter of 2025 was $16.5 million or $0.14 per share compared to a net loss of $16.4 million or $0.16 per share for the same period in 2024. On Slide 21, we have our balance sheet as of September 30, 2025. We ended the quarter with $59.5 million in cash. And as Matt mentioned, during the quarter, we completed a $30 million private placement of common stock, which netted the company $28 million. I'll conclude with Slide 22 with a discussion of our 2025 financial guidance. We've recently received information that a few of the milestones that we were expecting in the second half of 2025 will now be pushed to 2026. We also identified further efficiencies in our operating structure. And as a result, we're updating our guidance for this year. We now expect that 2025 revenue will be between $18 million and $22 million and operating expense will be between $82 million and $86 million. As a reminder, approximately 40% of our operating expense is noncash, mostly due to stock-based compensation and the amortization of intangibles, primarily from historical company or technology acquisitions. We continue to expect that our cash used in 2025 will be lower than the cash used in 2024, excluding financings in both years. and we expect our year-end cash balance to be between $52 million and $56 million. And finally, our guidance on the tax rate remains unchanged at approximately 0% due to a valuation allowance. And with that, I'd like to open up the call for questions. Operator? Operator: [Operator Instructions] Your first question is from Puneet Souda from Leerink. Michael Almisry: You have Micheal Sonntag on for Puneet. Congrats on the quarter. I just want to start my first question on the private placement. I was curious if you could offer some color on what motivated the timing of the placement and if you have any thoughts on the cash runway this now gives you if you expect this to get you to where you're consistently cash flow breakeven? Kurt Gustafson: Yes. Maybe I'll provide some additional or some thoughts and then maybe Matt can jump in there. These are conversations that we have with our Board. We took a look at our forecast and decided it was the right time to sort of bolster the balance sheet. Markets seem to start becoming a little bit more favorable. And so we took that opportunity to strengthen the balance sheet. We don't provide any sort of long-term guidance. I kind of gave you the guidance that we have for this year with regards to cash burn and cash balance. But I think this puts us in a good position. I feel like the company is now well capitalized. I don't know, Matt, anything else to add? Matthew Foehr: Yes. I mean I'll add as well. Again, this provides us a level of flexibility for the business and made sense. And as Kurt said, we think the business is well capitalized. As we look out into the coming years, we'll provide further guidance, but we feel good about where we are. Michael Almisry: Okay. Great. And then on xPloration, I was wondering if you could provide some, I guess, additional color on customer conversations. What kind of customers in your partner base are you seeing some more interest? And if you have any thoughts on, I guess, bookings or order timelines? Any color you can provide there would be helpful. Matthew Foehr: Yes. Yes, Michael. Yes, it's been very busy on the xPloration front and interest has been very strong. I would say, generally, now we've got obviously a partner base or a partner universe now of 104 partners. It is definitely the higher tier of partners who are the ones who are the most active and likely the ones who will benefit the most from xPloration. We've been very busy with demos here at our Emeryville site as well as at some partner sites as well. So I think that bodes well for how things are lining up. Obviously, xPloration itself in terms of the instrument purchase is a capital expenditure, and we feel like our timing of launch was quite good and being very busy in the demo space in Q3 and into Q4 is very good timing as partners develop their budgets for 2026 and their capital spend plans. So we feel good about where we're placed. The feedback has been very positive around the efficiency of the instrument, the ease of use and kind of the broad user base from a lab perspective that xPloration can enjoy. So we're feeling good about that. Operator: Your next question is from Joseph Pantginis from H.C. Wainwright. Unknown Analyst: Can you hear me? This is [ Sara ] on for Joe. Sorry if it was muted. Matthew Foehr: We can hear you now, Sara. Unknown Analyst: Yes. Just had one regarding OmniUltra. And just wanted to get a sense of launch readiness and if you're able to, at this point, elaborate on the readiness of OmniUltra for launch? Has there been any beta or pilot projects completed or any potential partners that you already have lined up to adopt the platform once it goes live next month? Matthew Foehr: Yes. Yes, Sara. We've done a substantial amount of validation work around OmniUltra with many, many targets that we know are of interest to the industry. So that's work we've been doing here internally. And part of why we're launching the technology with 2 podium presentations at the AET conference. So we'll talk in a lot more detail about that specific work at the scientific conference at the time of launch. So we have a really good sense of the breadth of applicability of this technology and I think are really well positioned for the launch in December. So hopefully, that answers your question. Operator: Your next question is from Kripa Devarakonda from Truist. Alexander Xenakis: This is Alex on for Kripa. We also have a question on xPloration. It sounds like the conversations have been going really well. And do you have any update on the new thinking as to how much revenue can be generated from xPloration and over what time period? Matthew Foehr: Yes. It's still early days in the xPloration launch, obviously. We have said we expect xPloration to be accretive to both earnings and cash flow in both the short and the long term. That has a lot to do with kind of how the technology has been designed and how we're implementing the launch. There are multiple revenue streams that are associated with xPloration. Of course, the instrument sale itself, which will bring revenue, and we have a nice margin on the instrument. And then we also have single-use proprietary consumables as well as service contracts and maintenance contracts. So we've not given precise guidance at this point. I think as we progress through the launch, as we get additional instruments sold and deployed, we'll have more visibility there, but we're feeling really good about how it's positioned. Alexander Xenakis: That makes sense. And a little bit of a follow-up. Are there other trade shows that you're also demonstrating the technology and partnerships with? Or is it done mainly through the conversations directly with the company? Matthew Foehr: No, we are also present at trade shows where we know our partners will be. Actually, in addition to launching OmniUltra at AET, for instance, we'll also have a substantial xPloration presence there as well. And then we have some other ones lined up as well where we'll have demo units and be doing either virtual or planning in-person demos with partners. Operator: Your next question is from Matt Hewitt from Craig-Hallum. Matthew Hewitt: Maybe first up, it sounds like you had -- and I realize this is just part of the business, but you had a couple of customers that pushed out programs until 2026, milestones that you had anticipated later this year got pushed to '26. Are you seeing any improvement? We've heard from several companies this earnings season that between the M&A activity that's been pretty active as well as the funding environment that's been improving for small and midsized pharma that the R&D budgets are kind of coming back online, that they're starting to spend. And I'm just curious if this is just kind of a one-off with a couple of partners? Or are you seeing a little bit more of a broad trend that things are getting pushed to 2026? Matthew Foehr: Yes. Thanks, Matt. I mean, broadly, and we kind of noted this really starting late in Q4 of last year with strong program addition momentum, right? We are seeing continued momentum in program additions that has been sustained through this year, which is very good to see. And I think we're continuing to see momentum there. The connection or the element of milestones being pushed into 2026, I would, in this instance, categorize that as more what I consider standard development stuff, right? So it's timing of clinical batches or processes in clinical start-up, things like that. In some instances, these were programs where partners had communicated to us their plan to start in Q4 and also had committed that plan publicly, but just with kind of standard development items had drifted into early 2026. So a variety of factors. But we are seeing similar to what you were describing in terms of industry momentum, we're seeing that in the form of strong program additions. Interestingly, we're also seeing with some of our academic partners an increased focus on forming spin-out companies around assets and being much more focused on monetization of programs and assets that have come or can come out of our technology. So that's kind of another interesting thing we're starting to see as well. But hopefully, that gives you some color. Matthew Hewitt: No, that's very helpful. And then maybe kind of a similar line here, but -- and I realize it's early, it's October. But as you're having these conversations with your partners, what are you hearing as far as '26 R&D budgets are concerned? I think there was a lot of, I guess, excitement that 2025 budgets look pretty good relative to '24. And I realize there's been some fits and starts during the year, but it does feel like maybe those budgets are going to get spent. Are conversations kind of indicating that we might see an increase in R&D budgets? And I guess, tied to that, with xPloration, do you anticipate that the feedback that you're getting is that this is a Q1 purchase decision? Or could you still see some of these boxes sold already this year? Matthew Foehr: Yes. Matt, so probably our -- one of our best barometers is in the form of program starts, right? That's really what we see is that when you see a new program start for a novel target, right, a lot of work in terms of novel biology goes on upstream of that by the partner. They've obviously committed a project team, and they're starting a program. So that, again, we've seen really nice strong program addition momentum this year, and that's been good to see. So I think that's a good indicator. Most of our specific discussions around budget and budget planning more recently have been centered around xPloration, and that's really just in the capital realm. And then downstream exact timing of orders can obviously be dependent on a variety of factors at the partner in terms of what work they're doing when and how they're gating out their capital spend in 2026. So yes, that's kind of what we're seeing. Operator: Your next question is from Brendan Smith from TD Cowen. Brendan Smith: Maybe just a quick one first on OmniUltra. Again, I fully appreciate it's early, but can you maybe just help us understand how you all are thinking about the potential economics of some of those partnerships, maybe just relative to some of the other offerings that you guys have or ones on the books? And if you're envisioning maybe there could be different terms based on how they want to use it, whether for antibodies or peptides or what have you? And maybe just if you anticipate any of those could potentially replace some of the existing partnerships in any instances? Matthew Foehr: Yes, Brendan, I think we see OmniUltra as additive to the business, right, broadly applicable and opening up new fields for us. Obviously, our stable and large ecosystem of antibody-based partners now at 104. Many of those have -- or will have or already have expressed interest in OmniUltra for things like bispecifics or CAR-T therapies. We have a number of partners in the radiopharma space, which is also a space that is growing rapidly as well, and I think we'll continue to expand. But this really also adds an entirely new set of potential partners who are interested in peptide discovery. For some of our larger partners, they also are working in peptides as well as antibodies, but then there is a completely new set of partners who are more peptide focused. And that has really increased over the last couple of years with the successes of the GLP-1 drugs, et cetera. So there's a lot of investment going on in the peptide space. So we see it really as additive. In terms of your question of agreement structure, I think this does open new opportunities for us to drive service revenue in the near term for a variety of reasons. There's also a lot of precedent out there for peptide-related discovery deals that follow the frameworks that we've built around upfront payments, service payments, milestones and royalties. But precise terms will obviously be an interplay of a variety of factors associated with each license. Brendan Smith: Okay. Got it. And then maybe just quickly, if I could, just a follow-up. Just on the partner pipeline -- can you just speak a little bit to how you all are thinking about maybe the initial ramp in some of these royalties? Just I know it's kind of a range of different spaces you all are partnered in between FcRns and PCSK9 and PD-1. So just kind of wondering where you maybe see the fastest opportunity for some of those royalties to grow versus others that might just take a little bit longer to get up and running? Matthew Foehr: Yes. Yes. I mean maybe I'll talk generally about some of the programs, and then Kurt can maybe talk a little bit about kind of the revenue generally modeling around how milestones and royalties come into play. But now obviously, we have 2 drugs that are in the registration bucket, both of those currently in China. The newest is the SAL003, which is the anti-PCSK9 you referred to. So that was news here just from 4 weeks, 5 weeks back from Salubris. And they reported they submitted their NDA submission. It was accepted in China. They mentioned in their public disclosures that the NDA aligns with China's accelerated approval framework for high-impact biologics. So that was generally good to hear. And then they've stated publicly they're positioning for market entry in 2026. They've also kind of highlighted comparable or superior efficacy to other anti-PCSK9 therapies and one that will be -- that was developed domestically in China. So we'll continue to keep an eye on that. That's a drug that came originally out of our early partnership with WuXi for our rodent platforms, and it has a 3% global royalty associated with it. So that's probably the newer one. And then as you look at the Phase III assets and Phase II assets, there are a number in there that folks are rightly paying attention to. Immunovant is doing great work around IMVT-1402 and has a couple of expected data events next year that we're obviously keeping an eye on. Acatilimab with Genmab is in Phase III trials as well. That's another one that folks are paying attention to. And then now we're starting to see growing attention around Teva's 53408, which is an IL-15 for celiac, and they're also pursuing some other indications. They've been really moving that quite aggressively and highlighting the program. So we're cheering that on as well. But Kurt, maybe you want to talk through the... Kurt Gustafson: Yes. I mean I think in terms of how we think about the royalty ramp, we typically take a look at what analyst consensus are for these drugs. So both acasunlimab and the 1402 compound, I mean, Genmab has been out there, said that they expect to launch in 2028. When I take a look at analyst estimates, that's sort of what they're projecting as well, and there's a ramp associated with that. It's similar with -- similar timing for 1402. So we take a look at those analyst expectations in terms of how we model the royalties that we might ultimately get. And they're pretty nice ramps and people have pretty nice forecast associated with both of those compounds. They're expected to be very large drugs. Operator: Your next question is from Stephen Willey from Stifel. Unknown Analyst: This is [ Josh ] on for Steve. I just had a quick question on OmniUltra and how it differs from OmniTaur. I think I remember the OmniTaur platform sounded very similar with this generation of these ultra-long CDR3s or CDRH3s. Could you maybe just provide some color on how these platforms actually differ? Matthew Foehr: Yes. Great question, Josh. And I'll try not to get too geeky and technical. OmniTaur actually leverages cows, right? So these are sequences that are derived out of cows. And also, we've developed some downstream workflows and other things that drive value in OmniTaur. And we actually have a number of active OmniTaur programs, some of which are now at the preclinical stage approaching IND. OmniUltra leverages a chicken host to get that advantage of the evolutionary distance, right? So you're able to leverage that distance of chickens from mammals to elicit a stronger immune reaction. And we've also engineered in some other features that have increased kind of the broad applicability of OmniUltra into a variety of spaces, including opening up opportunities in the peptide space. So at the core, the difference is the host, but there are obviously a number of other kind of finer technical details that broaden the applicability of OmniUltra. Unknown Analyst: Okay. Great. And then just another question on the xPloration revenues. Is there any color you can maybe offer as to the breakdown between maybe the consumables versus the software versus the hardware? And do you think -- do you anticipate maybe in the future providing any kind of metrics around the breakdown of sales related to the xPloration platform? Matthew Foehr: Yes. No, it's a good question. I think there's not really a breakdown that we'll have for you this quarter. It wasn't a huge amount of revenue. It was -- I guess I would say it's mostly related to consumables. I think it's still early days with the xPloration launch. As we get more into it, I think we'll probably be able to provide some -- a little bit more color on sort of what the average consumable usages per instrument and put out some other metrics like that. But at this point, it's still pretty early. So stay tuned for that. As we see the launch continue and progress, hopefully, we'll be able to provide that type of color. Operator: Thank you. There are no further questions at this time. I will now hand the call back over to Matt Foehr for the closing remarks. Matthew Foehr: Great. Thank you, operator. I'd like to thank everyone for joining us today on today's call and for your questions and engagement. We look forward to discussing our fourth quarter financial results early next year. In the meantime, we'll be participating in a number of investor conferences later this month, including Truist's BioPharma Symposium this week in New York, Stifel's Healthcare Conference that is next week and the Jefferies Global Health Conference in London. So as I mentioned, on December 15, we'll also have -- we'll be formally launching OmniUltra, and we'll have an investor webcast that day as well. And we look forward to providing additional details on that webcast next month. So thanks again, and have a great afternoon. Operator: Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may all disconnect your lines.
Operator: " Jennifer Hutcheson: " Colin Reed: " Mark Fioravanti: " Cooper Clark: " Wells Fargo Securities, LLC, Research Division Aryeh Klein: " BMO Capital Markets Equity Research Patrick Chaffin: " Bennett Rose: " Citigroup Inc., Research Division Charles Scholes: " Truist Securities, Inc., Research Division Daniel Politzer: " JPMorgan Chase & Co, Research Division Duane Pfennigwerth: " Evercore ISI Institutional Equities, Research Division Chris Woronka: " Deutsche Bank AG, Research Division David Katz: " Jefferies LLC, Research Division Jay Kornnerbreg: " Cantor Fitzgerald Chris Darling: " Green Street Advisors, LLC, Research Division John DeCree: " CBRE Securities, LLC, Research Division Operator: Welcome to Ryman Hospitality Properties' Third Quarter 2025 Earnings Conference Call. Hosting the call today from Ryman Hospitality Properties are Mr. Colin Reed, Executive Chairman; Mr. Mark Fioravanti, President and Chief Executive Officer; Ms. Jennifer Hutcheson, Chief Financial Officer; Mr. Patrick Chaffin, Chief Operating Officer; and Mr. Patrick Moore, Chief Executive Officer, Opry Entertainment Group. This call will be available for digital replay. The number is (800) 839-3516 with no conference ID required. [Operator Instructions] It is now my pleasure to turn the floor over to Ms. Jennifer Hutchison. Ma'am, you may begin. Jennifer Hutcheson: Good morning. Thank you for joining us today. This call may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, including statements about the company's expected financial performance. Any statements we make today that are not statements of historical facts may be deemed to be forward-looking statements. Words such as believes or expects are intended to identify these statements, which may be affected by many factors, including those listed in the company's SEC filings and in today's release. The company's actual results may differ materially from the results we discuss or project today. We will not update any forward-looking statements, whether as a result of new information, future events, or any other reason. We will also discuss non-GAAP financial measures today. We reconcile each non-GAAP measure to the most comparable GAAP measure in the exhibit to today's release. I'll now turn the call over to Colin. Colin Reed: Thank you, Jen. Good morning, everyone, and thanks for joining us today. We're pleased to report third-quarter results in line with our expectations in what continues to be a somewhat volatile operating landscape. On the hotel side of our business, our group business actualized a bit better than we had anticipated, with a stronger short-term pickup in corporate group meetings. In addition, the leisure hotel market in Nashville improved as the quarter progressed. And in September, transient ADR growth for the upscale and luxury hotel segment turned positive for the first time since February of '25. Overall, our same-store hospitality portfolio meaningfully outperformed the industry in the third quarter, achieving a RevPAR and total RevPAR index relative to our Marriott-defined competitive set of approximately 141% and 195% of fair share. In our entertainment business, our recent investments in Category 10 and Block 21 continue to perform well, while some of our downtown Nashville venues saw some impact from the surge in new bar and restaurant openings on Lard Roadway. Similar to what we're seeing in the hotel market right now, the rising popularity of country music and Nashville as a destination has attracted new live entertainment supply into the market. Despite this near-term period of absorption, we continue to be extremely bullish on the long-term trajectory of Nashville. Progress on the new Derm Titan Stadium and the East Bank development continues. Construction on Oracle's new headquarters there is expected to begin soon, following recent approvals by the Metro Council. Soil testing on the initial launch site of the boring Company's Music City loop has commenced. And just last week, the Airport Authority outlined more details for the demolition of the current Concourse A and rebuilding of a new 16-gate terminal. Today, with Concourse A out of commission, Nashville has 54 gates in operation and enough capacity to accommodate about 28 million travelers. When the new concourse opens in, I think it's early 2029, Nashville Airport will be able to accommodate up to 40 million travelers. These long-term demand drivers are arguably some of the strongest amongst large cities in this country. And our iconic portfolio of brands is well-positioned to continue to induce and capture more of our fair share of incremental demand. From a brand perspective, the third quarter was a major milestone for our entertainment business. The Opry traveled to the Royal Abbott Hall in London for its first-ever international performance, which was also broadcast on BBC2 in the U.K. The show garnered over 1.2 billion media impressions, and the broadcast was BBC2's highest-rated program of the day. As an aside, the former Chair of the Royal Albert Hall Board told us that in all of his years, he's never seen an audience so engaged at a performance like he did at the Opry Show; folks were bouncing in the aisles at the Royal Albert Hall. That's never normally done. The music that has made Nashville Music City is becoming so incredibly popular across Northern Europe. Now, to give you some idea of what's going on in this incredible feeder market, a couple of weeks ago, our business partner, friend, and country music superstar, Luke Combs, announced a series of stadium dates for next year across Europe. And here's an illustration of why I say this genre is exploding in this region. He announced 2 nights at Wembley Stadium and an 85,000-seated stadium; both nights sold out. And now they've announced the third date. The stadium in Glasgow, again sold out. And Slane Castle, look it up, an incredible festival site north of Dublin, catering to about 80,000, again sold out, and they've now arranged a second date. And what Luke told me was that there's only ever been one band that has played 2 consecutive nights at Slane Castle, and that was U2. This is extraordinary stuff, creating Pilgrims who will make their way to Nashville and to our businesses. As we had anticipated, through the investment we're making behind Opry 100, the brand is reaching far more fans than ever before. And we are continuing to expand the platform. A couple of weeks ago, we, together with Luke, announced a second Category 10 development in the heart of the Las Vegas Strip. Construction is already underway. And once open in the fourth quarter of '26, it will be 1 of only 2 country music live entertainment venues with Frontage on the Strip, the other being, of course, Old Red, which has performed incredibly well since opening early last year. As we look ahead, our businesses are in great shape. The amount of group business we have on the books remains healthy, and we continue to generate good returns on the investment we're making in our hotel portfolio. Our expanded entertainment platform contains more avenues for growth than ever before, and we look forward to building on the momentum of the Opry brand and Country Music more broadly in the years to come. As always, we appreciate your interest and support. And with that, let me turn over to Mark to discuss the quarter, our positioning in more detail. Mark? Mark Fioravanti: Thanks, Colin, and good morning, everyone. I'll review our third-quarter results and also provide some color on how we're thinking about 2026. I'll start with our hospitality business. Our same-store hospitality segment delivered results towards the high end of our expectations due primarily to short-term corporate group pickup in the quarter for the quarter. As a result, the year-over-year group mix shift was not as significant as we had anticipated, with corporate group room nights down only about 20,000 room nights from last year, about half the magnitude we saw in the second quarter. With the decline in corporate group rooms, banquet and AV revenue declined approximately $14 million, but as has been the case all year, contribution per group room night, a proxy for catering spend per group guest, continues to exceed our expectations, so groups continue to spend at healthy levels. Food and beverage outlet performance was a bright spot in the quarter, driven by a combination of higher leisure demand, better-than-anticipated corporate group volumes, and our recent capital investments. Outlet sales per occupied room increased nearly 13% and performance was particularly strong at Gaylord National, Gaylord Rockies, and Gaylord Palms, where we've made significant investments in recent years, both in the quality of the offerings as well as our capacities. In fact, total revenue for Gaylord National and Gaylord Rockies was a third-quarter record. And for Gaylord Rockies, the second-best total revenue quarter of all time, behind the second quarter of 2025. Our leisure business was another bright spot in the quarter, including at Gaylord Opryland. Leisure room nights at Opryland increased more than 5% compared to last year, and leisure ADR, while still modestly lower year-over-year, actualized a few percentage points better than our expectations as of last quarter. Finally, the JW Marriott Desert Ridge delivered third-quarter results right in line with our expectations. The existing meeting space renovations wrapped up at the end of September, bringing the multiyear comprehensive property refresh that was initiated by the prior owner to a conclusion. As a value creation opportunity post acquisition, we have begun the work to convert 5,000 square feet of existing vacant office space into sellable carpeted breakout meeting space. As we learn more about this property, we continue to be very bullish on its long-term potential under our ownership. Looking ahead to the fourth quarter and the next couple of years, we're pleased with the amount of business we have on the books. Same-store group rooms revenue on the books for the fourth quarter is comparable to the same time last year, and early ticket sales for our holiday programming are pacing ahead of the same time last year. Despite some of the macroeconomic uncertainty in government policy weighing on the broader lodging industry, the visibility we have into our group business for 2026 and beyond continues to be encouraging. We're continuing to book more room nights at higher room rates. In the third quarter, same-store gross group room nights booked for all future years were up 9% compared to last year, bringing room nights on the books for all future years to a third-quarter all-time high. The ADR on those bookings was also an all-time high, up nearly 3% year-over-year. Our group pace for 2026 and 2027 remains healthy. As of the end of September, same-store group rooms revenue on the books for '26 and '27 were up approximately 8% and 7%, respectively, compared to the same time last year for '25 and '26, with ADR growth continuing to pace in the mid-single digits, while the number of new leads and late-stage opportunities remain at near record levels. Certainly, we've seen elevated cancellation activity this year due primarily to the government sector, but we've also responded with strong in-the-year-for-the-year bookings production and disciplined margin management while continuing to pursue long-term value creation through enhancements and additions to the portfolio. Turning now to our Entertainment business. OEG delivered third-quarter revenue of approximately $92 million and adjusted EBITDAre of approximately $25 million. Growth from Category 10 and Block 21 behind our recent investments was partially offset by softer volumes at our downtown Nashville venues as the local live entertainment industry absorbs the cumulative impact of recent new supply. As a result, and as Jennifer will review in a minute, we've narrowed our range of expectations for full-year adjusted EBITDAre in our entertainment business with a new midpoint of $112 million, which represents approximately 6% growth year-over-year and approximately 12% annualized growth since 2019. Before I turn it over to Jennifer, let me also provide some color on some of the building blocks for 2026, with the caveat that we're still working through the budgeting process with Marriott and expect to provide formal guidance when we report fourth quarter results in February. From a macro perspective, we are optimistic we'll see an increase in group demand given expectations for lower interest rates and a more favorable business and regulatory environment. However, even if the current uncertainty persists, we still expect our business model to outperform others in our sector and the broader group industry. As I mentioned earlier, the group rooms revenue we have on the books for 2026 for the same-store hospitality segment is pacing approximately 8% ahead compared to the same time last year for 2025. From a mix perspective, corporate group bookings are pacing ahead of association group bookings. Should this trend continue, we would expect it to be a modest tailwind for group outside-the-room spending levels in 2026. On the cost side, recall that the collective bargaining agreement for the Gaylord National became effective in November of 2024, so we will lap the initial wage and benefit increases in the fourth quarter of this year. Regarding capital, we anticipate that the sports bar development at Gaylord Opryland will open in April of 2026, and the Texas rooms renovation will finish sometime in the second quarter. We also expect the meeting space conversion at the JW Marriott Desert Ridge to come online in the second quarter. The ongoing meeting space expansion at Opryland will continue through 2027, and we expect to kick off a room renovation at the JW Marriott Hill Country beginning in April 2026. And finally, on entertainment, we expect our 2025 investments behind Opry 100 and the new amphitheater addition to our portfolio to be a modest tailwind to growth in 2026. As Colin mentioned, Category 10 Las Vegas will be under development for much of the year, opening sometime in the fourth quarter of 2026 with full-year contribution in 2027. As with all our ROI projects, we expect to generate at least mid-teens unlevered IRRs on the estimated project cost of approximately $35 million. We look forward to providing more details on how we expect the year to shape up on our fourth quarter call in February. And now I'll turn it over to Jennifer to run you through our guidance revisions and review our financial position. Jennifer Hutcheson: Thanks, Mark. Regarding our outlook for the full year 2025, we are narrowing our guidance ranges now that much of the year is behind us. And in our Entertainment segment, we are lowering the top end of our guidance range for adjusted EBITDAre to reflect softer volumes in our downtown Nashville venues related to new supply in the market. On a consolidated basis, we now expect adjusted EBITDAre in the range of $772 million to $802 million, AFFO in the range of $509.5 million to $538 million, and AFFO per fully diluted share in the range of $8 to $8.38. Turning to our balance sheet. We ended the third quarter with $483 million of unrestricted cash on hand and our revolving credit facilities undrawn. Total available liquidity was nearly $1.3 billion. We retained an additional $33 million of restricted cash available for FF&E and other maintenance projects. At the end of the quarter, our pro forma net leverage ratio based on total consolidated net debt to adjusted EBITDAre, assuming a full year contribution of adjusted EBITDAre from the JW Marriott Desert Ridge, was 4.4x. Finally, let me comment on our anticipated major cash outflows for the year. Regarding our outlook for capital expenditures in 2025, we are narrowing the range of our expectations to $375 million to $425 million based on our latest construction timelines for projects currently underway. As we mentioned in our earnings release, these estimates include modest investments at the JW Marriott Desert Ridge, accelerated material purchasing for the planned 2026 rooms renovation at the JW Marriott Hill Country, and initial project costs for the development of Category 10 Las Vegas. Regarding our dividend, it remains our intention to continue to pay a minimum of 100% of our REIT taxable income through dividends. And with that, Mickey, let's open it up for questions. Operator: [Operator Instructions] We'll take our first question from Cooper Clark with Wells Fargo. Cooper Clark: Curious if you could provide us with updated thoughts on the entertainment market in Nashville, acknowledge that drove the guidance reduction in the quarter. Just curious how you're thinking about that business over the next couple of years, as it seems like supply headwinds are persistent. Colin Reed: Should I start, Patrick? Yes. This is Colin Reed. So the issues that we saw within this city over the period of time, February of this year through June, were that the more budget-conscious consumer pulled back a little. And we saw it in other markets, too, like Las Vegas. But it happened here. And I think a lot of it was created by the overhang on what the hell was going to happen with the big beautiful bill and tariffs, and the media was saying the world was going to fall apart. But what has actually happened as the year has progressed is that obviously, things have stabilized very, very well. The market, the New York Stock Exchange, and the S&P at all-time highs right now. Trade agreements are being confected, and interest rates are moderating. Corporate profits seem to be in good shape, and airline traffic is up. And I'll give you a statistic that was relayed to me last night by the CEO of the Nashville Airport. October traffic into Nashville was up 10% over last year. And the amount of traffic that the airport received in October was the best October Nashville has ever had. We've been, I think, a little cautious in what is going to play out in the months of November and December, and that is reflected in our guidance. But as we look forward to 2026, 2027, we have this new stadium opening that is going to dramatically increase big, big concerts. We have a whole bunch of new developments taking place on the East Bank. We have a greater capacity to put more traffic through this airport. We have folks, I can tell you, every one of the 3 large airlines that are flying in from Europe has increased the capacity of their airlines over the course of the last couple of months. So as we look forward to '26, '27, '28, I think we're going to see a surge in tourism in this city, and I think it's going to be long-term, really good for these iconic assets that we own. Cooper Clark: And then I guess, how should we be thinking about a potential spin of OEG? Are there more bolt-on acquisitions within the entertainment business or additions you need to make to the leadership team that you want to get done first? Colin Reed: Well, the opportunity we have with this business with the acquisition of Southern, what we've done in Austin, the expanding into markets like Las Vegas, I would be very surprised if you don't hear from us over the course of the next few months in other markets that we will potentially move into markets that are very country music-centric so we can intercept those consumers in their source markets. The great thing about this business is I think we have more opportunity to grow it today than we've ever had. And I would suggest that over the course of the next 12 to 24 months, you'll hear from us more on the growth of this business. Operator: We will move next with Aryeh Klein from BMO Capital Markets. Aryeh Klein: Maybe first on cancellations, which ticked up in the quarter. Can you provide a little bit more color on recent trends? What have you seen here in October? And is this still mostly government-related or any other sectors where you've seen an uptick? Patrick Chaffin: Aryeh, this is Patrick Chaffin, and good to hear from you. Yes. So cancellations were up in the quarter. We were expecting that as a result of the tariff situation that began in the second quarter of this year. I would tell you that as we look across the year, if you look at the Smith Travel Research information, U.S. group monthly occupancy started to decline in April of this year with the tariff situation emerging. And while our group business has fared really well through that tariff situation that's characterized Q2 and Q3, the overall U.S. group monthly occupancy has continued to decline and appeared to trough roughly in August based on Smith Travel information. And it has been recovering in September and potentially in October based on what we've seen so far. So it's too early to tell how cancellations are going to fare in the fourth quarter, but it appears that while it's still down, it's starting to move in the right direction. For us we have seen elevated cancellation activity. We have also seen group leads and group demand in the corporate sector increase at the same time. So we've been able to mitigate some of that impact. But cancellations have been elevated. They've been mostly in the government and government-related sectors, but we have seen some impact from corporate layoffs that have been occurring across the country. But again, I would stress corporate leads and corporate booking volumes continue to be very, very strong. So we've been able to mitigate some of that. So we'll see how the fourth quarter goes. But we do feel like, while overall U.S. monthly occupancy and demand are still down, it is moving in the right direction. Aryeh Klein: And then curious if you can touch on some of the underlying leisure assumptions for the fourth quarter. Last year was a bit of a challenge, and I think you made some changes to the ICE programming. Any early feedback on either bookings or expectations? And then I believe you're also bringing ICE to Hill Country. How is that shaping up? Colin Reed: Good questions. Pat, do you want to deal with that? Patrick Chaffin: Yes. So Hill Country will have ICE for the second year in a row. We'll bring ICE to Desert Ridge next year. But we are expecting improved performance in ICE and in leisure in the fourth quarter of this year versus last year, about a 5% improvement. I would tell you that we're cautiously optimistic. It's still early, but we have some really positive trends occurring right now. Our ICE tickets are up. We've booked about 300,000 tickets to date. It's only about 21% of what we expect to actualize for the full holiday period. But the 21% we have on the books is about a 6-point improvement over what we had booked at this point the same time last year. So we're up about 95,000 tickets over the same time last year. So we're moving in the right direction to achieve that improved performance year-over-year, and we're in a good spot. From a transient room night perspective that's associated with the leisure holiday bookings, we booked about 127,000 room nights to date. That represents about 60% of what we expect to actualize for the 2025 holiday period, and that's an improvement over what we had booked same time last year as well. So we're up about 11,000 leisure room nights. So we've forecasted an improvement both in tickets and in leisure room nights, and we appear to be on pace to make that happen. I would remind you that we still have about 79% of our ICE tickets to book, and about 60% of those book within a 10-day travel period. So still a lot of wood to chop, but we are moving in a very encouraging direction, and we're cautiously optimistic. Operator: Our next question comes from Smedes Rose with Citi. Bennett Rose: I wanted to just ask a little bit about, I guess, the relationship between gross definite room nights that you show quarterly and the net definite room nights. Obviously, the gross improved nicely year-over-year. The net declined for the second quarter sequentially. I'm just wondering, do those 2 go together? Should be looking at the flow-through of one to the other? Or maybe you can just speak to what those numbers are telling you? Patrick Chaffin: Hi, Smedes, it's good to hear from you. Let's talk about gross versus net on the group side. So the main difference between those 2 is -- let's talk about gross first. As I mentioned earlier, we're seeing really great production from the sales team. We believe we have the best sales team on the planet on the group side, and they continue to perform. Corporate leads are up, and corporate bookings continue to be up. And so they're doing a great job of really taking advantage of the opportunity, even though we are losing some of the cancellations and revals. So on the gross side, we see really good production on the corporate side. To your question on net, the difference between gross and net is essentially cancellations and revals. And when I say revals, that's groups who have previously contracted for, let's say, 1,000 room nights in their block who then call in and say, "Hey, due to tariffs, we're pulling back down to 800 or 700 rooms from our originally agreed upon block. So you have your gross number, which is booked by the sales team. And then if a cancellation or reevaluation of that room block occurs, that's the difference in the net. And so that all the nets together produce the net production in the month or in the quarter. So if you think about what's going on, as I mentioned, corporate room nights continue to be strong, and the folks who are booking right now have already taken into account the impact of tariffs and everything else that's going on within their business. And so they're contracting at a more realistic level based on what they know is going on in the economy. The room nights are on the books previously that are calling in and reducing their blocks are just taking into account now what's going on in the economy. So we continue to see really strong gross results, offset somewhat by what's happening on the netting side with reevaluation of the blocks from groups already on the books and the cancellation that has been occurring. Bennett Rose: And then you mentioned in your opening remarks that corporate bookings are outpacing association bookings. Do you attribute that largely to the context of tariffs that you were just speaking to? Or is there something that you might think might, I guess, fuel association bookings going forward over the next few quarters? Patrick Chaffin: Yes. I mean, there's definitely some impact from the tariffs without a doubt. The other thing I would point to, though, is where we stand at this point in the year. We currently have 7.9 million group room nights on the books from a same-store perspective for all future periods. At this point in the year, that's the highest level we have ever seen, and it has a really strong rate associated with it as well. So there's the impact of tariffs, but there's also the impact of the fact that we just have less availability on the books for selling into the future than we've ever seen in our history, which is a good problem to have and will help us further compress group ADR going forward. Colin Reed: Smedes, my hope would be that, that this shift towards the corporate mix will become more systemic over time because as we've talked about in the past. One of the things that we're trying to accomplish with the capital investments we're making across these hotels is to improve the quality of the rate and improve the quality of the group, and lean more into that corporate customer versus some of the lower-rated SMERF and association business. Operator: We will move next with Patrick Scholes from Truist Securities. Charles Scholes: Question for you specifically on the D.C. National. Are you seeing any impact from the government shutdown as it relates to 4Q expectations or just forward bookings in general? Patrick Chaffin: Yes. Patrick, this is Patrick. Yes, we have seen a few groups that have pulled back or canceled as a result of the shutdown. But it has been pretty isolated, honestly. And it's not really been material in terms of the number of groups that have called in and said, "Hey, we're having to pull back or cancel. So there has been some impact, but it has not been very material. It's pretty isolated thus far. Colin Reed: But it's fair to say National's performance was terrific. Patrick Chaffin: Yes. National is right on plan for the year, doing a great job. And as we look to 2026, we look for additional ways to offset the impact of the collective bargaining agreement, but the property is in a really good position. Colin Reed: And some of that you're seeing from the capital we deployed coming out of COVID, around food and beverage, and the room renovation that we did. Those investments are paying off. Patrick Chaffin: Yes. And we're booking a bunch of business. So it's pretty good. Operator: Our next question comes from Dan Politzer with JPMorgan. Daniel Politzer: Group, it's pacing up nicely for 2026, up 8% and 2027 up 7%, I believe you said. Can you maybe talk about how the conversations with group and meeting planners ex ex-government, obviously, have evolved? Like, have they meaningfully improved versus 3 or 6 months ago, that gives you maybe increased confidence as you look out to that '27 guidance that you still have out there? Colin Reed: Do you want to take it? Mark Fioravanti: Sure. Yes. I mean, you saw what happened in our third quarter results. There was a bit of an overreaction in the second quarter to the tariff situation, and folks significantly reduced their expectations for the third quarter. As we actually moved through the third quarter, things improved somewhat, and we actually ended up beating our expectations on the banquet contribution per group room night. The fourth quarter is more dominated by the transient side. And I don't want to give any guidance on 2026 right now, but we feel like we're well-positioned for 2026, and we're hopeful, as I was alluding to earlier, that while, again, U.S. group demand is currently still down, it is moving in the right direction. So we see meeting planners pausing somewhat in some of their decision-making around when to book, but we're not seeing them wholesale pull back and make any changes. It's really just, hey, the environment is volatile. We're watching it, and we may delay our decision-making a little bit, but we feel like we're in a great position for 2026 as we look towards that and start planning for it. Colin Reed: Hi, Dan, this is Colin. I want to make one observation. And we've been in this business here, certainly, Mark and I, Patrick, almost 25 years running this business here. And we've seen these periods where we have volatility in the mindset of the group consumer. But Mark said it 5 minutes ago, the group is not vanilla. Different companies that are focused on group operate in very different ways. And what we have done is, I think, we put together a pretty good management team in these hotels. We have world-class physical assets. We generate really good levels of service. And as a consequence, we have a high degree of loyalty amongst these meeting planners. And that is one of the reasons why you see us booking the living daylights out of this business and why going into 2026 with the numbers that we have on the books. And it's something that's taken a long time to perfect. And we will go through these periods. Tariffs will create a problem in the mindset of many companies. But at the end of the day, these companies have to meet and the associations have to meet, and they choose to meet in the places that deliver the best levels of value for them, and we believe that is our company. Patrick Chaffin: Yes. And I think an important aspect to keep in mind as it relates to '26, that 8% revenue increase year-over-year, was about 2/3 of that premium was from rate. The durability of that rate premium versus an occupancy premium at this point of the year is much stronger. And that's really driven by the fact that we have been investing capital and we have been focusing, as Colin was talking about, on these higher-quality corporate customers. So you're seeing that strategy play through into the numbers. Daniel Politzer: And then just pivoting to entertainment. It sounds like there are a couple more investments coming in, obviously, Category 10 in Las Vegas. What's your appetite at this point, or thoughts around monetizing that? Is there a certain EBITDA number you guys have marked internally that you want to get to? Or is it just that you're seeing how it evolves over time? Mark Fioravanti: Well, Dan, you're a sophisticated analyst. The EBITDA is one measurement. The growth characteristics are another measurement. Companies that are able to articulate that they have a growth rate of whatever it may be, whether it's 5%, 10%, 15%, or 20%. As you go up the scale, invariably, the investment community is far more receptive to companies with higher growth rates than lower growth rates. And so it's a combination of things. And as we are plowing the field and sowing the seeds, we've got a lot of stuff that will come out of the ground here over the next 12 to 24 months. But here's what I do believe. And I know Patrick Moore, you believe this, too, that this is an extraordinarily valuable asset that we have. And we want to pick a moment in time. And at that moment in time, we will create a lot of value for our shareholders. This is a very valuable business. Operator: Our next question comes from Duane Pfennigwerth with Evercore ISI. Duane Pfennigwerth: Within your corporate group bookings, are there any specific industries you would call out from a recovery perspective? Mark Fioravanti: That's one of the beauties of our business. We don't have one segment that operates over 5%. So how would you answer the question, Patrick? Patrick Chaffin: No, I would completely agree with what you just said, Colin, which is that corporate is strong for the most part across the board. And I would call out any one sector as being stronger. I mean, we've obviously been shifting our guns towards fintech quite a bit. So that's an area that we've been expanding in, but I wouldn't say there's greater growth in any one segment right now. Colin Reed: It's fair to say that the impact that we've seen this year, obviously, from the government shutdown as well as all the devil's work It's we're really seeing weaknesses in the government-related large consulting groups, segments that rely on government contracts. Duane Pfennigwerth: And then just with respect to Desert Ridge and some of the groups booking into that, broad brush, how many are existing rotational groups versus new to your portfolio? Mark Fioravanti: So I would tell you that we've only begun to scratch the surface on that. We actually just hired 2 new sales resources who focus on lead generation, who are going to be solely focused on increasing the overlap between Gaylord and JW, as well as increasing the rotational opportunity between the JWs that we own. So it's really too early because they honestly have just been hired in the past 45 days, but we're really encouraged because we believe that we've seen immediate impact in the collaboration and communication between the teams. And I think I'll be able to talk to you in February about some really interesting and encouraging results as a result of those hires. Operator: We will move next with Chris Woronka from Deutsche Bank. Chris Woronka: I want to ask, as you look out, this is more of a multiyear, longer-term question, if that's okay. When you look at the composition of groups, and I'm really talking about by size, but also maybe a little bit corporate versus association. Is there any desire to maybe reduce your mix of the smaller short-term groups that can be more unpredictable? And are you seeing greater, I guess, growth in demand from the larger groups on the corporate side or from the smaller groups that like to book closer in? And then I have a follow-up. Patrick Chaffin: Let me start. The last time we did a big, big, big piece of research, and the last time we observed the research that Smith Travel did, large groups are the groups that are growing in this country. And we are uniquely positioned because of the scale of our assets and our ability to accommodate these large groups. And it's one of the things that I know I look at every month, Patrick, when we get our sales report, is the way the room nights how they fall between 10 to 300 and larger. So we're seeing good growth in the large groups, but how would you answer that question? Mark Fioravanti: Yes. Chris, I was actually looking at that last night, and it was interesting to see that for 2026, we have a higher mix of the larger groups on the books versus the same time last year, as we looked into 2025. So, as Colin has been talking about for a few years now, we continue to see that growth in the larger groups. But I do want to say the small groups are always essential to what we do. They have a higher rate, they book short term, and they allow you to really top off your group business with the remaining patterns that may be open. And so they come along at the last minute and help you fill out that piece of business, and then you put on top of that any leisure opportunities that you might have. So we're increasing the mix towards the larger group, but the small group will always be essential to finishing off the business. Chris Woronka: The follow-up is maybe for Colin or Mark. I mean, you guys have a lot of perspective. You've been in Nashville for a long time. Colin, I think many years ago, I'm not going to hold you to this, but I think many years ago, there was a thought to maybe doing something around your Opryland with some of the parcels that might be available or you already. My question today is, really, how do you see that little submarket near Opryland evolving? There's kind of a lot of retail stuff across the street. I know you guys at one time were partners in the development across, I think, Briillley. Is that submarket of Nashville something where you think that could become a new little market aside from downtown, and you can kind of create your own buzz there aside from obviously what Opryland already has? Colin Reed: Yes. So here is my belief. And I spent a lot of my time talking with the elected political leaders of this city and the state on this issue. My perspective is, and some of it has been shaped by Mark's and my history in the early '90s, shaping casino gaming throughout the country and particularly in Las Vegas. My view is that the demand for the product that originates in this city is blowing up right across the planet. And the opportunity for this city is extraordinary. And the question becomes how do we do it, and the form in which we do it. So we own a lot of land out here on the eastern side of the city. And I think we've proven to the world that we don't have a geographic problem here because we've created with Opryland, the most successful convention resort in America that doesn't have a casino. There's not another convention resort that comes close to what we have built over here. And then you look at the Grand old Opry that puts 0.75 million people through it every single year. And my view is that we have a big-time opportunity to change the campus and make it more compelling over time for the consumer that I believe will turn up in this city in droves over the course of the next decade. And I think the other thing that using the parallel to Las Vegas, you think about Vegas and gambling. And 10 years ago, the notion of putting professional sports in that city was crazy. Nobody would have thought it was possible. Now you have professional sports in that city, and that city has become arguably the sports capital of America. We're going to be building here a state-of-the-art city, a state-of-the-art stadium here. And we're going to be attracting Super Bowls, final bowls, college playoffs, WrestleMania, as Las Vegas has that didn't exist. The notion of putting a Super Bowl in Las Vegas a decade ago was crazy. But we have a product here that people want, and it is absolutely blowing up right across the globe. And I do believe that the potential for Nashville is extraordinary. Operator: We will move next with David Katz with Jefferies. David Katz: This may or may not be top of mind today. But just curious what your appetite is and what the boundaries would be for potentially more acquisition. One of my go-to issues is always, as you know, I've followed the property in Chula Vista for many years. And that's underlying a more general question. Colin Reed: Shall I start? Yes, go ahead. So, David, the way we've known each other for a long, long time. And I think you would appreciate that the way we think about acquisitions is purely how do we create value for our shareholders? How do we generate really high-quality return on invested capital? So as we sit here today, we have 7 of these beautiful babies, these great hotels in great markets, 2JWs, 5 Gaylords. And here's the thing. We have, I don't know, right now, $1 billion, $1.5 billion in capital in some way, shape, or form under construction that will happen over the next 1, 2, 3 years, and we believe that the majority of that capital is going to generate mid-teen type returns. And all of that is going to create value for our company. So the issue for us is, is there a market that we can plug an asset into? Is there a market that Patrick Chaffin was talking about a second ago about plugging in Desert Ridge into our system and moving customers around? Is there a market that we're not in that we'd like to be in? And the answer is there may be 1 or 2 markets left in the country. But the issue is the asset that we would acquire, the price at which we would acquire it for and how we create real value for our shareholders by doing that. My personal view is I think that if I were a betting man, I would say over the next 1 to 2 years, I think the deployment of capital will be focused internally versus externally, but who knows? The internal rates of return on these incremental investments are pretty hard to compete with if you've got to buy existing assets at market rates. Yes. But we did the bridge a few months ago, and we've been at that one for, I don't know, 10 years, looking at it and trying to get it. And it's simply because of the belief that we can rotate customers into that top 10 group market, Phoenix, Scottsdale, and that over time, we can expand that property and generate really high returns on that incremental capital. So we'll see. But if I were a betting man, I bet you we'd be more likely focused on deploying capital internally than externally. Operator: We will move next with Jay Kornnerbreg with Cantor Fitzgerald. Jay Kornnerbreg: Last quarter, I believe you guys had commented on the expectation for RevPAR in the third quarter to be down mid-single digits and reverse for the fourth quarter. And so I guess just curious now that the third quarter came in ahead of those expectations and yet the annual guidance was maintained, I guess where are you maybe seeing some 4Q softness? Is it really just related to government or anything else that's worth calling out? Jennifer Hutcheson: We've mentioned several times throughout the call already, Jay, that we are seeing government, government-related weakness. That's not a surprise as it relates to the shutdown that's still ongoing. But certainly some bright spots in terms of how leisure is pacing. So all of that's coming together to where I think we are cautiously optimistic about how the fourth quarter will pan out. We're in as good a position, I think, as we can be with all the headlines that are ongoing. Certainly pleased with how the third quarter turned out relative to our expectations, and feel very comfortable being able to reiterate that full year guidance on the hotel segment. Mark Fioravanti: I think the other part of it is the thing that we don't know that we're being cautious about is how long this dam shutdown lasts. And as the shutdown prolongs, do we see an acceleration in negative behavior by the consumer? And we don't know the answer to that question. Nobody does. And if these politicians can get their act together and get this country back to work, I think our fourth quarter should be pretty decent. But the big unknown is the craziness of what is taking place in Washington right now. Jennifer Hutcheson: Yes. But Mark mentioned we've got a comparable number of room nights on the books from a group standpoint in the fourth quarter. Patrick mentioned that at improving rates. And ticket sales, while a small proportion of the total complement that we would expect for the full holiday season has transpired this early on, given the short booking window for leisure, it's pacing ahead. Colin Reed: I'm encouraged by what we saw in October here in Nashville in the amount of airline arrivals, which is material. So we'll see. Patrick Chaffin: And I would point out, this time last year, it was very clear that folks were very distracted by a national election. That is not the case this year. We believe that's going to bode well for leisure. But to Colin's point, it's just a question of how much this government shutdown is a distraction to the groups of the country. Jay Kornnerbreg: And then maybe just one follow-up, moving just to the renovation side with a number of renovations being completed and others ongoing. As we look towards 2026, do you expect the EBITDA lift from completed projects this year in 2025 to outpace the EBITDA displacement from renovations that will be ongoing next year in '26? Jennifer Hutcheson: Yes. Jay, I appreciate the question. We're going to give guidance in '26 as we finish out our budget. We'll be meeting with Marriott here in the next week or 2 to review what that's going to ultimately look like. We can certainly give you the building blocks, which are very consistent with what we've talked about all year. Certainly, we've already shown that the capital that has come online from the projects we did last year, if you look at the Rockies, has started to return. Performance has been great there, related to the Grand Lodge work that we did there last year. So you're seeing that. So certainly, as things come online like the Opryland Sports Bar, which will be completed early in the year in 2026, you will start to see returns from that. But as Colin mentioned, we've got a lot of things in the pipeline, a lot of good things that are going to return well, and those are going to be ongoing. So we'll just see how that can shape up in terms of improvements from what's coming online and then continued investments as we continue down the multiyear path. Patrick Chaffin: It would be fair to say that we don't expect any incremental headwinds from a disruption perspective next year? Colin Reed: No. And I would give a shout-out to our design and construction teams, who are really getting all of this renovation and construction work down to a science and doing a phenomenal job with minimizing the impact on the business and trying to pull back on the displacement that we've already projected. Mark Fioravanti: We have 3 minutes from the top of the hour. Maybe take one more question. Got a couple. We'll shorten our answers. Let's try to get through all these. Go ahead. All right. Operator: We will move next with Chris Darling with Green Street. Chris Darling: Colin, you mentioned that in all likelihood, OEG will expand into other markets in the coming years, or at least you have the opportunity to do so. How do you think about the international opportunity for OEG? Any thoughts on growing overseas? Or were you primarily referencing new U.S. markets? Colin Reed: It's funny you asked that question. Patrick Moore, Mark, and I, 2, 3 weeks ago, had dinner with Luke over in London, Luke Holmes, who was with us on the Opry show that we did at Royal Alber Hall. And Luke would love to do a category over there simply because of the popularity that, that man has. It's extraordinary. I think it's something that we'll be looking at, but it's not something that I would say, no, we're not going to do that. The popularity here is music. And I think the product that we deliver would be well sought after. The issue is finding a partner to do that in that neck of the woods. Doing business in the U.K. is difficult. And so we'll see. But the good news is, I think we've got lots of other opportunities to grow this business domestically. Mark Fioravanti: And we do have content airing in the U.K. now for the Opry show. Yes. So the brands are present. We just don't have a physical presence in those markets at this point. Operator: We will move next with John DeCree with CBRE. John DeCree: Maybe just one on that same theme about international next year, the World Cup in North America. I know there's only a handful of games in Dallas, but how do you think about given Country Music's penetration in Europe, follow-on trends? Is there any programming that you're thinking about doing? Have you seen any early bookings yet? I know it might be early, but I think it dovetails with our conversation on country music expansion in Europe, given there might be some customer overlap. Curious if you have any initial thoughts. Colin Reed: Well, we're going to see a lot of international travel in the summertime next year for the World Cup. And unfortunately, our stadium here will not be complete. And I can tell you, I've spent quite a bit of my time with other folks in the city, quoting FIFA to try and get the 2026 World Cup here in Nashville. But there are going to be markets where there will be some lift, like, for instance, Orlando is a market, I think that we'll see lift because of the World Cup next year. But the interesting thing is, we're very active, not we, Ryman, but we, the city, are very active in quoting FIFA for the Women's World Cup here because we will have a beautiful stadium. And so this is a consumer base that we think could be potentially very valuable for international sporting events. We just announced, I think it was last week, that we secured the Olympics for the physically disabled folks. What are we, Special Olympics? Yes, Nashville has secured that here. So this is a consumer base that we are very interested in. All right. I think, Nikki, that's it. I appreciate everyone being on the call this morning. A lot of good questions. Our business is in good shape, and we're looking forward to this fourth quarter. And I know I'm looking forward to seeing how '26 plays out because I think it could be a good year for our company. Thank you, everyone. Operator: Thank you. And this concludes the Ryman Hospitality Properties Third Quarter 2025 Earnings Conference Call. Thank you for your participation, and you may now disconnect.
Operator: Good afternoon, and welcome to Cumberland Pharmaceuticals Third Quarter 2025 Financial Report and Company Update. This call is being recorded at the company's request and will be archived on its website for 1 year from today's date. I would now like to turn it over to Emily Kent from the Dalton Agency, who handles Cumberland's Communications. Emily, please proceed. Emily Kent: Hello, everyone, and thank you for joining us today. This afternoon, Cumberland issued a press release announcing its third quarter financial results. The release also provided an operational update, including key developments during the quarter. The release, which includes the related financial tables can be found on the company's website at www.cumberlandpharma.com. During today's call, management will share an overview of those financial results. They'll also provide an overall company update, including recent developments, along with the discussion of Cumberland's brands, pipeline and partners. Participating in today's call are A.J. Kazimi, Cumberland's Chief Executive Officer; along with Todd Anthony, Vice President, Organizational Development; and John Hamm, Chief Financial Officer. Please keep in mind that their discussions may include some forward-looking statements as defined in the Private Securities Reform Act. Those statements reflect the company's current views and expectations concerning future events and may involve risks, as well as uncertainties. There are many factors that could affect Cumberland's future results, including natural disasters, economic downturns, international conflicts, trade restrictions, public health epidemics and others that are beyond the company's control. Those issues are described under the caption, Risk Factors in Cumberland's annual report on Form 10-K and any subsequent updates filed with the SEC. Any forward-looking statements made during today's call are qualified by those risk factors. Despite the company's best efforts, actual results may differ materially from expectations. So information shared on this call should be considered current as of today only. Also, please remember that the company isn't responsible for any -- for updating any forward-looking statements, whether as a result of new information or due to future developments. During today's call, there will be references to several of Cumberland's marketed brands. Full prescribing and safety information for each brand is included on the individual product website and you can find the links to those sites on the corporate site at www.cumberlandpharma.com. The company will also be providing some non-GAAP financial measures with respect to its performance. An explanation and reconciliation to GAAP measures can be found in the financial tables of the earnings release noted earlier. If you have any questions, please hold them until the end of the call at which point, we'll be happy to answer them. Management is also prepared to hold a follow-up conversation with shareholders after the call, if you prefer. With that introduction, I'll turn the call over to Cumberland's Chief Executive Officer, A.J. Kazimi. A. Kazimi: Thank you, Emily. Good afternoon, everyone. We appreciate you joining us today. As Emily mentioned during the call, we'll provide a review of our financial results for the third quarter this year and we'll also cover key operational developments that occurred during that period. In addition, we'll discuss several recent updates that continue to underscore our optimism about the company's future. So let's get started. Today, I'm very pleased to announce a new addition to our commercial product portfolio. We've entered into arrangements with RedHill Biopharma to jointly commercialize Talicia which is an FDA-approved and leading treatment for helicobacter pylori infections, provided in a single capsule that contains Omeprazil, amoxicillin and rifabutin, Talicia is now recommended as a first-line therapy for aged pylori infections in the American College of Gastroenterology clinical guidelines. The product is patent protected through 2042 and also received 8 years of U.S. market exclusivity under its qualified infectious disease product designation. We believe Talicia is an excellent strategic fit for our company. It was FDA-approved based on two large successful clinical studies, and it features an outstanding safety -- excuse me, an outstanding profile of the three 3 key advantages: a high eradication rate exceeding 90%, the convenience of an all-in-one capsule containing three medicines and minimal antibiotic resistance. We formed a new company with RedHill called Talicia Holdings, Inc., and RedHill has contributed to worldwide rights to Talicia, as well as the product assets to the new company. Cumberland will invest $2 million this year and $2 million next to participate in the new company's joint ownership. Through a joint commercialization agreement, we'll assume responsibility for the distribution and sale of Talicia in the U.S. and will equally share Talicia's net revenues. In 2024, net sales of Talicia totaled $8 million. Cumberland will also assume responsibility for product promotion through our field sales division, which currently details Kristalose, another gastroetrology product. And we'll provide an annual investment of up to $2 million to cover certain distribution, marketing and sales costs associated with the brand. Meanwhile, during the third quarter, we announced international developments, including the launch of our Vibativ product in Saudi Arabia. The launch follows an agreement with to book pharmaceutical manufacturing company, to introduce Vibativ into the Middle East. To book had obtained the final approvals needed to commercialize Vibativ in Saudi Arabia, and we're pleased the product is now available for patients in that market. In October, we announced the regulatory approval of our ibuprofen injection product in Mexico. We worked to secure that approval through our partnership with PiSA Pharmaceutical a well-established Mexican pharma firm. Under the terms of the agreement, PiSA is responsible for both the registration and commercialization of the product in their country, while we provide regulatory support and the product supply. Additionally, we previously shared that our antibiotic batter received approval from the regulatory authorities in China earlier this year. That milestone provides us with access to the world's second largest pharma market, and we're now preparing to support the launch of Vibativ there. Here in the U.S., we announced the availability of our Vibativ starter pack through a new supply arrangement with Vizient, making it accessible to their health care members nationwide. And we also announced that Vibativ was added to a national purchasing agreement with Premier Inc. Meanwhile, we've continued to progress our Phase II clinical programs evaluating our ifetroban product candidate in patients with Duchenne muscular dystrophy, systemic sclerosis and an idiopathic pulmonary fibrosis. Turning to the third quarter financial results. Our portfolio of FDA-approved brands delivered combined revenues of $8.3 million during the quarter. Year-to-date revenues for the first 9 months of the year totaled $30.9 million, while third quarter sales were impacted by a delay in some Kristalose and Caldolor shipments our year-to-date revenue has grown 12% over the same period last year. Furthermore, as a reminder, the fourth quarter is often our strongest as customers tend to increase their product purchases towards the end of the year. And therefore, we continue to believe our financial performance is best evaluated on an annual basis. The adjusted loss for the third quarter was $0.8 million or $0.06 a share, and our year-to-date adjusted earnings were $1.9 million or $0.13 a share. In addition, our business continued to generate positive cash flow from operations, which increased to nearly $5 million through this year through September. At the end of the third quarter, we held $66 million in total assets, including $15 million in cash. Liabilities totaled $40 million and shareholders' equity was $26 million at the end of the third quarter. And please note that our total debt has been reduced by $10 million since the end of 2024. With those developments and overview, I'd now like to turn to Todd Anthony, Cumberland's Vice President Organizational Development to further discuss both our brands and our sales organization. Todd? Todd Anthony: Well, thank you, A.J. I'll start by sharing an update on each of our major brands. Vibativ is our intravenous antibiotic designed for difficult-to-treat infections, such as hospital-acquired and ventilator-associated pneumonia, as well as complicated skin and skin structure infections caused by certain gram-positive bacteria, including those that are multidrug resistant. Unlike many antibiotics that are losing the battle to fight bacteria, Vibativ's unique dual method of action was specifically designed to address these drug-resistant bacteria. We, therefore, believe it has lifesaving potential to help many patients amid this growing antibiotic resistance crisis, which faces a very fragile pipeline of new antibiotic development. Recall that to reinforce the message, we are conducting a series of infectious insights. These are discussions with infectious disease experts that we are disseminating across the country. These video vignettes share the opportunity to use Vibativ as a solution for select patient types where other products have failed. In June, a comprehensive new pharmacokinetic analysis of Vibativ was published in antimicrobial agents and chemotherapy. The analysis utilizes data from over 1,200 patients across varied demographics and comorbidity profiles. The findings support optimized dosing strategies for patients with different infection severities and renal function levels, which reinforces Vibativ's critical role in treating life-threatening gram-positive infections. We recently announced the availability of the Vibativ 4-Vial Starter Pak through a new supply arrangement with Vizient, making it accessible to their health care members nationwide. As the country's largest provider-driven health care performance improvement company, Vizient serves more than 65% of the nation's acute care providers, including 97% of our country's academic medical centers. Through this agreement, Vizient members now have access to Vibativ's new 4-vial configuration, which supports flexible treatment initiation in both inpatient and outpatient settings, again, for this life potentially life-saving therapy. Vibativ was also added to a national group purchasing agreement with Premier, Inc., an alliance of approximately 4,350 U.S. hospitals designed to drive transformation across the health care system. The product's addition provides Premier's members with a cost-effective solution to treat resistant gram-positive infections. Moving next to Kristalose, which is our prescription strength laxative provided in a convenient premeasured powder dose that dissolves quickly in just 4 ounces of water, resulting in a clear taste-free and grid-free solution. While our field sales division has been able to generate prescriptions of Kristalose through their promotional efforts, we have always faced substitution by pharmacies in favor of generic alternatives. That substitution has increased this year with the arrival of additional generic competition. We have taken appropriate action and implementing strategies to protect and grow our business. Let's shift now to Caldolor, our intravenous ibuprofen product. With its new pediatric labeling cleared with the FDA, Caldolor is now the only non-opioid product approved to treat pain in infants that's delivered by injection. As a reminder, we are featuring Caldolor through sales and marketing initiatives, highlighting this new indication, resulting in growing use of the product in our country's children's hospitals. We previously announced the publication of our study investigating Caldolor in clinical therapeutics, demonstrating the product's safety and efficacy for managing postoperative pain in patients 60 years of age and older. This analysis encompassing over 1,000 patients from our comprehensive post-surgical studies represents the first such evaluation in this vulnerable population where traditional pain management options such as opioids, carry increased risk. Turning to Sancuso, our transdermal patch FDA approved for the management of chemotherapy-induced nausea and vomiting. We continue to see favorable sales results following the expansion of our oncology sales force. We have also launched a new Sancuso website along with promotional marketing resources and digital marketing campaigns to further support awareness and access to this product. Recall, our Vaprisol product is the only intravenously administered vasopressin receptor antagonist. It's used to raise serum sodium levels in hospitalized patients with hyponatremia, which is the most common electrolyte disorder among these patients. Our new manufacturing and distribution partner for Vaprisol has successfully begun producing the product in their facility and are now awaiting FDA's GMP certification for this site. Once they receive regulatory clearance we will file for approval to manufacture branded Vaprisol there. Well, that completes my updates for today. And so I'll turn it back to you, A.J. A. Kazimi: Thank you, Todd. I'd now like to provide an update on our ongoing clinical activities. We continue to progress our pipeline of innovative products designed to improve patient care and their quality of life. Our ifetroban product candidate just a potent and selective thromboxane receptor antagonist is being evaluated in several clinical programs for patients with a series of unmet medical needs. Ifetroban has now been dosed in nearly 1,400 subjects and has been found to be safe and well tolerated in those individuals, resulting in an outstanding safety database. Earlier this year, we announced positive top line results from our FIGHT DMD trial. The study evaluated ifetroban as a therapy for Duchenne muscular dystrophy and its heart disease, which is the leading cause of death in DMD patients. The study and its results mark a breakthrough for these patients, as is the first successful study, specifically targeting the cardiac complications of their disease. The trial enrolled 41 DMD patients who received either a low dose of ifetroban, a high dose of ifetroban or a placebo. The study's primary efficacy end point was an improvement in the heart left ventricular injection fraction or LVEF and key findings associated with the patient's LVEF included high-dose ifetroban treatment resulted in an overall 3.3% improvement and the high-dose ifetroban showed an increase of 1.8%, while the placebo group showed the expected decline of 1.5%. And when those are combined, you get the 3.3% overall improvement I mentioned. Now when compared with propensity matched natural history controls, the difference was even more pronounced, with the high-dose treatment providing a significant 5.4% overall improvement as the control patients experienced a 3.6% decline. And both doses of ifetroban were well tolerated with no serious drug-related events. These top line FIGHT DMD study findings were selected for a late-breaking presentation at the Muscular Dystrophy Association Clinical and Scientific Conference in March and were then presented at the Parent Project Muscular Dystrophy Annual Conference in June. We completed the comprehensive analysis of the study results. We've prepared our clinical study report and then we submitted it to the FDA along with a request for an end of Phase II meeting. We held that meeting in September, and we began interaction with the FDA to determine their remaining development requirements. The FDA recommended a follow-on meeting, which we are now planning is the next step in that process. Meanwhile, we've been evaluating our ifetroban product candidate, in a clinical program in patients with systemic sclerosis or scleroderma. Enrollment in the study was completed this year, and we've been monitoring the clinical study sites in preparation to lock the database and begin evaluating the study results and we look forward to announcing those findings from this study. In addition, we have a Phase II clinical study, the finding fibrosis trial underway in patients with idiopathic pulmonary fibrosis, the most common form of progressive fibrosing interstitial lung disease. Patient enrollment in that study is moving rapidly. It's well underway and medical centers across the country. The study design includes both an interim safety analysis as well as an interim efficacy analysis, and we'll look forward to reporting on both of those findings. Additional pilot studies of ifetroban are also underway through several investigator-initiated trials and following completion of our ongoing studies and with the FDA feedback will then determine the optimal regulatory pathway for development of ifetroban, our first new chemical entity. So with that update on our clinical activities, I'd now like to turn it over to our Chief Financial Officer, John Hamm, to review our third quarter financial results. John? John Hamm: Thank you, A.J. For the 3 months ending September 30, 2025, net revenue from continuing operations was $8.3 million. Revenue for the first 9 months of the year totaled $30.9 million. Net revenue by product for the third quarter of 2025 included a $1.2 million for Kristalose, $3.2 million for Sancuso, $2.6 million for Vibativ and $0.9 million for Caldolor. Year-to-date, product revenues totaled $7.4 million for Kristalose, $8.6 million for Sancuso, $6.7 million for Vibativ and $3.8 million for Caldolor. Turning to our expenditures. Total operating expenses for the third quarter were $10.3 million. Year-to-date expenses totaled $32.3 million, the net loss for the quarter was $1.9 million. Year-to-date net income loss was $1.4 million, and when noncash expenses are added back, the resulted adjusting earnings for the first 9 months of 2025 or $1.9 million or $0.13 a share. Cash flow from operations during 2025 was $5 million. Also, please note that the adjusted earnings calculations do not include the additional benefit of the $0.1 million of Vibativ cost of goods during the third quarter. Those goods were received as part of the Products acquisition. We're pleased to see that the additions of Vibativ and Sancuso to our portfolio continue to positively impact our financial performance. As a result of the Vibativ acquisition, a total of $34 million in new assets were added, including approximately $21 million in inventory, $12 million of intangible assets and $1 million of goodwill. The estimated value for those assets was $10 million at the end of the third quarter. The financial terms for the Vibativ transaction included a $20 million payment upon closing and a subsequent $5 million milestone payment. We also continue to provide royalties tied to product sales. Sancuso added a total of $19 million in new assets, including approximately $4 million in inventory, $12 million of intangibles. The estimated value of those assets was $9.5 million at the end of the third quarter. We provided $13.5 million at closing for the Sancuso acquisition, and we paid $1.5 million in milestone payments. There are ongoing royalties that we pay based on the brand sales. Turning to our balance sheet as of September 30, 2025, we had $66 million in total assets, including $15.2 million in cash and cash equivalents. Liabilities totaled $40 million including $5 million on our credit facility. Total shareholders' equity was $26 million at the end of the quarter. We continue to hold a bank line of credit, which provides up to $20 million in capital. The interest rate is based on benchmark term SOFR and is subject to a financial covenant determined on a quarterly basis, and we were in compliance at the end of the third quarter. We are also continuing the process of implementing new trading plans for our Board members who are purchasing Cumberland shares throughout the year to increase their holdings in the company. Lastly, I'd like to note that Cumberland continues to hold over $53 million in tax net operating loss carryforwards, primarily resulting from the prior exercise of stock options. And that completes our financial report for the third quarter of 2025. Back to you, A.J. A. Kazimi: Thank you, John. Well, overall, it's been a successful year-to-date, and we're encouraged by our progress. The addition of a new product marks an exciting next phase of growth for our company. We remain dedicated to our mission of working together to provide unique products that improve the quality of patient care. And we pursued our mission by building a portfolio of FDA-approved brands with the outstanding safety and efficacy profiles that can make a difference in patients' lives. We continue to support our product portfolio through our three dedicated sales divisions, each focused on strategic segments of the health care market. And we're encouraged by the progress of our ifetroban clinical programs as we continue to progress, as we continue to pursue therapeutic solutions unmet medical needs. Looking ahead, we expect continued momentum across our approved brands, increased international contributions, further progress in our clinical pipeline and new opportunities to select product additions. We have a lean, highly productive organization and the achievements outlined today were made possible by the dedication and fine efforts of our outstanding team, and we look forward to providing updates on further developments as the year progresses. Now let's open the call to any questions. Operator, please proceed. Operator: [Operator Instructions] A. Kazimi: Well, if there are no questions, I'd just like to thank everybody for joining us for today's call. We understand that many of our shareholders prefer a private discussion with management. And if so, please just reach out and we'll be happy to get a call scheduled with you and hold such a discussion. As always, we appreciate your time and interest in our company and look forward to providing updates in the coming months. Operator: Thank you, sir. Ladies and gentlemen, that concludes today's call. If you would like to listen to a replay of the discussion, please visit the Investor Relations section on Cumberland's website. I would now like to thank you for your participation. You may now disconnect.
Operator: Greetings, and welcome to the Synchronoss Technologies Third Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Ryan Gardella of Investor Relations. Thank you, and you may proceed. Ryan Gardella: Thanks, Claudia. Good afternoon. Welcome to the Synchronoss Technologies Third Quarter 2025 Earnings Conference Call. Joining us from Synchronoss today is President and CEO, Jeff Miller; and CFO, Lou Ferraro. By now, everybody should have access to the company's third quarter 2025 earnings press release issued this afternoon, which is available on the Investor Relations section of our website. Today's call will begin with remarks from Jeff and Lou after which we'll host a question-and-answer session. Before we conclude, we'll provide the necessary cautions regarding the forward-looking statements made by management during this call. I would like to remind everyone that this call will be recorded, made available for replay via a link in the Investor Relations section of the company's website. Now I'd like to call -- turn the call over to Jeff Miller, President and CEO of Synchronoss. Jeff? Jeffrey Miller: Thanks, Ryan. Welcome, everyone, and thank you for joining today's call. While revenue in the third quarter was slightly below our expectations, primarily due to subscriber growth weakness among certain customers and delayed timing of new customer contracts, we are pleased with our profitability performance, including strong EBITDA results, net income of $5.8 million and diluted earnings per share of $0.51. The sustained growth of our cloud-based business model was evident with recurring revenue representing more than 93% of total revenue. Our disciplined execution of key initiatives across the organization continues to enhance the company's financial strength and supports sustained progress in the profitability of our more predictable and stable business model. While we continue to operationalize our costs, we reflect rapidly in the changes of the economic environment, we have further focused on solidifying our balance sheet to enable greater operational flexibility for our future. This year, we completed a strategic $200 million 4-year term loan refinancing, retiring our senior notes and prior term loan, strengthening our capital structure and extending our debt maturities to 2029. This was followed by the completion of our CARES Act refund process, resulting in the receipt of $33.9 million of total outstanding balance of the refund owned to the company. This long-awaited refund enabled us to make a $25.4 million prepayment at par on our term loan, adding to the total of $100 million of debt reduction over the past 4 years, and we placed an additional $8.5 million of cash -- inorganic investments to accelerate our growth. Among those potential avenues, we are exploring new product adjacencies to maximize our total addressable market outside the core mobile market. Turning to Q3 results. Revenue for the quarter was $42 million, consistent with results in Q1 and Q2 and included a year-over-year subscriber growth rate of approximately 1% across our global customer base. While our subscriber growth count was lower than we expected in the quarter, we believe that new customer contracts, combined with the strategic changes to how some of our key existing customers are intending to regain market share, should have a positive impact on our subscriber and revenue growth going forward. As I mentioned in the past, our service is extremely profitable for our carrier partners in their efforts to increase ARPU should ultimately be a positive net for Synchronoss. We delivered $12 million in adjusted EBITDA, which resulted in an adjusted EBITDA margin of 28.5% in the quarter. Those results, combined with our year-over-year reduction in operating expenses, further demonstrate the resilience of our high-margin SaaS business model and our team's disciplined approach to cost management, even while facing some revenue headwinds. Our recurring revenue grew to 93.8% of total revenue, underscoring the stability and predictability of our business model. Plus, with more than 90% of our projected revenue under long-term contracts with Tier 1 carriers, we continue to operate from a position of fundamental strength. We also remain focused on adding new global customers to our cloud platform. And while we've reached the contract negotiation phase with prospects, those opportunities did not contribute revenue in the quarter. Next, I'd like to provide some context on our key customer relationships. At AT&T, we continue to see positive momentum in subscriber growth. AT&T has seen a meaningful lift in their value-added service revenue growth, enabled by the streamlined digital onboarding processes that jointly we've put in place, which continue to drive improved take rates. We're still less than 2% penetrated within the total subscriber base of AT&T and growing ahead of our expectations, leaving a long runway for continued growth in 2026 and beyond. At Verizon, we continue to navigate the ongoing transition of their bundled cloud users migrating to their myPlan Perks portfolio. While this transition has created some near-term subscriber growth pressure, which has been slightly compounded by weakness in the carrier's overall subscriber growth, we believe Verizon's focus on positioning our cloud solution, as a premium perk, will ultimately strengthen the value proposition and drive more sustainable growth as their customers migrate on to those individual perk selections. Further, we have several joint initiatives with Verizon that we believe will further accelerate growth, including expanded leverage of their direct and indirect retail channels, where we're seeing healthy uplifts in cloud take rates in both Q3 and early signs in Q4. We're also capitalizing on new SMB cloud perk to continue momentum with the SMB segment. And we're seeing promising subscriber adoption within the value segment, represented by brands such as Straight Talk, Total Wireless and Simple Mobile. At SoftBank, we've kicked off the development work of our digital integration to their My SoftBank app, through our software development kit. This will allow us to expand the discoverability across a broader base of software -- SoftBank subscribers, which we expect to lead into increased adoption once fully implemented. We expect contribution from this digital channel expansion to begin next year. We're also below 2% penetration across SoftBank's mobile brands, with significant room for growth and expansion throughout 2026 and beyond. With Capsyl, our own branded solution, we're seeing digital marketing initiatives with our carrier partner, Telkomsel, begin to generate tangible momentum. While this launch is still in small scale, we're encouraged by the focus and the results of their promotional efforts. We're also using this success story at Telkomsel to pitch Capsyl to a variety of other deep pipeline opportunities with other carriers, and we're seeing meaningful progress in those conversations. It's still early but we're pleased directionally and expect to see progress accelerate in 2026. On the new business front, we continue to make progress across all channels, including our current partner, Assurant, who has helped us expand our reach into new customers. We intend to continue to leverage this partnership for new customer launches in the fourth quarter and throughout 2026, while seeking additional channel partners, which will expand our customer base. We're also making meaningful progress with several new potential customers moving to the contracting and onboarding phases in preparation for launches in 2026. Also, Synchronoss continues to make and achieve significant milestones in our AI-driven transformation. We successfully developed complex features like end-to-end encryption for desktop clients using AI development automation and advanced AI capabilities by promptimizing tuning large language models to generate user stories and test cases. Our teams leverage AI to enhance product features, improve security and streamline development, including generating code that met stringent security and compliance standards with minimal refactoring. We also accelerated innovation through open source AI model adoption, fine-tune models for greater accuracy and deployed hybrid retrievable augmented generation approaches to meet our customers' requirements. These advancements have enabled us to deliver secure, scalable solutions posted on private networks, enhance our user engagement with AI-powered features and lay the groundwork for continued growth in operational excellence. Additionally, we made a significant step forward with our core personal cloud platform by successfully completing and deploying a hybrid cloud AI model for advanced content intelligence which also continues to focus on our cost optimization by enabling in-house photo tagging and image embedding to be dynamically distributed across both company-owned and public cloud environments. This capability is a foundational pillar for next-generation features, including the new memories feature with integrated highlights and personalized genius style content, reinforcing the commitment to driving monthly engaged users and delivering superior value to our service provider partners. Our enhanced platform capabilities, large global cloud subscriber base and talented software development teams are creating a recipe to introduce capabilities and offerings to drive revenue and complement the expansion of our current cloud customer base. We believe these strategic initiatives will drive accelerated growth in the years ahead. Now I'd like to give some color around our guidance for the remainder of 2025. With anticipated continuation of subscriber headwinds among some customers in the fourth quarter and anticipated revenue contributions from new customer contracts, we're adjusting our full year revenue guidance to be between $169 million and $172 million. Due to this revision and expectations on the top line, we are also lowering our adjusted EBITDA guidance to between $50 million and $53 million and free cash flow of between $6 million and $10 million. These adjustments are a reflection of slightly lower expected revenue contributions and steady performance in operating expenses. Our recurring revenue is still expected to be at least 90% of total revenue and our adjusted gross margin is expected to remain between 78% and 80%. Looking ahead, we see the softness in subscriber growth for the quarter as a temporary weakness, and we're building momentum across multiple fronts that we believe will drive improved performance in 2026. We're diligently working to drive accelerated growth through our core offering, while exploring additional adjacencies to expand our total addressable market without losing sight of what makes Synchronoss unique. We're seeing the pace of development increase, and we internally develop new tools for AI initiatives across the technical side of our organization as well. Our strengthened balance sheet, operational discipline and expanding customer relationships provide a solid foundation for growth. And while we recognize our results for the quarter were slightly below our expectations, we believe our healthy business model, combined with our disciplined approach to cost management and expectations for new customer launches, positions us to deliver improved growth performance in 2026 and the years to come. We remain confident in our strategy, our market position and our ability to drive long-term value for shareholders. Now I'd like to turn it over to Lou for a detailed review of our financial performance. Lou? Lou Ferraro: Thank you, Jeff, and thank you, everyone, for joining us today. First, I'll review our key financial metrics for the third quarter of 2025, which we believe serve as critical benchmarks for our performance, and then we'll provide an update on our financial results and outlook. Starting with our key performance indicators. Quarterly recurring revenue was 93.8% of total revenue, reflecting our stable cloud business model, which was driven by cloud subscriber growth of approximately 1%. Turning to our financial results for the third quarter ended September 30, 2025, total revenue was $42 million, down slightly from $43 million in the prior year period due to delay of anticipated customer contracts and lower-than-expected subscriber growth at certain customers. Adjusted gross profit was $33.4 million or 79.5% of total revenue compared to $34.2 million in the prior year, which amounted to 79.6% of revenue. The slight decline was due to lower revenue in the quarter. Income from operations was up 6.4% year-over-year from $5.5 million to $5.9 million, driven by further reductions in operating expenses. As a reminder, we paid down $25.4 million of our existing term loan at par last quarter from the proceeds of our CARES Act refund. Therefore, we do not foresee having to make another scheduled amortization payment prior to 2028. This should provide us with more free cash flow going to the bottom line over the next 3 years. Moving down the income statement. Our total operating expenses decreased 3.5% from $37.4 million to $36.1 million. Cost of revenues and sales, general and administrative costs were down year-over-year while research and development and depreciation and amortization were up slightly. We're going to continue to be focused on disciplined cost control to support our profitability. As part of our cost-reduction initiatives, we're seeking benefits in productivity and cost savings from AI deployment, including the optimization of multiple open source models used in our products. We'll continue to evaluate every avenue to mitigate additional cost, including deploying AI and machine learning, both internally and externally as appropriate. Net income was $5.8 million or $0.51 per diluted share. This result was driven by a $5.2 million onetime interest income event from our tax refund as well as noncash foreign exchange that was slightly positive in the quarter. As a reminder, foreign exchange is a noncash paper gain or loss that has no impact on the financial viability of the business nor does it reflect on the fundamentals of our performance. Adjusted EBITDA was $12 million, representing a 28.5% margin, consistent with our high-margin model and supported by cost control, including a 3.5% year-over-year reduction in operating expenses on a year-over-year basis, as we've mentioned previously. Moving to the balance sheet. Cash and cash equivalents were $34.8 million as of September 30, 2025. This includes approximately $8.5 million in cash that was not used for the prepayment of debt from the tax refund, which we intend to use to fund new growth initiatives. The remainder of our proceeds from the tax refund were used to materially reduce our total debt balance, resulting in net debt of $139.8 million, which is approximately 2.7x our anticipated 2025 adjusted EBITDA, a significant reduction from the year ago period. As Jeff mentioned, this also reduced our annual interest payments by approximately $2.8 million at current interest rates. Free cash flow was $36 million, driven largely by the receipt of our tax refund in the quarter and adjusted free cash flow was $4.2 million. Due to the factors mentioned today, we have adjusted our guidance to reflect the following for 2025: Revenue of between $169 million and $172 million, adjusted gross margin of between 78% and 80%, recurring revenue of at least 90% of total revenue, adjusted EBITDA of between $50 million and $53 million and free cash flow of between $6 million and $10 million. The company's free cash flow guidance excludes proceeds of $33.9 million from the federal tax refund as previously communicated. As discussed last quarter, the guidance also excludes approximately $4.4 million of transaction fees from the 2025 term loan. These fees resulted from the company's recapitalization in which $75 million term loan and a portion of the senior notes were considered modified under accounting principles when replaced with a new $200 million term loan due to participation by existing lenders. I'll now turn the call back over to the operator for questions and answers. Thank you for joining us today. Operator: [Operator Instructions] The first question comes from Anja Soderstrom from Sidoti & Co. Anja Soderstrom: So I'm just curious with the growth that you are seeing, is that mainly then driven by higher wallet share rather than the subscriber growth, which seems to be a little bit challenged? And how should we then think about overall growth when the subscriber growth comes back, if you are adding more value to the existing customers? Jeffrey Miller: Yes. Anja, I'll give a start. Thank you very much for joining us. First off, we had a slight growth in our subscriber and subscription growth revenue category this quarter. One of the major contributors, as I mentioned, has been a little bit of a long sales cycle that we have experienced on getting new customer contracts and therefore, getting new customer growth to contribute to our overall results. We are seeing those conversations progress very well with new customer prospects, it's just taking some additional time to get through the contracts. On the subscriber side, we believe the initiatives that we have in place with our existing customers and the momentum that is already in existence with AT&T, in particular, will allow us to get back towards mid-single-digit types of subscriber growth, complemented by bringing in some new customers to try to help drive our growth for 2026 and beyond. Anja Soderstrom: Okay. And you're talking about 2 rather important customers in the pipeline that you think you're going to sign one by the end of the year and one early next year it sounded like. But how does the rest of the pipeline look like? Jeffrey Miller: Well, the pipeline, you should look at our business, obviously, in 2 dimensions. Number one, continued growth with the subscribers that we -- or the customers we already serve. And as mentioned, with -- for example, at AT&T, less than 2% penetration of subscriber growth today across their broad subscriber base, we have a lot of growth that will be driven through that. In addition to that, the pipeline for other customers both looks good for, I'll call it, branded clouds, not unlike what we do today for AT&T, Verizon and SoftBank, but also for our Capsyl. And we have those opportunities in the United States, in Asia, in Europe and even other parts of the world. So we are continuing to see a broad and very healthy pipeline of opportunities. And the guidance that we've given, as I mentioned, yes, we expect to have a new customer launch this year, and an additional one launch in 2026. Anja Soderstrom: Okay. And just one last for me. With the improved balance sheet and your positive cash flow, how should we think about capital allocation priorities, and are you -- and potential share buybacks? Jeffrey Miller: Yes. Maybe I'll ask Lou to address that question on behalf of the capital plan. Lou Ferraro: Sure. So Anja, the first thing that we're looking at is our ability for a change to be a little bit more on the offensive with our additional cash that we have from the tax refund. And that really before we get into stock buybacks, we look at that as a two-pronged potential opportunity for the company. Number one is additional investment in our current products or expansion of our platform to serve our current and new customers with additional products or potentially some inorganic growth opportunities that prior to this point, we haven't been able to take the advantage to look at and evaluate strategically. So that's really kind of where our capital allocation mindset is right now. Operator: [Operator Instructions] Our next question comes from Jon Hickman from Ladenburg Thalmann. Jon Hickman: Can you elaborate a little bit on the 2 line items, the expense -- the interest income and the interest expense? Both of those were affected by your IRS payment. Is that what you said? Lou Ferraro: No, so our interest... Jeffrey Miller: Go ahead, Lou. Lou Ferraro: So Jon, our interest income is a result of the interest that we received related to our federal tax refund. And our interest expense is related to the interest on the term loan and issuance costs related to it. Jon Hickman: Okay. So -- okay. So going -- how much of that was like onetime on the interest expense side? Lou Ferraro: $1.7 million. That was the deferred issuance cost as it relates to that line item. Jon Hickman: $.1.7 million, okay. And then the interest from -- so when you got the $39 million or whatever, you had -- part of that was just a refund, but part of it was the interest and that's where the interest -- that was like earned interest that you had been... Lou Ferraro: Right. So if you look at the... Jon Hickman: You had to take it all at once. Lou Ferraro: Yes, if you look at the $33.8 million, Jon, $28.6 million was the pure refund amount that was the remaining balance of the $42-plus million that we had filed for under the CARES Act. And then we received $5.2 million going back retrospectively for all the years that were open under the investigation. So the total proceeds of the company were $33.9 million, inclusive of the interest. Jon Hickman: Okay. So then -- so you said you had 1% subscriber growth year-over-year. What happened between Q2 and Q3, sequentially? Jeffrey Miller: We went from 3% subscriber growth, I believe, as we reported last quarter to 1% this quarter, impacted by some of the things I had described. Yes, go ahead. Sorry. Jon Hickman: Well, was there a loss of subscribers... Jeffrey Miller: No, that year-over-year total subscriber growth on a -- we look at it year-over-year to be able to provide full visibility through gross adds, net adds, churn and everything else. So we look at it on a year-over-year basis. Each quarter, we are growing. So we grew hundreds of thousands of subscribers in the quarter, but by virtue of our 11-plus million subscriber base, that represented 1% on a year-over-year basis. Jon Hickman: Okay. So why -- so can you explain -- I mean, let's see. So revenues were actually down sequentially. Can you elaborate on that? Jeffrey Miller: We had -- in the second quarter, if you look at the line item detail, actually, the revenue makeup, our subscription growth actually grew, as I mentioned, on a slightly Q3 over Q2, but what we saw less of were a onetime license or professional services fees. That is a reflection of the fact that we had a contract with SoftBank that we closed in Q2 for the license associated with the SDK deployment that we're doing. And while we saw some new business revenue in the third quarter, it was not as large as the second quarter performance. Operator: There are no further questions at this time. I'd like to turn the floor back over to Mr. Jeff Miller. Thank you, sir. Jeffrey Miller: Thank you. Once again, to all of those who participate in the investment community, we thank you for continuing to take time to invest your time and understanding and learning more about our business and the prospects for our future. To the Synchronoss team, once again, very strong performance by the team to help deliver tremendous advancements in our AI functionality to improve not only our product capability, but also our operational efficiency and for continuing to maintain very disciplined control that give us the strong financial foundation upon which we have to grow the business in the future. So thanks to the Synchronoss team. I wish the rest of you a very good afternoon, and thank you for taking the time to join the call. Back to you, operator. Ryan Gardella: Thanks, Jeff. Before we conclude today's call, I'd like to provide Synchronoss' safe harbor statement that includes important cautions regarding forward-looking statements made during this call. During this call, management discuss certain factors that are likely to influence the company's business going forward. Any factors that are discussed today that are not historical, particularly comments regarding our prospects and market opportunities are considered forward-looking statements within the meaning of applicable securities laws. These forward-looking statements include comments about the company's plans and expectations about future performance. Forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially. All listeners are encouraged to review the company's SEC filings, including its most recent 10-K and 10-Q for a description of these risks. Statements made during this call are as of today, and the company does not undertake any obligation to update or revise any such forward-looking statements, whether as a result of new information, future events or changes in expectations or otherwise. Please note that throughout today's call, management discuss certain non-GAAP financial measures such as adjusted EBITDA. Although the non-GAAP financial measures are derived from GAAP numbers, adjusted EBITDA is not necessarily cash generated by operations. This does not account for such items as deferred revenue or the capitalization of software development. Today's earnings release describes differences between the company's non-GAAP and GAAP reporting measures and presents a reconciliation for the periods reported and not released. Thank you for joining to Synchronoss Technologies Third Quarter 2025 Earnings Call. You may now disconnect.
Operator: Good afternoon, everyone, and welcome to the Arteris Third Quarter 2025 Earnings Call. Please note, this call is being recorded and simultaneously broadcast. All materials contained in the webcast is sole property and copyright of Arteris, Inc., with all rights reserved. For opening remarks and introductions, I will now turn the call over to Erica Mannion of Sapphire Investor Relations. Please go ahead. Erica Mannion: Thank you, and good afternoon. With me today from Arteris are Charlie Janac, Chief Executive Officer; and Nick Hawkins, Chief Financial Officer. Charlie will begin with a brief review of the business results for the third quarter ended September 30, 2025. Nick will review the financial results for the third quarter followed by the company's outlook for the fourth quarter and the full year of 2025. We will then open the call for questions. Before we begin, I'd like to remind you that management will make statements during this call that are forward-looking statements within the meaning of federal securities laws. These statements are based on management's current expectations and assumptions and involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated, and you should not place undue reliance on forward-looking statements. Additional information regarding these risks, uncertainties and factors that could cause results to differ appear in the press release that Arteris issued today and in the documents and reports filed by Arteris from time to time with the Securities and Exchange Commission. Please note, during this call, we will cite certain non-GAAP measures, including, among others, non-GAAP net loss, non-GAAP net loss per share and free cash flow, which are not measures prepared in accordance with U.S. GAAP. The non-GAAP measures are presented as we believe they provide investors with the means of evaluating and understanding how the company's management evaluates the company's operating performance. These non-GAAP measures should not be considered in isolation from as substitutes for or superior to financial measures prepared in accordance with U.S. GAAP. A reconciliation of these non-GAAP measures to the nearest GAAP measure can be found in the press release for the quarter ended September 30, 2025. In addition, for a definition of the key performance indicators used in this presentation such as annual contract value, confirmed design starts and remaining performance obligations, please see the press release for the quarter ended September 30, 2025. These key performance indicators are presented for supplemental informational purposes only should not be considered as a substitute for financial information presented in accordance with GAAP and may differ from similarly titled metrics or measures used by other companies, security analysts or investors. Listeners who do not have a copy of the press release for the quarter ended September 30, 2025, may obtain one by visiting the Investor Relations section of the company's website at ir.arteris.com. In addition, management will be referring to the third quarter 2025 earnings presentation, which can be found in the Investor Relations section of the company's website under the Events and Presentations tab. Now I will turn the call over to CEO, Charlie Janac. Karel Janac: Thank you, Erica, and thanks to everyone for joining us on our call today. In the third quarter of 2025, we achieved yet another record annual contract value plus royalties of $74.9 million, resulting in 24% year-over-year growth. We saw increased product adoption in chiplets and SoCs across multiple vertical markets. AI applications accounted for over half of our licensing dollars in the third quarter reflecting the growing adoption of Arteris system IP technology from data centers to the smart edge. We continue to see growing adoption of our product portfolio by top technology companies. An example of this is Altera, which selected Arteris technology portfolio to streamline design workflows, optimize data movement and enable intelligent computing across data center, communications, vision, industrial applications, robotics, aerospace and defense applications. This includes our network on-chip IP products, including Ncore and FlexGen and the management platform for IP block integration and hardware, software integration automation, which Altera plans to use in designing their next generation of FPGA and SoC FPGA solutions. Speaking of FlexGen, last quarter, we announced that AMD licensed the Smart NoC IP to provide high-performance data transport in AI chiplets across AMD's broad portfolio from data centers to edge devices. I'm happy to note that in the third quarter, AMD has ordered additional incremental licenses. In addition to the Altera and AMD relationships, we added 4 other new FlexGen customers in the third quarter. Within the automotive sector, FlexGen was deployed by Dream Chip, a custom SoC design house for high-end automotive semiconductor design. Additionally, a leading automotive OEM adopted FlexGen for next-generation EVs. Within the industrial sector, NanoXplore, a provider of radiation hardened silicon technology serving the aerospace, defense, avionics and industrial markets, licensed FlexGen's Smart NoC IP to address the demanding mission-critical computing requirements in space while supporting their product performance, team productivity, device reliability and meeting the underlying area and cost targets. This represents another example of our products being used not only for applications on Earth, but increasingly in terrestrial orbit, where performance, safety, reliability and security are essential. These examples illustrate the broad applicability of our new FlexGen Smart NoC IP, helping design teams deliver on expanded needs of chiplets and SoCs. Additionally, we expect demand to scale with rising design complexity and the move to advanced foundry nodes, particularly 5-nanometer, 3-nanometer, 2-nanometer and as we head into the Angstrom era of silicon. As the semiconductor industry accelerates efforts to increase performance and efficiency, especially driven by AI workloads and data centers and the edge, we are continuing to see a growing shift from traditional monolithic chips toward chiplets for multi-die SoC architectures, particularly for AI infrastructure and data center applications. One of the key chiplets is the IO Hub chiplet, which controls data movement across heterogeneous multi-die SoCs. 2V Systems licensed our Ncore and FlexNoC interconnect IPs to develop just such an IO Hub chiplet where Arteris technology serves to control multi-die data traffic meeting the high bandwidth, low latency energy efficiency and total cost of ownership objectives while meeting the needs of enterprise computing in data centers and cloud infrastructure. In the quarter, we also saw increased adoption of chiplets for high-end automotive applications, including our recently expanded multi-die solution. For example, one of our advanced automotive semiconductor customers shifted from a single chip to multi-die SoC architectures for their next-generation ADAS design, leveraging Ncore FlexNoC IPs for underlying data movement. Aside from various automotive semiconductor companies, we also saw expanded adoption of Arteris technology by automotive OEMs. Two of the top 5 EV automotive OEM companies expanding their use of silicon proving Arteris technology with functional safety for their next generation of vehicles, which increasingly include a wider array of advanced electronic functionality. Given the accelerating demand for increasingly advanced chiplets and chips from the AI surge in the high end to the growing needs of advanced microcontrollers, the needs for more specialized computing is becoming increasingly evident. This trend drives a broad range of specialized processors or XPUs, for a growing number of applications by providers who increasingly rely on Arteris technology for their underlying connectivity and data movement. With our growing ecosystem, we recently announced an expanded collaboration with Alibaba Damo Academy, enabling better integration and optimize performance between the risk 5 CPU cores and our data movement system IPs. This collaboration is intended to further enable mutual customers to more efficiently design AI server communications and automotive chips. Such ecosystem collaborations help enhance support for end customers, enabling them to accelerate their pace of innovation, with recent example being Axelera AI, a provider of purpose-built hardware acceleration technology for AI inference. They recently expanded the use of Arteris to help accelerate computer vision for edge devices using our technology to help achieve high bandwidth, low latency and scalability requires to optimize their next-generation inference products. The need for ecosystem collaboration is also evident as industry standards continue to evolve. In particular, AI data center infrastructure needs are rapidly evolving, driving demand for purpose-built solutions that can better support rapidly expanding AI workloads. To better meet the associated demand from customers, Arteris joined the Ultra Accelerator Link Consortium, or UALink. The goal of this organization is to establish an optimized, scale-up ecosystem across multiple AI accelerators with Arteris NoC IP serving as data movement transport in chiplets and SoCs. We joined with other companies in the consortium, such as AMD, Astera Labs, AWS, Cisco, Google, HP Enterprise, Intel, Meta and Microsoft, all of whom deal with high-end computing and some of whom are requesting the related support in our products. Lastly, I'm proud that Arteris continuous innovation was recognized with yet another award this time as the winner of the most innovative technology company of the year by the 22nd Annual International Business Awards, while also being recognized for new FlexGen Smart NoC IP and Magillem registers integration automation software product, both announced earlier this year. We believe the scale and scope of our opportunity remain robust, supported by our current products, and strong pipeline of new data movement system IP technologies as well as growing relationships with the largest and most advanced electronics companies in the world in collaboration with a broader ecosystem. Our customers continue to innovate in exciting high-growth areas across multiple applications from AI data centers to the edge, autonomous driving, advanced communications, consumer and industrial use cases. Many of these customers are increasingly turning to our products and solutions to support their innovative designs. With that, I'll turn it over to Nick to discuss our financial results in more detail. Nicholas Hawkins: Thank you, Charlie, and good afternoon, everyone. As I review our third quarter results today, please note that I'll be referring to GAAP as well as non-GAAP metrics, reconciliation of GAAP to non-GAAP financials is included in today's earnings release, which is available on our website. Also, as a reminder, I will be referring to the 3Q 2025 earnings presentation which can be found in the Investor Relations section of the company's website under the Events and Presentations tab. We had a strong third quarter meeting or beating our guidance on all financial measures. Turning to Slide 5 of the presentation. Total revenue for the third quarter was $17.4 million, up 5% sequentially and 18% year-over-year and above the top end of our guidance range. Notably, trailing 12-month variable royalties was 36% higher year-over-year. At the end of our third quarter, annual contract value plus royalties was $74.9 million, up 24% year-over-year, above the top end of our guidance range and at a new record high. Remaining performance obligations, which is our contracted future revenue at the end of the third quarter was $104.7 million, representing a 34% year-over-year increase, a new high and exceeding the $100 million milestone for the first time. Non-GAAP gross profit for the quarter was $15.9 million, representing a gross margin of 91%. GAAP gross profit for the quarter was $15.6 million, representing a gross margin of 90%. Now turning to Slide 6. Non-GAAP operating expense for the quarter was $19.5 million. We continue to reinvest a portion of our top line growth into technology innovations, solution support and our global sales team. Total GAAP operating expense for the third quarter was $24.4 million. We believe that our ongoing investments will help accelerate our top line growth in the coming years. At the same time, we are delivering operating leverage by controlling G&A spending, which has now remained broadly flat on a non-GAAP basis for over 3 years. This has resulted in a 15% improvement of non-GAAP operating expense as a percentage of revenue for the year-to-date compared to the same period in 2023. Non-GAAP operating loss in the quarter was $3.5 million, in line with our guidance. GAAP operating loss for the third quarter was $8.7 million compared to a loss of $7.9 million in the prior year period. Non-GAAP net loss for the quarter was $3.8 million or diluted net loss per share of $0.09 based on approximately 42.7 million weighted average diluted shares outstanding. GAAP net loss in the quarter was $9 million or diluted net loss per share of $0.21. Moving to Slide 7 and turning to the balance sheet and cash flow. We ended the quarter with $56.2 million in cash, cash equivalents and investments, and we have no financial debt. Free cash flow, which includes capital expenditure was positive $2.5 million for the third quarter, above the midpoint of our guidance range. I would now like to turn to our outlook for the fourth quarter and the full year 2025 and refer now to Slide 8. For the fourth quarter 2025, we expect ACV plus royalties of $74 million to $78 million, revenue of $18.4 million to $18.8 million with non-GAAP operating loss of $2.3 million to $3.3 million and non-GAAP free cash flow of $0.2 million to $3.2 million. For the full year, 2025, our guidance as follows: ACV plus royalties to exit 2025 at $74 million to $78 million, an increase of $1 million compared to our prior guidance. Revenue of $68.8 million to $69.2 million, also an increase of $1 million compared to our prior guidance. Non-GAAP operating loss of between $12.5 million to $13.5 million and non-GAAP free cash flow of $2.5 million to $5.5 million. We remain encouraged by our strong deal execution witnessed by the 34% year-over-year growth in RPO at the end of the third quarter. We are seeing promising signs of accelerated interest by some major customers to increase their outsourcing of system IP products to Arteris, which we believe will help accelerate growth in our license and royalty revenue, ACV plus royalties and positive free cash flow. With that, I will turn the call back to the operator for the Q&A portion of the call. Operator? Operator: [Operator Instructions]. Your first question is from Kevin Garrigan from Jefferies. Kevin Garrigan: Charlie and Nick, congrats on the results in the Altera announcement. Can you just talk a little bit more about Altera? Are they fully away from using internal interconnect teams? Or is there still more opportunities for you guys to expand there? Karel Janac: I think there's more opportunities. Basically, the application is for FPGAs and FPGA SoCs. So Altera is using their own interconnect in the FPGA matrix, and then we are used essentially in the SoC part. But Altera business is going to continue to evolve and grow and we believe that there's future opportunities, but this is a major milestone because Altera, as they spun out of Intel chose to go with Arteris for their primary system IP requirements. But yes, there is more potential going down the road. Kevin Garrigan: Okay. Perfect. And then since the initial discussions with AMD and the initial order announcement, it seems like it took about 1 quarter, maybe a little bit longer for them to expand the use of your products. So what were they kind of most impressed with that led to increasing usage in such a short time frame? Karel Janac: Yes. I mean, AMD is a big company. The deal in the second quarter was for their -- basically their central engineering group. And this -- the third quarter deal was basically for another group. And Altera is -- I'm sorry, AMD has many groups to -- for us to work with. And so there are also additional opportunities at AMD, and we're very much looking forward to helping them accelerate their chip deliveries. Kevin Garrigan: Got it. Got it. Okay. And just one more if I can. You talk -- can you just talk a little bit more about the importance of reliability and safety when it comes to interconnects and the importance of it in some end markets like space as you guys mentioned? And I think you guys have done a very good job on this front, but do you see this as this focus as really a competitive advantage for you guys? Karel Janac: Absolutely. I mean, basically, all the important data goes through our network on chips. And basically, if that has problems or doesn't work, the chip doesn't work. So customers are very risk averse in choosing system IP solutions because any problems there can cause major delays in tape-outs and field problems. So we're being recognized as very much a silicon-proven company. I think now our installed base has shipped something like 3.9 billion SoCs and they all work. And probably some of the stuff used daily, probably has our Arteris Interconnect in it. So yes, we are very much focused on reliability. We're very much focused on quality because if the system IP doesn't work, the chip doesn't work. Operator: The next question is from Kevin Cassidy from Rosenblatt Securities. Kevin Cassidy: Congratulations on the great momentum. Just on the UALink consortium, what kind of timing can we expect for licenses to come out of that consortium and some of the players there? Karel Janac: Well, some of the players are already customers. But basically, the objective of the UALink consortium is to essentially scale up data center solutions. And so we're basically developing technology to support that, and we're already involved in some of those designs, but we're basically following that consortium's protocol in order to support the data center scale up efforts that they are pioneered by the companies that we mentioned. Kevin Cassidy: Okay. Great. And with the penetration you're getting within AMD and combining it with the Altera announcement, is there opportunities for Xilinx? Or is that already included in your AMD discussion? Karel Janac: Well, Xilinx is an important part of AMD. And in fact, Xilinx was the first customer that was involved with us prior to the AMD acquisition. So Xilinx has been a long-time user of Arteris. Operator: Your next question is from Gus Richard from Northland. Auguste Richard: Real quick, you've had a number of design wins for a while. And just wondering the royalty relative to most mature IT companies is relatively low. Just wondering when do you expect that to start to accelerate? Karel Janac: Nick, do you want to take that one? Nicholas Hawkins: Yes. I will. Yes. Gus, welcome to the call. So the -- it's a great question because as you and I have discussed in the past, the -- an increasing rate of customer design starts is a great indicator of future royalty growth because typically, there's somewhere between a 3- to 6-year lag between start of the design and mass production and scale, and it can take even another couple of years to get up to full scale after the mass production starts. So it is definitely a heavy link between the 2. The -- we're already seeing that, and we're already seeing the beginning of the inflection on royalties. And there's one you'll see in our investor, like our Q3 Investor Day, there's a new additional piece of information on royalties. And what's very interesting is number one, the growth of royalties is quite -- a variable royalties is quite impressive. And in fact, the growth year-over-year for the variable royalties in the trailing 12 months to the end of September compared to the prior 12 months ending September 30 2024 was up 36%, which is in line with what we've been saying in terms of the royalties growing at roughly 2x the rate of licenses. And what's particularly interesting in that chart you'll see in the investor deck, is that we -- if you go back to 2020, which is quite an interesting start point because that's when we were dominated in royalties from HiSilicon, which has now, of course, gone to 0, we now have a higher rate of variable royalties in fact we have all year since the days of HiSilicon back in 2020 and now instead of being a one-trick pony where we had one customer making up 90% of our variable royalties. We now have 5 customers who between them have a greater royalty stream than the one HiSilicon. So we've got more diversity. We've got more people who are now the majors. So it's 5 majors and then another 50 smaller players. And so it's all up and to the right and growing very nicely. So we are starting to see that. I do see there's an increasing inflection point as we go through the next couple of years. So by 2028, you'll see an even faster rate of acceleration. Auguste Richard: Got it. That was super helpful. And then, Charlie, for you, you guys talk about the top tech companies that you've penetrated, I was wondering if that's just for everybody to find what those companies are and then how many you've, at this point, penetrated? And then specifically in the AI ASIC crowd, are you starting to penetrate those, both U.S. and Taiwan? Karel Janac: Yes. I mean we basically, we define the large company to sort of top 20 semiconductor companies and then basically, another 20 of the largest system electronics companies, right? So that's -- we're kind of jokingly referring to that as the Arteris index. And we have, I would say, more than 50% of those companies as customers but not all of them are huge customers, right? So there's still a long way to go in terms of expansion of our business. But obviously, with the AMD and Altera announcement, and there's a couple of others who don't let us announce who they are. One of which we also closed in the Q3. We did our best to be able to announce them, but they did not let us. So I think our progress in the top 40 largest technology companies is quite good. But there's a long ways to go. It's about a $1 billion, $1.2 billion market and we're about $68 million this year or something like that. So there's a long way to go. Auguste Richard: Okay. Got it. And then the Lord Baltimore questions. When I go through cash flow on balance sheet, blah, blah, and it looks like bookings were in the ZIP code of $32 million in the quarter, book-to-bill about $1.8 billion. So Nick, am I in the right ZIP code? Nicholas Hawkins: Yes. I don't want to comment on bookings otherwise, we open up a Pandora's box of future disclosure. So bookings, as you know, fairly lumpy. And so -- because we have very large customers these days. And so that can really create a false precedent if we start if we start disclosing that. So I'll have to allow you to do your own math on bookings, Gus. Operator: Your next question is from Joshua Buchalter from TD Cowen. Joshua Buchalter: Charlie, I thought your comments in the prepared remarks about more -- seeing more traction from AI applications and specifically in the data center were interesting. Obviously, a lot's happened in the AI space over the last few months. Could you maybe level set us on how much of your opportunity over time you see coming from actually in data center versus edge device edge and edge embedded devices where I think that's been your bread and butter for a while? Karel Janac: Yes. I mean, basically, our thesis is that, over time, pretty much all electronic endpoints or edge devices are going to be connected to the data center. And so for each end point or edge device, there is some ratio of blades in the data center. And as everything becomes connected to the data center, these the number of chips that's actually in these data centers goes to a very large number. So we're sort of following customer demand. And we are -- there's just a lot of attention on AI workloads in the data center. There's a lot of project starts. Obviously, NVIDIA is a very, very major player and it will continue to be a major player. But some of these system houses are also designing some of their own chips for specific data acceleration of specific workloads. They're working on specific AI workloads and those kinds of things. So we see as a major opportunity, and we're working with those customers, and we're increasingly starting to pivot our engineering to address the issues that are important to these data center companies, hyperscaler companies that are handling the high-end AI workloads. So over time, I mean, I think data center will be somewhere between 25% to 30%, maybe 35% of our business. But right now, AI is -- represents about 50% of all the design starts that we're involved with. So right now, there's a bit of a design start bonanza. But on a long-term basis, I would expect it to be about probably 35% or so. Joshua Buchalter: Maybe, Nick, could you provide any comments or color on -- it seems like you're getting a lot of good traction from FlexGen, which comes with higher ASP on the royalty and I'm guessing the licensing side as well. When should we expect that to start being a sort of meaningful needle mover in the model? Nicholas Hawkins: Josh, just to be clear, are you asking that question specifically regarding royalties or more generally on license revenue? Joshua Buchalter: It was more on the royalty side. Nicholas Hawkins: Yes. So I mean FlexGen is accretive to both ASP and therefore, license, but it's also accretive to royalties because it has more competence as a product than it's -- the more junior the FlexNoC 5 that doesn't have the automation feature. So yes, if you look at somebody, for example, in who've just kicked off a FlexGen cycle or FlexGen deal with us, and most of those have come from the mid of this year onwards. And now you saw we had another 4 in addition to Altera and AMD in the third quarter. So it very much depends on the use case. There are some -- most of the use cases right now are more in the server and FPGA environment which don't have huge volumes, as you know, there are some which are more involved in higher volume. We're early stages yet. We do expect a lot more penetration from FlexGen into some of the other areas that are perhaps higher volume. And of course, the biggest royalty area for us, which is about half of our total royalties is actually from the automotive market. And so from a -- if you use FlexGen in automotive, for example, in automotive design today and you start the design, it would be 2030 to 2031 before we started seeing the royalties from that. So there's a lot of pipe stocking going on in royalties from this. Operator: There are no further questions at this time. Mr. Janac, please proceed with closing remarks. Karel Janac: Well, thank you, everyone, for your interest in Arteris. We're very excited about the current quarter, and we look forward to meeting you -- with you in the upcoming non-deal road shows and investor conferences in the quarters ahead and updating you on our business progress. Thank you very much. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
Operator: Good morning, everyone, and welcome to the Gibson Energy Third Quarter 2025 Conference Call. Please be advised that this call is being recorded. [Operator Instructions] I would now like to turn the meeting over to Beth Pollock, Vice President, Capital Markets and Corporate Development. Ms. Pollock, please go ahead. Beth Pollock: Thank you, Jill. Good morning, and welcome to our third quarter earnings call. Joining me today from Gibson Energy are Curtis Philippon, President and Chief Executive Officer; and Riley Hicks, Senior Vice President and Chief Financial Officer. The rest of our senior management team is also present to help with questions and answers as required. Listeners are reminded that today's call refers to non-GAAP measures, forward-looking information and is subject to certain assumptions and adjustments and may not be indicative of actual results. Descriptions and qualifications of such measures and information are set out in our investor presentation available on our website and our continuous disclosure documents available on SEDAR+. With that, I will turn the call over to Curtis. Curtis Philippon: Thanks, Beth. Good morning, everyone, and thank you for joining us today. The third quarter was a strong period for our customers and the Gibson team. Our customers delivered a number of throughput records this quarter, including an all-time high across our Canadian and U.S. terminals of 2.2 million barrels per day, up 8% from last quarter and 27% higher than the third quarter of 2024. In Edmonton, throughput reached a record level of over 330,000 barrels per day, 14% higher than last quarter and more than double the volumes from the same period last year. Year-to-date, in Edmonton, we have handled roughly half of the heavy crude volumes shipped to TMX. At Hardisty, volumes remained strong at over 1.1 million barrels per day, marking the highest quarterly throughput at the terminal since TMX came online and tracking toward a potentially new all-time record for annual throughput for Hardisty by year-end. At our Moose Jaw facility, following the successful completion of the turnaround last quarter, we increased third quarter throughput by 7% over the same period last year and delivered a new monthly throughput record for the facility in September. At our Gateway terminal, the completion of dredging supported a new quarterly throughput record of 717,000 barrels per day including a new monthly record of 775,000 barrels per day of loadings in August alone, and we have maintained that this momentum into Q4. The terminal also saw a record number of vessel loadings during the quarter with 85% of those vessels being VLCCs and Suezmax's. These Gateway volumes represent a 20% share of total U.S. crude exports and 44% of the Ingleside market. And finally, in support of our Gateway customers, we've achieved record monthly volumes at Wink in September, exceeding 55,000 barrels per day. This impressive performance contributed to third quarter throughput of approximately 52,000 barrels per day, up from 43,000 barrels per day in the same period last year. We get asked sometimes why do we care about the volume throughput records. The vast majority of Gibson's infrastructure revenue is fixed in nature, so the records do not always directly impact quarterly revenues. But we care about these records because they are a great indicator for us as we look forward. These throughput numbers highlight the strength and growth of our customer base and reinforce the essential role our assets and teams play in safely and efficiently delivering energy to global markets at the best possible netbacks for our customers. On top of these records, I'm pleased with the progress made in the quarter on our 5 strategic priorities: safety, Gateway execution, growth, building high-performance teams and cost focus. We're very proud of the outstanding safety culture and program at Gibson. The team is achieving best-in-class safety performance. In the third quarter, Gibson hit record levels for total recordable incident frequency for our employees and contractors. We have now surpassed 9.8 million hours without a lost time injury. A great safety culture that is focused on continuous improvement is the foundation for our success as an organization. This week, we will achieve a key milestone on our strategic priority at Gateway -- on our strategic priority of Gateway execution with the completion of a major capital project. The Cactus II connection at Gateway has finished construction and is being commissioned this week with oil expected to flow as early as tomorrow. The addition of this connection provides our customers with access to an additional 700,000 barrels a day of Permian supply, effectively increasing their supply options by 1/3 and now providing access to 100% of the supply in the region. We remain fully confident in achieving our 15% to 20% Gateway EBITDA growth run rate milestone in Q4 and the record-breaking performance of Gateway post completion of the dredging project, now combined with the supply capabilities provided by the Cactus II connection will enable sustained elevated throughput volumes. On the growth and building a high-performance team strategic priorities, we had an important addition to the leadership team in the quarter. We continue to strengthen the Gibson growth muscle with the appointment of Blake Hotzel as Senior Vice President, Chief -- Senior Vice President, Commercial Development U.S. based in our Houston office. Blake brings more than 20 years of energy infrastructure experience, including senior commercial and business development roles at Tallgrass and Phillips 66. As we expect infrastructure EBITDA per share growth of more than 5% over the next 5 years, Blake's leadership will be instrumental in advancing our U.S. strategy and driving continued growth across the platform. Following the quarter, the construction and commissioning of the infrastructure supporting our long-term strategic partnership with Baytex was successfully completed, an important step that adds stable long-term cash flow under the 10-year take-or-pay and area dedication agreement. The production is now flowing to our Edmonton terminal. On our cost-focused strategic priority, we continue to advance our -- we are all owners cost focus initiative. We are on track to exceed $25 million in run rate cost savings by the end of 2025, driven by strong engagement from teams across every area of the business. During the quarter, we captured onetime an ongoing cost savings contributing $9 million to distributable cash flow. On financial highlights, the business delivered a solid quarter that was in line with our expectations. Infrastructure continued to perform exceptionally well this quarter with near record EBITDA of $154 million and marketing contributed $7 million of EBITDA as expected. Distributable cash flow was $86 million during the quarter. In summary, the third quarter once again demonstrated the strength and resilience of Gibson's business model. We delivered consistent operational and financial performance, advanced key growth projects on both sides of the border and maintained our unwavering commitment to safety. As we look ahead, with Gateway running at record levels, the construction and commissioning of Cactus II complete and our Duvernay project with Baytex on schedule, we are well positioned to continue generating stable growing cash flows. At the same time, our high-performing team, continued focus on cost discipline and an ownership-driven culture ensures that we remain aligned with our shareholders and well prepared to deliver on our long-term growth and return objectives. With this, I'll pass it over to Riley, who will discuss our financial performance in more detail. Riley Hicks: Thank you, Curtis. As discussed, the third quarter was another strong quarter for our core business. Our Infrastructure segment continues to deliver solid results with third quarter adjusted EBITDA of $154 million, an increase of $4 million over the same period last year and in line with the record that we set earlier in 2025. Infrastructure EBITDA also accounted for over 95% of adjusted EBITDA before G&A during the period, emphasizing the high-quality, stable nature of our cash flows. This performance was driven by record throughput across our assets. In Canada, quarterly volumes rose by 26% year-over-year, while in the U.S., throughput rose by 30% over the same period. These positive results reflect the critical nature of our assets and their value to our customers. Our Marketing segment delivered EBITDA of $7 million for the quarter, consistent with both our prior guidance and the previous quarter results. For the fourth quarter of 2025, we expect the macro environment to remain relatively consistent. And as such, we anticipate marketing EBITDA for the year to be around $20 million, within our previously communicated range. As we look towards 2026, we anticipate a stable commodity price environment with marketing performance expected to remain consistent until egress tightens. As such, our focus will continue to be on supporting our long-standing infrastructure customers as they execute their development plans and grow their production around our critical asset base, positioning Gibson for continued stability, growth and long-term value creation. On a consolidated basis, third quarter adjusted EBITDA of $147 million was $4 million lower than the same period in 2024, primarily driven by lower contributions from the Marketing segment and offset by strong performance through our Infrastructure segment. Turning to distributable cash flow. We generated $86 million in the third quarter, a $3 million decrease from the third quarter of 2024. During the quarter, we captured onetime and ongoing cost savings contributing an impressive $9 million or $0.05 per share to distributable cash flow. Approximately 80% of these savings came from 4 main drivers: lower interest expenses, reduced property taxes, decreased operating costs and the one that I am most proud of, our grassroot cost savings efforts. This area made up a significant portion of our total savings through many small initiatives implemented across the company and supported by the participation of 80% of our employees. This is a great example of our culture of ownership and engagement and highlights how individual contributions have meaningfully strengthened our financial performance. Quarter-over-quarter, our debt to adjusted EBITDA ratio improved from [ 4x ] to 3.9x, though it remains above our long-term target range of 3x to 3.5x, while our consolidated payout ratio for the quarter was 85%. On an infrastructure-only basis, our debt-to-adjusted EBITDA ratio was 4.1x and our payout ratio was 80%. As expected, leverage and payout are temporarily above our long-term targets. However, we have clear visibility to returning to our target range in the first half of 2026. We remain fully committed to our financial governing principles. Our balance sheet remains a key strength of our business, supporting both disciplined growth and a sustainable growing dividend. Supporting our conservative financial profile and our continued commitment to our investment-grade rating, both DBRS and S&P have reaffirmed Gibson's BBB low and BBB- ratings, respectively, each with a stable outlook, underscoring their confidence in our long-term financial plan. With this, I will now pass the call back to Curtis for a few closing remarks. Curtis Philippon: Thank you, Riley. To close, the third quarter further demonstrated Gibson's ability to deliver strong results through disciplined execution and a clear strategic focus. We continue to advance our priorities, maintaining top-tier safety performance, executing at Gateway, delivering growth, building high-performance teams and driving cost efficiency across the business. We'll be holding our Investor Day in Toronto on December 2 and look forward to seeing you there where we will walk through our long-term strategic plan. I'd like to take a moment to thank all of our employees for their continued commitment and exceptional performance. Their dedication to safety, operational excellence and our ownership culture continues to drive Gibson's success. Thank you again for joining us today and for your continued support in Gibson. Operator: [Operator Instructions] Our first call comes from the line of Jeremy Tonet with JPMorgan Securities. Jeremy Tonet: Just want to pick up with one of your last points there with regards to the upcoming Investor Day in December. Just wondering if you might be able to provide a little bit more color, I guess, on what type of topics we could be discussing there. Specifically, I guess, growth initiatives as you see at this point, any foreshadowing color you could provide at this juncture? Curtis Philippon: We want to make sure you come to the Investor Day. So we don't want to get too far ahead of ourselves there. But what I would say is the -- I wouldn't come to it expecting that you're going to hear big individual project FIDs. Like we're not intending to announce a significant sort of $100 million-plus project FID in the meeting or even announce any sort of significant change or improvement in marketing outlook. How we look at the world today is how we think it looks like for the front half of the year. And we think we see from a capital project perspective, a lot of very good projects, but a lot of projects that are more in the sub-$100 million range that we'll be working through. So I wouldn't come expecting a specific project FID announcement. What you can expect to hear is we're going to be introducing the team. So we've got a number of new faces around the table and want to give people a chance to meet them in person. So you'll meet our senior team. You'll hear a little bit more about what we've been working on over the last year, and you'll see us lay out the specifics of our 5-year plan. And I think for me, that's the important step that we lay out some of those specifics and give a bit of a step-by-step of how we're thinking about growth and something that our investors can hold us accountable to. And then lastly, we're going to spend a fair bit of time talking about what I believe is a pretty compelling return proposition in Gibson that is backed by an outstanding dividend. Jeremy Tonet: That's helpful. And maybe picking up on one of your comments there, expectation for kind of a static environment through the first half of next year. Around the middle of next year, do you see the egress tightening at that point and supporting better marketing? Or any other thoughts you could share, I guess, on how marketing progresses over time? Curtis Philippon: I think we'll wait and see. I think at this point, when you look at what you see for production and egress, I don't know that you see significant tightening of egress in 2026. I think that's more in 2027 that you start seeing that come in a bigger way. But I think you do start seeing it on the horizon and you start seeing people acting in preparation of those egress challenges coming. And so I think that will make for some interesting opportunities for Gibson. So we see some slight improvement in the marketing outlook in the back half of the year, but it really is fairly consistent for what we see in 2025. And what I would comment on that is the positive on that is it is a tremendous environment right now for our infrastructure customers. Even in low commodity markets, our infrastructure customers are exceptionally healthy and are growing production, and that's really the core of our business. And so we're seeing very good throughput numbers, you see good project announcements from our customers, healthy balance sheets, all while there's sort of this sort of challenging commodity market backdrop. And so as much as we do believe in the long-term guidance of marketing and returning back to our range, it's actually phenomenal for our infrastructure business that we have this very efficient market egress happening right now. Operator: The next question comes from the line of Aaron MacNeil with TD Cowen. Aaron MacNeil: Curtis, as you mentioned in the prepared remarks, you've seen record throughput across the platform. I'm hoping you can sort of take this a step further. Are there any notable contract expiries in the near term where we could see this performance translate to higher contracted pricing to reflect that stronger fundamental backdrop? And if so, how material could that be? Curtis Philippon: Aaron, really, we always have contract renewals that are happening. So there's no sort of uniqueness to 2026 or 2025 for a contract renewal period. We always are working through those. I would say, as you look into next year, though, as you start seeing tightening egress, we like that market condition for renewals as you get into '26, better than what it has been in '24 and '25. Aaron MacNeil: Okay. I also wanted to dive a bit deeper into the impact of nonrecurring cost savings. I know you don't split it out, but can you speak to the specific items this quarter that were nonrecurring, what the impact is and what the visibility to nonrecurring savings could be on a go-forward basis? Curtis Philippon: Yes. We talk about sort of half and half. I don't know if we're given such a -- it's sort of scattered over a number of different buckets. I don't know if it's worth getting into the specifics of what are the nonrecurring ones, but it's about half and half. We'll get into that a bit more at IR Day. I would call out the cost savings program has just been tremendous. The cultural impact of people leaning in and finding cost savings across the business has been quite impactful and culturally getting people focused on, hey, we're all owners here, let's drive cost efficiencies across the business has been powerful. Riley talked about over 80% of our employees participating and having a direct impact on it. We had one example in the quarter that I think is a great story. We've got a senior ops member of our ops team that's a long-term Gibson employee, Kevin Buelow out in Hardisty, who had a capital project in Hardisty come to his attention that we had done an excellent job designing a growth project in Hardisty. We're improving some connectivity in the Hardisty facility. It was about an $800,000 project. And Kevin, with many, many years of experience and knowledge of that asset, looked at that and felt empowered by the cost program to say, I think there's a better way and drove a great conversation with our engineering team and directly on that project. And we ended up saving, I believe it's almost $400,000 on that project and cut time out of the scope, thanks to that. I think these stories, so that would be a great example of a non-recurring cost impact in the quarter that will be realized -- some of that was realized in the quarter. But we've got stories like that happening all over the business right now. And it's just -- I think the cost program just elevated some of these conversations and empowered people to lean in and suggest different ways of doing things. So shout out to Kevin Buelow. Kevin is also one of the newest members of the Hardisty Town Council. So shout out to Kevin, he's a great long-term employee of Gibson. Operator: The next question comes from the line of Sam Burwell with Jefferies. George Burwell: First off, on exports, a little bit of volatility month-to-month through 3Q, even post dredging. So wondering if you could just sort of illuminate whether that was more idiosyncratic to Gibson or reflective of broader macro conditions? And then any insight you could give us on just like the EBITDA sensitivity to this volumetric volatility? Curtis Philippon: Sam. So from a Gateway volumes, super interesting. Obviously, post dredging, we've seen an uptick as we take that facility sort of 47 to 52 feet of depth. You're able to suddenly fill a VLCC rather than 1.25 million barrels to 1.5 million barrels since we saw immediate throughput increase. Not every vessel going through is a VLCC, so you don't see it all the time and not every customer has all that inventory available every time. And so that you don't always get it. But we saw from time of dredging, so pre-dredging, we would have been in the 500,000 range per day on average unloading. Post dredging over the last 5-ish months that it's been -- we've averaged about 725,000 barrels a day. There is some month-to-month flexibility in that. Some of that is geopolitical. There's a lot going on in the world right now. But some of that is really just our customers' programs and when they're timing. And so we've seen a fairly consistent volume. It's actually quite remarkable that we've been able to do the 725,000 on average without the Cactus connection that we -- when we initially planned this out, we really didn't think we would get that big of an uptick without -- until we got Cactus completed because it's such a challenge for the facility to keep up and our customers to keep up with that level of activity with only 2/3 of the supply available to them. And so we've been doing a lot of juggling. Our customers have been extremely supportive on working with us to find ways to get volume onto other pipes to make sure that they can take advantage of using Gateway. But it has been a challenging situation to maintain sort of the high. We did that 775 in August. It's been challenging to maintain that -- quite that level without Cactus. With Cactus now completed, I expect that you're going to see customers get used to using that, and you'll see a volume uptick as we get into the early part of next year. But there is -- at the end of the day, we get a certain amount of compensation for volume throughput, but the vast majority is on just booked windows. And so there is some sensitivity to volume throughput, but there's -- at the end of the day, it's MVC minimums that drive the bulk of the revenue at Gateway. And so there is sometimes month-to-month variations where customers choose for whatever reason, not to take advantage of their MVC. George Burwell: Okay. Perfect. Understood. On marketing, I appreciate the comments you guys gave earlier and that makes sense that the outlook is challenged given where the dips are. But just curious if there are any other headwinds or tailwinds that you see outside of kind of the headline dip, whether it's refining margins? Or I mean, if we do see crude go into contango, just like anything else out there that could potentially swing marketing one way or the other over the, call it, medium term? Curtis Philippon: Yes, there's a few things, but I caution that they're still early on that. But they do give us optimism that we expect to see a bit of an uptick as we get into next year. One thing we flirted with contango just recently. And so obviously, that's a big deal. We've been very backwardated for a long time. Just recently, we flirted with contango. If that was to come back, obviously, there's a very positive impact for our bottom line. On the refinery side of things, one of it is actually just demand for products that one of our large markets for drilling fluids out of the refinery is Western Canada. And as you see a fair bit of activity around LNG-related drilling activity in Western Canada. We think there's a bit of a small uptick around that, and that's a good product for us. So that's a nice indicator for us. And then the other one is just around Gateway and that we've -- in our U.S. side of our business, we haven't really done a lot to take advantage of what our marketing team can do to help Gateway customers, and we expect that you'll see us do more out of our U.S. business to grow a bit of a market business that supports Gateway throughput. Operator: The next question comes from Robert Hope with Scotiabank. Robert Hope: Maybe keeping on the South Texas theme. With Cactus entering service here imminently as well as the dredging now done, where are you spending most of your time on the files for that asset? Is it on the storage side? Are you devoting more time to the incremental dock? Or is it all contracting? Curtis Philippon: Yes. On Gateway, obviously, a great story this year with a couple of notable things. And so as we get into '26, there's a certain amount of us just taking advantage of the new capabilities that we've got. Now that we've got this dredged facility and all this connectivity, we can really move into some recontracting with customers to -- at larger MVCs and that the original MVCs at the facility were done at an Aframax size vessel. Now that we're fully VLCC ready, as recontracting comes up, there'll be larger windows being contracted. And it's nice that we're getting paid on throughput today for that incremental volume, but we love MVCs. We're midstreamers, we love guaranteed revenue. And so you'll see a lot of work over the next couple of years as contracts come up to sort of shift over to larger MVCs versus having a variable portion on some of this throughput. So that's one piece. The other piece that we're seeing is just with the large amount of activity at Gateway that we're seeing customers really pulling for a lot -- looking for additional supply. And so we're doing a fair bit of work out in Wink to go support sourcing additional volumes for customers, and that's quite helpful as they think about getting incremental cargoes off the dock in Gateway, what can we do to find additional barrels for them. So we're doing a fair bit of work around that, and I think we'll talk more about that at the Investor Day and some of the things we're doing there. And then also out of the Eagle Ford, we see some nice opportunities to provide additional Eagle Ford barrels with existing customers that have a footprint up there that would like to get more of those barrels across the dock. And so we're doing a few things around that as well to sort of unlock some of that potential for the Eagle Ford. Robert Hope: All right. And then maybe on Wink, you've highlighted a couple of times this call, and it's been silent for a number of calls recently. How are you thinking about your Wink assets? And what do you think the outlook for them is and how they fit in to the company longer term? Curtis Philippon: Wink has been -- it's an interesting one for us. So early on with Gateway, we definitely underpromised around what is the linkage between Gateway and Wink. And it was still, still early, we're learning what exactly that potential was. But in the back of our minds, I think there -- we think there's something there. And we've seen that play out this year that it is a big deal for customers to be able to find more barrels for the -- across the dock and Gateway. And so having the ability to gather barrels at Wink has been an advantage for us. And so we've leaned into that. The team has done an exceptional job, and you can see the volumes going up. So we're seeing some good activity and profitability out of that Wink business. We think there's an opportunity to grow that a little bit as well as we -- I think it's a good piece of business, but it's also nicely supports Gateway. So you'll see us leaning into that one a little bit more. And I also think just from an overall macro of the Permian, why I'm interested in that is because you can look forward and say the Permian is right now today, a fairly flattish production profile over the next little bit. But if you look specifically at the quality of the barrel in the Permian, there's a real trend going on out there right now that there's increasingly more quality challenged barrels that would benefit from a terminaling solution that Wink and Gibson can provide to help them make sure that they're optimizing their quality before shipping the barrels out of the field. And so I think increasingly, the importance of our service increased a bit. When saying all that, it's still a relatively small part of our business. This is -- we're talking about 50,000 barrels a day of gathering. It's a relatively small asset for us, but we've been pleased with how it's performed. Operator: The next question comes from Maurice Choy with RBC Capital Markets. Maurice Choy: Just a question on, I guess, taking a bigger picture about your objectives in your second year as CEO. It feels like the first year, you've channeled the company's focus, including on keeping things more simple, focusing on a crude oil theme, optimizing costs and on culture. When you think about your second year, what are some of the mandates you've been given by the Board? And how do you look at things like M&A as well as any other hirings that you need to make beyond... Curtis Philippon: Maurice, I think it's been -- I think you characterized the first year well that we had a certain amount of work to do in the first year to get the organization focused on cost and strategically aligned, execute really well out in Gateway. And the team has done a phenomenal job of that. And so I think as we get into next year, it's a little bit of, okay, we've got the team in place now and let's go really -- let's accelerate this. There's an opportunity to accelerate our growth and some of the things that we're doing. And now that we've sort of been through a bit of a period of change, I think now we've got a bit of ability to just go run now, and I'm really pleased with the team we've got around the table and pretty excited about what we can do with that. But we'll see what that means for M&A. I think we've proven with Gateway that Gibson is capable of doing excellent M&A and going and integrating it well and delivering on it but we're not going to force that. I think one of our benefits is we're -- of our size that we don't -- there's not a need to go do M&A just to get a little bit bigger for the sake of getting bigger. If we would do M&A on crude-focused assets that were true crown jewel type assets that we could add to our portfolio that nicely plugged into our current assets as best as possible and had the sort of contract profile and customer quality that we're after and the valuation has to make sense. So in saying all that, I think we'll be pretty focused on growth capital, but have an eye on is there a potential M&A out there that's crude focused that makes sense for us. Maurice Choy: Understood. And if I could just finish off on a question on the leverage and targets. Riley, I think you mentioned earlier that you're forecasting to reach your 3x to 3.5x debt-to-EBITDA target by the first half of next year. I think previously, there was a mention of this being early 2026. So would you view that to be consistent with your prior messaging? And if not, is it merely the marketing outlook having changed a little bit for 2026? Or are there other drivers that you highlight? Riley Hicks: Thanks, Mau. I think as we look at our leverage and kind of returning to our normalization in the first half, we would view that as consistent with our prior messaging. And really, the main impact driving that downward is realizing the benefit of all the great capital projects we've got here in 2025. As that EBITDA comes online, we'll drive our leverage back down to the range that we like. So we feel very comfortable with our long-term deleveraging plan, and we expect to achieve that in the next -- first half of next year. Operator: The next question comes from Benjamin Pham with BMO. Benjamin Pham: I wanted to follow up on the last question and maybe just touch base on your thoughts on the -- your current leadership team. You effectively have completed so what you need to place on your team. And I'm also curious with the new hire, what priorities you've set for him and any potential changes in terms of how you think about the U.S. versus before? Curtis Philippon: Yes. So from a team perspective, I'm pretty excited about the team we've got. I think we've got -- I think it's so important to get the right team around the table. We've done that. We've got a team that's pretty excited about growing Gibson over the next phase of time. And so we're excited about that. In particular, with Blake joining now. We looked at the U.S. business with the addition of Gateway is now Gibson is very relevant in the U.S. And so we've got -- part of bringing Blake in is like, one, let's make sure that we're running and managing our Gateway and our Wink asset very well and continuing to drive good growth of those things and driving great recontracting and doing all those positive things. So that's sort of plan A, sort of keep the car on the track. So we're having a bunch of success, keep that going well. The second part of that is, boy, we're relevant now. Like we're exporting 1 in 5 barrels out of the U.S. goes through the Gibson Gateway facility. So we're a meaningful part of the energy infrastructure in the U.S. We've got a footprint now. What do we do with that? And what other incremental growth capital or other things could we do that could expand that growth down in the U.S. And so I think that's really what his mandate is. And in saying that, it's -- we're targeting this overall infrastructure EBITDA per share growth of over 5%. And I expect there'll be a nice mix of Canadian and U.S. growth that will be pushing for that and a little bit of adding Blake to the mix and his counterpart, Kelly Holtby in Canada is just -- we grant a nice -- a nice competitive tension of a lot of projects coming to the forefront for us to compete for capital and make sure we're driving the best possible projects forward on both sides of the border at the best possible returns. And so I think that's a little bit of how we're thinking about it. Benjamin Pham: Think what ideally, not necessarily putting numbers at this point in time that you could see long term a nice balance mix of sanction projects between both countries? Curtis Philippon: It's hard to predict what the mix is. I think right now, I think it's a fair assumption that you've got a balance between both sides of the border. When you -- we've got -- the U.S. market is obviously much larger, and so the opportunity set is tremendous. But on the other side, in Canada, Gibson has got 70 years of history and just a really substantial asset base across the Western Canadian basin that gives us a lot of relationships and a lot of opportunities on the Canadian side of the border as well. Benjamin Pham: Okay. Got it. And maybe a follow-up question to your earlier comments, Curtis, on the volume uptick, maybe not necessarily translating to the one for one on the EBITDA side of things. I was wondering, I just simply look at your numbers, infrastructure year-to-date, year-to-year, it's up 2%. And I understand there's some dredging impacts there. There's asset sales, but then you got the Edmonton project and you got a big ramp-up in Gateway. So is that I guess maybe just unpack that a bit of just the disconnect between volumes and EBITDA growth? And then is the 15% to 20% then is that more -- it sounds like it's more of a back-end uptick then depending on your comments on the first point? Curtis Philippon: Yes. I think you've got -- there's -- we've definitely seen volume increases. But as I mentioned, there is not a direct correlation between sort of revenue on some of those volumes. And so when I look at those volume increases, I get excited about okay, the next set of recontracting, when does the next tank demand come on as you see our customers getting more and more active in the terminal. And then on top of that, when you get into situations where you get into egress challenges in the future, over the fact that we've got a great customer base moving a lot of volume, I think that just really even further enhances how can we help them at times of egress challenges in the future. So it's a bit -- it's definitely very much a forward look that we get excited about what that impact is versus sort of an immediate earnings impact other than in gateway where we see some throughput earnings impact on the sort of the excess over MVC numbers. So that's a little bit of how I'm thinking about the volumes. The 15% to 20% marker on Gateway, we feel very good about that. Well -- so that's the marker we set on acquisition day that we wanted to -- we thought that we'd realize some benefits and drive a 15% to 20% increase from what the run rate was at the time of acquisition to at some point in the future. We're hitting at some point in the future here in Q4. There will be a step-up in Q4 with just being able to realize sort of a bit more of the full benefit of having of these assets available to us. I think you'll see a bit more of that. We'll likely be closer to the 15% in Q4, and you'll see a bit more of that as you get into 2026 now that you've got -- obviously, we only have Cactus for part of the quarter here in '25. Operator: The next question comes from Patrick Kenny with NBCM. Patrick Kenny: Just on the Edmonton Terminal, see the throughput being up nicely with TMX and then obviously, the Baytex deal coming online. Just wondering if you could refresh us on what the remaining upside story here looks like at Edmonton, either from a capacity or capital investment standpoint? Curtis Philippon: Yes, we're pretty excited. Like it's over half the volume is going on to TMX. That's a good story. I think where we think about what is the additional growth specifically in Edmonton, when we added those last 2 tanks for Cenovus on 15-year agreements, we did the prework to get ready to build 2 more tanks as we see volume and activity continue to increase, I think the probability of adding those 2 tanks just increases as well, whether -- I think there's sort of 2 things. There's sort of -- is there additional TMX debottlenecking and growth and whether that's dredging on one end of that, that allows them to get additional throughput. I think there's some positive indicators on sort of volume increase that will have a good impact on Gibson. But also the second part is it's still so new that I think our customers are telling us that they're still finding ways to further optimize their netback on what they -- on how they're shipping on TMX. And I think there's things we can do to help them on how they're shipping on TMX to sort of offer some upside. And so I think that provides a bit of a growth opportunity for us with our customers. But saying all that, I'd say this has exceeded our expectations for how much volume we've seen on TMX coming through the Gibson facility and pretty excited about how that pipe has been operating. Patrick Kenny: Okay. That's great. And then maybe at Gateway, just coming back to -- you mentioned you're still comfortable with the 15% to 20% growth target. But if I'm not mistaken, that target was set a while back. And so I'm just wondering based on where your market share is now in Corpus Christi, seeing how strong throughput has been year-to-date. Just wondering how close you are to exceeding that 20% growth target as we look into next year. And just wondering if your base outlook includes your ability to move VLCCs at night or any other optimization efforts that might be in the works? Curtis Philippon: Yes. I think we'll dive into a bunch more of that at Investor Day, Patrick. I think that's -- I think there's an interesting additional value that you can unlock at Gateway. One, just using the current capabilities that we've already got. But yes, as you get into things like night moves of VLCCs and thinking about how do you optimize that capacity, I think there's some additional levers still to be pulled even as we get to the 15% to 20% marker now, opportunity to exceed that as you go forward. Patrick Kenny: Got it. And then maybe just lastly for Riley, not to steal too much thunder from Investor Day, but just coming back to the balance sheet and I guess, the plan to stay under 3.5x once you get there next year. Curious how much dry powder you might see being available for additional partnerships like the Baytex deal or other tuck-in acquisition opportunities? Riley Hicks: Yes. Thanks, Pat. I think when we think about those type of opportunities, we think we have ample liquidity and ample ability to access the financial markets to support our growth plan. So no real concerns in growing and deploying capital to grow. We're very comfortable with our financial plan and where we stand with the investment credit rating agencies. So to the extent that we find great tuck-in acquisitions or opportunities or potential partnerships, we will be happy to execute. Operator: There are no further questions, and I would now like to hand the call back to Beth. Beth Pollock: Thank you. Thank you for joining us for Gibson Energy's Q3 2025 Earnings Call. Additional supplementary information is available on our website at gibsonenergy.com. For follow-up questions, please reach out to investor.relations@gibsonenergy.com. Thank you. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to today's conference call to discuss LifeVantage's First Quarter of Fiscal 2026 Results. [Operator Instructions] Hosting today's conference will be Reed Anderson with ICR. As a reminder, today's conference is being recorded. And now I would like to turn the conference over to Mr. Anderson. Reed Anderson: Thank you. Good afternoon, and welcome to LifeVantage Corporation's conference call to discuss results for the first quarter of fiscal 2026. On the call today from LifeVantage with prepared remarks are Steve Fife, President and Chief Executive Officer; and Carl Aure, Chief Financial Officer. By now, everyone should have access to the earnings release, which went out this afternoon at approximately 4:05 p.m. Eastern Time. If you have not received the release, it is available on the Investor Relations portion of LifeVantage's website at www.lifevantage.com. This call is being webcast, and a replay will be available on the company's website as well. Before we begin, we would like to remind everyone that our prepared remarks contain forward-looking statements and management may make additional forward-looking statements in response to your questions. These statements do not guarantee future performance, and therefore, undue reliance should not be placed upon them. These statements are based on current expectations of the company's management and involve inherent risks and uncertainties, including those identified in the Risk Factors section of LifeVantage's most recently filed Forms 10-K and 10-Q. Please note that during today's call, we will discuss non-GAAP financial measures, including results on an adjusted basis. Management believes these financial measures can facilitate a more complete analysis and greater transparency into LifeVantage's ongoing results of operations, particularly when comparing underlying operating results from period to period. We've included a reconciliation of these non-GAAP measures with today's release. This call also contains time-sensitive information that is accurate only as of the date of this live broadcast November 4, 2025. LifeVantage assumes no obligation to update any forward-looking projection that may be made in today's release or call. Now I will turn the call over to Steve Fife, the President and Chief Executive Officer of LifeVantage. Steven Fife: Thanks, Reed, and good afternoon, everyone. Thank you for joining us today. Before we dive into our Q1 results, I want to take a moment to reflect on what has truly been transformational this quarter for LifeVantage. We successfully closed the strategic acquisition that positions us at the forefront of a rapidly growing wellness market. We've brought together 2 passionate consultant communities and we've continued to execute on our product differentiation of activating the body through nutrigenomic innovation. Looking at our Q1 2026 results. Net revenue of $47.6 million was up fractionally from a year ago, reflecting a modest increase in the number of consultants and similar growth rates in both the Americas as well as Asia Pacific and Europe. Adjusted EBITDA of $3.9 million was down $500,000 versus last year due to lower contribution margin, partially offset by lower SG&A. Given its strategic importance, let me now turn to the LoveBiome acquisition we closed on October 1. This transaction represents far more than just additional products in our portfolio. It's about positioning LifeVantage squarely within one of the fastest-growing segments in wellness, gut microbiome health. The gut health supplement market is projected to grow from $14.4 billion in 2025 to $32.4 billion in 2035 million and LoveBiome flagship P84 product aligns perfectly with our approach to product using carefully selected blends of naturally derived ingredients that activate optimal health processes ensuring your body is making things it needs for health. The innovative product that's right alongside our existing portfolio of scientifically validated activators including our flagship Protandim Nrf2 Synergizer customer favorite, TrueScience Collagen and our breakthrough MindBody GLP-1 system. But what makes this partnership truly special is our shared commitment to the direct selling industry and the empowerment it provides to consultants around the world. By bringing LoveBiome consultants into our industry-leading evolve compensation plan with compelling products that address a broad spectrum of health concerns, we're able to activate wellness, both financially and physically to a much broader base of consumers. The integration of LoveBiome is essentially complete with systems and website cutover happening this past weekend. We successfully onboarded personnel, including founder, Kelly Olsen, and his leadership team and we're seeing positive early indicators from the consultant community integration. Consultant product cross-selling training has kicked off and is expected to ramp during the quarter. From a financial perspective, we're on track to achieve the operational synergies we outlined at the time of the acquisition announcement. The integration of our technology platform, supply chain operations, and consultant support system is progressing smoothly, and we expect to realize the full benefits of these synergies as we move through fiscal 2026. Looking beyond this fiscal year, we remain confident in our ability to drive improved operating leverage as we scale our combined operations and realize the full benefits of our strategic investment in technology, product development and market expansion. The timing of this acquisition couldn't have been better as it allowed us to showcase this exciting partnership at our U.S. Momentum Academy event, which was held in Dallas on October 24 and 25. This was truly a historic event. The first time our 2 active communities came together in person for training, along with incentive and product announcements. The energy in Dallas was absolutely electric. We had nearly 2,000 registered, making it one of our largest Momentum Academy events ever. The integration of our consultant communities exceeded our expectations with LoveBiome consultants embracing our drive era quarterly incentive campaign and our comprehensive training programs. This year's event centered around the theme, Love Life and Drive which served as both a nod to the companies coming together and inspiration to consultants to take the driver's seat in their business with purpose, speed and unstoppable momentum. Nothing replaces the energy and momentum that comes from meeting in person, and our time in Dallas emphatically proved that point. Attendees are also trained on Healthy Edge, a groundbreaking combination that pairs the original proven technology of Protandim Nrf2 Synergizer with the emerging science of P84. Individually, each product delivers powerful benefits by supporting cellular health and system communication. Together, they form a peak performance wellness system that provides foundational health throughout the entire body, helping you feel ready to take on life's daily challenges. Consultants at the event got a first look at results of a recently completed in vitro study on P84, which demonstrated the activation of 14 natural peptides found in the gut responsible for regulating, repairing and restoring this vital organ. While most other gut health products merely supplement with pro, pre and post-biotics, the testing proved the activation differentiator of this comprehensive product. We will be providing more details of these exciting results in the coming weeks during the full P84 and Healthy Edge product launch. Next, let me update you on the Shopify partnership we announced last quarter as this is a key focus as we continue to invest in modernizing our technology infrastructure to meet the demands of today's fast-paced consumers. This quarter, the team made great progress with the design, content and development aspects of our new e-commerce platform as we work towards a pilot this fiscal year and later our full rollout. This partnership with the most reputable highest converting e-commerce platform on the market will deliver significant growth potential for both LifeVantage and our consultants. Shopify enables increased conversion and brand advocacy through seamless channel experiences, deeper personalization and data insights and greater consumer confidence through enhanced payment security, checkout reliability and order tracking. As we look ahead to the remainder of fiscal '26, I'm optimistic about our positioning and growth trajectory. The successful integration of LoveBiome has expanded our addressable market while strengthening our consultant base with passionate, experienced entrepreneurs who share our commitment to activating optimal health. We're not just adding products or consultants or creating a comprehensive wellness ecosystem that addresses multiple aspects of human health, including physical and financial from cellular health with Protandim to metabolic wellness with MindBody to gut health with P84 to beauty and longevity with TrueScience. We're uniquely positioned to serve the evolving needs of health-conscious consumers worldwide. And with our industry-leading evolved compensation plan, comprehensive training and recognition programs and vibrant community, we're uniquely positioned to serve the unique needs of entrepreneurs worldwide as well. The direct sales industry continues to evolve and companies that combine innovative products, compelling compensation, modern technology and authentic community will be the winners. I believe LifeVantage enhanced by our LoveBiome partnership is perfectly positioned to lead in this new era. With that, let me turn the call over to Carl for a detailed review of our financial results and outlook. Carl? Carl Aure: Thank you, Steve, and good afternoon, everyone. Let me walk you through our first quarter financial results. Please note that I will be discussing our non-GAAP adjusted results. You can refer to the GAAP to non-GAAP reconciliations in today's press release for additional details. For the first quarter of fiscal 2026, we delivered net revenue of $47.6 million, which was up 0.7% compared to $47.2 million in the first quarter of fiscal 2025. The slight increase in net revenue reflected increased sales of our MB GLP-1 system, offset by lower sales of Protandim and TrueScience product line as well as decrease in total active accounts. While net revenues in our primary geographic regions were both up slightly in the first quarter, we did experience higher growth in Japan, driven by the launch of the MindBody GLP-1 system beginning in March. For the quarter, revenues in Japan increased 2.6% on a constant currency basis. Our gross margin for the quarter was 79.5%, down 40 basis points compared to the prior year period, primarily due to increases in shipping and warehouse related expenses. Commissions and incentive expense as a percentage of revenue was 43.5% in the first quarter compared to 43% in the prior year period. The increase was due to changes in sales mix, along with the timing and magnitude of our various promotional and incentive programs. Non-GAAP adjusted SG&A expense was $14.6 million in the first quarter compared with $14.7 million in the prior year period. Adjusted non-GAAP operating income was $2.5 million in the first quarter compared with $2.7 million in the prior year period. Adjusted non-GAAP net income was $2.3 million or $0.18 per fully diluted share in the first quarter compared to $1.9 million or $0.15 per share in the prior year period. We recorded income tax expense of just under $100,000 in the first quarter compared to income tax expense of approximately $800,000 in the prior year period. Our overall effective tax rate for the quarter was approximately 4%. The decrease in our effective tax rate for the first quarter was due to the positive impact of discrete items recorded in the quarter. We anticipate our full year fiscal 2026 effective tax rate to be approximately 25%. Adjusted EBITDA for the first quarter was $3.9 million or 8.2% of revenues compared to $4.4 million and 9.4% in the same period a year ago, primarily reflecting lower gross margins and higher commission and incentive-related expenses. Please note that all of the adjustments from GAAP to non-GAAP that I discuss today are reconciled in our earnings press release issued this afternoon. Our financial position remains strong with $13.1 million of cash and no debt at the end of the first quarter compared to $14.6 million a year ago. We also maintain access to a $5 million revolving line of credit. Capital expenditures totaled $400,000 in the first quarter compared to $300,000 in the prior year period. Turning to capital allocation. We repurchased 44,000 shares during the first quarter at an average of $13 per share for an aggregate purchase price of $600,000. As of September 30, 2025, there is still $16.7 million remaining under our existing share repurchase authorization. Today, we also announced a quarterly cash dividend of $0.045 per share of common stock or approximately $600,000 in the aggregate. This dividend will be paid on December 15, 2025, to stockholders of record as of December 1, 2025. Since the beginning of fiscal 2024, we have returned approximately $19.8 million in total value to our stockholders through stock repurchases and dividends. We will continue to focus on our balanced capital allocation strategy in order to drive value for our stockholders. Turning to our outlook for fiscal 2026. We continue to expect our full year revenue will be in the range of $225 million to $240 million, which includes expected revenue contribution from the LoveBiome transaction. We are also reiterating our profitability guidance and expect adjusted non-GAAP EBITDA in the range of $23 million to $26 million and adjusted non-GAAP earnings per share in the range of $1 to $1.15 per share. We continue to anticipate revenue in the second half of fiscal 2026 will be higher than the first half due to the seasonality associated with our MindBody product line and the impact of the LoveBiome acquisition. Overall, we are pleased with the continued improvement in our profitability metrics and remain committed to improving our adjusted EBITDA margins to reach our long-term target. And with that, let me turn the call back over to the operator for questions. Operator? Operator: [Operator Instructions] The first question we have comes from Doug Lane of Water Tower Research. Douglas Lane: Before we get to LoveBiome, can you give us a feel -- I know you don't put out quarterly guidance, you put out annual guidance. But can you give us just a some sort of feel on how you thought the September quarter came in versus your original expectations? Steven Fife: Yes, Doug, this is Steve. Q1 is historically our low quarter. We have a lot of our consultant base that isn't as active during the summer months. And we saw that trend continue this quarter. We also -- when I look back to our prior year comparison, we had in September a year ago, a fairly strong ramp-up to our launch of MindBody that occurred in the middle of October and had a separate incentive 20% off a year ago and a ramp-up to that. So it was -- on a year-over-year comparison, it's probably a tough comparison to begin with. But again, kind of seasonally low in general for us over all the years. So a little softer than maybe than what we thought, but not alarming at all. Douglas Lane: Okay. That makes sense. And this year, I guess you announced LoveBiome right in the third month, September. Was there any impact to your business? Did that have any impact on your business between September 3 and October 1. Steven Fife: No. There was 0 revenue contribution from LoveBiome. We didn't close the transaction until October 1. So there were 0 revenue impact from the LoveBiome group. If anything, I would say that our consultant base of the LifeVantage consultant base may have kind of taken their foot off the gas a little bit to wait and see the anticipation and to understand what all of that meant. So possibly some just kind of a pause with some of the LifeVantage consultants, but no contribution from the LoveBiome revenue group. Douglas Lane: Okay. That's good color. So actually, the opposite of what happened last year. So LoveBiome closed on October 1. So you will benefit from a full quarter of their sales just mathematically before you even begin the integration of their sales force and the rollout of the Healthy Edge stack. So let me ask you this. And that will help offset that tough comparison from last year, but I get that really -- really, we're looking at the second half year to really get the full benefit of LoveBiome becoming part of LifeVantage. Steven Fife: Yes, that's exactly right. We -- the transaction closed on October 1, and for the entire month of October, we were operating separately. So their systems, their website, their comp plan was still in full effect and similar for LifeVantage. What's really exciting and really a great success for us is that over this last weekend, we took our systems down for a few days, but converted all of LoveBiome onto LifeVantage's systems, both the transactional side, the e-commerce, the websites, the back offices, so all the tools that the consultants use and the compensation plan. So effective November 1, we have really integrated all aspects of our business. And that was a huge effort for us to pull off so quickly. And now that integration piece is behind us, and we can focus more of our attention on really optimizing now the combined consultant base and customer base of the 2 companies. So we've put in place a very robust training programs of the cross-selling opportunities. Clearly, we've got a full court press on training the former LoveBiome consultants on the evolved compensation plan and helping them understand how their businesses can benefit from that. And the reception to both sides, I guess, of this partnership has been tremendous. But everyone is kind of drinking from that proverbial fire hose right now. And so the quicker we can get everyone trained and up to speed, and that's going to take a minute for that to really happen. But that's why we also -- and from the very beginning, it felt like our second half of the year is going to be larger than our first half weighted heavily to the second half because of that ramp up with LoveBiome but also reentering a season at our MindBody product will come to the forefront with a lot of consumers. As we enter kind of the traditional weight loss season in the January time frame. And then there's a little bit of a resurgence in the April, May time frame as people start looking closer to summer as well. Douglas Lane: A lot of moving parts. Let's talk about the science a little bit. The P84 Nrf2 stack sort of a no-brainer right, the 2 flagship products from each company. But what I think interests me is how deep you're going on gut health. And what are the opportunities from a gut health standpoint with LoveBiome science combined with the work that you've done on MindBody? Steven Fife: Yes. Well, it fits in from the very first conversations that we had with LoveBiome. The question that we asked ourselves and had to answer was how does it sit into our activation philosophy from a product standpoint. And we've started to do testing on P84, and we were fortunate that right before our Dallas Momentum Academy just a few weeks ago, we announced results from an in vitro test of P84, where I mentioned that we identified 14 peptides in our body that are responsible for regulating, repairing and restoring overall gut health that were activated. So our body's ability to produce is so far superior to anything that we can supplement with it. And our -- that in vitro test showed that across these 14 peptides, it increased the production of those peptides and so we're thrilled with that and adding another activator in a market that it's projected to grow from $14 billion to $35 billion over the next 10 years. So we see a huge massive white space for us to operate in with a product that fits into our product strategy as well as when you couple that with the power of Protandim Nrf2 and we've got studies underway right now that we'll hopefully be announcing here in a couple of months around that power of the synergistic benefits of taking Protandim and PAD together and what we've now positioned in what we call our Healthy Edge stack. Operator: There are no additional questions in the queue. So I'll turn the call back over to Steve Fife for closing remarks. Please go ahead, sir. Steven Fife: Yes. Thanks, operator, and thank you, everyone, for joining us today. As we conclude, I just want to extend my appreciation to our committed employees, our outstanding independent consultants and stockholders and all of our faithful customer base. And I look forward to updating you next quarter with further clarity and outcomes of our results. Thanks a lot. Operator: Ladies and gentlemen, that then concludes today's conference. Thank you for joining us. You may now disconnect your lines.
Operator: Greetings. Welcome to MARA's Q3 2025 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Robert Samuels, VP of Investor Relations. Thank you. You may begin. Robert Samuels: Thank you, operator. Good morning, and welcome to MARA's Third Quarter 2025 Earnings Call. Thank you for joining us today. With me on today's call are our Chairman and Chief Executive Officer, Fred Thiel; and our Chief Financial Officer, Salman Khan. Today's call includes forward-looking statements, including those about our growth plans, liquidity and financial performance. These involve risks and uncertainties, and actual results may differ materially. We disclaim any obligation to update these statements, except as required by law. For more details, see the Risk Factors section of our latest 10-K and other SEC filings. We'll also reference non-GAAP financial measures like adjusted EBITDA and return on capital employed, which we believe are important indicators of MARA's operating performance because they exclude certain items that we do not believe directly reflect our core operations. Please see our earnings release for reconciliations to the most comparable GAAP measures. We hope you've had the chance to read our shareholder letter and look forward to your feedback. We'll begin with some brief prepared remarks from Fred and Salman. After their comments, we are going to be conducting an analyst interview with management. Today's session will be conducted by Reggie Smith, analyst at JPMorgan. And with that out of the way, I'm going to turn the call over to Fred to kick things off. Fred? Frederick Thiel: Thanks, Rob, and thank you all for joining us. This quarter, we continued to evolve MARA from a pure-play Bitcoin miner into a vertically integrated digital infrastructure company, one that converts energy into both value and intelligence. At the heart of our strategy is a simple belief, electrons are the new oil. Energy is becoming the defining resource of the digital economy, powering everything from Bitcoin mining to artificial intelligence. And we believe those who control abundant, low-cost energy will shape the future of both finance and intelligence. Bitcoin has now entered its institutional phase. We're seeing financial leaders such as BlackRock, Citicorp, and now even JPMorgan, integrating Bitcoin into traditional frameworks. And we're seeing the establishment of strategic Bitcoin reserves by corporations and governments alike and even the Secretary of Treasury has posted positive notes about Bitcoin on X. What miners have always understood is now being recognized by global markets. Bitcoin is digital energy, a mechanism for storing and transmitting value. As one of the largest Bitcoin miners in the world, MARA sits at the center of this shift. Our energy to value infrastructure allows us to convert raw power directly into Bitcoin that we hold on our balance sheet, a distinct advantage that grounds our broader mission, transforming energy into intelligence. Every electron has potential value and artificial intelligence represents the next frontier of this transformation of energy into even higher value. We believe that inference AI where the value of AI is actually created and derived, and not training in foundational models is where the AI industry will create the greatest amount of value over time. Every insight produced by an AI model has a cost per token, driven by the cost to build and operate the data center, of which the energy cost makes up a major component. Over time, compute and the cost to build the data center will drop as technology advances such as low-cost ASICs, open-source models and the ability to operate in less sophisticated and less costly data centers drive efficiencies resulting in rapidly declining drops in cost per token, making the AI data centers of today unable to compete on cost per token over time without significant technology refreshes, requiring even more and higher capital injections. We believe energy, not compute, really becomes the primary constraint on AI growth. We are already seeing the alternatives to GPUs enter the market and open-source AI is making it far easier and much less expensive for companies to deploy advanced AI systems directly in their own private cloud environments. In the past, most models were only available through public cloud APIs. That meant enterprises had to send data off-site and pay high per token fees to access AI capabilities. But today, many of the world's most capable models like Llama, Mistral, and others are available in open-source form, giving companies full control to run AI more cost efficiently and fine-tune their models privately. This is a major inflection point for enterprise computing and a shift that plays directly to our strengths as we build out low-cost, high-efficiency compute powered by our own energy infrastructure. We believe we're positioned to provide the kind of private, scalable environments enterprises need to deploy these open models securely. MARA is positioning itself at the nexus of these two AI trends. Open-source AI is expanding the addressable market for private cloud compute. We believe that the future infrastructure will be built to serve that demand efficiently and profitably. This is where MARA's expertise in securing and operating low-cost power gives us a distinct advantage. Just as we optimize for the lowest cost per petahash in mining, we're now optimizing for the lowest cost per token in AI inference. Our long-term vision is to integrate these two energy pathways, Bitcoin and AI into a single platform. Bitcoin mining monetizes underutilized energy and stabilizes grids, while AI inference transforms that same energy into intelligence and productivity. By bringing Bitcoin and AI together, we seek to maximize the value of every megawatt hour we manage. We've already begun executing on this strategy. This quarter, we installed our first AI inference racks at our Granbury site within a modular non-water cooled containerized data center. This site currently has 300 megawatts of nameplate capacity with potential opportunities to expand our growing AI inference business in combination with our Bitcoin mining operations at the site. This milestone marks a significant step forward in proving out our AI infrastructure and next-generation inference hypothesis. It also demonstrates the versatility of our platform, underscoring the potential flexibility of our mining sites to support AI workloads along with Bitcoin mining. Two major initiatives this quarter are propelling our strategy going forward. First, our pending acquisition of Exaion, a subsidiary of EDF in France. Once regulatory approvals are completed and closing conditions have been met, Exaion will expand our capabilities into enterprise-grade AI-optimized private cloud and HPC infrastructure. We believe this will position MARA as a credible partner for enterprises seeking secure localized inference capacity. Second, today, we announced an initiative with MPLX, a separately traded public company formed by Marathon Petroleum Corporation, the largest petroleum refinery operator in the United States, to develop and operate multiple integrated power generation facilities and state-of-the-art data center campuses in West Texas. Under this initiative, MPLX will provide long-term access to lower-cost natural gas at scale, where MARA will develop and operate on-site power generation and compute infrastructure. The initial capacity is expected to reach 400 megawatts with the option to expand to up to 1.5 gigawatts across three plant sites. We are also evaluating additional prospective sites to support modular AI and HPC data centers alongside mining operations, creating optionality for future AI inference workloads. MARA's approach is to deploy smaller, modular facilities directly at lower-cost power sites instead of building hyperscaler campuses. We believe this distributed model will enable us to capture value at the inference layer while continuing to monetize mining and grid sales. This modular structure also gives MARA the optionality to shift capacity towards HPC over time as and if economics and infrastructure maturity support greater AI utilization. We believe MARA is positioned to capitalize on a key structural advantage as power becomes the primary constraint in AI growth. Together, Exaion and MPLX connect the two sides of our AI and data center business, energy and compute, and strengthen our ability to control both cost and performance from power to inference. Internationally, we're deepening relationships across Europe and the Middle East, where we see significant opportunity to deploy our integrated energy and compute model. Our pending Exaion acquisition exemplifies this, and we're honored to welcome Gérard Mestrallet, President Macron’'s special energy onboard as an advisor tomorrow. His expertise strengthens our global strategy as we pursue our goal of driving 50% of revenue from international operations by 2028. On the financial front, we continue to operate with discipline and transparency. We ended the quarter with 52,850 Bitcoin, having mined over 2,100 BTC during Q3. We remain focused on improving free cash flow through ongoing cost optimization, site level efficiency gains and disciplined capital allocation. We have begun opportunistically monetizing Bitcoin from production to fund operating expenses and aim to limit reliance on our ATM to support growth initiatives, helping to mitigate shareholder dilution. As I spoke about last quarter, Bitcoin prices have consolidated within a range since Q2. With intermittent volatility, we view this as a healthy period of equilibrium characterized by institutional inflows into ETF balanced by long-term holder liquidation activity. Using Jordi Visser's IPO analogy, Bitcoin is going through an IPO where early investors in VCs are exiting and institutional investors are coming in, forming a new base and foundation for growth. Meanwhile, broader macro trends, including rate cuts and expanding liquidity suggest improving condition for risk assets. Regardless of short-term volatility, our long-term trajectory remains unchanged, building enduring value through energy ownership, operational excellence, and strategic execution. Finally, I want to provide an update on 2PIC. While we continue to recognize the long-term potential of 2-phase immersion, its practical broad application is still a few years out, and direct-to-chip cooling remains the preferred cooling methodology of data center operators and compute OEMs. We have exited near-term investment in 2-phase immersion to focus resources on opportunities with more immediate and higher return potential. In closing, MARA is evolving from a Bitcoin miner into a digital infrastructure leader, combining energy generation, Bitcoin mining, and AI compute under one scalable platform. Our guiding metric is simple, profit per megawatt hour. It measures how effectively we convert energy into value, whether in Bitcoin, AI inference, or grid stability. As we continue to execute, we believe the market will increasingly recognize the strength of this diversified model and the strategic importance of energy ownership in the digital economy. I want to thank our employees for their exceptional work this quarter and our shareholders for their continued support as we build MARA into the world's leading digital energy and infrastructure company. With that, I'll turn it over to Salman to review the financials. Salman Khan: Thank you, Fred. During the quarter, global hashrate grew by roughly 20%, with the hashrate and network difficulty both hitting new all-time highs by end of the quarter. Bitcoin's price remained relatively range-bound, trading between $104,000 to $124,000, closing the quarter with a modest $7,000 gain. It was one of the most competitive mining environments in recent times and a difficult backdrop for our performance this quarter. Despite this, Q3 was the highest revenue and exahash quarter in the company's history. Our focus on operational and financial discipline over the past year is reflected in the substantial growth of our compute capacity and Bitcoin holdings. Between Q3 2024 and 2025, our Bitcoin holdings expanded by over 98%, growing from approximately 27,000 to nearly 53,000 Bitcoin. Our energized hashrate also expanded, increasing 64% from 36.9 to 60.4 exahash per second. Bitcoin price appreciation resulted in approximately $4.3 billion or 256% increase year-over-year. While Fred spoke to our vision and strategy, our vertical integration and capital allocation strategy is reflected on our financial results. That balanced execution allowed us to expand our holdings and take advantage of favorable market conditions while maintaining liquidity and flexibility. We mined 2,144 Bitcoin and purchased an additional 2,257. The impact on our financials is evident in the results we achieved. Let's dig in. Revenues increased 92% to $252.4 million from $131.6 million in the third quarter of 2024. Bitcoin's average price increased 88% over that time period, which contributed $113.3 million. We mined an average of 23.3 BTC a day throughout Q3 compared to 22.5 BTC in Q3 of 2024, which resulted in 74 more Bitcoin mined this quarter. Our strategy to deploy exahash responsibly resulted in growth of our BTC mine despite a significant growth in global hashrate and the network difficulty level. We reported a net income of $123.1 million or $0.27 per diluted share last quarter compared to net loss of $124.8 million or negative $0.42 per diluted share in the third quarter of last year. We also booked a $343.1 million gain on digital assets, including Bitcoin receivable during the third quarter of 2025 reflecting the positive impact of the Bitcoin holdings on our balance sheet. Now let's talk about our cost structure. Our purchased energy cost of Bitcoin for the quarter was $39,235 and our daily cost per petahash per day improved 15% year-over-year, which we believe at scale is one of the lowest in the sector. This improvement is directly tied to our growing inventory of owned and operated sites, which now account for approximately 70% of our nameplate megawatt capacity. That transition supports our vertical integration strategy, but also pays dividends both financially and operationally. Since we do not control the price of Bitcoin we mine, minimizing the cost of inputs like energy are critical to the financial resilience and long-term success of the company. Next, I'll provide some insights into our Bitcoin holdings and digital asset management strategy. MARA is the second largest corporate public holder of Bitcoin, and we seek to generate returns on our holdings as Bitcoin price appreciates. Our approach combines the potential for long-term Bitcoin appreciation with disciplined efforts to generate return while managing risk. Additionally, we have also used Bitcoin as a collateral to borrow under lines of credit. As of September 30, 2025, we held a total of 52,850 Bitcoin, including 17,357 Bitcoin that were loaned, actively managed, and pledged as collateral. As such, approximately 1/3 of our total holdings were activated through our digital asset management strategy. In Q3, we issued $1.025 billion of zero-coupon convertible notes due 2032, extending our maturity profile and increasing balance sheet optionality. With additional liquidity, MARA gains strategic flexibility to act on opportunities, whether that's acquiring more Bitcoin, funding acquisitions, balance sheet management, or general corporate purposes. We have positioned MARA to act in response to market conditions in order to maximize long-term shareholder value. As of September 30, 2025, we held over $7 billion in liquid assets, giving us the flexibility to fund domestic growth and pursue international expansion. To streamline our communications starting in Q4, we will share our production on a quarterly basis. Investors can continue to monitor our monthly MARA Pool production in real time on the mempool. As we have stated previously, electrons are the new oil, and we are laying the groundwork for 2026 and beyond. We're executing on a pipeline of energy infrastructure projects, both in the U.S. and internationally, and we expect these investments to expand our capabilities while keeping costs low. With that, I'll turn it over to Reggie Smith from JPMorgan to begin our management interview. Reggie? Reginald Smith: I appreciate you selecting me for this call here. I have a very big announcement this morning. I guess kind of help me interpret this morning's announcements versus, I guess, kind of your prior strategy. Like what's being emphasized, deemphasized? Maybe talk about that from the -- like what's the most emphasis you're placing on the business and maybe the least, because there's a lot going on here, certainly relative to the other Bitcoin miners. I know the other guys, it's either Bitcoin mining or kind of colocation. You guys seem to have a lot more balls in the air. Maybe talk through those differences. [Technical Difficulty] Frederick Thiel: Hey, guys. Is everything okay? Reginald Smith: Yes. I didn't hear anything. Did you catch my question? Frederick Thiel: Sorry about that. Sorry. I had a comms issue here. I'm in the U.K., so it was a little bit of a problem. I'm back on now. So yes, I heard your question, Reggie. Sorry. So if you think about the deal we announced today, it's about getting access to low-cost energy that is reliable, available 24/7, where because we are the generator, it provides us with a very low cost. If you look into the details of the announcement, you'll see that the pricing on the gas is amongst the lowest in the market. The other thing is that it gives us now the capacity to add potentially up to 1.5 gigawatts of data center capacity if we want to, which gives us lots of flexibility. A lot of our Bitcoin mining sites are very attractive to use for inference AI, as we discussed earlier. We talked about what we're doing at Granbury and what we'll be able to do at some of our other sites in a similar fashion where we can blend inference AI and Bitcoin mining. But the relationship with MPLX and the opportunities it provides give us a much broader canvas that we can paint on, whether that is traditional HPC like some of our peers have done or whether we want to build it out as hybrid AI, inference AI, and Bitcoin mining sites. So it gives us a lot of flexibility. And we believe controlling and owning power is a core part of any company that operates in the digital infrastructure space. When you look at the spending that's going on, and I think Sachin Ardell said this, in a recent podcast that was quoted, where he was quoted as saying that compute isn't the constraint, energy is the constraint. And so access to energy, we believe, is critical. We think inference over the long term is where all the value is going to get created in this space. But we believe that Bitcoin mining has a very important role to play in not just balancing grids, but providing a flexible load when mixed with AI, such that AI can begin to operate in more places than it does today. And the last thing I'd say is that we believe that the technology curve is going to move so quickly in this space because you have to realize that just like in Bitcoin mining, where cost per petahash is the most important metric that drives profitability in the AI business, unless you are in the application layer. In other words, running is the -- owning the data and the application that is generating value for the enterprise. In healthcare, owning the healthcare data, running the actual AI analysis. The only thing hosting providers and model operators provide are tokens in the sense of we need lowest cost per token if we're going to use that service. And using the APIs from the cloud providers is a very expensive way of running AI. And most enterprises today are being confronted with the fact that the cost per token is too high using existing systems, and they want to move to lower-cost systems. And we're going to start seeing, and we already are seeing ASIC-based solutions coming, open-source models, all of which will allow enterprises to build their own and operate their own private cloud or use those services from third parties, allowing them to drive value from AI. So I think for a lot of the big guys, the challenge is they are doing deals with colocation partners where they are not taking on the debt. The debt is being laid on the joint venture or the SPV related to that colocation facility. And that colocation partner is having to deploy a lot of capital to build those sites and equip those sites, and you have technology obsolescence. Over the course of a 10-year lease, you will have to upgrade the hardware in that location. And you have to estimate that in the cost of what it's going to be to build and operate. And I think there's a risk potentially that $1.4 trillion of data center contracts signed by OpenAI over the -- that will have to be operating in the next 5 years according to what was recently reported in the press, that some of that may not actually be able to come online and generate revenue. So I think our approach is much better, more prudent, certainly much more capital efficient. And by being at the end of the spectrum where we're vertically integrated and able to operate at lowest cost per token and deliver lowest cost per token, we will have a significant advantage in the marketplace. Salman Khan: And Reggie, just a reminder, we -- today, we control approximately 2 gigawatts of capacity. And this added capacity is incremental to that, that takes us to close to 3.5 gigawatts over a period of time. Reginald Smith: Got it. Understood. I'd like -- Fred, I appreciate the color there. And I was doing some kind of light math this morning. And I think about, I guess, kind of AI and HPC, you made a comment in your shareholder letter about the price of power and the price of compute. You made some parallels between Bitcoin mining and HPC. And I was looking at the numbers, and I think they may be a little bit off, but directionally, this is, I think, a fair statement. When you look at Bitcoin mining, the price of power and the price of the actual ASICs, if you think about depreciating per hour, are about the same, like a 1:1 ratio there. For GPUs, that ratio is more like 1 power 10 GPU. So like depreciation charge, and depreciation is super high. So you talked about ASICs and somehow, I guess, driving the cost of the hardware down there. Am I thinking about that right? Like what are you seeing? And kind of where do you see the role going there? Frederick Thiel: Listen, just think about it this way. When Bitcoin mining started, we were running CPUs, right? Then we went to GPUs, then we went to FPGAs, then we went to ASICs. And when you look at the amount of compute power for -- think of it as the number of terahash we could produce for a jewel of energy, it has dramatically changed. So you are now processing many more calculations at much lower cost of energy. And in our business, we depreciate the compute over 3 years. So if you're a hyperscaler and you're signing a deal for 10 years, some of these are 15 years and the depreciation schedule is 5 years for the machines. Does that mean they're going to have to replace those machines 3x in that cycle, right? And to your point, GPUs to power is most probably a 10:1 ratio. And as you get to ASICs, that starts dropping and power starts becoming an even more important component. And when you start looking at the end cost per token, at that point, the model cost also comes into play. And so if you have open source models, if you have low-cost hardware that's energy efficient, you're operating in data centers that don't cost you $10 million a megawatt to build, you start getting to economics that start resembling Bitcoin mining over time. Reginald Smith: Okay. Understood. Now, help me understand this. I wanted to understand or make sure I'm hearing you correctly. When you think about kind of the investment risk and the CapEx risk within this chain, obviously, you've got guys that are building data centers, you've got people that are buying like GPUs and hardware. And then you say, obviously, you got the model guys as well. But I guess your comments on kind of where the CapEx risk is greatest, are you suggesting that the people that are buying the machines are taking on the most risk? Or do you think there's still substantial risk in building big data centers? And I ask you that in the context of, I mean, you guys just, I guess, bought a few GPUs yourself. And so like help me square all of this together to understand kind of what your view is there. Frederick Thiel: Right. So part of the question is, are you in the business of being a bare metal shop, right? You're providing essentially hosting and GPUs. Look at what Iron is doing, right, bare metal. Somebody has to load their software on it, but they're renting capacity on GPUs effectively. And that's what GPU cloud is called. In that case, the operator is funding the GPU purchases, right? In the case of a colocation, there are some deals that have been done where the operator is funding the GPUs. And there are other deals where the lessor of the space, if you would, is bringing the GPUs, and they are the buyer and operator. So if Microsoft comes and is going to contract with you to just buy capacity from you, they're going to bring the GPUs, hopefully. You would hope at least. And they're taking that risk. But there are lots of different models out there being operated by people. What we're doing with inference at the edge is much more around providing inference AI, which is not running on GPUs. We're running on ASICs, ASIC type solutions. And so it's a very -- it's a different model from a hardware cost perspective. It's air-cooled. It's not liquid-cooled, for example, which means your infrastructure is much less expensive. You're not having to spend many millions of dollars per megawatt on building infrastructure, specialized cooling infrastructure. And all of that adds up to the economics of what you can do. But inference is also done at smaller volumes, right? You don't have to do 100-megawatt sites yet. Most of the needs for inference still are quite young. It's early in the market. But if you believe what Gartner and the analysts say, over the next 3 to 5 years, inference will be the primary generator of revenues and value creation within the AI space. So that's where we're swimming. Reginald Smith: Understood. I'm going to skip around a little bit here. I wanted to talk about Exaion. And kind of loop it back into the broader discussion. But obviously, you guys announced that acquisition. Help me understand what they do today? And maybe talk about the scale of their operations. Like are they running data centers today? And if so, what's the size of those? Like what do they do exactly? Frederick Thiel: Yes. Exaion is today, until we close, a fully owned subsidiary of EDF that operates EDF data centers where all of the data for the nuclear fleet operates in this process. So they run EDFs, AI and traditional data centers across the EDF enterprise. They have about four data centers today, three in France, one in Canada. They also operate quantum technology in the Canadian data center, which is made available for research purposes. And they have built a whole set of software solutions that allow you to operate the data center, store data in full private mode, meaning the users' data is fully encrypted. Exaion doesn't have the keys to that data. And so, were that data center to be broken into, if you think of -- if somebody were to steal data, the data in the data center is encrypted. So it's the customer who holds the keys to that data. And so it's a way to build private cloud solutions that are fully secure. And so the whole reason for making the investment in Exaion is it gives us access to a team and an existing set of data centers that are Tier 3 and Tier 4 already. They know how to operate the most sensitive data. They know how to protect it. They have existing customers, so they have experience, and we are going to leverage their knowledge, their experience, their technology, and their platforms to expand what they do on a global basis. Reginald Smith: Got it. So they're asset like. They're more of a service layer, their engineers, their software, things like that. Like they don't actually own any data centers. It's really running that data center, securing data. Is that the right way? Frederick Thiel: Yes. Reginald Smith: Understood. Okay. Is there a way to frame it, maybe early, their revenue run rate? And interestingly about that transaction, I think the first 64% of the transaction you bought them for $168 million. The next 11% will be at a much higher rate. Like what was the thinking there? Any opinions you can provide there. Frederick Thiel: I mean, I think you can think of how many times deals like this are structured. You're paying for a portion of the business based on where it is today. And then the growth opportunity for the existing investors is in executing on a plan to help grow the business. And therefore, you're going to pay a higher multiple for that. That's how you should think of it. Reginald Smith: Understood. Okay. Now, I want to tie all this back. So the MPLX transaction, real quick on that. Does it require any like ERCOT approval? Let's say these guys have the natural gas. You guys would make the power plant or the generation assets and then the data center. But is anything needed from ERCOT? Any roadblocks there? And like how quickly could you have a data center up and kind of running? Frederick Thiel: Yes. I think you have to think of it more as the first thing we're doing is building a power generating station, which will be gas-fired power plant. So you have regulatory requirements around air permits, for example, which in the current political environment should not be exceedingly difficult to acquire. We feel fairly confident that we'll be able to get those without much problem. So once you built the power plant, then because you are not directly grid attached yet, you then have to apply to attach to the grid and be a provider to the grid. So there's a regulatory process for that. Meanwhile, you can be producing energy and operating data center fully behind the meter. And ERCOT gets involved when you connect to the grid or the utility does once you connect to the grid. So -- and the goal here, what's really important to remember about this MPLX relationship is it gives us the ability to own and operate gas-fired power plants with very low-cost gas with the ability to colocate large-scale data centers with reliable 24/7 power in a very attractive part of the marketplace. And so it gives us a lot of control to really drive our growth in a very cost-effective way. And I think it positions us very well, come what may in this HPC AI market and give us a lot of opportunities to really operate and continue to generate a lot of value for our shareholders. Reginald Smith: I agree. I've been thinking about this idea of like vertical integration, and I didn't know if it was going to be a power company acquiring data center capabilities or the other way around. So this is very interesting. If I could dig in a little bit more. So I think you talked about 400 megawatts of capacity to start. How should we think about like the minimum effective dose to kind of get started. So I don't know if you want to commit to 400 megawatts right off the bat. Is it 20 megawatts? And how quickly can something like this come together? And then I know it's early days, but we've heard estimates of up to $10 million per megawatt to build out a data center. Like what are you thinking about from that perspective as well? Frederick Thiel: So you don't build a power plant in 20-megawatt increments. You build it right to a certain size at each site. So there are three sites. We'll likely think of it in 100-megawatt increments initially, but you have the ability to scale these plants much larger. As it relates to the data centers, we have the optionality. We can build these as traditional Bitcoin mining data centers that are fully containerized at somewhere around $1 million a megawatt, including hardware costs for compute. If you then want to look at going the AI route, if we're doing it similar to how we're running the inference AI we're running today, the actual infrastructure cost is very similar. It may run a little bit more expensive depending on the cooling technology, if we use direct-to-chip cooling or we continue to use air cooled. And if you use direct-to-chip cooling, your cost of infrastructure will end up somewhat higher. But the key is we're not building buildings that take 3 years to build. We're doing these as modular containerized solutions, which gives us full flexibility to reconfigure a site depending on whatever we want to do at it. And I'm a big believer that you will see very high-performing HPC capable modular solutions on the marketplace within the next 2 to 3 years, where you will be able to deploy the same sophisticated solutions you're building in these very sophisticated data centers where people can run some of the most sophisticated AI they need to. Remember, there are not many customers in the world who need data centers of the scale that OpenAI needs it, right? OpenAI needs a lot of compute capacity because of the breadth of data and the breadth of the solutions their models operate. If you remember what DeepSeek did and how DeepSeek created the stir in the market, it's because instead of operating with a broad foundational model, they only load into memory specifically the model segments that they need and the data to solve the query, which means you now don't need all of that scale. So what I think will happen in the marketplace is that you're going to have efficiencies in models going to open-source, clients developing their own models and training their own models because the clients don't want to give the data to OpenAI. If I'm -- and I'll give you an example. I was at FII last week in Saudi Arabia, and I was sitting with the Head of Strategy for Aramco on a panel. And they don't put their seismic data in the cloud. They're not going to do that. What do they do? They build their own models. Other companies do the same thing. Look at what Lockheed just did the deal they just did with Google, right? It's an on-prem solution. You are not -- I'm not going to put my data up into your cloud Google. You're going to build a cloud instance on-prem, on my site that is air gapped from your systems. That's what corporations want. They want data sovereignty. They want private cloud. They don't want to run up in Meta's cloud, Amazon's cloud, or OpenAI's systems. 70% of corporate data today is still not in the cloud. There's a reason for that. And I think when you look at inference, inference is driving insights from the data that runs your company, right? It's -- if you're in the healthcare business doing drug discovery, it's all the patient data, the lab samples, et cetera, all that data, you're driving insights from it, right? And if you are doing -- you're building airplanes, it's all the design data and the manufacturing data. If you're running a factory, it's the operations data of the factory, right? If you're running a power plant, it's the operations data of that power plant. You don't want to run that off-site. You want to actually run it on site because as those systems become mission-critical and actually operate the resources and operate parts of the business, you can't take the risk that you have a system failure that brings your whole business down just because you lose a link to a cloud or Amazon goes offline like it did the other day. So I think it's -- people really have to understand that there is a limit to what data and how much risk people want to do in putting their core critical assets into a cloud operated by a third party. And if they can solve the model issue and do it at lower cost, near-prem or on-prem in a private environment, they will do it. And I have been speaking with the heads of AI for major corporations in the financial market today who tell me that they are relocating AI systems out of the cloud back to near-prem, on-prem private solutions because it is significantly less expensive to operate than doing it in an Amazon Cloud or other places like that. And I think that the analyst community really needs to do a much better job of talking to the enterprises who are the users. These are the people who are actually going to pay the money that will allow OpenAI to be successful or not, that will allow Microsoft to be successful or not. You can talk till you're blue in the face with the people building these things, but it's like building railways. If there isn't passenger traffic and there isn't cargo, the rail lines fail. So I hate to be a downer on this, but this is an important thing that a lot of people aren't doing. You need to talk to the customers. Who's going to pay for this stuff? Reginald Smith: And I want to make sure I'm hearing this right and connect these dots. I think you mentioned kind of a smaller kind of, I think, a 1 megawatt, what do you call it, I guess, kind of like a sample or a small micro data center, pilot site. If I'm hearing this right, are you saying that like that could become like the prototype for enterprises having their own on-premise like AI capabilities? Is that what you want to say? Frederick Thiel: Yes. So think of it this way, right? I'll give you an oil drilling example, right? So you have an exploration drill that's drilling, you have seismic data. Today, you have to plan exactly the drill profile and what some -- what the drill operator is going to do. And so the oil companies have built these very sophisticated AI models that run in a modular container typically out on the drilling site that are collecting real-time data from the drill and then feeding back instructions into the drill master. That's an existing example. You can go to a trading -- a financial trading company. And their whole thing is speed and latency. They want their systems operating on their local network, not on a wide area connection where there's latency because 25 millisecond delay in a response means they lose the profit on a trade. And so there are -- whether you're looking at defense, which is going to be a huge growing sector when it comes to AI, just look at the amount of AI that's needed to operate in any theater of war today, look at healthcare, look at manufacturing and production, look at the movie television industry. The single largest consumer of tokens in AI are video illustrations and audio generation. Those are the systems that consume that these diffusion models are the single largest consumer of tokens. And so cost per token is very critical to them because if you're going to generate a 5-, 10-, 15-minute clip of video, it takes multiple factors of magnitude more tokens than asking OpenAI where you should eat lunch today. And so I think, again, the marketplace gets all hyped up about these big contracts, but they really need to look at who's actually going to use this stuff. What are they going to use it for? What can they afford to pay for it? What will the pricing trends be over time? And to use the worn-out Wayne Gretzky technology. If you're in our business, you want to be skating to where the puck is going to be, right? You don't want to be chasing the puck. And I think there are a lot of people announcing deals out there, getting on the bandwagon to pump their stock when they need to look at what's this industry going to look like in 5 years. Reginald Smith: That actually leads to my next question, Fred. So thinking about announcements and catalysts, like what should we look for from MARA to know that like this strategy is taking form and we can start to frame an economic story or a creation story around some of these initiatives. Like what are the milestones and announcements we should be looking for from you guys? Frederick Thiel: So here's what I think you should look for. 4 years ago, I made a presentation at a conference where I said that Bitcoin miners are either going to become energy companies or be owned by energy companies. I think what you should look for is when large energy companies start signing partnership agreements with companies like us to monetize their energy assets at large scale. That will tell you that if that happens to be us, that they have chosen us to do it with because they feel we are the best option for them to maximize the value of the electrons that they produce. That's one step. The next step is as you start seeing customers using more and more inference AI and you see us reporting a greater and greater mix of inference AI in our data centers. And the real metric you should look for is what is our profit per megawatt hour that we talk about. It's not a GAAP measure, so it's not going to be reported that way. But you can think of it as an operational KPI where the profit we can generate from every megawatt hour of energy that we consume or produce is a data point that our investors will be able to see and that will directly correlate to our profitability and ability to have a cash-generating business. Reginald Smith: Okay. And just to make sure -- and I apologize, this is a silly question. Are you looking to sign colocation clients or deals for this site in West Texas? Or is this something that you're thinking about putting your own machines in? Frederick Thiel: It gives us -- I'm not going to answer the question directly because I think our competitors spend more than enough time listening to what I say and then emulating it. So I'm just going to say it this way. It gives us maximum optionality to decide what we want to do with whom. Reginald Smith: Got it. Okay. Because I want to bring it up because you mentioned signing a colocation as like a milestone and... Frederick Thiel: No, you see if I can operate inference AI and make money on it without signing a colocation facility that will give you a little bit more insight into what the business model might actually be. Because think about it, the best thing about our Bitcoin mining business is we don't have a customer. What's the hardest thing all these colocation deals have is they have to go find a customer. Reginald Smith: Yes. Okay. Okay. People say, I change my opinion when the facts change. And this is a pretty -- this seems like a pretty major shift for MARA. Like I said, you guys bought GPUs, I guess, in the last 3 months and you start to run them. Like what in your mind has changed -- that has changed your opinion or has your opinion changed? Because strategically, it seems like the company is kind of pivoting. Talk to me about that. Like what have you learned or gleaned in the last couple of months or quarters that has driven this shift? Frederick Thiel: Yes. Reggie, I wish I could tell you that I had a lightning bolt strike me and I came to an epiphany, but this is -- we're executing the strategy we decided to execute over a year ago. It's just we have decided not to go totally open with the market and tell people what we're doing because it just gives our competitors insight into what we do and they can emulate it. And we prefer to control the timing on how we talk about what we're doing. But I've been talking for the longest time about inference at the edge, and that's where we would make our mark in the marketplace, and we are. We've talked a long time about owning power and the desire to run our business based on controlling energy assets so we're fully vertically integrated. And we're doing that. There's no change in strategy. There's no pivot. It's just we have been purposely operating more like a start-up in the sense that we have really wanted to make sure that we had everything in place so that as the market becomes aware of what we're doing, they just start seeing kind of announcement after announcement after announcement that just gives them more and more confidence in that we're executing on the vision that we set out a year ago. Reginald Smith: Yes. No, I'd say from where I sit and I think about all the pieces you guys have. There are a lot of pieces, and I'm not smart enough to figure out how to put it all together, but it seems like you guys have a lot of ways to kind of win here. I guess we just have to kind of sit back and wait for those announcements as they kind of come through. I know we've kind of spent a lot of time on this. I hope it wasn't a wasted time for people. Maybe we could shift gears a little bit and talk about your like sovereign and foreign government initiatives and things that are going on there. Like one of the questions I have, as you think about this is like what do you think gives you guys a right to win in the sovereign compute kind of load management space versus competitors? Who's even competing with you there? Frederick Thiel: I think -- so here are a couple of ways to look at it. Most of our competitors enter a marketplace by partnering with somebody or contracting for power. They don't bother talking to the government because they're afraid that if they do, they may not be allowed to do what they want to do. And that's the case in a lot of places in the Middle East. We, on the other hand, chose to do it the other way. So in UAE, where we've been operating now for a couple of years, we chose to directly go and work with the sovereign. So we partnered with ADQ and IHC and operate a joint venture together with them where we balance the grid in UAE. It's one of the most advanced liquid immersion technology sites in the Middle East. The only one that's bigger than that is the liquid immersion site we operate in Granbury. And so that has given us a reputation of being somebody who works well with government entities, follows the rules, and is focused on being a good grid citizen and balancing the grid. So when we talk to people in other countries, such as in France, such as in the U.K., such as in Kenya, in Saudi Arabia, in other places, we are welcomed with open arms because we are focused on how can we make your grid more efficient and more effective. How can we make sure that every electron your generators generate -- sorry, generate maximum value. And we are here to be a good grid citizen, and we are here to operate such that your grid becomes more stable and it becomes easier for you to bring on new types of loads, be them AI data centers or whatever. And the challenge, the way most people see it is that takes time. I have been crossing the Atlantic very frequently, but I have been having meetings in the top levels of government, and we have a lot of support. We certainly have seen a lot of support on the European side because there are certain dynamics in Europe that create very large opportunities for us. And so same thing exists in Saudi Arabia, for example, and other places. And we think that it's worth our effort to spend the time and take the time to do this carefully and prudently and well thought out so that we're able to execute successfully and have long-term success in the countries. Because if we're friends with the government, then we have the advantage that as they look to expand what they're doing, if we are a good partner, they will come to us and say, "Hey, we want to do more with you." And that's the type of relationship we want to have with our partners across industry, be it governments, vendors, or end customers. Reginald Smith: And it's funny, we haven't talked about Bitcoin mining at all. I know we're running short on time. Just an update there. Love to hear about the stuff that's happening at the wind farm and some of your flared gas initiatives. Maybe talk a bit about Auradine. And then I guess, your plans for growing hashrate here and how you think about that in the context of kind of where hashprice is and why it makes sense to continue to grow your hashrate at these levels? Frederick Thiel: Yes. So maybe I'll look at this in kind of a somewhat reverse order. So there is more hashrate coming online every day from lots of players. There are very well-capitalized companies who are not public, who are -- have access to huge amounts of capital, who have a stated goal of becoming the largest Bitcoin miner in the world. And if we don't grow our hashrate, we will have an ever-decreasing amount of the global hashrate and produce ever decreasing amounts of Bitcoin. And we think that it's our duty to continue to grow hashrate, not just in the United States, but globally to support the security and diversity of the Bitcoin blockchain and the Bitcoin network because we don't want it to be dominated by any small handful of players. And so we believe it's our duty to continue to grow hashrate. So how do we do that economically? We do it with low-cost power, which we can control, which ties to the MPLX deal. It ties to what we're doing with our wind farm, Texas. It ties to what we're doing with flare gas. We have doubled -- by the end of this year, we'll have doubled our flare gas capacity, and we're going to continue to grow that. The wind farm is fully built out from a data center perspective, and that's running. And we're going to continue to look at opportunities to acquire more energy that is low cost that we can then allocate between Bitcoin mining or AI. You have to kind of think of us as we are going to own lots of electrons, and we're going to put those electrons to best possible use. In regards to Auradine, Auradine's more recent hydro model, which competes very well with the Bitmain and other vendors' models is doing well. We're deploying Auradine in our fleet. We're not deploying exclusively Auradine at this point. There are still different machines have different characteristics that are really good for different environments, and we have a lot of different environments. And so we're continuing to deploy a mix of systems. But over time, it would be logical to feel that we're going to add more and more Auradine to our fleets. Their systems offer some very unique capabilities, especially around load balancing that in a model such as the one that is beginning to gain steam in Texas, where the utility wants to regulate your curtailment and shut you off and turn you on, that requires special capabilities in the miners, and that's something that exists in the Auradine systems. And so as more and more utilities start looking for those capabilities amongst miners who are on grid, I think they will continue to gain some market share there. Other than that, they have spun out some very interesting AI-related businesses, One or Escape, which is around securing large language models -- sorry, which recently had a lot of positive reviews at the RSA show earlier this year and then also ScaleUp, which is a start-up around ultra high-speed cluster interconnect switch technology. So that has been a great investment for us, and we continue to look for investments like that where we can acquire or build technologies that can become part of our solutions over time. Reginald Smith: I guess last one for me. You kind of talked about it earlier, but obviously, a lot of market cap, a lot of value has been created in the Bitcoin mining space amongst the publicly traded guys. I'd argue that you guys haven't received or gotten your share of that. Like what do you think the market is missing and hopefully will come to appreciate in the near term or medium term? Frederick Thiel: I think. Reginald Smith: About that specifically. Frederick Thiel: Yes. I mean I think the key for us is the floor on the valuation of our stock is essentially the value of our Bitcoin holdings. And people don't put a lot of value on the Bitcoin mining infrastructure or the Bitcoin mining business per se. And I think as our business continues to evolve, especially with the energy generation story and as AI becomes a bigger piece of this and we generate more profit per megawatt hour consumed, we'll start getting more attention from people. And I think you'll start seeing people realizing really the benefit of what we're doing in our model, and we'll get more credit for that. Salman Khan: Reggie, just to add to that, the power capacity that we have secured through these transactions that puts us at the forefront. And here's the actual value flows with Bitcoin mining option value between AI-ready assets, our operational flexibility with integrated power, that's what's going to drive value for our stockholders from a long-term perspective. Reginald Smith: Perfect. Congrats on the quarter. Robert Samuels: Thanks, Reggie. We appreciate it. Most of the questions that we received from our retail shareholders have been answered. We're obviously running short on time. But thanks, everyone, for joining us today. If you have any questions that were not answered during today's call, please feel free to contact our Investor Relations team at ir@mara.com. Thanks very much, and enjoy the rest of the day. Operator: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. Please disconnect your lines, and have a wonderful day.
Operator: My name is Julianne, and I will be your conference facilitator today for the Amgen Q3 2025 Earnings Conference Call. [Operator Instructions] I would now like to introduce Casey Capparelli, Vice President of Investor Relations. Mr. Capparelli, you may now begin. Casey Capparelli: Thank you, Julianne, and good afternoon, everyone. Welcome to our third quarter 2025 earnings call. Bob Bradway will lead the call and be followed by a broad review of our performance by Peter Griffith, Murdo Gordon and Jay Bradner. Through the course of our discussion today, we will use non-GAAP financial measures to describe our performance and have provided appropriate reconciliations within the materials that accompany this call. We will also make some forward-looking statements, which are qualified by our safe harbor statement. And please note that actual results could vary materially. Over to you, Bob. Robert Bradway: Okay. Good afternoon, everyone, and thank you for joining us today. Amgen delivered another strong quarter, driven by rising demand for our medicines and meaningful progress across the pipeline. Volume growth once again paced our progress in an environment where selling prices are declining across the industry. This volume growth reflects the strength of our portfolio and the value our medicines provide to patients and prescribers. We saw growth across all four therapeutic areas this quarter. Revenues were up 12% year-over-year and volume up 14%. 16 of our products grew at double-digit rates and 14 are now annualizing at over $1 billion in sales. Our broad base of innovative medicines is generating powerful momentum and gives us confidence in our ability to sustain long-term growth. We've also been working to expand access to our medicines. And we recently launched AmgenNow, a new direct-to-patient platform that allows qualified patients in the U.S. to access Repatha at one of the lowest prices in the world. This is an important step forward in helping more people benefit from the kind of innovation as represented by Repatha. Let me take a moment to recognize the scale and complexity of what we do in biologics manufacturing which is both an art and a science. And at Amgen, we've built one of the most advanced capabilities in the world in making large molecules. We benefit from 45 years of experience in this space and from having a manufacturing network that's predominantly based here in the U.S., serving American patients and patients all around the world since our inception. We continue to invest in manufacturing with more than $3 billion in planned investments in the U.S. this year alone. This builds on over $40 billion invested in manufacturing and research and development since the passage of the Tax Cuts and Jobs Act in 2017. This foundation positions us well to support growing global demand for our products. And let me just turn briefly to each of our four therapeutic areas. In General Medicine, we're expanding our impact across underserved disease areas with substantial runway. Cardiovascular disease remains the world's leading public health challenge with tens of millions of patients at risk for heart attack and stroke. At the upcoming American Heart Association meeting, we will share data on Repatha showing important benefits in preventing a first heart attack or stroke. Again, a powerful signal for the impact or potential impact of Repatha in primary prevention. In bone health, EVENITY is a transforming care for postmenopausal women at high risk of fracture. It is the first and only bone-building therapy that increases bone formation and decreases bone resorption. EVENITY continues to deliver strong performance and with treatment rates still low among women with high fracture risk, we believe there's significant room for growth. We expect this product to remain a growth driver throughout its life cycle. Looking ahead, both MariTide and Olpasiran offer additional pathways for growth in obesity and cardiovascular disease, two of the world's most pressing health issues. In rare disease, our portfolio of growth drivers are all early in their life cycle. These products are performing well now, and we expect them to continue to grow well into the future. For example, with new indications such as IgG4-related disease and generalized myasthenia gravis on the horizon for UPLIZNA, we're excited by what this product can offer an increasingly broad range of patients. I would also say that the progress that we are seeing with UPLIZNA across a range of different diseases reaffirms our belief for the potential of CD19-directed therapies to address a wide range of rare autoimmune diseases. In inflammation, we've been a leader for decades, and we are very encouraged by what we're seeing with TEZSPIRE as physicians are increasingly comfortable with its profile increasingly comfortable with the fact that it is a well-tolerated and broadly effective agent able to intervene upstream in the inflammatory cascade. We remain highly encouraged by the long-term prospects for TEZSPIRE. In oncology, we're continuing to establish new standards of care. IMDELLTRA has generated strong clinical enthusiasm in small cell lung cancer. BLINCYTO is, of course, now firmly established as the standard of care in frontline consolidation for B-cell acute lymphoblastic leukemia, and we are seeing encouraging project -- progress rather with Xaluritamig in prostate cancer as it advances through Phase III. Meanwhile, our biosimilar strategy continues to deliver results as well. You can see that in the quarter, revenues were up more than 50% year-over-year and are now annualizing at roughly $3 billion in sales. To close, let me just say that we continue to engage with policymakers in Washington and elsewhere around the world to support policies that improve access, protect innovation and strengthen the biomanufacturing ecosystem, especially here in the U.S. We've built a strong springboard for 2026. The products that will drive our next wave of growth are in hand, supported by compelling data, reinforced by readouts this year and still early in their life cycle. We're encouraged by the momentum we're seeing in the business and confident in our ability to deliver innovation and growth well into the next decade. I want to extend my thanks to our colleagues around the world for their commitment to patients. With that, let me turn over to Peter for a financial update. Thank you. Peter Griffith: Thank you, Bob. We are pleased with our strong third quarter performance and remain on track with our 2025 full year goals and long-term objectives. The financial results are shown on Slide 6 and 7 of the slide deck. In the third quarter, revenues increased 12% year-over-year to $9.6 billion, reflecting the continued strong performance of our six key growth drivers, Repatha, EVENITY, TEZSPIRE, and our innovative oncology, rare disease and biosimilar portfolios. The quarter also benefited from discrete items, including roughly $250 million from favorable changes to U.S. estimated sales deductions and a government order for Nplate of $90 million. I would also note that the third quarter included $105 million in sales for RAVICTI, a small molecule within the rare disease portfolio for which we now have a generic competitor as of October. Our non-GAAP operating margin was 47% and reflects significant investments across the business, led by non-GAAP R&D growth of 31% year-over-year, this includes several business development transactions, resulting in roughly $200 million of incremental R&D spending. Excluding these business development transactions, Q3 non-GAAP operating expenses rose 14% and non-GAAP R&D grew 19% year-over-year, reflecting increased investment in our late-stage pipeline. Our continued investments in programs, including MariTide, Olpasiran, Xaluritamig and rare disease will drive sustainable long-term growth and strengthen our leadership in innovation. Our non-GAAP OI&E resulted in a $568 million expense. We continue to strengthen our balance sheet with $4.5 billion of debt retired in 2024 and $6.0 billion of debt retired in 2025. We are pleased to report that we have returned to our pre-Horizon capital structure ahead of plan, and we will achieve greater than $500 million in pretax cost synergies in 2025 in connection with the acquisition. Our non-GAAP tax rate increased 4.8 percentage points year-over-year to 18.2%, primarily due to the change in earnings mix. We generated $4.2 billion in free cash flow in the third quarter, reflecting operational momentum across the business, rigorous management of working capital, all while continuing to invest in innovation. In addition to the increase of 31% in non-GAAP R&D described above, we continue to advance and accelerate technology and AI across the value chain from discovery to development to manufacturing and through to commercial execution. AI and trial enrollment, manufacturing optimization and customer engagement are all among areas leveraging innovation to drive productivity at speed and scale. We're also accelerating molecule design and other aspects of early-stage research powered by modernized AI and data platforms. For 2025, we now expect capital expenditures of roughly $2.2 billion to $2.3 billion to expand network capacity for our products across the portfolio and our innovative pipeline, including MariTide. Our capital expenditures reflect significant investments across the United States, including Ohio, North Carolina, Puerto Rico, Rhode Island, California and Massachusetts. We expect our projects to continue to be on budget and on time. In addition, we returned capital to shareholders through competitive dividend payments of $2.38 per share, representing a 6% increase compared to the third quarter of 2024. Turning to the outlook for the business for 2025 on Slide 8. The benefit of our portfolio was clearly seen this quarter and coupled with momentum across the business, we are raising our 2025 guidance ranges for both revenue and non-GAAP earnings per share. We expect 2025 total revenues in the range of $35.8 billion to $36.6 billion and non-GAAP earnings per share between $20.60 and $21.40. This guidance includes the estimated impact of implemented tariffs. It does not account for tariffs or pricing actions announced or described, but not yet implemented. In addition, let me highlight a few updates to our outlook for the remainder of the year. For the full year, we now expect other revenue to be approximately $1.5 billion. Non-GAAP R&D expenses are now expected to grow at a mid-20s percentage rate year-over-year in 2025. This is driven by increased investment in our late-stage programs and the previously mentioned Q3 business development transactions. We now anticipate non-GAAP OI&E to be in the range of $2.1 billion to $2.2 billion in 2025. We now expect a non-GAAP tax rate in the range of 15.0% to 16.5%. And for WEZLANA in the United States, we continue to expect quarterly sales to fluctuate and do not expect any sales in the fourth quarter. And let me remind you of prior items that have not changed. We continue to expect the full year non-GAAP operating margin as a percentage of product sales to be roughly 45%. The outlook continues to reflect our investments in advancing key late-stage programs, including MariTide, Olpasiran, rare disease and Xaluritamig and leveraging technological advancements, including artificial intelligence. Our operating margin outlook also includes incremental launch and commercial investments. We're focused on delivering sustained long-term growth and value for patients and shareholders by doing what we said we would do, driving innovation in areas of high unmet medical need and maintaining rigorous financial discipline. We continue to focus on execution excellence across the enterprise and remain well positioned for sustained growth throughout the long term. I'm grateful to work with all of our colleagues worldwide in serving patients. This concludes our financial update. I'll now hand it over to Murdo for an update on our strong commercial progress in the quarter. Murdo? Murdo Gordon: Thanks, Peter. In the third quarter, sales increased 12% year-over-year, driven by 14% volume growth. 16 products delivered double-digit or better growth, clear evidence of the strength of our portfolio and the disciplined execution of our teams around the world. Starting with general medicine. Repatha delivered $794 million in the third quarter sales, up 40% year-over-year and now annualizing at approximately $3 billion. Since Repatha's launch a decade ago, the PCSK9 inhibitor class remains underutilized with these therapies currently reaching fewer than 5% of patients eligible for lipid-lowering therapy. With roughly 100 million people still in need of effective LDL-C lowering, Repatha has a substantial opportunity to expand its use to address cardiovascular disease, the world's #1 public health crisis. As you'll hear from Jay, we have recently announced important data from the VESALIUS-CV outcome study, which met its dual major adverse cardiovascular events or MACE endpoints in patients at elevated cardiovascular risk without prior heart attack or stroke. Now I've worked in lipid management for more than 30 years, and I've witnessed numerous landmark statin studies, demonstrating how intensive LDL cholesterol lowering reduces cardiovascular risk. The VESALIUS-CV results demonstrate that Repatha provides additive benefit above and beyond statins, delivering even more reduction in cardiovascular events in primary prevention patients at higher risk. Currently, greater than 95% of patients insured in the U.S. have coverage for Repatha, and most insured patients pay less than $50 out of pocket per month. The prior authorization requirements for many of these patients have also been removed or substantially reduced. In the U.S., we're taking bold steps to improve access with the launch of AmgenNow, our new direct-to-patient program. Repatha is the first therapy available through AmgenNow at a monthly price of $239 or roughly $8 a day. This is nearly 60% below the current U.S. list price, which is already one of the lowest in the world. The launch of this program is a meaningful step toward providing additional affordability and access to Repatha for American patients. EVENITY delivered $541 million in third quarter sales, up 36% year-over-year. In the U.S., sales grew 44%, driven by higher prescription volumes from both established and newly activated prescribers. EVENITY is the only therapy that builds bone and slows bone loss, which is a unique advantage in helping postmenopausal women reduce fracture risk. In the U.S., EVENITY continues to lead the bone builder segment with over 60% market share and approximately 270,000 patients treated to date. However, many remain at high risk of fracture, with close to 90% of the roughly two million very high-risk patients still not receiving appropriate therapy. In Japan, EVENITY has been prescribed to approximately 800,000 patients since launch, making it the leader in the bone builder category with greater than 50% market share. The success of EVENITY in Japan underscores the significant untapped potential in the U.S., where improvements in screening and diagnosis and increased treatment could meaningfully expand patient reach and drive continued growth. Prolia delivered $1.1 billion in sales, an increase of 9% year-over-year. Three biosimilars have launched to date in the U.S., and we see competitive dynamics evolving in line with expectations. In future quarters, we expect increased competition to negatively impact Prolia sales. Our rare disease portfolio grew 13% year-over-year to $1.4 billion, now annualizing at over $5 billion with strong performance across the board. UPLIZNA sales increased 46% year-over-year to $155 million. The launch of UPLIZNA in IgG4-related disease is progressing well with significant uptake among rheumatologists and key academic medical centers. While IgG4-related disease is a recently defined condition, our educational efforts are rapidly building awareness and diagnosis. We've seen over 300 unique prescribers since launch across multiple specialties, demonstrating breadth of adoption of UPLIZNA in this indication. UPLIZNA is a leading FDA-approved treatment for NMOSD with growth driven by increased new patient demand and strong rates of treatment initiations and adherence. Additionally, launch preparations are underway for the anticipated approval of UPLIZNA in generalized myasthenia gravis or gMG, a chronic autoimmune neuromuscular disorder driven by pathogenic B cells. We look forward to the potential of serving more patients who can benefit from UPLIZNA's differentiated profile, including its durable efficacy and convenient dosing and administration. TEPEZZA grew 15% to $560 million in the quarter, driven by increases in inventory and price. We're encouraged by our launch in Japan, where more than 800 patients have been treated with TEPEZZA since December. In the U.S., approximately 25,000 patients have received treatment since launch. To reach even more patients who can benefit from TEPEZZA, we continue to engage a broad prescriber base who have indicated an increasing intent to prescribe. TAVNEOS sales were $107 million in the third quarter, an increase of 34% year-over-year, driven by strong volume growth. More than 6,700 patients with ANCA-associated vasculitis have been treated with TAVNEOS in the U.S. Over 3,800 health care professionals have now prescribed TAVNEOS, representing a 31% increase in the prescriber base so far this year. In inflammation, TEZSPIRE delivered another strong quarter with sales up 40% year-over-year to $377 million and has now achieved over $1 billion in sales year-to-date. TEZSPIRE is well positioned to help many more patients in the U.S. given its differentiated and broadly applicable profile to treat multiple triggers and drivers of severe uncontrolled asthma. In addition, TEZSPIRE has recently been approved in the U.S. for add-on maintenance treatment in adults and adolescents aged 12 years and older with inadequately controlled chronic rhinosinusitis with nasal polyps. This disease is associated with elevated eosinophils and is observed in roughly 20% of patients with severe uncontrolled asthma. This reinforces TEZSPIRE's proven efficacy in eosinophilic disease. Importantly, in this registrational trial, TEZSPIRE demonstrated a reduction in the need for surgery, further expanding its value and potential to help an even broader patient population. Our innovative oncology portfolio, which includes BLINCYTO, IMDELLTRA, LUMAKRAS, Vectibix, KYPROLIS, Nplate and XGEVA grew 9% year-over-year, generating $2.3 billion in third quarter sales. Growth in oncology is fueled by our industry-leading bispecific T cell engager platform, the foundation for IMDELLTRA and BLINCYTO. These medicines are redefining standards of care in difficult-to-treat cancers and extending survival for more patients worldwide. IMDELLTRA generated $178 million in third quarter sales, fueled by strong clinical conviction and rapid adoption across care settings. IMDELLTRA is widely recognized as the standard of care for patients with extensive stage small cell lung cancer who are progressing on or after chemotherapy. Over 1,400 sites of care in the U.S. are now administering IMDELLTRA with more than half of the doses occurring in the community setting. Following superior clinical evidence in the Phase III DeLLphi-304 study, the NCCN guidelines have been updated to reflect IMDELLTRA as the highest recommended therapy in the second-line setting. We look forward to the anticipated full confirmatory approval later this year. BLINCYTO grew 20% year-over-year to $392 million in sales, driven by broad prescribing across both academic and community segments. We see strong conviction in BLINCYTO as standard of care in combination with continued multi-agent chemotherapy for both adults and pediatric patients with Philadelphia chromosome-negative B-cell ALL. Our biosimilar portfolio delivered another strong quarter with sales increasing 52% year-over-year to $775 million and now annualizing at $3 billion. Since our first product approvals in 2018, our biosimilars have generated nearly $13 billion in sales. Additional launches are providing meaningful top line growth and durable cash flow. PAVBLU, a biosimilar to EYLEA continues to gain momentum, reaching $213 million in sales in the third quarter. Retina specialists have responded very positively to the launch of PAVBLU, citing its convenient prefilled syringe format and Amgen's high-quality biosimilar manufacturing as important advantages. I'm very pleased with our performance in the quarter, fueled by the unwavering commitment of Amgen employees around the world to deliver on the company's mission to serve patients. And now I'll hand it over to Jay. James Bradner: Thank you, Murdo, and good afternoon, everyone. The third quarter was a period of strong and disciplined execution across R&D. We advanced multiple late-stage programs and deepened the evidence base for our marketed medicines. Starting with MariTide, both of our Phase III chronic weight management studies are fully enrolled. Interest was significant, enrolling approximately 5,000 adults in roughly 6 months. We have rapidly advanced into additional Phase III studies with strong enrollment momentum in MARITIME-CV and MARITIME-HF for the study of atherosclerotic cardiovascular disease and heart failure, respectively. Recall, in our Phase II chronic weight management study, we observed statistically significant reductions in systolic blood pressure, triglycerides and hs-CRP, a key marker of vascular inflammation. These statistically significant improvements in validated cardiovascular risk factors highlight the potential impact of MariTide beyond weight loss. We have also recently initiated two Phase III studies in obstructive sleep apnea. With six global Phase III studies now underway, we're building a robust evidence base for MariTide. In addition to MariTide, we are advancing our early-stage portfolio for obesity and obesity-related conditions. This includes AMG 513 presently in Phase I and a number of rising preclinical candidates for both incretin and non-incretin targets, featuring both oral and injectable routes of administration. Beyond obesity, in general medicine, as Murdo noted, the Repatha Phase III VESALIUS-CV clinical trial met its dual primary endpoints, demonstrating significant reductions in major adverse cardiovascular events, or MACE, in higher-risk individuals without a prior heart attack or stroke. VESALIUS-CV asked a clinically vital question. Can people at higher risk for a first heart attack or stroke benefit from Repatha when it is added to optimized lipid-lowering therapy. This landmark study enrolled over 12,000 patients, approximately 85% of whom were maintained on moderate to intensive statin-based LDL-C-lowering therapy. At a median follow-up of approximately 4.5 years, both primary MACE endpoints were met and no new safety signals were observed. We are very excited to share the full results from this trial at the American Heart Association Scientific Sessions on November 8 and would encourage all to review the detailed data when presented. In addition to the VESALIUS-CV data, we will also present several real-world studies that report on the state of current lipid management and the effectiveness of Repatha treatment in clinical practice as well as new data from the FOURIER open-label extension study. Together, these data reinforce Repatha's long-term benefit and established safety profile while providing new insights into atherosclerotic cardiovascular disease risk management. The size, scope and ambition of our cardiovascular program, including efficacy from clinical trials and effectiveness from real-world data demonstrate Amgen's unwavering commitment to people living with heart disease and the impact that affordable transformative medicines like Repatha can have on their care. Turning to Olpasiran, our promising best-in-class small interfering RNA medicine targeting Lp(a), we are pleased by the conduct and progression of the fully enrolled event-driven OCEAN(a) Phase III cardiovascular outcome study. We continue to follow the aggregate endpoint accrual rate, which is lower than initial predictions. As the study matures, we will update on the date for primary analysis as appropriate. We retain strong conviction in the potential of lowering Lp(a) to reduce cardiovascular events, owing to very compelling genetic and epidemiological data that link elevated Lp(a) to cardiovascular disease. Moving to our rare disease portfolio at UPLIZNA. We recently presented additional data from the Phase III MITIGATE trial in IgG4-related disease, featuring subgroup analyses stratified by baseline characteristics and organ involvement, such as the pancreas, kidney and bile ducts. These data demonstrate benefits comparable to those seen in the overall trial population, supporting UPLIZNA's potential across the spectrum of IgG4-related disease patients. For UPLIZNA in generalized myasthenia gravis, we look ahead to the December 14 PDUFA date and continue to receive encouraging physician feedback that highlights the need and opportunity for highly active, durable and convenient treatment options for patients with gMG. In inflammation, we are excited by the FDA and European Commission approvals of TEZSPIRE for the add-on maintenance treatment of inadequately controlled chronic rhinosinusitis with nasal polyps for the benefit of adult and pediatric patients aged 12 and older. The Phase III data supporting this approval revealed rapid and sustained symptom improvement and a meaningful reduction of systemic steroid use. Notably, among patients treated with TEZSPIRE, we observed a near uniform avoidance of surgical intervention. Additionally, our two Phase III studies of TEZSPIRE in chronic obstructive pulmonary disease are enrolling patients with moderate to very severe COPD with blood eosinophil counts greater than or equal to 150 cells per microliter. Our Phase III study in eosinophilic esophagitis continues to mature. By targeting thymic stromal lymphopoietin or TSLP at the top of the alarm in inflammatory cascade, TEZSPIRE targets the root cause of serious inflammatory diseases driven by Th2 inflammation. Moving to oncology. Our bispecific T cell engager or BiTE platform is delivering outstanding clinical results for patients facing advanced cancers. IMDELLTRA, our DLL3 targeting BiTE molecule now established as standard of care in second-line small cell lung cancer is generating compelling data in combination and in earlier lines of therapy. In September and October, we presented results for multiple arms of the DeLLphi-303 Phase Ib study of IMDELLTRA in patients with small cell lung cancer, tested in combination with a PD-L1 inhibitor as first-line maintenance therapy. IMDELLTRA demonstrated a promising overall survival of 25.3 months, approximately doubling survival observed in other studies featuring the existing standard of care. In separate arms of DeLLphi-303, IMDELLTRA tested as first-line treatment in combination with platinum-based chemotherapy and a PD-L1 inhibitor demonstrated 12-month overall survival of 81% with median overall survival not yet reached. In both settings, the safety profile was manageable and consistent with the known safety of each component. We are now evaluating these combinations in the pivotal DeLLphi-305 frontline maintenance and DeLLphi-312 frontline induction and maintenance Phase III studies. Previously, we shared the remarkable results of the DeLLphi-304 study, evaluating IMDELLTRA versus standard of care in subjects with relapsed extensive-stage small cell lung cancer after platinum-based first-line chemotherapy. The U.S. regulatory submission has been accepted by the FDA with a PDUFA date of December 18, 2025. Regulatory reviews are also underway in a number of additional geographies. We are developing IMDELLTRA for expansive impact in small cell lung cancer and other DLL3-positive malignancies, including Phase Ib studies evaluating novel agent combinations, less frequent dosing regimens and subcutaneous delivery. As an oncologist, let me share that the impact of IMDELLTRA for patients facing such a challenging disease as small cell lung cancer is honestly very moving. This disease has seen little innovation in decades, and IMDELLTRA is now benefiting so many in this fight. With BLINCYTO, our CD19 targeting BiTE medicines, we continue to work to improve and evolve the standard of care for patients here with B-cell acute lymphoblastic leukemia. Recently, we initiated a potentially registration-enabling study of subcutaneously administered blinatumomab in both adults and adolescents with relapsed or refractory B-ALL. Our first-in-class STEAP1 CD3 bispecific T-cell engager, Xaluritamig is advancing in Phase III clinical development with two studies now underway. The first study, XALute, is enrolling patients with metastatic castrate-resistant prostate cancer who have previously been treated with taxane-based chemotherapy, comparing Xaluritamig monotherapy versus investigators' choice of standard therapy. The second study, XALience, is evaluating the combination of xaluritamig and abiraterone versus investigators' choice of standard therapy in patients with chemotherapy-naive metastatic castrate-resistant prostate cancer. We are also exploring Xaluritamig in other combinations and in earlier stages of prostate cancer with multiple Phase Ib studies ongoing. Across IMDELLTRA, BLINCYTO and xaluritamig, we see meaningful long-term potential from our bispecific T cell engager platform and remain committed to bringing transformative and innovative therapies like these to patients with cancer. Lastly, we are disappointed to announce that FORTITUDE-102, a Phase Ib/III study of bemarituzumab plus chemotherapy and nivolumab in patients with first-line gastric cancer was stopped for an adequate efficacy at an ad hoc analysis requested by the Data Monitoring Committee. We are deeply grateful to the patients, investigators and research partners who made the study possible. We remain committed to creating and developing medicines for challenging cancers where unmet need is significant as for patients with gastric cancer. Here, however, the magnitude of observed efficacy did not meet our standard for an Amgen medicine. Beyond these innovative medicines, our next wave of biosimilar candidates is advancing in Phase III clinical development, featuring biosimilars to OPDIVO, KEYTRUDA and OCREVUS. With breadth and depth across our four therapeutic areas, we are excited about the potential to deliver for patients, and we are well positioned to deliver sustained long-term growth. In closing, thank you to the Amgen teams whose disciplined execution and patient-first mindset make this progress possible. I'll now turn it over to Bob for Q&A. Robert Bradway: Okay. Thank you. Why don't you remind our callers of the procedure for asking questions, and we'll try to get to as many of you as possible. I know it's a couple of minutes past the top of the hour now. So we'll try to get through these. And if we don't get to everybody on the call, we'll be available afterwards to answer any outstanding questions. So, let's get started. Operator: [Operator Instructions] Our first question comes from Salveen Richter from Goldman Sachs. Salveen Richter: With Olpasiran, you mentioned best-in-class in the context of a competitive landscape out there. And you also noted that the event rate for the OCEAN(a) outcome study is lower than you expected. Could you just speak to your confidence in this program and what the event rate means for a base case readout, whether it's now in 2027 versus year-end '26 prior? And then separately, from a BD perspective, you spoke to how you're back at pre-Horizon debt levels. How does this impact your approach to business development heading into 2026? James Bradner: Thank you very much, Salveen. I'll take the first question around Olpasiran. And as I mentioned, our conviction remains very strong. The genetic association for Lp(a) in cardiovascular disease is crystal clear from human genetics, from epidemiological data. Lp(a) is fundamentally an inflammatory lipoprotein particle, and we know a lot about that biology in the vascular beds from analogy to LDL-C. Olpasiran has true best-in-class properties. It's frequency of administration is better. The depth of Lp(a) suppression is better, has a very clean safety profile. OCEAN(a) is an event-driven study. We're accustomed to conducting these global studies, look at VESALIUS-CV. We're very pleased with study conduct and look forward when we do read this out to seeing the impact of Olpasiran. We won't guide today on that particular date, but we'll keep all posted as we put into focus. Robert Bradway: And Salveen, I wouldn't say that the return to the leverage that we had pre-Horizon affects our thinking in business development to any great extent. We're actively looking for opportunities in business development, as you know. We're particularly focused in the therapeutic areas that you're familiar with as areas of interest for us. And just given the number of things we have in the late-stage clinic right now, we're focused primarily on earlier-stage things. And the good news is there are more of those than late stage anyway. So we're focused, open for business, but we have been. So thank you for the question. Operator: Our next question comes from Terence Flynn from Morgan Stanley. Terence Flynn: Peter, I was just wondering, high level, I know you're going to give 2026 guidance at this point, but maybe you could walk us through some of the puts and takes that we should think about heading into 2026. And then, Jay, just one clarification on ROCKET ASTRO. I noticed you completed that trial and it said the safety was consistent. Just wondering if there was any gastrointestinal ulcerations in that study. I know you saw those before in some of the prior studies. Peter Griffith: Yes, Terence, thank you very much for the question. And I would point towards our key growth drivers when you think about the top line and where the company is going. We've just had an excellent quarter, 14% volume growth, Repatha, EVENITY, TEZSPIRE, innovative onc, rare disease now annualizing at over $5 billion off the quarter, biosimilars annualizing at close to $3 billion. So that's how we're thinking about that. As we go down the P&L, maybe the easiest thing for me to do, Terence, would be just to spend a minute because I think people probably are thinking about operating margin. And we've been clear in the past number of years about that. And when we have an opportunity to achieve cash-on-cash returns greater than our hurdle rate, we're going to drive those opportunities for shareholders. So nothing has changed in that. We're at about the 47% operating margin level in 2024 as we continue to accelerate the investing in research and particularly development, Terence of our later-stage pipeline. We're going to continue and have continued to invest in 2025, again, focused on research and development. We're going to stick with this disciplined capital allocation approach. We haven't changed from that, investing in the best innovation, as Bob just said, looking externally inside the company internally remains at the top of our capital allocation hierarchy. Nothing's changed there. So we'll keep that up. We haven't provided longer-term margin targets, so nothing into 2026. But I'd just say we remain focused on achieving industry-leading margins while continuing to invest in the very best innovation. So as you think about the business going forward, here's a couple of thoughts for you to think about. First, we're focused on our earlier pipeline. Bob just mentioned that again, investing in the best innovation to further build out that part of the pipeline. In terms of R&D expenses, I just want to note, we experienced what I might characterize as a step change increase in R&D expenses over the last year. We don't anticipate an incremental step change going forward. In terms of R&D expense, think of a lot of puts and takes there. We'd remind you that we've completed a number of Phase III studies in 2025, including Repatha VESALIUS, the a confirmatory study for IMDELLTRA along with several rocatinlimab, bemarituzumab studies. And we've added studies, of course, for MariTide, Olpasiran and Xaluritamig and those will carry forward into 2026. I'd also remind you, Terence, that our non-GAAP operating margin guidance of for the full year 2025 includes $200 million of business development activities in the third quarter, along with some incremental launch and commercial investments in the fourth quarter. So just kind of summarizing, hoping that answers your question and gives you some thoughts about where we're at this year and continuing into '26. We're going to continue to drive executional excellence, productivity and ruthless prioritization around the organization. We've worked very hard as an enterprise for many years to be amongst the leaders in margins in our industry, and we certainly expect to continue to remain there. So, Terence, thank you very much for the question. Robert Bradway: Jay, do you want to speak to ASTRO? James Bradner: I gladly would. Terence, thanks for asking. For all on the call, ASTRO is a 52-week study of rocatinlimab, the OX40 directed T cell rebalancing agent. In this case in adolescents with moderate to severe atopic dermatitis, tested two doses, 150 and 300 milligrams. We studied the medicine as monotherapy as well as combination therapy with low-dose steroids or calcineurin modulation. Study met its co-primary endpoints at 24 weeks. Safety, quite consistent with the other studies. We did observe GI side effects, mostly mild in nature and not at an excessive rate. As we bring to close the eight studies of the ROCKET program, we start to reflect on the target product profile, we'll have more to say about that in the near future. Robert Bradway: All right. Let's move on to the next question and see if we can keep it to one question so we can get as many of you as possible. Who's next? Operator: Our next question comes from Jay Olson from Oppenheimer. Jay Olson: Congrats on the quarter. We're curious about the VESALIUS-CV results and how you expect them to impact the overall market opportunity for Repatha? And also what should we look for in the details when you present them at AHA? And related to that, just any lessons learned that you can apply to Olpasiran? Robert Bradway: Jay, we're glad you're interested and excited about the VESALIUS study. So are we -- we look forward to having a chance to share with you in detail. Maybe two parts. Jay, do you want to kick off and then Murdo, you can follow up. James Bradner: Yes. Thanks, Jay. Cardiovascular disease is still the #1 killer, heart attack every 40 seconds in the United States. And just about everybody in the world knows about bad cholesterol or LDL-C that Repatha so dramatically lowers. And we know that lower is better, yet lipid management globally is still very poorly managed, about 100 million people in the world who are in need of better control. Repatha, so firmly established as accessible, affordable, efficacious in the prevention of recurrent CV events in VESALIUS-CV, we asked the really vitally important question, can we prevent first events? And indeed, this is the first -- the only PCSK9 to demonstrate such an effect. 75% of MIs are first events. And so it's a really important question. We can't wait to share these data at the upcoming AHA. Importantly, on this study, as Murdo mentioned in the top of the program, this is in addition to optimize lipid management. And so for patients and doctors on a statin, but with inadequate LDL-C control, this is a major, major advance. We're looking very much forward to sharing the complete results. You asked about lessons learned. I think work with great people. The TIMI Study Group was outstanding. We carry all of the learnings of how to conduct a global study of this incredible span in nature, more than 12,000 patients worldwide. And I think it also serves to emphasize by hitting both dual primary endpoints, just how much room there still is to improve cardiovascular care targeting inflammatory lipoparticles. Murdo? Murdo Gordon: Well, I think you've covered most of it, Jay. I would say that if you're not doing anything this weekend and you're really curious, be in New Orleans or tuned in. I really -- I think that the word landmark gets thrown around a lot in describing clinical trials, but I don't think it's an inappropriate moniker to put on this one. I think this is a substantial advance in understanding how you can prevent first heart attacks and strokes. This is a call to action for primary care physicians everywhere. And we will make sure that immediately after the presentation of these data that our medical teams, our field sales teams, our patient support organizations are out there in full force, making sure that primary care physicians are aware of these data. and that patients have the benefit, as Jay said, of an affordable solution that gives them incremental risk reduction beyond any established lipid-lowering therapy on the market today with Repatha. So it's an exciting time. We've systematically told you all that we were opening up access for Repatha and that we were asking primary care physicians to do more beyond the cardiologist role here. And these data give us yet another opportunity to continue that important work. Thank you. Robert Bradway: And Jay, as we mentioned a couple of times on the call in our prepared remarks, Amgen now obviously is an important part of the thinking here. We don't want there to be any excuse for anyone not to be able to get access to this at an attractive price relative to the benefit that the medicine provides. So, anyway, thanks for asking the question. Let's move on to next caller. Operator: Our next question comes from Matt Phipps from William Blair. Matthew Phipps: FDA recently released new biosimilar guidance and maybe removing the need for comparative efficacy studies. I wonder if that changes your view at all on the business, maybe some of the barriers to entry, but also the calculus on what biologics might be worth pursuing a biosimilar for? Murdo Gordon: Thanks, Matt, for the question. I don't think it changes our strategic focus on biosimilars. This has been a very good growth business for Amgen, and we continue to see it as such. Obviously, we pay attention to the new guidance and our development teams and regulatory teams are very focused on making sure we're ready to adapt to them. I would say that all of the technical functions here at Amgen are in a position to compete effectively regardless of the guidance, whether it's heavy clinical trial requirements or whether it's technical comparability requirements. We've got a great process development team here in our manufacturing operations organization who continue to do very innovative things in the development of biosimilars, such as helping us be the only biosimilar to EYLEA commercially available on the market. So we think we'll be in good shape. We'll be competitive. And no matter what the guidelines come, obviously, we'll look closely at them, as I said, and we'll understand how that might impact development of products going forward. Robert Bradway: And just quickly, Matt, at a strategic level, I would observe that there's an undercurrent of question in some quarters, particularly in Washington about how successful the biosimilar market is in the United States right now. As a leading competitor, our perspective is the market is performing very well. We think the ground is well set for this to continue to be a flourishing market in the U.S. with patients having access to alternative supplies of important medicines after their patents have expired. And we would watch carefully to make sure that policies don't emerge that might move this marketplace in the direction of the generic drug industry, where there have been obviously a number of abuses that have given rise to quite a bit of anxiety about that market and its impact on patients. In contrast, we think the biosimilar market is working well. We think regulatory and other policies that are in place today enable that to continue. And we would advocate for, again, a recognition that the things that are in place now are working well. Operator: Our next question comes from Yaron Werber from TD Cowen. Yaron Werber: Great. Maybe just a question for Jay. The second year of the MariTide data is expected by year-end. We know you're looking at three different things. You're looking at the same dose, lower dosing, going to placebo and you're testing Q12 weeks in that study. There's no Q8 weeks. Any sense sort of -- is this going to be in a medical meeting? And can you give us any sense kind of what to really expect and put it in context? James Bradner: Yes. Thanks, Yaron. The Part 2 of the Phase II chronic weight management study is indeed a very interesting study, having achieved strong efficacy in Part 1, 52 weeks, Part 2 will contribute a first maintenance experience. And just a reminder the design, as you covered already, we are testing quarterly dosing, full dose. We're testing low dose at monthly, and we're comparing these measures to placebo and continued treatment. And these data will be very useful to us. This will inform our maintenance strategy. It will provide guidance to additional Phase III designs, and we'll have more to say about our disclosure approach in due course. Operator: Our next question comes from Chris Schott from JPMorgan. Christopher Schott: Maybe a bigger picture question on obesity. We've had a number of updates in the space lately. We've got the Metsera headlines going around. We've got some discussions on lower Medicare pricing for obesity drugs. I'd just be interested in just Amgen's latest view on kind of the obesity market and the company's role within the market with MariTide and the broader pipeline. I want to get just the latest kind of lay the land from your perspective. Robert Bradway: Yes. Thanks for the question, Chris. I would say that we are -- we remain very enthusiastic about the opportunity for us in obesity. We believe strongly, as you know, that we have a differentiated approach to this market than the competitors that are in the space. presently and different from what we see others advancing in their portfolios. So again, our interest in this based on everything we know about our molecule and everything we see in the marketplace remains very, very constructive. So, I'll invite Jay and Murdo, I'm sure they'll have thoughts they want to add. Jay, why don't you kick in? James Bradner: Sure. Thanks for the invitation. It's a major public health crisis. Living in the United States, so many people face this every day. Maybe 40% of adults in the United States will have a BMI over 30 and 1/5 of children. It's also massively costly to health care in the United States. The CDC will estimate over $170 billion a year. And market -- Murdo can speak to it, but the market is totally underpenetrated, implying that health care can significantly improve. But for it to improve, we think it will take really differentiated assets, not just another weekly injectable peptide, which have proven very hard to keep patients on those types of medicines with 55% failure to continue medicines beyond the calendar year. And of course, obesity itself as well as the related conditions require much more enduring and chronic therapy. And so we think that MariTide has a fantastic and differentiated profile to contribute there. But as you asked about the broader pipeline, we've been in obesity and metabolic medicine discovery research for more than 20 years. And this pipeline, we have another Phase I asset, AMG 513. And we have preclinical programs advancing for novel targets within the incretin and non-incretin pathways. Some will be oral, some will be injectable. And so we're really in it to have a huge impact on this major public health crisis. Murdo? Murdo Gordon: Yes. Thanks, Jay. I mean the only thing I would continue to reinforce for everybody listening in is we continue to feel that MariTide is a true differentiation compared to what is available in the market. I mean it is interesting that there's a bidding war between two companies for a GLP-1 that is through some lipid technology enabled potentially to maybe be monthly. So to have a product that's well defined clearly monthly, perhaps even less frequently in a market, as Jay described, that is massive and undersatisfied, where we hope to go into this market, not just to reduce the weight of patients who struggled with obesity but also to help deliver on the medical benefit of managing that weight. And I can't wait to see the results of our Phase III program, and I'm really pleased with how the team is executing. We look forward to that day. Thank you. Operator: Our next question comes from Evan Seigerman with BMO capital. Evan Seigerman: Bob, your comment kind of on the biosimilar sector struck with me. I'm wondering if you could highlight what you think needs to change from a policy perspective to encourage even more uptake of biosimilars. For example, the #1 selling adalimumab product is still HUMIRA and not AMJEVITA. How can you as a biosimilar leader really encourage more use of these products? Robert Bradway: Yes. Again, I think there's a difference in the U.S. between the Part B medicines and the Part D medicines or the retail and the physician-administered medicines. So I think the market dynamics are evolving differently in those two areas. Obviously, the payers are very involved in the Part D where the rebate dynamics are important, but that erodes over time, and I think we see happening that now. Very confident when you look back over the fullness of time, you will see that AMGEVITA, our adalimumab biosimilar will have been a very successful product for us. We see that internationally. It continues to be a strong product for us. We think it will continue to be that. And I think, again, in the U.S., a safe, reliable supply of a true biosimilar like ours will do well in the long term. Operator: Our next question comes from Umer Raffat from Evercore. Michael DiFiore: This is Mike DiFiore in for Umer. I just want to go back to the MariTide Phase II trial for a bit. There is some confusion on whether we'll get two-year weight loss data in the upcoming Part 2 readout of the MariTide obesity Phase II trial. So can you clarify the design, especially as it relates to the washout post week 52? And since most of these patients will have lost weight in year one, isn't it reasonable to assume that weight loss in year two, Part 2 will be a lot less in year one Part 1? Robert Bradway: Yes, Jay, go ahead. James Bradner: Yes, I'm happy to answer the question. As I shared, it's principally a maintenance study that tests low dose monthly and full dose quarterly against placebo and continued MariTide at target dose. As the study was powered really to inform Phase III and we derived a significant amount of guidance from Part 1, there are some aspects of Part 2 that are more descriptive. I mean you may know that to participate in Part 2, patients had to achieve greater than 15% weight loss in Part 1, and then they were randomized to a number of arms. And so the power to make significant insights into weight loss between the arms is not strong, but there will be patients that continue on at their target dose. And as patients in Part 1 did not achieve a weight loss plateau, we'll be interested to follow those patients forward for the second calendar year. Robert Bradway: And just to be clear there, Jay, when you say the power is not strong, you mean it's not designed -- numerically, it's not designed for that purpose. James Bradner: That's right. This, as I shared, is a study that's designed to inform our strategy on maintenance MariTide as well as further Phase III programming. And we fully expect to derive all the information needed from Part 2 of the study for those purposes. Robert Bradway: Great. Okay. Let's go to the next question. Again, I'm mindful we're getting up to the half past the hour. So we'll take two more questions, and then I apologize to the rest of you. We're available for calls later in the day. So let's go to the next question. Operator: Our next question is from David Amsellem from Piper Sandler. David Amsellem: So on UPLIZNA specific question. So you're seeing pretty strong performance in the wake of the label expansion in IgG4-related disease. Can you talk to the extent to which there's been pent-up demand here? Give us your refreshed views on the sales opportunity here? And then I guess, beyond that with the gMG label expansion, how are you thinking about rapidity of uptake there given that, that's a more competitive landscape and there are some competitive dynamics to consider in gMG. Robert Bradway: We'll try to get it efficiently for you here. But I think, Murdo, I'm sure you're going to want to have -- say a few things about the exciting dynamic we see for UPLIZNA. Murdo Gordon: Yes. Thanks for the question, David. Obviously, we're very early in the IgG4 launch. As I mentioned, we've got roughly 300 unique prescribers that have prescribed UPLIZNA for IgG4. I'm not sure I would characterize it as pent-up demand. IgG4 is a disease that really only got its own ICD-10 code in 2023. So this is a patient that often presents without an obvious diagnosis on the part of the physician. So we're actually seeing our awareness, our education and the fact that we've got the only FDA-approved treatment for IgG4 as a catalyst for even more growth. The estimate is about 20,000 patients in the U.S. But as I mentioned, given that the diagnostic codes are relatively new here, the actual market could be much bigger. We have obviously demonstrated overwhelming efficacy. When you can reduce flares by as much as 87%, substantial reduction in steroids and really have patients who are in significant trouble here, have their disease resolved and have their flares reduced as a very important therapy. So it's helped us a lot. Jay will want to expand further on that. But before I turn it to him, I'd just say that in NMOSD, we expect to have a strong -- sorry, in gMG, we expect to have a strong presence in that market given the profile that we were able to show in the MINT trial. We've got a very convenient dosing here after the first loading dose, you get to twice a year therapy. very durable effect, perhaps more durable than some of the agents that are in the market today. And given that the data are already out there, we -- there, we have some real interest on the part of the people who are treating the gMG patient population. The other thing to think about in gMG is there's a lot of switching between treatments and between classes of therapy. Usually, a patient is on a primary therapy for no longer than a year to 1.5 years, and they see at least two medications, sometimes as many as three medications until they feel stabilized. So it is a market that's still dissatisfied despite the number of entrants. Jay? James Bradner: Yes. Thanks, Murdo. I think the differentiation is really strong, as Murdo shared. And I think it's attributable to targeting the core disease biology. I mean targeting the CD19 positive cell is really the entirety of the B-cell compartment, not just the mature cells, but also the immature cells that start to elaborate the autoantibodies. And because of this, although it's always hard to make trial-to-trial comparisons, we see numerically higher efficacy by MG-ADL, which is a standard measure. We see more steroid sparing than FcRn. We see incredible durability, as Murdo said, during the randomized control period and a serious dosing advantage with Q6 months dosing after the loading dose. And so durable, sustained efficacy are not just promising for gMG, but more broadly to the other diseases that are driven by pathologic autoantibodies. And as you might know, we have open studies of inebilizumab as well as blinatumomab in autoimmunity that are open and enrolling in a very dynamic and exciting space where CD19 medicines of many classes are showing profound activity in severe and advanced autoimmune diseases. And we, of course, have two in-market brands. So we're in a good spot to take advantage of this opportunity to help these patients. Operator: Our last question today will come from Dave Risinger from Leerink Partners. David Risinger: So thank you for all the updates. I was just hoping that you could maybe just call out the top two or three pipeline cards that are turning over that could be most impactful for Amgen in the next 6 to 12 months that we should be focused on? Robert Bradway: Jay, do you want to go ahead and talk about a couple of things that you're watching carefully? James Bradner: Yes. Well, I'm obviously very excited in this moment about the VESALIUS-CV, which we're going to be sharing in just a week. And so I really quite encourage you to pay close attention to this. The further development of IMDELLTRA and tarlatamab is also very exciting. We see very dramatic activity in the cases that are now being communicated back to us of patients saved from impossible situations, as I shared, is very powerful. And as we've learned from blinatumomab, moving tarlatamab, IMDELLTRA into combination therapy into frontline use into a setting where there could be less active disease owing to the debulking of chemo, all promises, as we've seen in this dramatic 303 study presented at World Lung as well as at ESMO for really meaningful activity in frontline in Phase III. And this is one of those moments, David, where time just can't move fast enough to read out those Phase III studies. Robert Bradway: We had an opportunity here before the call, Dave, to see some PET scan data on a patient who is in tough shape, who is experiencing quite a profound response to the medicine. So it's a medicine that we're excited about. I think somebody at ESMO described it as wow squared. So stay tuned. A lot of -- we're hopeful about the data that's forthcoming on the IMDELLTRA platform here over time. All right. Well, thank you all for your attention and for joining the call. Casey and his team will be available through the afternoon and evening if anybody didn't get a chance to raise a question that they have an interest in. We look forward to being with you after the next quarter. Thanks. Operator: This concludes our Amgen Q3 2025 Earnings Conference Call. You may now disconnect.
Operator: Good afternoon, everyone. Thank you for standing by, and welcome to the Corvus Pharmaceuticals Third Quarter 2025 Business Update and Financial Results Conference Call. [Operator Instructions] It is now my pleasure to turn the call over to Zack Kubow of Real Chemistry. Please go ahead, sir. Zack Kubow: Thank you, operator, and good afternoon, everyone. Thanks for joining us for the Corvus Pharmaceuticals Third Quarter 2025 Business Update and Financial Results Conference Call. On the call to discuss the results and business updates are Richard Miller, Chief Executive Officer; Leiv Lea, Chief Financial Officer; Jeff Arcara, Chief Business Officer; and Ben Jones, Senior Vice President of Regulatory and Pharmaceutical Sciences. The executive team will open the call with some prepared remarks, followed by a question-and-answer period. I would like to remind everyone that comments made by management today and answers to questions will include forward-looking statements. Forward-looking statements are based on estimates and assumptions as of today and are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied by those statements, including the risks and uncertainties described in Corvus' quarterly report on Form 10-Q for the quarter ended September 30, 2025 and other filings the company makes with the SEC from time to time. The company undertakes no obligation to publicly update or revise any forward-looking statements, except as required by law. With that, I'd like to turn the call over to Leiv Lea. Leiv? Leiv Lea: Thank you, Zack. I will begin with a brief overview of our third quarter 2025 financials and then turn the call over to Richard for a business update. Research and development expenses in the third quarter of 2025 totaled $8.5 million, compared to $5.2 million for the same period in 2024. The $3.3 million increase was primarily due to higher clinical trial and manufacturing costs associated with the development of soquelitinib as well as an increase in personnel-related costs. The net loss for the third quarter of 2025 was $10.2 million, including a noncash loss of $300,000 related to Angel Pharmaceuticals, our partner in China. This compares to a net loss of $40.2 million for the same period in 2024, which included a $32.8 million noncash loss related to the change in fair value of Corvus' warrant liability and a $700,000 noncash loss related to Angel Pharmaceuticals. Total stock compensation expense for the third quarter of 2025 was $1.2 million, compared to $700,000 in the same period in 2024. As of September 30, 2025, Corvus had cash, cash equivalents and marketable securities totaling $65.7 million, as compared to $52 million at December 31, 2024. Consistent with our last quarter, we expect our current cash to fund operations into the fourth quarter of 2026. I will now turn the call over to Richard, who will discuss our clinical progress and elaborate on our strategy and plans. Richard Miller: Thank you, Leiv, and good afternoon, everyone. Thank you for joining us today for our update call. Our primary focus continues to be on the development of soquelitinib for both atopic dermatitis and T cell lymphomas, and we have several important milestones upcoming for these programs. First, we have completed enrollment in the extension Cohort 4 of our Phase I trial, and we expect to have the results of the full data set in late December. Given the proximity to the holidays, we plan to report results in January. Second, the initiation of our Phase II atopic dermatitis trial is on track for early Q1 2026. We believe soquelitinib is strongly positioned as an oral medication with a novel mechanism of action that so far has shown favorable safety and efficacy profile. There has been increasing interest in drugs with novel mechanisms to address atopic dermatitis and other inflammatory diseases. Our confidence in soquelitinib is bolstered by our belief that the data to date not only stands up favorably against recent data sets from other approaches, but indicates that we have the potential to be a leader in this space. We are also encouraged that the clinical evidence obtained to date with soquelitinib in both atopic dermatitis and in T cell lymphoma bode well for the potential of ITK inhibition in a broad range of immunology and inflammatory indications, and we continue to explore potential next opportunities for our platform. On today's call, I will provide an overview of extension Cohort 4 and our plans for reporting this data, and the status of our planned Phase II trial in atopic dermatitis. I will also discuss the relevance of our soquelitinib ASH oral presentation for our Phase III peripheral T cell lymphoma trial and its implications for I&I indications, including atopic dermatitis. And I will provide a brief recap of other operational progress and updates. Let me start with a reminder of the key data reported to date for soquelitinib in atopic dermatitis. In June, we reported data from Cohort 3 of the Phase I trial evaluating a 200-milligram twice-per-day oral dose for 28 days of treatment, building on the encouraging results we had already reported with a lower dose level from cohorts 1 and 2. All of the treatment cohorts demonstrated a favorable safety and efficacy profile compared to placebo. The Cohort 3 efficacy data was especially remarkable, demonstrating earlier and deeper responses compared to cohorts 1 and 2. At day 28, Cohort 3 showed a mean percent reduction of EASI score of 64.8%, compared to 54.6% for the combined cohorts 1 and 2 and 34% for placebo. In Cohort 3, 50% of patients achieved EASI 75, 8% achieved EASI 90 and 25% achieved IGA 0 or 1. No placebo patients achieved EASI 75 or IGA 0/1. We also saw an impact on itch with a number of Cohort 3 patients reporting steep drops in patient-reported PP-NRS score beginning at day 8. In terms of the kinetics of response, Cohort 3 showed earlier and deeper separation from placebo starting at day 8, compared to cohorts 1 and 2, with the EASI score improvement continuing through day 15 and 28. The continuous downward slope of the curve suggests that longer treatment duration could potentially deepen responses further, which we are now exploring with the extension Cohort 4. We have completed enrollment in the extension Cohort 4 of the Phase I trial, which is evaluating 24 patients at the Cohort 3 dose of 200 milligrams twice per day given for 8 weeks, with an additional 30-day follow-up without therapy. The 24 patients were randomized in a blinded fashion 1-to-1 with placebo, 12 active and 12 placebo. As mentioned earlier, we plan to report the 8-week data set on 24 patients in January. Our objective with this additional data is to confirm the results obtained in our earlier cohorts in a larger number of patients and to determine if the longer treatment duration of 8 weeks leads to better efficacy. The second upcoming milestone for soquelitinib in atopic dermatitis is the initiation of our planned Phase II clinical trial, which we anticipate will begin early Q1 2026. The trial will be randomized, placebo-controlled and double-blinded, involving approximately 70 clinical trial sites globally. The trial was designed to enroll approximately 200 patients with moderate to severe atopic dermatitis that have failed at least 1 prior topical or systemic therapy. I would like to emphasize that we are including patients who have failed previous systemic therapies, such as Dupixent or JAK inhibitors. We are interested in this population of patients because soquelitinib has a mechanism of action that is different than currently available agents and prior use of these agents would not be expected to lead to resistance to soquelitinib. The patients will be randomized equally into 4 cohorts, 50 patients each, receiving soquelitinib 200 milligrams once per day, 200 milligrams twice per day, 400 milligrams once per day, or placebo. The treatment duration will be 12 weeks and patients will be followed for an additional 90 days without therapy. The primary endpoint will be the mean percent reduction in EASI score from baseline to week 12. This is the typical endpoint for Phase II clinical trials in atopic dermatitis. Secondary endpoints will include the percent of patients achieving EASI 75 or IGA 0/1 at week 12, impact on itch measured by the percent of patients achieving greater than or equal to 4-point decrease in PP-NRS at week 12, and safety. Photographic documentation of disease at baseline and response to therapy will be mandated on the study and reviewed by independent experts. In oncology, we continue to enroll patients in our registrational Phase III trial of soquelitinib in patients with relapsed PTCL, driving towards interim data in late 2026. In addition, we are pleased to report that the final results from our Phase I/Ib clinical trial of soquelitinib for the treatment of relapsed/refractory T cell lymphomas will be presented in an oral session at the Annual Meeting of the American Society of Hematology meeting in December. This presentation will report on the clinical data and supporting preclinical work that drives us to continue advancing the program for PTCL, as well as providing the rationale and safety information motivating us to focus on immune and inflammatory diseases. In particular, we will report on the durability of progression-free and overall survival. We believe the presentation at ASH adds to the growing clinical evidence that soquelitinib is a safe and active agent working through a mechanism that supports its utility in both T cell lymphoma and immune-mediated diseases. As a reminder, some patients in the Phase I trial were treated beyond 2 years in the same daily dose range as is being studied in atopic dermatitis. And complete durable tumor responses were seen in patients with highly aggressive tumors. We also have a growing body of preclinical data supporting the potential of ITK inhibition in a broad range of additional indications across dermatology, rheumatology, pulmonary medicine, solid cancers and other diseases. Briefly on other operational updates. In October, we appointed Mr. David Moore to our Board of Directors, building on the addition of Richard van den Broek in April. David is Executive Vice President, U.S. Operations, at Novo Nordisk and President at Novo Nordisk. His experience leading one of the most successful GLP-1 franchises, along with his broad expertise across strategy, commercial, market access, business development and investing, is anticipated to be an important strategic resource as we work to maximize the potential of our ITK inhibitor platform. In closing, we remain very optimistic about the potential of soquelitinib in atopic dermatitis. In addition, the knowledge and experience from our current trial motivates us to think beyond atopic dermatitis, to a broad range of other immune diseases. We believe we may have the opportunity to establish selective blockade of ITK as a new therapeutic approach to autoimmune inflammatory diseases based on modulation or rebalancing of cellular immunity. We look forward to providing soquelitinib updates in the coming months. First, at ASH for our T cell lymphoma program, and then in January for the extension Cohort 4 data for our atopic dermatitis program. Combined with the planned initiation of our Phase II atopic dermatitis trial in early Q1 2026 and the ongoing enrollment in our Phase III PTCL trial, we are building significant momentum for soquelitinib coming into the new year. I will now turn the call over to the operator for questions and answer period. Operator? Operator: [Operator Instructions] Your first question comes from the line of Graig Suvannavejh from Mizuho. Graig Suvannavejh: Congratulations on the progress in the quarter. I had a couple of questions. First, on your ASH abstract and the data that you will be presenting next month. I'm wondering, we saw very impressive OS data, and with that in mind, with other information that was in that abstract, could you perhaps put in context the comparability that obviously leads to your enthusiasm for the prospects of soquelitinib in peripheral T cell lymphoma? And I'll come back with a second question. Richard Miller: First of all, the PFS and OS being presented at ASH meeting is quite impressive, the -- especially when you consider this is a Phase I trial using an agent that was not previously tested in this disease. As you all know, T cell lymphoma is a very bad disease with a median survival usually of about 6 months in relapsed. We have far better results than that and we're excited about that. The reason that we're also excited is we've learned so much from that trial in terms of immunobiology, safety, pharmacokinetics, pharmacodynamics, mechanisms of action that pertain to -- that are very pertinent with regard to immune diseases. One of the things I talk about in the ASH abstract, and we'll elaborate on at the meeting, is the fact that we're seeing responses in T cell lymphomas that are so-called GATA3-positive. Now GATA3 is a transcription factor that is also known as the master regulator of Th2 function. Th2 cells are the cells of interest in a variety of immune diseases, including atopic dermatitis. So putting all that information together we feel bodes well, not just for the T cell lymphoma program, but for a range of immune diseases. It's confirming and consistent with our belief that we have a drug with a really new novel mechanism of action, it's oral, it appears very safe. And we are seeing really significant signals of activity in patients who have a cancer of their immune system that involves the very same cells that are involved in all these other immune diseases. I hope I answered that question. Graig Suvannavejh: You did. And then if I could just go to soquelitinib and your atopic dermatitis readout that's coming in the early part of the year. As you have expanded the treatment duration and as you've expanded the number of patients, is it fair for us to assume that what you saw previously will have an improvement on the efficacy that you saw? And if you don't see an improvement versus what you saw previously, does that change in any way your enthusiasm for the prospects of soquelitinib in atopic dermatitis? Richard Miller: So first of all, we feel, and so do many of our outside experts feel, that the data that we generated in Cohort 3 with 28 days of treatment was quite good. It was safe and it was quite active in that. What we aim to show -- and as you recall, the reduction in EASI scores were continuing to go down for the last few weeks of therapy. So with the expanded cohort, we really are looking for 2 things. Number one, we want to show consistency. We want to show -- confirm what we showed before in a larger set of patients with more placebos and more patients getting active drug. Placebos, I don't have to tell you folks, placebos are very important in evaluating these diseases. The second thing we're looking for is: does the extension of the treatment duration improve the results further? So those 2 concepts. I want to see consistency of the data from what we did earlier, and yes, we'd like to see an improvement as we go beyond 28 days. And of course, we want to confirm safety and the other things as well. So that would be what to expect as we look at the data that comes out in January. Operator: Your next question comes from the line of Jeff Jones from Oppenheimer. Jeffrey Jones: Congrats on the real progress you're making here. One on soquelitinib. Richard, as you mentioned, you've seen and been generating data in a number of other indications in the I&I space. What are your plans to take soquelitinib forward in other indications at this point, sort of indications and timing? Richard Miller: Okay. So just to be clear, Jeff, soquelitinib in humans is being studied in the registration Phase III trial and, of course, in our Phase II atopic dermatitis trial. We also have a trial in lymphoproliferative disease called ALPS that you know about. Now we have many preclinical models that we've evaluated soquelitinib, everything from asthma, atopic dermatitis, psoriasis, scleroderma, systemic sclerosis, et cetera. We are making definite plans to move into other immune-related diseases. I'll be talking more about that early next year. The key diseases for us now appear to be asthma, and probably another dermatologic condition, yet to be defined. Jeffrey Jones: Great. Appreciate that. And then you -- or the Kidney Cancer Research Consortium reported an update on the cifo trial at ESMO. Just curious as to the next steps there. The trial is still ongoing, there are still patients on follow-up. How are you thinking about ciforadenant in the context of renal cell and beyond? Richard Miller: So as you know, the cifo trial was done in collaboration with the Kidney Cancer Consortium, who pay for most of the trial. I don't think we have any other expenses related to that. There were 19 patients still on treatment and on follow-up, 19 out of 50, 40% or so almost. So we're going to continue to follow those people, and we'll decide what to do once we see how the rest of the data evolves. But that's our current plan for that. Operator: Your next question comes from the line of Li Watsek from Cantor. Li Wang Watsek: Congrats on the progress. I have a couple of questions here. First, maybe just in terms of baseline characteristics of the Cohort 4 versus prior 3 cohorts. Is it reasonable for us to assume they're pretty similar to Cohort 3? Or is there any difference that we should keep in mind? And I have a follow-up. Richard Miller: It is very reasonable for you to assume that the characteristics are very similar to Cohort 3. And to elaborate on that, the enrollment in the trial is 17 centers, all U.S. centers, the same centers that were utilized for the first 3 cohorts. None of the criteria for eligibility have been changed. And yes, we know the demographics already of our patients, very, very similar to those of Cohort 3. Li Wang Watsek: Okay. Great. And then for the Phase II trial, just given the patient population that you'll be enrolling, it sounds like the patients can be exposed to JAK inhibitors and Dupi. So just given this demographic, what should be the bar for the EASI score? Richard Miller: Okay. So first of all, when we go to Phase II, of course, it's a larger trial, 200 patients, it would be very difficult, would take a long time to enroll that solely in the U.S. So there is going to be a heavy reliance on sites outside United States, particularly in Europe, which is what most companies are doing now. I think that we're somewhat unique in that we're allowing patients who failed Dupi and JAK and other systemic therapies -- within reason. I mean you can't fail 10 therapies. But -- now the reason we're doing that is that we have some patients that we've seen in cohorts 1, 2, 3 and now even in the fourth cohort that have failed those systemic therapies, and they're responding to our drug. So I don't know what the final numbers are going to be on that yet, whether it's identical to first-line therapies or somewhat not identical. So it's a little bit hard for me to say what the bar is. First of all, I'm not aware of any data that has specifically been published on the response of a drug to somebody who's failed the JAK inhibitor or Dupi. Now those studies do, I know, recycle patients. They take patients who are EASI 50s and they treat them again for longer periods of time. But that's really kind of a different kind of experiment. So look, I think it's a little early to set a bar for the Phase II. Let's get our Phase I results. Let's take a look at the Dupi failures and the JAK failures, and then we can talk more about that. But I think it is an important point, I'm glad you asked the question, that the Corvus patient population is a little bit different. Now we're doing that deliberately. We want these failures because we think that we have a drug with a mechanism of action that is going to -- where the mechanism of resistance to a Dupi or a JAK is really -- may not really be pertinent or relevant for our mechanism. And then we need to learn that. So the good news here is that it expands the potential use of our drug. We feel that it potentially could be used first line or it could be used in the relapsed situation. Operator: Your next question comes from the line of Aydin Huseynov from Ladenburg. Aydin Huseynov: Congrats on the progress this quarter, and appreciate taking questions, I got a couple. So Richard, so you're already running a trial in atopic dermatitis, and I was curious to hear any thoughts on potential other dermatologic indications such as either hidradenitis suppurativa, vitiligo, psoriasis or anything else. And can you run several trials simultaneously -- several dermatologic trials simultaneously? Just wanted to get your thoughts on this. Richard Miller: Okay. So the preclinical models and the data we have in the lab tells us that asthma should be a very good indication for us. We also think that a disease like hidradenitis suppurativa would be a very good disease for us. It's in the dermatology space and that's a disease that's both Th2 and Th17 driven. So let's think about that a little bit. A Dupixent, for example, or a STAT6 inhibitor or whatever, is going to get your Th2-type cytokines, but it's not getting Th17 because that doesn't signal through STAT6. So we think we have a distinct advantage here for a disease like HS because we hit 17 and Th2. There are other reasons as well. So other diseases we're thinking about are prurigo nodularis, that's a Th2 and Th17 disease as well. That's not as common, but there's even more of an unmet need there. Alopecia areata, we've considered. It's a very competitive space. JAK inhibitors work well. But that's still on our list and we're still doing some work on that. Now your question, can we run more trials? We intend to run multiple trials in immune disease. We intend to push this drug in multiple areas, as I mentioned on my talk, not just in dermatology, pulmonary medicine, oncology, rheumatology, et cetera, et cetera. Now of course, we know at some point here, we're going to have to raise some money to do that. And we're optimistic that with the data that we have coming out, that we'll be in a position to raise money to fund those activities. Aydin Huseynov: Very helpful, Richard. One more question I have regarding Phase II registration trial. I just wanted to better understand the time lines, the potential readout, and hopefully, the potential launch of the drug. So given so many developments with soquelitinib, I guess this is the first indication -- that's the first indication you're going to launch the drug. And I just wanted to get a better sense of immediate commercial opportunity and the time lines in PTCL for soquelitinib. Richard Miller: Yes. So well, our time line is a futility interim analysis at the end of 2026, probably finished, full data by end of 2027. Launch would be, I think, relatively quick for this. One of the beauties of this trial is that it's a single registration, randomized trial that could lead to full approval should you meet your endpoints. And it's 150 patients, relatively small trial, with relatively short endpoints. The control -- the chemotherapy control arm is expected median PFS, which is the primary endpoint of, what, 3 months, 2 months. So we're excited about it. I'm an oncologist and lymphoma is my expertise, as you know, and I ran a clinic at Stanford for 25 years or more taking care of lymphoma patients, there is no treatment, no good treatment for this disease. There is no competition at this point. Even in the research stages, I mean, really there's nothing new in this area. So we think we have the potential should this drug be approved, where it will be used immediately in all T cell lymphomas, frontline, late line, you name it, because really there isn't anything else. I mean we have a ways to go before we can figure all that out, but the opportunity here, we think, is much larger than people recognize. Now it's not atopic dermatitis in terms of the number of patients, of course, but it also doesn't have the competition and it also doesn't have the very long time lines to approval. All right? Operator: Your next question comes from the line of Etzer Darout from Barclays. Jordan Becker: This is Jordan Becker on for Etzer Darout. Thanks for taking our questions and congrats on the updates. Two questions. You alluded to it, but I just want to double-click on this. Do you plan to do any post hoc analysis following the Cohort 4 completion to look at efficacy in Dupi and JAK-naive and refractory populations? And then two, can we expect a similar analysis in terms of biomarker correlates of clinical efficacy with the updated data? Richard Miller: The answer is yes and yes, Jordan. Thanks for the question. We, of course, will be doing post hoc analysis trying to figure out how the drug is working, how to make it work better, all sorts of things. So clearly, looking at the effects of prior therapy, prior systemic therapies, all those clinical variables will be evaluated. We do have a pretty aggressive biomarker program. We're minimizing biopsies of the lesions on patients only because that does hurt enrollment, and we don't want to do that. But we have a pretty extensive program now looking at single-cell RNA sequencing of blood, and that's revealing a lot of interesting things. I mean there's a lot of new things that are coming out on this. I think the same old, same old look at IL-13 or whatever, that's going to go bye bye, TARC, et cetera. Those are not good biomarkers, everybody knows that. The best biomarkers for these diseases are yet to be defined because they're heterogeneous diseases and we don't really know what the cause is. So we're looking at a lot of that. We'll report on what we find. The biomarker game is a tough game. There's a lot of variables to look at, and hard to make much of anything when you have a small number of patients. But we certainly will hope to get clues and signals that we can validate in larger trials. Okay? Operator: Your next question comes from the line of Sean Lee from H.C. Wainwright. Xun Lee: I just have a couple of quick ones on the design of the upcoming Phase II AD study. So what's the reasoning behind the settling on a 12-week duration treatment rather than the 8 weeks that you're testing in the Cohort 4? And are there any notable differences between the enrollment criteria of the Phase II compared to the patients that you're enrolling in Phase I? Richard Miller: So far, the eligibility criteria are pretty much identical. The reason we're going to 12 weeks is we're going to examine that. Most therapies are out at 16 weeks now. But if you look at the data from most studies, you'll see that most of the separation, most of the efficacy is obtained in the first 12 weeks. You don't really gain that much more by treating longer. So that's the reason for our 12-week study. Look, I'm trying to make this a shorter treatment, not a longer treatment, okay? I don't know any patient, and I've been, as I mentioned earlier, running a clinic for over 30 years, I don't know any patient who wants more medicine to take longer. So I'm trying to see if we can go shorter, not longer. But of course, we want to maximize -- both are important. You want to maximize responses. You want to hopefully shoot for total clearance of disease, that is EASI 100%, that's what you want. And that's what we'll try to do. But that's -- if you look at most studies, you don't gain much by going from 12 weeks to 16 weeks. Now some people are going to 6 months, 1 year. I mean, great, if you're willing to take a drug for that long, for an incremental benefit that's marginal. Operator: Your next question comes from the line of Cha Cha Yang from Jefferies. Cha Cha Yang: This is Cha Cha on for Roger Song. I was hoping that you could give us some color on any of your plans for potential partnerships or licensing deals for soquelitinib in the coming future, or if you plan to raise money and take this forward yourselves in either AD and oncology. Richard Miller: Okay. So thanks for the question, Cha Cha. I can tell you that ITK as a target is on the radar of every major company that works in this area. I know that because we're talking to them. We'll evaluate partnering opportunities as they arise, whether it be in oncology or immune diseases. At this time, however, we're pushing forward with our cancer program and our immunology program. We, as I mentioned just a few minutes ago, we do recognize that we're going to have to raise more money to maximally develop all these programs. We're optimistic about our data and we think there will be ample opportunity to raise funding, whether it be through offering stock or partnerships at the appropriate time. Operator: Next question is from the line of Graig Suvannavejh from Mizuho. Graig Suvannavejh: I was very curious, as you think about your ITK portfolio and comments around potentially advancing next-generation ITK, I was wondering, Richard, if you could share kind of the vision or strategy around the potential of adding another indication for soquelitinib versus moving forward with a next-generation ITK inhibitor with perhaps a similar indication in mind. Just how do you balance that kind of strategy? Richard Miller: Well, that's a -- thank you for the question. That's a good question. Obviously, pushing forward with soquelitinib, which now has a wealth of safety and efficacy data in hundreds of patients, is -- will move faster than bringing along one of our backup compounds, which, of course, still have to go through IND-enabling studies. And then if you go in the immunology space, don't forget you need to do normal volunteer single-dose, normal volunteer multi-dose. So that takes time. But we are going to consider all that. Right now, we're pushing forward in the PTCL, atopic dermatitis and soon other immune diseases. We're also considering other dosage forms and formulations of soquelitinib. We're working on that now. We also are looking at soquelitinib-like ITK degraders. We've made some of those. We're looking at those in the laboratory. Interestingly, it turns out that soquelitinib, a covalent drug, leads to degradation of the ITK target to a certain extent. We've learned that. That's really interesting. I don't think anyone has known that before. So we're looking at any and all of that stuff. But certainly pushing forward with our lead compound, that's going to be the fastest. Operator: Your last question is from the line of Jeff Jones from Oppenheimer. Jeffrey Jones: Just a quick one. Digging a little bit deeper into the Dupi and JAK-exposed patients that could be enrolled in the Phase II study. Would you guys be powering the study to really do a subgroup analysis that could be statistically significant again and separate those systemically exposed patients versus systemic therapy naive patients? Richard Miller: No, we would not be doing that. I mean that's -- I mean, we don't have enough information yet, Jeff, to make a commitment like that. But one thing is for sure, we will stratify the studies to look at that subgroup. So what I mean by that is that will be a defined subgroup. We will stratify randomization based on whether you fail this -- a prior systemic therapy or not. You want those equally distributed in your placebo and in your active arm. But without really knowing the efficacy signal yet we would expect in that, it's a little hard to power how many patients you would need and what effect you're looking for. I think that would be going pretty far. I'm not sure you'd want to do that at this stage. I'd rather do a study, include everyone -- the best outcome, do a study, include those people, have a positive study in your predefined endpoint. You get approval, I mean if it were Phase III, you get approval for everyone. Jeffrey Jones: Yes. No, great. And the other way to look at that would be stratifying. So really appreciate the clarity. Richard Miller: Thanks, Jeff. Operator: Thank you very much. As there are no further questions at this time. I would like to turn the call back to Mr. Richard Miller for closing comments. Sir, please go ahead. Richard Miller: Thank you very much, operator. Thank you, everyone, for participating in this call. We look forward to advancing the soquelitinib programs and our other programs. And we look forward to updating you on our progress as we move forward into 2026 and beyond. Thank you very much. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.
Conversation: Operator: Good afternoon, and welcome to the NMI Holdings, Inc. Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to John Swenson of management. Please go ahead. John Swenson: Thank you, Gary. Good afternoon, and welcome to the 2025 Third Quarter Conference Call for National MI. I'm John Swenson, Vice President of Investor Relations and Treasury. Joining us on the call today are Brad Shuster, Executive Chairman; Adam Pollitzer, President and Chief Executive Officer; and Aurora Swithenbank, our Chief Financial Officer. Financial results for the quarter were released after the close today. The press release may be accessed on NMI's website located at nationalmi.com under the Investors tab. During the course of this call, we may make comments about our expectations for the future. Actual results could differ materially from those contained in these forward-looking statements. Additional information about the factors that could cause actual results or trends to differ materially from those discussed on the call can be found on our website or through our filings with the SEC. If and to the extent the company makes forward-looking statements, we do not undertake any obligation to update those statements in the future in light of subsequent developments. Further, no one should rely on the fact that the guidance of such statements is current at any time other than the time of this call. Also note that on this call, we may refer to certain non-GAAP measures. In today's press release and on our website, we provided a reconciliation of these measures to the most comparable measures under GAAP. Now I'll turn the call over to Brad. Bradley Shuster: Thank you, John, and good afternoon, everyone. I'm pleased to report that in the third quarter, National MI again delivered standout operating performance, continued growth in our insured portfolio and strong financial results. Our lenders and their borrowers continued to turn to us for critical down payment support. And in the third quarter, we generated $13 billion of NIW volume, ending the period with a record $218.4 billion of high-quality, high-performing primary insurance-in-force. In Washington, our conversations remain active and constructive, and there continues to be broad recognition in D.C. of the unique and valuable role that the private mortgage insurance industry plays, offering borrowers low-cost down payment support and access to mortgage credit while also placing private capital in front of the taxpayer to absorb risk and loss in a downturn and ultimately ensure the safety and soundness of the conventional mortgage market. National MI and the broader private mortgage insurance industry have never been stronger or better positioned to provide this critical down payment support than we are today. And we're excited to continue working with Director Pulte, other members of the administration and the leadership teams of Fannie and Freddie to advance their important goal of helping more Americans than ever unlock the dream of homeownership. With that, let me turn it over to Adam. Adam Pollitzer: Thank you, Brad, and good afternoon, everyone. National MI continued to outperform in the third quarter, delivering significant new business production, consistent growth in our insured portfolio and strong financial results. We generated $13 billion of NIW volume and ended the period with a record $218.4 billion of high-quality, high-performing primary insurance-in-force. Total revenue in the third quarter was a record $178.7 million, and we delivered GAAP net income of $96 million or $1.22 per diluted share and a 15.6% return on equity. Overall, we had a terrific quarter and are confident as we look ahead. The macro environment and housing market have remained resilient through an extended period of headline volatility. Our lender customers and their borrowers continue to rely on us in size for critical down payment support, and we see an attractive and sustained new business opportunity fueled by long-term secular trends and furthered by the recent improvement in mortgage rates. We have an exceptionally high-quality insured portfolio covered by a comprehensive set of risk transfer solutions and our credit performance continues to stand ahead. We're delivering consistent growth in embedded value gains in our insured book, and we continue to manage our expenses and capital position with discipline and efficiency, building a robust balance sheet that's supported by the significant earnings power of our platform. Taken together, we see a clear opportunity for continued outperformance. Notwithstanding these strong positives, however, macro risks do remain, and we've maintained a proactive stance with respect to our pricing, risk selection and reinsurance decisioning. It's an approach that has served us well and continues to be the prudent and appropriate course. More broadly, we remain encouraged by the continued discipline that we see across the private MI market. Overall, we had a terrific quarter, delivering strong operating performance, consistent growth in our insured portfolio and strong financial results. We're in the market every day with a clear mandate and purpose offering a low-cost, high-value solution that helps borrowers bridge the down payment gap and meaningfully reduces the cash required at the closing table. In the process, we help to make homeownership more affordable and achievable for millions of Americans and communities across the country with coverage that works to insulate the GSEs and taxpayers from risk and loss in a downturn. Looking ahead, we're well positioned to continue to serve our customers and their borrowers, invest in our employees and their success, drive growth in our high-quality insured portfolio and deliver through the cycle growth, returns and value for our shareholders. With that, I'll turn it over to Aurora. Aurora Swithenbank: Thank you, Adam. We again delivered standout financial results in the third quarter. Total revenue was a record $178.7 million, GAAP net income was $96 million or $1.22 per diluted share and return on equity was 15.6%. We generated $13 billion of NIW and our primary insurance-in-force grew to $218.4 billion, up 2% from the end of the second quarter and 5% compared to the third quarter of 2024. 12-month persistency was 83.9% in the third quarter compared to 84.1% in the second quarter. Net premiums earned in the third quarter were a record $151.3 million, compared to $149.1 million in the second quarter and $143.3 million in the third quarter of 2024. Net yield for the quarter was 28 basis points, consistent with the second quarter. Core yields, which excludes the cost of our reinsurance coverage and the contribution from cancellation earnings was 34.2 basis points also unchanged from the second quarter. Investment income was $26.8 million in the third quarter compared to $24.9 million in the second quarter and $22.5 million in the third quarter of 2024. Total revenue was a record $178.7 million in the third quarter compared to $173.8 million in the second quarter and $166.1 million in the third quarter of 2024. Underwriting and operating expenses were $29.2 million in the third quarter compared to $29.5 million in the second quarter. Our expense ratio was a record low 19.3% in the quarter, highlighting the significant operating leverage embedded in our business and the success we have achieved in efficiently managing our cost base. We have a uniquely high-quality insured portfolio and our credit performance continues to stand out. We had 7,093 defaults at September 30 compared to 6,709 at June 30, and our default rate was 1.05% at quarter end. Claims expense in the third quarter was $18.6 million compared to $13.4 million in the second quarter, reflecting normal seasonal activity and the continued growth and seasoning of our portfolio. GAAP net income for the quarter was $96 million and diluted earnings per share was $1.22. Adjusted net income was $95.7 million, and adjusted diluted EPS was $1.21. Total cash and investments were $3.1 billion at quarter end, including $148 million of cash and investments at the holding company. Shareholders' equity at September 30 was $2.5 billion and book value per share was $32.62. Book value per share, excluding the impact of net unrealized gains and losses in the investment portfolio was $33.32, up 4% compared to the second quarter and 16% compared to the third quarter of last year. In the third quarter, we repurchased $24.6 million of common stock, retiring 628,000 shares at an average price of $39.13, through quarter end, we've repurchased a total of $319 million of common stock, retiring 11.3 million shares at an average price of $28.25. We have [ 256 million ] of repurchase capacity remaining under our existing program. At quarter end, we reported $3.4 billion of total available assets under PMIERs and $2 billion of risk-based required assets. Excess available assets were $1.4 billion. Overall, we achieved standout financial results during the quarter, delivering consistent growth in our high-quality insured portfolio, record top line performance and expense efficiency and strong bottom line profitability and returns. With that, let me turn it back to Adam. Adam Pollitzer: Thank you, Aurora. We had a terrific quarter, once again delivering significant new business production, consistent growth in our high-quality insured portfolio and stand out financial results. We have a strong customer franchise, a talented team driving us forward every day, an exceptionally high-quality book covered by a comprehensive set of risk transfer solutions and a robust balance sheet supported by the significant earnings power of our platform. Taken together, we are well positioned to continue to serve our customers and their borrowers, invest in our employees and their success drive growth in our high-quality insured portfolio and deliver through the cycle growth, returns and value for our shareholders. Thank you for joining us today. I'll now ask the operator to come back on so we can take your questions. Operator: [Operator Instructions] Our first question today is from Terry Ma with Barclays. Terry Ma: Just wanted to start off with credit. As I look at new defaults in the quarter, it was up only about 5% year-over-year, that's a noticeable step down from the pace of year-over-year increases that you've seen in the last kind of 10 quarters. So maybe just any color on kind of what happened in the quarter? And as we kind of look forward, how should we expect kind of new defaults kind of emerge like when we factor in kind of seasoning and everything? Adam Pollitzer: Yes. Terry, good question. Look, I'd say broadly speaking, we're still greatly encouraged by the performance of our portfolio overall including the trends, obviously, in the default population. The impact of seasonality coming through this year was a bit more muted, which is encouraging. I think we trace that to a few things, right? We got broad resiliency that we've seen in the macro environment, and so that continues to set a favorable backdrop. We have an incredibly high-quality insured book and our existing borrowers, broadly speaking, remain well situated, and we're seeing that continue to translate through to our credit experience. The increase in our default experience that you noted some amount of that traces to seasonality, right? We tend to see seasonally a seasonal uptick in default experience as we roll through the second half of the year, and some portion of it traces to what we've talked about for a while now the seasoning, just the natural growth and seasoning of our book. As we look forward, we do expect that seasonality will continue to come through, and so we'll see an additional impact seasonally in Q4. And we do also expect that as we roll forward over the longer term, we'll continue to see that normalization in our credit experience but overall, we're delighted with how our portfolio is performing. It's exceptionally high quality, and we're encouraged by the trends that we saw in the third quarter and really year-to-date. Terry Ma: Got it. That's helpful. And then maybe just any color on the competitive environment. There has been some rumblings about a potential new entrant, so any color on kind of how to think about how the dynamic may or may not change like if there was a new entrant into the MI market. Adam Pollitzer: Yes. Yes. It's -- I'd say, look, it's not necessarily new. I think there's been periodic chatter about new market entrants over the years. and we're aware of the latest effort that's out there. But I'd say we, perhaps more than anybody else know the challenges and difficulties that come with building a private MI business, it is not easy at all, right? It's really hard to raise the capital. It's really hard to build an MI specific operating platform. It's really hard to hire the right team to sign up customers, earn their trust and also manage through an extended J curve to get to a point of profitability. And when we look at things, say, today versus when we got our start back in 2011, the market is at a very different point today. And so today, there is no clear need in the market, right? At this point, the 6 incumbent MI players are all serving the market incredibly well. We're showing up every day for lenders and their borrowers. We've got ample capacity to support their origination volume. We've got their trust we're offering, I think, broadly speaking, fair and valuable solutions for every borrower that comes through our market, and so it's difficult to know obviously exactly where things land. We don't know what will happen with the latest rumors. But say, it's a very high bar, right? It takes a lot of capital, a very large amount of capital to fund the PMIERs compliance business. And if we were controlling first strings and thinking about making an investment in a new entrant ourselves, I'd say we'd be highly skeptical that now is the right time to do that, given all the challenges that we would see for anybody who came into the market today. And that's not because the market itself is challenges because the market is doing so well in the 6 companies that are there today are performing so well. So we'll see, ultimately, if somebody new came in, everybody -- the market will adapt around it. But I think going from discussions to actually having a fully funded, capitalized approved entity, that's a pretty wide gulf. Operator: Next question is from Bose George with KBW. Bose George: Can you give us an update on what you're seeing in terms of the strength of the consumer? Also just any housing markets that you're keeping an eye on where -- in terms of home prices or other signs of potential weakness. Adam Pollitzer: Sure. Yes. Good question. Look, I'd say broadly speaking, I noted in our prepared remarks, but we've been encouraged by the broad resiliency that we're seeing in the economy and the housing market for a while now. Headline unemployment remains low, inflation is cooled, consumers broadly speaking, are still spending businesses or continuing to make significant investments. The equity market is continuing to set new highs. And so the overall picture today is an encouraging one. But for us, obviously, it's not just about today. It's also what comes tomorrow. And so we always think about risks that might be on the horizon. And so when we parse through the data, I think we can all see it on the macro side, there are signs in the labor market of some degree of strain emerging. We're not seeing unemployment increase, and we don't have government data for the last little while, but there are certain private data points that we can look at. So we don't see unemployment increasing, but certainly, the pace of new hiring activity has slowed. I think consumer confidence is down, particularly amongst certain borrower cohorts, and there's broad talks of -- I think we're terming it a K-shaped recovery. So we'll see what I'd say from our vantage point, it's still a really encouraging and resilient backdrop those macro and housing market but we're always focused on what might come. And then Bose, I think you asked a question about geos. And so yes, we've talked for a while now that there are certain geographies, Florida, Texas, the Sunbelt, Mountain West where we're seeing some -- either a declining pace of house price appreciation or a turn in prices with inventory building. And that's still the case. Those same markets, there's nothing new, the pressure isn't new, but we're still seeing, when we look at the world, those markets that have been soft for a little while now continue to show signs that they're soft, and we see continued strength, though, in the Northeast and the Midwest. Bose George: Okay. Great. That's helpful. And then actually just in terms of the reinsurance markets, can you just talk about what you're seeing there? Also, just I guess you guys are more active on the XOL side, just in terms of execution, like why there versus more on the ILN side? Aurora Swithenbank: Sure. In terms of what we're seeing in the reinsurance market, reinsurance markets remain very robust, and we look at the pricing achieved by some of our competitors in the marketplace year-to-date, it's the best pricing that's ever been achieved. If we wind the clock back to 2024, we placed full XOL and quota share coverage for 2025, 2026 and a portion of the 2027 year with respect to the quota share. So we have a really nice runway in terms of our locked-in capacity in the traditional reinsurance market. So you may recall that in the third and fourth quarter of the year, the back part of the year, we typically engage with our reinsurance partners and talk about the opportunity to lock in further coverage for forward years or to optimize the coverage that we have in place. And so you may imagine, we're engaged in those discussions currently. And -- but again, it's a very strong reinsurance market backdrop leading into those conversations. And with regards to ILN versus XOL, we like both of those markets. Both of them have been very good sources of capital for us as a company. Recently, we have been more biased towards the traditional reinsurance market. In particular, because it offers that forward coverage, which isn't available in the debt capital markets. And so that's been our recent preference just from a cost flexibility and speed of execution perspective. But we like both of those markets. And I think you should expect us in the fullness of time to be active across all different markets. Operator: The next question is from Mark Hughes with Truist. Mark Hughes: Yes. the core yield, it's been holding pretty steady at 34 basis points. Is that a good run rate here? What moves that 1 way or the other in the kind of the near to medium term? Aurora Swithenbank: Sure. I'm happy to start out here. It has been very stable, and that's obviously been supported by the tremendous persistency that we've had in the book and continue to have in the third quarter. So again, we would -- we don't give forward guidance, but given the strength of the in-force book, we would expect that plus/minus that kind of number for the core yield will be good. Obviously, the net yield is influenced by claims expense in the quarter and how that runs through our reinsurance contracts. Mark Hughes: And then any thoughts about the impact on persistency if we do see interest rates drop, that would be great from a new business perspective, a lot of purchase activity would ramp up presumably, but you get a lot of refi. How would you see the puts and takes if kind of you get a refi-ed market? And then if you can get multiple rounds of it, given the -- where recent borrowers have been borrowing at. Adam Pollitzer: Yes. So I think as you termed it, there's both puts and takes. Our persistency was 83.9% in the third quarter, and as we noted, again, helped to drive continued growth in embedded value gains in our insured portfolio. Overall, our portfolio is broadly well situated because we've got a 5.2% weighted average note rate underpinning our exposure at quarter end. But it's not even, obviously, across the entirety of our book. There are vintages parts of our in-force that have greater degrees of refi sensitivity, and where we will likely see an uptick in some prepayment speeds given the recent moves in rates, that's going to be natural, right? So that's the put. The take, as you noted, though, is, one, some portion of the borrowers in our portfolio who will benefit from a refinancing today or very likely to still need MI coverage because while HPA has generally trended higher, it's trended higher at a normal, not record pace. And so there's an opportunity to see penetration of refinancing origination activity grow if there were -- if we saw an uptick in overall refi activity. As you noted, look, if rates lag down, to the point where we see a more pronounced pressure on persistency, we'd also expect to see a benefit in new business activity, NIW volume, bringing prospective buyers purchase demand off the sidelines. And the 1 other 1 to note is there's a potential knock-on benefit from a credit experience standpoint, to a refinancing cycle, right? If we see refinancings accelerate, it's most likely just because of where the underlying note rates are that, that will come from our more recent vintages. And those are the vintages that we're looking at for that normalizing credit experience. If those vintages begin to turn over, it will take -- it will extend that normalization cycle from a credit performance standpoint. Mark Hughes: Appreciate that. And then were there any onetimers in the expense ratio is obviously, as you say, a record number. Anything nonrecurring there? Or is that a good run rate? Aurora Swithenbank: I'd say, with regard to the expense ratio, there was nothing in particular that I'd point out in the quarter. And if you look at the raw dollars, it's within a couple of hundred thousand dollars of what we spent last quarter. And so there are a few positives and negatives, but again, nothing of note. I would say if you're looking forward, typically, the second and third quarter are lightest in terms of expenses and the fourth, and then the first quarter tend to be heavier just in terms of both dollars of expense and also the ratio goes up during those quarters. And in the fourth quarter, that typically results from the accrual of some of our people-related expenses. So that's the only thing that I would note with regard to the fourth quarter. Operator: The next question is from Rick Shane with JPMorgan. A.J. Denham: This is A.J. on for Rick. So if rates fall in refis do start to tick up, is there anything kind of proactive you can do to recapture MI on more of those loans? Could you maybe just walk through your playbook sharing your early experience you've had there? Adam Pollitzer: Yes. So I'd say on the margin, there are things that you might try to do. But more broadly, the most important piece of the playbook is to be everywhere in the market and be offering valuable solutions for our customers to be plugged in with as many lenders as possible and so that we could serve their borrowers. We've noted for a while that 1 of the unique attributes that we have to our benefit is that our share of the new business environment is larger than our share of industry insurance-in-force. So to the extent that there is some amount of industry insurance-in-force that's in motion because it's refinancing, but still needs MI coverage. We have an opportunity, we think, to capture a little bit more of that than we will necessarily lose. And so that's not a strategy per se, it's just where the numbers are. But the real strategy behind it is make sure that we are connected to our customers that we're offering them valuable solutions that were present for their borrowers across all markets so that, that business that is potentially in motion is a business that we can capture. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks. Adam Pollitzer: Thank you again for joining us. We look forward to speaking with you again soon. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Operator: Good afternoon, and welcome to the NMI Holdings, Inc. Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to John Swenson of management. Please go ahead. John Swenson: Thank you, Gary. Good afternoon, and welcome to the 2025 Third Quarter Conference Call for National MI. I'm John Swenson, Vice President of Investor Relations and Treasury. Joining us on the call today are Brad Shuster, Executive Chairman; Adam Pollitzer, President and Chief Executive Officer; and Aurora Swithenbank, our Chief Financial Officer. Financial results for the quarter were released after the close today. The press release may be accessed on NMI's website located at nationalmi.com under the Investors tab. During the course of this call, we may make comments about our expectations for the future. Actual results could differ materially from those contained in these forward-looking statements. Additional information about the factors that could cause actual results or trends to differ materially from those discussed on the call can be found on our website or through our filings with the SEC. If and to the extent the company makes forward-looking statements, we do not undertake any obligation to update those statements in the future in light of subsequent developments. Further, no one should rely on the fact that the guidance of such statements is current at any time other than the time of this call. Also note that on this call, we may refer to certain non-GAAP measures. In today's press release and on our website, we provided a reconciliation of these measures to the most comparable measures under GAAP. Now I'll turn the call over to Brad. Bradley Shuster: Thank you, John, and good afternoon, everyone. I'm pleased to report that in the third quarter, National MI again delivered standout operating performance, continued growth in our insured portfolio and strong financial results. Our lenders and their borrowers continued to turn to us for critical down payment support. And in the third quarter, we generated $13 billion of NIW volume, ending the period with a record $218.4 billion of high-quality, high-performing primary insurance-in-force. In Washington, our conversations remain active and constructive, and there continues to be broad recognition in D.C. of the unique and valuable role that the private mortgage insurance industry plays, offering borrowers low-cost down payment support and access to mortgage credit while also placing private capital in front of the taxpayer to absorb risk and loss in a downturn and ultimately ensure the safety and soundness of the conventional mortgage market. National MI and the broader private mortgage insurance industry have never been stronger or better positioned to provide this critical down payment support than we are today. And we're excited to continue working with Director Pulte, other members of the administration and the leadership teams of Fannie and Freddie to advance their important goal of helping more Americans than ever unlock the dream of homeownership. With that, let me turn it over to Adam. Adam Pollitzer: Thank you, Brad, and good afternoon, everyone. National MI continued to outperform in the third quarter, delivering significant new business production, consistent growth in our insured portfolio and strong financial results. We generated $13 billion of NIW volume and ended the period with a record $218.4 billion of high-quality, high-performing primary insurance-in-force. Total revenue in the third quarter was a record $178.7 million, and we delivered GAAP net income of $96 million or $1.22 per diluted share and a 15.6% return on equity. Overall, we had a terrific quarter and are confident as we look ahead. The macro environment and housing market have remained resilient through an extended period of headline volatility. Our lender customers and their borrowers continue to rely on us in size for critical down payment support, and we see an attractive and sustained new business opportunity fueled by long-term secular trends and furthered by the recent improvement in mortgage rates. We have an exceptionally high-quality insured portfolio covered by a comprehensive set of risk transfer solutions and our credit performance continues to stand ahead. We're delivering consistent growth in embedded value gains in our insured book, and we continue to manage our expenses and capital position with discipline and efficiency, building a robust balance sheet that's supported by the significant earnings power of our platform. Taken together, we see a clear opportunity for continued outperformance. Notwithstanding these strong positives, however, macro risks do remain, and we've maintained a proactive stance with respect to our pricing, risk selection and reinsurance decisioning. It's an approach that has served us well and continues to be the prudent and appropriate course. More broadly, we remain encouraged by the continued discipline that we see across the private MI market. Overall, we had a terrific quarter, delivering strong operating performance, consistent growth in our insured portfolio and strong financial results. We're in the market every day with a clear mandate and purpose offering a low-cost, high-value solution that helps borrowers bridge the down payment gap and meaningfully reduces the cash required at the closing table. In the process, we help to make homeownership more affordable and achievable for millions of Americans and communities across the country with coverage that works to insulate the GSEs and taxpayers from risk and loss in a downturn. Looking ahead, we're well positioned to continue to serve our customers and their borrowers, invest in our employees and their success, drive growth in our high-quality insured portfolio and deliver through the cycle growth, returns and value for our shareholders. With that, I'll turn it over to Aurora. Aurora Swithenbank: Thank you, Adam. We again delivered standout financial results in the third quarter. Total revenue was a record $178.7 million, GAAP net income was $96 million or $1.22 per diluted share and return on equity was 15.6%. We generated $13 billion of NIW and our primary insurance-in-force grew to $218.4 billion, up 2% from the end of the second quarter and 5% compared to the third quarter of 2024. 12-month persistency was 83.9% in the third quarter compared to 84.1% in the second quarter. Net premiums earned in the third quarter were a record $151.3 million, compared to $149.1 million in the second quarter and $143.3 million in the third quarter of 2024. Net yield for the quarter was 28 basis points, consistent with the second quarter. Core yields, which excludes the cost of our reinsurance coverage and the contribution from cancellation earnings was 34.2 basis points also unchanged from the second quarter. Investment income was $26.8 million in the third quarter compared to $24.9 million in the second quarter and $22.5 million in the third quarter of 2024. Total revenue was a record $178.7 million in the third quarter compared to $173.8 million in the second quarter and $166.1 million in the third quarter of 2024. Underwriting and operating expenses were $29.2 million in the third quarter compared to $29.5 million in the second quarter. Our expense ratio was a record low 19.3% in the quarter, highlighting the significant operating leverage embedded in our business and the success we have achieved in efficiently managing our cost base. We have a uniquely high-quality insured portfolio and our credit performance continues to stand out. We had 7,093 defaults at September 30 compared to 6,709 at June 30, and our default rate was 1.05% at quarter end. Claims expense in the third quarter was $18.6 million compared to $13.4 million in the second quarter, reflecting normal seasonal activity and the continued growth and seasoning of our portfolio. GAAP net income for the quarter was $96 million and diluted earnings per share was $1.22. Adjusted net income was $95.7 million, and adjusted diluted EPS was $1.21. Total cash and investments were $3.1 billion at quarter end, including $148 million of cash and investments at the holding company. Shareholders' equity at September 30 was $2.5 billion and book value per share was $32.62. Book value per share, excluding the impact of net unrealized gains and losses in the investment portfolio was $33.32, up 4% compared to the second quarter and 16% compared to the third quarter of last year. In the third quarter, we repurchased $24.6 million of common stock, retiring 628,000 shares at an average price of $39.13, through quarter end, we've repurchased a total of $319 million of common stock, retiring 11.3 million shares at an average price of $28.25. We have [ 256 million ] of repurchase capacity remaining under our existing program. At quarter end, we reported $3.4 billion of total available assets under PMIERs and $2 billion of risk-based required assets. Excess available assets were $1.4 billion. Overall, we achieved standout financial results during the quarter, delivering consistent growth in our high-quality insured portfolio, record top line performance and expense efficiency and strong bottom line profitability and returns. With that, let me turn it back to Adam. Adam Pollitzer: Thank you, Aurora. We had a terrific quarter, once again delivering significant new business production, consistent growth in our high-quality insured portfolio and stand out financial results. We have a strong customer franchise, a talented team driving us forward every day, an exceptionally high-quality book covered by a comprehensive set of risk transfer solutions and a robust balance sheet supported by the significant earnings power of our platform. Taken together, we are well positioned to continue to serve our customers and their borrowers, invest in our employees and their success drive growth in our high-quality insured portfolio and deliver through the cycle growth, returns and value for our shareholders. Thank you for joining us today. I'll now ask the operator to come back on so we can take your questions. Operator: [Operator Instructions] Our first question today is from Terry Ma with Barclays. Terry Ma: Just wanted to start off with credit. As I look at new defaults in the quarter, it was up only about 5% year-over-year, that's a noticeable step down from the pace of year-over-year increases that you've seen in the last kind of 10 quarters. So maybe just any color on kind of what happened in the quarter? And as we kind of look forward, how should we expect kind of new defaults kind of emerge like when we factor in kind of seasoning and everything? Adam Pollitzer: Yes. Terry, good question. Look, I'd say broadly speaking, we're still greatly encouraged by the performance of our portfolio overall including the trends, obviously, in the default population. The impact of seasonality coming through this year was a bit more muted, which is encouraging. I think we trace that to a few things, right? We got broad resiliency that we've seen in the macro environment, and so that continues to set a favorable backdrop. We have an incredibly high-quality insured book and our existing borrowers, broadly speaking, remain well situated, and we're seeing that continue to translate through to our credit experience. The increase in our default experience that you noted some amount of that traces to seasonality, right? We tend to see seasonally a seasonal uptick in default experience as we roll through the second half of the year, and some portion of it traces to what we've talked about for a while now the seasoning, just the natural growth and seasoning of our book. As we look forward, we do expect that seasonality will continue to come through, and so we'll see an additional impact seasonally in Q4. And we do also expect that as we roll forward over the longer term, we'll continue to see that normalization in our credit experience but overall, we're delighted with how our portfolio is performing. It's exceptionally high quality, and we're encouraged by the trends that we saw in the third quarter and really year-to-date. Terry Ma: Got it. That's helpful. And then maybe just any color on the competitive environment. There has been some rumblings about a potential new entrant, so any color on kind of how to think about how the dynamic may or may not change like if there was a new entrant into the MI market. Adam Pollitzer: Yes. Yes. It's -- I'd say, look, it's not necessarily new. I think there's been periodic chatter about new market entrants over the years. and we're aware of the latest effort that's out there. But I'd say we, perhaps more than anybody else know the challenges and difficulties that come with building a private MI business, it is not easy at all, right? It's really hard to raise the capital. It's really hard to build an MI specific operating platform. It's really hard to hire the right team to sign up customers, earn their trust and also manage through an extended J curve to get to a point of profitability. And when we look at things, say, today versus when we got our start back in 2011, the market is at a very different point today. And so today, there is no clear need in the market, right? At this point, the 6 incumbent MI players are all serving the market incredibly well. We're showing up every day for lenders and their borrowers. We've got ample capacity to support their origination volume. We've got their trust we're offering, I think, broadly speaking, fair and valuable solutions for every borrower that comes through our market, and so it's difficult to know obviously exactly where things land. We don't know what will happen with the latest rumors. But say, it's a very high bar, right? It takes a lot of capital, a very large amount of capital to fund the PMIERs compliance business. And if we were controlling first strings and thinking about making an investment in a new entrant ourselves, I'd say we'd be highly skeptical that now is the right time to do that, given all the challenges that we would see for anybody who came into the market today. And that's not because the market itself is challenges because the market is doing so well in the 6 companies that are there today are performing so well. So we'll see, ultimately, if somebody new came in, everybody -- the market will adapt around it. But I think going from discussions to actually having a fully funded, capitalized approved entity, that's a pretty wide gulf. Operator: Next question is from Bose George with KBW. Bose George: Can you give us an update on what you're seeing in terms of the strength of the consumer? Also just any housing markets that you're keeping an eye on where -- in terms of home prices or other signs of potential weakness. Adam Pollitzer: Sure. Yes. Good question. Look, I'd say broadly speaking, I noted in our prepared remarks, but we've been encouraged by the broad resiliency that we're seeing in the economy and the housing market for a while now. Headline unemployment remains low, inflation is cooled, consumers broadly speaking, are still spending businesses or continuing to make significant investments. The equity market is continuing to set new highs. And so the overall picture today is an encouraging one. But for us, obviously, it's not just about today. It's also what comes tomorrow. And so we always think about risks that might be on the horizon. And so when we parse through the data, I think we can all see it on the macro side, there are signs in the labor market of some degree of strain emerging. We're not seeing unemployment increase, and we don't have government data for the last little while, but there are certain private data points that we can look at. So we don't see unemployment increasing, but certainly, the pace of new hiring activity has slowed. I think consumer confidence is down, particularly amongst certain borrower cohorts, and there's broad talks of -- I think we're terming it a K-shaped recovery. So we'll see what I'd say from our vantage point, it's still a really encouraging and resilient backdrop those macro and housing market but we're always focused on what might come. And then Bose, I think you asked a question about geos. And so yes, we've talked for a while now that there are certain geographies, Florida, Texas, the Sunbelt, Mountain West where we're seeing some -- either a declining pace of house price appreciation or a turn in prices with inventory building. And that's still the case. Those same markets, there's nothing new, the pressure isn't new, but we're still seeing, when we look at the world, those markets that have been soft for a little while now continue to show signs that they're soft, and we see continued strength, though, in the Northeast and the Midwest. Bose George: Okay. Great. That's helpful. And then actually just in terms of the reinsurance markets, can you just talk about what you're seeing there? Also, just I guess you guys are more active on the XOL side, just in terms of execution, like why there versus more on the ILN side? Aurora Swithenbank: Sure. In terms of what we're seeing in the reinsurance market, reinsurance markets remain very robust, and we look at the pricing achieved by some of our competitors in the marketplace year-to-date, it's the best pricing that's ever been achieved. If we wind the clock back to 2024, we placed full XOL and quota share coverage for 2025, 2026 and a portion of the 2027 year with respect to the quota share. So we have a really nice runway in terms of our locked-in capacity in the traditional reinsurance market. So you may recall that in the third and fourth quarter of the year, the back part of the year, we typically engage with our reinsurance partners and talk about the opportunity to lock in further coverage for forward years or to optimize the coverage that we have in place. And so you may imagine, we're engaged in those discussions currently. And -- but again, it's a very strong reinsurance market backdrop leading into those conversations. And with regards to ILN versus XOL, we like both of those markets. Both of them have been very good sources of capital for us as a company. Recently, we have been more biased towards the traditional reinsurance market. In particular, because it offers that forward coverage, which isn't available in the debt capital markets. And so that's been our recent preference just from a cost flexibility and speed of execution perspective. But we like both of those markets. And I think you should expect us in the fullness of time to be active across all different markets. Operator: The next question is from Mark Hughes with Truist. Mark Hughes: Yes. the core yield, it's been holding pretty steady at 34 basis points. Is that a good run rate here? What moves that 1 way or the other in the kind of the near to medium term? Aurora Swithenbank: Sure. I'm happy to start out here. It has been very stable, and that's obviously been supported by the tremendous persistency that we've had in the book and continue to have in the third quarter. So again, we would -- we don't give forward guidance, but given the strength of the in-force book, we would expect that plus/minus that kind of number for the core yield will be good. Obviously, the net yield is influenced by claims expense in the quarter and how that runs through our reinsurance contracts. Mark Hughes: And then any thoughts about the impact on persistency if we do see interest rates drop, that would be great from a new business perspective, a lot of purchase activity would ramp up presumably, but you get a lot of refi. How would you see the puts and takes if kind of you get a refi-ed market? And then if you can get multiple rounds of it, given the -- where recent borrowers have been borrowing at. Adam Pollitzer: Yes. So I think as you termed it, there's both puts and takes. Our persistency was 83.9% in the third quarter, and as we noted, again, helped to drive continued growth in embedded value gains in our insured portfolio. Overall, our portfolio is broadly well situated because we've got a 5.2% weighted average note rate underpinning our exposure at quarter end. But it's not even, obviously, across the entirety of our book. There are vintages parts of our in-force that have greater degrees of refi sensitivity, and where we will likely see an uptick in some prepayment speeds given the recent moves in rates, that's going to be natural, right? So that's the put. The take, as you noted, though, is, one, some portion of the borrowers in our portfolio who will benefit from a refinancing today or very likely to still need MI coverage because while HPA has generally trended higher, it's trended higher at a normal, not record pace. And so there's an opportunity to see penetration of refinancing origination activity grow if there were -- if we saw an uptick in overall refi activity. As you noted, look, if rates lag down, to the point where we see a more pronounced pressure on persistency, we'd also expect to see a benefit in new business activity, NIW volume, bringing prospective buyers purchase demand off the sidelines. And the 1 other 1 to note is there's a potential knock-on benefit from a credit experience standpoint, to a refinancing cycle, right? If we see refinancings accelerate, it's most likely just because of where the underlying note rates are that, that will come from our more recent vintages. And those are the vintages that we're looking at for that normalizing credit experience. If those vintages begin to turn over, it will take -- it will extend that normalization cycle from a credit performance standpoint. Mark Hughes: Appreciate that. And then were there any onetimers in the expense ratio is obviously, as you say, a record number. Anything nonrecurring there? Or is that a good run rate? Aurora Swithenbank: I'd say, with regard to the expense ratio, there was nothing in particular that I'd point out in the quarter. And if you look at the raw dollars, it's within a couple of hundred thousand dollars of what we spent last quarter. And so there are a few positives and negatives, but again, nothing of note. I would say if you're looking forward, typically, the second and third quarter are lightest in terms of expenses and the fourth, and then the first quarter tend to be heavier just in terms of both dollars of expense and also the ratio goes up during those quarters. And in the fourth quarter, that typically results from the accrual of some of our people-related expenses. So that's the only thing that I would note with regard to the fourth quarter. Operator: The next question is from Rick Shane with JPMorgan. A.J. Denham: This is A.J. on for Rick. So if rates fall in refis do start to tick up, is there anything kind of proactive you can do to recapture MI on more of those loans? Could you maybe just walk through your playbook sharing your early experience you've had there? Adam Pollitzer: Yes. So I'd say on the margin, there are things that you might try to do. But more broadly, the most important piece of the playbook is to be everywhere in the market and be offering valuable solutions for our customers to be plugged in with as many lenders as possible and so that we could serve their borrowers. We've noted for a while that 1 of the unique attributes that we have to our benefit is that our share of the new business environment is larger than our share of industry insurance-in-force. So to the extent that there is some amount of industry insurance-in-force that's in motion because it's refinancing, but still needs MI coverage. We have an opportunity, we think, to capture a little bit more of that than we will necessarily lose. And so that's not a strategy per se, it's just where the numbers are. But the real strategy behind it is make sure that we are connected to our customers that we're offering them valuable solutions that were present for their borrowers across all markets so that, that business that is potentially in motion is a business that we can capture. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks. Adam Pollitzer: Thank you again for joining us. We look forward to speaking with you again soon. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, everyone, and welcome to the A10 Networks Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Tom Baumann. Sir, the floor is yours. Unknown Executive: Thank you all for joining us today. This call is being recorded and webcast live and may be accessed for at least 90 days via the A10 Networks website at a10networks.com. Hosting the call today are Dhrupad Trivedi, A10's President and CEO; and CFO, Michelle Caron. Before we begin, I would like to remind you that shortly after the market closed today, A10 Networks issued a press release announcing its third quarter 2025 financial results. Additionally, A10 published a presentation and supplemental trended financial statements. You may access the press release, presentation and trended financial statements on the Investor Relations section of the company's website. During the course of today's call, management will make forward-looking statements, including statements regarding projections for future operating results, demand, industry and customer trends, macroeconomic factors, strategy, potential new products and solutions, our capital allocation strategy, profitability, expenses and investments, positioning and our dividend program. These statements are based on current expectations and beliefs as of today, November 4, 2025. These forward-looking statements involve a number of risks and uncertainties, some of which are beyond our control, that could cause actual results to differ materially, and you should not rely on them as predictions of future events. A10 does not intend to update information contained in these forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law. For a more detailed description of these risks and uncertainties, please refer to our most recent 10-K and quarterly report on Form 10-Q. Please note that with the exception of revenue, financial measures discussed today are on a non-GAAP basis, unless otherwise noted and have been adjusted to exclude certain charges. The non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP, and may be different from non-GAAP financial measures presented by other companies. A reconciliation between GAAP and non-GAAP measures can be found in the press release issued today and on the trended quarterly financial statements posted on the company's website at a10networks.com. Now I would like to turn the call over to Dhrupad Trivedi, President and CEO of A10 Networks. Dhrupad Trivedi: Thank you, Tom and thank you all for joining us today. A10's strategic position, aligning our solutions and technology road map with the persistent needs of our customers around trusted infrastructure, cybersecurity and AI capabilities continues to enable growth that outpaces our market peers. Our solutions emphasize high throughput, low latency, and integrated security, which our customers and the broader market increasingly view as Essential. A10 is well positioned alongside the durable catalyst that are driving spending across our markets. In the third quarter, revenue grew nearly 12% year-over-year. On a trailing 12-month basis, growth from enterprise customers in North America continues to outpace our overall company-wide growth. Revenue from the Americas has increased 25% on a trailing 12-month basis, driven primarily by investment in AI infrastructure. This performance helped offset macro-related headwinds in other regions. Our global diversification continues to enable consistent performance despite macro variability. AI-related deployments were a key driver for growth, where security and performance at scale are critical. These applications are power hungry and our solutions deliver efficient throughput and low latency with integrated best-in-class security capabilities. This allows customers to achieve target performance with fewer devices, improving total cost of ownership, while maintaining the highest levels of network performance. We continue to leverage this advantage in large data center opportunities globally. Our operating model continues to focus on discipline and leverage, converting growth into profitability and cash, while reinvesting in strategic priorities. EBITDA margins expanded year-over-year from 26.7% to 29.3%, while non-GAAP operating margin expanded from 22.6% to 24.7%. This demonstrates the inherent leverage in our model even as we continue to invest more in R&D. A10 is well positioned to serve both enterprise and service customers alike, while we navigate macro uncertainty. In the world of AI, these will be harder to demarket as customers redefine their architectures. Our increasingly strong alignment with AI infrastructure build-out and adoption gives us confidence in our strategic positioning as we align investment with structural tailwinds of AI and cybersecurity. As our investments in innovation and product enhancements have taken shape, we have established ourselves as a stronger, more differentiated technology solution provider. On a trailing 12-month basis, growth stands at just over 10%. Based on momentum in key strategic initiatives, we expect full year growth rate of 10%. With that, I'd like to formally welcome Michelle Caron, our new Chief Financial Officer to the call. I also want to take a moment to thank Brian Becker. Brian had been an important part of the leadership team during A10's progress and had instituted strong processes that will continue to serve us well into the future. Michelle brings deep operational and financial expertise from complex global organizations and a proven ability to align financial strategy with growth opportunities. Her background complements A10's disciplined culture and long-term transformation agenda. We expect continued disciplined execution and an increased focus on capital deployment to play a role in our overall growth. Michelle's experience positions us well to help drive that next phase of the company. Michelle? Michelle Caron: Thank you, Dhrupad. I'm excited to join A10 at this important inflection point. What drew me here is the combination of a strong foundation, coupled with an even stronger opportunity ahead. With a proven business model, solutions that are ideally aligned with global spending trends and a Tier 1 customer base, A10 is positioned for consistent success. I shared Dhrupad's belief that we can continue to grow both organically and inorganically, and I look forward to contributing to both sides of that growth equation. My near-term focus involves building on our solid base and driving greater consistency, predictability and profitability as we grow. I'll be concentrating on a few key areas. First, maintaining financial discipline and transparency, better aligning our performance and market expectations. Second, driving profitable growth. balancing top-line expansion with healthy margins and cash flow; and third, maintaining disciplined capital allocation. Investing where we can create the most value, while continuing to return capital to our shareholders. Supporting our pipeline of M&A activities and effectively putting our cash to work will be part of this initiative. Now let me turn to the results. As Dhrupad noted, we delivered a strong Q3, growing revenue almost 12% to $74.7 million, reflecting a mix of 58% product revenue and 42% service revenue. Global service revenue of $31.6 million grew 6% while product revenue of $43.1 million grew 17% year-over-year. Product revenue, which has been strong for the last 2 quarters represents a leading indicator of future revenue. Our third quarter performance gives us confidence we're on the right track to deliver on our strategic priorities, while continuing to drive rigor building on our culture of excellence. Within our product revenue category, the third quarter reflected a greater contribution of security-led revenue exceeding our long-term target of generating 65% of our total revenue from security-led solutions. This performance reflects customer demand and our alignment with customer needs, particularly within North America for both service providers and enterprises. Now looking at our major verticals, enterprise customers represented 36% of Q3 revenues. As previously stated, America is our priority region, and we continue to see growth in excess of overall revenue on a trailing 12-month basis. Service provider revenue, which was 64% of total revenue, was weighted towards cloud providers, further indication of our success in strategically aligning our offerings with AI infrastructure build-out. From a geo perspective, our Americas region represented 65% of global revenue, reflecting the benefits of A10's investments in our enterprise segment and strength of AI infrastructure build-out. As Dhrupad mentioned, macro-related headwinds in Rest of World were made up for in the Americas region. Now with the exception of revenue, all of the metrics discussed on this call are on a non-GAAP basis, unless otherwise stated. A full reconciliation of GAAP to non-GAAP results is provided in our press release and on our website. Our continued operating discipline contributed to our strong Q3 results. Non-GAAP gross margin was 80.7%, in line with our stated goals of 80% to 82%. Operating expenses were $41.8 million, reflecting an operating margin of 24.7%, an improvement of about 215 basis points year-over-year. GAAP net income for the quarter was $12.2 million or $0.17 per diluted share. Non-GAAP net income for the quarter was $16.7 million or $0.23 per diluted share, reflecting a 7.4% EPS growth from the year ago period. Diluted weighted shares used for computing non-GAAP EPS for the third quarter were approximately 73 million shares, down 1.7 million shares year-over-year, driven by our continued share buyback. Adjusted EBITDA was $21.9 million, 29.3% of revenue, which is aligned with our long-term strategic goals. Turning to the year-to-date results. Revenue for the first 9 months of 2025 was $210.2 million compared to $187.5 million, an increase of 12.1%. Non-GAAP gross margin was 80.5% year-to-date. Adjusted EBITDA was $61.1 million year-to-date, reflecting 29% of revenue. Non-GAAP net income on a year-to-date basis was $47.2 million or $0.64 per diluted share compared to $41.9 million or $0.56 per diluted share last year. On a GAAP basis, net income for the first 9 months was $32.3 million or $0.44 per diluted share compared to net income of $31.8 million or $0.42 per diluted share in the first 9 months last year. I'll now turn to the cash flow and balance sheet, both of which are very strong. We generated $22.8 million in cash flow from operations in Q3. CapEx was $4.7 million with cash and investments totaling $371 million at the end of the quarter. Deferred revenue was $143.5 million. During the quarter, we paid $4.3 million in cash dividends and repurchased $11 million worth of shares. The Board has approved a quarterly cash dividend of $0.06 per share to be paid on December 1, 2025, to shareholders of record on November 17, 2025. The company still has over $60 million remaining of its $75 million share repurchase authorization. I look forward to speaking with many of you in the coming weeks, gathering your feedback on our strategy and operations. I'll now turn the call back to Dhrupad for closing comments. Dhrupad Trivedi: Thank you, Michelle. We are encouraged by continued business execution and remain confident that A10 is strategically well positioned in the market, especially as we see acceleration in AI infrastructure build-out. A10 is positioned squarely in front of multiple durable secular catalyst. In fact, our strength in high-performance hardware and software is more relevant than ever before. We are investing to enhance our position in the enterprise space and remain aligned with key leaders in the service provider sector around the world. We believe our business model enables us to dynamically allocate resources to address changing market conditions, while preserving profitability and shareholder returns. Operator, you can now open the call up for questions. Operator: [Operator Instructions] Your first question is coming from Gary Powell (sic) [ Gray Powell ] from BTIG. Gray Powell: It's actually Gray up again for Gary. Gary is traveling today. But just want to say congratulations on the good results. I just had a couple of questions. Yes, absolutely. I think last year, security-led revenue was around 63% of the business, growing 9%. You called out 65% in the prepared remarks in the slide deck. Just how is it tracking this year? And where do you think it can go longer term? Dhrupad Trivedi: Yes. Good question. I think -- so we had said long term, our goal was 65% because -- we see the connection between security and infrastructure as something that actually is a strength for us in the sense, we want those things to work together and make it even better. So if you look at where we actually ended up in Q3, the number was higher than 65%. And so we feel pretty good continuing to maintain that goal of about 65%. And if we do better, that's great. But at the same time, we are not looking to lose infrastructure revenue in its place, right? So, I feel pretty good that we have been able to improve that mix to -- from somewhere less than 30% to 65%. And obviously, our goal is to lead with that because that tends to expose us to higher growth markets and applications. Gray Powell: Understood. Okay. That's really helpful. And then just a separate topic and this 1 might be a little bit early. But F5 had a pretty bad data breach a few weeks ago. Again, like, I'm sure it's a little bit early from your side, but is that something that can potentially help your customer discussions on the enterprise side of the business? Is that something that's come up at all in conversations yet? Or is there any -- I don't know, is there any directional commentary you could make about that? Dhrupad Trivedi: Sure. Yes. No, I think good question. And I think, first of all, I would say that all of us in the cybersecurity industry, right, face the same kinds of attacks and challenges that we are all resolving, right? So obviously, we cannot specifically comment on anything, but I would say as we navigate that market environment and you look at some of the key players in that space, right, including F5, of course. I think we have seen certainly an increased level of interest from customers, not necessarily wanting to change, but wanting to understand what else is in the market and what alternatives there might be towards making sure that their own infrastructure is more resilient in the future, right? So of course, I think we'll continue to work with our customers just as we'll continue to work with the industry overall to find better ways to manage and handle cybersecurity challenges. Operator: Your next question is coming from Simon Leopold from Raymond James. W. Chiu: This is Victor Chiu for Simon. You noted strength in North American AI infrastructure investments in your prepared remarks. But can you elaborate on some of the specific factors contributing to the upside this quarter, were there a handful of specific customers or deals? Or was it more -- was the strength more broad-based? Dhrupad Trivedi: Sure, Victor. I think -- so as, of course, you know well too, the market today in AI is pretty concentrated with several large players. And then in the longer term, we are also engaged with multitude of players who, in 2 to 3 years' time will be doing a lot more things on their own, right? So right now, it's in the phase of initial big build-out and then it becomes more realistic in terms of business goals, local models and so forth. So in this phase of the evolution, certainly right, the benefit to us was from a few large customers, who are investing aggressively into building the AI infrastructure. But we are equally engaged with customers around the world on the enterprise side as well, who will be the beneficiaries long term as they build out their own solutions and decide how to take advantage of AI. W. Chiu: Great. That's very helpful. And just a quick follow-up, just to elaborate on the previous question. Have you observed any -- on the flip side, have you observed any negative collateral impact from the high profile security breach from 1 of your key competitors that customers express specific concerns or hesitations moving forward with planned deployments? Dhrupad Trivedi: No, we are certainly not seeing any negative impact from that. I think people are used to kind of having to deal with public as well as private incidents in that space for many, many years to come. So, it is certainly not a negative thing for us at all. And it's -- I would say, it has certainly increased conversations we are having with customers. But at the same time, it's hard to say it's positive. But certainly, there's no hesitation on customer side in terms of spending on A10's products, right, and holding off on that in any way. Operator: Your next question is coming from Julio Romero from Sidoti & Company. Julio Romero: This is Julio on for Anja. So my first question would be just it seems like the efforts you've done on the enterprise sales push have been working. Are there any more initiatives you can do there? And then secondly, where are you in the innings of expanding within this market? Dhrupad Trivedi: Yes. Good question. And I think we have been talking about that for a few periods now, right? So I think our initial thesis was around building up our capability on the product solution side as well as on the commercial execution side to get more stability with enterprise customers than growing our share. I think in the last 2 to 3 years, we have continued to see that kind of maturation process, if you will. And we believe, certainly with our sales leadership currently in place, there is a lot of focus around that while we continue to support our service provider customers as well. So I would say, if I had to characterize it in that sense, I would say probably we are in the third or fourth innings as we continue to build kind of our own maturation of the team, but also engagement with customers. Julio Romero: Excellent. Very helpful. And then just any preliminary thoughts you could share on how you would view 2026 shaping up for you from a top line and bottom line perspective just at a high level at this point? Dhrupad Trivedi: Yes. No, good question. And I think I would say you can see, obviously, last year was a little bit unusual year in terms of seasonality. And this year, as we talked about, we expect on a full year basis to get back to 10% growth and obviously, the EBITDA results as well. As we look into the future, I would say the challenge like everybody else is we are dealing with uncertainties that we cannot control, such as interest rates and tariffs and everything else. But given the momentum in the business, particularly around secular tailwinds that we are aligning more and more to. We feel that going into next year, we should be able to sustain the growth level that we are seeing now. And we obviously will continue to provide more clarity as we see it as well. But our goal is obviously to be in that high single-digit range. And if the market aligns do better than that, but at the same time, focused on -- our business model goals on 26% to 28% EBITDA as well as EPS growth faster than top line. Operator: Your next question is coming from Hamed Khorsand from EWS Financial. Hamed Khorsand: I was just wanted to see what kind of progress you've been making as far as expanding your service provider customer base? Dhrupad Trivedi: Yes. No, good question. So I think, Hamed, I would probably differentiate it in 2 ways. So 1 is we -- during this year, with our existing large Tier 1 service provider, I think that has been, like most companies have seen a lot of pressure on CapEx. And so our efforts there have been more around improving share of wallet and cross-selling, whether it's in U.S. or Europe or Asia, right? Where we are seeing a little bit more traction is on the Tier 2 service provider side, where it's not necessarily related to things like BEAD funding, but we are certainly seeing a little more activity and rollout. So our progress there is, I would say, gaining new customers that are in that category of independent or Tier 2 type service providers. With Tier 1 in addition to waiting for CapEx, really trying to expand our footprint to sell into different business units or selling them multiple products. Hamed Khorsand: Okay. And then just looking out to the clarity you're seeing as far as your service prices are concerned, do you have that clarity at all? Is it better? Dhrupad Trivedi: Yes. So good question, Hamed. So I would say on the service provider customer side, it probably varies, so on the ones that are exposed to more building out things like cloud infrastructure, the clarity is decent, I would say. And we have a 6- to 9-month kind of cycle. So we generally have a reasonably good idea. On the Tier 1 telcos in Europe, I think we have reasonably good clarity, a little slower than normal, but moving along. Japan is pretty slow, but their economy is still in a difficult spot, right? So that we -- it's in line with what we expect. In the U.S. Tier 1 service provider, I would say, where they are exposed to cloud and infrastructure like that is good. But on the pure classic telco side, it's still a little bit choppy in the sense -- they may still spend the same amount for the full year, but projecting it by quarter is still harder than it normally used to be. Hamed Khorsand: Okay. And could you just talk about what drove that big outperformance this quarter in the EMEA region for you? Dhrupad Trivedi: Sorry, Hamed. I think you broke up for 1 second. Can you please repeat that? Hamed Khorsand: In the EMEA region, it seems like on your presentation slides, that was a big revenue portion. What drove that? Dhrupad Trivedi: I think so the -- in Q3, the EMEA portion, the step-up that you saw was 1 big project that culminated in the period. So it's probably fair to look at that 3 quarter and average it to be more indicative of it. And it's not like a new step level that you should expect to continue seeing there. Operator: Your next question is coming from Christian Schwab from Craig-Hallum. Christian Schwab: Great quarter. Can you give us an idea yet of the percentage of product revenue that's tied to AI-related security products? Dhrupad Trivedi: Yes. No, good question, Christian. And I think you have mentioned that last time as well. So we are working internally on how to create a view that does that. And the complication for us is -- for many of our customers, they were, let's say, going to build 10 data centers. Now they are still building 10, but 6 are designed for AI and 4 were what they used to do before. And I think we are trying to get a better handle on that through our customers so that we are more specific and clear in how we represent that. So that's the tougher part of it. Now when you look at our service provider growth improvement, I would say majority of it is related to because they are doing AI build-out. But it's hard for me to say from the 10 data centers they build 4 were AI and 6 were not AI, right? Because they don't market that way either. So -- but that's something that's on our docket Christian and that we are working towards in our Q1 comments to start figuring out a way to show some kind of a proxy for that. Christian Schwab: Great. And then when you talked about the momentum in the business sustaining itself in '26, we kind of did 10%, then you went back to high single digits. So should we just kind of assume sustaining the momentum in the business, next year's top-line growth objective would be 8% to 10%. Is that -- did I hear that right? Dhrupad Trivedi: Yes, I think that's a fair way to look at it. So I think that's sort of the line of sight we have, right, is in that range for next year as well? And as we navigate things up and down, right, it's hard to kind of nail it down by quarter at this point. But on a full year basis, certainly, we feel good with that ZIP code, yes. Christian Schwab: Great. And then my last question. Seeing the increased customer interest as an alternative given F5's recent issues when would be a logical time for those indications of interest to potentially turn to orders? Is that 3 months, 9 months, how should we be thinking about that opportunity? Dhrupad Trivedi: Good question. So I think, yes, as I said before, certainly, we are having customer conversations and certainly, right, we wish all those customers and F5 to resolve those problems swiftly for themselves because a good thing for the industry. Typical sales cycle for us in that kind of an enterprise market is 6 to 9 months. And we are engaged or talking to customers, but roughly speaking, that's the window in which you would see it translate into incremental bookings if that were going to be the case. Operator: Your next question is coming from Michael Romanelli from Mizuho Securities. Michael Romanelli: Yes. Maybe to start off, I was wondering -- I was wondering if you can comment on linearity in the quarter and how activity has been through the month of October? Dhrupad Trivedi: Yes. No. Good question. And I think, Michael, that it varies a little bit by regions as well. So I would say that linearity for us outside of Americas has been not atypical or in line with what we expect to get to. Within Americas, I think there is a little bit of jitter around kind of political things and tariff and interest rate. But overall, we don't see a dramatic change in linearity relative to what we were expecting. Michael Romanelli: Got it. Okay. That's helpful. And then as my follow-up, it's nice to see the services revenue return to growth following consecutive quarters of decline. As part of revenue algo. How should we be thinking about your services revenue growth going forward? Dhrupad Trivedi: Yes. Good question. So you are right. I think there's a little bit of timing element to the service revenue because it's related to 1-year, 2-year, 3-year kind of support contracts and so forth. The way you should think about it is if our product is growing at a certain rate, typically, that is sold with 1-year service or support contract. So 1 year from that date, we would have a larger eligible pool of renewals and support contract and revenue. So in that sense, product revenue growing faster means that a year from now, it should naturally lead itself to service revenue growing faster as well. Operator: Your next question is coming from Hendi Susanto from Gabelli Funds. Hendi Susanto: Dhrupad and Michelle. Dhrupad, would you talk about opportunity in AI, like we are somewhat familiar with A10 like core application, but perhaps you can go deeper into use cases for AI for service providers, data centers, Tier 1 service providers, like where you foresee A10 in influencing. For example, whether it is -- like what are the growth drivers in AI, whether it is traffic or security and whether there are things that are somewhat presenting new use cases for A10? Dhrupad Trivedi: Sure. Yes, Hendi. Good question. So I think I'll do that briefly here. But for us, really, the like we have done in the last several years, right? We connect everything back to our differentiation. So on the foundation level, we have hardware platforms and software that now also support higher throughput, lower latency and GPU-based architecture. So those feed into people building out data centers, whether it's enterprise or service provider or telco or cloud, right? So that's the first foundation level. Second level is in our cybersecurity product, we have expanded coverage to where our products are able to detect and remediate threats that occur now because of AI traffic, and that will be things like prompt injection and loss of PII data and so forth, right? So that's an expansion of our networking know-how to now handle new kinds of threats that happen because of AI. Third is, obviously, we are working with our customers on a longer-term basis to understand how we can look at traffic data from a long period of time in complex networks and use AI tools to drive predictive analytics, which ultimately, for them, helps do better things around network planning, resource management and which is ultimately their cost of running -- like building and running a network, right? So that's the range of things we do. So we don't come into it thinking we are a new AI startup. What we do is we know 20 years of networking, we know cybersecurity, we have a large team of people, a lot of young graduates as well who are AI engineers. And what we are doing is we are taking our know-how in networking and security. And using that as a foundation to create AI solutions that are value creating for our customers. Hendi Susanto: Got it. And then Dhrupad, I think when you talk about U.S. service providers, you refer like Tier 1. What does the opportunity in Tier 2 service provider look like at A10 now? Dhrupad Trivedi: So I think broadly. So this is not AI, right? But broadly speaking, I think in the Tier 2 service provider side, a few years ago, right there was a lot of discussion of government spending, rural broadband, things like that. Obviously, that has changed quite a bit, particularly with the government actually in shutdown now. So it's not that, but it's more that for those kind of carriers, our solution does not require them to fully rip and replace everything they do and then figure out how to monetize it or pay for it, right? Our solutions are more aligned on getting more out of those networks, doing more virtualization, things like CGNAT, which allows them to reuse addresses cheaper and so progress there is more on an economic value proposition based on our technology. It is not a substitute for a Tier 1 who might spend 5x as much, right? But it is something where we continue to see good resonance with our technology and solutions. Operator: Thank you. That concludes our Q&A session. I will now hand the conference back to Dhrupad Trivedi for closing remarks. Please go ahead. Dhrupad Trivedi: Thank you and thank you to all of our employees, customers and shareholders for joining us today and for your continued support. I am increasingly confident in our strategy and about our future. Thank you for your time and attention. Operator: Thank you, everyone. This concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.
Operator: Greetings, and welcome to the RideNow Group, Inc. Third Quarter 2025 Earnings Call. [Operator Instructions] And as a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jerene Makia, VP of Finance. Please go ahead. Jerene Makia: Thank you, operator. Good afternoon, everyone, and thank you for joining us for RideNow's Third Quarter 2025 Earnings Conference Call. Joining me on the call today are Michael Quartieri, RideNow's Chairman, Chief Executive Officer and President; and Joshua Barsetti, RideNow's Chief Financial Officer. Our Q3 results are detailed in the press release issued this afternoon and supplemental information will be available in our third quarter Form 10-Q once filed. Before we begin, I would like to remind you that comments made by management during this conference call may contain forward-looking statements, including, but not limited to, RideNow's market opportunities and future financial results. All forward-looking statements involve risks and uncertainties, which could affect RideNow's actual results and cause actual results to differ materially from forward-looking statements made by or on behalf of RideNow. A discussion of material risks and important factors that could affect our actual results can be found in our filings with the SEC, which are also available on our Investor Relations website and at sec.gov. This conference call also contains time-sensitive information that is accurate only as of the date of this live broadcast, Tuesday, November 4, 2025. RideNow assumes no obligation to revise or update any forward-looking statement, whether written or oral, to reflect events or circumstances after the date of this conference call, except as required by law. Also, the following discussion contains non-GAAP financial measures. For a reconciliation of these non-GAAP financial measures, please refer to our earnings release issued earlier today. Now I'll turn the call over to Michael Quartieri. Michael Quartieri: Good afternoon, everyone, and thank you for joining us for RideNow's Third Quarter 2025 Earnings Call. Before I provide an update on our key initiatives, I'd like to welcome Josh Barsetti, our new CFO, to the team. After my remarks, Josh will take you through our Q3 results in detail. At RideNow, we remain laser-focused on improving what we control, approaching our operations with fresh thinking, discipline and a commitment to serving our customers. I remind our teams every day to stay focused on what we can control within the 4 walls of our business. When you get the right people in the right place at the right time, taking the right actions, good things happen. And while it's still early in our turnaround, that's exactly what we are beginning to see in our results. We are confident that we are taking the right actions, which allow us to harness the true earnings power of this company as the sales cycles return positive. Importantly, the momentum we saw in Q2 continued throughout Q3 and now into Q4. We increased gross profit year-over-year despite the challenges facing our transportation services segment and delivered improved year-over-year adjusted EBITDA results for the second consecutive quarter. Q3 marked the first quarter in our core powersports segment, where we achieved year-over-year improvement in revenue, new and pre-owned unit sales and gross profit dollars post-COVID. This combination, coupled with maniacal focus on driving waste out of the operation led to $12.3 million of adjusted EBITDA for Q3, which is a $5.5 million improvement year-over-year. As I stated during the Q2 call, we enacted a tactical plan that balance on near-term initiatives to improve financial performance and structural changes to reset the strategic direction of the company to drive long-term value creation for our shareholders. The near-term initiatives of getting the right leadership in place, reevaluating the cost structure and reinstalling a disciplined approach to store performance have progressed nicely to date. By focusing on the highest and most impactful priorities in the near term, we have seen tangible benefits in our operating results as demonstrated by the year-over-year improvement in unit volumes, gross profit and adjusted EBITDA despite the loss of business volumes at Wholesale Express. Rest assured, these near-term initiatives are not short-lived or temporary in nature. They are the building blocks of long-term structural changes that will provide lasting benefits and will drive long-term value creation for our shareholders well into the future. Since our last earnings call, we completed our name change to RideNow Group, Inc. with our new ticker symbol RDNW on the NASDAQ Exchange. This was done in conjunction with the relocation of our corporate headquarters back to Chandler, Arizona, the original and true home of RideNow. We completed the amendment and extension of the term loan agreement, which extended our maturity to September 2027 and lowered our interest rate. We raised $10 million in subordinated debt from related parties. The proceeds, combined with cash on hand, were used to repay $20 million of outstanding principal owed on the term loan. The combination of the lower interest rate and principal paydown has lowered our annual cash interest by approximately $3.4 million. This reduction, now coupled with the Fed's subsequent 2 interest rate cuts will increase this annual cash savings to $4.4 million. One of our key initiatives as a new management team taking a clean sheet of paper approach to the business has centered around a 360-degree assessment of our existing store portfolio to identify areas of operational improvement, consolidation and potential dispositions. Our primary opportunity is around exiting or consolidating consistently unprofitable or smaller locations into larger existing locations. These larger multi-brand stores are true destinations for our customers, which we refer to internally as our aircraft carriers. They are our best-performing locations and we are excited to have opened our 15th aircraft carrier in Fort Worth, Texas during the third quarter, which was the result of the consolidation of two smaller locations in the surrounding area. We've also initiated shutdown procedures of our pre-owned only store in Houston, Texas. Our team is aligned with clear goals, performance metrics and a culture of accountability. My conviction in our ability to execute and deliver improved results continues to grow each day. Looking forward, we are poised to deliver even more adjusted EBITDA and increased free cash flow, which we intend to deploy with a discipline of an owner-oriented company. And with that, I'll turn the call over to Josh for a more detailed discussion of the Q3 results. Joshua Barsetti: Thanks, Mike and good afternoon, everyone. I'll start by reviewing our financial results for the third quarter of 2025, followed by an overview of our balance sheet. During the quarter, we generated revenue of $281 million and adjusted EBITDA of $12.3 million. Adjusted EBITDA increased $5.5 million or over 80% when compared to the same quarter last year despite revenue being down 4.7%, which was driven solely by the reduction in revenue in our vehicle transportation business. Consolidated adjusted SG&A expenses were $61.5 million or 80.9% of gross profit compared to $64.3 million or 86.5% of gross profit in the same quarter last year. This is a reduction of $2.8 million or 4.4% compared to the same quarter last year. Moving on to our segment performance. The powersports group sold 15,949 total major units during the quarter, up 601 units or 3.9% from the same quarter last year. Total powersports major unit sales were 9,904, 164 units or 1.7% higher compared to Q3 of last year, while pre-owned unit sales totaled 4,701, up 152 units or 3.3%. The increase in total unit volume, coupled with an increase in gross profit per major unit contributed to a $4.9 million improvement in gross profit dollars, which totaled $75.7 million during the third quarter of 2025. New unit gross margins improved to 12.6% for the quarter compared to 11.3% for the same quarter last year. And pre-owned gross margins also improved from 14.6% in last year's third quarter to 16.1% in the third quarter of the current year. Our fixed operations business consisting of parts, service and accessories delivered $50.8 million in revenue and $23.9 million in gross profit. GPU for our fixed operations business was $1,636, up $47 or 3% from the third quarter of last year. Our finance and insurance teams delivered $24.9 million in revenue or GPU of $1,705, relatively consistent with the prior year's quarter. In total, revenue from our powersports group was $280 million, up slightly from the same quarter last year, which marks the first quarter of year-over-year improvement since the second quarter of 2023. Turning to our asset-light vehicle transportation services operating group. As you'll recall from our second quarter conference call, we addressed the departures of brokers within Wholesale Express and the expected impact on our results for the remainder of 2025. For the third quarter, Wholesale Express revenue was $1 million, down $14.1 million compared to the same quarter in the prior year. Gross profit decreased to $300,000 from $3.5 million in the prior year's third quarter. Turning to the balance sheet. We ended the quarter with $51.8 million in total cash, inclusive of restricted cash. Non-vehicle net debt was $184.9 million and availability under our short-term revolving floor plan credit facilities totaled approximately $131.1 million. Total available liquidity, defined as unrestricted cash plus availability under the floorplan credit facilities at September 30 totaled $182.9 million. Cash inflows from operating activities were $15.5 million for the 9 months ended September 30, and free cash flow was $10.5 million as compared to $68.6 million in cash flows from operating activities and $67 million in free cash flow for the same period last year. Last year's cash from operating activities and free cash flow were impacted by proceeds from the sale of a finance receivable portfolio and the reduction of excess major unit inventory during the period. With that, we'd like to begin the question-and-answer session. I'll turn the call back over to the operator now to open the lines. Operator: [Operator Instructions] And your first question comes from Eric Wold with Texas Capital Securities. Eric Wold: A couple of questions. I guess, one, give us an update on -- I know it's probably still -- I don't want to put words in your mouth but maybe give us an update on kind of the mindset of buyers that you're seeing coming into the dealerships after a couple of Fed rate cuts. Any change in sentiment? Or is it still a little early for that payment buyer to really shift their sentiment? Michael Quartieri: Yes. Look, I think it's probably a little bit earlier since the second cut just really was within the -- less than a week ago. But we do see it as obviously positive momentum for us. We usually see somewhere about 65% to 70% on average on a quarter of customers that are buying using financing as their option. So any rate cut, not only does it benefit us from a flooring perspective but also on the term loan, but the bigger benefit we see also comes from consumers and getting more money in their pocket to spend. So... Eric Wold: Got it. So kind of a little bit on that sense, I guess you continue to see positive momentum from the start of the year with pricing and margins on the preowned vehicle side of the business. How much of that is the quality of the product that you're bringing into inventory kind of versus obviously what happened last year versus reduced need to discount in the environment that we're kind of moving through this year? Michael Quartieri: Yes. Look, I think we got a really good opportunity in front of us because not only with the cash offer tool, we're able to get bikes from an online and using the technology accordingly. But also as customers are coming in for service, we've got plans in place that allow us to execute on offering that customer the opportunity to trade in, trade up to a better bike, get them into a new side-by-side. So we're taking advantage of any opportunity we have where we have interaction with the customer to look at providing them with a value of their unit to see if they want to use that as a trade-in. But an overall view, the health of the inventory is better than it's been in quite some time. And we obviously will see that in the quality of what you're getting from a GPU perspective and sale price. Eric Wold: And that's actually dovetails into my last question is now that we're kind of getting into the typical kind of buying period in the fall, can you talk about the quality of product that you're seeing out there in the used market and kind of how aggressive do you want to be now you've got a little bit better balance sheet, you got a better cost structure? How aggressive do you want to be out there in taking in inventory in the pre-owned side of the business ahead of the spring selling season next year? Michael Quartieri: Yes. Look, great point because we were looking at that as we go through because this is about the time when we start getting ourselves ramped up for the buying season. We have more availability and dry powder on our balance sheet today than we had before when it comes to the used product. So we do have the flexibility to flex up and buy more inventory. But rest assured, we're going to take a very kind of disciplined approach to it. We just don't want to go buy inventory for the sake of buying inventory. We want to buy the right inventory that we know we can make a profit on, and that's the most important aspect of it. Operator: Your next question comes from Craig Kennison with Baird. Craig Kennison: I wanted to ask about your, I guess, aircraft carrier strategy. As you consolidate locations, do you work with your OEM partners to make sure you preserve sort of the market share and the brand that you want in those markets? Michael Quartieri: Absolutely. Any time we move any one of our dealer points, we have to get permission and approval from the OEM. So we work with them hand-in-hand on consolidating the 2 smaller stores, which were basically 2 stores that had 3 brands each. So if you just think about the economy of scale that you can get by putting 6 brands under one roof, it's one management team. It's one less facility to maintain and that creates even more of a just a buying power opportunity for customers to come in, see 6 different OEMs under one roof, and we just see that as a great path forward and that's the success we've seen when we're sitting here in the Chandler location. We see it in Peoria and the other 14 plus that we have outside of the new one in Fort Worth. Craig Kennison: Got it. And with respect to the promotional environment, we know that many OEMs have been pretty aggressive trying to clear excess inventory, and it sounds like that has been successful. But I'm curious, from your standpoint, do you expect sort of a heavy promotional environment to continue? Michael Quartieri: No, I think it's going to be -- it will ebb and flow just based on demand. So what we're seeing right now is we view it as the OEMs are healthier today than they were before from an inventory level perspective. Our inventory is healthier than it's been before. And so that seems to be a great opportunity with consumers coming in as new products are coming available. We're not carrying a bunch of excess stuff where we get into next year where we're selling a bunch of model year '25 stuff rather than having the fresh new '26 models on the floor. Craig Kennison: And as you consider orders, I guess, for the next year, are you replenishing inventory sort of on a one-to-one basis in each store? Or do you feel like there's still room to destock what you have? Michael Quartieri: Yes. Look, it's going to be seasonal in nature. So where we're at right now is we feel very good about the overall age of the inventory with a more healthier portion of it being less than 120 days old, which really is a key to when you're coming up to the end of the year where you've got '25 models starting to wrap up and write down and you're starting to ramp up on some of the '26 models that will be coming. We feel really good on where we are. Cam and the team with Ross in general have done a great job in getting that inventory right and getting us to the point where we want to see it. Operator: [Operator Instructions] As there are no further questions at this time, this concludes today's conference call. We thank you so much for your participation. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to Enel Chile Third Quarter and 9 Months 2025 Results Conference Call. My name is Carmen, and I will be your operator for today. During this conference call, we may make statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect only our current expectations, are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from anticipated in the forward-looking statements as a result of various factors. These factors are described in Enel Chile's press release reporting its third quarter and 9 months 2025 results. The presentation accompanying this conference call and Enel Chile's annual report on Form 20-F, included under risk factors. You may access our third quarter and 9 months 2025 results press release and presentation on our website at www.enel.cl, and our 20-F on the SEC's website at www.sec.gov. Readers are cautioned not to place undue reliance on those forward-looking statements, which speak only as of their dates. Enel Chile undertakes no obligation to update these forward-looking statements or to disclose any development as a result of which these forward-looking statements become inaccurate, except as required by law. I would now like to turn the presentation over to Ms. Isabela Klemes, Head of Investor Relations of Enel Chile. Please proceed. Isabela Klemes: Good morning, and welcome to Enel Chile's 2025 Third Quarter and 9 Months Results Presentation. We greatly appreciate you taking the time to joining us today. My name is Isabela Klemes, and I'm the Head of Investor Relations. Joining me this morning is our CFO, Simone Conticelli. Our presentation and financial related information are available on our website, www.enel.cl in the Investors section as well as through our app investors. In addition, a replay of the call will be soon available. At the end of this presentation, there will be an opportunity to ask questions via webcast chat through the link Ask a Question. [Operator Instructions] Simone will kick off the presentation by covering key highlights of the period, our portfolio management actions, providing us updates on the regulatory context and an overview of our business economic and financial performance for the period. Thank you all for your attention. And now let me hand over the call to Simone. Simone? Simone Conticelli: Thank you, Isabela. Good morning, and thank you for your participation. Let's start the presentation with our main highlights of the period. Let's begin with portfolio management. We observed a high-level performance of our thermal generation fleet, which helped offset lower hydrological conditions during the quarter. This outcome reflects our ability to adapt to evolving market dynamics and maintain operational stability. In addition, our gas optimization activities continued to support our margin, reinforcing their strategic role in balancing our portfolio and mitigating exposure to spot market volatility. On the distribution side, we achieved successful implementation of the comprehensive winter plan aimed at strengthening grid's resilience and improving service continuity under challenging climate condition. Indeed, our performance in the period was one of the best in Chile. The winter plan included the deployment of emergency crews strategically positioned in high-risk areas, extensive vegetation management action and the installation of new telecontrol units to reduce restoration time. Additionally, targeted measures were implemented to support vulnerable customers, ensuring continuity of supply during adverse weather events. Now let's move on the Chilean regulatory context. With reference to the VAD 2024-2028, a key milestone was the publication in the last weeks of the consultant report followed by the preliminary regulatory technical report. I will give you more details about it. Furthermore, in October, was also released the preliminary regulated energy tariff report for the first half 2026. Now the generation association, of which Enel is a part of, is working with authorities regarding the outcomes of the report. Looking ahead, 2 regulated energy auctions are scheduled for the fourth quarter 2025. Let's now turn to business profitability. We closed the first 9 months of 2025 with a stable EBITDA compared to the previous year despite the difficult context and significantly lower hydrology, demonstrating the resilience of our operations. Our FFO remained positive, driven by the recovery of $261 million of receivables generated by the PEC mechanism. This inflow significantly strengthened our cash position for the year. As a result, we maintained a strong liquidity position, enabling us to support our development plan and to mitigate operational headwind associated with the market and climate uncertainties. In the next slide, we will take a closer look at these topics to provide further insight, but let me anticipate that these achievements demonstrate our focus on operational excellence and sustainable growth. We remain committed to delivering long-term value to our shareholders while advancing in the energy transition and strengthening the resilience of our business. And now let's move to Slide 4 to talk about the energy market situation, especially regarding hydrology and gas opportunities. On the left side of the slide, you can see our hydro production over the last 10 years. For 2025, we set our target at 10.7 terawatt hour based on the last 10-year average. Although 2025 has been a particularly dry year, our hydro production has remained in line with our strategic plan. This was possible, thanks to the flexibility of our hydro plants with access to hydrological basins. For this reason, we are keeping our hydrology guidance unchanged. To manage this dry scenario, we relied also on the flexible and competitive thermal fleet, supported by a strong and diversified LNG and Argentine gas supply. This helped us respond quickly to market needs and reduce exposure to hydro volatility. As a result, we increased thermal production, used competitive gas and seized favorable trading opportunity, adding $74 million in margin during the first 9 months of 2025. Regarding gas business, in October, we completed a gas sales to Europe with margins similar to those recorded in the second quarter 2025. Looking ahead to 2026, we are evaluating options to secure competitive gas from Argentina through firm contracts in line with the past year strategy. And now moving on to Slide 5, let's review our generation portfolio and energy balance. During the first 9 months of 2025, net production decreased by 9% compared to the same period of 2024. This decline was driven by lower hydro dispatch during the first 9 months of 2025, reduction in renewable energy production due to the maintenance of 2 solar plants, higher curtailment levels also caused by transmission line limitations. These effects were partially offset by higher contribution from the efficient CCGT. The same factors impacted the third quarter generation that amounted to 5.4 terawatt hour, lower by 1.1 terawatt hour versus the same period of 2024. Energy sales reached 22.7 terawatt hour, mainly due to the lower sales to regulated customers following the expiration of regulated contracts. The regulated contracts volume reduction is also the main cause for the decrease of the third quarter sale from 8.4 to 7.6 terawatt hour. And now I would like to take a moment to review an important milestone in the resilient program of our distribution business. We are pleased to share that we successfully implemented a comprehensive winter plan aimed at strengthening the stability of our grids and guaranteeing service continuity during the most challenging months of the year, particularly for our most vulnerable customers. First of all, we deployed 376 emergency crew across our service territory. These teams were mobilized to respond to outages and restore power. One of the most impactful initiatives was the execution of more than 115,000 tree trimming actions, which significantly reduced feeder failures in areas exposed to severe weather. We also modernized the grids, installing new telecontrol unit. This helped us to isolate faults and reducing service interruption time. In parallel, we implemented several infrastructure upgrade that enhanced network reliability and quality of service for more than 193,000 customers. Supporting vulnerable customers remain a priority for Enel, so we assisted more than 3,000 electro-dependents, ensuring continuity of supply through targeted measures. Among them, more than 2,000 were equipped with digital meters, while almost 2,900 receive makeup power solutions, such as generators or battery systems. Finally, we strengthened the collaboration with municipalities to improve coordination during extreme weather events. This joint approach has enhanced emergency response capabilities. All these efforts translated into tangible improvements in the performance of our distribution network with results that clearly demonstrate the effectiveness of the winter plan. And now let's take a look at Slide 7, where we highlight key updates on the energy regulatory context. In 2025, we saw key changes in the regulatory framework. The distribution cycle for 2024, 2028 is under development. In September, the consultant final report was published. Then in October, the CNE released its preliminary technical report with changes in maintenance and technical standards. Company have until the 10th of November to submit comments. The final report is expected in 2026. In parallel, we are currently awaiting settlement of outstanding debt related to the PAD decree for 2020, 2024, published in April 2025, that is expected to be settled in 2026. Passing to generation business on the 4th of October -- on the 14th of October, the CNE published the preliminary technical report for the first half of 2026. It includes a correction related to the inflection effects. We are reviewing the impact and waiting for the final report. Passing to the stabilization mechanism as of September 2025, we have $149 million PEC 1 receivable to be fully recovered by the end of 2027. Going to other relevant topics in August came into effect a resolution on BESS remuneration that authorize the BESS to provide ancillary services. In the last week, changes have been introduced in 2025 regulated auctions, increasing the volume of the 2027-2030 auction from 1.7 to 3.4 terawatt hour per year. The offer deadline is now the 14th of November, launching a 1.5 terawatt hour per year short-term auction for 2026. The offer deadline is the 2nd of December. Finally, regarding subsidies, the third electricity subsidy round run from the 3rd of June to the 15th of July, covering the period from July to December 2025. Around 341,000 annual distribution customer benefit of it. A bid to expand the subsidy is still pending in the Congress. And now I will start reviewing the highlights of our financial performance over the period. Before we review the results, a quick reminder. As of January 1, 2025, Enel Chile changed its functional currency from Chilean pesos to U.S. dollars. For comparison, 9 months and third quarter 2024 figure are short using the average exchange rate of these periods. I will enter into details of our financial and economic performance in the next slide. So let's move to the next slide to look at the progress made on CapEx. Our total CapEx reached $245 million during the first 9 months of the year, maintaining a focus on grids and power plant fleet performance. Let's review the allocation in more detail. 41% or $101 million was directed towards grids investments. 31% or $76 million supported thermal power projects. 27% or $67 million was invested in renewable and storage. Regarding grids, the focus remain on the resilience program to strengthen the grids and ensure service continuity under adverse weather conditions. In thermal segment, the priority is the maintenance and performance announcement of the power plant fleet. In the renewable segment, we have centered our efforts on finalizing the PMGD program, enhancing hydro facility performance and maintaining fleet liability. Now let's move on to the breakdown by nature. Asset management CapEx totaled $139 million, accounting for 57% of total CapEx, mostly used for the maintenance of Atacama Quintero and San Isidro CCGT, the improvement of renewables fleet availability and corrective maintenance and digitalization of grids. Development CapEx was $60 million, mainly driven by investment for grid reliability enhancement, digital methods programs and telecontrol deployment and for the completion of 2024 investment program for PMGDs. The 2025 development CapEx for battery-related project will be recorded starting from the next quarter. Finally, customer CapEx totaled $46 million, mainly invested in low and medium voltage connection projects and initiatives to support load increase. Let's now turn to the next slide, which provides a closer look at our EBITDA performance. During the last quarter, our EBITDA totaled $345 million, representing a decrease of $63 million compared to the same period of 2024, mainly explained by the following factors. Starting with the generation business, we recorded a decrease of $89 million in PPA sales, mostly due to the termination of some high-price regulated contracts that impacted on volumes and average price of regulated portfolio, partially offset by the negative impact of exchange rate hedges recorded in 2024. Regarding sourcing, its contribution remained in line with the same period in 2024. This result was mainly achieved, thanks to our optimized sourcing strategy and the issuance provision, mainly coming from GasAtacama, which effectively offset higher cost in the energy spot market mainly due to the higher purchase volume. Gas trading contributed positively with a $5 million margin increase, mainly fueled by expanded trading activity in the third quarter of 2025. Turning to grids. We recorded a positive impact of $17 million, mainly driven by regulatory provision reflecting the settlement adjustment for the previous year and higher OpEx recorded in the third quarter of 2024 due to the extreme weather events that occurred in May and August. These effects were partially offset by the increase of OEM expenses, mainly associated with the implementation of the comprehensive winter plan. And now let's move on to the next slide to review the main impacts on EBITDA during the 9 months period. Our EBITDA reached $1,004 million, remaining flat compared to the same period of 2024. Starting with the generation business, we recorded a decrease of $244 million in PPA sales, mainly due to the termination of high-price regulated contracts, partially offset by the negative impact of exchange rate hedges recorded in 2024 and the positive price effect due to the indexation of the free market contracts. Regarding sourcing, we recorded a positive effect of $192 million despite the $34 million negative impact related to the transmission line restriction following the February blackout and the additional second quarter issues. The result was obtained, thanks to lower spot and third parties energy purchases costs, energy settlements from previous periods, already anticipated insurance provision and finally, lower transmission costs. In the first 9 months of 2025, gas margin contributed for $27 million, also thanks to the increase of the gas trading activity versus the same period in 2024. Passing to grids, we recorded a positive impact, primarily driven by the provision reflecting the higher tariff expected for the 2024-2028 regulatory period and tariff indexation, some settlement adjustment from the previous year, higher OpEx recorded in the period 2024, mainly due to the extreme weather events, partially offset by the increase of OEM expenses, mainly associated with the implementation of the comprehensive winter plan. We also recorded an increase of generation costs due to the new developed capacity and the maintenance activities. Finally, in 2025, specifically in the second quarter, we recorded the personnel cost one-off effect, mainly for the incentivized early retirement plan to support the company organization aimed at improving internal skills and performance. And so now let's move on to the next slide, where we will review the net income evolution. Our 9-month 2025 net income reached $352 million, a 21% decrease compared to the last year's figure, mainly explained by higher depreciation, amortization, impairment and bad debt expenses for $84 million, mainly due to the commissioning of new renewable capacity amounting to $32 million, the impairment related to our decision not to proceed with the new PMGD solar project initially planned for development in this area. And finally, the $12 million increase of grid's bad debt provision, mainly due to the higher billing resulting from tariff increase and long overdue customer debt. Regarding financial results, we recorded a negative variation of $38 million, mostly explained by the lower capitalized expenses on renewable projects by $61 million, partially offset by lower financial expenses for $29 million resulting from lower average outstanding debt and lower average interest rate. The latter was partially offset by a $20 million reduction in corporate income tax expense, mostly explained by lower results. Focusing on the quarter, net income decreased by $74 million, mainly due to a $63 million decrease in EBITDA, a $29 million increase in depreciation, amortization and bad debt, primarily due to the operation of new renewable capacity and an $11 million increase in financial results, mainly due to the lower capitalized expenses on renewable projects. The latter was partially offset by a $23 million reduction in corporate income tax expenses mostly explained by lower results of the period. And now let's move on to the FFO analysis on the next slide. Let's analyze the FFO composition for the first 9 months of 2025 and the main effect compared to the same period in 2024. Our FFO reached $615 million, representing an improvement of $248 million compared to the previous year. This is due to the following factors. First, EBITDA totaled $1 billion, remaining flat compared to the same period last year, as previously explained. Second, the recovery of PEC receivable in 2025 contributed for $285 million, mainly thanks to factoring executed in April 2025 related to PEC 2, 3 and recovery to the tariff of $31 million of PEC 1 receivable. It is worth mentioning that we offset a positive FFO variation of $248 million versus the 9 months 2024, thanks to the end of accumulation of PEC receivable started in October 2024. Third, the increase of net working capital impacted for $329 million, mainly due to the 2024 development CapEx payment, lower collection in our distribution business and other seasonality effect. The increase was higher by $255 million versus previous year, mainly due to the negative effect of energy payment scheduling and the voluntary compensation paid in 2025 regarding the extreme climate event from May and August 2024. These effects were partially offset by lower CapEx payments related to renewable capacity. Fourth, the income taxes impacted on FFO amounted to $231 million, mainly due to the tax payment in the generation business. Income taxes paid in the 9-month 2025 were higher by $63 million compared to the 9 months 2024. This difference is mainly due to the increased tax payment in the generation business, driven by both higher results and higher monthly payment tax rates. Finally, financial expenses were $130 million, mostly due to the debt related costs. This represents a reduction of $52 million compared to the 9 months 2024, mainly driven by a lower average debt this year. And now let's take a look at our liquidity and leverage position. Our gross debt is $3.9 billion at the end of September 2025, in line with the gross debt as of December 2024. The average terms of our debt maturities decreased from 6.2 years as of December 2024 to 5.5 years as of September 2025, and the portion at the fixed rate is 87% of total debt. The average cost of our debt reached 4.8% as of September 2025, decreasing from 5.0% in December 2024, in line with our efforts to optimize the financial costs. Regarding liquidity, we are in a comfortable position to support our capital needs for the upcoming months and cope with the next year maturities. As of September 2025, we have available committed credit lines for $640 million and cash equivalent for $373 million. And now I would like to share the following closing remarks. In the coming months, significant regulatory updates are expected that will clarify tariffs and market mechanisms. These represent an essential step to refine our long-term strategy and to assure that our investment decisions remain aligned with regulatory developments. We are implementing proactive initiatives to address portfolio dynamics and climate challenges. This includes action to strengthen our generation and distribution businesses, improve risk management and enhance our ability to respond to extreme weather events. The measures are designed to safeguard service continuity and maintain system stability. Our solid financial position and flexible business model allow us to follow with our business plan, even through market uncertainties, while continuing to invest in strategic renewable and BESS project and deliver sustainable returns for our shareholders. Finally, we are preparing for our 2026 Investor Day scheduled for the first quarter 2026, where we will share a comprehensive view of our strategy and the actions that will drive long-term value creation. And now let me hand it over to Isabela for the Q&A session. Isabela Klemes: Thank you, Simone. Now let's move on to Q&A session. We will be taking questions via chat through the webcast. The Q&A session is now open. Okay. So Simone, the first question is coming from Rodrigo Mora from Moneda. Rodrigo has 4 questions, so I will be talking one by one, okay? So the first one is, what is the amount that Enel Chile must return to customers due to the miscalculation of the CNE included in the first half 2026 PNP report? Simone Conticelli: Okay. Thank you, Rodrigo. Just to give some context. So in the first half of October, the CNE explained that they have changed the formula for the calculation of the PNP. And so this change in the formula will have some impact. We have calculated the impact for Enel in an amount that is between $40 million and $45 million. So we have to expect a negative provision in terms of mainly financial costs. So the impact will be mainly in the financial items. And -- but in your question, you talked about customer, but in any case, just comment that the customers were impacted just for a small amount because just the 2% of the total amount of the changes was transferred to customer in the tariff. So this amount will be accrual by Enel in 2025, and then we will pay back. In this moment, the process is not so clear. But in any case, we expect in the first half of 2026. But the amount, we will have not impacted directly for the total value of the customer. Isabela Klemes: Okay. Thank you, Simone. So the second question now is on Enel distribution. So what is the amount on to Enel's distribution Chile in connection to the VAD 2000, 2025, please? Simone Conticelli: So talking about the remuneration period of 2020, 2024, we are really not finalizing the last steps of the process. So the amount was ready to be defined. And what we are waiting is that the sector will say when we have to receive back the missing part. And the amount, in this case, is around $50 million, $55 million. There are 2 possibilities. If you want to be prudent, you can imagine that this the cashback can start middle of 2026, even if I remember interview of the new Minister of Energy that say the process can also be faster and start earlier. Isabela Klemes: Okay. Thank you, Simone. So now let me check here. We have the third question. So the third question of Rodrigo now is on generation side on the LNG strategy. So could you please explain about your strategy regarding LNG and Argentina gas firm or interruptible? For the year 2026, how many ships do you plan to buy? Simone Conticelli: So as you know, for us, the gas business is very important business because we need gas for our thermal power plant, but also because we find during the year some creative opportunities to make margin to our gas contract. We have basically a long-term gas contract for LNG. And more or less, the volume for this contract for any addition in more than 32 teraBtu per year. And so in 2026, we'll keep on using this contract. In these very days, we are working -- we are negotiating Argentinian supplier to the new contract for Argentinian gas. And so in this moment, I cannot talk about this negotiation. The negotiation is ongoing as well and has not been finalized. Isabela Klemes: Okay. Thank you, Simone. Now the last question of Rodrigo is regarding CapEx also on generation business. Regarding CapEx for generation, could you please give us an update for 2025? And actually, we also received the same question from balance as well. Simone Conticelli: So very well. Talking about this year's CapEx, as you know, we follow the plan with one exception that was the CapEx for the development of the new system because we recorded a little delay for this project and it was due to strategic reason. I mean we have the new piece of regulation related to BESS. I mean the regulation for the participation of BESS in the ancillary service market. And then we keep on starting the evolution of the market and the penetration of the BESS in the Chilean production system. So we started a little bit late in the project. And in the first 3 quarters, the amount of CapEx for this project was reduced compared to the expectation. But the projects have been already started are ongoing. And so you will see in the last quarter -- in total, talking about AGP and generation investment for more or less USD 150 million, USD 160 million. And a part of this investment will be the BESS, at least $50 million. And then we keep on growing also in investments on thermal fleet and how strategic is the thermal fleet. And of course, in case of low water in the system, our efficient CCGT plants are called to produce. And so we have to keep on these plans at the highest level of efficiency and performance. Isabela Klemes: Okay. Thank you. And we have a final one. Sorry, Rodrigo. We have 5 questions from Rodrigo Mora. So the last one is on distribution side, okay? On distribution, could you outline the measures being taken to address the increasing energy losses? Simone Conticelli: Okay. Talking about losses in energy, we have discussed the losses getting higher in the last 2 years, started from 2023. And so in this moment, the percentage of losses is a bit higher than 6%, which is the reason -- can be many reasons, but the most important reason is the increase in the target. So the final customer. And so a little bit a change in EBIT related also to this increase in tariff. What we are doing? From one side, we are increasing the activity to recover these losses. And so we have recovered more than expected in the initial planning related to losses. And on the other side, we are making other action, for example, launching flexible payment plans for the customers that want to pay the new bill. We have a new smarter special tool. We work on formulas to localize where the losses are originated and we can intervene. And finally, we are working with the regulator to try to find changes also in the regulation that can help to contain this phenomenon. Isabela Klemes: Okay. Thank you, Simone. Now move on. We have questions from Javier Suarez from Mediobanca. Thanks for the question. So the question is, is the company Enel Chile confirm its latest guidance? Simone Conticelli: So the answer is simple, it's yes, but just some context. This was a very tough year in terms of hydrological situation. So finally, the season was drier than expected. But in any case, we show our flexibility as a company. We leverage on our very profitable gas contract. We use the flexible and efficient CCGT. And so we have those effects. So we maintain high production. Also our hydropower plant can use reservoir. And so also the production for Enel did not decrease so much. And given all this action and the flexibility the company built in the past year, we can react to this adverse climate conditions and achieve -- we can confirm the results for the year. Isabela Klemes: Okay. Thank you, Simone. So move on. The next one is also from Javier Suarez, Mediobanca. It's about the FFO. So could you explain the dynamics of FFO during the 9 months of this year? And your expectation by the year-end? Simone Conticelli: Okay. Talking about the FFO, talking about our business, the FFO usually is concentrated in the second half of the year and particularly in the last quarter. And the main reason is that EBITDA is higher in this period and so on. This year, in the first 9 months, and this week, we had a very high level of FFO. And this was -- thanks to the not ordinarily cash-in from tech regulatory process. So we cash in around USD 300 million recovering cash credit from the past. Looking ahead, the cash flow from ordinary business will be higher compared to the first months in the last period. And also, we will have more efficient management of the net working capital because in the last part of the year, the CapEx are focused in the last part of the year. So also the net working capital can be managed in a more efficient way. And so we expect to improve the performance of FFO in this last quarter, which is more or less the dynamic. Isabela Klemes: Okay. Perfect. So now the next question is coming from Fernan Gonzalez from BTG Pactual. So Fernan is talking about the BESS, not the storage that we are implementing. So I will read here. I saw that BESS Las Salinas, 200 megawatts and BESS Acebache, 58 megawatts were declared under construction at the CNE. So these projects involve additional solar capacity or just the energy storage. There are still an additional 200 megawatts of BESS capacity to meet your announcement plan. Will this be added to exist in solar PV in the North? Simone Conticelli: Yes. So talking about the strategy on BESS, we have launched 3 projects this year in line with what was expected in the plan. And these projects are hybrid projects. So we are going to implement BESS system in solar power plant in the North. And while we do this, in general, the BESS can be profitable also like a stand-alone device. But the profitability is higher if you use the BESS system to [ improvise ] our power plants and why? Because the project in faster. You need less environmental document to be produced, considering that you are building the BESS in your plant and also we have some savings in terms of cost and electrical infrastructure. And so I think that I have answered the question. At this moment, we are not increasing the solar capacity. You are just equalizing solar project. Isabela Klemes: Okay. So let me check here. So we have another one from [ Thomas Peruchi ], Balanced Capital. Well, part of the question was already answered. So I'll just keep the one that wasn't here. So thank you for the presentation. And he has one question. If I'm not mistaken, you had a target of -- for 2025 of $500 million for expansion projects, mainly relating to batteries to storage. How has that changed by now, given that you are expecting a resolution on ancillary services before moving forward? And was the resolution in line with your expectations? Do you think we will be enough to unlock high investment in storage? Simone Conticelli: Okay. So in our current power plant, we put more or less 600 megawatts of new capacity. And you are right, 450 average in BESS projects. This well project should have been launched at the beginning of the year and were launched during the second launch. And so you can expect a movement of the COD. The recent COD was in 2026 in the second half. And then the new COD will be in 2027, and this will have an impact. But in any case, we start from a fleet of around 9 gigawatts of production and so this change is not a huge change. Talking about regulation. So in August, the 4th of August was largely in new regulation that say that BESS can participate in Chile service mark. It means that this is a very good news for the country because the BESS very means important element that can stabilize the system at a very low cost. And so usually because for the system, it is also reducing the cost for the participant. In terms of revenues, it's not a huge increase, but it's in line with what we expected. Talking about the current BESS that we have, the BESS that we have already installed, it means that amount USD 5 million and USD 7 million per year. But in any case, it's an important step because a permit to meet the BESS project is little bit more profitable than considered in the beginning. And it means that they are profitable also imagining a higher penetration of BESS project. Isabela Klemes: Okay. Perfect. So we have the last question that is from Edward Palma from Itaú Asset. So the question is, do you have any news for unregulated PPA contracts? Simone Conticelli: In this moment, no, we don't have any news related to this stock. Isabela Klemes: Okay. Perfect. Let me just check if we have no more questions. Okay. As there are no further questions, we formally conclude our conference call. The Investor Relations team is at our disposal for any further inquiries. Many thanks for joining us, and have a great rest of the week. Thank you. Operator: And ladies and gentlemen, this concludes our conference. Thank you for participating. You may now disconnect.
Operator: Thank you for standing by, and welcome to Corcept Therapeutics Third Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to hand the call over to Atabak Mokari, CFO. Please go ahead. Atabak Mokari: Hello, everyone. Good afternoon, and thank you for joining us. Today, we issued a press release announcing our financial results for the third quarter and providing a corporate update. A copy is available at corcept.com. Our complete financial results will be available when we file our Form 10-Q with the SEC. Today's call is being recorded. A replay will be available at the Investors Past Events tab of our website. We will also post a presentation regarding our oncology development programs in the same section. Statements during this call other than statements of historical fact are forward-looking statements based on our plans and expectations that are subject to risks and uncertainties, which might cause actual results to be materially different from those such statements expressed or implied. The risks and uncertainties that may affect our forward-looking statements are described in our annual report on Form 10-K and our quarterly reports on Form 10-Q, all of which are available at the SEC's website. Please refer to those documents for additional information. We disclaim any intention or duty to update forward-looking statements. Our revenue in the third quarter of 2025 was $207.6 million compared to $182.5 million in the prior year period. We have modified our 2025 revenue guidance to $800 million to $850 million Net income was $19.7 million compared to $47.2 million in the third quarter of last year. Our cash and investments at September 30 were $524 million, which reflects our acquisition of $50 million of our common stock in the third quarter pursuant to our stock repurchase program as well as shares acquired upon the exercise of Corcept stock options and the vesting of restricted stock grants. I will now turn the call over to Charlie Robb, our Chief Business Officer. Charlie? Gary Robb: Thanks, Atabak. There is nothing new to report regarding our patent litigation with Teva Pharmaceuticals. Recall that in March 2018, we sued Teva to stop it from marketing a generic version of Korlym in violation of our patents. The case went to trial in September 2023, and in December 2023, the trial court ruled against us. We appealed that decision to the Federal Circuit Court of Appeals. 3 judge panel of that court heard oral argument on July 7 of this year. Although it is impossible to say exactly when the court will issue its decision, enough time has passed that it is reasonable to say that the decision could come at any time. If we prevail, Teva will lose FDA approval of its product until the expiration of our patent in 2037. We strongly believe our position is correct and are eager to advance this appeal. I'll now turn the call over to Sean Maduck, the President of our Endocrinology division. Sean? Sean Maduck: Thanks, Charlie. Our hypercortisolism business had another quarter of robust growth. In the third quarter, we shipped more tablets to patients than ever before, 42.5% higher than the third quarter of last year, driven by yet another record of prescriptions written for Korlym. Importantly, our base of prescribers has expanded substantially over the last 2 years. In summary, the underlying strength of our business continues to build. Our financial results don't fully reflect the surge in demand. I discussed on the last few calls, the insufficient capacity of our previous pharmacy vendor. While we expected their capacity to improve in the third quarter, it did not, which is why we have begun transitioning our business to a new pharmacy in the fourth quarter. While capacity constraints may continue for the next few months as we complete the transition, we are very encouraged by the new pharmacy's abilities and its capacity to meet demand. As welcome as such improvements are, eventually the growth we anticipate will outstrip the capacity of any single pharmacy, which is why we plan to add a second specialty pharmacy to our network in January and to onboard a third pharmacy shortly thereafter. Our confidence in continued and accelerating growth is based on several factors. The first is growing physician awareness of hypercortisolism. For many years, the prevalence of hypercortisolism and the serious risk it poses for patients were not well understood. As a result, physicians only screened for and treated the most physically obvious cases of the disorder. In the last 15 years, many studies have shown that hypercortisolism is much more common and is a serious threat to health and far more than the most extreme cases. Most recently, our CATALYST study confirmed these findings, proving that there are many more patients with hypercortisolism than previously assumed and that treatment with a cortisol modulator is highly effective improving their condition, even when other medications, including the newest diabetes medications such as Ozempic and Mounjaro have not. The CATALYST results have been published in Diabetes Care, the field's leading journal and are now being absorbed by the broader physician community. To translate these insights into patient impact, we continue to expand our physician education efforts, and we have enlarged the size of our sales force to 150 clinical specialists, up from 60 at the beginning of 2024. With the awareness of hypercortisolism growing and the effectiveness of cortisol modulation demonstrated in a large placebo-controlled trial published in a leading peer-reviewed journal, I eagerly anticipate relacorilant's approval. Korlym is a great medication but relacorilant is even better. It will be a terrific option for both prescribers and patients. I expect that almost all patients who are receiving Korlym will choose to transition to relacorilant and our growth will accelerate. I've never been more confident in both our current and future commercial growth and most important, our potential to help many more patients. In the next 3 to 5 years, I believe relacorilant will generate $3 billion to $5 billion in annual revenue in hypercortisolism alone. I will now turn the call over to Joe Belanoff, our Chief Executive Officer. Joe? Joseph K. Belanoff: Thank you, Sean, and thank you, everyone, for joining us this afternoon. After many years dedicated to studying the potential of cortisol modulation to help patients suffering from serious diseases, we are on the cusp of a new era at Corcept. We have 2 new drug applications that are rapidly approaching their FDA target action or PDUFA dates. Our NDA for relacorilant as a treatment for patients with hypercortisolism has a PDUFA date of December 30, 2025. Our NDA for relacorilant as a treatment for women with platinum-resistant ovarian cancer has a PDUFA date of July 11, 2026. We believe the FDA will meet both deadlines. We submitted the European analog to our ovarian cancer NDA, known as a marketing approval authorization, or MAA, to the European Medical -- Medicines Agency, or EMA in October with a regulatory decision likely by year-end 2026. Some of our most advanced clinical studies will soon produce important data. Our MOMENTUM trial, which is evaluating the prevalence of hypercortisolism in patients with resistant hypertension will have results early next year. We expect final overall survival results from ROSELLA, our pivotal trial in platinum-resistant ovarian cancer around the same time. By the end of 2026, we expect results of our BELLA trial also in patients with advanced ovarian cancer as well as results from MONARCH, our Phase IIb trial in patients with MASH, a life-threatening liver disorder. We are also about to start important new studies. In consultation with the regulators, we are finalizing the design of a Phase III trial of our proprietary selective cortisol modulator, dazucorilant in patients with ALS. We plan to start this trial by the middle of next year with a simple goal of replicating the strong results we saw in DAZALS, our Phase II trial. Our oncology program is about to expand significantly beyond platinum-resistant ovarian cancer. The success of ROSELLA provides clear evidence that cortisol-directed therapies have substantial potential in oncology. What comes next in oncology is a unique sequencing challenge because the opportunities are so large. We have spent many months giving careful thought to a long-term development plan in oncology that is both methodical and ambitious and most important, will best position Corcept to help as many patients as possible. I'm going to ask Bill Guyer, our Chief Development Officer, to describe what he and his team have planned. Bill? William Guyer: Thanks, Joe. Now in order to understand the scope of our opportunity in oncology, I think it helps to recall that our program follows groundbreaking insights made by investigators at the University of Chicago, who hypothesized that cortisol activity at the glucocorticoid receptor promotes solid tumor growth in 3 ways. First, it's anti-apoptotic, so it blunts the effectiveness of chemotherapy. Second, it provides alternative growth pathways for prostate cancer tumors being treated with androgen deprivation medication. And third, it suppresses the immune system, reducing the effectiveness of immunotherapy in the treatment of cancer. Increasing apoptosis by blunting cortisol activity is a very broad platform. It applies to all solid tumors that express the glucocorticoid receptor. Published research has shown that about 60% of solid tumors express the GR, and they do so at every stage of treatment. Our oncology program is built on the belief that antagonizing the effects of cortisol at the GR can benefit many, many more patients. And a prime example of that is shown by the women from our Phase II and pivotal Phase III ROSELLA studies who received relacorilant in addition to nab-paclitaxel and experienced extended progression-free survival and live longer than the women who were treated with just nab-pac alone. Now remember, nab-pac is one of the most potent treatments for women with this disease and adding relacorilant led to an even better result and remarkably without adding to the safety burden of the women who received it. Adverse events with relacorilant plus nab-pac were comparable in type, frequency and severity to nab-pac monotherapy. As I review the data, relacorilant is a remarkably well-tolerated drug. The medical field understands the importance of our results because the data from ROSELLA were presented at high-profile forums this year, including late-breaking oral sessions at both ASCO and ESMO annual meetings. And ROSELLA findings were published in The Lancet, one of the world's most preeminent journals. Our goal now is to undertake studies that will extend this work in 3 ways: first, in earlier lines of therapy for ovarian cancer; second, in new types of solid tumors; and third, combining our proprietary GR antagonist with additional regimens. So the first study advancing this goal is a Phase II BELLA trial. BELLA's initial objective is to treat and test the additional benefit of relacorilant may bring when combining it with nab-pac as well as bevacizumab, which is a potent drug that is commonly used to treat patients with platinum-resistant ovarian cancer. Due to the strong interest in our program by investigators around the world, this study has enrolled patients much faster than we expected. And as Joe mentioned, we will have the results by the end of 2026. But this is just our first step. BELLA's protocol allows us to add more arms to the study that include patients with different types of solid tumors. Currently, we are going to add 2 new arms. The first will evaluate relacorilant plus nab-pac and bevacizumab to treat patients with platinum-sensitive ovarian cancer, an earlier stage of the disease. In order to enroll in this arm, patients must have progressed on a PARP inhibitor, which is the subgroup that experienced profound benefit in ROSELLA, and we just presented that data at the ESMO conference. The second new BELLA arm will evaluate the potential of relacorilant plus nab-pac to treat patients with endometrial cancer. Separately, we are also initiating a Phase II study of relacorilant plus nab-pac in patients with cervical cancer in collaboration with ARCAGY-GINECO, which is an academic clinical research group specializing in gynecological cancers. These new studies will enable us to triple the potential number of women with gynecological cancers that we can help each year in the United States from 20,000 patients with platinum-resistant ovarian cancer to 60,000 patients. We are also targeting other tumors with significant unmet medical needs. We are initiating a Phase II study in patients with pancreatic cancer by combining relacorilant with the first-line standard of care regimen of nab-pac and gemcitabine. All of these studies will begin enrollment in the coming weeks and should enroll very quickly like all of our past studies have done. The results will be guideline enabling with a particular focus on the National Comprehensive Cancer Network or NCCN guidelines. These studies will also inform our future development decisions. In addition to exploring cortisol receptors antagonism potential to resensitize tumors to chemotherapy, we are evaluating its use in combination with antigen deprivation therapy. Our collaborators at the University of Chicago are currently enrolling a randomized placebo-controlled Phase II trial of relacorilant plus enzalutamide in patients with early-stage prostate cancer to determine if GR antagonism can block a cortisol-mediated tumor escape route. Another possible role of cortisol receptor antagonism is in combination with immunotherapy. Immunotherapy has emerged as a standard of care cancer treatment with more than 200,000 patients in the United States receiving this form of therapy each year. Because cortisol suppresses the immune system, it may blunt the effectiveness of cancer therapies intended to stimulate an immune response. Adding a GR antagonist to immunotherapy may enhance their effectiveness. Therefore, in the coming weeks, we are initiating a Phase Ib dose-finding study of nenocorilant, our new proprietary selective cortisol receptor antagonist in combination with nivolumab, a PD-1 directed immunotherapy to treat patients with a broad range of solid tumors. We've embarked on a mission to advance GR antagonism to help many patients with a broad range of solid tumors. Our ROSELLA study produced exciting confirmatory evidence of our hypothesis, and there is much more to come. We look forward to updating you on our progress. I'll now turn the call back over to Joe. Joseph K. Belanoff: Thanks, Bill. Before reporting advances in our MASH and ALS programs, I will briefly describe the research findings that give us confidence in the substantial opportunity before us in our hypercortisolism franchise. Prevalence phase of our CATALYST trial demonstrated that 1 in 4 patients with resistant diabetes has hypercortisolism, a far higher rate than was previously assumed. These results are transforming medicine. Patients who are enrolled in the placebo-controlled treatment phase of CATALYST had uncontrolled diabetes despite treatment with the best current medications administered by the leading diabetologists and hypercortisolism. In 24 weeks, patients treated with Korlym experienced a 1.47% reduction in hemoglobin A1c, along with significant improvements in body weight and waist circumference. Notably, patients in CATALYST experienced these improvements even as they decreased or entirely discontinued their other glucose-lowering medications, including the most potent GLP-1 agonists. Our MOMENTUM trial builds on the findings from CATALYST by evaluating the prevalence of hypercortisolism in patients with resistant hypertension. Results from MOMENTUM are expected by early next year. The findings from CATALYST and MOMENTUM will substantially accelerate screening for hypercortisolism and its treatment. As physician awareness of hypercortisolism rapidly grows, relacorilant is approaching its December 30 PDUFA date. Relacorilant's NDA is supported by our pivotal Phase III GRACE trial as well as our GRADIENT long-term extension and Phase II trials. In these studies, patients treated with relacorilant experienced clinically meaningful improvements in all the measures of hypercortisolism including hypertension, hyperglycemia, weight, lean muscle mass, waist circumference, cognition and Cushing's quality of life score. These benefits were observed consistently and durably with improvements emerging early and continuing or deepening over time. As awareness of hypercortisolism and its ability to be treated grows, many more patients will be identified, and Corcept is well positioned to help them. As Sean said earlier, we are confident that our Cushing's syndrome business will continue to grow for years. Our proprietary molecule, miricorilant, has very potent activity in the liver. Metabolic dysfunction-associated steatohepatitis, or MASH, is a serious liver disorder that afflicts millions of patients in the United States and globally. Cortisol activity plays a role in both the initial development and progression of the disease and cortisol modulation may serve as a treatment. Our Phase Ib study showed that miricorilant rapidly reduced liver fat and improved other important markers of liver health, including fibrosis. Miricorilant was also very well tolerated without the GI side effects commonly seen in patients being treated for MASH. Our randomized double-blind placebo-controlled Phase IIb MONARCH study aims to expand on our encouraging Phase Ib results. MONARCH enrolled 175 patients in 2 cohorts. The first cohort of patients has biopsy-confirmed MASH. The second cohort consists of patients with presumed MASH. We expect results from both cohorts late next year. ALS is a devastating disease associated with elevated cortisol activity. Our proprietary compound, dazucorilant, is an excellent candidate to treat it. In our 249 patient double-blind, placebo-controlled Phase II DAZALS trial, patients who received 300 milligrams of dazucorilant exhibited an 84% reduction in the risk of death at the 1-year mark compared to patients who only received placebo. The p-value for this finding was 0.0009. This reduction in early death occurs when patients still retain considerable function and quality of life. It does not simply add months to the end of their life when the disease's burden can be enormous. As I mentioned earlier, we plan to start a Phase III trial in 2026, designed with input from the FDA, European regulators and leading clinicians that simply aims to replicate the results of DAZALS. We covered a great deal today. Let me reiterate our important developments. Next month, we expect FDA approval of relacorilant for the treatment of hypercortisolism. This milestone comes as physicians begin to fully absorb the results of the CATALYST study, which demonstrated that hypercortisolism is far more prevalent than previously recognized and the treatment with a cortisol modulator can significantly improve the health of their patients. Our MOMENTUM study will produce results by early next year, building on CATALYST findings. By mid next year, we anticipate relacorilant's first oncology approval in platinum-resistant ovarian cancer, a particularly challenging form of ovarian cancer. Results from the ROSELLA trial showing improved progression-free and overall survival without additional safety burden are groundbreaking. The fact that cortisol receptor antagonism demonstrated such compelling results in this extremely difficult-to-treat cancer type gives us confidence in its potential across a broad range of tumors and underpins our decision to expand our oncology development portfolio. We expect first results from our new oncology studies by the end of next year. Beyond hypercortisolism and oncology, we expect results from a large, controlled study in patients with MASH by the end of next year and plan to initiate a Phase III study in patients with ALS by mid-next year. We continue to discover and develop proprietary selective cortisol modulators with likely very distinctive clinical attributes and are advancing the most promising to the clinic. Cortisol modulation's vast potential to help many patients is just beginning to unfold. It is a very exciting time for Corcept. Operator, let's proceed to questions. Operator: [Operator Instructions] Our first question comes from the line of Edward Nash of Canaccord Genuity. Edward Nash: I wanted to ask, I know sometimes you give the numbers. I just want to get an idea of how many patients at the end of the quarter that you had on drug? And then also, can you give us some idea of -- I know you're going to be bringing on a second new distributor at the beginning of the year, as you mentioned. But just wanted to have an idea of based upon what historically your previous distributor, what additional capacity or what magnitude of capacity does this new distributor that sort of come on in October have over your old distributor? Joseph K. Belanoff: Thank you, Edward. I think we understand both of those questions. And I'm going to pass you over to Sean Maduck, who is the President of our Endocrinology division. Sean Maduck: Thanks, Ed. I appreciate the question. Your first question was around about how many patients do we have on medicine at the end of the quarter. We had around 3,250 paying patients at the end of the third quarter. So in terms of the pharmacy that was just onboarded on October 1, it's a great pharmacy and we think we're going to -- they're going to do just a fantastic job supporting patients. And they've got about 25 years of experience, which is in serving orphan and orphan disease products, which is great. In terms of the specific question around capacity, they have the ability to continually expand with our business. They also have multiple locations around the country to distribute, which is something that was very appealing to us as we continue through the rest of the year with Korlym and then get ready for the relacorilant launch in 2026. Joseph K. Belanoff: And Edward, I think you also asked about other pharmacies, which are coming on next year. I think a really important thing to realize to tie your 2 questions together as well there are now 3,000 or so patients who are taking Korlym. We actually believe that the market capacity is much, much greater than that. And we really do think that as relacorilant begins to come on to the market, no single pharmacy is going to easily handle all of the business there. And that's why we're gearing up right now to add second, third pharmacies to that. Edward Nash: Great. That's helpful. And I just had one quick model question. On the gross margin line, you guys have historically had really high margins. And given the increase in volume, but also pricing and generic shift, are you seeing any downward pressure on margins that might require modeling adjustments going forward? Joseph K. Belanoff: Let me give you back to Atabak on for that question. Atabak Mokari: Edward. No, we have not seen that, and we don't expect that. Operator: Our next question comes from the line of David Amsellem of Piper Sandler. David Amsellem: Just a couple of quick ones. One, can you just remind us what the -- what net pricing looks like relative to brand pricing, just given that more and more of the business is going through the AG? How much of your business is coming from the AG? And then also, as you look to the PDUFA in ovarian, were you surprised you didn't get a priority review? And then lastly, can you talk about R&D and SG&A directionally for 2026 given the launches and given all the clinical studies? Joseph K. Belanoff: Thanks, David. And I think we'll give your questions to the person who could each answer them best. Sean, why don't you begin? Sean Maduck: Yes. Thanks, David. In terms of our authorized generic in the second quarter, we were -- about 2/3 of our business were on the authorized generic. In the third quarter, it ended in the low 70s. And our expectation is by the end of the year, it might creep up a little bit, maybe ending at around 75%. And then in terms of the net, it's about a 30% discount to Korlym's list price. Joseph K. Belanoff: Charlie, answer about the ovarian cancer NDA. Gary Robb: Yes. So we requested priority review. We didn't receive it. And to say, we weren't surprised to not receive it. We wouldn't have been surprised to receive it. Just based on the strength of the application, we were confident that we met the sort of stated criteria about substantial benefit in terms of safety or efficacy over available treatments. But the FDA has many priorities, many other things going on and their decisions are theirs and are sometimes opaque to us. So no, not surprised. Always hopeful, not surprised. And that's just, I think, the way dealing with the FDA on this kind of question has to be. Joseph K. Belanoff: And Atabak? Atabak Mokari: Sure. So regarding your question on R&D spend and SG&A, so we've talked a lot about the huge opportunity that we see ahead of us on multiple fronts across all of our businesses. And so we're going to invest to capture that. So on the R&D side, while we -- Bill walked you through many new studies that we're planning, there are many studies that we've been running throughout this year that are completing and winding down. So I would expect our R&D expenditures next year to be about the same as we are in 2025. And then on the SG&A side, we see huge opportunities on both hypercortisolism and ovarian cancer. And so we've been investing to prepare for launches of relacorilant in both of those indications, and we'll continue to invest to capture the large market opportunity. So I would expect those SG&A expenses to continue to increase. Operator: Our next question comes from the line of Joon Lee of Truist Securities. Asim Rana: Congrats on the quarter. This is Asim Rana on for Joe. Just a couple from us. So you said previously that the second pharmacy would have more meaningful contribution in the fourth quarter. Now that the first pharmacies out of the picture seems to be, how confident are you that Curant can handle the increase in volume over, say, fourth quarter and the quarters going forward? Is Curant fully online as of the fourth quarter? And then just as a follow-up, on the upcoming PDUFA for relacorilant, have you had a late cycle review for relacorilant? And if so, what can you share? Joseph K. Belanoff: Sure. Thank you very much for those questions. I think I understand all of them. The first one, we will send to Sean. Sean Maduck: Yes. So I'll answer your second question first. Curant is fully online. They started taking new patients on October 1. Almost all new enrollments are going to Curant. And over the course of the quarter, we will be transitioning the remainder of the business. So we're very confident in their ability to handle the capacity and meet the demands of the fourth quarter. Joseph K. Belanoff: And Charlie? Gary Robb: So just can you repeat the question for me because I want to make sure I answer it really correctly. What you say? Asim Rana: Yes. Just on the upcoming PDUFA for relacorilant, have you had a late cycle review for rela? And if so, what can you share? Gary Robb: Sure. So just a little background for people who don't -- are not as familiar with NDAs as you are. When the FDA agrees to review your new drug application, they give you a letter that sets out sort of the key milestones that are going to happen during the review process. And one of them is the mid-cycle review meeting with -- between the sponsor and the FDA. And the second is, as you know, another one is this late cycle review meeting. I can tell you that we've had both. I cannot tell you sort of what transpired or the nature of our back and forth with the FDA because we just can't comment on that. But we held them both exactly on the schedule the FDA set out in additional -- in its original letter to us. Things have moved per schedule, very ordinary course, and we are very confident as a result that the FDA will meet its target date of December 30. Asim Rana: And if I could just have a quick follow-up. Is Optime still selling Korlym? And if so, like how long would they have to? Joseph K. Belanoff: Yes. Sean, please take that. Sean Maduck: So Optime is still servicing patients just as they were before as they're obligated by the contract. Operator: Our next question comes from the line of RK with H.C. Wainwright. Swayampakula Ramakanth: A couple of questions. So first question being on the guidance. If I take the midpoint of your current guidance, the fourth quarter sales should come around $265 million or so, which is -- which means it requires a 28% growth from the third quarter number. With only one pharmacy in operation per se, how comfortable are you in thinking about that sort of growth, especially with holidays and less number of sales days? And the second question... Joseph K. Belanoff: Go ahead, please. Swayampakula Ramakanth: Sorry. And the second question is on the new molecule that I see on the pipeline, nenocorilant. -- how different is that from rela? And do you plan to release any preclinical data from that molecule as we start thinking about the study in solid tumors as a combination therapy with the PD-1 inhibitors? Joseph K. Belanoff: Okay. I think we have both of those questions. The first one is Sean. Please go ahead, Sean. Sean Maduck: Yes. So RK, just to be clear, you said in your question that we only have one pharmacy. That's incorrect. We actually have 2 pharmacies. Optime Care is continuing to service the active patient base and all new prescriptions are going to Curant. So over time, a greater percentage of our business is going to transfer over there. We expect combined to see some efficiencies, and we expect to have a strong Q4. Joseph K. Belanoff: And Bill, any comments you'd like to make about nenocorilant? William Guyer: Yes. Thank you. So related to nenocorilant in our oncology portfolio, when we look at relacorilant, as you heard, all the studies we're doing with relacorilant. Relacorilant is a great molecule and it's shown its benefit not only in oncology, but also endocrinology, but we're always looking at and evaluating new molecules preclinically to help us broaden our reach in every therapeutic area and especially oncology. And as we looked at the opportunity with combinations with PD-1 inhibitors, we felt that a drug like nenocorilant had unique properties that allowed us to dose it on a regular basis to help us look at other solid tumors. And we really felt it was the best partner for PD-1 inhibitors compared to that of relacorilant. And so when it comes to publishing our preclinical data, yes, we always publish our data, and I would expect us to have that data in the public domain next year. Joseph K. Belanoff: Let me make just a more general point because I know, obviously, RK is really the first person who really absorbed our oncology opportunity. You've been following this the longest of anybody, but let me make some points for those who have not. One of the really interesting things is that years ago, when we were only working with mifepristone, which we call Korlym, we were looking for a follow-on compound, which wouldn't have progesterone receptor activity. And our terrific Chief Chemist at that point. Now our Chief Scientific Officer, Hazel Hunt, was able to come up with one and then more and then more. And what was really interesting about them is that while all of those compounds modulated cortisol activity and none of them touch the progesterone receptor. So they were really distinct. She sort of accomplished her mission in separating the activities. As we began to test them preclinically, they simply weren't identical. Some got into the brain, some didn't get into the brain, some were organ-specific, some were general and some were more potent in the -- on various oncology models than others. And so where it left us with not a single follow-on compound, which is frankly what I had anticipated but with 4, 5, 6, 7 compounds, each paired with the best treatment opportunity and best disorder for which it could make progress. So it's been a very interesting opportunity. I think nenocorilant is quite interesting. You'll learn more about it next year as we go along. We're very excited to actually begin that study. I think it will really help us learn very much as to what the next thing to do is. So thank you all for your questions. Thank you for listening in. Really an exciting time, and I look forward to talking to you next quarter. Thank you. Bye-bye. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Hello, and welcome to the Mirum Pharmaceuticals Third Quarter 2025 Financial Results and Business Update. My name is Harry, and I'll be your operator today. [Operator Instructions] I would now like to hand the conference over to Andrew McKibben, SVP of Strategic Finance and Investor Relations. Please go ahead. Andrew McKibben: Thanks, Harry, and good afternoon, everyone. I'd like to welcome you to Mirum Pharmaceuticals Third Quarter 2025 Conference Call. I'm joined today by our CEO, Chris Peetz; our President and Chief Operating Officer, Peter Radovich; our Chief Medical Officer, Joanne M. Quan; and Eric Bjerkholt, our Chief Financial Officer. Earlier today, Mirum issued a news release announcing the company's results for the third quarter of 2025. Copies of this news release and SEC filings can be found in the Investors section of our website. Before we start, I'd like to remind you that during the course of this conference call, we will be making certain forward-looking statements based on management's current expectations, including statements regarding Mirum's programs and market opportunities for its approved medicines and product candidates. These statements represent our judgment and knowledge of events as of today and inherently involve risks and uncertainties that may cause actual results to differ materially from the results discussed. We are under no duty to update these statements. Please refer to the risk factors in our latest Form 10-Q and subsequent SEC filings for more information. With that said, I'd like to turn the call over to Chris. Chris? Christopher Peetz: Thanks, Andrew, and good afternoon, everyone. 2025 continues to be an outstanding year for Mirum. We've created a leading rare disease company, purpose-built to create and deliver life-changing medicines to patients. Our success comes from that foundation. The team deeply connected to patients and families, turning their insights into meaningful therapies and measurable performance. In the third quarter, we delivered strong commercial results, advanced our clinical pipeline and strengthened our financial foundation. I'm proud of the way our team continues to execute with focus and consistency. First, on commercial performance. We reported third quarter revenue of $133 million, representing a nearly 50% year-over-year increase over the same period last year. This performance reflects the strength and breadth of our commercial portfolio, including continued momentum from the U.S. PFIC launch and expanding demand from our international markets. Turning to R&D. We remain on track for three potentially pivotal readouts over the next 18 months. First up is the VISTAS Phase IIb study in PSC. With enrollment complete, we expect to announce top line data in the second quarter of 2026. With the successful interim analysis last year and a consistent body of supporting data with IBAT inhibitors across multiple cholestatic diseases, we're optimistic about volixibat's potential to become the first approved treatment in this setting. We are also progressing well with our VANTAGE study of volixibat in PBC, the EXPAND study of LIVMARLI in ultra-rare cholestatic conditions, and our newly initiated Phase II study of MRM-3379 in Fragile X syndrome. We've also taken meaningful steps to further strengthen our financial performance. This quarter, our cash balance grew significantly, and we recognized positive net income for the first time. This is an important milestone that highlights the operating leverage in our commercial model. In sum, it's been another solid quarter of execution for Mirum. I want to thank the entire Mirum team for their continued dedication to patients. We built a high-growth cash flow-positive rare disease company with a broad pipeline and global footprint, and we're just getting started. And with that, I'll hand the call over to Peter. Peter? Peter Radovich: Thanks, Chris. Q3 was another excellent quarter for Mirum with total net product sales of $133 million. This was driven by continued robust performance of LIVMARLI in both the U.S. and international markets as well as steady contribution from our bile acid portfolio. LIVMARLI net product sales totaled $92 million for the quarter. In the U.S., LIVMARLI demand remains healthy in both Alagille syndrome and PFIC with $64 million in net product sales. Alagille syndrome growth remains durable, and PFIC continues to contribute meaningfully, reflecting the real-world benefit of expanded diagnosis and increased genetic screening. As we begin reaching into broader segments of the medical community, particularly adult-focused providers, we're finding that genetic testing is still less embedded in practice and often requires more education and dialogue. So we view this as an area where sustained engagement can continue to drive incremental gains. Internationally, LIVMARLI demand continues to grow with $28 million in net product sales this quarter. Demand across our direct and partner markets remains robust, supported by expanding reimbursement and launches in new geographies. Q3 was the first full quarter of commercialization for our partner, Takeda in Japan, with in-market adoption dynamics generally consistent with LIVMARLI's U.S. launch. Our Bile Acid Medicines, CHOLBAM and CTEXLI generated $41 million in net product sales this quarter, supported by increased CTX patient finding following CTEXLI's FDA approval earlier this year. And I'm happy to say that we now expect to land in the upper end of our prior full year 2025 guidance range with $500 million to $510 million in revenues. This reflects the continued strength of our U.S. business in both Alagille syndrome and PFIC, steady contributions from our bile acid portfolio, along with the typical quarter-to-quarter variability in international partner and distributor ordering patterns. Looking ahead, we continue to see substantial growth potential across our portfolio with peak revenue potential for LIVMARLI, volixibat and MRM-3379 each exceeded $1 billion. And then with that, I'll turn it over to Joanne for an update on the pipeline. Joanne? Joanne M. Quan: Thanks, Peter. I'm pleased to provide an update on the continued progress across our clinical pipeline, where we're seeing continued collaboration and momentum with physicians and patients across all of our ongoing studies. Starting with volixibat, we completed enrollment in the Phase IIb VISTAS study in primary sclerosing cholangitis, or PSC, and expect to announce top line data in the second quarter of 2026. PSC represents a significant area of unmet need with no approved therapies and limited treatment options. We're deeply grateful to the investigators and the PSC patient community for their partnership in advancing this important study. As a reminder, the outcome of the interim analysis of the VISTAS study last year was what we'd hoped for. The recommendation was to keep the current sample size, which we believe reflects a strong signal for the final analysis. It's worth noting that the study was powered using conservative assumptions, a placebo-adjusted treatment effect of 1.75 points and standard deviation of 3. A case series is being presented at AASLD of 8 PSC patients treated with maralixibat under our compassionate use program, a continuation of a case series presented earlier this year at DDW. All of these patients had meaningful reductions in pruritus and 4 of the 8 had complete resolution. This data supports the role for IBAT inhibition as a treatment for PSC. Turning to PBC. The VANTAGE study continues to progress well, and we expect to complete enrollment next year. Interim data presented last year demonstrated statistically significant improvement in pruritus, meaningful reductions in serum bile acids and encouraging improvements in fatigue. We're excited to advance this study through the confirmatory stage. Additional analyses from the VANTAGE interim will be presented at AASLD, which highlights the decreases in fatigue and improvement in sleep in volixibat patients as well as showing a decrease in IL-31 in treated patients. Our EXPAND study evaluating LIVMARLI in additional settings of cholestatic pruritus is also enrolling well. This study is designed to broaden access to patients across multiple rare cholestatic diseases who currently have few or no treatment options. It represents a meaningful label expansion opportunity, and we're targeting enrollment completion in 2026. Finally, I'm excited to share that we've initiated our Phase II study of MRM-3379, our brain-penetrant PDE4D inhibitor for Fragile X syndrome. The preclinical data we recently presented from a mouse FMR1 knockout model of Fragile X, showed that MRM-3379 reversed the disease phenotype across multiple behavioral assessments and increases our confidence in the importance of this pathway in Fragile X. Overall, we're very encouraged by the progress across our development programs and look forward to upcoming milestones in 2026. With that, I'll turn the call over to Eric to discuss our financial results. Eric? Eric Bjerkholt: Thanks, Joanne, and good afternoon, everyone. We delivered another solid quarter of financial performance, highlighted by total net product revenue of $133 million, representing a 47% increase over the prior year and reflecting growth across all our commercial medicines. This quarter included approximately $5 million in sales to our partner, Takeda in Japan. We do not expect additional sales to Takeda in Q4 of this year. Total operating expense for the quarter ended September 30 was $130 million, which includes R&D expense of $43 million, SG&A expense of $62 million and cost of sales of $26 million. Expenses for the quarter included noncash stock-based compensation expense of $18 million and intangible amortization and other noncash items of $6 million. The intangible amortization and other noncash items expense are largely reflected in our cost of sales. Our cash operating margins continued to improve, and we delivered GAAP profitability in the third quarter, generating approximately $3 million in net income. While this reflects the strength and scalability of our business model, we view quarterly GAAP profitability as a milestone, not yet a consistent expectation as we continue to invest in growth. Cash, cash equivalents and investments were $378 million at September 30, an $85 million increase from the beginning of the year. We continue to be well funded and financially independent, providing us the resources required to expand our patient impact and grow our business. With that, I'll turn the call back to Chris. Christopher Peetz: Thanks, Eric. Before we open the call for questions, I want to close by reflecting on what's been an incredibly productive quarter. Across every dimension of our business, commercial, clinical and operational, we continue to execute with purpose and discipline, anchored by the same patient-centric approach that's driven our success from the start. That's what's enabled us to become a high-growth cash flow positive, leading rare disease company. Thanks again to the Mirum team and to the patients and families who inspire our work every day. With that, operator, please open the call for questions. Operator: [Operator Instructions] Our first question will be from the line of Jessica Fye with JPMorgan. Abdulqudus Tahlil: This is Abdul on for Jess. We just have two questions. What are going to be the key drivers of LIVMARLI's performance as we look ahead to 2026? And can you talk about why the midpoint of the new guidance range now implies 4Q reps flat sequentially from 3Q? I don't think we saw that dynamic last year. Christopher Peetz: Abdul, thanks for the question. On key drivers into 2026, I mean, we see a lot of basically what we have today rolling forward into next year. We expect that we'll probably give guidance early in the year next year on what that year looks like. But we are in early innings of the PFIC launch, both in the U.S. and internationally. So expect that to continue to build in over time. And I think for the guidance this year for Q4, maybe I ask Peter to speak to what we see from kind of the quarter-to-quarter dynamics... Peter Radovich: Thanks, Chris. Yes, and I appreciate the question, Abdul. The main dynamic is tried to highlight in our prepared remarks. We see growth for LIVMARLI U.S. We see the bile acid portfolio continuing to do what it does. It's really the LIVMARLI international line where we expect variability as we move quarter-to-quarter. As we've talked about before, that business has periodic large orders from distributors, and we saw those come in, in Q3. We also mentioned that we had Takeda revenue in Q3, which we also had Q1 and Q2 that we don't expect in Q4. So there's a fair bit of an inventory build there. So that's really the dynamic that's in the LIVMARLI international line. Operator: The next question will be from the line of Josh Schimmer with Cantor. Joshua Schimmer: Maybe I have two quick ones. First, what trends are you seeing in terms of adoption of the solid tablet formulation of LIVMARLI? And what percent of sales are for that versus the liquid? And then for volixibat, what are you thinking in terms of the appropriate price analogs, especially after we've seen a significant increase in rare orphan disease prices perhaps over the last year, particularly for conditions that perhaps are less prevalent than PBC and more aligned with PSC. Peter Radovich: Thanks for the questions, Josh. Yes. So in terms of the solid tablet, just launched in the U.S. in mid-June. So this is really our first full quarter with it. And what we've seen a very encouraging kind of uptake and really switches from the liquids. So if you look at the prescribing information, patients are eligible to switch if they're at least 25 kilos. I think what I could say is that a substantial proportion of those who are eligible based on their weight, are switching. So certainly excited about what that can mean long term in terms of persistence and adherence and an easier single tablet per dose format that will be preferred by these adolescents and adults. So excited about that dynamic. And then yes, volixibat pricing. Obviously, I haven't made a final decision there, monitored those dynamics that you're talking about. We've kind of base case thinking, you can look at the other -- PPARs and the other products that are kind of approved in PBC at 130 to 150, but we're still analyzing. I think it's kind of too early to say what the right pricing strategy is for volixibat. Operator: The next question will be from the line of Gavin Clark-Gartner with Evercore. Gavin Clark-Gartner: Just had one. What's your expectation for Paragraph IV filers? Maybe just helpful to lay out your confidence in your whole IP portfolio, especially around the method patents and including volixibat. Christopher Peetz: Gavin, thanks for the question. Overall, I mean, the -- we're in the window where we could potentially see that and kind of all routine for this point in the life cycle for LIVMARLI, and really quite confident in our overall IP position. In particular, you mentioned the method patents that are specific to dosing of LIVMARLI in these indications. So we've seen this has been really the key fundamental observation that's made all of Mirum possible and the IP behind it, we see is quite strong and in a great position and prepared to defend it. So more to come if and when we do see any filers, but nothing to date. Operator: The next question will be from the line of James Condulis with Stifel. Mark Hitrik: This is Mark on for James. So recently on earnings, Shionogi seemed to suggest it's still an open question around sort of what exactly the best endpoint is for their Fragile X study. I wanted to see if you guys had any perspectives on that and sort of the implications for your program that you initiated this year. And then we had a second question on PSC. And these patients typically kind of have inflammatory disease sort of like comorbidities. And we know that IBAT inhibitors by nature, sort of have some of these GI side effects. So curious your thoughts on the safety risks there. And if you can see sort of anything in the blinded data on like GI side effects, and whether those look any materially different than, say, PBC or Alagille. Christopher Peetz: Thanks for the question, Mark. I can't really speculate too much on Shionogi's update and what's going on underneath that. But let me turn it to Joanne to talk a little bit about our endpoint strategy and what we're -- our approach on our programs. Joanne M. Quan: Yes. Thanks for the question. We feel that we're in a good spot at this point. The preclinical data in terms of this pathway and the importance of this pathway in Fragile X is quite strong. We recently presented some preclinical data with our compound in a mouse model, mouse knockout model, which supports efficacy in us moving forward. And then we've also had very good engagement with the community with patients and with physicians, we also had a very successful and engaging pre-ND meeting with the FDA earlier this year, and they're entirely aware of the range of endpoints that we're looking at, and we're well aware of the types of validations that are needed for these types of outcomes. So I think we're actually in a pretty good spot. A lot of interest in the community, and we're looking forward to conducting the study and seeing what we see. Christopher Peetz: And then on the PSC safety standpoint, I actually look to Joanne for that... Joanne M. Quan: Yes. And so with regards to that, for the PSC study, we've had a data monitoring committee following with us. And so no issues have been raised, no suggested modifications to the protocol. So we feel pretty comfortable there's no big safety issues here. We feel pretty comfortable with moving forward with the way the protocol was initially designed. So it's not -- no issues have emerged there. Christopher Peetz: Profile overall is consistent with what we know about IBAT at this point. Operator: The next question will be from the line of Joseph Thome with TD Cowen. Joseph Thome: Congrats on the progress. Maybe on the PSC study, now that, that one is fully enrolled, are you able to talk a little bit about the baseline criteria of the patients that were enrolled, especially as it relates to the population that was studied in the interim analysis population? And maybe second, can you also discuss a little bit the importance of hitting on quality of life measures or bile acid in distance to ITCH? And will that -- those secondary endpoints be provided in the top line release in the second quarter? Christopher Peetz: Thanks, Joseph, for the question. I think overall, we've not plan to present or analyze some of the baseline criteria at this point. What we know from -- and we can take it more generally from the enrollment criteria and what was in the interim is the patients are selected for ITCH. So we do have quite elevated baseline pruritus scores. And it's -- from what we're seeing, it's quite representative of the PSC population in terms of background disease, background medications, things like that. So overall, kind of in line with what we expected for the population. And shifting to the question about endpoints, the focus from a regulatory standpoint is 100% on that pruritus endpoint being the outcome that we've discussed with FDA. We do expect to -- are excited about and expect to see based on other settings, we expect to see movement on things like fatigue and the bile acids. Bile acids obviously being a key mechanistic marker, fatigue being a really important measure for patients. But again, those are secondary for a reason. The regulatory path is entirely through that pruritus endpoint. Operator: The next question will be from the line of Ryan Deschner with Raymond James. Ryan Deschner: Congrats on the quarter. Can you remind us what went into the decision to offer BID dosing for the EXPAND study? And how would you expect the dosing instructions to look on an expanded label in cholestatic pruritus patients? And then I have a follow-up. Christopher Peetz: Thanks, Ryan, for the question. I mean the simple answer is empirical, right? So this is based on observations we've had in compassionate use settings at dose levels that have explored across a range in this kind of all in the bracket of these elevated dose levels from the Alagille label up to the PFIC label. And empirically, this is where we've seen really great response stories from compassionate use examples. And Ryan, do have a follow-up... Ryan Deschner: Yes. Real quick, how big of an impact has the government shutdown been so far for things like genetic screening programs and other programs related to Alagille and PFIC? Christopher Peetz: To date, no impact that we've seen across kind of all of our interactions with customers and really across the business. Operator: The next question will be from the line of Mani Foroohar with Leerink Partners. Ryan Mcelroy: You have Ryan on for Mani. Congrats on the quarter. Can you just talk a little bit about the pace of new PFIC adds that you guys saw in the third quarter compared to the second quarter. I know you talked a lot about genetic testing and new patient diagnoses. And then maybe more broadly, as you guys start to see consistent positive cash flow and you have several launches on the horizon. Maybe just talk through your BD strategy about adding more products to the pipeline. Christopher Peetz: Yes. Thanks for the question. I'll turn it over to Peter to jump into those. Peter Radovich: Yes. In terms of the pace of PFIC adds, it continues to be healthy. It continues to come from a broad patient population, everything from infants to adults that we've kind of commented on that is a dynamic where the paradigm is really being changed with adult providers to think about genetic cholestasis as kind of a clinical entity to be suspicious about. So that's kind of an educational effort. And some of the major academic medical centers are on board with that, and they're looking into genetic causes of cholestatic liver diseases in the patients they can't explain with other diseases, but most aren't, right? So that's just kind of a gradual effort and -- but it's continuing to bear fruit in Q3. Oh, BD, yes, do you want to... Christopher Peetz: Sure. I mean the thing we'd say on BD is since the beginning of the company, that's really been at our core is looking for underappreciated programs. So we continue to do that and expect to always be active doing that. But we're in just a fantastic position where there's no urgency and no need. So we have a very high bar. And as you can see from the programs we've brought in since the start of the company, and look for good value creation opportunity. So that will continue to be the standard we take going forward, and plenty in the company to grow and build and optimistic about adding more down the road. Operator: Next question will be from the line of Mike Ulz with Morgan Stanley. Rohit Bhasin: This is Rohit on for Mike. Just with the recent linerixibat PDUFA announced for GSK, how do you see the competitive dynamics playing out in PBC? Christopher Peetz: Rohit, thanks for the question. I think two overarching things to think about for the competitive landscape in PBC. One is just kind of a reminder on lines of therapy and where the volixibat program plays. And in the VANTAGE study, there is no baseline alkaline phosphatase criteria. So our program incorporates both first and second-line PBC settings. So those that have stable alkaline phosphatase on UDCA that likely wouldn't be a treatment candidate for some of the PPARs that are recently launched, but still have ITCH. That's the candidate for volixibat study and what we expect ultimately volixibat marketed treatment. And then with respect to linerixibat as a competitor, we're very excited about the interim data that we saw from the VANTAGE study and what it means for the dose level that was selected. The placebo-adjusted difference that we saw on ITCH in that data set was striking, it led to breakthrough designation. And It's really everything that we had hoped to see from all that we've learned about dosing of this mechanism in these settings. So quite excited about the competitive profile of volixibat given that highly active dose level. Operator: The next question will be from the line of Jon Wolleben with Citizens. Jonathan Wolleben: Wondering if you guys are anticipating seeing similar disease-modifying effects over time with volixibat as you saw with LIVMARLI in PSC and PBC? And if so, what would be the time frame? And do you think that would be an important consideration for adoption and use over time? Christopher Peetz: Jon, thanks for the question. I mean, the overarching first thought there is the first readouts here, we think are probably too soon to be looking at that and focused on the ITCH endpoint, and really see that as the -- that's the launch profile. But I'll turn it to Joanne to talk through some of what we'll be looking at and what we'll be able to see over time from the program. Joanne M. Quan: Yes. Thanks for the question. As Chris alluded to, the whole discussion, especially with the regulators has been around how do we get something in PSC approved. And clearly, that's with pruritus -- with the pruritus endpoint. At this point, in the field of PSC, that's really the only approval endpoint. Obviously, we'll look at other things. Look, longer term, we do expect those types of endpoints may take quite a long time to evolve. We'll continue to follow these patients. And obviously, we'll continue to engage with the agency in terms of appropriate endpoints. But we do think a concrete path forward is with pruritus, and we're pretty confident in terms of the ability of volixibat to affect that in a positive way for patients. Operator: And with no further questions on the line at this time, I would like to hand the call back to Chris Peetz for some closing remarks. Christopher Peetz: Great. Thanks again, everyone, for joining us today and for your continued support. We look forward to updating you next quarter. Good afternoon. Operator: This will conclude the Mirum Pharmaceuticals Third Quarter 2025 Financial Results and Business Update. Thank you to everyone who is able to join us today. You may now disconnect your lines.
Operator: Good afternoon, and welcome to AudioEye's Third Quarter 2025 Earnings Conference Call. Joining us for today's call are AudioEye's CEO, Mr. David Moradi; and CFO, Ms. Kelly Georgevich. Following their remarks, we will open the call for questions from the company's publishing analysts. I would like to remind everyone that this call will be recorded and made available for replay via a link available in the Investor Relations section of the company's website at www.audioeye.com. Before I turn the call over to AudioEye's Chief Executive Officer, the company would like to remind all participants that statements made by AudioEye management during the course of this conference call that are not historical facts are considered to be forward-looking statements. The Private Securities Litigation Reform Act of 1995 and provides a safe harbor for such forward-looking statements. The words believe, expect, anticipate, estimate, confident, will and other similar statements of expectation identify forward-looking statements. These statements are predictions, projections or other statements about future events, that are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ because of factors discussed in today's press release and the comments made during this conference call and in the Risk Factors section of the company's annual report on Form 10-K its quarterly reports on Form 10-Q and its other reports and filings with the Securities and Exchange Commission. Participants on this call are cautioned not to place undue reliance on these forward-looking statements, which reflect management's beliefs only as of the date hereof. AudioEye does not undertake any duty to update or correct any forward-looking statements. Further, management remarks today will include certain non-GAAP financial measures. A reconciliation of the most directly comparable GAAP financial measures to these non-GAAP financial measures is available in the company's earnings release or otherwise posted in the Investor Relations section of its website at www. audioeye.com. Now I'd like to turn the call over to AudioEye's Chief Executive Officer, Mr. David Moradi. Sir, please proceed. David Moradi: Thank you, operator. I want to begin by highlighting our record third quarter results. We have achieved 39 straight quarters of record revenue with $10.2 million in revenue. In the third quarter of 2025, we also achieved a record $2.5 million in adjusted EBITDA, up from $1.9 million sequentially. The adjusted EBITDA margin was a record 24%. We expect a significant increase in fourth quarter ARR revenue adjusted EBITDA and adjusted EBITDA margin. As you may recall, we have made significant R&D and go-to-market investments in our Enterprise channel. And we are now seeing the rewards. In the third quarter, we had one of the best quarters in new business in our history, including contributions from the EU. This momentum has continued into the fourth quarter with many deals already closed in the EU and U.S. We currently have several late-stage deals with ARR over $100,000, and in EU and the U.S., which would imply a record quarter in new business ARR based on historical close rates. Our partner and marketplace channel also continues to ramp in anticipation of the DOJ Title II rule, which begins to take effect in May 2026. Our biggest partners in the government and government adjacent spaces contributed significantly to partner ARR growth this quarter. We believe there is significant additional runway for these partners to further expand in 2026. As discussed last quarter, we opted to migrate customers acquired from small acquisitions to eliminate duplicate systems and processes, which should further improve margins in the fourth quarter and into next year. The integration of these customers into the AudioEye Core platform is on track to be completed this quarter. As we finalize attrition from customer integrations this quarter, we expect our reported results to reflect ARR acceleration in our core direct business and growth in our reseller revenue. There have been significant recent advancements in AI which we are very excited about. One recent advancement is the combination of the open source Playwright framework with the Model Context Protocol or MCP. Using Playwright MCP enables large language models to integrate with websites and for AI agents to perform tasks like humans. Things like interacting with buttons, billing in forms, scrolling, et cetera. Instead of analyzing code statically, an AI agent using Playwright MCP would navigate using the accessibility tree, the same structured data that screen readers for people with disabilities use. The key change is that it uses a site accessibility tree rather than the Document Object Model or DOM. Since Playwright MCP uses the accessibility treat, an AI agent using this framework should be more efficient when factoring in compute and LLM token usage, especially at scale. We also see significant potential for Playwright MCP and our product and expect to further improve our industry-leading detection and accuracy. Based on an analysis of 1,500 legal claims, our solution is already 300% to 400% more effective than competitors. We are excited to further improve the detection accuracy and scale of our software with Playwright MCP. These product advancements should drive further margin expansion and cash flow as we head into next year. As we generate more cash, we believe that in addition to M&A, stock buybacks can be an attractive way to deploy cash. In the third quarter, we repurchased approximately 154,000 shares, bringing our total to roughly 300,000 shares in 2025. Moving on to guidance. For the fourth quarter, we are guiding revenue between $10.45 million and $10.6 million. For the fourth quarter, we also expect to generate a record adjusted EBITDA of $2.7 million to $2.8 million and adjusted EPS of $0.21 to $0.23. We are narrowing our 2025 full year revenue guidance to $40.3 million to $40.4 million and refining our profitability guidance towards the top end of the range with adjusted EBITDA of $9 million to $9.1 million and adjusted EPS of $0.72 to $0.73 per share. Based on our expectation of adjusted EBITDA margins in the upper 20s in the fourth quarter, we expect to generate an annualized adjusted EPS of nearly $0.90. We are very excited about ARR growing significantly and the operating leverage in our model. We continue to have an aspirational goal of increasing adjusted EBITDA and adjusted EPS by 30% to 40% annually for the next 3 years. I'll now turn the call over to AudioEye's CFO, Kelly. Kelly Georgevich: Thank you, David. As David discussed, revenue again hit record levels with Q3 2025 revenue at $10.2 million, up 15% over the comparable period of prior year, and an increase of $370,000 over the second quarter of 2025. The third quarter marked our 39th quarter of record revenue. Annual Recurring Revenue, or ARR, at the end of the third quarter of 2025 was $38.7 million, a $2.5 million increase over the end of the third quarter of the prior year and a $500,000 increase from the end of the second quarter of 2025. Our two revenue channels are continuing to generate strong results with high year-over-year and annualized sequential growth. Overall, the enterprise channel grew around 26% over the comparable period of the prior year, and the partner and marketplace channel grew around 7% over the same period. In the third quarter, the enterprise channel contributed around 45% of revenue and 42% of ARR and the Partner and Marketplace channel contributed around 55% of revenue and 58% of ARR. The Partner and Marketplace channel includes all revenue from our SMB-focused marketplace products as well as revenue from partners to deploy those products for their SMB customers. We saw solid ARR growth in this channel in the third quarter of 2025, driven by additional partner penetration, which will soon be affected by the DOJ Title II rule. We continue to see strong retention rates in this channel. We opted to migrate customers acquired some small acquisitions to eliminate duplicate systems and processes. While the ongoing integration will impact the fourth quarter, we expect ARR growth to reaccelerate Customer integration will be substantially complete in the fourth quarter. On September 30, 2025, our customer count was approximately 123,000 and a sequential increase of 3,000 from June 30, 2025. Customer accounts decreased approximately 3,000 from September 30, 2024, due to one partner renegotiation in Q1 2025. Gross profit for the third quarter was $7.9 million or around 77% of revenue compared to $7.1 million or 80% of revenue in the third quarter of last year. As we highlighted on the last earnings call, with customer migration to the upgraded platform, we expected margins in the second and third quarter of 2025 to temporarily decrease. We are pleased with the margins remain in the high 70s in the third quarter, and we expect gross margin to be up approximately 1 percentage sequentially in Q4 as the migration to the upgraded platform complete. While revenue increased 15% over the comparable period of prior year. On a GAAP basis, operating expenses increased only 2% or around $150,000 to $8.2 million with additional investments in sales and marketing, offset by savings and other departments. Our total R&D spend in Q3 2025 was approximately $1.6 million with approximately $450,000 reflects the software development cost in the investing section of the cash flow statement. This was consistent with Q3 2024 R&D investment. The total R&D spend was about 15% of our revenue this quarter versus 18% in the comparable period of prior year and 17% in the second quarter of 2025. We see increased efficiencies with AI tools and our product development team. Net loss in the third quarter of 2025 was $600,000 or $0.04 per share compared to a net loss of $1.2 million or $0.10 per share in the same year ago period. The decrease was primarily driven by additional revenue, partially offset by increases in sales and marketing expense. Our Q3 2025 adjusted EBITDA was a record $2.5 million, and our adjusted EPS was $0.19 per share. The primary adjustments to GAAP earnings and EPS for Q3 2025 for noncash share-based compensation, depreciation, amortization, interest expense and litigation expense. In the third quarter, we repurchased approximately $1.8 million of shares at an average price of $11.86. During 2025 and through September 30, 2025, we have repurchased approximately 3.6 million worth of shares at an average price of $12.05. Our balance sheet remains well capitalized with $4.6 million in cash as of September 30, 2025 and an additional $6.6 million in debt facilities available. As of September 30, our net debt defined as total debt less cash was $8.9 million, and our net debt to adjusted EBITDA ratio was 0.9x. Free cash flow, defined as $2.5 million of adjusted EBITDA plus $450,000 of software development cost was $2 million in the third quarter. We expect this to continue increasing in the fourth quarter. We will now open the call up for questions. Operator, please give instructions. Operator: [Operator Instructions] Your first question comes from Zach Cummins with B. Riley Securities. Unknown Analyst: This is Ethan Widell calling in for Zach Cummins. To start, it sounds like you're getting some nice traction in the EU. And you've highlighted your partnerships with [ Creode mobility ]. Can you maybe speak a little bit more to the momentum that you're seeing there? David Moradi: Yes. I think we had some deals closed in the third quarter. We have some large deals active in the late-stage pipeline today. And this is before any real enforcement. We expect a substantial pickup once the fines are issued, similar to what happened with GDP. Unknown Analyst: Got it. And then it sounds like you're on track for your platform migration. Can you maybe speak to where you're at as of right now? David Moradi: Sure. Yes, the migration is going well. Most customers are going to be on the new platform this quarter. So we're happy to see that. It's going really well. Yes. Unknown Analyst: Great. And then maybe if I can squeeze the third one in. Just with regard to Title II of the ADA. Have you seen any impact to the rate of compliance adoption there from the government shutdown? David Moradi: No, we're not seeing anything there. Operator: Your next question comes from George Sutton with Craig Hallum. Unknown Analyst: We have Logan on here for George. It obviously sounds like Europe is contributing nicely here. I'm just curious if you can give us anything on how the pipeline has developed over the past quarter. And kind of beyond that, is there anything you can say about close rates or conversion rates kind of relative to expectations or maybe the business historically? David Moradi: It's too early to tell on the close rates. It's going very well in the EU at the moment. Kelly, anything to add on that? Kelly Georgevich: No. I think just that pipeline is also growing in the EU, and we're seeing some good opportunities come up. Unknown Analyst: Okay. Got it. Kind of staying on the same note, one of the things that we picked up is that potentially in Europe under the EAA, there's a bit more emphasis on documentation of accessibility and usability statements, things of that nature. Just curious if you're seeing that also. And does that change anything competitively? Or how does that play into your product offering? David Moradi: That's true. We've adopted accordingly with that. We have all the statements for each member state. . Operator: Your next question comes from Scott Buck with HC Wainwright. Scott Buck: David, could you remind us what average deal size looks like in Europe versus the U.S.? David Moradi: It's a bit higher. It's running I would say about 50% higher than the average field in the U.S., it's more enterprise deals that we're seeing there in upper mid-market. Scott Buck: And what percentage of total revenue in the quarter is coming out of Europe versus the U.S.? David Moradi: In the third quarter or fourth quarter? Scott Buck: Third quarter. But if you want to give fourth quarter, that's fine, too. David Moradi: Do see contribution still mostly U.S. and it's picking up into the third quarter or fourth quarter. Scott Buck: Okay. Perfect. I appreciate that. And then I wanted to ask about the aspirational goal you laid out in the release and the early comments in the call. How do we think of that in terms of what's coming from revenue growth versus gross margin expansion versus ongoing cost discipline. I mean, how do we kind of piece that out? To get to that 30% to 40% on the adjusted EBITDA line. Kelly Georgevich: Yes. I think they're all coming into play. To reach that aspiration all we do need revenue to continue to increase. We see good opportunities with you, resellers, U.S. business demand. So that is obviously a factor, but there is also the gross margin opportunity. And then what we've proven is with revenue scaling, we can still be efficient with costs. So all three of those things are contributing to that aspirational goal. Operator: At this time, this concludes our question-and-answer session. I'd now like to turn the call back over to Mr. Moradi for his closing remarks. David Moradi: Thank you for joining us today. As always, I want to thank our employees, partners and investors for their continued support. We look forward to updating you on our next call. Operator: Before we conclude today's call, I would like to remind everyone that a recording of today's call will be available for replay via a link available in the Investors section of the company website. Thank you for joining us today for AudioEye's Third Quarter 2025 Earnings Conference Call. You may now disconnect, and have a wonderful rest of your day.
Operator: Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the Tempus AI Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Liz Krutoholow, Vice President, Investor Relations. You may begin. Elizabeth Krutoholow: Thank you. Good afternoon, and welcome to Tempus' Third Quarter 2025 Conference Call. This afternoon, Tempus released results for the quarter ended September 30, 2025. The press release, and overview of the quarter and our latest presentation are available on our IR website. Joining me today from Tempus are Eric Lefkofsky, Founder and CEO of Tempus; and Jim Rogers, CFO. Before we begin, I would like to remind you that during this call, management may make forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially. For a discussion of these risks, please refer to our 10-K and other subsequent filings with the SEC. During the call, we will discuss non-GAAP financial measures, which are not prepared in accordance with generally accepted accounting principles. Definitions of these non-GAAP financial measures, along with reconciliations to the most directly comparable GAAP financial measures are included in our earnings release and is available on our IR page. I would now like to turn the call over to Eric. Eric Lefkofsky: Thank you. Q3 was a great quarter all around. Our Genomics volume came in super strong with 33% overall growth with Oncology growing at 27% and Hereditary growing at 37%. We expect Hereditary growth will moderate a bit, although we now expect growth to be in the low to mid-20s as opposed to our previous guide of mid- to high teens. Our genomic growth was across the board. Really all of our assays did exceptionally well. And with MRD reimbursement on track, and our planned regulatory filing of our liquid biopsy xF later this year, we expect additional tailwind in that business, both from a unit perspective and revenue. Our data licensing or Insights business grew 38% in the quarter with an additional $150 million in total contract value, which was a super strong bookings quarter for us across multiple contracts that we highlighted in our letter. This is on top of the multi-hundred million dollar foundation model deal we struck earlier this year. So from a bookings perspective, our data licensing business is just really performing exceptionally well. The combination of growth in Genomics and growth in our data business allowed us to generate positive adjusted EBITDA for the first time this quarter, which has been a 10-year goal of ours and a key milestone. This was inclusive of several million dollars worth of additional expense from Paige, which is an acquisition we made mid-quarter. And even with that, we generated a positive EBITDA and would have been close to $4 million in adjusted EBITDA without Paige. So the business is doing exactly what we had hoped. We now expect for the year to be slightly positive adjusted EBITDA, and that's even with the additional several million dollars of drag from Paige. So all in, the business is performing well. We're growing at a rapid pace, and we're managing our costs to generate leverage in the business, which is exactly where we want to be. With that, take some questions. Operator: [Operator Instructions] Our first question comes from Ryan MacDonald from Needham. Ryan MacDonald: Congrats on a great quarter. Maybe, Eric, to start just on the -- in the Genomics business. Obviously, Oncology portfolio continuing to perform very well and a great increase in sort of testing volumes there. Can you just talk sort of click -- double-click a little bit on sort of what you attribute that the great strength in the volume growth here? Are we starting to see sort of a broader market and industry shift to more NGS testing that's sort of just helping see more patients that are just getting sequenced? Or would you say that you're really starting to see a benefit from the execution changes and sort of the sales coverage here with the broader portfolio? Just maybe what sort of Tempus-controlled success, if you will, versus sort of broader industry and market tailwinds? Eric Lefkofsky: Yes. So at a high level, look, our success is maybe slightly different than some others. So let me just talk about, I think, what's driving ours, and then we can talk about some macro phenomenon. In terms of our success, it's predominantly related to the fact that our sales force is more efficient today than it was a year ago. We made significant changes to our sales force when we brought in our MRD portfolio. Any time you make changes to sales forces in this space, you kind of cause havoc. I think people don't really realize how much havoc you cause. And then we all talk about the havoc after it's been caused. We certainly did cause some havoc, which was unintentional, and it's taken us several quarters to work through that. Our sales force is now kind of efficiently trained and doing its job, and so we're benefiting from some of that. And the second is that our technology, which is really tightly integrated and allows us to deliver highly contextualized comprehensive results to physicians is picking up steam as more and more doctors want us to deliver results that help them treat patients in a more comprehensive and more efficient manner. So we're kind of benefiting from those 2 trends. What I think broadly, people are benefiting from certainly, I think testing volumes have been healthy as more and more biomarkers are identified, people are looking to make sure their patients are tested. And so I think that's a general tailwind to the space. And then I think certainly, there are some companies who might be benefiting from the fact that they only offered solid or only offered liquid and so maybe they're now doing more concurrent testing or maybe there's some sequential testing. We're not benefiting from nearly as much of that because we've had a comprehensive portfolio in place for years now. So we don't see any of those kind of onetime benefits. So our unit growth, at least to us, looks really healthy and durable by virtue of the fact that we're not being artificially propped up by some kind of onetime benefit in either solid or liquid assays that's driving the majority of that gain. Operator: Our next question comes from Mark Massaro from BTIG. Mark Massaro: Congrats on a good quarter. I wanted to ask, Eric, maybe can you just -- there's a lot of interest not only in AI and big data, of course, but there's a lot of interest in MRD testing. And so I was just wondering if you could give us an update on how you're thinking about going to market in the clinic with MRD, recognizing that you have a partner in Personalis. I'm just curious how -- whether or not your team is trained, I believe they are. And just can you give us a sense for how fast you might go assuming reimbursement comes in over the coming weeks or months, how do you plan to sort of leverage your large sales team and go to market against a couple of other pretty significant labs in the space? Eric Lefkofsky: Yes. I mean -- so at a high level -- first of all, at a high level, when you have kind of 27% unit growth, leaving aside the Hereditary business, we're operating at a unit growth, which to us is quite healthy. As we've said historically, and we actually, in our letter, have called out that we expect to grow at about 25% for the next 3 years. So that's a fairly exceptional amount of growth. So given our size and scale. And so we don't want to grow 40% this quarter and then grow 20% in Q1 of next year. Like we want sustained long-term unit growth and revenue growth, and we feel like we're in a really good spot to deliver that. So I wouldn't expect us to like get MRD reimbursement and all of a sudden try to like jam as many tests as we can into the market, whatever that means, and kind of artificially buoy our growth rates. I would expect us to kind of dial that up every quarter in a more aggressive manner as reimbursement makes that more affordable. And we will do that. We have a really good portfolio of both naive products and informed products that span CRC, breast, lung, IO. And we've got a whole bunch of -- which we also talked about in our letter, a whole bunch of new studies being run with even a more sensitive version of our tumor-naive assay. So we're investing heavily in the space as is Personalis, and we have a really nice portfolio of tumor-naive and tumor-informed MRD assays. And we will certainly leverage our large sales force. We also have a subset of that sales force that's well trained in MRD, and we'll continue to dial that up. I wouldn't expect us to do anything unnatural in terms of investments in the sales force or anything unnatural in terms of growth, but it will certainly help us. It's one of the elements of tailwind we have that we believe can propel us to 25% growth in that space for the next 3 years. And if you kind of look at the size of our business and go out 3 years, you're looking at a pretty large Genomics business in Oncology at that point. Operator: Our next question comes from Dan Brennan from TD Cowen. Daniel Brennan: Congrats on the quarter. Maybe just on the new contracts, Eric, the company hasn't really been disclosing, I don't think, new bookings. You had the Pathos deal earlier in the year, but obviously, I think it's been an annual basis. So just kind of walk through the $150 million. You had a lot of details in the press release, all the different customers. But just can you fill us in a little bit about why disclose this? Like kind of why did these come together here? Maybe if you want to update us on what the backlog looks like today since you're giving us the bookings number. Just any more color on this trajectory and whether there was -- were you expecting these this year or next year? Just any more color you can provide since it is a pretty differentiated call out in the quarter this time. Eric Lefkofsky: Yes. I mean -- so I think, first of all, we have -- we try to provide some color in previous quarters as to the size of some of these data deals. So we -- this isn't the first time we call out at a customer level or even at a kind of a dollar level, the size of these deals, including the fact that we called out that with the AZ, Pathos deal with several hundred million dollars of additional data licensing. So we try to call these things out when they rise to a level that we feel like we should call it out. So in other words, if we have a -- if we're just closing contracts in a normal cadence, we might just refer to 1 contract or 2 contracts. If we think something bundles together in a way that's worth calling out and worth highlighting, then we highlight. There's no rhyme or reason to why this quarter versus other quarters. We don't want to be in the habit of every quarter being like, oh, our bookings was $56 million or $152 million or whatever, $212 million because it's just -- it creates noise as if that number somehow translates into revenue in the next quarter, and it doesn't because these bookings, like all of our bookings are over multiyear. So if we sign $150 million in data licensing today, it doesn't mean my revenue next quarter or next year is going to go up $150 million. These are typically multiyear deals, and so we try not to cause a havoc. Our total contract value is in a great spot. We'll disclose it at the end of the year. We told people we'll give that number annually. But it's obviously -- we've already told the world about more than $350 million of bookings in just 2 data points. So you can imagine it's well north of that. And so it's in a really strong spot. And when we do disclose the number annually, it will be -- it's a great number. So it's doing all the things you'd want it to do, which is up and to the right. And at the present moment, we're having really strong success even at our scale, signing good size or large data licensing deals. We called out 4 in this particular release. Some of them are people licensing our analytics software lens. Some of them are people licensing libraries of data or having us get additional data. But these are kind of garden variety deals where people increasingly come to us because our data product is just really differentiated. And you can see that in terms of the scale of our business, the growth of the business relative to our peer set who are all really established companies. I mean if you look at who we compete with in diagnostics, these are not underfunded companies. They're big companies, they're well funded. They've been in business typically way longer than us. To the extent they should have data, they should have lots of data. And so when you look at our data business growing in theirs, the differentiation is the fact that we just have a unique data asset. We've invested in a ton of products around that, including proprietary software and tools and technology. It resonates with people who license our data. They license more of our data on a regular basis. And so we're just pulling further and further apart from anybody else we know of in the data space in Oncology. And I don't see any sign of that slowing down. Operator: Our next question comes from Casey Woodring from JPMorgan. Casey Woodring: So starting off, just congrats on another strong quarter in core Oncology volumes. You had another competitor come out recently and also report strong liquid therapy selection volumes. So just wondering if you're seeing a similar pickup in xF and more of a marketed shift towards liquid? And then as a follow-up here, you talked about plans to submit xF for FDA approval in 4Q, followed by a full PMA submission for xR. Once you get FDA approval for those tests, I assume they would be eligible for ADLT status. So can you just walk through how you're thinking about the potential upside to the Medicare list price for those tests over the next year? And what we could think about as a benchmark really for the price that you'll try to get for them? Eric Lefkofsky: Yes. So in terms of -- so Tempus is unique in that we are now considered strong really across the entire continuum. So we're strong in Hereditary profiling when people are at risk. We're strong in therapy selection, either solid tumor or liquid biopsy, and we now have a strong offering in MRD and monitoring. So people kind of look at us end-to-end. So the interesting thing is we are probably in a pretty good position to see some of these big shifts, and we didn't see that. So we had really good growth in our solid tumor assay. We had really good growth in liquid. Nothing stood out at us as like a fundamental shift from solid to liquid. We had really good growth, certainly year -- prior period over this across both. So that said, I would agree that if with certain studies like, for example, SERENA-6, some of these studies where you might have more repetitive liquid testing, I could see over time, there being some additional volumes to our liquid portfolio that we and others might benefit from. But at the present moment, I haven't seen any seismic shift, although, again, I think the growth prospects for solid are great as more and more doctors order it and liquid probably even better because you're going to benefit from some of that serial testing. James Rogers: And then, Casey, from a reimbursement perspective, as we've said, we have the long-term tailwinds remain there. xT CDx, we ended the quarter with about 30% of the volume that had been migrated. We now have plans to move the majority of that over to the FDA approved or ADLT version throughout 2026. In the letter, you also mentioned that we're submitting xF to the FDA by the end of this year. Obviously, that's a long process, so we can't speak to specific reimbursement levels. But certainly, ADLT typically provides upside from where we're at today, and that will follow by xR. So our viewpoint, total reimbursement on average is $1,600 for the third quarter, so up about $20 sequentially, but still well below parity with our peers. So given kind of these efforts, these regulatory filings, that certainly will help us close that gap. Operator: Our next question comes from Doug Schenkel from Wolfe Research. Colleen Babington: This is Colleen on for Doug. We have a question about Ambry. Ambry continues to perform well and ahead of expectations. We believe that last quarter growth was driven about half by share gains and half by organic expansion. Can you clarify what the mix was this quarter? Also, a competitor reported last night that its Hereditary cancer volumes grew low double digits in Q3 should we, therefore, be thinking about industry growth in the low double-digit range as a reasonable baseline? And within that context, can you elaborate on how Ambry's growth compares to the broader market? And then finally, on Ambry, can you clarify the mix of panels, like larger panels like cancer next versus more targeted panels and how that impacts how we should be thinking about the ASPs going forward? James Rogers: Yes. So I'll start and then Eric can chime in. So similar to last quarter, about 50% of the gain is coming from share gains. As we highlighted in the letter, we expect that to moderate in Q4. And so we think kind of low to mid-20s is a more likely scenario than kind of where we're tracking today. Obviously, in terms of competitors, we can't speak to the share gains that -- or growth rates that others are experiencing. But Ambry continues to do well, both with bringing on new customers that are previously utilizing our competitors and then also continuing to expand kind of share of wallet with existing accounts. Eric, anything you want to add? Eric Lefkofsky: Yes. I mean in terms of the overall market, I would think that -- I think the space is much stronger than people thought. We've said that now on the last several calls. So I think whereas people thought this space might be kind of flat to anemic growth, you're now seeing people be like, oh, yes, we're growing in low double digits, which I think is probably right. We suspect that our Hereditary business will grow in the low to mid-20s, so kind of significantly above that by virtue of the fact that we have kind of the gold standard assays in market today in that space. Look, it is possible that you're going to see growth rate in the high 20s or low 30s. I mean that could easily happen, whether it's in Q4 or Q1 or Q2. And like we have historically, we're going to call out that I wouldn't expect that to continue as a long-term trend. We think a long-term trend, low to mid-20s is -- it feels pretty healthy to us and achievable, and that's where that business is. Do you want to cover the ASP piece? James Rogers: Yes. And then in terms of kind of breakdown of assays, we don't disclose the assay level detail. The ASPs have been pretty consistent over the last couple of quarters, down a little bit year-over-year as one of our larger payers kind of renegotiated agreements. But overall, pretty stable in terms of the Hereditary space. The only thing that will impact ASPs is the rare business is still a relatively small component of overall testing for Ambry, but that comes with a higher ASP. So as that continues to scale, then that will have some impact on ASPs as well. Eric Lefkofsky: And I would just add to that really quickly. There aren't a lot of rare companies out there. I mean, we are now at some size. There's a few others. Obviously, GeneDx is well known. But there's not many. And I do think that we will make real ground over the next 12 to 18 months in becoming a very big player in that space. Operator: Our next question comes from Michael Ryskin from Bank of America. Parth Talsania: I want to follow up on the last one on Ambry, but maybe tied into a bigger picture one. Just if I'm looking at the guide, the raise for the guide for the year looks like you bumped it up effectively for the 3Q beat. But just your comments on Ambry just now, if you're going from mid- to high teens to low to mid-20s, by our math, that adds about $20 million of revenue to the full year. So is there something else that's offsetting it where you're taking something out of the legacy Genomics business or maybe data and services? Just if you could talk about the bridge a little bit and sort of how that rolls up to the full year, that would be helpful. James Rogers: Yes. So I'll start and then Eric can chime in. So the Q3 growth rate was about 32% for Ambry. So we're saying it's going to go from 32% down sequentially into Q4. So not an increase in Q4. Eric Lefkofsky: But even still, let's assume that, to your point, if Ambry is outperforming by x amount of money, call it, $15 million or $20 million a year, and that might equate to a $5 million benefit in Q4. We just take the approach that we've always taken, like we try to look at it and say, if we have a beat, beat and a raise, that's great. But we don't need to get ahead of our skis. There's no benefit. We want to be in a place where we're consistently overperforming, outperforming expectation. And we don't need to artificially raise expectation for no reason, especially when the core business is growing at 30%. If we were growing at 4%, we might be like, oh, God, we need to raise expectation. But our business is growing at a really healthy rate, and we want to constantly orient people around whether we grow at 31% in Q4 or 29% or 30%, that doesn't really matter. What really matters is -- can we deliver 25% growth, not just for the next 3 years, but for the next 10 years? If we can, this will be a very, very big business. So we're architected around long-term growth, not short term. That's how we guide. Operator: Our next question comes from Subbu Nambi from Guggenheim. Ricki Levitus: This is Ricki on for Subbu. There is a bit on this in the letter, but could you share any updates on your work on the foundation model with AstraZeneca and Pathos and maybe what the next milestones we should be looking for here are? And is there any benefit you could speak to from the Paige acquisition in the foundation model work? Eric Lefkofsky: Yes. So the foundation model is just finishing the pretraining phase right now. It's going exceptionally well in terms of like the all the -- you run all these small models, both single models and multimodal models and see how they perform and are they predictive and you're measuring them against kind of these common benchmarks like C index to see how they're doing. All that's going incredibly well. The teams feel great. We're kind of entering the phase of large compute over the next several months. And then when that is done, we begin post training later this year, kind of early 2026, and we expect to have kind of the first versions of the model in Q1. In general, the team is super happy with the progress we're making, both on every side. And so there's no kind of red flags. And I would -- we're in the midst of procuring additional GPU capacity. We feel like this is just an advantage we have, and we want to lean into it and double down. And we're going to address our -- if you look at -- and we called this out in the letter, if you look at Tempus relative to other companies, we're going to look and smell and feel like a tech company in many ways, including lines of code we write, amount of money we spend on cloud and compute, number of software engineers we have on staff. And we're in a world where AI is coming and we happen to be perfectly situated, we think, we're investing in that heavily. And I think instead of us taking our foot off the gas, we will continue to press forward. Paige is awesome in that they have their own foundation model work going on in digital pathology. They have a tremendous team and have made really interesting progress there. Those teams are now connected. They're now part of our foundation model team. We're aggregating some of that data and trying to understand the insights. And so there's just quite a bit of good momentum that comes from that. And we're excited to see where it goes. Operator: Our next question comes from David Westenberg from Piper Sandler. David Westenberg: I'll focus a little bit more on the long term. Generally, the reimbursement system, CPT codes, et cetera, have generally worked on reimbursing for what you're doing in the wet lab. Now you've accumulated a lot of data and you have a lot of strong analysis interpretation. Do you believe that the health care system can effectively start to reimburse for really the challenges around data interpretation and analysis? And do you believe there's still a major -- or do you believe there's still maybe a differentiation with what you do in wet lab with, say, air correction? Eric Lefkofsky: Yes. I mean -- so look, when we think about the business, and if you look at the kind of guide we laid out the longer-term guide of growing at 25% for the next 3 years, we build that guide almost entirely looking at the growth we can see in our diagnostic business and our data business because those are big businesses, predictable, operating at scale, really good growth rates, really good margin. We understand them. We have a very hard time predicting the growth rate of some of these algorithms we have in market, effectively, to your point, this dry lab CPT code stuff. We have a hard time predicting the revenue associated with that because at the present moment, it isn't well reimbursed, if at all. We believe at some point, that will change. We believe at some point, that has to change or the health care system in this country is in danger of real problems. We just can't afford $5.7 trillion a year, growing at 7.5%. Their only solution to this problem is some amount of intelligence, call it AI, that allows us to understand where error is occurring, where waste is occurring, where mistakes are occurring, where we can be predictive and preventative, that's going to have to be paid for or it isn't going to scale. When that's paid for, Tempus is in a really unique position because we have a lot of this. We invest a lot of money embedded in our results, even with positive EBITDA, generating a ton of algorithms. I mean a lot. We have algorithms in digital pathology, radiology, cardiology, neuropsych, oncology, up and down the spectrum. And so when these things are paid for, we can distribute them across the over 5,000 hospitals connected to our ecosystem very quickly. And many of these things are already FDA approved, and so we suspect our path to reimbursement will be very quick if there is a path to reimbursement. And if -- and I've said this historically, if Tempus ever has its NVIDIA moment or whatever that moment is, it's going to be because one of these things starts to get paid for or 2 of them or 3 of them, and they just scale rapidly. So in the wet lab, you might go from $100 million of revenue to $150 million of revenue, that would be a very heavy lift. But in the algo world, you go from $100 million of revenue to $1 billion of revenue overnight because you're distributing zeros in 1s instead of having to kind of collect biospecimens and run a test and distribute it. So it just scales differently. So I'm hopeful they will get paid for. I can't see any other way out of this mess, and we're well situated. Operator: Our next question comes from Mark Schappel from Loop Capital Markets. Mark Schappel: Eric, a question on Paige AI. In addition to their AI pathology applications, I believe they also bring some synergies and leverage to your genomic diagnostics business. I was wondering if you could just provide some additional color or details on how Paige actually complements or works with your diagnostics business. Eric Lefkofsky: Yes. I mean it will work beautifully. Obviously, we just acquired Paige like very, very recently. So some of these things are being integrated now, but I'll give you just one example of ways in which digital pathology can enhance sequencing. So first of all, some percentage of the time sequencing doesn't work. It just doesn't work. You can't sequence the patient. Now it's a low percentage, but it's real. It's called kind of QNS. The results just don't -- they aren't delivered. Or some percentage of the time, you don't get enough material to even run sequencing. You just don't literally have enough material, high enough tumor percentage to even sequence the patient. In these instances, today, we say to a doctor, I can't help you. I don't have a result. But in a world where you have these digital pathology algorithms that can be deployed that can predict the most common mutations that might exist from sequencing, and Paige already has some of these in flight with more coming, one FDA approved, others from the FDA, you can basically return results to physicians even when NGS fails. Likewise, you can imagine a world where a certain number of results are really critical to get very quickly. For example, if a patient has non-small cell lung cancer, you want to know if they're EGFR mutated in 1 or 2 days. And so another benefit of integrating these things is we will be able to make some number of predictions very quickly. So we've always thought that the winning answer here was through this kind of multimodal approach to looking at the totality of data that can be generated for a patient and producing the highest quality data-driven insights as fast as possible. And those are never -- typically never single data modality driven. So we want to live in a world where we're every bit as good at generating molecular data as we are generating digitized pathology data or understanding a CT scan or an MRI or mammography. And if you look at our investments, we make investments along those lines. And I think it will over time, similar to the way if you look at Amazon, let's say, 20 years ago, you may have said, oh, whatever, they deliver books or maybe they deliver books in consumer electronics, and they're not that much better than eBay. But if you start to fast forward 5 years, 10 years, you can see the differentiation by Amazon's ability to kind of give you anything you want instantaneously. And that's because of the investments they made in depth of product and speed of distribution. And we're making similar investments or at least the corollary of similar investments in our portfolio today. Operator: And in interest of time, our final question comes from Dan Arias from Stifel. Daniel Arias: Maybe one on MRD. You guys have been pretty clear about not having plans to spend a bunch of money on big studies, but it does sound like you're investing there. And so to the extent that, that involves R&D, is there data next year that we should look out for? It does seem like we're going to have a whole slew of high-sensitivity assays coming to the market over the next 12-plus months. So I just want to make sure we have our eyes on the right things and updates from Tempus within that discussion. Eric Lefkofsky: Yes. I mean I would say we put out -- and I think this is called out in our investor deck, like it's -- we put out publications posters presentations constantly. I mean it's a crazy number. I just looked at the SITC press release, it's got like 7 papers coming out or something. So we put this stuff out pretty regularly. In terms of big studies, I think we called out in the letter that our -- on the tumor-naive side, we're in CRC today. We're running a non-small cell lung cancer study right now. We likely will go back and look at some of our CRC work. And I suspect you'll get some data coming out about both of those next year. Beyond that, we might bleed into early '27 in terms of other disease areas or other disease indications that we go into. But we expect to have really interesting data in market next year from our tumor-naive assay in both lung and CRC. And we believe we're hitting metrics that are just super powerful on the tumor-naive side that will allow us to kind of go head-to-head against some of the tumor-informed guys by virtue of some of the enhancements we've made internally with -- we have 400 PhDs around here. So it's a fairly large and talented technical team. In terms of tumor-informed, I'll leave it to Personalis to kind of provide you their road map of what's coming and what studies they're doing, but they too are investing, I think, quite heavily. Operator: That concludes the question-and-answer session. I would now like to turn the call back over to Liz Krutoholow for closing remarks. Elizabeth Krutoholow: Great. Thank you. Thanks all for joining us today. We look forward to updating you again next quarter. Operator: This concludes today's conference call. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Niagen Biosciences, Inc. Third Quarter of 2025 Earnings Conference Call. My name is Tamika, and I will be your conference operator today [Operator Instructions] And as a reminder, this conference call is being recorded. This afternoon, Niagen Biosciences issued a news release announcing the company's financial results for the third quarter of 2025. If you have not reviewed this information, both are available within the Investor Relations section of Niagen Biosciences website at www.nigencience.com. I would now like to turn the conference over to Kendall Knysch, Senior Director of Publicity and Public Relations. Please go ahead, Ms. Knysch. Kendall Knysch: Thank you. Good afternoon, and welcome to Niagen Bioscience, Inc.'s Third Quarter of 2025 Conference Call. With us today are Niagen Biosciences' Chief Executive Officer, Rob Fried; Chief Financial Officer, Ozan Pamir; and Senior Vice President of Scientific and Regulatory Affairs, Dr. Andrew Shao. Dr. Shao will join the call for Q&A. Today's conference call may include forward-looking statements, including statements related to the company's research and development and clinical trial plans and the timing and results of such trials, the timing of future regulatory filings, the expansion of the sale of Niagen products and ingredients in new markets, business development opportunities, future financial results, cash needs, operating performance, investor interest and business prospects and opportunities as well as anticipated results of operations. Forward-looking statements represent only the company's estimates on the date of this conference call and are not intended to give any assurance to the actual future results. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties. Many factors could cause Niagen Biosciences' actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These risk factors include those contained in Niagen Biosciences' quarterly report on Form 10-Q most recently filed with the SEC, including results of operations, financial condition, cash flows as well as global market and economic conditions on our business. Please note that the company assumes no obligation to update any forward-looking statements after the date of this conference call to conform with the forward-looking statements, actual results or to changes in its expectations. In addition, certain financial information presented in this call references non-GAAP financial measures. The company's earnings presentation and earnings press release, which were issued this afternoon, are available on the company's website, present reconciliations to the appropriate GAAP measures. Finally, this conference call is being recorded via webcast. The webcast will be available at the Investor Relations section of our website at www.niagenbioscience.com. With that, it is now my pleasure to turn the call over to our Chief Executive Officer, Rob Fried. Robert Fried: Thank you, Kendall. Good afternoon, everyone, and thank you for joining us on today's investor call. For the third quarter, I am quite pleased to share that we delivered yet another record performance with $34 million in revenue, a 33% increase year-over-year and net income of $4.6 million compared to net income of $1.9 million last year. We ended the quarter with $64.3 million in cash and no debt. Our e-commerce business continues to anchor our growth, delivering net sales of $19 million, a 29% increase year-over-year. The distribution business grew 109% year-over-year with $7 million in revenue, while our Niagen ingredient business remained steady, bringing in $6.9 million. During the third quarter, we onboarded a new strategic partner with access to a network of over 8,000 medical and health care practitioners, strengthening the Tru Niagen distributor revenues. This partnership supports our ongoing mission to educate health care practitioners, patients and consumers that Niagen is the most efficient, effective and only legal and highest quality NAD booster available. It also expands our communications engine to amplify awareness of Niagen's 40 peer-reviewed published clinical studies, our new study results and the healthy aging benefits of Niagen. Niagen Plus remains a key strategic focus for the company. In August, Niagen Plus at-home injection kits were launched, now only available to patients with a prescription from their practitioner, but we plan to expand distribution of the at-home injection kits via our own telehealth platform and leverage our e-commerce expertise to reach more patients. Last month, we announced that we added iCRYO to our clinic network and are currently in over 50 of their clinics nationwide. As of today, we have now onboarded more than 1,000 wellness and health care clinics across the United States to offer our Niagen Plus product line. As most of you may have noticed, the NAD market in general continues to expand quite rapidly, yet it is still only met a fraction of its potential. The supplement and injection markets are still at early stages, but there also remain considerable opportunity for NAD boosting innovations in skin care, cosmetics, food, beverage and of course, in drug applications. But it is critically important for everyone to understand that the NAD molecule itself is very large and is a nucleotide, meaning it cannot enter cells directly. It is therefore, ineffective at directly boosting NAD levels. One needs a precursor to enter the cell and then convert into NAD. And of course, the best precursor by quite a lot is Niagen NR. This is likely the reason why NAD IVs take hours to ingest, and they have significant unpleasant side effects. There are no studies that show that oral NAD supplementation increases cellular NAD. Yet, as you know, we have over 40 published peer-reviewed clinical studies in NR. Indeed, last month, the National Advertising Division, an independent advertising review arm of the Better Business Bureau, agreed with this position. Niagen Bio made a formal challenge against one particular company that was making false claims about its products that feature the NAD molecule. The National Advertising Division found that this company lacked human clinical evidence to support claims that NAD itself elevates NAD levels in the body since NAD itself is not bioavailable and there are no published human studies, oral or otherwise, demonstrating that it elevates cellular or tissue NAD. The National Advertising division's decision affirms the importance of scientific substantiation for safety and benefit claims in an industry quite crowded with brands seeking to capitalize on this big trend. At the end of September, the FDA reversed a prior determination that nicotinamide mononucleotide, NMN could not be lawfully marketed as a dietary supplement. We believe this decision will face quite strong opposition, and we expect further challenges. But even when NMN was prohibited from being on the market, the companies that are selling it presently were selling it. They were ignoring the previous FDA decision anyway. And what we see in the month since the decision is the same companies are continuing to sell at a comparable pace. We also will note that we and others have tested many NMN products on the market and most do not meet product label claims. It's important to highlight that the businesses that have been and continue to sell NMN are likely infringing on existing NMN patents that are owned by Niagen Bioscience and another company throughout the global market. So technically, NMN continues to be illegal. While NMN as an NAD precursor does elevate NAD levels, Niagen is the superior scientifically validated, safe and most efficient and effective way to elevate NAD levels. Last quarter, I discussed 2 studies investigating the effects of NR supplementation on patients experiencing symptoms of long COVID. One study conducted by Harvard University examined the effect of NR supplementation on fatigue, depressive symptoms, sleep quality and cognition. This study will be published later this month. There is also another study conducted in Norway that is undergoing peer review. We continue to make steady progress toward Parkinson's disease and ataxia telangiectasia or AT indications. As mentioned last quarter, the Phase III NOPARK clinical trial was completed in June, and we expect the results of that study to be published in early 2026. We are incorporating the FDA's feedback into our strategy for AT and continue to engage with the agency to prepare for an investigational new drug application. In an industry often marked by unverified claims and inconsistent quality, Niagen Bioscience stands apart for its scientific rigor, authenticity, integrity, transparency and innovation. While we maintain portfolio of several NAD precursors, nicotinamide riboside patented as Niagen is the most efficient, effective and extensively researched NAD precursor, as we have said, supported by over 40 peer-reviewed clinical studies with more than 50 patents and used in over 300 research collaborations. I am and I remain proud of the team's commitment to the company's initiatives and of the progress we have made over the years. Our 25-plus year mission is rooted in one goal, delivering scientifically proven solutions to address one of life's greatest challenges, aging. I would like to hand the call over to Ozan to run through the quarter's financials and then on to Q&A and closing remarks. Ozan? Ozan Pamir: Thanks, Rob. It is a pleasure to once again address our investors, partners and team members today and present another quarter of exceptional results. As Rob highlighted, we delivered another quarter of record revenues and continued profitability. This performance we're seeing is a testament to our team's commitment to operational discipline and delivering on our key initiatives and to the growing general awareness of Niagen as a premier solution to boost NAD levels. In the third quarter of 2025, we brought in $34 million in revenue, an increase of 33% or $8.4 million from the same period last year. Tru Niagen revenue grew by 44% to $26 million, a $7.9 million year-over-year increase, driven primarily by e-commerce revenue of $19 million, which was 29% or $4.3 million higher. Our Niagen ingredient revenue was $6.9 million, up 4% or $300,000 year-over-year. Within the ingredients business, we delivered $6.4 million in food-grade Niagen sales to key partners and $0.5 million in pharma-grade Niagen sales. Tru Niagen distribution remains a key growth opportunity, both domestically and internationally. While we anticipate quarterly fluctuations with Watson's, we continue to work closely with them to strengthen Tru Niagen's brand presence in Hong Kong and to launch Tru Niagen in additional Asia Pacific markets. Domestically, we're focused on expanding our distribution through partners with access to health care practitioners and other key channels, which contributed to the growth in the third quarter. As Rob mentioned, our new partner will give us access to thousands of medical and health care practitioners, a key part of our efforts to reinforce that Niagen is the most effective, efficient and clinically validated NAD booster while amplifying awareness of the growing body of clinical research supporting it. Our gross margin improved to 64.5% in the third quarter, up 100 basis points compared to 63.5% a year ago. This improvement was driven primarily by changes in product mix, improvements in labor and overhead utilization and the use of lower cost inventory purchases and production. While we expect that gross margins will improve year-over-year on a full year basis compared to 61.8% in 2024, we expect that gross margins will normalize on a quarterly basis moving forward. Selling and marketing expense as a percentage of net sales improved to 25.8% compared to 27.5% in the third quarter of 2024, reflecting our continued investments in growing global brand awareness of Niagen and doing so efficiently. Research and development expense was $1.8 million, $0.5 million higher year-over-year. Science continues to be the cornerstone of our company as we continue to invest in research and innovation to further our studies and R&D projects. General and administrative expenses totaled $7.1 million, an $800,000 increase compared to the previous year. This increase is primarily driven by increased share-based compensation expense. And finally, our net income for the third quarter of 2025 was $4.6 million or $0.06 per share, a significant improvement compared to $1.9 million or $0.02 per share for the third quarter of 2024. Turning to the balance sheet and cash flow. Our balance sheet continues to strengthen. We ended the quarter with $64.3 million in cash and no debt. For the 9 months ended September 30, 2025, net cash provided by operations was $12.8 million compared to $3.5 million in the same period last year. This year-over-year increase was mostly driven by an $11.9 million increase in net income, along with other positive shifts in working capital, such as higher accounts payable, significantly improved collections on trade receivables and increased share-based compensation expense compared to the prior year period. These were offset by increased inventory levels to support operational expansion. Regarding our full year 2025 outlook, detailed information on key financial metrics can be found in our earnings press release and presentation. Building on the strong momentum year-to-date, we recently revised our revenue growth guidance from 22% to 27% to 25% to 30% year-over-year. We remain confident in our updated full year guidance, supported by our strong e-commerce business and existing and new partnerships in the rapidly expanding NAD market. We're also revising our outlook for research and development expenses to decline as a percentage of net sales while still increasing in absolute dollars compared to our previous expectation of remaining stable as a percentage of net sales and increasing in absolute dollars. This adjustment reflects changes in timing of studies and projects. Finally, we are revising our outlook for general and administrative expenses. We now expect expenses to be up $8 million to $9 million in absolute dollars year-over-year compared to the previous expectation of a $7 million to $8 million increase. This change in G&A expectations is primarily driven by increased share-based compensation expense. One year into my tenure as CFO of Niagen Bioscience, I want to express how proud I am to be part of an organization that not only leads and defines the NAD category, but does so with integrity and professionalism. Looking ahead to 2026 and beyond, I'm confident in our ability to deliver significant returns to our shareholders. Operator, we're now ready to take questions. Operator: [Operator Instructions] Your first question is from the line of Jeff Cohen with Ladenburg Thalmann & Company. Destiny Buch: This is Destiny on for Jeff. I'm curious with the new partnership for IV, I'm curious to know what the uptake is looking like, any feedback you've received from those clinics? And if you're getting any sense, which potentially no, but if you're getting any sense of what the number of patients they're treating per week or month, whatever clarity you have there is great. Robert Fried: It's a little early, Destiny, for that. They just made the purchase towards the end of the quarter. And so they've only just begun the process of reselling the material to their physician network and presenting it. So we don't have any direct feedback from them yet. Destiny Buch: Okay. Got it. And then I'm curious with about NAD, where does this fit in your marketing funnel? Is this something that a potential consumer would see early on? Or is this something that would maybe fall a little later further down the funnel prior to purchase? Just curious. Robert Fried: With regard to NAD? Destiny Buch: Your AboutNAD site. Robert Fried: AboutNAD. Sorry. The AboutNAD website is something that we maintain, but it's an objective website. There are no -- it's not -- it's actually not in any way connected to or part of the purchasing funnel. It's just an information resource for journalists, investors, researchers, people who are generally interested in the true up-to-date science of NAD, -- what are the actual published studies, clinical and preclinical. As you know, as a dietary supplement company, the rules are clear, and we stick to the rules that one cannot imply a claim for a disease state, even if your product cures a disease. So if one conducts a study on a disease and it's actually therapeutic or prophylactic, they're very limited in what they can do with the information. So AboutNAD is a great resource where we can publish all the studies, not just the Niagen studies, but all NAD-related studies. So people can go, go to the search bar, type in any disease indication that they are concerned about or want to know about. And we'll see the studies that have been published to date without any noise of commerce or any attempt to try to push a product. Operator: Your next question is from the line of Susan Anderson with Canaccord Genuity. Susan Anderson: Nice job on the quarter. I guess maybe just a follow-up on the at-home injection. So it sounds like they're at physician offices. Are they at all of the offices, I guess, where you can also go to get the injection in office? And then also, how should we think about that rollout? Will they go -- will you go into other distribution? And then I think you mentioned you're going to put them on your own telehealth platform. So maybe if you could talk about that a little bit. How should we think about that getting up and running? And will this be in conjunction with your own DTC platform as well? Robert Fried: Yes, that's an important series of questions. Thank you, Susan. We do believe that the at-home kits are important for our future. But we are doing it like most things that we do carefully and slowly. And although there is an at-home kit available in the market, one needs to go to a clinic to purchase it at this point in time. And we're still working on the user experience to make sure that it's optimized. So it will be several months at least before it is available on our website. We are developing our own telehealth capability where one could go to truniagen.com or niagenplus.com and get a prescription from a physician online, much like the classic telehealth companies, and it would be delivered to their home via a pharmacy. But that -- we don't expect that functionality to be available for maybe 2 quarters probably, middle of next year. We do expect that some of the existing telehealth companies that are out there right now will be making it available to their customers. There are studies being done presently on Niagen injection as a potential complement to GLP-1. As you know, one of the leading side effects for these GLP-1s are muscle loss. And we believe that there is a benefit to getting NAD with Tru Niagen or with Niagen Plus to muscle density. So we hope that the results indicate that. And if that's the case, we expect to see some of the existing telehealth companies to offer it either in addition or as a complement to their GLP-1 products or as a separate stand-alone anti-aging at-home injection product. We expect that also to be somewhere in the middle of next year. Susan Anderson: Okay. Great. That was actually going to be my next question. So I assume you're already in conversations with them. And I guess, are there multiple other telehealth platforms that you're talking to? Robert Fried: Yes. Susan Anderson: Okay. Great. I guess just looking at Tru Niagen, I'm curious since the FDA's announcement on NMN, have you seen any change in purchasing behavior by consumers, I guess, in your own products, whether that's higher or lower or just changed behavior at all since the announcement? Or do you think it was really kind of a nonevent? Robert Fried: Yes. It's only been 5 or 6 weeks, and we haven't noticed anything yet. We've seen basically the sellers that never stopped selling and continuing to sell it, maybe 1 or 2 new brands that we never heard of. None of the existing established reputable play by the rules brands have entered the space, probably mostly because they know that there's a very good chance that the FDA will reverse this reversal again and because there are patents. And most of the well-managed reputable companies in dietary supplements don't blatantly go against existing patents. The ones that play in the space, the main beneficiaries of that rule are these Chinese manufacturing companies. It's all coming out of China and the smaller earlier-stage dietary supplement companies that generally don't really care much about the rules anyway. And as you know, we've tested many of the existing NMN products on the market and very few of them actually met label claims. Some of them had actually no NMN at all. We think NMN has in its purest form, an ability to elevate NAD, not as well as Niagen, obviously, but it still does it. It's still an effective way to elevate NAD. But at this point in time, we're not seeing any meaningful impact from the change in that rule. Operator: Your next question is from the line of Raj Selvaraju with H.C. Wainwright. Raghuram Selvaraju: Hear me? Robert Fried: Yes, we got you. Raghuram Selvaraju: Sorry about that. A couple of technical difficulties. Just wanted to ask about 2 aspects here. Firstly, I wanted to see if you would be in a position at this juncture to elaborate on the possibility of establishing a stand-alone entity to pursue pharmaceutical Rx applications of nicotinamide riboside, particularly in the context of Parkinson's disease, but not limited to Parkinson's disease. And if you could maybe talk through some of the key decision-making factors that are likely to influence the timing and the nature of the manner in which you might go about establishing a stand-alone entity or venture to pursue those initiatives. Robert Fried: Thank you. It is likely that we will set up a stand-alone entity to manage the pharmaceutical pursuits. As you know, the 2 primary indications at this point are Parkinson's disease and ataxia, AT, telangiectasia. There are other disease indications for which we've been doing studies. Some have been early stage have been published, others are ongoing. But at this point, we're waiting for some of these studies to be completed so that we can see the results. And we've had conversations with a number of pharma companies. And I think that the results of those studies and the results of those discussions will dictate when we exactly set up that separate entity and put all those rights into that entity. We might begin segment reporting in the next quarter or 2. Raghuram Selvaraju: That's very helpful. Also, I wanted to ask about, more broadly speaking, how you are thinking about, in particular, the Niagen Plus -- the Niagen Plus IV applicability in the context of, for example, broader access for GLP-1 medications, the continued prevalence of compounded versions of those drugs. And in particular, if you could perhaps quantify for us, now you've indicated through your press release that this manifestation of the product is available in over 1,000 clinics. Maybe you could give us a sense of how large that segment actually is in terms of the total number of clinics in which the product could be positioned and how long it might take for you to reach sort of steady-state maximal penetration in this segment, please? Robert Fried: The way we view that segment is in 2 groups and then there are subgroups of those 2 groups. There's the injection market and then there's the IV market, and they're distinct markets. The IV product itself will deliver a much higher dose. The injection market does still go straight into the bloodstream, but it's injected at much smaller doses and generally takes place over a period of time. We think the -- both injections and IVs are available in the clinics. And we think there are 2,000 to 3,000 of these IV clinics or wellness clinics in the U.S. But there are also several thousand physicians that administer NAD IVs or injections in office. So part of the reason we did this deal with this third-party company is to begin accessing actual physicians' offices to administer some of these IVs and injections. So we think between the 2 markets, then there is even a potential third market, these Botox clinics, it could be as much as 10,000 individual offices in terms of the clinic market. Again, the clinic market is both IVs and injection. When we endeavor to pursue this business, which is quite different than the dietary supplement business, although it's a similar molecule, but it's a molecule pharmaceutical grade, very, very different supply chain and manufacturing process and approval process. And Ram, as you know, we've also everything we do, we also apply for support patents, which we've done in the Niagen Plus business in addition to all of our ingredient and supplement businesses as well. But it's a very, very different vertical with different operations, although the molecule is quite similar. But when we endeavored to get into this business, we didn't contemplate the at-home injection market, GLP-1s. It took us several years, 5 years or so to get to where we are now in that business. Now we realize that there are tens of millions of people who are willing to self-inject in order to stay thin or get thin. And we're hopeful that there will be many people that are interested in self-injecting in order to stay young or to complement the GLP-1 products that they're injecting with. So the injection market, as we look at it today, appears to be significantly larger as an addressable market than the clinic market or the straight IV market. The other thing we didn't know about at the time when we first entered this was the telehealth market in general. We started this process prior to COVID. So now we see the telehealth market is expanding quite rapidly, and it provides a fascinating service to the average consumer, integrating physicians' prescriptions as well as very convenient and well-priced medications delivered straight to the home. So we see that as a very significant opportunity for Niagen. And from what we see in that telehealth market and in the clinic market, the players in that space seem to so far agree with it as well. One headwind that we've noticed so far is -- we have one very good partner in the compound pharmacy space who compounds Niagen and productizes it. They sell at a fairly high price and then they sell it to the clinics who then sell at an extremely high price. So the price to consumers of getting these IVs at this point is quite high. They've positioned it very much like a Rolls-Royce in this space. We think that until those prices come down to more manageable levels, the volume is not going to reach its potential. So right now, it's not a huge business for us, this pharmaceutical ingredient business that's catering to Niagen Plus. And we don't think it's going to really take off in a significant way until those 2 things happen. Those 2 things being, number one, the injection market, particularly the telehealth market embraces it. And number two, the overall pricing at the clinics and physicians' offices comes down fairly dramatically. Operator: Your next question is from the line of Sean McGowan with ROTH Capital Partners. Sean McGowan: A couple of questions. Maybe first, circling back on the impact of the FDA decision you've talked a little bit about it not apparently having much impact. But has there been any discussion with customers about pricing in any way? Is it having any impact on your ability to hold price where it is? Robert Fried: So you mean the FDA decision on NMN? Sean McGowan: Yes. Yes. Robert Fried: You mean with our ingredient partners? Sean McGowan: Yes. Robert Fried: Most of them understand that those companies are not really that interested in anything other than Niagen. They're always asking us to cut our prices, though, regardless of there's FDA or not. So... Sean McGowan: Why waste a good crisis, right? Robert Fried: Exactly. Sean McGowan: Okay. Got it. And then maybe for Ozan, the gross margin overall was higher than I thought and it was especially higher in consumer, where I thought we would see kind of things drift down a little bit. Can you drill down a little bit more on how, I guess, on normal the margin in the Consumer segment might have been in the quarter when you say that you expect it to normalize? How far above normal do you think those factors that you cited have pushed that margin? So what should we expect in terms of normalization? Ozan Pamir: Yes. So the gross margin in the quarter was driven -- a lot of it was driven by still some of the leftover inventory, the lower cost inventory we had and also improved product mix. But once we are through that lower cost inventory, it will -- it will normalize, but we have also increased our outlook to -- previously was slight improvement. We are now seeing an improvement. We're not able to put a percentage on it, but it will be better than last year. That's what we can say. Operator: At this time, there are no further questions. I will now hand the call back over to our presenters for closing remarks. Kendall Knysch: Thank you, Tamika. A replay of this call will be available beginning at 7:30 p.m. Eastern Time today. The replay number is 1 (800) 770-2030, and the replay ID is (858-4242). Thank you, everyone, for joining us today and for your continued support of Niagen Bioscience. Operator: This concludes today's call. Thank you for joining. You may now disconnect your lines.