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Operator: Hello, and welcome to the Bit Digital third quarter 2025 earnings call. Depending on where you are joining us from, we will begin shortly. During the call, all participants' lines will be open in listen-only mode. If you would like to ask a question at that time, please press star 1 on your telephone keypad. As a reminder, today's call is being recorded. I will now turn the call over to your host, Cameron Schnier of Investor Relations at Bit Digital. Please go ahead. Cameron Schnier: Thank you, and welcome to the Bit Digital third quarter 2025 earnings call. Joining me on the call today are Sam Tabar, our Chief Executive, and Eric Wong, our Chief Financial Officer. Before we begin, I would like to remind everyone that certain statements made during today's call may be considered forward-looking. These statements involve risks and uncertainties that could cause actual results to differ materially from those projected. For a discussion of those risks, please refer to our filings with the SEC, including our Form 10-Q filed today. Our remarks today may also include non-GAAP financial measures. Reconciliations of those measures to the most directly comparable GAAP figures can be found in our Form 10-Q, which is available on our website. After our prepared remarks, we will open the call for Q&A. With that, I will hand the phone over to Sam to discuss our performance. Sam Tabar: Thank you, Cameron. And thank you to everyone for joining us today. The third quarter was our first full period as a focused Ethereum treasury and staking company. Our execution has been consistent with the plan we laid out last year. Since completing the White Fiber IPO in August, Bit Digital has become a more streamlined business. Our strategy is simple: grow our Ethereum holdings and staking activity in a prudent, responsible way that creates long-term value for shareholders. We are not chasing size for its own sake. We are not trying to accumulate as much ETH as possible in the shortest time. Our goal is to compound value per share through disciplined capital allocation, careful risk management, and consistent yield generation. During the quarter, we continued to expand our ETH position. At quarter-end, we held about 122,000 ETH. By October, that number had risen to more than 153,000 ETH, with roughly 132,000 actively staked. That is a fivefold increase since June. It shows that our transition to an Ethereum-centric platform is well underway. After quarter-end, we completed a $150 million convertible notes offering. We used the proceeds to purchase about 31,000 ETH. The structure of the offering was designed to be accretive to net asset value per share. The initial conversion price was set at a premium to our estimated MNAV at the time. The transaction attracted participation from leading digital asset investors and institutional funds. This financing reflects our disciplined approach to growth. We are not pursuing rapid expansion for its own sake. Instead, we raise long-term low-cost capital on attractive terms, then we deployed it directly into Ethereum at what we believe is a compelling long-term entry point. Our staking operations are now beginning to contribute meaningfully to revenue. Staking revenue grew to about $2.9 million in the third quarter, up from $400,000 in the prior quarter. This was driven by a larger staked balance and a higher realized yield price. As our ETH position grows, staking income will become the main engine of our results. We see it developing into a strong recurring source of cash flow. And, of course, the real power of this model shows itself when ETH moves meaningfully higher, something we believe is a matter of when, not if. Turning briefly to mining, we produced 65 Bitcoin in the third quarter, down from 83 in the prior quarter, as we continue to wind down the business in a measured way. Mining gross margin was about 32%, our highest since the recent halving. This reflects improved fleet efficiency as we phased out older hardware and optimized hosting. As of September, our active hash rate was about 1.9 exahash, with an average efficiency of roughly 22 joules per terahash. We expect fleet efficiency to improve to around 19 joules per terahash over the next few quarters as less efficient units are retired. We anticipate active hash rate trending towards 1.2 exahash by mid-2026. Mining remains a small non-core contributor, but it continues to help offset corporate overhead while we complete the transition to a fully Ethereum-based model. As I like to say, mining can be a pretty good business if you never have to spend money on replacing ASICs. Ethereum's fundamentals remain solid. Institutional participation is rising, validated accounts continue to grow, and on-chain activity is strong. We believe ETH's role as the foundation for digital assets, decentralized finance, and tokenized real-world assets becomes clearer with time. For investors, Bit Digital offers an actively managed, yield-generating way to gain Ethereum exposure. We combine the characteristics of a treasury vehicle with the benefits of active capital allocation and staking income. Our experience and scale allow us to manage risk and capture opportunities that passive ETH holders cannot. Finally, discipline is more than a strategy; it is who we are. This quarter reaffirmed that discipline is our competitive edge. We have operated and evolved through multiple crypto cycles as a public company. Drawdowns are nothing new to us. That experience helps us stay focused on durability, not momentum. The third quarter was about execution. We streamlined the business, strengthened our capital base, and delivered strong results while positioning Bit Digital for the next phase of growth. With that, I will hand it over to Eric to walk through the financials. Eric Wong: Thank you, Sam. As a reminder, our financial results continue to consolidate White Fiber under US GAAP due to our majority ownership. Segment breakouts are available in our Form 10-Q. Also note that a portion of our consolidated cash is held at the White Fiber level. Total revenue for the third quarter was $30.5 million compared to $25.7 million in the prior quarter and $22.8 million in the same period last year. Ethereum staking revenue totaled $2.9 million, up over 542% from last year. We earned 644 ETH from native staking and 53 ETH from delegated staking during the quarter. The year-over-year increase in staking revenue reflects both higher Ethereum earned and a higher average Ethereum price. As of September 30, we held approximately 122,000 ETH, of which about 100,000 ETH were staked, representing roughly 82% of total holdings. That balance has continued to grow meaningfully since quarter-end, with 153,500 ETH held and 132,000 ETH staked as of October 31. While new validators take time to enter the activation queue before generating yield, we expect the full effect of this increase to be reflected in fourth-quarter results. Digital asset mining revenue was $7.4 million compared to $6.6 million in the prior quarter and $10 million in the same period last year. We produced 65 Bitcoin during the quarter. Mining margins remained positive despite higher network difficulty and the ongoing wind-down of the fleet. Cost of revenue, excluding depreciation, was $2.1 million compared to $13.8 million in the prior quarter and $15.5 million a year ago. Gross profit was $18.3 million, representing a 60% gross margin compared to 32% in Q3 2024. General and administrative expenses were $33.1 million compared to $19.7 million in the second quarter and $13.7 million a year earlier. The increase primarily reflects higher share-based compensation and consulting costs related to the White Fiber IPO and transition. Standalone Bit Digital G&A is expected to normalize as nonrecurring costs fall off and once White Fiber-related costs are fully separated. The standalone cost structure for Bit Digital has the flexibility to become very lean. Net income for the third quarter was $146.7 million or 47 cents per share, compared to a net loss of $38.8 million in the year-ago period. Results were driven by higher revenue, improved margins, and a $168 million gain on digital assets, reflecting appreciation in our Ethereum holdings. Adjusted EBITDA was $166.8 million compared to $27.8 million in Q2 and negative $19.7 million a year ago. On the balance sheet, we ended the quarter with approximately $179 million in cash and cash equivalents and approximately $424 million in digital assets, consisting almost entirely of Ethereum. Including USDC, total liquidity was approximately $620 million, of which roughly $166 million was held at the White Fiber level. We had no debt outstanding as of September 30. After quarter-end, we closed a $150 million offering of 4% convertible notes due 2030, providing long-term low-cost capital to support continued ETH accumulation. Our plan is to keep total leverage below 20% of ETH holdings. Right now, the figure is above the threshold, meaning we would not increase leverage until the ETH price rises to comfortable levels relative to our notes. That concludes my financial review. I will now hand the line back to Sam. Sam Tabar: The third quarter was an important step in Bit Digital's evolution. We completed our transformation into an Ethereum-focused company. At the same time, we continue to deliver strong financial performance. Our balance sheet is solid, our capital base has expanded, and our ETH position continues to grow. Looking ahead, our priorities remain the same. We will allocate capital responsibly, continue scaling our staking operations, and maintain a strong financial position. We believe that discipline, patience, and thoughtful execution will create the most long-term value for our shareholders. We are also in a unique position amongst digital asset companies. Bit Digital gives investors exposure to two powerful secular trends: first, the growth of Ethereum as the backbone of decentralized finance, and second, the rise of AI infrastructure through our ownership of White Fiber. Our competitive edge is clear. We built infrastructure that earns in all conditions, anchored by the two most powerful story arcs of our time: ETH and AI. White Fiber is establishing itself as a credible operator in the high-performance computing market. We continue to see substantial value in that business. Our retained stake represents a meaningful asset for Bit Digital shareholders. We view our ownership as both strategic and long-term. The lockup on those shares expires in February 2026, but let me state firmly, we will not sell any of our White Fiber shares during 2026. We are confident that the value of this asset will materially appreciate over time. The recent sector-wide drawdown does not affect our conviction. Clarity accelerates adoption. For the first time, we are seeing regulation begin to finally catch up with technology, and Ethereum is winning where it matters most. Every part of modern financial infrastructure now touches ETH in some way. It has become the foundation for stablecoins, decentralized finance, and the next wave of on-chain financial innovation. We believe Ethereum and AI will define the future of digital infrastructure. This is where credibility and capital meet. Bit Digital positions itself early where the puck is going, not where it has been. We are building for participation, not extraction. We own the compute, the capital, and the credibility to help secure the next generation of networks. As we move forward, we will stay focused on what we can control: disciplined capital deployment, prudent risk management, and steady growth in our staking operations. We believe this approach will allow us to compound value per share over time and remain one of the most durable platforms in the digital asset space. Thank you for joining us today, and thank you for your continued support. Operator, please open the line for questions. Operator: Thank you. If you are dialed in via the telephone and would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. A voice prompt on your phone line will indicate when your line is open. Please state your name and company before posing your question. Again, press star 1 to ask a question. If you are in the event via the web interface and would like to ask a question, simply type your question in the ask a question box and click send. We will take our first phone question. We will go to George Sutton with Greg Hallum. Please go ahead. George Sutton: Thanks. Hey, Sam. So one thing that I think would be helpful, the market has gotten a little confused of late with a number of different blockchain alternatives. I would call them Solana, SWE, Ganson, etcetera. Can you just talk about your ultimate belief in Ethereum relative to the rest of the blockchain options? Sam Tabar: Sure. I mean, to begin with, Ethereum has no downtime. And Wall Street is going to back a blockchain that has zero downtime. So when it comes to security and downtime, there is no second best. Ethereum is certainly the very best blockchain for that use case. Of course, Bitcoin is not possible because it does not have smart contracts. And, of course, there is smart contract technology with Solana and the others, but they have downtime. There are also centralization issues. It is pretty clear that Wall Street has already made its decision about which blockchain it is going to back given those reasons that I mentioned. It also helps that from a regulatory perspective, there has been some clarity, and there is emerging clarity about stablecoins. You are seeing regulatory acts like the Clarity Act and the Genius Act making their way up. And a lot of these regulations provide a lot of clarity about the rules on stablecoins. And last I looked, I think a little bit more than half of stablecoins are built on Ethereum. And stablecoins are certainly where the puck will be going, and that is built on Ethereum. So for all those reasons and much more, not to mention there are tens and tens of thousands of developers in Ethereum, that is way more than any other blockchain by orders of magnitude. So, I mean, I can go on, but those are a few reasons why we believe Ethereum is going to be the winner. And, frankly, we think the race has already been largely determined, but perhaps I am biased. George Sutton: So I appreciate the increase in the staking revenue. Do you have a limit on the percentage that you will ultimately stake? Sam Tabar: I mean, for us, the more the merrier. I will let Eric talk about that a little bit. Eric Wong: In terms of the ETH balance sheet, we can stake 100%. And right now, the reason we are about, like, you know, 85% is below 90% is because a portion that we are working with external managers is also being staked via different staking strategies that would generate alpha for the company as well. So that is our target to generate a small yield and just, you know, not just native staking. But beyond native staking, you know, above 3% of the yield. But to answer your question, we can stake 100%. George Sutton: Are you using multiple custodians? Eric Wong: Yes. We primarily are using two custodians. One is Fireblock, and another one is Cactus Custodian by Measures Board. And we have been using them for the past, like, you know, four or five years. It has been working great. Operator: We will go to our next question. Our next question comes from Brian Dobson with Clear Street. Please go ahead. Brian Dobson: Hey. Thanks very much. As you look out into the broader market, thinking about your competition, what do you think sets Bit Digital apart over the next two years? Sam Tabar: I mean, we have just taken a step back. There is SPAT and there is DMNR. These two companies, I have a lot of respect for Joe and for Tom. I was just on a panel with them in Singapore at 2049. We had a very healthy debate with each other. Highly recommend checking out that debate because that question came up. And the short version of my answer was that, first of all, you know, Bit Digital was a successful business. We had Bitcoin mining, which was profitable. We sold all our Bitcoin. We bought into Ethereum at that. We also had a very successful HPC business, so successful that we IPO'd that business, and we now own 71.5% of a real business. So Bit Digital was not some sort of failed business that was a shell that was just picked up and then, you know, did a pipe and shoved a bunch of Ethereum on it. That is not what happened. This was a real company, and this company currently still has a very profitable business, including staking Ethereum on the balance sheet. Also, I mean, except for Joe Lubin, who is the co-founder of Ethereum, I have been involved with Ethereum since 2017. I remember people asking me if I thought Ethereum was basically topping at $300. I kept telling people no. I do not think it is topped. And if you ask me today, I will continue to put the same answer. It has not topped even at $3,000. So I have been involved in those. I also built technology on Ethereum. As a co-founder to Fluid and Navy, the team built something called AirSwap. It was a decentralized exchange. We actually sold that company to Joe Lubin, who is the co-founder of Ethereum, is involved with us. So, you know, we are intimately involved with Ethereum, not just from a price action perspective, but also from a technological perspective, which is why it reinforces our belief and our conviction why this technology over other technologies. And, lastly, I mean, there are many reasons. But, lastly, we are able to do things like unsecured converts. We have been able to financially engineer the purchases of Ethereum unlike any other DAX. There is not any DApp out there that has done unsecured convert. We are the only ones, and we just have that ability and talent, and we are structured in a way where we could do that. And that is really important because if it is a secured convert, well, when the third goes down, creditors can grab your Ethereum, and that is not going to end well for you. But in our case, that cannot happen because it was an unsecured debt. It is not secured by the underlying assets that we have in our balance sheet. So because of our creative ability with financial engineering, which we were inspired by Michael Sandler's playbook, and this was a successful company, continues to be a successful company. It owns a controlling ownership stake in White Fiber, which is an AI infrastructure company. And because we understand the underlying technology very, very well, and the only person who would know that better than me is Joe Lubin, we think that we are very differentiated in many different ways. So we do not think, frankly, being the largest is the marker of success. It is how you do it. And we have done it with unsecured converts. We are structured in a way that positions us to have exposure to digital assets and artificial intelligence in a successful company. And so those for those reasons and more, that is how we are differentiated versus SPAT and BMNR. Brian Dobson: Great. Thanks. And then just as a quick follow-up, the converts and preferreds market are rather demand converts and preferreds has been pretty robust over the past few months. Looking forward, do you have a preferred way of raising capital? I mean, because I will be using secured converts, but I will let Eric, our CFO, talk more about that. Eric Wong: Yeah. I mean, convertible is always on the table, but we do monitor our leverage very closely. And we do not want to overleverage the company. And we had to set up an ATM program for $2.5 billion, but we only use it when we see in the market makes sense or the MNAV makes sense. We are very conservative. And combined, I think that is our way of adding additional Ethereum accumulation. Treasury. Brian Dobson: Excellent. Thank you very much. We will next go to Kevin Dede with H. C. Wainwright. Kevin Dede: Hi, Kevin. Hi, Eric. Hi. Guess first question is, I know you mentioned 1.2 exahash midyear next year, Sam. But I am looking at the hash price at 4 cents now, and I am wondering if that may have reset your calculus a little bit. And maybe you could give us an idea where you think you would be at the end of the year next year. Sam Tabar: I will give that to you, Kim and Eric. I mean, likely in that range. I think it is just a function of sort of a hosting portfolio pruning over time as contracts roll off and then optimizing the newer machines. I mean, there might be space to increase it marginally. Just based on what is available, maybe on shorter-term, you know, one-month extensions here or there if those machines make sense. But, I mean, it is a business generally that is sunsetting, and like, we have never had a lot of conviction historically in being able to model mining economics a year out. So I think we will just evaluate that as it comes. But as it stands, it is going to be a business that methodically winds down. And as older machines are retired, efficiency should improve and should enhance the overall margin profile of that business. All else equal with the Actress. I know that you are working with Fireblocks, obviously, another custodian, but I was wondering if you might offer your thinking on running your own validator nodes and I guess more broadly, how you expect to squeeze more yield out of the Ethereum network? Eric Wong: We work with Figment for our native staking, and we have been very happy with the service, you know, and security as well. I would take this very, very seriously. I, you know, I would throw digital assets based, you know, in the hundreds, million dollars range and, you know, not too far from, you know, billion dollars of digital assets on the management. Another strategy we have is we have been engaging with external, you know, fund managers for strategies that would, you know, generate additional yield beyond native staking. But, again, we are very, you know, cautious about, you know, the risk associated with external partners as well. So we take a very measured way. But, yeah, we are trying to, you know, generate additional yield alpha from the market as well on top of the 3% native staking that is bringing us. Kevin Dede: Eric, is there, I mean, is there any thinking on, you know, internally about perhaps running your own validator nodes? And, you know, taking Figment out of the equation. Eric Wong: I think as of now, we are, you know, pretty happy with working with Figment. But I would say when the operation becomes, you know, meaningful enough, we might consider by this point we are happy with working with the external service provider. Kevin Dede: Could you just sort of walk me through your $2.9 million staking revenue number? How do you get that? I mean, I saw how much Ethereum you generated. Is that just sort of the end of the quarter number multiplied by the Ethereum price, or is it done on some sort of average basis? Eric Wong: It is based on, I think, daily basis for revenue. Kevin Dede: Oh, okay. Sort of a higher-level question. Given on the Ethereum network because, you know, I am still trying to get used to it, the, you know, the complexion of the business has changed a lot. The network has changed a lot, right, with some very large companies acquiring large amounts of Ethereum. And you named a Bitmine, and SharpLink and EtherZilla, the ether machine, and I am wondering, you know, how you might think about what happens to inflation of 1% at most recently. But I am wondering if you think these treasury companies change that inflation pattern. Eric Wong: I am not sure if it is treasury companies would, you know, change the inflation. Because the inflation is more driven by, you know, the issuance of Ethereum from the blockchain itself. And, you know, the activity is on-chain. So the treasury companies would, you know, help, you know, help accumulate and stake the ETH. That would, I think, that would average a lower staking yield. But at this point, you know, the staking yield is pretty stable. So it is not making a very material impact for the overall, like, inflation discussion of Ethereum. Kevin Dede: Okay. Thanks, Eric. I appreciate your color on that. I guess I was sort of thinking that, you know, huge amounts of Ethereum were coming out of the network. And there is not more available to handle, you know, the daily transaction volume. Eric Wong: No. They are all being fixed. And, you know, all the, you know, that were, like, you know, running the evaluators. So that is still in the ecosystem. Money is not being taken out in that regard. Kevin Dede: Okay. Thank you, gentlemen. Thanks for having me on the call. Appreciate it. Operator: Thank you, Kim. Next, we will go to Nick Giles with B. Riley Securities. Please go ahead. Nick Giles: Thank you, operator, and good morning, everyone. This is Henry Hurl on for Nick Giles. For my first question, what are your guys' expectations for consolidation in the digital asset space? And how do you guys think about opportunistic M&A? Thanks. Sam Tabar: It is a good question. We have come across some opportunities ourselves. But we are currently focused on our unique position. And we are very uniquely positioned. We are not just some ordinary, you know, playing the middle of that. We are, you know, we have Ethereum on our balance sheet, which we stake the vast majority of. And we own 71.5% of White Fiber, which is in, you know, the hottest sector, and that will continue. We see absolutely no drop in demand for the building of the data centers regardless of the drawdown in the sector today, regardless of what Jim Cramer has to say. We actually know that there is incredible demand, and we own 71.5% of that. A company that is exposed to that particular demand. So we are uniquely positioned, and there is just no space I would rather be in than digital assets and artificial intelligence. And I do not know of any other publicly listed company that has direct exposure to that. So very uniquely positioned. If we were to buy another DApp, I am unsure how they would add value, really. I think we will just continue to stay the course and buy and buy. And then just as I mentioned today, and it is very important for everybody to note, we will, even though our lockup ends in about three months for White Fiber, we are announcing today that we will not sell that stake throughout next year because our conviction in that company is extremely rock solid high. Nick Giles: Great. Thank you. That is well noted. And then as a follow-up to a previous question, could you guys provide any more guidance on staking yields going forward? Like, how should we think about opportunities beyond the 3% annually that we are seeing today? Thanks. Sam Tabar: I will let Eric answer that question, but I hope that one day, people will dig a little deeper on how people are doing their staking amongst the DApps. You know? It would be interesting to see if fees that, you know, should not be, you know, you guys should look at the fees that are being charged in the various service providers that other DApps are using just to make sure that, you know, it is in line with the interest of shareholders. I could certainly say that with respect to ours, very much aligned with the interest of shareholders. From there on, I will just leave it to Eric to answer your question more directly. Eric Wong: Yeah. I am happy to. Yeah. The native staking right now provides about 3%. I think it will continue to provide 3% for, you know, medium-term, period of time. And the, you know, managers who are working with, we like to see at least, you know, 4% of the yield. Yeah. That is a goal. But we are, you know, evaluating those strategies, you know, and justify the risks return and do, but combined, you know, we like to add this new boost, you know, 10%, new 20% of the, you know, compared to the benchmark of a native state. Nick Giles: Great. Thanks for the time, guys. Operator: Thank you. Mike Grondahl, Northland Securities. Mike Grondahl: Hey, Sam. I wanted to ask you about White Fiber and what would you say have been the two biggest challenges in ramping revenue there? Sam Tabar: Well, look, you know, we are trying to close this deal, this lease, and I wish it was as easy as signing a lease for an apartment. But it is not. There are a lot of moving parts when it comes to a contract that is generationally long and that has this kind of quantum amount to it. So things take a little longer than anticipated. But time is our friend because as time went on, we were able to upgrade the deal on the White Fiber side. So we look very much forward to announcing that deal when it is finally signed. I will not give, I will not discuss, like, a timeline, except to say it is very soon, but I cannot, I do not want to quantify it because I do not want to be crucified afterwards if I get it wrong. So I am glad that everybody is patient. But to answer your question, the challenge with respect to White Fiber is basically how long it takes and how complicated things are in negotiating deals of a certain size. It takes a while, but, you know, for those who are patient, people would be likely rewarded. Mike Grondahl: Got it. And no operational challenges or anything of that nature? Just basically lease complications and signing, it sounds like. Sam Tabar: That is right. That is right. And, you know, we are so blessed with the Enovum acquisition. On the White Fiber side, we did what I think was a gem of an acquisition of a team called Enovum last year. And one of their strengths is they have a retrofit approach to data centers. So they, or their entire careers, they have been doing this for high before they did it for us. They would identify facilities and turn them into tier-three data centers. In fact, the latest what they did for White Fiber was they identified what was a mattress factory last February. They took control of it, I think, early April or late March. And now, they turned it into a tier-three data center, and it is going to start generating revenue now for a very well-known counterparty called Cerebras. And they did that on time within budget, six months. And they used a retrofit model approach to that, you cannot do that with a greenfield build. Greenfield builds take about eighteen months, sometimes two years, and a lot of variables that you do not control in building a greenfield. But because this team that we acquired has this ability to retrofit existing facilities and turn them into tier-three data centers, that is a very special ability that not many people have. We have that team. And so because, you know, now we are looking at North Carolina, which is our flagship facility that used to be one of the largest manufacturing facilities on the Eastern Seaboard, and we are turning that into a tier-three data center. The construction has already begun. And now we are just working on finalizing the business development aspect of it. But, operationally, we are extremely well-seasoned, thanks to the talent, the very deep talent, and the seasoned experience of our team that we were able to acquire and hire across the past year and a half. Mike Grondahl: Got it. Hey. Thanks for that color. Operator: Thank you. And next, we will go to Pat McCann with Noble Capital Markets. Please go ahead. Pat McCann: Hey, thanks for taking my questions. On for Joe Gomes today. First question is, with the goal of becoming the largest public ETH treasury, where do you believe you rank today? Sam Tabar: The goal is to be the best. Size is not really the metric. The goal is how you do it. So we were able to financially engineer the purchase of Ethereum in ways that others have not. That is extremely important. Imagine you become the best or sort of the biggest to your base a secured convert. I would much rather be number two purchasing Ethereum with an unsecured convert than being number one in doing that through a secured convert. I am not saying that is what the number one guy did. But there are sloppy ways to buy Ethereum, and to be number one through a sloppy way is not the way to go. And so we have been very, very careful not to do it that way. And I think that to us is really our north star. How you do it, how you are purchasing Ethereum, how are you positioned, being positioned with owning a successful company like White Fiber, being positioned by buying Ethereum through unsecured converts, being positioned that way to do it responsibly to us is our goal and not to just buy Ethereum hell or high water and, you know, and be number one and then, you know, you can get in trouble after a while. So that is not something that is our goal necessarily. Having said that, we do intend to buy material amounts of Ethereum. We will do it in a responsible way. We have levers that others do not have. And we look forward to reporting in the medium-term future about these Ethereum purchases that we will be doing. And, you know, it is nice to see that Ethereum is down today. You know? People may be selling Ethereum today, but, you know, it is those who have diamond hands that get rich. And we have a very long-term vision of what Ethereum was. I have been saying the same thing since 2017. The same thing in 2018. Same thing in 2019, and I am saying the same thing in 2025. I will be saying the same thing next year in 2026. Ethereum will continue to structurally go up. There will be a lot of cyclical gyrations. But the way that Bit Digital is going to purchase Ethereum will be responsibly and prudently because we do not want to blow up. Pat McCann: Got it. Appreciate that. And then the other question, just if you could comment on the G&A expense this quarter, what went into that? And do you see that going, moving forward? Sam Tabar: Yeah. There is a lot of one-off G&A expenses because of a maybe I should leave that to Cameron and Eric. Go ahead, guys. Eric Wong: I mean, the G&A does consolidate White Fiber, and I mean, like, from the perspective of consolidation, I would generally refer to comments made on the White Fiber earnings call, which would provide a lot of nuance on that side of the business. For Bit Digital, like, there were similarly some nonrecurring items, some elevated marketing spends, some that we would view as discretionary that we could pull back. Like, generally, Bit Digital is pretty flexible from a cost structure perspective, and it can be very lean. And it will become significantly leaner. So, like, on a forward basis, G&A should be materially lower. Cameron Schnier: Yeah. Basically, just a lot of one-offs that happened at the G&A level. On a normalized basis, you will see how the Bit Digital cost structure is actually very light and flexible. Pat McCann: Great. Appreciate it, guys. Operator: And we have no more questions over the phone. Sam Tabar: No more questions? Okay. Well, thank you for joining us today. We appreciate your continued interest and support. We look forward to speaking with you again next quarter. And remember about my comments on Diamond Hands. Thank you, everybody. Operator: This concludes today's call. We thank you for your participation. You may now disconnect.
Operator: Good afternoon, and welcome to Biotricity's Second Quarter Fiscal 2026 Financial Results and Business Update Conference Call. Today's conference is being recorded. As a reminder, this is Biotricity's Second Quarter Fiscal 2026 ended on September 30, 2025. So all figures presented for this period will reflect that end date. Earlier, Biotricity issued its earnings press release for the period, which highlighted financial and operational results. A copy of the press release is available on the Investor Relations section of Biotricity's website and full financials have been filed with the SEC on Form 10-Q and posted on EDGAR at www.sec.gov. Before beginning the company's formal remarks, I'd like to remind the listeners that today's discussions may contain forward-looking statements that reflect management's current views with respect to future events. Any such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in these forward-looking statements. Biotricity does not undertake to update any forward-looking statements except as required. At this point, I'm pleased to turn the call over to Biotricity's founder and CEO, Dr. Waqaas Al-Siddiq. Please go ahead. Waqaas Al-Siddiq: Hi, everybody. I would like to first thank everybody for joining us today. Fiscal 2026 has been a pivotal year for Biotricity, defined by significant advancements and strategic initiatives that have brought us to the threshold of profitability. Our relentless focus on innovation, strategic partnerships and operational excellence have positioned the company for continued growth and scalability across multiple fronts. This is a milestone as it sets the foundation for continued growth. With our approach to operational efficiency and automation, we can continue to scale and grow the business while maintaining margins and costs. We believe we have achieved economies of scale where new revenue will have incremental operational costs but with declining ratios, driving us to a healthy net margin business similar to other SaaS-like businesses. Technologically, we are continuing to hone our AI clinical model while developing next-generation diagnostic technologies. Our focus is to have a suite of diagnostic tools that are available to clinicians for more comprehensive screenings. To that end, we are now in the process of developing a multiparameter cardiac monitor. In preparation of this ultimate goal, we are finalizing Biocore Pro 2, our next-generation cardiac monitor with an expanded set of capabilities, which we expect to file for FDA by end of Q1 next year. During the latest quarter, we continued to expand sales of Biocore Pro, our next-generation cardiac monitoring device, strengthening our industry presence and underscoring our dedication to delivering cutting-edge health care technology. This includes recent initiatives that continue to build momentum, including the launch of major cardiac monitoring pilot programs with several hospital networks and clinics, accelerating our path to breakeven. These efforts are anticipated to fuel the rapid adoption of our Biocore Pro, expanding use across existing and new customer bases. Alongside sales expansion, we are focused on expanding our strategic partnerships to build complementary distribution channels where we are inactive. Recently, this has culminated in market expansion with contracts in the VA and leading home care groups. Additionally, we continue to expand our pulmonary and neurology partnerships with leading home-based diagnostic companies, diversifying our market reach. In summary, our innovation, strategic execution and operational efficiency have positioned Biotricity for sustained growth and profitability. In the coming year, our focus is to expand our commercial team, investing profits into commercial expansion to increase market share and drive top line growth. We expect our growth rate to improve as we invest profits into commercial expansion. We remain focused on delivering innovative high-quality cardiac care solutions and are confident in our ability to continue driving value for our shareholders while improving patient outcomes worldwide. With that, I will turn the call over to our CFO, John Ayanoglou, to provide more detailed financial insights. S. Ayanoglou: Thank you, Waqaas. Let's review the highlights of our second quarter fiscal 2026. Our recurring revenue generated as a result of strong market adoption of our Technology-as-a-Service subscription model as well as our usage-based subscriptions remain robust, driven by the popularity of our FDA-cleared cardiac monitoring devices, especially the next-gen Biocore Pro, which features cellular connectivity. Atrial fibrillation, a primary contributor to strokes, remains a significant focus for our business. Biotricity has already monitored and recorded well over 2 trillion heartbeats, improving patient outcomes for patients with atrial fibrillation, increasing their chances of earlier medical intervention. This is not only an improvement in patient outcomes, it also has the propensity to deliver significant health care cost savings for both patients and the broader health care system. For the second quarter of fiscal '26 ended September 30, 2025, revenue increased by 19% compared to the corresponding prior year period to $3.9 million from $3.3 million in the prior quarter. This growth is reflective of our strategic initiatives and directly impacted by our focus on continual technological advancement. We see further revenue growth in our sales pipeline in coming quarters and are optimistic about delivering those future results, which reflect the fact that our latest flagship device is a best-in-class device geared towards use in hospitals and large clinics where we continue to penetrate effectively. Technology fees accounted for 89% of the quarter's total revenue, reflecting strong customer satisfaction and retention and quality support services. Gross profit for the quarter totaled $3.2 million, up 29.4% from $2.5 million of the prior year period. Our gross profit percentage improved 660 basis points to 81.9% for this quarter, up from 75.3% in the corresponding prior year quarter. This increase is attributable to the expansion of our recurring technology fee revenue base, efficiencies gained through our proprietary AI and improvements in our monitoring and cloud cost structure. As part of our sales initiatives, we continue to search for opportunities to expand our geographic footprint. We serve thousands of cardiologists across hundreds of centers. Our in-sourcing business model allows these cardiac medical professionals to have direct control over our services, enhancing efficiency and enabling broader market penetration. Our business development initiatives include expansion into other verticals that are ancillary but fit naturally with our core business. We continue to investigate those types of opportunities for the future. Operating expenses for the second quarter were $2.9 million compared to $2.8 million in the same period last year, which is a 5.1% increase. Our SG&A expenses increased by 2.5%, a comparative additional spending of over $56,000 for this quarter, though we added to our R&D expenses, increasing those by $84,000. As previously discussed, we have strategically transformed our sales force to increase efficiency. Our external sales team is focused on longer sales cycles in larger accounts, including independent hospitals and GPO networks. We are contracted under 3 of the largest GPO networks, which gives us coveted access to sell into more than 90% of hospitals in the U.S. All of these positive improvements in revenue growth and operating efficiencies through the use of AI and other automation as well as proactive cost management have allowed us to continue to achieve positive free cash flows, defined as the cash from operations that is available to pay interest and dividends. And we've done this for the last 5 consecutive quarters and has been set on a path to achieve profitability in the next few quarters. In fact, we're pleased that this quarter, the second quarter of fiscal 2026 is the second consecutive quarter of Biotricity in which it has achieved a positive EBITDA. This is an important milestone and indicator that we are nearing full profitability. The company achieved EBITDA of $373,000 this quarter, which corresponds to $0.14 on a per share basis. A reconciliation of our EBITDA and adjusted EBITDA numbers is available in our 10-Q. We are pleased with the progress made in building our technology, obtaining FDA registrations, developing effective sales strategies and implementing cost-cutting measures. The result has been an improvement in operating results of nearly $0.6 million to achieve our second consecutive profitable quarter from operations, which was $274,000 for this quarter. Net loss attributable to common shareholders for the fiscal 3-month period was $772,000 compared to $1.6 million during the corresponding prior year period. On a per share basis, we reported a loss per share of $0.29 compared to $0.73 for the corresponding prior year period. Looking ahead, we remain committed to advancing our business through commercialization of our Biocore, Bioflux and Biocare products. Our tech is truly useful globally, and cardiac is the #1 chronic care condition in the entire world. The growing market interest and demand for our suite of products dedicated to chronic cardiac disease prevention and management reinforce our confidence in our market position. Importantly, our focus on innovation and development continues to yield significant advancements in our remote monitoring solutions for both diagnostic and post-diagnostic products, bringing us ever closer again to profitability. We are excited about the future and confident in our ability to deliver sustained growth and profitability for Biotricity. That concludes our prepared remarks. Operator, please open the line for questions. Operator: [Operator Instructions] Okay. Gentlemen, it looks like there are no further questions at this time. I'd like to turn the conference back to management for any closing remarks. Waqaas Al-Siddiq: Thank you, and thank you all for attending. This has been a fantastic quarter for us as we believe it is the moment we achieved economies of scale. We are confident that we are on the cusp of profitability and expect increasing revenues while maintaining margin. Our focus now is to scale the business, investing in the expansion of our commercial team to drive growth and market share. If I had to distill our message into key takeaways for the next 12 months, they would be as follows: one, our revenue will continue to increase; two, our margins will be maintained; three, we will be profitable and we will invest our profits into commercial expansion to increase revenue and market share; and four, we will continue to innovate. Thank you, and have a great day. Operator: And with that, everyone, this does conclude today's teleconference. We thank you for your participation, and you may disconnect your lines at this time. Have a wonderful rest of your evening.
Operator: Good day, everyone, and welcome to today's QuoteMedia Third Quarter Results Conference call. [Operator Instructions] Please note, this call is being recorded, and I will be standing by. It is now my pleasure to turn the conference over to Dave Shworan. Please go ahead, sir. David Shworan: Thank you, and welcome, everyone. We appreciate you joining us today. Before we begin, I have a brief safe harbor statement. Except for historical information contained herein, the statements made in this call include forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks and uncertainties that could cause actual results to differ materially from those projected. And now we're happy to go through our 2025 third quarter results. 2025 continues to be a very successful year for QuoteMedia. We're growing, and this quarter clearly reflects that momentum. We've delivered a 10% year-over-year revenue increase and revenue rose 5% sequentially from Q2. This is a solid growth. And importantly, it is supported by several new contracts that will be starting next quarter. Looking ahead, we expect this momentum to continue, and we're forecasting even higher growth numbers for Q4. Our pipeline is strong, and we're in advanced stages on several new large proposals. We are busier than ever, both onboarding new clients and expanding our footprint with existing clients. We're also continuing to expand our products and our data across almost every category, and the response from clients has been overwhelmingly positive. I'd like to touch briefly on profitability trends. Our gross margin improved from 46% to 48%, and we expect our gross margin to continue improving as revenue grows and as amortization expenses trend downward over time. The same is true for EBITDA and overall profitability, which we expect to strengthen in coming quarters as the impact of previously capitalized development costs continue to diminish. In addition, our deferred revenue finished the quarter at $2.2 million, which reflects strong contracted business that will be recognized in future periods. We're extremely proud of the progress we're making. The products are state-of-the-art. Our data is comprehensive and proprietary, and we continue to differentiate ourselves in a competitive industry. We're succeeding -- successfully winning business from large incumbents and our market position is strengthening quarter after quarter. It's all very exciting, and we believe that we're extremely well positioned for continued growth -- strong growth heading into 2026. With that, I'll now pass the mic over to Keith Randall to walk us through the financial details for the quarter. And after that, we'll be happy to take any questions. Go ahead, Keith. Keith Randall: Thank you, Dave, and welcome, everyone. I'll start with the income statement. Note that all comparisons are on a year-over-year basis, unless otherwise noted. We had a 10% increase in total revenue compared to Q3 2024 and a 5% increase compared to Q2 2025. Corporate Quotestream revenue increased 18% and interactive content revenue increased 5%. These increases were driven by an increase in average revenue per customer as we continue to attract larger customers and cross-sell additional products to existing customers. Individual Quotestream revenue was relatively flat, increasing 1%. Our cost of revenue consists of fixed and variable stock exchange fees and other data costs and amortization of capitalized development costs. Our cost of revenue increased 6%, mainly due to increased variable stock exchange fees related to our increase in revenue as well as price increases for fixed stock exchange fees. Our gross margin percentage increased from 46% to 48% as the cost of revenue decreased as a percentage of sales. This was due to an increase in revenue as well as a decrease in amortization expense related to capitalized development costs. We expect the gross margin percentage to continue to improve going forward as our revenue grows and the amortization expense continues to decrease as we capitalize less development costs. Our total operating expenses increased 11% for the quarter. Sales and marketing expenses decreased 5% due to a decrease in salary payroll. G&A expenses decreased 25%, mainly due to a decrease in bad debt expense. The decrease was also due to a decrease in office rent expense as we downsized our office space in Vancouver, Canada when our previous lease ended in June. Since COVID, the majority of our development staff work remotely, therefore, we require less office space. Software development expenses increased by 74%. This was due to the decrease in the percentage of development costs capitalized versus expensed as we capitalized 4% this quarter compared to 26% in Q3 2024. The increase in development expenses was offset by the decrease in payroll expense resulting from the reduction in development personnel in December 2024. Our net loss for the quarter was $367,000 compared to a net loss of $441,000, an improvement of $74,000. Our adjusted EBITDA was $378,000 compared to $367,000, an increase of $11,000. While the accounting for development costs has no impact on cash flow, it continues to negatively impact our reported earnings. As previously mentioned, a smaller proportion of development costs was capitalized compared to prior quarters, resulting in a greater amount being expensed immediately. As development costs are amortized over a 3-year period, amortization expense remains elevated due to higher levels of development costs capitalized in previous periods, temporarily reducing our net income. But despite the negative impact of the accounting for development costs, our profitability improved versus Q3 2024. We expect gross margin, EBITDA and overall profitability to continue to improve in future quarters as our revenue grows and the impact of higher amortization expenses related to prior periods diminishes. Please refer to the reconciliation included in our press release for the calculation of adjusted EBITDA. Turning now to our balance sheet and cash flow statement. Our cash totaled $281,000 at quarter end, which was a $304,000 decrease from our 2024 year-end cash balance of $585,000. Our deferred revenue totaled $2.2 million at quarter end. The future costs associated with realizing that revenue is minimal as most of our deferred revenue relates to setup and development work already completed. Those setup and development fees have been deferred and will be recognized in future periods over the service contract to which they relate. Our year-to-date net cash flow from operations was $832,000, while net cash used in investing activities was $1.1 million, primarily due to spending on infrastructure and product development. Going forward, we expect our double-digit revenue growth to continue for the remainder of this year and into 2026. Also, as mentioned earlier, we expect our bottom line to improve as our revenue grows and the amortization expense associated with capitalized development cost decreases. Thank you, and I'll now pass it back to Dave. David Shworan: Thanks, Keith. Okay. We'll now open up the call for any questions. So please let us know if you have any questions. Operator: [Operator Instructions] And our first question will come from Michael Kupinski with NOBLE Capital Markets. Michael Kupinski: Yes, a couple of questions. You mentioned that you believe that there will be an acceleration in the rate of growth in the Q4. And I was wondering if you were referring just to the year-over-year growth or were you referring to sequential growth? You mentioned that you saw 5% sequential growth in Q3. I was just wondering -- just to clarify what you were referring to there. Keith Randall: That was year-over-year in terms of the double-digit growth. Michael Kupinski: Yes. Okay. And then... Keith Randall: We also expect quarter-over-quarter growth as well. Michael Kupinski: Right. But not at the 5% level sequential... Keith Randall: Well, it will be comparable to that -- quarter-over-quarter growth will be comparable -- I'm not sure if it will be exactly 5%, but Q4 will definitely be revenue growth -- the revenue for Q4 will definitely be higher than Q3. Michael Kupinski: Got you. Okay. And in terms of that, can you just kind of give us a little color if that -- if you believe that growth is coming from increased number of customers? Or is that coming from increased average revenue per customer? Keith Randall: Well, it's mostly increased average revenue per customer, but that's new -- that's a little bit deceiving because it's new business coming in the door for existing customers. So basically cross-selling new products to existing customers will account for most of that. Michael Kupinski: Got you. And then in terms of just kind of like the tone of the market and your -- and the competitive nature of the market, I was just wondering if you can just talk a little bit about that. And then if you can talk a little bit about, we went through a period of product development for the company to be a little bit more competitive with the products, and it seems like you're kind of gaining a little traction there. How do you feel about the product suites that you have right now in terms of your competitive position? Are there products that you feel that you may need to invest in to offer in the future to be a little bit more competitive? Or do you feel like your product suites are pretty much very competitive where you are? David Shworan: So the product suites that we have, I think, are very, very competitive. There isn't a lot of investment that we have to make to expand on that. It's more internal. So it's more just doing more with the data. We're doing a lot of work with AI so that it can automate a lot of services that people are looking for because we own all of the data, that's making it perfect. It's making us very, very strong in the industry. But as far as product lines against our top competitors, we are definitely either neck and neck or better than them in many areas. And that's why we're taking away some of their business, which is great. Yes. So I think we're always developing and we're always adding. We're expanding on all kinds of different features and services and product lines and data sets that we're doing. But it's not like it's heavy investment anymore. It's just continuation of expansion. Michael Kupinski: And you touched on my next question. I was just wondering in terms of AI, what are -- how are you using AI? Obviously, you have a lot of opportunities, especially as you look at utilizing some of your data reports and things like that. I was just wondering if you can just kind of give us some thoughts on how you're utilizing AI. David Shworan: Yes. We've been -- well, QuoteMedia has been using AI for probably since the inception of it in some shape or form. So because we're doing a lot of the data collection, data normalization, all kinds of things like that, the AI has always kind of been there behind the scenes doing things for us. But as it gets stronger and stronger now, now we're having it do a lot more. And we actually have an AI department that's building out all kinds of advanced AI tools on top of all of our data for our clients. So it's things like taking our Quotestream platform and having a complete chatbot that you can talk to and you can have it do anything you want, tell you about trades, execute trades, analyze portfolios, all of those things. So we're basically training AI, but having AI use our data for everything. So it's not about where you have ChatGPT where it goes out on the web and it starts hitting websites and grabs information and puts it together for you. This is actually using actual complete fundamental data from us, our corporate action data, our quote data, everything, all of the data from the user. So you should -- the users are going to be able to do everything that they want with AI in all of our products and that's where we're going with it. And in addition, we're doing a lot of data collection with AI, data cleansing with AI, normalization, scoring, sentiment, all kinds of things with AI taking news, turning it into smaller tidbits that are easily ingestible by people, flagging what's going on in their portfolios with their watch list, things like that. So we're working with all of our -- obviously, our higher-level clients. All of our high-level clients have a wish list, and we're working with them kind of across the board to take all of this to market. And we're moving very quickly with it because we've already been working with AI. So it's probably going to be coming out very, very quickly. Michael Kupinski: And if I could squeeze in just one more question. In terms of the churn in the third quarter, was churn very similar to second quarter? Or can you just kind of give us some thoughts about customer churn and how it was relative to maybe the first and second quarter? Keith Randall: Yes, we had very little churn this quarter and last quarter for that matter. Michael Kupinski: And it's very similar. Keith Randall: Yes. I mean I don't have an exact percentage to give you, but I can tell you it's very low. Operator: And our next question will come from Jonathan Jetmundsen. Unknown Attendee: Two quick questions. One is on the cash balance. You guys are cutting it pretty close. So just wondering kind of now that we're a month into Q4, how cash is looking? And is there any risk of needing outside financing this year or early next year until cash starts to build? Keith Randall: Yes, I can answer that. Unfortunately, the way the timing of our funds work is we receive -- we have some quarterly clients that we get in right after the end of each quarter. So the quarter ends are the lowest of our cash balances. And then I think on October 3, we had got in $700,000. So it's just the timing of our cash flow. The end of the quarter is always the lowest. Unknown Attendee: Okay. And then turning to bookings, if you look at end of Q3, taking recognized revenue for the quarter as well as any kind of new bookings on top of that, do you guys have an estimate of what ARR looks like at the end of Q3? Keith Randall: Sorry, repeat that last part, please? Unknown Attendee: Yes, asking if you have an idea of what kind of total booked ARR was at the end of Q3, which should be taking just your recognized revenue plus any new bookings that just haven't started recognized yet? Keith Randall: I don't have that exact figure. But as you know, that like most of our revenue is almost exclusively -- all our revenues are recurring. The only part of the revenue that's not recurring is just the development work that we do, like the setup and development. So that's something we'll look to, I think, maybe to publish in future quarters. But I don't have a -- if you're asking for an exact amount, I don't have it handy right now. Unknown Attendee: Okay. Final question, just really on the sales and marketing and go-to-market. Like how are -- how do you rate the effectiveness of that team in strategy right now? Because just looking at the financials, you guys spend a decent amount on sales and marketing and generate kind of net new bookings each year well below that spend. I'm just trying to understand how you guys think about it and how we can get more efficiency and effectiveness out of the sales. David Shworan: Yes, that's always the game plan. But this -- I think this year has proven that we've done a pretty good job. There's a lot of activity with sales and marketing going on. There's a lot of conferences. I don't know if you follow our LinkedIn, but they're always attending every event in every city that we can go to and meeting with every different firm. So we're doing everything we can as far as sales and marketing. But I mean, they've done well. I mean we've got, what, a 10% increase. And in fact, it's -- if I know the math and what we lost in the previous year, which was probably about 5%, so that's probably 15% increase. In reality of how well the salespeople have done, they're doing very well. And I think we've got a good team. I'd like to expand on that team. I'd like to get into some more cities. But yes, we're monitoring it all and working -- it's a big team approach, and they're closing some pretty big deals now. So things are going well. Operator: And our next question will come from Ankur Sagar. Unknown Attendee: Congratulations to you, Dave and Keith, I think, at least getting back on that growth trajectory after your last year's efforts. I just have a couple of questions. On the press release, I think it was mentioned about some large or major new contracts that will start contributing in Q4. On those -- if you could just shed some light on these larger contracts on what sizes and products these are? And have they contributed anything in these new contracts in this Q3? Are they just net new? Keith Randall: I can address that. So -- we had some larger ones. I'm not going to get into the exact dollar amounts from some of our larger -- and this is like new statement of works for existing larger customers. So some of that revenue has started in Q3. And then the remainder of that will start in Q4 or possibly even Q1 of next year. Unknown Attendee: In terms of the size, are they just -- if you were to look at the annual contribution, both the development cost and the ARR, are these like 7 figures? Keith Randall: Combined, they approach it, but individually, no. So -- but we have other deals that are in the pipeline as well. Unknown Attendee: So based on these and the pipeline that you have, you expect to continue on this growth trajectory. Would that be fair to say? Keith Randall: Yes. We think... David Shworan: That's what we predict. Yes, that's what we're predicting. But I mean, it's also because we have a lot of new ones like actually brand-new clients on the go right now. I mean, Keith is referring to we closed a whole pile of new deals. But as far as the largest ones, we're -- new statement of works or new purchase orders from our -- some of our largest clients where they expanded with us and they went into other divisions and powered other services and platforms and things like that. So obviously, the bigger the firm -- when you're working with a multibillion-dollar firm, they have lots of different places that we can do business with them. So we've been expanding in all those areas. But we also have some more of those in the works right now. Unknown Attendee: Okay. Okay. And how much of that growth, Dave, is within the existing clients? As you mentioned, you work with these large clients where you get a deal in one area and then you're able to sell into and work with them on other areas? Or are they're just net new customers? What portion of growth is net new customers and the other way with existing customers? David Shworan: Well, as far as this last quarter, I mean, it all depends on what the quarter holds, right? Sometimes there's -- you're closing more new deals and sometimes all of a sudden, one of your largest customers comes along and says, I want to spend another $1 million with you. And then all of a sudden, you jump that way. But I mean, we're always working on both. So what percentage, it's hard to say. It's -- I don't even know the numbers of percentages because it fluctuates, right? Like we might sign a big deal with an existing customer right now and then next week, we might sign a big deal with a brand-new customer, and they kind of even out. Unknown Attendee: Okay. And then one for you, Keith. In terms of this development cost capitalization, I mean, when do you expect this to be done with this or at least get to a normal level, you think where it should just be reflect the true profitability on the income. Keith Randall: Yes, sorry to cut you off. Yes. I mean every -- you can already see that the impact is diminishing. I would imagine that the impact will be -- I haven't really worked out the exact numbers. But by the end of next year, the impact will be negligible by the end of 2026. But each quarter, the impact goes down and down. And if you remove the impact of capitalization of costs, whether it's development or fixed assets, for the quarter. We actually have a positive net income if you remove the impact of those effect -- for the accounting of those capitalized costs. So they really do distort our earnings. But that impact is, like I say, every quarter... David Shworan: And I think the message there is also that we're going to be banking cash because even though the books show these numbers that are financially reported, it's not the reality of the cash flow, right? So as we start banking cash, then we can start to figure out what we're going to do with that cash, whether it's share buyback or acquire companies or different things like that. So we're on the right trajectory now for 2026. Unknown Attendee: Got it. And then on that cash flow, Keith, I know you were mentioning but to the prior caller that with -- how it works, I mean, quarter end, your cash flow is all -- shows down on the cash on the balance sheet. But with this double-digit growth that you're expecting, despite that the way it works quarter end, you expect to be -- generate -- be free cash flow positive in Q4 and then going forward? Keith Randall: Cash flow positive, I think that's fair to say. Yes, we're always subject to timing of when we receive funds. But yes, no, it's just -- it's unfortunate that the timing of our funds, we have a lot of large clients that pay quarterly and it's at the beginning of the quarter. So by the end of the quarter, like I say, like I previously mentioned, our cash balances are at their lowest at the end of each quarter. Unknown Attendee: But there is also the dynamics where you generate the cash and there's also you invest into the development of it. I mean the cost -- I mean you expect probably next year those development costs to be less. Any expectation or comment you could share on that? David Shworan: I don't -- lots of people ask me that if I'm going to decrease development costs. I think I don't really want to decrease development. I want to keep development as kind of a flat, like so where we keep our developers and they're working. We have lots and lots of things that I want to do and where we want to go. But it's not growing the development cost. I think that's the main thing is we want to use all of those people. They're very well versed in our systems. We've got good teams. Everybody is creating what's needed. And when a company comes along, and you have to realize when these big companies come along, they've got lots of money and they want it done a certain way, and I want to have the people to do it that way. And that's how you do it. But then you lock them in for many, many years. And once they're in, they're in, and you just keep growing it. Unknown Attendee: Okay. One last one for you, Dave, not putting you -- I'm not trying to put you on spot, but still we're showing top line growth. Based on your commentary, the outlook looks pretty good. I mean you will have double-digit year-over-year growth going forward. But the company's valuation just doesn't reflect that improvement. Any thoughts you could share on what things you could probably do, as you mentioned about share repurchase or anything -- any other instruments you could use? David Shworan: Yes. I mean I think it's mostly just doing more IR activities and next year going to more conferences and getting the word out, just doing the best we can that way. We needed to pull out of that bad year, and we did. So I'm glad I didn't spend a lot of time last year doing those events because I would have been talking to a wall. But now I think we've got the story again. Everything is looking great. We're projecting really good growth. We've got bigger clients we can announce next year. So it's perfect timing to get the ball rolling and get investors to know about QuoteMedia. I think we're so thinly traded. And our stock bumps up and down. I mean it dropped today, but somebody just [ trades ] some shares out there and the next thing you know it's down, but it could be up tomorrow. I mean it's just we're so thinly traded. We need to get more investors. So that's the target for next year. Keith Randall: And I also think we're negatively impacted by our accounting bottom line, which -- because I don't think a lot of people can wrap their head around that. It's the reason for it, that it's the capitalization of development costs. So that's going to work itself out as well. I think that's taking our stock price down. Operator: [Operator Instructions] And it appears we have no further questions. Mr. Shworan, I'll turn the conference back to you. David Shworan: Okay. Well, thank you, everyone, for joining us today. We appreciate your continued support and interest in QuoteMedia, of course. And as always, if you have any follow-up questions, please feel free to reach out to us, reach out to me. And investors@quotemedia.com is an e-mail address we use. And thanks again. We wish you have a great rest of your day. Bye-bye. Operator: And this does conclude today's QuoteMedia Third Quarter Results conference call. Thank you for your participation. You may now disconnect.
John Dolan: The call today includes our Chief Executive Officer, John Lai, Chief Financial Officer, Garry Lowenthal, our Commercial Operations Adviser, Michael Eldred, and myself, John Dolan, PetVivo's Chief Business Development Officer and General Counsel. Following our remarks, we will open the call for your questions. Before we conclude today's call, I will provide some important cautions regarding the forward-looking statements made during the call. Before we begin, I would like to remind everyone that the call is being recorded to make it available for replay. The replay instructions can be found in today's press release available in the Investor Relations section of our website. Now turning to our results for the quarter. Our growth in product momentum continued into the second quarter as we further expanded the use of our flagship animal osteoarthritis veterinary medical device, Spring with OsteoCushion technology. We have also advanced the commercialization of PRECISE PRP, our new breakthrough regenerative health product that can be administered alongside Spring. Precise PRP for dogs generated increased revenue during the quarter as its adoption continues to spread in the canine market. We expect the PRECISE PRP revenue to further increase at an accelerated pace with the recent reintroduction to the equine market of PRECISE PRP for horses. We have also continued to advance the research, development, and use of other technologies we have gained from new major partnerships formed over the last several months. These innovative technologies, which include PRECISE PRP, involve diagnostics and medical treatments that are transformative for our platform and particularly for the veterinarians and pet owners we serve. Since the market introduction of Spring in late 2021, it has now been used by more than 1,200 veterinary clinics across all 50 states. Now with the recent addition of our first distributor in Europe, which soon followed from our first international distributor we signed in Mexico, we can include several additional international clinics now using Spring. Mexico is a very attractive market for our animal health solutions, especially since the country's veterinary healthcare market is projected to grow at a compounded annual growth rate, or CAGR, of 11% and is anticipated to reach approximately $2.4 billion within the next six years. Personal horse ownership is deeply intertwined with Mexican culture and tradition, which makes the Mexican marketplace exceptionally ideal. The market is much larger, estimated at more than $16.56 billion today and is projected to more than double to $34.8 billion by 2033, growing at a CAGR of 8.6%. In just the UK, where our new European distributor, Nupsila Group, operates, the market currently exceeds $2.6 billion and is growing at a 7.8% CAGR. For each of these markets, their high growth rates are particularly noteworthy given their already very large size. As sales continue to ramp up in Mexico and kick off in the UK, our US distributor network increased their sales by 35% over the same year-ago quarter, reaching $237,000 and representing 75% of our total revenues for the quarter. The growth in distributor sales, combined with the expansion of our in-house sales force and product offerings, drove a 1% increase in total revenue for the quarter, totaling $303,000 and making it one of our best quarters yet. In fact, it was our highest revenue-generating fiscal second quarter on record. On a first-half comparative basis, revenues were up 85% to more than $600,000, marking our best first half ever. This performance reflects the success of our sales and marketing efforts. These efforts remain strongly focused on the large equine market as we continue to expand our larger and fast-growing companion animal market. Our growth has also been driven by a strong performance of our sales and marketing leadership, including April Boyce, our VP of Sales and Marketing, and Michael Eldred, our Commercial and Operations Adviser, as well as several new highly experienced territory managers we have deployed nationwide over the past year and our new team of professional sales representatives and technical service veterinarians who support them. Together, they have been developing deep relationships with the nation's leading veterinary clinics, veterinary corporate entities, consolidators, and distributors, setting the stage for continued strong growth. During the quarter, we were excited to announce the appointment of Josh Rubin to our Board of Directors. He brings to us a wealth of experience in healthcare and life sciences finance, capital markets, and corporate strategy. He currently serves as Managing Director of Life Sciences at Uniti Capital, where he is focused on venture lending to healthcare companies. He previously served in financial director roles with RBC Capital Markets and Wells Fargo Securities. Josh boasts a tremendous track record in the successful execution of multibillion-dollar M&A and capital transactions. His deep understanding of the life sciences industry and strategic insights into growth-stage companies like PetVivo will be invaluable as we continue to grow and expand our market presence in the veterinary markets and begin to explore the introduction of products to the human markets. Now before we get into more of the other exciting recent developments and our outlook for the second half of the fiscal year, I would like to turn the call over to our CFO, Garry Lowenthal, who will take us through the financial details for the quarter. Garry? Garry Lowenthal: Thank you, John, and good afternoon, everyone, on our call. Thank you for joining us today to discuss the results of our second quarter of fiscal 2026 ending September 30. As John mentioned, we had another great quarter with revenues of $303,000. This was an increase of 51% over the first quarter of last year. Our results were up 85% to more than $600,000. Despite the second fiscal quarter being traditionally our slowest quarter of the year, we generated an increase from the previous first quarter. This growth was largely driven by a number of key factors, including our expanded North American distributor network, with their contribution increasing 35% compared to the year-ago quarter, reaching $237,000 or 75% of our revenues. Our expanded in-house sales force also helped drive sales, which include the sales of our new product offerings such as PRECISE PRP. Gross profit totaled $220,000 or 72.6% of revenues, which was an increase of 23% from $180,000 or 89.5% of revenues in the same quarter a year ago. The decreased gross margin was due primarily to the new PRECISE PRP product, which carries a smaller margin as we increase sales mix with this new product offering. Total operating expenses decreased 3% to $2.3 million from $2.4 million a year ago. The reduction in operating expenses was due to reduced research and development costs as well as the strategic cost reduction and restructuring program we implemented last fiscal year. Combined with the increase in sales, the lower operating expenses helped decrease our operating loss by 5% compared to the same year-ago quarter, bringing it down to approximately $2 million. Net loss totaled $3 million or $0.11 per basic and diluted share compared to a net loss of $2.2 million or $0.11 per basic and diluted share in the same year-ago quarter. The increased loss was due to an increase in interest expense from debt discount as all of our convertible notes converted on September 30. Excluding the $942,000 of debt discount recorded as interest expense, the net loss actually improved 5% to $2.1 million. Net cash used in operating activities increased to $3.8 million from $3.1 million in the same year-ago quarter. The increase was primarily due to the increase in inventory purchases of the company's new PRECISE PRP product line to meet growing demand and trade vendor settlement payments as our accounts payables decreased substantially during the fiscal quarter. Now turning to our balance sheet. Our available cash totaled $768,000 on September 30, 2025, up from $220,000 at the end of our fiscal year ending March 31. The increase was primarily due to finance activities that we conducted during the quarter. Also notably, our total liabilities decreased to $1.1 million from $5.1 million just last March 31, 2025, at the end of our fiscal year. This 79% decrease was primarily due to the extinguishment of derivative liabilities related to our convertible notes as well as a massive reduction in accounts payables due to settlement payments with trade vendors and the conversion of all of our convertible notes to common stock on September 30. Finally, I would like to mention that during the quarter, we qualified to begin trading on the OTCQX Best Market. To qualify for the OTCQX, public companies must meet higher financial standards, follow best practices in corporate governance, and demonstrate compliance with applicable securities laws. Furthermore, trading on the OTCQX, we are now penny stock exempt. We believe our uplift from the OTCQB to the OTCQX demonstrates our commitment to transparency, strong corporate governance, and delivering long-term value to our shareholders. We also believe that trading on the OTCQX enhances our visibility within the investment community and provides greater liquidity and accessibility for investors as we continue to execute on our strategic growth initiatives. Now this completes our financial summary for the quarter. John? John Dolan: Thank you, Garry. The growth for the quarter demonstrated the success of our overall strategy for driving greater adoption of Spring, as well as increasing the awareness and acceptance of PRECISE PRP for the treatment of osteoarthritis in animals. PRECISE PRP is a proprietary and revolutionary allogeneic platelet-rich plasma product, or PRP, designed for horses and dogs that was developed by VetStem. PetVivo has been granted the exclusive license to commercialize PRECISE PRP for canine and equine in the United States. PRECISE PRP is a first-in-class off-the-shelf PRP product for use by veterinarians. It is a Leuko Reduce allogeneic pooled freeze-dried PRP that provides a species-specific source of concentrated platelets and plasma for intra-articular administration. Unlike other PRP mechanical kits currently in the market, PRECISE PRP does not require a blood draw or centrifugation, thereby making it a truly off-the-shelf product that is easy and convenient to administer. We have begun to sell this great breakthrough regenerative product under an exclusive licensing supply agreement with VetStem that we signed in February 2025. The combination of Spring and PRECISE PRP has received very favorable reports from veterinarians regarding the ease of use of these products and their effectiveness in the management of osteoarthritis in horses and companion animals. We have continued to work on expanding the awareness of the benefits of both of these innovative products among key decision-makers. In July, we exhibited at the Texas Equine Veterinary Association 2025 Summer CE Symposium held in Marble Falls, Texas. We also attended other smaller industry events during the quarter. At these events, we demonstrated the research-backed benefits of Spring to veterinarians, including leading sports medicine and rehabilitation experts in the veterinary industry. We also had the opportunity to exhibit jointly with VetStem at the 2025 Fetch Kansas City Veterinary Conference held in August at the Kansas City Convention Center. Together with VetStem, we exhibited the PRECISE PRP technology at this conference. These conferences are very important to our marketing efforts as they allow us to discuss firsthand with decision-makers the benefits of administering Spring and/or PRECISE PRP to companion animals. We can discuss with them the anecdotal reports as well as present the positive results from several clinical studies that have been conducted by leading independent investigators. From these events, we usually gain a better understanding of our target market and the types of veterinarians we should be more focused on. This includes vets who specialize in sports medicine, rehabilitation, and/or pain management, as well as surgery. Regarding additional studies, we have completed the accumulation of data from a canine elbow pilot study conducted by Orthobiologic Innovations, a leader in R&D for regenerative and sports medicine. The study was led by two prominent veterinarians, Sherman and Deborah Knapp, and we expect the data to be ready for presentation by the end of the calendar year. Studies like this canine elbow study, as well as our other completed studies related to the management of stifle, cranial cruciate ligament disease, and hip osteoarthritis, continue to play a crucial role in our sales and distribution strategy. Veterinarians, as well as large national and international distributors, generally want to review university or independent entity-conducted research before adding new products like ours to their treatment regimens or distribution catalog. Our internal sales team and outside distributors also use these studies in their commercialization efforts, including related veterinarian training. The studies also help our engagement of new industry partners, such as Veterinary Growth Partners, VGP, with whom we recently joined forces. VGP is a management services organization, or MSO, that supports veterinary practices by offering practice management and marketing tools, consulting, and vendor relationships. VGP is committed to actively promoting Spring and PRECISE PRP through their expansive member network of more than 7,300 veterinary hospital clinics across the United States. As I mentioned earlier, during the quarter, we entered into the European marketplace for the first time with the engagement of UK-based Nupsila Group. Nupsila Group is a leading UK-based veterinary group that operates as both a veterinary wholesaler and referral provider, with a specialization in musculoskeletal health, orthobiologics, and regenerative medicine for companion animals and horses. Nupsila has committed to inventory, market, and promote throughout the United Kingdom our Spring with OsteoCushion technology. An initial order was shipped, and the official education and training of Nupsila's sales force is scheduled to begin in mid-January. During the quarter, we also advanced our new strategic collaboration with Commonwealth Markets, the syndicated ownership group behind the 2023 Kentucky Derby winner, Meij, and the 2022 Dubai World Cup champion named Country Grammar. Our partnership with Commonwealth has been centered on the clinical use promotion of Spring and PRECISE PRP. As part of our collaboration, Commonwealth has integrated Spring and PRECISE PRP into the care protocols of a number of their top-tier thoroughbred stables. In this environment, they are using these technologies as both a preventative measure and/or a management solution to promote joint health and extend performance longevity. It is also being used to support recovery after high-impact training and racing. In addition to this clinical implementation, we are also exploring co-branded content, educational initiatives, and industry outreach to elevate awareness around joint wellness to support the broader adoption of Spring and PRECISE PRP across the equine health community. Our unique partnership with Commonwealth, a recognized leader at the highest level of sport, represents a tremendous affirmation of our Spring and PRECISE PRP technologies. Their championship-caliber horses and progressive approach to wellness make them the ideal partner to showcase the benefits of these revolutionary restorative technologies. By combining our clinical expertise and commercial capabilities with Commonwealth's vast network, we can provide more veterinarians with cutting-edge, effective solutions that enhance recovery and long-term soundness in competitive horses. Also during the quarter, we made great progress with our strategic alliance and collaboration with another key partner, Digital Landia, who is a leading pioneer in agentic AI solutions. Following the end of the quarter, we signed an exclusive ten-year white-label licensing agreement with Digital Landia for its patented breakthrough next-generation agentic pet AI technology. Our efforts are now focused on integrating this amazing technology into our platform as a first-of-its-kind global pet care ecosystem. In support of the diagnostic process, it can decipher animal behavior and communication through real-time analysis of vocalizations, body language, and physiological signals captured via a vet's or a pet parent's smartphone camera. Furthermore, the AI system has the capabilities to receive animal medical data such as physicians' medical records, medical imaging, and lab results to assist the veterinarian in diagnosing afflictions and diseases as well as suggesting treatment options. Given how it accomplishes this with an amazing 97% accuracy, Digital Landia's agentic AI presents a paradigm shift in how we understand pets and their physical health. The underlying technology features five patent-pending innovations with nine specialized diagnostic agents accessible to veterinarians for all patients. By aligning our clinically proven therapies with such powerful AI technology, we believe PetVivo is uniquely positioned at the intersection of AI innovation and veterinary care. This agentic pet AI technology also addresses two critical challenges facing the veterinary industry: skyrocketing client acquisition costs and the difficulties in capturing the exploding Gen Z pet parent demographic. We believe the implementation of this agentic pet AI technology has the potential to deliver a 90% to 98% reduction in client acquisition costs, lowering it from $50 to $150 per patient to just $1.50 to $5 per targeted client outreach. It can also simultaneously provide veterinary practices with unprecedented access to the fast-growing market segment of Gen Z pet parents. Also, earlier this week, Digital Landia announced the publication of a comprehensive technical white paper documenting the agentic pet AI framework that will power our new PetVivo B2B veterinary practice platform, which we will market through our wholly-owned subsidiary, PetVivo AI Inc. The white paper validates the technical foundation underlying the platform. It provides veterinary professionals, investors, and industry stakeholders with detailed visibility into the multi-agent artificial intelligence architecture, which will enable transformative clinical and economic benefits for veterinary practices. Given the strength of this report, we expect our PetVivo AI solution to rival mainstream AI applications in terms of adoption rates, and thereby create tremendous visibility for our brands, particularly Spring with OsteoCushion technology and PRECISE PRP. Beta testing continues and has been advancing well, and we anticipate the official commercial launch to take place in the near future. The launch will introduce both Digital Landia's agentic pet B2B and B2C app and PetVivo's new B2B platform. Now for an introduction to a functional Spring-like product, in the first fiscal quarter of this year, we established a strategic partnership with Piezo Biomembrane, a spin-off from the University of Connecticut that is pioneering biodegradable piezoelectric materials designed for implantable and regenerative applications. Through this collaboration, we have been advancing the research and development of revolutionary functional biomaterials that can promote regeneration, restoration, and/or remodeling of damaged or injured tissue and bone in both animals and humans. The combination of these two technologies, Spring and Piezo Biomembrane's piezoelectric material, is creating an exciting new future for PetVivo. One that we believe will be transformative for not only our growth outlook but also for veterinarians and their many precious patients. We have now completed Stage A of our three-phase joint research and development project that successfully demonstrated that materials from our mutual products can be combined into a single offering, which can generate piezoelectric activity that provides therapeutic benefits to animals and humans. Stage B, which is now underway, will determine if combined products can be mass-produced at scale and demonstrate a preliminary indication of safety for administration in animals. This stage is progressing very well to date. The final stage, Stage C, which is expected to begin in the second calendar quarter of next year, will determine the definitive safety and efficacy of the product. Altogether, our latest new technologies have created an exciting future for PetVivo that is transformative to not only veterinarians and the patients they serve but potentially for humans as well. Looking ahead, we expect to see continued strong sales momentum and market penetration for the duration of fiscal 2026 and beyond. In fact, we have never been in a better position to accelerate our growth and expand across high-growth markets. The U.S. animal health market is expected to double to $11.3 billion by 2030. Such massive growth is rare for such an already large industry, and it provides us with amazing tailwinds. For the full fiscal year ending March 31, 2026, we continue to see another year of record growth and improving bottom line as we continue to expand the use of Spring and PRECISE PRP as well as advance our other new products on our expanding medical therapeutics platform. The third and fourth quarters of the fiscal year have been traditionally the strongest, particularly given the increase in annual industry events during the third fiscal quarter, which typically drive greater product awareness and new orders. In fact, given our current growth momentum, we see the fiscal third quarter having the potential to produce another very robust revenue outcome. As we continue to grow and expand over the coming quarters, we will remain committed to advancing the best in pet health solutions, ensuring our products reach more veterinary professionals and pet owners, with our success in these efforts driving greater value for our stakeholders. Now I would like to turn the call over to our Commercial and Operations Adviser, Michael Eldred, to provide us with an update on the company's sales, marketing, and operations efforts as well as some other exciting events occurring in the company. Mike? Michael Eldred: Thank you, John. I hope everyone on the call had a wonderful week. Overall, I am extremely pleased with the sales performance, and our Vice President of Sales and Marketing, April Boyce, is doing a wonderful job enhancing our digital marketing initiatives. We are now expanding our sales team and adding a few more inside sales reps so we can have a stronger team out there communicating to the veterinarians and bringing awareness and selling the product. Additionally, we are implementing a new CRM system called HubSpot, which will be critical so we can keep track of all of our call notes and follow-ups and all the veterinarians that need additional details on the product and sales follow-up calls. Having our new PRECISE PRP equine, as John mentioned, is a wonderful thing to strengthen our portfolio. Previously, we just had the canine PRP, but now having both products in our portfolio gives us a better opportunity to train distributors and train them on both products so they can help us out there in the marketplace sell the product. We will be excited to have a bigger launch at AAP coming up here in December in Denver. Overall, I am just extremely excited with the performance, and we are taking all steps we can to make sure that we continue to drive forward and become known as the leader in regenerative medicine. If anybody has any specific questions on any of the sales and marketing initiatives, I would be more than happy to answer afterward. But I think John Dolan has done a pretty good job summing up the great progress that we have made. So overall, nothing out of the norm that's selling these products. It just takes time, and we are making great progress. So now I will turn it over to our CEO, John Lai, and he can take it from here. John Lai: Thank you, Mike. Now I would like to open up the call to the Q&A session. Operator, could you please instruct our listeners on how they can ask questions? Operator: Sure. So now we are starting the Q&A section. For anyone that joined over the phone, please dial 9. Or if you joined over your computer, please click the react button on the toolbox and select raise hand. Okay. We have one raised hand. You are now allowed to talk. Please, unmute yourself. Peter Sullivan: Can you hear me? John Lai: Yes, I can. Thank you. Peter Sullivan: Okay. Thank you. Hi. My name is Peter Sullivan. So a couple of questions. You quoted the number somewhere around 1,200 clinics that have used your product. How many of your clinics are really heavy users? And you can define that however you want, but something more than a few cases here or there. John Lai: The learning curve or the time that it takes for a vet to really bring on the product ranges anywhere from six months to a year. They use it because one of the major selling points of Spring with OsteoCushion is the longevity of the product. The only way to establish longevity is the actual time. So like with the VGP, I believe they tried the product probably close to two years ago or even more before they felt comfortable to come on board in a big way. So it is a time-consuming process. I do not have those numbers in front of me on how many of those are active users. But as you can see from the anecdotal evidence, we are continuing to grow the clinic numbers that are potentially coming on board. Peter Sullivan: Sure. Can I ask a follow-up question? John Lai: Absolutely. Peter Sullivan: Can you break down the revenue between Spring and PRP? John Lai: I am going to leave that to the CFO because I have it, but I do not know if we can disclose because that is more of a—I do not think we break that down right now in our financial reporting. Garry, do you want to answer that? Garry Lowenthal: Absolutely. It is actually a really good question. We had roughly about 42% that was the PRP for this last quarter, and 58% was Spring. Keep in mind that it is just the canine. It was just the canine. It was not the equine. It was not the horse. Peter Sullivan: The PRP was just the canine version. Garry Lowenthal: Just the canine. We just started shipping the equine in this quarter literally about a month ago. Michael Eldred: I think it is important to note that small animal veterinarians, joint injections are not something they do every day. It is something that they are getting more familiar with, starting to do it as a means to increase revenue in their clinics as they start to lose the pharmacies. The equine veterinarians, on the other hand, Spring and this PRECISE PRP equine, equine veterinarians know how to inject joints. They do it every day. So I think we will see a good ramp-up with the equine PRP, and we are starting to take more efforts on Spring. But the companion animal market is a slow growth, but it is long-term. It is going to be a much more significant market for us. Peter Sullivan: Yeah. I mean, that is kind of why I asked about your heavy user clinics because even though I am not a veterinarian, I know a few, and they were like, I would not even try to do this thing. So it is not surprising to hear that it is sort of slow to get into those clinics. Michael Eldred: We are focusing more on the progressive clinics. There are a lot of corporate accounts like the VCAs, the MARS, all the NVAs. Any veterinary clinic that is emergency or has three to five doctors is a relatively good-sized clinic. Obviously, those are our targets. Then we start to focus on the single veterinarians when we run out of things to do. Peter Sullivan: Do you have any corporate—I do not know what the right word is—but these big corporate clinics, have any of them adopted your product corporate-wide yet? Michael Eldred: No. Because every corporate is different. Sometimes a lot of the corporate clinics now, they still allow the veterinarians to have their own decision-making process. We do have some veterinarians that are probably part of a corporate group. But, like, for instance, Mars, who has a formulary, no. That is a significant process to get a corporate mandate to use the product. Peter Sullivan: I am not super knowledgeable. Are there some products that would, like, not yours, but some product that would have a corporate blessing to use? Michael Eldred: Yeah. Any of the normal drugs that are used maybe for NSAIDs or anti-inflammatories, flea and tick, those kinds of things. Anything that is prescribed daily or monthly by veterinarians is something for sure. But a specialized product that is a specialized area is a learning curve. They all have to get comfortable with it. Peter Sullivan: Okay. I have one more question. I am hoping I am not monopolizing somebody else's time. Do you do a breakdown, or can you do a breakdown between companion versus equine, regardless of the product, but just how that revenue breaks down? Michael Eldred: Gary could do that at some point in time. The other thing too is those are two very separate markets. Equine veterinarians buy differently than canine veterinarians. So, yeah, we track those separately, but once again, we just got the equine PRP. That is going to be a good upscale and a big launch for us. But once again, it takes time, and you have to realize a lot of these veterinarians already have centrifuges. They have things. They have product on the shelf, so they have to work through that. But we hope it is somewhat like a hockey stick. Garry Lowenthal: Peter, this is Garry, the CFO. Since we are now shipping the equine, in the future, we are going to do some reporting, but we are also going to break out equine and canine in the future just because the PRECISE PRP is going to be really big for us. We are going to break it out by the companion animals, small animals versus the horses. Peter Sullivan: Sure. Okay. So, Peter, I should follow up also. John Lai: You have quite a bit of adoption from VCA clinics out in California, Nevada, and Arizona. It is not on their official formulary, but, like Mike said, they allow the vets to choose the product outside if they want to use it. So we are starting to get good traction into those areas, and that should eventually lead to the approval process as a formulary. Peter Sullivan: Sure. Okay. Yeah. I think it is helpful to track both the Spring PRP breakdown and companion versus equine to see the underlying growth in the individual products. So I appreciate you breaking that stuff down. That is all I have for questions. Thank you. Operator: Okay. Thank you. Yes. Anyone would like to raise your hand, please. If you dial in, dial 9 or if you are on your computer, please click on the react button and select raise hand. John Lai: Okay. So let us just give one last warning or one last chance for anybody to ask a question. If not, then I will be giving closing notes and having John Dolan, our General Counsel, give the disclosures. If there are no more questions, then I would like to thank everyone for joining us today. We look forward to talking with you again soon and presenting our second fiscal quarter results when we report again. As always, take care, and thank you for joining us today. John, please go ahead and wrap up the call. John Dolan: Thank you, John. Now before we conclude today's call, I would like to provide the company's safe harbor statement that includes cautions regarding forward-looking statements made during today's call. The information that we have provided in this conference call includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements regarding the company's future revenue, future plans, objectives, expectations, events, assumptions, and estimates. Forward-looking statements can be identified by the use of words or phrases usually containing the words believe, estimate, project, intend, expect, should, will, or similar expressions. Statements that are not historical facts are based on the company's current expectations, beliefs, assumptions, estimates, forecasts, and projections for its business, the industry, and markets related to its business. Any forward-looking statement made during this conference call is not a guarantee of future performance and involves certain risks, uncertainties, and assumptions which are difficult to predict. Actual outcomes and results may differ materially from what is expressed in such forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, various risks as detailed in the company's periodic report filings with the U.S. Securities and Exchange Commission. For more information about risks and uncertainties associated with the company's business, please refer to the management's discussion and analysis of financial conditions or results of operations and risk factors sections of the company's SEC filings, including but not limited to, our annual report on Form 10-Ks and quarterly reports on Form 10-Q. Any forward-looking statements made during the conference call speak as of today's date. The company expressly disclaims any obligation or undertaking to update or revise any forward-looking statements made during the conference call to reflect any changes in its expectations with regards thereto or any changes to its events, conditions, or circumstances on which any forward-looking statement is based except as required by law. I would like to remind everyone that this call will be available for replay starting later this evening or by tomorrow morning. Please refer to today's earnings release for dial-in replay instructions available via the company's website at www.petvivo.com. Thank you again for attending today's presentation. This concludes the conference call. Operator, you may disconnect.
Curtis Schlaufman: Hey, everyone. Thanks for joining. Let's give a few moments for rest of the folks to filter in. We'll wait until 9:01 to get started. But in the meantime, I'll go ahead and remind everyone that this call is being recorded, and there will be some forward-looking statements. And then -- this is not investment advice. We'll start the call with an overview of our Q3 financials from Paul Bozoki. We'll then move on to a statement from our current CEO, Olivier Roussy Newton, followed by a follow-up from Johan Wattenstrom, our incoming CEO; and then some growth initiatives that are currently in progress and updates from our President, Andrew Forson. So let's give some everybody about another 30 seconds, and then I'll hand it over to Paul. Well, the Q&A is also open to folks. So after the presentation and after comments, we'll go through Q&A from retail and then open it up to -- and bring on our analysts to ask questions and then wrap up the call. So joining us today, as you can see on the screen, my name is Curtis Schlaufman, VP of Marketing and Comms. We have our current CEO, Olivier Roussy Newton; incoming CEO, Johan Wattenstrom; CFO, Paul Bozoki; and President, Andrew Forson. With that, I'll hand it on over to Paul to give an overview of the quarterly financials. Paul Bozoki: Thank you, Curtis. Good afternoon, everybody. Starting with an overview of our AUM. DeFi closed September 30 with AUM of USD 989.1 million. Q3 average AUM increased to $950.7 million from $760.2 million in Q2 and $789 million in Q1 due to crypto price movements and positive cash flows into our ETP products. Q3 saw $38.8 million cash flow into our ETP products, bringing our year-to-date positive cash flows to $116.2 million. Moving on to revenues. Our Q3 revenue was $22.5 million and brought our cumulative IFRS revenues for the 9 months ended September 30 to $80 million. Q3 effective staking and lending income yield was 3.1% on the $950.7 million average AUM, a reduction from the 3.6% realized during Q2. The 0.5% absolute term reduction is due to lower protocol rewards realized in the quarter. We staked approximately 58% of our AUM at the end of Q3. We adapt our staking percentage of our AUM in sync with market conditions and internal risk management policies to ensure we can meet ETP commitments on a timely basis. Our Q3 effective management fee yield was 1.2%, up slightly from the 1.1% realized in Q2 due to additional new management fee-bearing products. Reminding our investors, we don't charge management fees on Bitcoin and Ethereum products. We closed Q3 with 99 products and reached our 100-product goal during October 2025. Moving on to our revenue bridge from our guidance. The company previously disclosed revenue guidance of $218.6 million. This consisted of $116.6 million of core revenues and $102 million of DeFi Alpha-related revenues. DeFi Alpha opportunities have been delayed from the forecast due to the proliferation of digital asset treasury companies and the consolidation in digital asset price movements in the later half of 2025, thereby delaying arbitrage opportunities and compressing available arbitrage profits. Furthermore, given the unpredictable nature of DeFi Alpha transaction revenues, we understand most analysts were not factoring these revenues into their financial and valuation models. As such, we reiterate our core forecast of $116.6 million revenue for 2025 and guide that the $102 million of DeFi Alpha-related revenues will be deferred over a longer period. We believe the core revenue forecast of $116.6 million will be achievable if cryptocurrency prices post a modest rally into year-end from current levels. Given Bitcoin is currently in a material supply distribution phase and the price is still holding in and around $100,000, plus or minus a few percent, with the increasing institutional and retail participation in cryptocurrencies, we are bullish for cryptocurrency prices in the coming months. We believe DeFi's strong balance sheet, bolstered by the recent $100 million equity financing and our relationships will allow the company to source attractive arbitrage opportunities, which others cannot. Moving on to our operating income. Q3 operating income came in at $9 million and $32.6 million for the 9 months ended September 30, reflecting our strong focus on profitability. Q3 IFRS net income after tax came in at $3.9 million and $33.8 million for the 9 months ended September 30. In terms of our crypto investments, our venture portfolio now consists of 12 private investments with our largest being our 5% stake in AMINA Bank that makes up 83% of our portfolio's fair value. AMINA Bank continues to perform exceptionally well, growing its AUM quarter-over-quarter and year-over-year to approximately CHF 3.5 billion at this time. We also made three new investments during the third quarter being TenX Protocols, Canada Stablecorp and Continental Stable Coin. Lastly, about the $100 million equity raise, the $100 million equity raise in September of 2025 will assist the company to increasing its staking back to the 70%-plus target by providing more capital to facilitate ETP market-making on a larger AUM base, provide working capital for DeFi Alpha trades and support our other revenue and AUM growth initiatives. The company is also always on the lookout for accretive M&A opportunities. As of September 30, the company had $119.5 million of cash on hand, treasury crypto holdings of $46.2 million for a combined total of $165.7 million. Management is confident that this capital will support future growth and also provide downside protection in the event of market turbulence. Thank you. Handing it over to Olivier. Olivier Roussy Newton: Thanks, Paul, and welcome, and happy to have everyone who's joined us on this call. Q3 2025 was another exceptional quarter of execution and consistent profitability. We delivered revenues of $22.5 million and operating income of $9 million, marking our third consecutive profitable quarter this year. I think this really reflects the scalability and resilience of our model through kind of macro headwinds that we've kind of experienced, I would say, throughout the last kind of 10 months or so. Valour continued to be a major driver of performance, achieving net inflows every month year-to-date and delivering $38.8 million of inflows during the quarter and $116.2 million year-to-date. Importantly, Q3 marked our highest average AUM on record over USD 900 million per month. And all of the aforementioned figures are also in U.S. dollars, just for the record. Ending the quarter at $989.1 million. I mean, in terms of Valour's trajectory, it's quite clear. As AUM compounds, reoccurring revenue scales. With continued product launches and internal expansion, Valour remains at the center of our long-term growth strategy. On to our other very exciting acquisition that we made about 1.5 years, 2 years ago. Stillman Digital continues to see exceptional trading volume and produced $2.2 million in trading commissions in Q3, continuing to strengthen its position in institutional trading. They recently integrated into the Talos network, which is an FX and stablecoin capabilities network that deepens our liquidity, provisioning and exposure. And senior hires have been made to exponentially drive higher volumes and improve execution. Stillman's steady growth and high-margin model further enhance our profitability, and we expect a lot more going forward as that business grows. We remain exceptionally well capitalized with just under $120 million in cash and $46.2 million in digital assets for a combined $165.7 million on our balance sheet as of September 30. This financial strength enables us to fund growth, maintain flexibility and return value to shareholders. During this quarter, we also repurchased just under 1 million shares for $2.44 million. Our NCIB buyback, share back program is still in place, and I think we will continue to execute that moving forward with the larger cash position that we have, something that Paul reflected on. But in terms of a company, Valour specifically, as well as DeFi having never done an institutional capital raise, the ratio to our AUM, I felt was a bit on the lower side of things. I think we kind of timed our financing well. And it gives us a lot of further capabilities to do buybacks, acquisitions and other strategic initiatives. While we've adjusted 2025 revenue guidance to $116.6 million as DeFi Alpha opportunities have been delayed due to the proliferation of DAT or digital asset treasury companies and the consolidation in digital asset price movement in the latter half of 2025. The underlying business remains strong, diversified and profitable. Our asset management, trading and research divisions are all contributing to a foundation that compounds cash flow and shareholder value. Valour's record AUM levels demonstrate sustained investor demand for regulated digital asset exposure. Stillman's institutional footprint continues to expand, and our balance sheet gives us the strength to capitalize on opportunities across all lines of business. We are executing, scaling and delivering profitability quarter after quarter. Our model works, our platform is compounding, and our focus remains on long-term sustainable growth. As we look forward, I want to take a moment to announce my resignation as CEO. After 3 transformative years as CEO and Chairman, I've made the decision to step down. This has been one of the most rewarding chapters of my career, not without it's up and down -- ups and downs as we see, obviously, across crypto cycles. I'm extremely proud of what our team has achieved together. We've scaled and institutionalized Valour's ETP platform, strengthened our capital base, executed strategic M&A and delivered record financial results of -- to our shareholders. And obviously, came out of a mountain of debt that we did so by focusing on revenue generation without the need for diluting shareholders. I'm deeply grateful for the support of the employees, partners, investors throughout the journey. Johan Wattenstrom, who I consider a dear friend, I've got to know him over the course of the last 8, 9 years. We founded Valour together before we set up DeFi, has been but by my side since day one, we've been through ups and downs, round and rounds together, and will step in as CEO and Executive Chairman. Johan's leadership, discipline and deep understanding of our business make him the right person to guide DeFi Technologies into the next phase of growth. Thank you all for your continued trust and support. I could not be prouder of what we've built and even more excited for what lies ahead. And yes, I'm not going anywhere. I continue to remain a significant shareholder, partner and an advisor day-to-day. Hopefully, I won't annoy anyone too much with all of my pestering. And my focus will go towards BTQ Technologies, which has been a 13-plus year endeavor. And I think we're at a critical juncture for digital assets being protected by quantum security, and it's a real risk for the entire industry along with businesses such as Valour, BTQ. And Valour as well as DeFi will have working relationships and joint ventures going forward as well. That's it from my side. I'll pass it on to Johan. Johan Wattenstrom: Right. I'll start to comment a bit on use of funds, DeFi Alpha monetization rates. But first of all, I also want to thank Olivier for everything so far, and we will have continued great cooperation going forward as well. And obviously, I'm super excited to take the CEO role in a time where we have never been -- had a better infrastructure in -- had a more solid balance sheet and more potential on the upside than we have right now. As we've seen in the last quarter, when we have the highest average AUM we ever had, we more -- have a stronger balance sheet than we ever had, and we're making weekly progress on all our core areas and also expansions beyond that. On the use of funds, DeFi Alpha monetization rate, they are quite intertwined. One first comment would be on the monetization rate, where we have had a temporary dip during end of Q2 and during Q3, due to the fact that we launched tons of products. We have expanded market-making efforts quite a lot and more need for operational capital in those businesses. However, we have worked to build the infrastructure and the potential monetization rate to be of much higher potential. And I would say that we would, for this quarter and also starting this week, next week, we'll be able to deploy basically all the AUM to making yield for the company. And I would say that our annual ongoing monetization rates from -- in a week or 2 will be higher than it's ever been historically. Much thanks to also the capital raise we did, which go in great length in supporting more effortless handling of the market making, the flows, the capital we need to deploy to be working at the most optimal level. And this also goes for DeFi Alpha for sure, where it opens up new opportunities. The forecasted -- we obviously had hoped to be able to execute more on the DeFi Alpha side now. None of the opportunities on our pipeline have disappeared, not to digital asset treasury companies or to anything else, they still remain. Some are dependent on levels for specific projects. And we obviously hope to be able to execute on these and more the coming 6 to 12 months and are very optimistic about that line of continuously our business. But as we think have been very clear in communication from -- that those type of deals started to come around 1.5 years ago. It's super hard to predict timing, and we're doing all we can to expand the scope of that business, along with the core business, where we also now see a lot of new opportunities in our core markets in Europe, even not counting the new geographies. There's a lot of new demand that we can see in Continental Europe, including not the least in France, where it's been hard to penetrate before. We're also extremely optimistic about the slight shift we're seeing starting to happen now in Europe towards more institutional participation on the back of what's happening in the U.S. during this year. I think that will trigger a big expansion in the addressable market for us in our core markets, in our core operations. When it comes to use of funds, as I think we also have communicated before, some of it goes to optimizing the treasury, DeFi Alpha and market-making business, providing liquidity for our own products and making more deals. Besides that, we have the UCITS funds coming up, actively managed certificates that we all hope to be able to execute on before year-end. We will -- as soon as that's up and running, we will obviously PR on those. And one aspect of this type of products is that we do need to [ put ] some seed in a few of these in order to get institutional flow. Some of our liquidity will be used for seed, which will be redeemed once we have a critical mass of AUM in those different products. We will also obviously be more active in our treasury with the -- also the arbitrage operations we're running there to provide a high return on all our assets, both crypto and fiat. We are always looking at strategic deals. We are obviously super selective, but -- and it depends a lot on the market. We've seen obviously a big [ attraction ] here in the crypto market the last few days. And I think it's -- for us, it's just positive because there's more deals available for us at prices where we're happy to participate. But, obviously, we're looking long term to build the business to be more efficient, to grow with the AUM, grow the monetization rates, which are our prime targets. We also do some new efforts in institutional sales, [indiscernible] marketing budgets in our core markets. We have already added a bit to crypto treasury over time at low prices. And besides seeding, we are also working more in the treasury strategies with these funds. So we're confident we'll be able to give a very high return on our liquidity over the next 3 to 6 months on the back of a strong balance sheet. I think furthermore, maybe we have commented on the digital asset treasury companies before that delayed a few things, not only in DeFi Alpha. I think that from our perspective, that's been a bit of a hype that attracted from operational profitable companies such as us. And we do believe that, that way we'll come to kind of an end in terms of how hyped it is. which we've seen already where we get present with more deals that were -- it was delayed before because some counterparties thought there would be other avenues within the treasury company space. I'm sure there will be a lot of interesting treasury companies coming up, but we have seen a lot of things that are of low quality. And we obviously are just focusing on our own business and executing going forward. And with that, I think I'll leave over to Andrew to talk about the geographical expansion and other new areas of interest. Andrew Forson: Yes. Thank you so much, Johan. And of course, thank you, Olivier, for all the hard work and the many early mornings, late nights. I think it's always a challenge whenever we talk about geographic expansion because sometimes there's the impression that these things can happen quickly. Whilst we can't assure that they always happen quickly, we can assure that they will happen. We've been working very, very tirelessly, speaking with different jurisdictions. I can indeed confirm that we have had success. However, we are not able to announce the particular market where we will be listing next until such time that the regulator and exchange provides us with the listing date. This has been a significant team effort, a group effort -- and I'm particularly excited because we now have a strategic approach to looking at different markets. We understand which markets are more receptive. As a matter of fact, we have some markets reaching out to us, but it will take time. It is not overnight. And it is not something that we can just glibly discuss on X because the regulators don't want us to until they authorize this sort of thing. Certainly, another critical factor, and I think Johan alluded to this, is the importance of our home market in Europe. Europe is a market that has a lot of potential. We demonstrated our fidelity and our view of the importance of Europe as a market with our first DeFi Alpha Global Insights event, which was based in Frankfurt. There is a great deal of opportunity that can be had by us reaching out to broker-dealers, private wealth managers, family offices and banks in the European ecosystem. And this is something that we are actively doing. We have a system in place. And the metric that I'm always most interested in are what are our average inflows irrespective of new product launches. And consistently, our inflows have been quite significant, and we are always going to be pushing Europe on a country-by-country basis, exchange-by-exchange basis to ensure that our AUM grows from inflows, not just from capital increases in the underlying assets. And now I'll go on to the next two points briefly. I think in the coming weeks, we will definitely have more focused information on new products and new initiatives. One of the things that is near and dear to me is the idea of data. I mean, I'm coming from the DeFi space but have always worked in the quantitative finance space. And the data that we have access to both as Valour as DeFi Technologies and indeed, as our underlying operations with the ETPs, it means that we can do a great deal to feed the world of decentralized finance. I look forward to having a rejuvenated reflexivity operation. I think in some instances, some people may have heard of some of the projects that we're doing. Most of it has to do with providing -- using our own IP to provide scoring services for digital assets on a fee basis, and this would be made available to both institutional investors, which is important because there's actually not too effective scoring systems for institutional investors in the digital asset space. And of course, it would also be available to the foundations, which are always looking for novel ways to maximize the utility and communicate the message of their project. With regards to SovFi, for which there have been a number of questions, just to give a slight background and history, this has been a long-term project. It's not something that just came up. This has been something that's been percolating for, I think, since prior to COVID -- pre-COVID and this is something that we're working on strategically with DeFi Technologies to find a great way to leverage our existing platform in a way that maximizes revenue and shareholder value for DeFi. It will take time. Under the new leadership with Johan, we will work together to figure out how do we maximize this in a way that leverages what we're doing as Valour and DeFi, but also that injects new blood and new energy, in addition to increasing our total addressable market to something that is a little bit more significant beyond just the crypto space. And this is something that is well within our means. It will certainly take a little bit of time to establish. But in terms of the products, the research products, they're all well within our grasp. The platform of Valour and the ecosystem of DeFi Technologies is more than able to support what needs to be done there. And we look forward to having very, very detailed descriptions of the technologies, the IP, the projects that we're working on. And I think we'll also be able to give more insights into geographic expansions that comes with these new products because we're able to have different types of conversations in jurisdictions that may have been a little bit more squeamish or squealish about dealing with crypto. We're now able to have other service offerings that are all revenue generating, much like the DeFi Insights events are also revenue generating, that we'll be able to bring into the DeFi Technologies fold. So in the coming weeks, I look forward to discussing all of this. It's all very passionate. It's actually very exciting stuff. We have a great growth story. We're well capitalized. And I remember there's a famous quote about Warren Buffett saying that in the short term, the market is a voting machine, but in the long term, it is a weighing machine. At the end of the day, we're generating significant revenues, and our multiples are low. And now the onus is on us to prove to our shareholders and our communities, how effective we are, and we intend to do so with novel products and great results. Curtis Schlaufman: Great. Thanks, Andrew. I'll open it up now to some questions that have been in the Q&A, and then we'll turn it over for Q&A from analysts. I'll start with a question from Juan. Do Alpha trades carry a liquidity or price liability. Can you please explain what happens with the May $23.8 million SUI trade if price is lower or higher than $3.51 per token, at maturity? Also, could you explain if and how DeFi is hedged, if, for example, DeFi replaced 30% of their fee and liquid SUI tokens at the ETPs for these locked tokens in the March trade and there is a run on 75% of the SUI. So basically, I think the question is, how are we hedged against these locked token trades, particularly if they don't realize -- if they trade lower than the valuation they were acquired at maturity? Johan Wattenstrom: Yes, happy to answer that. So basically, with that trade and I think two other trades historically, as I think we communicated before, we have hedged all market risk for the core operation. We have a part of the profit, locked-in profit for this trade and the historical trades has been retained in tokens. So to that respect, the profit -- some of the profit is locked up and in token. So that part of the profit will obviously fluctuate a bit with the market. We will get a higher profit if the market goes higher and slightly lower if market goes down. Whilst the core -- the arbitrage itself is 100% hedged for the principal, the pure profit we locked in is retained in tokens that will be locked for a bit. So we will -- we might see some volatility there over time. There's a lot of upside and some downside, but it will not -- the principal of that trade is locked up and hedged away. Same thing as historically, we've seen with some of the other trades as well, where we retain some of the parts in the actual token where we did the trade. And that's something that we are keen to do for some of the assets where we have a high conviction and where we're building, where we have products and we're happy to support those ecosystems. And we believe the upside and potential is great, and we have a lot of interactions and support those ecosystem and technologies for sure. So yes, short answer, we have -- on the pure profit, there is a correlation to the market, so it can go up or go down. And yes -- I think was there anything more specific, Curtis, that I missed there? Curtis Schlaufman: No, I think you covered it. Johan Wattenstrom: So that's differs for different trades. If we do these trades in assets where we don't have a high conviction, we typically do not have any exposure at all. We lock in all fiat -- all profits in fiat. For some others, we keep some of the profit in the assets. Curtis Schlaufman: Great. Another question for you, Johan. What key message do you want to give long-term shareholders to take away today? And what to expect in regarding to milestones should they watch out for over the next 12 to 18 months? Johan Wattenstrom: Yes. I think nothing really has changed in the long-term core strategy. We will continue with a really, really high core focus to maximize AUM and maximize monetization and expanding in all the vectors like new products, second, third generations of products, more value-added and also more types of vehicles for participating in digital assets that will tap into new pools of capital that could be a debt markets, it could be funds that are not allowed to invest in ETFs and so forth. So we have new types of vehicles to reach that -- those types of capital pools. And what they all have in common, I would say, is that while a lot of [ ETFs ] we have now are kind of geographically sold in -- direct to markets, a lot of the new products that are more aimed at institutions are more global in their nature, so they can more easily be distributed globally without the confines -- being confined to Europe or Sweden or France and so forth. So I think you will see a super high pace in execution in our core strategy, making sure we don't not miss any of the low-hanging fruit we still see in our core markets. We obviously now have over 100 products. I think we cover all the actual digital assets we want to cover. We will selectively list more trackers if we see new extremely exciting technologies come through. Otherwise, the core focus now is on new vehicles and new more value-added products such as leveraged products, such as bonds, such as funds -- hedge funds, active managed certificates, UCITS funds and so forth. So we can tap into a much larger market and a more global market from our present organizational base and really leveraging the scalability we have had since long -- since beginning and also utilizing the extreme upgrades we have done, I would say, monthly in our infrastructure as well. So for some of that, we have taken a few hits temporarily in the monetization rate that was made in -- for us to be able to upgrade to a better infrastructure where we have partly new counterparties, partly new setups for the market making, where we can use collateral much more efficiently and being able to deploy a much more higher percentage of our balance sheet in income-generating yielding activities. And I think we have never been at a stronger point actually in terms of our balance sheet, liquidity, asset under management and an ability to really leverage and quickly go after and execute. And I think we have a great starting point. I also think that any temporary weakness in the macro scenarios or order temporary -- in the market, which we see, for instance, right now, I think that provide us with better opportunities to build on this long term. So, yes, I've never been more optimistic actually about how well positioned we are versus competitors and also within our present markets and also how we will be able to roll out after a lot of obviously grinding on the new -- on new geographies where sometimes regulatory authorities take time. Something also, that maybe Andrew has noted before, is that we come from a scenario on the geographical expansion where we had to chase new markets to start executing. Now these -- the new geographies are actually contacting us and want it, which is also a shift we've seen. Another really important shift, I think, is that we're seeing the beginning of more institutional participation from Europe, where I think right now, I would say, we have probably over 40,000 clients in Europe, but it's overwhelmingly retail, which obviously always are the first adopters. We have a lot of really tech savvy, financial savvy retail clients, while the institutions are lagging a bit because of other constraints within their operations. But I think with the new administration, we've seen the new climate in the U.S. It's clear that a lot of [ institutions ] in Europe has gotten the message that this is something they need to participate in, and this is something we are making sure we are in the lead of helping them being a participant in through our new products, new platforms, new vehicles which will make it easy to gain secure and best-in-class access to these exposures. Curtis Schlaufman: Thanks. I'll hop around now. I'll -- Kevin, you raised your hand first. So if you want to meet yourself and ask your question. Kevin Dede from H.C. Wainwright. Kevin Dede: I was hoping Johan might offer a little more color around DeFi Alpha and the influence that DAT have on that environment, it's not I guess, dots that I can easily connect in my little brain. Johan Wattenstrom: No. Yes, happy to do that. So there are a few particular deals, I would say, maybe three of them, all quite a bigger scale. We have been negotiating for a long time. And at some point, quite a few of these included, obviously, were thought because of the hype in that sector that they would have preferred to be able to participate in public markets, traditional markets through that type of vehicle instead. I think none of them are looking at that still. But when the hype was created with MicroStrategy and tons of new participants joining in, premiums were super high, there was a lot of, I would say, maybe a bit too creative solutions being offered to these, which never were actually set in motion in the end. So I think there was a lot of delays while they were contemplating other ways of getting financing, but also being participating in kind in different deals for their particular technologies, and that's just something that had dried out. In other cases, it has nothing to do with digital assets treasuries, it's more like the market -- for some of the alternative coins, their market has not been at all-time high levels. They have looked at specific levels where they want to execute these deals specifically for two deals we're looking at. And that's something that's still there, and we hope to be able to execute as soon as markets recover when they recover. If they don't recover, it will take time. But specifically in relation to the digital asset treasury companies, I'm not sure if you're aware, but with the high premiums, we saw at some stage in not least in the U.S. and Japan and so on, the -- all over the world in the Middle East, in Europe, there was a lot of this project being started and they were promising quite a lot to some of these technologies and some of these institutions, which never come to fruition. And I think that has delayed a lot of the discussions. Kevin Dede: Could someone comment on the investment pipeline, given focus that the company has had on it previously, I guess you can still continue to focus on it. You just have a little more dry powder rather lately than you've had in the past. And I mean, if asset prices here are any indication of how companies are valuing themselves, please offer some insight on your investment pipeline. Johan Wattenstrom: You mean in terms of M&A and... Kevin Dede: Exactly, Johan. Exactly. Johan Wattenstrom: Yes, sure. We -- I touched upon a few other uses of funds that we do right now to get a high yield on our liquidity and how we use it to be able to monetize our assets better. Obviously, a big factor here is also that we -- like we did in the past with Stillman, with Reflexivity, with Neuronomics. We're always looking, and we get tons of calls every week from interesting projects, competitors, complementary type of companies... Kevin Dede: I'm still on the DeFi call -- sorry. Johan Wattenstrom: So it's -- we're looking at a lot of different opportunities right now, and it's hard to say something really concrete because we are super, super selective, and this has been even historically. We don't venture into something that's not 100% will strengthen our long-term growth prospects and are part of our vertical integration and makes our infrastructure stronger and is aligned with our long-term strategic goals. So we obviously say no to, I would say, 9 out of 10 of all these suggestions and the deals we actively seek up as well early on. But there is a few that we're always looking at, and we are looking at a few of these interesting kind of deals right now. Obviously, one thing I might be able to say that's more concrete is obviously, it's one thing we're considering is when and how to enter the U.S. market with something that is differentiated and have a strong distribution with products, given the size of the U.S. markets. We don't -- it's not a -- we're not looking to just jump in for the sake of it, obviously. We want to maintain high margins and make sure we have a unique offering. But in that space, obviously, there's quite a few things we're looking at. I'm not sure if there's much more concrete things I can say at this point, but we have proven, I believe, in the past that we've been able to do acquisitions that is in line with our strategy in terms of vertical integration and long-term strategy to grow AUM and monetization rates. And we're looking at a few of the opportunities that would allow us to continue that process. We're also looking to internally grow one or two new business areas that also would increase our profitability and vertical integration and make us independent of outside suppliers. And we probably would be able to announce more in the near future as well. Curtis Schlaufman: Let's move on to Mike from Northland. Mike Grondahl: First question is maybe for Andrew. It sounds like you were talking about a geographic expansion win in your comments. I mean, was that the case? And is it in a small market, a big market? Just a little more color there. And I know you can't name it. I'm not asking that, but a little more color would be helpful. Andrew Forson: Yes. And it's a big market. Mike Grondahl: Good. Good. That's great. And then, hey, a question maybe for Paul, it looks like year-to-date, you guys have done $64 million, and now you're guiding to $116 million for the year. I mean that implies $52 million in the fourth quarter. What's driving that? Paul Bozoki: Mike, I'm at $80 million. $80 million for 9 months. And the $116 million is IFRS. So I got to do $36 million in Q4. We just did $23 million, right? $22.5 million. So $36 million. Curtis Schlaufman: And apologies, like we have dozens of questions. So if we don't get to your question on the call here, you can always e-mail or give me a call, widely available, as always. But let's hop over to Ed Engel from Compass Point. Edward Engel: Paul, some on the accounting side for you. In the MD&A, there was an add-back for adjusted revenue and EBITDA, which is a "price movement on equity investment distribution timing loss." Can you kind of go through that, please? Paul Bozoki: Yes. So we have an investment in a fund, and it took almost 3 weeks for the fund to distribute cash. It was a bunch of Solana, and they sold it at the end of the quarter and then just the nuance of getting the money to us in Switzerland took a bit of time. So there was some slippage on the crypto price. So it was a one-off, Ed. Edward Engel: Okay. And then as I think about the revenue for the third quarter, crypto prices were broadly higher and I think your total realized and unrealized impact for 3Q was still negative even if I do that adjustment for the -- that movement, as I think about Q4, crypto seems like it's going to probably not be higher Q-on-Q. So... Paul Bozoki: I had my IFRS number is [ 9.7% ] in Q3. If you look at the income statement for the [ digital assets movements. ] And that's got the negative hit from the timing loss, right? So it would [indiscernible] to that. Edward Engel: Okay. So the -- okay, that helps. Paul Bozoki: Thanks. So that's how you can see what we think we can get there. I mean, it does require crypto prices to move up from here, but with -- we're probably everybody on this call is generally crypto bullish. So if you think Bitcoin is going higher than $100,000, we should be able to get there. If you think it's going lower, we won't get there. Edward Engel: Okay. That's fair. And then I guess next on -- so what was I was going to say? For the staking. So I mean, I understood why staking the yield was lower. I guess looking into the fourth quarter post the capital raise, can you kind of expect that staking yield implied one to get back to maybe 2Q levels? Or is it going to be a gradual buildup? Paul Bozoki: Johan, do you want to add -- Johan, go ahead. Johan Wattenstrom: Happy to jump in. So we had -- we're quite confident that the high -- that rate will go higher. We are confident. We already have deploy a much higher rate of the coins. We did need some of the coins for the market making, for the collateral with new counterparties to be efficient in our market making. That was part of us tuning up our infrastructure and also the capital raise has helped us to not need to do that in the future. And we also have a better way to -- for a lot of the assets now to get higher rates for going forward. So it has been temporary in, I would say, from the end of Q2 to maybe last week at some point. But from last week and for some of the assets from Monday, closer to 90% to 100% instead of much lower rates will be deployed for yield and also in many cases, at a lot higher yield. So we would expect -- let's see, yes, I would expect it to go up to the former highs from last year in terms of monetization, but at a higher level of AUM from a dip during this quarter. Edward Engel: Okay. And I guess that's even with, I guess, just staking yields across the industry. I guess they're still probably higher year-on-year, maybe just below the end of last year. Okay. That makes sense. And then just lastly for me, on Stillman Digital, I think initially, you guys were guiding $15 million of revenue for 2025. It looks like you kind of reduced that. Paul Bozoki: It's going to do USD 8.6 million. [indiscernible] on $8.6 million. It was CAD 12 million to CAD 15 million, so it's going to be $12 million... Curtis Schlaufman: And I think we've gotten a couple of questions on growth path for Stillman Digital, Andrew or Johan, if you wanted to tackle that on how we're effectively scaling, or even Olivier, Stillman Digital and onboarding new services, new clients and then even expanding Stillman services geographically as Valour expands geographically? Johan Wattenstrom: Yes. I can comment a bit on that. So for Stillman, I think we see continued really strong growth for Stillman, and they're entering into new geographical areas. They have a lot of new clients in Europe. They -- I think early in the year, they had to re-onboard a lot of clients from earlier, I think U.S. to our -- for the international clients to the Bermuda entity. And that has opened up new markets, new clients for them as well. So they see a large inflow of new types of clients from new geographies. It's not tied to DeFi or Valour's other markets really. They are able to grow their business independently on where we have a presence for ETPs and so on. But they see a lot of upside within new -- the Bermuda for international -- Bermuda license for international clients. And also in the present markets, Latin America, North America and so forth and also on the back of our -- the group's balance sheet, they're able to do a lot more partnerships and deals and participate in more flows for market making and brokers. So it's a very optimistic message from that team, and we see continued growth in both top and bottom line. I don't know Andrew, if you have something else specific? Andrew Forson: Yes. If I can add to that, I mean the Stillman business case itself is one of the most pleasant to present. First off, the counter on the website significantly understates the gross transaction volume that they've actually executed since inception. I think they're actually over something like $51 billion in transactions executed. And that was as at September 25, when I met, I think, Johan in Germany. But I think the thing that's interesting is almost every instance where I speak with a centralized exchange, decentralized exchange, an on-ramp and off-ramp, they're all looking for liquidity. And if any people are following the news, you realize that pretty much any platform that seeks to sell or deal in tokenized assets, issue them, they need liquidity providers, and that's effectively a market for Stillman. One of the challenges is there is significant regulatory process, and there's a lot of KYC stuff associated with onboarding. So their sales cycles are long. But it's one of those situations where almost every single recommendation or introduction that I have made to Stillman has been able to be their client. And I think another thing that we should know, sometimes people see and hear, "Oh, yes, these guys have invested in Stablecorp, a stablecoin company, or they've invested in the cNGN. A stablecoin company." The glue that ties a lot of these things together, that gives us the opportunity to create alpha from our internal corporate venture capital portfolio is something like a Stillman. That provides liquidity to both and ensures that cash flows between a country like Nigeria and a country like Canada, via their stablecoin infrastructures, can happen. Now this is not something that is immediate. It's not something that when the deal is signed, those on rails and off-ramps are already established. But it's definite, it's true, it's there, and we have that capacity vertically within DeFi. So Stillman is a great story. Curtis Schlaufman: Michael Kim from Zacks. Michael Kim: Just given all of the new strategic initiatives around the advisory business, stablecoins, sovereign debt and what have you. Just curious to get your perspective on how you see the revenue mix evolving over time, particularly as it relates to management/advisory fees versus more trading or volume-based fees, if that makes sense. Johan Wattenstrom: Yes. I think -- those are -- the reason we have taken these initiatives is that we see they have a lot of synergistic properties to our other assets and our other businesses, for sure. I think it's in some of these areas, we are at a point where we see a huge potential stepping into new capital pools, new flows and so on that will benefit all sides of the business. It's probably a bit too early to say that in 1 year, the revenue mix will look this and that different. It's a little bit like with the DeFi Alpha that these are businesses we are building. It's much easy to forecast the core business and the evolution of that and then the new also type of products we will incorporate into that. I think that we do obviously want more streams of revenues, but we -- I'm not sure -- it's a goal in itself to just find things that makes us more diverse in that sense. I think we're really trying to make things that are synergistic and really make sure we are a leader within our core business. And I think all of these initiatives are synergistic with that goal in mind. While obviously, we would not have done these investments in these initiatives, we wouldn't think they would be great stand-alone revenue generators also in the long term because we don't really invest in anything that's not -- we don't -- we not have a high conviction that it will be cash flow positive, and we don't need to throw a lot of money at it. We're trying to build the long-term robustness and I would say, edge and the uniqueness of our business, so it's much harder for competition to really touch any of our core general drivers. And I think all of these new initiatives contribute to that. It's very hard, obviously, I guess, from my perspective, in 1 year to say how much would be contributed from this new business. I don't know if -- Andrew, if you have some color on that from your side. Andrew Forson: Yes. I think, Johan, you're absolutely correct. I think there's immense value in our cash cow core business and our cash cow core business models. That said, it's a expression that I very much like. We're really focused on investing initiatives that can positively impact the trajectory of expected returns for DeFi stock. So for instance, whilst I don't think I can give a specific case. I know that one of our portfolio companies in terms of volume had a massive quarter-on-quarter growth rate for their products. This is why we make certain investments and particularly in certain verticals. We like to go into places where we would have a unique competitive advantage, where we don't necessarily have to throw a lot of capital investment in order to be competitive and that there is significant moat in the space. And if you look, in particular, I think this is very public knowledge, at our stablecoin investments, whilst they're not one of the 20 U.S.-dollar stablecoin projects that are out there, they are the leading or at least top two stablecoin projects in each one of their markets and more significantly in both instances, we are on the cap table with Coinbase and Circle. So that doesn't happen by accident. And if we understand what underpins those stablecoins, we realized that, well, if you're dealing with treasuries or money market type instruments, that Valour is very, very well placed to help accelerate their mission. So it's not something that we might see the next quarter. But in terms of altering the trajectory of the expected return of DeFi stock, we're definitely there, and we're definitely partnering with the right people. Curtis Schlaufman: And Andrew, it'd probably be helpful to touch on hybridized products and specifically as well -- basically TAM versus TAM. Andrew Forson: Yes. Look, I don't know how much time we have. I've got to be short. But this is an area that I'm absolutely passionate about. And to be honest, I think that this is where DeFi stands unique. And whenever people are concerned about a quarter-per-quarter progression, of course, look, my mom and dad are invested in the company. I want to make sure that the stock price goes up. But ultimately, we focus on products, and we focus on the future, and we focus on executing in a profitable way. And where we have proven our expertise in generating product after product of single asset underlying ETPs. We've done 100 of them with a very small footprint. We've been so successful at that, that people almost take it for granted. It's sort of like whenever you have a really great athlete who keeps winning, they sort of ignore the fact that it takes a lot of work to stay at the top. We've been very efficient in that way. And I think now what particularly excites me is our ability to take novel instruments from within capital markets, whether they be equities, whether you look at debt, and create new instruments that have new return profiles to access new markets. I have always said, and I say this in many of the presentations that I make, the digital asset market is a $4 trillion market. Today, it might be less, but let's average. If you look at the market cap of gold, that is approximately $25 trillion. The market cap of global equities, $125 trillion. The market cap of sovereign debt and global debt a $100 trillion, $325 trillion, respectively. And we're one of the few entities that has the ability to tap these with hybridized instruments. And I'm very excited for this. And I know under the existing leadership team, we can make it happen. Curtis Schlaufman: Cool. We are a couple of minutes past time. But thank you, everyone, for joining the call. Please, if we didn't answer your questions, please feel free to e-mail ir@defi.tech or curtis@defi.tech. Also always happy to jump on a call per schedule. And then we'll see you guys in March, if not sooner, on some other announcements of sort. So thanks again. We're always widely available, can't stress this enough, curtis@defi.tech. Happy to answer any questions. And everyone, have a great rest of your weekend. Thank you.
Operator: Greetings, and welcome to Faraday Future Intelligent Electric Inc. Third Quarter 2025 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to John Schilling. Thank you, John. You may begin. John Schilling: Welcome, everyone, to Faraday Future's Third Quarter 2025 Earnings Call. This is John Schilling, Director of PR and Communications at FF. Today, I'm joined by a few members of our leadership team, including our global Co-CEO, Matthias Aydt; our CFO, Koti Meka, and our Global FF President, Jerry Wang. Today, we will be sharing details from our third quarter 2025 results. The press release as well as today's presentation will be available in the Investor Relations section of our website at investors.ff.com. A replay of this call will also be posted there later today. Please note that on the call, we will be making forward-looking statements based on current expectations and assumptions, which are subject to risks and uncertainties. These statements reflect our views only as of today, should not be relied upon as representative of views as of any subsequent date, and we undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. For further discussion of the material risks and other important factors that could affect our financial results, please refer to our filings with the SEC. In today's call, we will be covering the following topics: the third quarter overview and financial highlights; our development progress, together with our fourth quarter and 2026 outlook. At the conclusion of the overview, the management team will also address questions from our shareholders submitted electronically in advance of the call. With that, I will now turn the call over to Matthias. Thank you. Matthias Aydt: Thank you, John. Hi, everyone. This is Matthias, Global Co-CEO of Faraday Future. I am pleased to share our key developments for the third quarter of 2025 through today structured around our 7 Tier 1 strategic goals and pillars from S1 to S7, highlighting meaningful progress in operations, improvements in our business and financial fundamentals and continued strategic execution across our AI-driven mobility road map. For S1, our user ecosystem at the global launch of the FX Super One NPV in L.A. on July 17, we unveiled 3 groundbreaking innovations, the FX Super One EAI-MPV, the FF Super EAI F.A.C.E. System and the FF EAI Embodied AI Agent 6x4 Architecture. The event drew major attention across the U.S. and China, further elevating the FX brand. As of the launch, FX has secured over 11,000 paid nonbinding Super One preorders. Faraday Future also finalized the U.S. production assembly plan for the FX Super One. The company's bridge partners and supply chain collaborators will commence component supply for the production assembly phase. FX has also rolled out national co-creation and sales events across 8 major U.S. states receiving enthusiastic feedback in New York, Boston and L.A. The FX Super One continues to build strong momentum, reflecting the growing success of our co-creation ecosystem online direct sales model. In the third quarter, we have signed a 100-unit nonbinding and nonrefundable FX Super One deposit agreement with Ariana Motors, one of the largest independent dealerships in Las Vegas. We also expanded our co-creation network through new nonbinding and nonrefundable deposits with the ALPS, a leading global MCN agency and a key TikTok partner managing over 3,000 influencers, Space Auto of Beverly Hills-based luxury auto dealer, strengthening our reach across Southern California's ultra-luxury market and both auto, one of Boston's largest independent dealerships through a 100-unit preorder agreement that marks our entry into the Massachusetts market. In October, we also signed a nonbinding 1,000-unit preorder agreement with ZEVO, the U.S. Pioneer and peer-to-peer EV sharing platforms. In total, we have more than 11,000 B2B nonbinding preorders for the FX Super One. These will help FX expand into new markets and represent innovative steps in our B2B2C sales model. With their preorders and rising brand visibility, FX Super One is strengthening its position as the leading AI-driven ultra-luxury mobility brand. Moving to S2 and S3 product and technology. Building on last quarter's progress, we continue advancing both FF 91 and FX Super One. One exciting update is coming to the B-pillar AI system, which will soon include intuitive gesture control powered by AI, allowing users to open and close doors with simple hand gestures, completely touch-free. On FX, more than half of the Federal Motor Vehicle Safety Standards, FMVSS, 201U test points have been completed. Full vehicle safety testing have also delivered interim results. The series of assessment tests continues at MGA Research, keeping the vehicle on track for development and validation after multiple rounds of discussion and alignment, we have finalized the U.S. assembly plant for FX Super One. Our bridge partners and supply chain collaborators are now supplying components for the production assembly phase as the team pushes towards the milestone of rolling the first preproduction U.S. version FX Super One off the line. With more than $3.5 billion invested in our EAI EV strategy, FF has built a complete ecosystem, spanning R&D, manufacturing sales and aftersales. Operating FF as ultimate AI tech luxury and FX for broader markets, we continue to strengthen our foundation for sustainable long-term growth in the AI-driven ultra-luxury mobility space. This quarter, we released version 2.00.58 of the FF 91 operating system software delivered via OTA. This version enhances software stability and user experience and includes the latest FFAI 2.0 FS, proprietary next-generation voice assistant and ecosystem service platform, powered by large language models and generative AI. These advancements mark an important step forward in our long-term platform strategy. Lastly, the patent application for the Super One EAI phase product has been submitted. Shifting to S4, our progress on supply chain, industrialization and delivery. The FX Super One entered the trial preproduction phase at our facility in Hanford, California. We are progressing with process planning and validation, defining manufacturing processes, refining work procedures, establishing quality standards and ramping up training for engineers and production teams. FX also signed a procurement agreement for the first batch of complete parts with our supply chain partner with shipments scheduled to begin soon. The next focus will be accelerating logistics and supply chain efforts to ensure timely arrival of this first batch of parts at Hanford. Meanwhile, construction at our Ras Al Khaimah facility in the U.A.E. is progressing positioning us to begin our first few regional deliveries as early as this month. Regarding S5, our financial strategy and capital markets activity, Jerry, our Global President, will provide details shortly. Our efforts in the Middle East and China under S6, we continue to advance our three-pole strategy within FS global expansion. At the Sustainability and Clean Energy Conference in Dubai, FF 91 2.0 and FX Super One were showcased and received high praise and strong interest from members of the U.A.E. and Dubai royal families and senior government offices. The event highlighted not only our vehicles but also our solutions for future mobility, energy and sustainability, marking an important step forward in the region. The Middle East final launch of the FX Super One took place on October 28 at the Armani Hotel of Burj Khalifa, Dubai and was a tremendous success. The launch featured the debut of the first-class EAI MPV in the region, the release of the FX Super One price point, starting at approximately $85,000 and announced the first global FX Super One to Andres Ingesta, which will make him the vehicles' inaugural global owner. This event reflects the strong traction of our co-creation ecosystem in the region and demonstrates FX Super One appeal among high-net-worth and influential customers. On the event, we received nonbinding nonrefundable paid preorders from 3 B2C customers for more than 200 total units within 48 hours after this event. Finally, let's look at S7 operations system buildup. A key milestone this quarter was FF strategic investment in Collagen Therapeutics. This investment underpins FF's dual flywheel and dual bridge ecosystem. The transaction strengthens the synergy between our EAI EV platform, and our fast-moving AI, crypto and digital asset initiatives. The dual flywheel strategy can help drive growth by combining long-term value and building through the EAI EV ecosystem with immediate impact opportunities in the crypto and digital space. Jerry will discuss more details of the investment during his coverage of our third quarter capital markets activities. We also made significant strides in the system buildup and leadership expansion. This quarter, we welcomed George Lee as Head of FF and FX Global Supply Chain, and he also serves as FF-China Chief Strategic Cooperation and Business Growth Officer. George's extensive experience in other EV companies will strengthen our global supply chain ecosystem. We also added 3 new senior leaders, Todd Harrington, Deputy General Counsel; Steven Park, Head of Investor Relations; and Kevin Wong, Treasurer, further enhancing our capabilities in legal affairs, investor relations and financial management. Faraday Future continues to expand government affairs and policy engagement efforts, enhancing our presence in key policy discussions and supporting U.S. innovations and clean energy priorities. I would like to announce that Chris Nixon Cox, grandson of former U.S. President, Richard Nixon and Board member of the Nixon Foundation has been engaged as a strategic adviser, providing support with investors, high-level government officials and industrial partnerships. In this role, Mr. Cox will introduce potential global strategic investors, enhanced government engagement and policy communications and expand cross-border industrial cooperation on behalf of FF. In addition, Shahryar Oveissi was engaged as Global Strategic Advisor, focusing on Investor Relations and government affairs in the Middle East with extensive experience in business development and operations consulting. Heath Shuler, former U.S. representative at NFL, star has also been engaged as a senior adviser to the company to help support government affairs and offer strategic counsel to FF leadership regarding federal and state legislative regulatory and policy developments. Now, let's welcome Koti Meka, our CFO, to walk through the financial results for the third quarter. Koti Meka: Thank you, Matthias. Hello, everyone. I will walk you through some key metrics that highlight both our operational execution and improving financial position in Q3 2025. For the quarter, our loss from operations was $206.8 million compared to $25.2 million in the same period in 2024. These changes reflect our investment in engineering, talent expansion, strategic initiatives and alignment of the value of our assets related to manufacturing. For the 9 months ended September 30, 2025, operating cash outflow totaled $79.2 million compared to $51.8 million for the same period in 2024. This increase was primarily driven by changes in working capital and the operational ramp-up of the FX platform. The increase in operating cash usage reflects our ongoing investments in product development and strategic execution as we position the company for growth. Our financing activities generated $135.8 million in net cash inflows during the 9 months ended September 30, 2025, a 144% increase from $55.7 million in the same period of the prior year. In Q3, we received approximately $132.4 million in net financing proceeds from third parties, substantially exceeding $54 million from the same period last year. Notably, Q3 2025 marks the sixth consecutive quarter, in which financing inflows outpaced operating outflows, reinforcing a sustained trend that supports our operating runway and FX platform execution. Turning to our balance sheet, which now includes investment in Qualigen. Our net assets decreased compared to the year-end on December 31, 2024, primarily reflecting a realignment of asset values based on the updated operational plans and near-term production forecasts, while total liabilities grew by approximately $47.2 million over the 9-month period, a material portion of that increase reflects mark-to-market changes in existing convertible instruments. These dynamics underscore the sensitivity of our balance sheet to equity-linked valuation movements under fair value accounting. In summary, our Q3 performance reflects meaningful progress, and we remain focused on executing strategic investments aligned with our road map while optimizing capital deployment and driving toward long-term sustainable growth. I will now invite Jerry Wang, Global President of FF to provide some comments. Jerry Wang: Thank you, Koti. This is Jerry Wang, the Global President of Faraday Future. I will now share our progress with capital financing in the third quarter. First, we remain grounded in our stockholder-first philosophy. During the quarter, we continued our stock purchase program, which offers exclusive benefits for verified stockholders and eligible retail investors who participate in our ecosystem and preorder channels. Turning to liquidity and financing. We previously announced approximately $136 million in financing commitments to support our growth strategy, FX Super One launch readiness, and our position in the AI EV market. As of the end of the third quarter, we have received approximately $82 million, with the remaining amount subject to closing conditions and timing. We continue to manage deployment carefully and evaluate additional financing opportunities as needed to prudently support commercialization and ecosystem execution. Turning to corporate compliance and governance. In September, we successfully completed the NASDAQ 1-year compliance monitor period, returning to fully normalized normal listed company status. In addition, our management continued to demonstrate alignment with stockholders through Rule 10b5-1 stock purchase plans. Founder and Global CEO -- Co-CEO, YT Jia completed approximately 560,000 in purchases of FFAI common stock under a previously announced plan as of September 8, 2025. These purchases underscore management's long-term confidence and commitment to create shareholder value. We announced, and subsequently closed an approximately 41 million strategic investment in Qualigen Therapeutics, Inc., a NASDAQ-listed company including $30 million invested directly by Faraday Future and a $4 million personal investment from our founder and Global Co-CEO, YT Jia. This investment is intended to accelerate deployment of a crypto flywheel business and further advance the dual flywheel and dual bridge strategy. Qualigen's future financing will be conducted through a new entity without diluting FFAI's share capital. In summary, our capital markets efforts during the third quarter centered on 3 priorities: securing and prudently developing capital to support commercialization; building new digital asset financing platforms that completed building new digital asset financial platforms that complement our mobility business; and reinforcing strong compliance and investor alignment. We believe these initiatives position Faraday Future to execute the milestones ahead while maintaining strategic flexibility. I will now turn the call over to Matthias for the fourth and next year's outlook. Matthias Aydt: Thank you, Jerry. I will now walk you through our key updates with the primary focus on Q4 and next year also structured across the S1 to S7 framework. For S1 user ecosystem, we will be focusing on multiple areas on the user acquisition side. We continue to drive the FF 91 2.0 Futurist Alliance deliveries and FX Super One preorders. We are on track to deliver an additional FF 91 2.0 Futurist Alliance unit in December. For FX, we have now established FX Pars, our preorder holders in California, New York, Massachusetts, Texas and Nevada. The next phase of expansion will target New Jersey, Florida and Washington, where we are seeing strong signs of demand. We believe this expansion will support incremental preorder volume and broaden our FX Pars network. In parallel, we are making steady progress and tasks required to support vehicle deliveries, including sales operation, aftersales and service capability, auto finance and compliance. In addition, we continue to build the organization's execution capability through targeted hiring. Lastly, we are focused on enhancing our customers' user experience. On FF 91 2.0, we continue to upgrade our third AI space experience and specifically for the FX Super One, we will collaborate with content and application partners, including live sports, streaming, and in-vehicle entertainment to broaden our third AI space strategy. We also expect continued improvements in the experience and performance of the EAI space as part of this road map. Now shifting to S2 and S3 with product technology. We will continue to focus on building a robust internal R&D capability in software and AI while accelerating the transfer of core technologies from our flagship FF 91 into the FX product line to deliver a deeply interactive user ecosystem across all our vehicles. On the regulatory front, we expect to complete a series of Federal Motor Vehicle Safety Standards Assessment Tests at MGA, paving the way for further engineering development to ensure full compliance, enable the rollout of the first U.S. version FX Super One. From there, let's look at S4 where we will cover progress on supply chain, industrialization and delivery. Following the launch event of the FX Super One in the U.S. and U.A.E. in July and October, respectively, we have been accelerating our logistics and supply chain initiatives, enhancing training and strengthening our qualified team metrics management. We will release the first version of the manufacturing management system. For our second plant FX model, FX 4, we plan to show it's redesign rendering during the time period of Los Angeles Auto Show in November, subject to securing the necessary agreements. We also reaffirm our plan to introduce a series of models over the next 5 years, covering 4 major segments in the U.S. market. We do look forward to sharing more updates. Shifting to S5, we will focus on increasing our stockholders' base and additional outreach to investors and bank relationships with global efforts. We will be opportunistic in our fundraising efforts and evaluating various funding channels. Now to S6, our efforts in the Middle East and China. Our other key markets beyond the U.S., following a successful Super One product final launch event in Dubai, the preparatory work related to the delivery for the Middle East has officially been completed. The first Super One is scheduled to be delivered in November. We believe that high-net-worth users and investors in this region will strongly support our international expansion. Finally, let's close with S7 system development and strategic growth with new leadership recently joining FF, we are strengthening our expertise in legal affairs, capital markets and communications, financial management and government affairs. We are solidifying compliance. We will also continue improving operational efficiency and cost control across all entities, reinforcing our corporate goal of putting stockholder-first. Looking to the future, we expect to achieve a key milestone with the delivery of the first FX Super One vehicles in the U.S. and the Middle East making the beginning of a full-scale effort to strengthen FF's global delivery capabilities to support future rollouts. Now let's turn back to John for Q&A. John Schilling: Thank you, Matthias, and thank you to everyone who presented here today. With that, we'd now like to open the floor to Q&A. John Schilling: The first question, what are the key features of FX Super One? Matthias Aydt: FX Super One is more than an MPV. It's the world's leading EAI MPV, a truly AI-driven luxury cabin that intelligently adapts to your lifestyle. Powered by the super EAI FACE system, it transforms your relationship with the vehicle into something far more engaging and human. AI tech luxury and comfort, this FX Super One blends artistry and intelligence to craft an atmosphere of tranquil indulgence. It's zero gravity NAPPA leather seats with 10-point massage deliver effortless serenity and a purification system, antibacterial intelligence and super-quiet acoustic engineering create an environment of calm purity. FX Super One delivers a luxurious, comfortable, healthy, and private experience across all scenarios, turning every journey into a first-class experience for both body and mind. Dual power options AI HER, and AI EV engineered for effortless strength, composure and precision, the FX Super One introduces a new generation of intelligent power, AIHER hybrid extended range and AI EV battery electric systems, both paired with standard intelligent all-wheel drive. The result is best-in-class efficiency across all conditions and a seamless human machine connection that inspires confidence in every drive. Expansive and adaptive design with a commanding 213-inch overall length, 150.5-inch interior space and a 72.6-inch shared track layout for the second and third rows, the FX Super One creates an open, flexible environment that adapts to every lifestyle. Every detail has been sculpted for balance, comfort and ease, ensuring that every passenger enjoys true VIP serenity within this executive class EAI MPV. Truly perceptive EAI agent equipped with the world's first FF Super EAI FACE System and the EAI space, the FX Super One offers an ultra-clear, immersive multiscreen and multimodal interactive experience. It becomes the embodied AI agent, an intelligent life form that perceives things, communicates and grows. It understands you better than you do and reshapes the bond between you and your vehicle, 360 degrees intelligent safety. Built upon a high-strength steel cage body with extended full-length side curtain airbags, protecting all 3 rows and 4 longitudinal, 7 transversal multi-beam architecture, the FF Super One delivers next-generation safety intelligence. Through dual core protection, structure and algorithm, it fuses predictive sensing with physical resilience to create a truly holistic intelligent safety ecosystem. John Schilling: Question number two, how many preorders has the company received to date? And when will they turn into firm orders? Matthias Aydt: As of October 28, the company has secured nonrefundable deposits, nonbinding B2B reservation orders for more than 11,000 FX Super One units and approximately 250 refundable nonbinding B2C preorders. We continue to expand our market through the co-creation ecosystem, direct online sales and FX Par partnership models. Partners do not only reserve vehicles, but also responsible for off-line operations and services in specific regions, sharing in the revenue. Preorders will convert to binding sales orders ahead of vehicle availability. John Schilling: The third question, update on tariff impact. How much will it increase costs for next year? How are you mitigating it? Matthias Aydt: We see tariffs as something that affects the entire U.S. auto industry, not just one company. In many ways, tariff policy is part of a broader industrial strategy. It can help drive more local production, innovation and supply chain resilience, which ultimately strengthens the competitiveness of U.S. brands. The recent progress in U.S.-China trade discussions is encouraging. A more stable and predictable tariff environment benefits everyone. It reduces uncertainty for manufacturers and helps keep costs manageable for consumers. At FF, we operate our own factory in Hanford, California, with an annual SKD capacity of up to 30,000 vehicles as production of both the FF and FX brands scales up and more components are localized, we expect to rely less on imports and contribute even more to U.S. advanced manufacturing. At the same time, with the FX Super One model entering mass production in 2026 and gradually ramping up capacity, we expect the impact of tariffs on our cost over the next 12 months to remain manageable. While tariffs on Chinese-made EVs could reach up to 100% under certain policies, their main goal is to balance global competition and boost domestic capability. In that context, our FX bridge strategy becomes even more important. It helps connect global supply strengths with the U.S. innovation and efficiency. We've also been in active and constructive dialogue with policymakers to ensure tariff measures, support innovation, sustainability and affordability. So the entire industry can continue to grow in a healthy way. John Schilling: Question number four. Following the UAE launch, what initial reservation volumes have you seen? And what is your business strategy in the UAE? Matthias Aydt: We have received B2B preorders for more than 200 Super One units in the UAE. We have strong support from high-value co-creators including government officers and potential investors. We can also ramp up crypto-related business more quickly due to government support. Following the official launch of the FX Super One in the UAE, we have opened preorders through our local partner network and have seen strong early interest from both private buyers and institutional customers. John Schilling: Thank you for your time. This concludes our investor Q&A session. We appreciate all the questions submitted and apologize if we couldn't get to all of them today. We remain committed to maintaining open communication with our investors. That concludes today's conference call. Thank you for your participation. Operator: Thank you. And with that, this does conclude today's teleconference. We thank you for your participation, you may now disconnect your lines at this time, and have a wonderful day.
Mark Allan: Welcome to the presentation of Landsec's 2025 Half Year results. So we continue to see clear positive momentum across all parts of our business. Our primary focus is on delivering sustainable income and EPS growth, and we continue to do so effectively. I've been saying for some time that owning the right real estate has never been more important, and our performance over the past 6 months illustrates this yet again. Following our significant portfolio repositioning over recent years, our best-in-class office and major retail assets now make up over 90% of our income. And driven by the high quality of our market-leading platforms in both sectors, we have again delivered strong like-for-like net rental income growth and positive rental uplifts on relettings and renewals across both office and retail. We see no signs that the strong customer demand for high-quality space, which underpins this positive trend is abating. So this will remain the key driver of near-term income and EPS growth with further asset rotation and residential expected to enhance this over the longer term. As a result, we are raising both our near-term and medium-term EPS outlook, which means we are well placed to deliver material shareholder value as we move to higher income, higher income growth and lower cyclicality over time. To deliver our strategy, we set out 9 key objectives back in February, and we are on track or ahead of plan on each of these. In the near term, most of our EPS growth will be driven by our current platforms, the assets we own today. So that is what the first 5 objectives are built on. We continue to capture the growing reversionary potential in our office and retail portfolios and today raise our guidance for like-for-like income growth for this year to around 4% to 5%. We have also raised our overhead cost savings target, which now implies a saving of more than GBP 10 million against financial year '25 by next financial year. We are on track to deliver half of our 3-year target to reduce our capital employed in predevelopment assets by GBP 0.3 billion during year 1. And we have sold 1/3 of our retail and leisure parks, whilst we are seeing an increasing number of acquisition opportunities in major retail coming to the market over the next 12 to 18 months. Our 4 longer-term objectives are designed to ensure that in 3 to 5 years' time, our asset mix is such that we are still as confident about this outlook for income growth at that point as we are today. Again, progress on each is positive as we've sold nearly GBP 300 million of offices over 12 months ahead of plan. We set a clear expectation for our income growth in retail at our recent Capital Markets Day in September, and we have made good planning progress in residential. Still, as returns in retail continue to look most attractive, we do not plan any meaningful new development commitments over the next 12 to 18 months. And that means that our committed development exposure is set to come down to just GBP 200 million by mid-2026. And we expect this to remain meaningfully below the current GBP 1 billion level beyond that. Our sharper focus on sustainable EPS growth as our primary financial objective that we set out earlier this year is providing real clarity of focus and clarity in decision-making. And we're seeing the benefits of this across all parts of the business. Across the whole portfolio, we have driven 5.2% growth in like-for-like income, and our occupancy is now at a decade high. We have had a highly active half year in terms of shifting our portfolio mix with the sale of GBP 644 million of assets, which generated limited or no return, and we're expecting further capital recycling in the second half. Meanwhile, our capital base remains solid, supported by continued growth in rental values. And we are committed to further improve this as we now target net debt to EBITDA of below 7x within the next 2 years. That's down from a previous target of below 8x. All of this translated into a positive set of financial results for the half year. Our strong like-for-like income growth and continued overhead cost savings meant that EPS was up 3.2%, whilst our dividend is up 2.2%. NTA per share was down slightly at 1.3%, but principally driven by the sale of nearly GBP 650 million of low-returning assets that I mentioned earlier. Aside from the finance lease income on Queen Mansions, the impact on EPS from these disposals was broadly neutral and the cost to NTA about 1%. Our LTV is now 38.9%, and our net debt to EBITDA was up as expected, yet we expect this to come down to below 7x within the next 2 years as our current developments complete and lease up and future development exposure reduces, whilst we expect LTV to reduce to below 35% over time. Reflecting our positive performance, we raised our outlook for EPS growth for the full year and now expect this to be at the top end of our 2% to 4% guidance range. This is before the disposal of QAM, which turns the residual finance lease on the asset from a receipt of income across 2025 and '26 into an upfront capital receipt on completion of the sale next month. So although the amount of cash we receive is effectively the same, this reduces reported earnings for the year by GBP 7 million. In addition, we have also raised the outlook for our financial year '30 EPS potential from around 60p to 62p, and that's a 20% increase in our earnings growth objective. driven by higher growth in retail income, lower overhead costs and lower development. Any upside from our planned medium-term investment in residential only becomes meaningful beyond financial year '30. We'll continue to pursue opportunities to further improve on this, but this now implies a compound annual growth in earnings per share of 4% to 4.5%, adding further to our attractive existing income return. So now on to our operational review. Customers unquestionably remain focused on the best space in both office and retail. So driven by our high-quality operational platforms, our leasing performance remains market-leading and our relative outperformance against the wider market continues to widen. Our occupancy is up to a decade high as our portfolio is effectively full, which is driving growing competition for space. This, in turn, is driving up rental values. So rental uplifts are rising, principally in retail and like-for-like income growth is trending higher. Reflecting this, we now expect like-for-like net rental income to grow around 4% to 5% this year, up from our initial guidance of 3% to 4%. And this established trend remains a key driver for our near-term EPS growth. Turning to offices in more detail. We continue to see growth in utilization rates with turnstile tap-ins up 11% over the 3 months to October compared to the same period last year, even though TFL tube traffic was slightly down over the same period. Mirroring the experience we see across our own portfolio, the majority of active demand in the overall London market comes from businesses looking to increase space. So as the availability of high-quality office space in locations with the right transport connectivity and attractive amenities is limited, this continues to drive rents higher. And that is not just for brand-new developments, but also for existing high-quality assets. And we see the evidence of this in our 2.3 million square foot estate in Victoria, which is 100% full, and we are now achieving rents on existing buildings in line with what just 2 years ago were record rents for a new development. All this is reflected in another set of market-leading operational results. Our office occupancy is now nearly 99%, and that's significantly ahead of the overall London market at 92%. Like-for-like income was up 6.8% with uplifts on relettings and renewals of 6%. And we signed or in solicitors' hands on GBP 19 million of lettings on average 9% ahead of ERV. This drove 3.1% ERV growth over the 6 months, which is well on track against our guidance of broadly similar full year ERV growth to last year's 5%. As our portfolio is now effectively full, capturing this market growth in like-for-like income is increasingly a function of lease events and will therefore be more balanced over time than it has been over the past 6 months. Yet our growing reversionary potential continues to support a positive outlook for like-for-like rental growth from here. This positive customer demand extends to our near-term office completions. Over the next 9 months, we will see 4 new projects complete, including the repositioning of an existing asset to Myo flex office space and a small full purchase that we agreed back in 2021. Now in total, we expect these projects to generate around GBP 58 million of net effective, i.e., P&L rent once let with an associated incremental GBP 43 million of annualized interest expense. The outlook for FY '27 EPS is, of course, sensitive to the pace of lease-up of these schemes, but current engagement with prospective customers is encouraging as we have interest in the form of active negotiations, requests for proposals or live engagement equating to an excess of 100% of space across our nearest term completions. Now not all of that will translate into actual leasing, but in our FY '27 EPS outlook, we currently assume around 40% of the 2 main schemes to be let by the time they complete and for all space to be let around 12 months post completion. And we are comfortable that these assumptions reflect those current activity levels. In retail, brands continue to focus on the best locations as these provide the best access to consumer spend and the highest sales growth. As the chart on the left shows here, the top 1%, 60 of all U.K. shopping destinations capture some 30% of all in-store retail spend. And so this is where major brands focus their investment with, for example, around 90% of all Apple and Intertek stores in these locations. And it's also where close to 90% of our portfolio is focused. The quality of our assets and our platform is driving superior footfall, which in turn is driving substantially higher sales growth than the wider market. Indeed, whereas overall U.K. shopping center retailer sales have increased just 3% over the past few years, sales across our portfolio are up nearly 20%, and the gap in performance continues to widen. And this is why brands want to be in our locations. And as our portfolio is now nearly full, this is why rents continue to grow. And this is clearly reflected in our operational performance. Rental uplifts continue to trend higher, as shown here on the left, whilst occupancy is up 50 basis points year-on-year to almost 97%. This means that like-for-like income growth remains attractive at 5%, and we expect this to continue. We signed or in solicitors' hands on GBP 33 million of leases on average 10% above ERV, which drove 2.2% growth in ERVs over the 6 months, comfortably on track with our expectation of similar growth for the full year to last year's 4%. And as we set out at our Capital Markets event in Liverpool in September, the outlook for future income growth from retail is firmly positive. Building on the unique data and insights that our market-leading U.K. platform provides, we continue to invest in creating experience-led places. The growth in footfall and sales that this then creates continues to attract leading brands. So alongside enhancing our social eating, dining and leisure offer, this creates an environment and experience, which in turn attracts higher footfall, higher sales and so on. Our growth outlook is further enhanced by selective investment in highly accretive smaller CapEx projects. So combined with growing turnover income and commercialization income, this is what underpins our target to deliver between 4.5% and 7% compound annual growth in net rental income from our existing retail platform over the next 5 years. So turning now to capital allocation. We continue to prioritize our capital allocation decisions based on this clear framework. This looks at how our investment decisions contribute to income and EPS growth in the short term and how they shift our portfolio mix such that it can continue to deliver sustainable income and EPS growth for the longer term, underpinned at all times by our commitment to maintain a strong capital base. We continually monitor for any changes in risk and return prospects, but as things stand for the next 12 to 18 months, our priority is further investment into major retail destinations given the high income returns and attractive income growth on offer, funded by further rotation out of lower return assets, including London office assets as we have done over the past 6 months. And we do not plan to commit any meaningful capital to new development over that period, creating further investment capacity. Based on the clarity that this framework provides, we've had a very active period of capital recycling. Our largest disposal was Queen Anne's Mansions, an asset which generated 0 total return despite the high short-term income profile as the valuation depreciates in line with every rent receipt until the end of the lease. Aside from the impact of turning the residual finance lease income into an upfront capital receipt, as I mentioned earlier, this has essentially no impact on earnings and derisks the value of the site by transferring planning risk for a change of use to the buyer. We also sold 2 predevelopment assets, which generated a negative income return as well as 4 retail parks. Combined, these parks comprised around 1/3 of our portfolio of retail and leisure parks. And whilst they delivered a reasonable income return, income growth has been limited. All in all, this means we have sold nearly GBP 650 million of assets, which generated limited or no return in just 6 months. This came at a cost to NTA of 1% when comparing sales to March book values, but will enhance our future income and EPS growth prospects, a clear example of our decisions being guided by a focus on EPS growth. We expect to remain active in terms of capital recycling in the second half. Investor interest in London has picked up from its low point. So whilst we already are ahead of plan in terms of office disposals, this provides us with an opportunity to recycle further capital to fund accretive investment in retail, where we are seeing more opportunities come to market, although not all of those will be opportunities for us. We will, to some extent, be pragmatic on disposal values as our principal focus should be less on NTA per se and more on ensuring that the NTA delivers growing cash flow, growing earnings and growing dividends for our shareholders. So in that respect, the roughly 200 basis points positive yield spread between office and retail, coupled with the superior income growth prospects for the latter is meaningful, which is underlined by the excellent track record of the GBP 1 billion of retail acquisitions that we've made over the past few years, where in all cases, performance is tracking well ahead of our initial underwrite. We expect to see further opportunities like this to add to our market-leading platform. So this remains our key focus in the near term. So whilst we do have a number of development projects that we could start in the near future, we currently see more attractive risk-adjusted returns elsewhere. So we're not planning to commit any meaningful capital to this. In London, we very much see the potential for continued rental growth. But as I explained earlier, our existing portfolio is benefiting from this trend as well. So taking into account the differing levels of risk, we see little upside in selling high-quality existing offices to fund the development of new ones. Although we do see an opportunity to leverage our skill set by working with third-party capital to bring projects forward. For residential development, the picture is a little more nuanced, partly because it would help shift our portfolio towards the higher income growth and lower cyclicality asset mix that we aim for, but also because we are seeing a shift in public sector policy, which could be supportive to returns. For example, with the recently announced reduction in affordable housing requirements and community infrastructure levy in London, which for our London projects could add between 50 and 75 basis points to our current net yields on cost of around 5%. Our near-term focus here is now on locking in this upside. So the outlook for returns could look different in 12 to 18 months' time. Until then, CapEx spend will be very carefully controlled and very limited. Looking beyond the near term, we plan to move to structurally lower levels of development exposure over time in any event as having large amounts of capital tied up in development for prolonged periods has a negative impact on our risk profile and on EPS growth, particularly so in a higher cost of capital environment. Part of this is reflected in our objective to release half of our roughly GBP 700 million capital employed in predevelopment assets, where we're making very good progress. But we also plan to keep our own exposure to committed development closer to about half of the roughly GBP 1 billion that it has been in the past. This means that our balance sheet will have a greater proportion of income-generating assets in the future, which supports our objective to grow EPS in a sustainable way and means that our cash-based leverage measures will also improve. With that, I will now hand you over to Vanessa. Vanessa Simms: Thank you, Mark, and good morning. We have had a positive start to the year with strong operational performance. Our occupancy is at a record high. We're leasing well ahead of passing rent and our like-for-like income growth of 5.2% is well ahead of our full year guidance. Reflecting this and the continued positive outlook from here, we have raised both our near-term EPS guidance and our medium-term EPS potential. For the half year, our strong like-for-like income growth and further reduction in overhead costs meant EPRA EPS was up 3.2%, supporting a 2.2% increase in the interim dividend. Our portfolio valuation was effectively stable with NTA per share down slightly at 863p. This was principally driven by our capital recycling as we sold nearly GBP 650 million of assets, which generated limited or no return, which came at a cost to NTA of 1%. Our capital base remains robust with LTV at 38.9% pro forma for the disposal since the end of September. And our net debt-to-EBITDA ticked up in line with the guidance that we set out in May, but we target this to reduce to below 7x within the next 2 years as our current on-site developments complete and they lease up and we move to a structurally lower level of development exposure in the future. Now turning to income and EPRA earnings. Overall, our net rental income was up GBP 15 million, supported by GBP 12 million like-for-like income growth. This increase was despite the fact that the prior half year benefited from GBP 4 million increase in the recovery of previously provided bad debts, principally relating to a few assets where we bought the management in-house. Surrender receipts were low as well at just GBP 3 million, which means almost all of our rental income for the half year was regular recurring income as the benefit of one-off receipts was limited. Our focus on operational efficiency meant our gross to net margin improved by 130 basis points to 87.7%. And overhead costs were down GBP 2 million with further reductions to come. Finance costs increased as expected, principally relating to the increase in average borrowings following our acquisitions in the second half of last year and a small rise in our weighted average cost of debt. All combined, this meant EPRA earnings were up GBP 6 million or 3.2%. And this slide shows the movements of how this translates into growth in earnings per share. Our high-quality office and retail assets continue to benefit from strong customer demand and our strong operating platforms. And combined, these assets make up 90% of our income. In total, like-for-like income growth drove a 1.6p or 6.4% increase in earnings per share for the half year. And further overhead savings, which added 0.3p offset the increase in like-for-like finance costs. Year-on-year movements in other items, which include lower surrender receipts and the bad debt recovery reduced EPS by 0.9p. But the overall benefit to EPS from both items is minimal now and it's unlikely to have a meaningful impact in the future. The net impact from investment activity was also positive with overall EPS up 3.2%. And as I will explain in more detail in a minute, the outlook for EPS from here remains positive. Our continued growth in income is further enhanced by our improving efficiency. Back in February, we set out a target to reduce overhead costs to less than GBP 65 million by financial year '27. But we've now increased our target savings, and we expect overhead costs next year to be in the low GBP 60 million. This reflects the benefits from our investments in data and technology, which I've talked about previously, and a cultural shift in our organization to sustain efficiency and maintain a structurally lower cost base going forward. We now expect overhead costs next year to be more than GBP 20 million lower than they were in financial year '23. That's despite GBP 9 million increase from wage costs and inflation. So in total, this marks a reduction in costs of over 25%. Turning to portfolio valuation. Our successful leasing drove 2.5% growth in ERVs over the past 6 months, with 3.1% growth in office and 2.2% in retail, both well on track versus our guidance for the full year. The positive impact of ERV growth was partly offset by the continued wind down of the valuation of QWAM as the asset is nearing the end of its leases, so the NPV of the future income continues to reduce and an increase in the business rates at Piccadilly Lights. Combined, these 2 factors reduced our overall portfolio valuation by 0.5%. But as we have agreed to sell QAM and the business rates review was the first since 2021, neither are expected to be continuing factors in the future. This means our overall portfolio valuation was effectively stable. Our main focus is ensuring that we turn this value into growing cash flow, growing earnings and growing dividends for shareholders. With that in mind, we said in February that we would be pragmatic about the value in terms of capital recycling. And the last 6 months have been an example of this. We sold GBP 650 million of assets, which generated little or no return, which came at a cost to NTA of 1% when comparing the proceeds to the book value. Ultimately, these disposals materially enhance our future income growth, yet this is the main reason our NTA was down 1.3%. And this continues to be underpinned by our robust capital structure, which will strengthen further in the near future. Our average debt maturity remains long at 8.9 years, and we have no need to refinance any debt until 2027 at the earliest. I mentioned in May that we expected our net debt-to-EBITDA to exceed 8x this year as our 2 on-site office developments in London are nearing full investment, but they do not produce any income until they complete in the 6 to 9 months' time. Combined with our predevelopment assets, this means we currently have around GBP 1 billion of capital that's invested in assets that do not produce income. So we carry all the debt for this, but none of the EBITDA. As these projects complete and they lease up and we move to a lower level of development exposure in the future, our net debt-to-EBITDA ratio will naturally fall. So we're now targeting a net debt-to-EBITDA of below 7x, down from the previous target of below 8x, which we expect to achieve in the next 2 years. We also expect our LTV to reduce below 35%, down from our current 38.9%. Our financial risk profile will, therefore, be even lower in the future, which further underpins the attraction of our growing income and EPS. And the positive, the outlook for both of these is positive. So following the strong first half of the year, we have raised our guidance for like-for-like income growth for the full year to circa 4% to 5%, up from our initial guidance of 3% to 4%. Combined with further cost savings, this means we now expect EPS growth at the top end of our 2% to 4% guidance range that we provided in May. This is before the impact of the sale of QAM, which turns the residual finance lease income of this asset into a cash capital receipt on sale. The overall amount of cash that we receive is effectively the same, but as we will now receive the cash when the sale completes next month rather than as lease income over the rest of 2025 and '26. This reduces EPRA earnings for this year by GBP 7 million. For next year, we expect like-for-like growth and cost savings to continue, yet the exact outturn in terms of EPS is also dependent on the pace at which we lease up our office developments. As Mark outlined earlier, we are seeing good engagement from potential customers. So we assume our 2 main projects on average to be 40% let by the time that they complete and leased up in full over the 12 months thereafter. On this basis, we currently expect EPS growth for financial year '27 to be broadly similar to financial year '26, again, before the impact of QAM, which reduces earnings for financial year '27 by a further GBP 15 million. As the impact on EPS from the sale of QAM is beyond financial year '27 is minimal, this means we're on track for our medium-term EPS growth potential that we've outlined. So turning to that in more detail. Back in February, we set out the potential for EPS to grow by around 20% to 60p by financial year '30, including the headwinds of QAM and the higher finance costs. We now raised this outlook to 62p driven by higher income growth in retail, a further reduction in overhead costs and a move to a lower level of development exposure. So let me just take a moment to explain the movements -- the moving parts in a bit more detail. So starting with last year's 50.3p. The sale of QAM, which I just explained, had an impact of just under 3p. By far, the biggest part of future growth is capturing the growing reversion in our existing portfolio. As you can see from our strong operational performance, we have a good track record of this with 5.2% like-for-like income growth for the first half across the whole portfolio, building on a 5% like-for-like growth that we reported last year. Our office portfolio is 12% reversionary, and our numbers here assume that we deliver like-for-like rental growth of 3% to 4% per annum, which is a more normalized level than over the last 6 months, given that our office portfolio is now effectively full. At our Capital Markets Day in September, we set out how we target to deliver income growth across our retail portfolio between 4.5% and 7% over the next few years. where rental uplifts are now up to 14%, turnover income is growing, and we're seeing the benefits of accretive CapEx. This outlook is based upon the midpoint of this range. The upside from further overhead savings I set out earlier equates to about 1.5p, and we have a good track record of delivering on this too. Our recent acquisitions and disposals, which include Liverpool 1 and the sale of our retail parks have a net benefit of around 1p. And as Mark mentioned, we are ahead of plan in terms of our objective to halve our capital employed in low and non-yielding predevelopment assets, which will add around 1.5p per share from interest cost savings. And the lease-up of our near-term office completions will add around 2p. The upside from future asset rotation effectively reflects our plans to recycle more capital out of lower return assets and invest a further GBP 1 billion into major retail destinations. As our planned capital recycling out of offices into residential is broadly EPS neutral on this time frame and will mostly benefit EPS growth beyond financial year '30. So taking into account the expected rise in finance costs, all this equates to just over 4% annual growth. Delivering sustainable income and EPS growth will, over time, result in an attractive return on equity. So with a strong capital base and attractive existing income return, we are well placed to drive substantial shareholder value. And with that, I'll hand back to Mark. Mark Allan: Thanks very much, Vanessa. So I'm now going to wrap up with a summary of what you can expect to see from us in the near future, where we see the differentiation opportunity for Landsec before we then open for Q&A. So the updated strategy that we set out back in February provides real clarity in terms of our key objectives and our primary target to deliver sustainable income and EPS growth for our shareholders. This means all of our priorities and decisions flow from this, creating a real clarity of focus across the business. For our best-in-class office platform, we are focused on capitalizing on the continued strong customer demand for space, and that's both for our near-term completions as well as across our existing estate. And this is similar to our market-leading retail platform, where we have robust plans to deliver 4.5% to 7% growth in income over the next few years. As investment activity continues to pick up, we will look to rotate further capital out of offices into retail to capture the superior risk-adjusted returns. Meanwhile, in residential, we are focused on locking in the positive impact of strengthening public policy support as this remains a highly attractive opportunity in the longer term, supported by strong growth fundamentals. So we have now created a clear differentiation in our positioning. We have 2 unquestionably best-in-class irreplaceable portfolios operated by 2 market-leading platforms of real scale and stature. Our primary focus on sustainable income and EPS growth as our principal performance measure provides absolute clarity across our entire business. And our clear capital allocation framework means that we're clear-eyed and rational about investment decisions in pursuit of our primary financial objective as reflected in our decision to significantly reduce our future development exposure, which underpins our move to an even stronger capital base with a net debt-to-EBITDA below 7x. At the same time, the outlook for income growth remains firmly favorable. Strong customer demand for the best office and retail space continues to drive ERV growth, and our overall occupancy is at a decade high of 98%. Both our office and retail rents are highly reversionary, underpinning future income growth, which on an earnings level is supported by additional overhead savings. This provides us with the confidence to raise our guidance for FY '26 earnings per share and increase the outlook for our financial year '30 EPS potential, with dividends expected to grow alongside growth in EPS and a strategy which is seeing us move to higher income, higher income growth and lower cyclicality over time, we are well positioned to deliver significant value for shareholders. Ladies and gentlemen, thank you very much for attending this morning and listening to our presentation. As usual, I'm now going to open for Q&A. We'll start here first in the room here. So please, if you have a question, raise your hand and wait for a microphone. And then we've also got people attending via webcast and conference call, and we'll go to both of those in turn as well. So a couple of questions here at the front first, and then we'll go to a question at the back in the middle. Marios Pastou: It's Marios Pastou here from Bernstein. If I maybe turn to your longer-term plans in residential. I think you've quantified now kind of policy changes that will actually support your development yields within your kind of London schemes, for example. Would that uplift be enough for you to commit to those projects? Or are you looking for more upside potential from other maybe cost savings, for example? Mark Allan: So we've indicated that we think -- and we have to be clear at the moment, what we have is policy announcements from government and GLA together to reduce affordable housing and community infrastructure levy charges. We need to see how those things actually play through in the detail to individual projects. So -- but the indication we provided is if those land at a project level, that would be 50 to 75 basis points improvement. And that would take us to somewhere in the high 5s as a yield on cost, which for a sector which has got structural growth and annual capturing of rental growth feels a pretty attractive starting point. But it's a decision really for us to look at probably in -- towards the end of 2026 when we have more clarity at a project level, we also have an understanding of what the other opportunities to deploy capital look like and what the relative risks and returns look like. It is unquestionably positive in terms of the direction of travel policy support, but it will be a decision ultimately for later in 2026 when we can look at things with a greater degree of certainty. Marios Pastou: Okay. Very clear. And then also just turning to retail. I think you've mentioned again, you're expecting more potential investment opportunities to come to market, and that's where the focus is today and putting capital to work there. It feels also quite crowded with what we're seeing in the market. So are you confident on being able to allocate that capital and at the levels of returns you're previously targeting? Mark Allan: We are in short. There is more capital coming -- starting to look at the market. But I think we have to remember sort of a couple of things. It is a very operational market. I think having relationships with brands, having the operational expertise, having the data around consumer behavior are all critical to be able to successfully operate a shopping center. One of the reasons we have deliberately targeted that sector is because we have a demonstrable capital advantage. If you look at where we are today, our major retail portfolio has 40% more reach in terms of footfall than the next largest U.K. retail platform, and our plan is to build and grow on that. I think the bigger the lot sizes get, the more difficult it is for some of the other investors might be coming into the space to capitalize that and to underwrite an exit. So I think it's good news. You've got more investors looking at the sector in terms of validating what we see within it. I don't think it's enough at this stage for us to be overly concerned about capital deployment. But it does mean one of the reasons we think it's a 12- to 18-month window. And one of the reasons we've accelerated office sales to rotate into that window is we don't want to do things over too long a period of time and find that the cap rate is 6.5% rather than 8% when we start to deploy capital. Jonathan? Jonathan Kownator: Jonathan Kownator, Goldman Sachs. Three questions, if I may. First question is on retail ERV. When are we going to see this grow? You're obviously letting 10% ahead. So how do you think this is going to evolve? First question. Second question, share buybacks were on your allocation charts. How are you thinking about this? Would you need more disposals to do share buybacks? Are you considering those at this stage? And third question, you're obviously willing to redeploy in residential. We've talked about the economics. We've talked about the time frame. Given the long time frame for development as well, would student housing be something that you would consider instead of doing residential development? Mark Allan: Thank you. So just first on retail ERVs. I'll make a comment and then perhaps ask Vanessa just to explain a little bit in the context of valuation. My personal view is that the ERVs that they're putting into valuation metrics are not particularly meaningful on the basis that we see our letting evidence is consistently so far ahead of those ERVs. But I think there's been an issue over recent years of particular lettings being done and then a question of what does that provide rental evidence that can be ascribed to other demises within retail. And when occupancy was lower and there was a variety of different types of occupier demand, I think there were perhaps reasons to say, well, let's be a little bit more cautious on that. I think when you're 97% full and you're leasing, if you look at in solicitor's hands, double digits ahead, I think the evidence is clearer and clearer. For us, in terms of our decisions, we look at our leasing evidence, and we look at our leasing pipeline, and we base it on our conversations with retailers. So whether we find that ultimately finding its way into valuations is a sort of secondary point as far as we're concerned, we're looking at the cash on cash and how does it help us grow our earnings. Jonathan Kownator: And is that your impression that that's increasing, so the letting that you're doing is increasingly at better rates? Mark Allan: Yes. Yes. And I think you saw a chart in the chart which shows retailer sales across the portfolio, which I think is really quite striking. At the end of the day, as a retailer, what are you trying to do? You want space that can help you grow your top line and grow your margin. So to see 19% growth over 3 years across our portfolio in total retail sales compared to a market movement of plus 3%, which is substantially below inflation over that period shows that retailers are focusing on the best locations and so -- and that gap is widening. And so if the gap in terms of sales performance is widening, I think it follows that the room for rental values to grow is also widening. Is there anything, Vanessa, from a valuation point of view that you'd want to add on that? Vanessa Simms: I mean, no, I think the leasing stats speak for themselves that when you're leasing 10% ahead of ERV, you've got 2.2% reflected in your valuation. And we continue to lease ahead of ERV and ahead of passing rent. I think that kind of shows that there's -- we've a bit more successful leasing than probably the wider market. Mark Allan: So on to your second question, we've quite deliberately included share buybacks on our capital allocation framework. And you should take from that as it is something that we, as a Board, will continue to actively consider. You've seen the 2 axis of how we think about how we allocate capital, what does it do to our near-term earnings and how does it help our portfolio mix over time get us to a position that we think can support long-term earnings growth. At the moment, selling out of lower-yielding assets, including offices and deploying into retail is the most accretive use of our capital. We can buy an ungeared yield, which is higher than the implied ungeared yield on our shares. So that will definitely be where we would deploy. I think the second thing is then to make sure that we have a really solid balance sheet. And so we would always look at that quite cautiously. But I think one of the things you've seen with us today is talk about effectively taking development down to me, as things stand at the moment, if we were just looking at -- if we didn't have those other options, we would look at share buyback as being preferable to development deployment, for example, because it would have the same effect in terms of portfolio mix, but it would have much more benefit on earnings accretion. So it will remain on our framework, but we're very clear as things stand deploying into retail is the most accretive use of our capital. Jonathan Kownator: And how long do you wait? There's obviously a different execution risk in both products, right? Mark Allan: There is a different execution risk. There's also a different scarcity value. No one is building any more of these shopping centers. So if we can add 2 or 3 further locations to what is already the leading platform by quite a margin in the U.K., those chances aren't going to come around again. So if we were to say, well, let's do something short term in buying our stock and then not have the capital available in 9 months' time to buy an asset, which isn't going to be on the market again for maybe another 10 years, I think that would be a real shame. And then lastly, just on residential, you understand the time frame, you understand the direction of travel on build-to-rent. That's where we think there's opportunity over the medium to long term to leverage our skill set. We considered student housing as one of a number of living sectors when we looked at our strategy last year before the February announcement. I think it needs real expertise. I think there are some interesting questions about what the long-term growth characteristics of that sector look like. So it's not something that we would plan to deploy capital into. I might just -- if I may, in the interest of the -- oh, I've got my front at the back, sorry. So I know there's a question at the back, we'll go to first. And then I think there are a couple more in the second row here. Unknown Analyst: [indiscernible]. It might have some overlap to the previous question, but given the 1% pool of retail assets that you said you're interested in shopping in, you mentioned maybe about 30 centers, and you obviously haven't made any acquisitions yet since the CMD in February. If no assets do come to market available at the price or yield that you like, how does that kind of shift your larger strategy in terms of capital deployment? Mark Allan: Yes. I mean I think it's a largely hypothetical question because I think those assets will come forward, and they will come forward at returns that will make sense for us. But the reason we have that capital allocation framework is to make sure that we keep that discipline. So I think if we got to a position where in that hypothetical scenario, you had earnings accretion that was meaningfully below the alternative of buying our own stock, then we would need to reassess at that point in time. But as things stand, I think you've still got quite a lot of centers that are owned by investors either individually or collectively that are not natural long-term holders of these assets. As liquidity improves, I think one of the benefits that has is it will encourage some of those existing owners to bring assets forward to market that perhaps weren't available to invest in previously. So I think we'll see the market balance out. As I said to the earlier question, I mean, the operational component of this Plus, I think on some of these assets, the CapEx requirements on some of this, I think they will be, I think, reasons for investors without the real expertise in this sector to be a little bit cautious. Unknown Analyst: That's clear. And just quickly on the GBP 200 million of accretive CapEx, is there opportunity to increase that slightly in the interim if the opportunities are slightly delayed? Mark Allan: There might be. I think there's also hopefully opportunity to try and deliver the same for less, which will probably be our primary focus if we can get the benefit of the return from that GBP 200 million by only spending GBP 180 million, we'd rather do that. But I think there will always be investment opportunities across the portfolio, but we're really focused on the cash-on-cash yield that we can get from those things. There's a question -- we'll start in the middle of the row and then work that way, if that's okay. Unknown Analyst: Bjorn Zietsman from Panmure Liberum. You mentioned increasing opportunities in retail for acquisition. Can you give us a sense of the composition of those opportunities? Are they shopping centers, retail parks elsewhere? Mark Allan: Yes. So the comment was intended really to talk about shopping centers, which is the only sort of segment that we would look at. And within that, there will be some that would not be of interest to us. They don't have the dominance in the catchment. They're not in a strong enough catchment. We don't see the opportunity to leverage our platform sufficiently. So it will be the larger and more dominant of those that would be the likely area that we would look towards. Unknown Analyst: And just on capital recycling, can you give us a sense of on the pace, quantum and timing as well as composition of any disposals? Mark Allan: So it will be capital recycling for the first. So we will use disposals to fund acquisitions. I think that's the first important thing to say. So I think you can judge on the basis that if we're hoping to invest into retail meaningfully on a 12- to 18-month view, that will need to be funded from disposals over a similar time frame. We've said lower-yielding assets, including London offices. So looking at the composition of the portfolio, that will need to involve ongoing disposals of London office assets as we've signaled. Robert Jones: It's Rob Jones from BNP Paribas. This might be a question that's better offline, but we'll try it now to start with. Mark Allan: That sounds like fun. Robert Jones: I was excited when I wrote the question, put it that way. I don't know how you can get to your FY '27 EPS guidance that you published yesterday, which is 53.3p on your website. And the reason why I can't get there, but you'll be able to help me is, for '25, obviously, you did 50.3p. You've then got, let's say, 4% earnings growth for this year to March '26, which adds, say, 2p a share to 52.3p. I've then got to strip out 0.9p for Queens Anne's Mansions, it gets me to 51.4p roughly for FY '26. I then look forward to FY '27. We've got, as you said, the second impact of Queens Anne's Mansions of GBP 50 million, call that 2p a share. So my 52.3p for March '26 goes to 49 -- sorry, 51.4p goes to 49.4p ex Queens Anne's Mansions in FY '27. And then you need to obviously then grow income ex Queens Anne's Mansions from that 49.4p to the 53.3p that you've currently got as your analyst consensus on your website, but that's an 8% growth for '27. And let's say we do 4%, does that mean that consensus is 4% too high? Like what have I missed? And I definitely missed something. Mark Allan: I can't imagine why you thought that might be better offline. But perhaps I might as Vanessa just to comment, there might be a couple of sort of big moving parts in that. I mean... Robert Jones: You can come back if you want, honestly. Mark Allan: We wouldn't -- the number wouldn't be out there if we didn't have the component parts as well. Robert Jones: Or analysts are 4% too high. That's the other option. Mark Allan: I just have a -- is anything headlines to... Vanessa Simms: I'm happy to have a quick -- a bit more detailed offline. But effectively, you've got the continuation of like-for-like growth from leasing performance, cost reductions. We don't have any major refinancing coming through in that year, so a pretty stable position. But there will then be the development completions, which we've had really from now over the next 12 months or so. So we get some -- we're assuming in the bit of leasing performance and then you offset the QAM movement. Robert Jones: So you don't think that 53.3p FY '27 today is too high. Is that any fair? Vanessa Simms: I'll have a quick look at that, if you like afterwards. I haven't actually seen what you specifically talking about. John Cahill: John Cahill from Stifel. Just one question, please. As you say, one of your differentiating factors now is your risk profile is vastly reduced from what it once was. Leverage is going to be lower still, reducing the pace of developments. And in isolation, lower risk, of course, is a positive. But there must be a degree to which that slows down the rate at which you get to your 2030 diversified portfolio. Should we think of this as it's the executive's view that on a risk-adjusted basis, these are the best returns? Or is it that the shareholders via the Board are saying, well, yes, we want you to get where you're going with the resi developments, but actually, we're just going to put the brakes on you a little bit. Mark Allan: Yes. It's very much a -- I mean the capital allocation framework that we set out on the chart there with the exception of adding in share buyback is no different to the capital allocation framework that we set out with the strategy in February. And if you look at the objectives that we set the short term and the long term, the short term included invest GBP 1 billion in retail. The longer term is rotate office into residential. There's no change to that strategy. I think what we might reflect on post February is that there's a lot of focus on residential and perhaps say we needed to do a better job on explaining the time scales and that we were sharing a 5-year view of how we shift the portfolio mix over time. And that, I think, got conflated with what drives near-term earnings per share guidance. What we've sought to do since then and particularly with today is show, look, the earnings guidance near term is, of course, driven by today's portfolio. We're very, very happy with the quality of that. We think retail continues to be the best place for us to deploy capital and leverage our expertise. We still think the rotation into residential is the right thing to do, and we still think the time frame for that is medium to long term. So no change in that respect. I think just trying to be a little bit sharper on what's happening over the next 1 to 2 years, which is -- tends to be -- I may even be giving them a little bit more -- giving markets a little bit more credit, but that tends to be the sort of time frame that markets are more focused on. I think that's what we've sought to do. I may just pass to Paul, it's convenience, and then we'll come to Tom at the front. Paul May: Paul May from Barclays. Three questions from me. Given the losses on disposals on non-income-producing sites, have you proactively written those down in the first half? -- ahead of expected sales further forward? Or should we expect further losses on those as you're being pragmatic? Second one, if recent press comments are correct, sorry, apologies. Are you disappointed having lost out on Merry Hill? Just get some color there. And then final one, as you know, I applaud the earnings-based strategy. I think it'd be a shame if the market doesn't wake up to it and see the earnings growth potential because I think it brings to question the whole European listed sector. But I just wondered what more do you think you could do to convince people and what pushback do you get from investors on that? Mark Allan: Sure. So Vanessa, the first question around sort of, I suppose, where valuations sit relative to ongoing transaction activity? Vanessa Simms: Yes. So the disposal losses that we saw in the first half really related the majority of them to some development site sales where we're seeing that developers are really looking for a higher IRR from development activity than probably in the past they have. So I think that it's quite specific to those sort of assets. So we have reflected that through into our valuation for the first half of the September valuation. So we've been through the discussions that we have, as you would expect, with all the valuers. So we would -- we believe that our valuation now properly reflects what activity we are seeing and experiencing in the market. And we've been pretty active, as you can tell from having sold almost GBP 650 million over that period, we've been pretty active. So I'm sat here pretty confident that our valuation at this point reflects where we see the market position. Mark Allan: And of course, we have reasonable visibility on our own capital recycling plans and are comfortable in that respect as well. Your question on Merry Hill, you won't be surprised, I won't sort of comment on specifics. I guess what I will say is that there are a number of assets, including Merry Hill that are being marketed. And in how we look at those assets, we will look at what's the opportunity to leverage our platform, bring brands in that perhaps aren't there, reposition assets through investment using consumer data to see what might be missing or what might drive performance. And what do we think the CapEx bill is likely to be in order to affect those changes or to deal with backlog maintenance, which will be a feature on a lot of these assets. So that's what we will always look at. So I think you can be confident that anything we do acquire, we will have answered those questions in the positive, and there will be a decent number of assets we look at that we either won't spend much time on at all because we don't feel that they're right or we might spend a fair bit of time on, but struggle to get ourselves comfortable at the sort of levels others may end up being. But again, I think we're comfortable we'll get to our capital deployment targets with what we can see on the market at the moment. And then I think with respect to earnings growth and what more can we do. I mean we post our strategy, had a considerable number of meetings, both then and through results cycles and over the summer and into the autumn, we engage regularly with all of our shareholders. We certainly have had a pretty consistent message back that earnings growth and confidence and credibility in that earnings growth trajectory is what matters most to generalist investors, if that's the right term. Certainly, and you all understand this better than me, but the dynamic of investing in our sector is very different to where it was 10 years ago in terms of specialist versus generalist. I think it is the wider equity markets that we need to be able to talk to in a convincing way of how we are creating value for them. And I think that's a far more convincing story to be able to point in a quite granular way to how we're growing earnings and how you can form a view as an investor on the deliverability or otherwise of the different components of our earnings bridge to 2030 than pointing to a valuation and an NTA where I think there's -- certainly for investors that look globally, NTA is not necessarily a feature in other markets. So I think we're moving in the right direction. We certainly wouldn't be doing it if we didn't feel that. We've got to then deliver and execute on it. And the more we do that, the more confident market should become. Paul May: Sorry. And just on that last bit in terms of that is a bit with Rob's question as well, that consistency of earnings delivery into next year, what would be good to provide comfort for investors that you do have that into next year given the headwinds, as Rob mentioned. But also, are there any acquisitions baked into that FY '27 earnings assumption? Mark Allan: So we put the FY '27 earnings number up there. I think within that, we will assume there's a small amount of recycling based on what we can see today, but not a significant amount in terms of undue reliance on achieving massive amounts of recycling to achieve a number with respect to earnings next year. The biggest sort of sensitivity is the pace of development leasing, and we provided some color in the statement on what a sort of plus/minus 10% on the sort of average occupancy on those assets through the year would do to earnings. And I think that's the one that we're probably most focused on. Tom, on the front here. Thomas Musson: It's Tom Musson at Berenberg. Sorry, I just wonder if I can pin you down slightly on share buybacks. I appreciate what you're saying where you see best use of capital today, but markets are volatile, especially today. I'm just wondering at what share price or perhaps what earnings yield does it suddenly make sense for you to buy back shares? Are we close or still some way away? Mark Allan: We don't have a precise number in mind. I think it would probably be unwise to have that. I would point back to my earlier answer around the scarcity of the alternatives. So I think buying major retail is much less about just a comparison of the spot yield and much more about what does that do to the long-term earnings potential of the business, the quality of the underlying portfolio. So comparing a sort of a spot rate to a genuinely scarce asset, I think, is something that we would be cautious about doing. So at the moment, the cap rates that we believe we can invest in, in major retail would still make that very clearly the right place to deploy capital. And I think there is an opportunity to add some scarce assets to an already market-leading platform on a 12- to 18-month view. That's got to be the right thing to do for the long-term value of the business. Are there any other questions in the room? Otherwise, I'm going to go to the conference call. Okay. So we'll go to the call. I think there are a couple of questions on the call. So let me open up to the operator on the call. Thank you. Operator: Your first telephone question for today comes from the line of Zachary Gauge from UBS. Zachary Gauge: Can you hear me okay? Mark Allan: I can. Zachary Gauge: Sorry, I'm not there in person. Yes, just 3 questions for me, hopefully quite quick. Could you disclose what the discount to book was specifically on the GBP 72 million of development site sales that you had in the first 6 months? The second one is on the overall office acquisition. Just interested to see how that fits into your new strategy, particularly around obviously the office holdings and the location being close to South Bank. And lastly, on the current developments, based on my calculations, when you strip out CapEx, Timber Square dropped by about 5% in value over the period. Just interested to see what was driving that. And also, if you could touch on why Thirty High, which 12 months ago was guided to be completing October 2025, now has a June 2026 completion date. Mark Allan: Zach, I've written down your questions, and I've written the first one down so badly, I can't read my writing. Sorry, what was your first question? Zachary Gauge: The discount to book on the GBP 72 million. Mark Allan: Right. Yes. Yes. Well, look, on the first one, we don't disclose the specific sort of deal by deal of sort of achievements relative to book. I think what Vanessa mentioned earlier with respect to sales is that where we've been selling development sites, there's tended to be in the market a higher IRR requirement than had previously been the case and the valuations are reflecting. What I would say, though, is things are pretty sensitive, and we've got examples of other sites where we're talking to partners that are quite a different outcome to what we saw in the first half, including ones that would point to positive outcomes relative to book. So it is very sensitive, but it is a relatively small part of the portfolio that will, I think, be largely sort of taken care of during the current financial year. The overall acquisition dates back to 2021, very good quality assets just delivered within the last month or so, as you'll see from the schedule, good occupier demand. The thinking of that at the time was looking for assets with a good value entry point in terms of price, perhaps slightly different in terms of local amenity playing to what was quite a different occupier dynamic back in sort of COVID era times. And so we looked at a relatively small acquisition to test that. I think we're pretty happy with the way the occupier demand is shaping up on that particular asset. But as things have moved forward now, we've set out a very clear priorities of where we're looking to allocate capital. And I think you understand where office investment sits in that Thirty High, I'll just talk to briefly and then ask Vanessa just on the Timber Square sort of movement. So Thirty High, yes, I mean, an existing building where the contractors have some challenges within the existing building as a refurb, which has pushed the program back a little bit. We're indicating around middle of next year, there is a recovery program opportunity, which could outperform that. But it's important for us to set a clear date, particularly as we're starting to see quite significant incoming occupier demand, and there's quite short lead times on the sort of people that are looking to take, say, 10,000, 11,000 square foot floor plates. So we need to have a date that we're very confident committing to for those occupiers. So we've moved that guided completion date back for those reasons. And then Timber Square. Vanessa Simms: Yes. So Timber Square as an asset, actually, the valuation because it's pretty close to completion was -- has transitioned to a cost to complete basis. So looking at the end asset with the cost to go. And then it's then therefore, valued at the moment as an asset that's 100% vacant because we haven't actually signed any of the leases at this stage. So as we go throughout the remainder of the next 6 months until that completes on the basis we're expecting to lease that asset, we'll get to a position whereby the yield will shift to reflect that as a leased asset rather than a vacant office with cost to go. So it's just a nuance in the way that the valuations on developments transition over the life of development. Mark Allan: So a point in time factor. Vanessa Simms: Yes. So it's not necessarily any change to any major assumptions on that front. Mark Allan: Is that okay, Zach? Zachary Gauge: Yes. Mark Allan: I think we may have at least one more question on the conference call. Operator: The next question comes from the line of Adam Shapton from Green Street. Adam Shapton: Just one from me on the thinking around residential development returns. I know you had 1 or 2 questions on that already. But I'm going to preface the question by saying I realize there's political dimensions to the communication on this, but hopefully, we can put that to one side. If I look back to the February Capital Markets Day, you were pointing to net yield on cost of 5%, 10% to 12% IRR and described that as attractive. Today, swap rates are a little lower, your share price is broadly the same, and you're saying a 5% net yield cost is not sufficient. Could you explain why that stance has changed or correct me if my sort of February inference was wrong or I'm not comparing apples to apples. And then more broadly, can you explain how you think about what would be a sufficient yield on cost or IRR for you to commit more capital to resi in the medium term? Mark Allan: Yes, certainly. So I think 6 months on looking at what's happened across the wider market, not just residential, and I would include our development sales and what people are looking for an office development, et cetera, to the earlier question within this. I think our view on IRRs will probably be point to something a little bit higher than 10% to 12% being where we need to be. I think we would also take a slightly more cautious view on exit cap rates, which, of course, has a fairly sensitive impact on IRRs. So we're now suggesting, and as I stressed earlier, this is subject to all of this flowing through to the actual projects in detail. So it needs to be very heavily caveated. But at a headline level, the reduction in affordable, the reduction in sale looks like it could add 50 to 75 basis points. That would take us into the high 5s on a yield on cost basis, which with sensible cap rate assumptions, I think, delivers a better -- a decent increase on that 10% to 12% guide on IRR. So I think where we are now, and I think this would also be consistent with a lot of the shareholder discussions we had post strategy is pointing to a need for IRRs to be higher than that 10% to 12% range yields on cost, which we think, frankly, is the most important measure because that's what ultimately is going to flow through to our earnings and earnings growth longer term, high 5s feels a more sensible level at which to be seeking to underwrite these. Adam Shapton: Okay. Understood. And then just on those -- on the additional yield that might come from the policy changes, you would -- is your expectation or your hope that those become permanent rather than temporary or of time-limited measures, which I think is what we're looking at the moment. Mark Allan: I mean, at the moment, they're positioned as acceleration measures. One would hope that if those acceleration measures achieve the desired acceleration, there's a better chance of them being come permanent than if they don't. Certainly, from our point of view, without those changes, we'd have been unable to take any residential projects forward. Other questions on the conference call line. Operator: The next question comes from the line of Paul Gory from CTI. Unknown Analyst: Can you hear me okay? Mark Allan: We can. Unknown Analyst: Yes, just a quick follow-on from Rob Jones' question. I'm looking at Slide 28 and basically, the FY '27 outlook for earnings looks flat against FY '26. So I'm just trying to understand, is that correct? Is that the right interpretation? -- flat year-on-year '27 versus '26? Mark Allan: Is that before the QAM adjustments? Unknown Analyst: That's after the QAM. Mark Allan: After the QAM. Sorry, I haven't got it in front of me. Unknown Analyst: I'm just looking at the -- sorry, yes, it's like purple bars, the deep purple taking QAM fully into account. It looks like is flat year-on-year from Vanessa's comments. It sounded flat year-on-year. Vanessa Simms: Take out the finance lease -- if you take the finance lease income from QAM out because that basically we're receiving that as a cash receipt in the next month as opposed to through the finance lease income that comes through in those 2 years. So if you look at the underlying portfolio, how that performs, that will be the growth -- the guidance we've given is the 2% to 4%. And then if you net out the QAM, that's where it is, which I think goes back to Rob's point earlier, when I just had a quick look. I think what's happened is since we've announced the sale of QAM, not all of the analysts out there have adjusted for the impact of QAM, even though the announcement we were quite specific on the impact over those financial years. So I think that's where the difference is to the roll-up of the consensus that sits out there. So with all the moving parts, when you actually look at the reported, it would be flat, whether you look at the underlying performance of the portfolio, it would be the 2% to 4%. Mark Allan: Any more conference call questions? No, I think we're -- we've either cut them off or are any more questions. So we'll head to the webcast. A couple of -- a few questions coming down on the webcast. So first, with the business plan seemingly on track was the credit rating downgrade a surprise and our corrective measures called for from Mike Prew. So Vanessa, just on credit. Vanessa Simms: Yes, happy to talk about that. We had a Fitch rating that was reflecting of last financial year's position. That rating was reflecting the -- following the acquisition of Liverpool One, our debt was slightly higher as we talked about in our results being slightly higher. But it's worth noting that S&P have just reaffirmed their rating, I think a couple of weeks ago of AA rating, so still a very high investment-grade rating. And overall, we still have one of the -- we are the highest -- have the highest investment-grade rating in the sector. So there's no need for necessarily corrective measures our plan that we have in place at the moment, as we talked about with net debt to EBITDA improving and naturally improving positions us well and our capital operating guidelines position us well and commensurate with high investment-grade rating. So our plans for the future put us in a good position. Mark Allan: Thank you. Then a couple of questions from Alan Clifford. So on future London office development, talked about partnering with third parties to leverage platform. What capacity do you have for this? And how capital light is this likely to be? So I mean, we have, at the moment, following the 2 development site disposals that we've already made, we have 2 further city-based assets plus an additional one in the South Bank, all of which are well advanced in terms of being able to commit capital to and where we are in active discussions on how we best take those projects forward. That's what gives us the confidence to make reference within the statement here to opportunities to work with third-party capital. If you take that in alongside our comment within the results to not planning to commit any significant capital to development ourselves on a 12- to 18-month view, I think you can infer from that, that these would be very capital-light options should we choose to take them forward. And then with regard to the wait-and-see comment on resi, how does this impact progress on the currently owned schemes with planning consent. So that has no bearing at all on what we need to do on those, such as the detail required to take forward schemes from a resolution to grant planning plus deal with the additional requirements of the building safety regulator whilst finalizing detailed designs but more moving on site. even if we wanted to go as fast as we possibly could on those residential projects, it would be mid-'27 with a following wind before we could put a spade in the ground on any of those. So at the moment, there is no bearing. So that gives us the opportunity without spending significant amounts of capital because we've got the consents in place to now work through the viability of those projects by mid next year to then be able to make the decisions I talked about across the second half of 2026 without having any bearing on the delivery time lines of the projects we're looking at. And I think that is the last of the questions. So all that leaves me to do is to thank you all for taking the time to either attend here in person or to dial into the call, and we look forward to further discussions with you over the coming few days and weeks. Thank you very much. Vanessa Simms: This presentation has now ended.
Operator: Greetings, and welcome to the Milestone Scientific Third Quarter 2025 Financial Results and Business Update Call. [Operator Instructions] And please note, this conference is being recorded. I will now turn the conference over to your host, Mr. David Waldman. Sir, the floor is yours. David Waldman: Thank you. Good morning, and I appreciate everyone joining Milestone Scientific's Third Quarter 2025 Financial Results Conference Call. On the call with us today are Eric Hines, Chief Executive Officer; and Keisha Harcum, Vice President of Finance of Milestone Scientific. The company issued a press release yesterday after market containing third quarter 2025 financial results, which is also posted on the company's website. If you have any questions after the call or would like any additional information about the company, please contact Crescendo Communications at (212) 671-1020. The company's management will now provide prepared remarks reviewing the financial and operational results for the third quarter ended September 30, 2025. Before we get started, we would like to remind everyone that during this conference call, we may make forward-looking statements regarding timing and financial impact of Milestone's ability to implement its business plan, expected revenue and future success. These statements involve a number of risks and uncertainties and are based on assumptions involving judgments with respect to future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond Milestone's control. Some of the important factors that could cause actual results to differ materially from those indicated by the forward-looking statements are general economic conditions, failure to achieve expected revenue growth, changes in our operating expenses, adverse patent rulings, FDA or legal developments, competitive pressures, changes in customer and market requirements and standards and the risk factors detailed from time to time in Milestone's periodic filings with the Securities and Exchange Commission, including, without limitation, Milestone's report on Form 10-K for the year ended December 31, 2024, and Milestone's report on Form 10-Q for the third quarter ended September 30, 2025. The forward-looking statements made during this call are based upon management's reasonable belief as of today's date, November 14, 2025. Milestone undertakes no obligation to revise or update publicly any forward-looking statements for any reason. With that, I'll now turn the call over to Eric Hines, CEO of Milestone Scientific. Please go ahead, Eric. Eric Hines: Thank you, David. So good morning, folks, and thank you for all joining our call. We're very fortunate to have so many people who believe in Milestone Scientific, and we are making progress. During the third quarter, we continued to execute our plan to build a leaner, more focused organization capable of sustainable growth and improved profitability. Through disciplined cost management and operational restructuring, we reduced operating expenses by over $0.5 million compared to the same period last year, while maintaining stable revenue performance. These results reflect the early benefits of our transformational strategy, which is centered around 3 priorities: streamlining operations and driving efficiency, strengthening commercial execution in both dental and medical and advancing our reimbursement and payer strategy to position CompuFlo for broad adoption in pain management. In our Dental segment, we made solid progress, expanding our direct sales programs in North America and advancing international registrations for our STA Single Tooth Anesthesia System. We have also enhanced our omnichannel marketing capabilities, and our maturing e-commerce platform continue to drive brand visibility and recurring customer engagement. International dental sales increased year-over-year, partially offsetting the decline in domestic revenue. On the Medical side, utilization of CompuFlo disposables rebounded slightly as we are starting to reenergize current customers, ensuring them that we are even more committed than ever as we continue to work on a structured and supported Medicare reimbursement strategy. We are particularly encouraged by feedback from leading pain centers domestically and internationally that are using CompuFlo to improve accuracy, safety and building confidence in epidural procedures. We also strengthened our organization through the addition of Dr. Dawood Sayed to our Board of Directors. Dr. Sayed is one of the country's foremost experts in interventional pain management and serves as Division Chief of Pain Medicine at the University of Kansas Medical Center. His appointment deepens our clinical and payer expertise and supports our strategy to accelerate adoption within hospital systems in integrated pain networks. In parallel, we continue to advance our reimbursement strategy for CompuFlo. And as we discussed last quarter, the system has secured Medicare payment rate assignments under CPT Code 0777T in 3 jurisdictions, supported by 2 MACs, Novitas and First Coast, that includes large population states like New Jersey, Texas and Florida. We are now building on that foundation, engaging with additional payers and expanding our commercial coverage footprint, essential steps for long-term medical growth. In summary, Q3 reflects disciplined execution and tangible progress toward our operational and commercial goals. We are in a more efficient organization. Our cost structure is leaner and our strategic priorities are sharply focused on growth and profitability. I'd also like to just point out that we'd like to invite you all to join our Instagram, Facebook and TikTok pages. Our Instagram page is @the.wan.sta. Our Facebook handle is just the Wan STA. And our TikTok handle is @the.wan.sta. We continue to put tremendous energy into our omnichannel digital marketing strategy, and we believe that will drive more people to understand who we are as an organization. With that, I would like to turn it over to Keisha Harcum. Keisha Harcum: Thank you, Eric. For the 3 months and the 9 months ended September 30, 2025, revenue was $2.4 million and $6.9 million, respectively, compared to $2.5 million and $6.6 million for the same period in 2024. Gross profit for the 9 months ended September 30, 2025, and 2024, was approximately $4.9 million for each period, reflecting no material year-over-year change. The stable growth performance primarily resulted from consistent product margins, favorable manufacturing cost management and a balanced sales mix between domestic and international markets. For the 3 months and 9 months ended September 30, 2025, SG&A expenses were $2.7 million and $9 million, respectively. Research and development expense for the same period was $16,000 and $437,000, respectively. Operating expenses were approximately $1.1 million and $4.6 million for the 3 and 9 months ended September 30, 2025, respectively. As of September 30, 2025, Milestone Scientific had cash and cash equivalents of approximately $1.3 million, and working capital of approximately $3.1 million. That concludes my financial review. I'll now turn the call back over to Eric. David Waldman: Thank you, Keisha. As we move forward, our focus remains clear: to execute efficiently, grow revenue and position Milestone for long-term profitability. We are strengthening our sales infrastructure, enhancing customer engagement and advancing the commercial rollout of CompuFlo through partnerships, payer engagement and medical education. In Dental, we continue to leverage our strong brand and product differentiation to drive international growth and expand the recurring revenue through our direct and e-commerce channels. I'm really proud of the progress we've made in such a short time, reducing expenses, stabilizing revenue and advancing the foundation for future growth. The path forward is about disciplined execution, operational excellence and ensuring that we continue to build value for our shareholders, customers and patients worldwide. I can't thank you all enough for joining this call today, and we will now open the lines for questions. Operator: [Operator Instructions] Our first question is coming from Anthony Vendetti with Maxim Group. Anthony Vendetti: So Eric, it sounds like you're very focused on stabilizing the business, which obviously is something that has to be done when you first come in. And in terms of the Dental business, which still obviously drives the vast majority of the revenue. In this particular environment that we're in economically and Dental offices, Dental clinics have always been, I think, and just in my experience, very concerned about investing new capital or buying new equipment. How do you convince them that this is a must-have product? And also if you could talk about the clinics that you're currently in, is there a target utilization rate or a way to ensure a certain level of utilization of your STA unit? Eric Hines: Thanks, Anthony. No, those are great questions. And the Dental business is the foundation for the company, right? At the end of the day, 80 or 90 or even maybe higher than that percentage of the revenues come from the Dental business. What we are learning is that there's really 3 tiers of customers who are sort of low users, mid and high users. And we really believe that a big challenge for us in the marketplace in general is that when we moved over to the direct sales, the e-commerce model, a lot of customers felt that we had really sort of gone more or less out of business and didn't know a whole lot about us. And so we are spending a lot of time really reconnecting with old customers who maybe thought that we didn't exist anymore. But more importantly, really sort of starting to expand our digital marketing to start to get to more dentists because a lot of times when we talk to dentists just in my hometown and what Jason speaks to them in Dallas, they don't even really know about the company or the Wand in general. So we think with 1.5% to 2% of the market share in the domestic market and more or less the same internationally, that it's mostly about getting the word out and really telling people about the benefits of the Wand. On the other side, education, right? So to move the low end users to the high-end users. Typically, we find that the high-end users are spending about $2,500 to $3,000 per year with us on disposables. We need to get the others moving in that direction. And just by the nature of the name of the unit, the STA, the single tooth anesthesia. What we've learned is many people are not using it for all the other injection types. And I think as most of the people know on this call, the Wand can do all of the injection types that a dentist needs during the course of operating their clinic. So we really need to do a better job of educating the low- and mid-tier users to make sure that they understand, and it's clear that the Wand can be used for many more procedures than just single tooth. I don't know if that covers what you asked me, Anthony, but let me know. Anthony Vendetti: Yes. No, that's great. So there's an active effort to try to increase the utilization of the Wand within the current installed base as well as getting the word out. And like you said, there's a huge opportunity because you don't have a lot of penetration at this time, even though it's the vast majority of your business. On the Medical side, maybe I know you decided to refocus on the current clinics that are using it and building that base for broader commercialization. Can you tell us where the company is with that refocused effort and then the plan for broader commercialization? Is that something that's occurring in this quarter? Or is that more of a 2026 goal? Eric Hines: No, another good question, Anthony. And let me just want to one more thing on the dental. So Jason brought to me 11 objectives that he has for the Dental business moving forward from a sales perspective. So along with the education and so forth, we've got objectives to go after some of the dental schools. We've got the DSOs that are part of that mix. We've got the digital marketing to existing customers. We've got lists from our own distributors that we're now starting to go through and have discussions with those folks. So it's a kind of a multitiered program on the dental side that attacks 10 or 11 different objectives, including DSOs. But to answer your question on CompuFlo, and as I stated in the last conference call, what I felt when I stepped into this role is that we had a lot of things going in a lot of different directions. And really, the plan now is to focus our energy on a handful of states, a handful of jurisdictions but more importantly, to put the right structure in place to support the physicians once they start using CompuFlo. And even more importantly, is to collect the data in a very meticulous way so that we can share that to the Medicare folks from a reimbursement perspective. We also plan to attack the commercial side of that equation as well. So in parallel to Medicare, we also plan to look at, at least one, if not a couple of the commercial payers to see if we can get some traction in those areas as well. And then while we're doing all of that, we will start to tackle maybe one other jurisdiction. But again, the plan is to try to stay as focused as possible. And I'm kind of holding the reins back until we do the proper review of the sort of the business case or the value proposition for pain management because if you recall, we sort of started down the path of labor and delivery and then pivoted over to pain management. And I want to make sure that we've got a clear message for the pain management clinics because it's a slightly different value proposition than it is for labor and delivery, where fluoroscopy is not used. Anthony Vendetti: Okay. Great. And just to be clear, right, so the focus is on the jurisdictions in Texas, Florida and New Jersey, correct? Eric Hines: Correct. Novitas and First Coast are the 2 MACs that are supporting those 3 jurisdictions. Anthony Vendetti: And just -- maybe it's too early to say, but just a little bit on the timing of -- you said you're going to collect that data and work with Medicare and make sure about reimbursement. But is that a 6- to 12-month process? Or what's at this point in terms of your vision of when broader commercialization will start? Do you have any clarity on that at this point? Eric Hines: Yes. I mean the broad adoption is challenging, but we plan on sort of restarting the program here in the next handful of weeks. We're doing a lot of due diligence behind the scenes with people who have a lot of experience in that world and we're gearing up to be ready to sort of reroll out CompuFlo -- the more data we collect early, the quicker we can get to a commercial -- larger commercial rollout. So again, we just need to be -- I don't have a problem of having people want to use it. The bigger problem is making sure that the people that do start using it get the proper information back to Medicare. Operator: Our next question is coming from Bruce Jackson with The Benchmark Company. Bruce Jackson: I wanted to touch on the tariffs just real quick. Last quarter, you said that from a supply chain perspective, you're pretty well set. You have inventory in the states and for the international accounts, could ship out of China. Has there been any change to that during this quarter? And then secondly, with the international customers, are they -- have they changed their purchase behavior because of the current situation? Eric Hines: It's a good question. Thanks, Bruce. So as far as the tariffs, we're really not seeing much of an impact at all. We, as you mentioned, have the ability to ship out of China internationally, so to avoid that and plenty of supply here in North America to handle our business here. So we're not really seeing a whole lot of impact. As far as changing behavior, we'd like to see more customers initiating sale -- orders coming out of China. It's been a little bit lighter than we wanted it to be. So we're considering potentially having a bonded warehouse in the U.S. if the tariffs continue to persist so that we don't -- so that we can ship out of the U.S. and/or China. But we're not really seeing a tremendous impact from the tariffs. Bruce Jackson: Okay. Okay. Great. And then in terms of the United States marketing effort, any thoughts on the sales force or the composition of the sales force? Do you have, for example, reimbursement specialists on staff? Tell us a little bit about how you're structuring the sales force, thinking about the sales force right now. Eric Hines: Another good question. The -- as far as reimbursement, we really -- we've tried in the past for reimbursement on the Dental side unsuccessfully. We've talked a little bit about trying to get a pediatric code based on the use case there in pediatrics. So we go back and forth as far as looking to attack the reimbursement market on the Dental side because there's obviously a lot of cost in doing that, and it could be difficult. As far as the sales organization, we plan on continuing to ramp that up. We've got a handful of people doing it here locally. So we're anxious to add horsepower to the Dental team, and we've got a handful of programs that could expand our sales footprint pretty dramatically in the North American market. And I think there'll be more to be said about that in the coming weeks. Bruce Jackson: Okay. And then last question for me. With your sales, is there a seasonality pattern where the fourth quarter is generally a strong quarter for you? And as we're looking at the model, should we be thinking about an uptick in revenue for the fourth quarter? Eric Hines: That's funny you asked about. I used to be in the software business, and we always had the hockey stick in Q4. It was always -- we shoved all the business into Q4 and then it was a light Q1, a heavy Q2, a light Q3 and then a massive Q4. Here, it seems to be quite a bit different. It's very steady. I think we were $2.4 million, $2.2 million, $2.4 million. And we expect a similar quarter in Q4. So no real huge inflection in Q4. It's a pretty steady business, which is wonderful. But we'd love to see it tick up, and we expect a similar quarter as we've had in the past or no big, huge hockey stick. Operator: Our next question is coming from John Corp, who is a private investor. Unknown Attendee: Nice to hear your presentation this morning. I am a long-term shareholder of Milestone Scientific, I would say, at least 15 years. Permit me, if you will, to give you the perspective of a long-term shareholder, and I might say a suffering shareholder because my hopes have been dashed repeatedly for the turn of events that might allow increasing revenues and positive cash flow and positive earnings for Milestone. I don't think you would have taken this job unless you believed as I do in the product. My dentist uses STA, has used it with me and it's a wonderful product. It was just terrific to get an injection like I received with the STA product. I try to attend every quarterly call. I started off by talking to Leonard Osser years ago, and he was enthused about your products as am I. But when Milestone received FDA approval and my hopes really got up, that was the beginning of a down slide that really took me by surprise. Since that time, the balance sheet has been ravaged. And I thought at one time, I really know where Milestone was going. And now I'm kind of at sea, I don't know where Milestone is going. I don't know what the challenges or pushback have been. You know, I don't know. I don't know how many pain clinics are using this. I don't know what their feedback is from the clinicians or the doctors. Could you help me with that perspective on where we are and where you -- what do you think the possibilities are for Milestone Scientific? And where those dramatic possibilities may be. The CompuFlo, obviously, but what is going on that we went from 10 salesmen to no salesmen to when your predecessor ended, we're inching along with trying to get 100 cases authorized for payment? It seems to me the cart may have been before the horse on this, but I don't know. Maybe you could help clarify what I don't know and give me some hope for the future of Milestone from your perspective. Eric Hines: Thanks, John. So welcome to the club, right? So I've been a shareholder since 2018, pretty significant investment in the company. And so I've been following it like you have, not quite so long as you have. So you've definitely got a lot more history than me. And I appreciate you continuing to support Milestone and for your patience and hopefully, for the future perseverance of the organization. But to answer your question, again, what I've observed in the few months that I've been here is, first and foremost, we have fantastic technology, right? So the STA, as you mentioned, the dynamic pressure sensing capabilities that also applied to the CompuFlo unit. Our technology is what it is, right? That hasn't changed. I think what has happened in the Milestone historically is that -- and I've seen this in other organizations that I've invested in is that it was probably a research-oriented company with a lot of inventions and a lot of patents and a lot of IP, but where it fell short, at least in the past from what I can see is it really didn't have true sales leadership that was driving the execution and the discipline required to scale and grow business in a proper way, right? And so when they rolled out CompuFlo and so forth, they had a little bit of a shotgun approach and got a lot of excitement going and a lot of use of the product, but they really didn't have a structure in place to maintain that business, and it's sort of all started to sort of fall apart, right? And so what we're doing is stepping back just a little bit, not a lot, and we're taking a much more focused approach with a very targeted group of customers and with support on the Medicare reimbursement front, so that we can do a proper rollout that can scale. And again, I think that's really it. The technology is great. The sales execution has been poor and the structure in place to support a scalable, sustainable business was just not put in place. And so your expression of the cart before the horse, I'm requiring that we build an ROI, a plan, a strategy before we jump into the market. And when you jump into the medical market, it is extremely sophisticated, it's extremely political. There's lots of moving parts. And if you're not prepared, you can get yourself into a tough unsustainable situation. So I'd just ask that you be patient. I know that you've been here 15 years, and again, we appreciate your support. But we're going to do this the right way this time. Operator: Our next question is coming from Elliot Sparrow, who is an investor. Unknown Attendee: Eric, congratulations on a great quarter, best one in a long time. And I hope the trend continues. My question is along the same lines as what you've just been answering to Anthony Vendetti and now John. I'm curious why we had many, many successful trials and demos over the years with fantastic feedback from those people. How come they never translate into sales? And then b, again, as you've been trying to explain what is going to be different this time around? Eric Hines: Yes. I think one of the big changes, and it's sort of -- I guess, a little bit surprised if the question doesn't get asked, right? So we've got Dr. Demesmin, who is an early adopter, right? So he's been wonderful. He continues to use the product and he's surrounded by a lot of customers in New Jersey that are still using the product. But we've also added some high-caliber talented people, Shanth Thiyagalingam and now Dr. Sayed who have been advising us at least a little bit here over the course of the past handful of weeks. But we expect that with them on Board, helping us navigate this complex environment is going to be done in a much more focused way. And so again, not to hit on the old team who is trying their best and working very hard, but again, it's a very complicated process to go from a category 3 to category 1 and it's a very difficult process and requires a lot of data to be generated in order to get the proper reimbursement code number. So the doctors want to use your solution so that they can make money. So again, I think to sort of reiterate, we are stepping back. We're taking advice from many doctors, engaging that community and the engaging companies who have tremendous experience in that community to do it the right way so that we can start off very focused, get the data we need, get the reimbursement where we need it and then seek a larger commercial rollout over a handful of weeks or months. But that's really just it. It's -- sometimes the thought is you just go out there and start selling like crazy, and you hope that it will latch on. But what I'm finding out is in this world, it doesn't work. You have to have data, you have to have structure, you have to have all those things in place. And I think with the Board that we now have in place, we plan on leaning on them to help us navigate that complex infrastructure, namely Medicare. Unknown Attendee: Okay. Great. Fantastic. My second question is totally different, and that is just about how are we set for capital and cash? And I know we've saved $0.5 million this year, but how much longer are we good for? Or are we going to need capital? That's it for me. Eric Hines: Thanks, Elliot, for your second question. So the initial focus for me stepping into the company was to get control of the cost, right? And so we've done a decent job of that. We still have more opportunities to work on that. As far as the front end of the equation, I'm sort of turning the jets a little bit to the sales focus. So like I said, I've been holding back a very strong horse by the name of Jason Papes, who's sitting here with us. And the plan is to turn the sales jets on full steam ahead here very, very shortly. But the company is -- from a cash perspective, has got plenty of cash to keep going for several quarters. And so we always are looking at opportunities to improve that if we need to. But right now, the company is in good shape. Unknown Attendee: Thank you very much, Eric, and I hope we have more good news from you in the short term. Operator: As we have no further questions in queue at this time, I'd like to turn it back over to management for any closing remarks. Eric Hines: No, I just appreciate folks joining the call. I appreciate the shareholders being part of this community and sticking with us. I share most of the sentiments that all of you do, part of the reason that I joined the company. And I can't say enough about how good I feel about having -- I hear from a lot of the different shareholders. And what I will leave you with is that everything I do every single day is about driving shareholder value. So for me, it's all about anything that I can do, and I tell everyone on the team, we need to turn into a sales-focused organization. So anything you do, whether it's product management, whether it's R&D, customer service and so forth, always be thinking about how that can benefit sales, how that can benefit our customers, and finally, how it can benefit our shareholders. So thank you very much, and thank you, David, for setting up the call. And we look forward to speaking with you all at the end of Q4. Good luck to all of us. Operator: Thank you. Ladies and gentlemen, this does conclude today's call. You may disconnect your lines at this time, and we thank you for your participation.
Operator: Good day, and thank you for standing by. Welcome to the South Bow Third Quarter 2025 Conference Call and Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Martha Wilmot, Director of Investor Relations. Please go ahead. Martha Wilmot: Thank you, Marvin, and welcome, everyone, to South Bow's Third Quarter 2025 Earnings Call. With me today are Bevin Wirzba, President and Chief Executive Officer; Van Dafoe, Senior Vice President and Chief Financial Officer; and Richard Prior, Senior Vice President and Chief Operating Officer. Before I turn it over to Bevin, I'd like to remind listeners that today's remarks will include forward-looking information and statements, which are subject to the risks and uncertainties addressed in our public disclosure documents, available under South Bow's SEDAR+ profile and in South Bow's filings with the SEC. Today's discussion will also include non-GAAP financial measures and ratios, which may not be comparable to measures presented by other entities. With that, I'll turn it over to Bevin. Bevin Wirzba: Thanks, Martha, and good morning, everyone. We appreciate you joining us today. South Bow's third quarter financial results once again demonstrated the resilience of our business with our stable earnings profile, allowing us to meaningfully deliver on our capital allocation priorities in our first year as an independent company. We have paid a sustainable dividend to our shareholders, funded our first growth project at Blackrod and strengthened our financial position. We are also nearing the exit of all transition services with TC Energy, which we expect to finalize by the end of 2025, almost a full year ahead of schedule. We have become more efficient in the process and are realizing cost savings that drive a more competitive tool for our customers and a stronger bottom line for our shareholders. The team has successfully managed several priorities while establishing South Bow as a stand-alone entity. And I'm pleased, maybe even a little relieved, if I'm honest, to say that we are now fully focused on our future strategic priorities of growing our business and enhancing our overall competitiveness while ensuring safe operations, financial strength and capital discipline. Regarding our growth initiatives, I visited our Blackrod site last week, and I am incredibly proud of the team's success in executing this important project, set to be delivered on schedule, within budget and with an exceptional safety record. I am confident that we will continue to demonstrate this type of project execution excellence as we mature our growth portfolio with organic and inorganic opportunities. By adding more revenue lines through growth, we will become more competitive across our existing systems. As we look to the future and the role of South Bow will play in serving our customers, we are encouraged by the dialogue taking place in Canada and the United States about advancing energy solutions. These conversations not only underscore the strength of the supply basin and the demand centers we serve, but also highlight the resilience of our customers' businesses. South Bow's assets are strategically positioned to serve their needs and we are focused on being the first choice for our customers. As we evaluate opportunities to leverage our pre-invested corridors, it will be important to establish appropriate risk and return frameworks, and carefully consider our investment requirements, which include minimizing shareholder capital exposure, adhering to our capital allocation priorities and seeking permitting durability. On safe operations and asset integrity, we have made significant progress in our remedial actions following the Milepost 171 incident. The work our team is completing increases our confidence in the integrity of our system. As we work towards returning Keystone to baseline operations and closing out the requirements of PHMSA's corrective action order. Richard will provide further details on this shortly. Finally, we have laid out a clear set of priorities for our team as we focus our attention on our second year. These priorities include maintaining safe operations, maturing and executing on our growth portfolio, continuing to enhance our competitiveness and the ongoing demonstration of discipline in our capital allocation and shareholder returns. I will now ask Van and Richard to touch on the financial and operational expectations that come with these priorities. Richard? Richard Prior: Thanks, Bevin, and good morning. I first want to speak to the progress we've made on our remedial actions at Milepost 171, while we await PHMSA's publication of the root cause analysis. The findings from the third-party metallurgical lab report determined that the pipe and welds conform to industry standards for design, materials and mechanical properties, and our own records confirm the pipeline was operating within its design pressure at the time of the incident. Through the remedial work we've completed to date, we do not see evidence of a systemic issue, and we're confident we will address the system's long-term safety through actions we've already taken or through planned enhancements to our integrity programs. To that end, since April, we've completed 6 in-line inspection runs that place a focus on the long-seam pipe integrity. Preliminary inspection results show no notable concerns, reinforcing our confidence in the integrity and reliability of our system. We have also completed 37 integrity digs with no injurious issues to report. Our investigative work will be ongoing through the end of this year and into 2026. In parallel, we are advancing important work with our in-line inspection technology providers to address and resolve tool limitations and apply the latest and advanced technologies across our system to increase our ability to prevent future incidents. This work is being incorporated into our remedial work plan, which we will submit to PHMSA for approval. I anticipate that the Keystone pressure restrictions will eventually be lifted in a phased manner. We're proactively sharing with PHMSA the results of all investigative work being performed with the goal to safely return Keystone to baseline operations in 2026 ahead of when market differentials are expected to widen and demand for uncapacity -- uncommitted capacity increases. Switching gears to the Blackrod project. In October, we achieved overall project mechanical completion and placed the 25-kilometer natural gas lateral into service. These are both significant milestones, and I want to extend a sincere thank you to the team for the tremendous effort in safely executing this project. Facility commissioning work is underway, and we remain on schedule and within budget to place the project into service early in 2026. Lastly, in October, all parties withdrew from the legal proceedings related to the variable toll disputes filed with the Canadian and U.S. courts and regulators. These proceedings had been active for nearly 6 years. And with the matter behind us, the team has now focused -- has turned its focus to new business opportunities to jointly create value for our customers at South Bow. And a reminder that as part of the separation agreement with TC Energy, South Bow was indemnified for this matter in addition to other matters that existed prior to the spin up to a liability cap of USD 22 million. I will now pass it over to Van to discuss South Bow's financial performance and outlook. P. Van Dafoe: Thanks, Richard. I'll start with our strong third quarter performance, which included delivering normalized EBITDA of $250 million. As expected, the marketing losses that we crystallized early in the year were largely offset by normalized EBITDA associated with higher maintenance capital expenditures in the period. Distributable cash flow of $236 million benefited from a current tax recovery of $71 million resulting from changes in U.S. tax legislation and successful optimization efforts from our tax team. To reflect these tax wins, we are revising our outlook for distributable cash flow to approximately $700 million for 2025 and our effective tax rate to range between 20% and 21%. We are reaffirming normalized EBITDA guidance for 2025 of $1.01 billion. Turning to 2026. Our outlook is supported by our highly contracted cash flows and the structural demand for our services. We are forecasting normalized EBITDA of $1.03 billion within a range of 2%. The key drivers of the increase from 2025 include; for marketing, we're expecting normalized EBITDA will be approximately $25 million higher, reflecting the recovery from losses recorded in 2025. For intra-Alberta and other, we expect normalized EBITDA will be approximately $10 million higher, reflecting Blackrod cash flows ramping up in the second half of 2026. And for Keystone, we expect normalized EBITDA to be approximately $15 million lower primarily due to reduced planned maintenance capital expenditures following an active integrity program in 2025. Distributable cash flow is forecast to be approximately $655 million within a range of 2%. As we consider the potential outcomes for the year, I'll note that normalized EBITDA and distributable cash flow will be influenced by pressure restrictions and price differentials. To exceed our baseline expectations, pressure restrictions will need to be lifted early in the year and price differentials would need to widen. On the other hand, the low end of our guidance range reflects a scenario in which pressure restrictions have remained in place throughout the year and pricing differentials have tightened beyond current levels. Our capital program next year includes approximately $25 million of maintenance capital, reflecting a less active plan and approximately $10 million of growth capital to complete the Blackrod Connection project. We plan to update our outlook for growth capital once we have sanctioned our next development project. Lastly, our Board of Directors has approved a quarterly dividend of $0.50 per share payable on January 15 to shareholders of record on December 31. The dividend remains an important component of our total return proposition. With that, I'll hand it back to Bevin for closing remarks. Bevin Wirzba: Thanks, Van. After another solid quarter of financial and operational results and through the hard work and effort of the team in establishing South Bow, we have strongly positioned our business for longer-term growth and success. Our priorities for South Bow's second year are clear. We will maintain safe operations and continue progressing towards returning Keystone to baseline operations, mature and execute our growth portfolio of organic and inorganic opportunities, continue to optimize our workflows and increase our competitiveness and maintain discipline with our capital allocation and shareholder returns. We look forward to sharing more on this next week at our first ever Investor Day. With that, I'll now ask the operator to open the line for questions. Operator: [Operator Instructions] And our first question comes from the line of Sam Burwell of Jefferies. George Burwell: So we got these latest list of major projects, I believe yesterday in the proposed crude pipeline that Alberta [indiscernible] was not on that, but I understand that you're providing some engineering and permitting support. So I'm just curious for an update on that. And then there were also some press reports, I mean, this is going back a little bit further about Keystone XL, a reboot of that being talked about in trade discussions between the U.S. and Canada. So with respect to that, just curious about what sort of existing infrastructure you guys might be able to leverage to expand crude egress capacity over kind of the medium and longer term? Bevin Wirzba: Yes. Thank you, Sam. It's Bevin here. I mean, first off, one of our key capital allocation priorities is to leverage our pre-invested corridors that we have both in Alberta, the pre-invested capital that we made for the former Keystone XL project and then pre-invested capital along our system in the United States. So we're always evaluating ways of leveraging that pre-spend for other solutions. Directly to your question on the West Coast project. Yes, we are providing some advisory support. Many members of our team have a long history in developing significant capital projects. And so we're lending some of that expertise to the provinces initiative there, but it goes no further than that. With respect to trade negotiations, to be honest, Sam, that's way above our pay grade. We're obviously watching and encouraged by the ongoing dialogue between Canada and the U.S., but I can't really speak any more detail to what's going on behind closed doors that we're not a part of. So thank you. George Burwell: Yes, of course, totally respect that. And then the commentary around marketing and tight crude spreads that certainly makes sense and squares with commentary from some of your peers. Just curious if you have a view looking out a little bit further when you think that spreads can widen out, inventories in Alberta can normalize and then we might start to see some contribution from spot volumes once presumably the egress has been lifted? Bevin Wirzba: Yes. Our views have remained very consistent on that front. We anticipated with our -- with the TMX pipeline coming on that, that would relieve some of the egress issues that we had over the last number of years. But we're very encouraged by the supply growth that has been occurring by our customers. If you just listen to the last week of quarters from our customers here up in Canada, you'll have noted that they are all very encouraged by potential growth in their organizations. And so our outlook has us seeing conditions being a lot more favorable in effectively late '26, early '27, where we see that, that supply growth will exceed what currently exists for egress, making our systems likely to see more walk-up and spot needs. Operator: Our next question comes from the line of Maurice Choy of RBC Capital Markets. Maurice Choy: Can I just double-click on the tax optimization and the U.S. legislation changes. Can you share a little bit more about what these were? And if these benefits reflect in the guidance for DCF for this and next year would actually translate to benefits also beyond 2026? Or do you envision returning back to, I guess, the prior cash tax run rate level? P. Van Dafoe: Yes, Maurice, it's Van here. Thanks for the question. The tax wins that we got were a couple of things. One is the one big beautiful bill in the U.S. that allows us to deduct additional interest. We have reached the cap on interest deduction. So that was extended. So that would be as long as that legislation stays, then we would continue to benefit from that. The second piece was around tax optimization, and we identified some tax pools that we were able to accelerate. And so those tax pools were on our balance sheet, and they were there. We just accelerated them. So we'll get that benefit in 2025 and 2026. And then in 2027, we'll go back to more of a regular cadence. So it's really just a flip between current tax and our deferred tax. Maurice Choy: Understood. And if I could finish with a question on the transition agreements. I think you previously mentioned that this transition will help improve your processes to be more efficient and realize cost savings for your customers through a more competitive toll, both of which I think you reconfirmed today in your prepared remarks. But you also mentioned that this could benefit the bottom line for shareholders. So are you able to quantify what that is and whether this is within the 2% to 3% EBITDA CAGR objective? Bevin Wirzba: Yes, Maurice, it's Bevin. So our objective of getting off of the TSAs as quick as possible in our first year is that it was -- you're not able to really optimize many of the processes within the company until you're legitimately on your new systems. And a simple example of that would be supply chain and procurement on how you issue and pay invoices. And we delivered Blackrod very successfully, but it came with a very kind of clunky procurement system that we needed to use. So we're now as one -- just one example, being able to optimize that and the delivery. I did point out in my remarks is that we believe that we can accrete those savings and those optimizations through to our variable toll. But there are some of those cost savings that do then flow through as well down to EBITDA. We have not included any optimization efforts into our 2% to 3% outlook with respect to EBITDA going forward. Those elements, we're still targeting to improve. We made good headway and at our year-end results. I hope to provide a good summary of what we found in our first year. But just for clarity, Maurice, we did not include that optimization into our EBITDA outlook guidance. Operator: Our next question comes from the line of Jeremy Tonet of JPMorgan Securities. Unknown Analyst: This is Ely on for Jeremy. I wanted to circle back to the organic growth opportunity set. I know opening remarks mentioned the upcoming development project. Just hoping to get some more color on what types of projects you guys are looking at, which side of the border and maybe just whether Blackrod kind of represents the template for growth projects as you see it? Bevin Wirzba: Thank you, Ely. I think we're obviously going to have that as a subject area for our Investor Day next week. But consistent to what we've said previously, we've been listening to our customers and trying to understand what kind of services they're looking for, for their businesses to be competitive. We were able to provide a great solution for IPC on Blackrod. And we're in a number of conversations, both in Canada and in the United States. And so we've seen probably the -- when we launched this business and made the announcement that the spin was occurring in mid-2023, I would say, since that time, the environment actually has become a little bit more constructive in both Canada and the United States. And so we're -- we've been maturing those growth opportunities. And that's one of our key priorities for 2026 is to mature and execute on the next organic and inorganic opportunities. Unknown Analyst: Looking forward to the Investor Day. And then just for the second question, I think you guys had a helpful slide showing 2026 guidance drivers. But just hoping to get some more context on how the kind of Milepost 171 remediation plan fits into potentially reducing that DRA and providing some upside next year. What does that process look like? And when might we expect a little bit of color there and maybe framing how that fits into the guide? Bevin Wirzba: So, Ely, I'll start and then pass it over to Richard on the plans for this year. When you looked -- when we provided the guidance around the range, I just want to remind everyone that 90% of our EBITDA comes in every year through our contracted period. So we have a great solid base to start from. And we've been working very diligently around getting our system capacity back up. But at a very high level, what has allowed us to deliver all our contracts and deliver our base business is our system operating performance, our SOF has really hit it out of the park. And our teams have done a great job allowing our systems to be available for the volumes that we're moving today. But I'll pass it to Richard to just talk about our mitigation plans and the work that's left to do here as part of the Milepost 171. Richard Prior: Sure, yes. And I touched on in my comments, some of the work that we've completed to date. So we're implementing a comprehensive remediation program that's system-wide. We've completed so far 6 in-line inspection runs and 37 integrity digs. We'll continue that work through this year and into next year. And then what we'll end up doing is filing a -- all of this work as it's ongoing, but we'll file a remedial work plan with PHMSA and eventually work with the regulator around lifting the pressure restrictions. Our goal is for that to happen sometime in 2026, it's hard to point to a precise timing for it. But as we work through the year, we'll -- I think we'll start to see pressure restrictions removed in increments, and that will allow us more access to uncommitted volumes, which we think will ramp up through the year. P. Van Dafoe: And Ely, it's Van here. I think that even if pressure restrictions are lifted, with those tighter differentials, you won't see a ton of EBITDA from those spot volumes. So that's just another thing to point out. Operator: Our next question comes from the line of Praneeth Satish of Wells Fargo. Praneeth Satish: So recognizing you're going to talk about your projects more at the Analyst Day. But as it stands today, do you think a placeholder assumption for CapEx in 2026 would be kind of in that $165 million range that you're spending in '25? Or do you think at this point based on the nature of the discussions that you're having in the pipeline that, that spend won't really hit in '26, and therefore, CapEx is likely to go down significantly in '26, even if you announce new projects. Just trying to get a better sense of what to assume for CapEx and what to assume for free cash flow next year? Bevin Wirzba: Thank you, Praneeth. So we -- in our capital table, we only put capital that we have sanctioned. And so you'll note that we don't have anything sanctioned at present, but we're working towards maturing those projects forward. With what Van commented on in our tax optimization, we've created a bit more capacity with respect to free cash flow and just to be able to put towards capital. I would say that right now, we've consistently said that we need to invest roughly on average $100 million plus or minus every year in order to deliver our 2% to 3% EBITDA growth CAGR. And I would use that as probably a good proxy over the next few years. If we do find something that's larger or more material, then we would love to finance that on a different basis. But I think for your modeling efforts, remaining kind of consistent to what we originally guided right out of the gate would be the best approach. Praneeth Satish: Got it. That's helpful. And maybe following up on one of those modeling assumptions. So I'm just trying to square the moving pieces here with the variable toll settlements and what the future P&L impact could look like at this point. I guess the way I read it is you've got maybe $33 million of remaining payments that SOBO would make over the next 6 years. But then you'd receive $19 million over the next 2 years and all of this, I think, is excluded from EBITDA. I just want to kind of double check that? P. Van Dafoe: Yes, it's Van here. All that would be normalized out of our EBITDA. So that wouldn't be included. If you're talking about GAAP and cash, then yes, yes, you're correct. Operator: I'm showing no further questions at this time. I'd now like to turn it back to Bevin for closing remarks. Bevin Wirzba: Well, thank you all for joining us today. We appreciate your continued interest in South Bow and look forward to connecting with you next week at our Investor Day. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Good morning. My name is Sylvie, and I would like to welcome everyone to the Bridgemarq Real Estate Services Inc. 2025 Third Quarter Results Conference Call. This call is being recorded. [Operator Instructions] I would now like to introduce Mr. Spencer Enright, Chief Executive Officer of Bridgemarq Real Estate Services Inc. Mr. Enright, you may begin the conference. Spencer Enright: Thank you, operator. Good morning, everyone, and thanks for joining us on the call today. I'm joined by our Chief Financial Officer, Wallace Wang. I will begin with a brief overview of our company's third quarter results. Wallace will then discuss our financial results in more detail, and I'll conclude by providing some remarks on organizational highlights, company updates and market developments. Following our remarks, Wallace and I will be happy to take your questions. I want to remind you that some of the remarks expressed during this call may contain forward-looking statements. You should not place reliance on these forward-looking statements because they involve known and unknown risks and uncertainties that may cause the actual results and performance of the company to differ materially from the anticipated future results expressed or implied by such forward-looking statements. I encourage everyone to review the cautionary language found in our news release and on all our regulatory filings. These can be found on our website and on SEDAR plus. So we continue to build on the strong momentum established in the first half of 2025, an encouraging sign given broader economic challenges and ongoing geopolitical certainty including U.S. trade tensions that continue to affect the Canadian economy. Despite ongoing uncertainty in both the housing market and the wider economic environment, we have continued to successfully attract and retain high-performing agents across our brands. Our comprehensive suite of tools, training services and technology offerings, which are all tailored specifically to the needs of Canadian REALTORS, have been a key differentiator over our competitors, helping us remain competitive and deliver exceptional value to our network. Revenue for the first 9 months of the year was $309 million compared to $249 million in 2024. As a reminder, last year's results reflect the addition of the brokerage businesses, which were acquired on March 31, 2024. At its meeting yesterday, our Board of Directors approved a dividend of $0.1125 per share, payable on December 31st to shareholders of record on November 28. This indicates an annualized dividend of $1.35 per share, which is consistent with 2024. And with that, I'll turn the call over to Wallace for a closer look at our third quarter financial performance. Wallace Wang: Great. Thank you, Spencer, and good morning, everyone. Revenue in the third quarter was $123 million, slightly lower than the $127 million reported in the third quarter of 2024. Franchise fees increased for the quarter and the first 9 months of the year, driven by fee increases implemented at the beginning of 2025 as well as an increase in the number of REALTORS in our network. There are currently 21,617 REALTORS in our network, an increase of 3% since the end of last year. By contract, the total number of CREA REALTORS has decreased by 2% since the end of last year. In the third quarter, the company generated a net loss of $1.7 million compared to a net loss of $10.8 million in 2024. The reduced loss in the quarter is partially driven by the valuation of the exchangeable units remaining unchanged in the quarter compared to a loss of $10.8 million in the third quarter of 2024. Our adjusted net earnings, which considers our operating earnings before certain noncash, nonoperating adjustments and payments to holders of exchangeable units amounted to $1.0 million in the third quarter. Cash provided by operating activities amounted to $1.3 million in the third quarter of 2025 compared to $2.7 million last year. The company generated $1.5 million in free cash flow in Q3, down from the $5.3 million generated in the third quarter of 2024. This is primarily driven by increased capital expenditures during the quarter. The Canadian residential real estate market grew in the third quarter of 2025, closing at approximately $84 billion, an increase of 5% compared to the same period in 2024, driven by a modest 1% increase in the average selling price and a 4% increase in sales volume. This is largely driven by the province of Quebec, where the residential real estate market recorded a 20% increase in transactional dollar volume during the third quarter of 2025. Compared to the previous year, closing at $12 billion. This reflects a 10% increase in unit sales and a 9% increase in the average selling price. The greater Toronto market and the Greater Vancouver market recorded a decline in the average home prices compared to last year. The number of units sold during the quarter increased in both markets. As a reminder, market data is generally reported on a firm deal basis, whereas the company recognizes revenue when the transactions are closed. Spencer will now provide additional insights into the market and an update on our operations. Spencer Enright: Thanks, Wallace. So buyer activity throughout 2025 has remained below typical levels, particularly in Canada's two most expensive markets, Toronto and Vancouver. As has been the trend since spring, buyer demand in many areas of the country has been lower than historical norms, influenced by many factors, including housing affordability, employment, immigration and overall consumer confidence. For buyers in a position to transact at this time, however, improved affordability in the Greater Toronto and Greater Vancouver in market is presenting an opportunity. With inventory continuing to rise, prices edging lower and lending rates declining, affordability is gradually improving, creating more favorable conditions for those ready to make a move at this time. Quebec's real estate markets continued to demonstrate strength and resilience, joining major centers in the Prairies and Atlantic Canada in posting increases in prices amid tighter supply conditions this year. The Bank of Canada reduced its target for the overnight lending rate by 25 basis points in each in September and October. And the overnight rate now, it's at 2.25%. In September, Canada's consumer price index increased 2.4% year-over-year, up from the 1.9% recorded in August, which remains within the bank's inflation target range. On its own, the reduction to the Bank of Canada's key lending rate, along with indications of the rate remaining stable for some time, should drive a much needed measure of added stability for Canadians, who are contemplating a real estate purchase in the near term. Now I'll give you a few updates on the company's operations. A key competitive strength of our business is the ability to provide a broad range of real estate solutions for both agents and consumers. Our strong portfolio of brands, including Royal LePage, Via Capitale and Proprio Direct, sets the standard of service excellence across all of Canada. We continue to proactively innovate and improve our suite of services to our agents. We are currently embedding AI functionality throughout our service platforms with particular attention to tools that enhance lead generation and client engagement. At the same time, we have revamped our aid and training and coaching programs to equip our network of agents with AI knowledge and insights to improve their productivity and realize greater results in the marketplace. During the third quarter, we launched a new fall digital advertising campaign called Agents of a Different Stripe aimed at driving consumer brand awareness for Royal LePage. During its first 4 weeks, the campaign earned over 24 million impressions across Canada via video and static advertisements. Proprio Direct introduced a new CRM platform designed to enhance the client experience and streamlined business operations, helping our agents within that banner, deliver a higher level of service. And also in the third quarter, Via Capitale hosted its 2025 Via Capitale Congress to support skills development and training for real estate professionals. We remain focused on introducing new initiatives and training programs that enhance efficiency and help agents grow their businesses. During the quarter, agents operating under our corporately owned Royal LePage Real Estate Services and Johnson & Daniel Luxury brand benefited from the launch of a new Deal Hub, creating -- created to streamline compliance and deal processing across all of our brokerage operations. By continuing to invest in initiatives that enhance agent productivity through education and the strategic use of artificial intelligence, we are strengthening our leading brand, creating new opportunities for growth and delivering greater value to our shareholders. Overall, I am pleased with the market share growth we have achieved so far this year, and I'm excited to continue that momentum as we close out the year. With that, I will turn the call back to our operator and open up the call to any questions. Operator: [Operator Instructions] First, we will hear from Jeff Fenwick at Cormark Securities. Jeff Fenwick: I wanted to start off just talking about the REALTOR network. It looks like you've had some success sort of progressively growing it this year. The industry itself has seen some contraction. What are you seeing in terms of opportunities for recruiting right now, a bit of a better environment for you to maybe pick off some talented people that might want to come into your network, or how are you thinking about that? Spencer Enright: Yes, Jeff, this is an excellent year for us from a recruiting standpoint. We've had success both in securing new franchises as well as in recruiting individual agents with not just within our owned brokerage operations, but also within our franchise network of brokers. And that's been across both the Royal LePage brand, which operates nationally in all 10 provinces as well as our Via Capitale brand, which is exclusive to the Quebec province. What I found is, over the years, when -- and what we've seen sometimes as a trend is in years where the market is extremely difficult, and especially when you see Toronto and Vancouver with fewer home sale transactions, competition for listings is that much more fierce than it normally is, which is extremely fierce on a regular date. And agents want and need support for that. The ability to find and secure new business for them is even more difficult when there's less business to go around. And there's what we like to term a flight to quality, where there's a lot of new conversations with agents that maybe have been successful in the past with other brands, other competitors and are struggling now, and they're looking to partners like us for new solutions. And is there a way that they can regain that momentum for themselves or really build it in their career in a way that they're not getting today from others or that they've been getting before. And so we're having great conversations all across the country with ages as well as with broker owners. We've had really good success in growing our network this year. We've got a really robust pipeline that we continue to work on. And so I'm very excited for what we've got moving forward as well as what we've seen so far this year. Jeff Fenwick: That's helpful color. And then, I guess, another aspect business you've been investing in, it sounds like, is just operationally becoming a bit more efficient and using tools like AI. So are there opportunities here to sort of help boost the margins and, I guess, also make your REALTORS more productive at the end of the day? Like how is -- what's the current outlook there? Spencer Enright: Yes, there's lots of opportunity there, and we're doing everything we can in two key focus areas. One is with agents themselves, helping them take advantage of large language models and other tools that they have already available to themselves. We provide through our Google Suite partnership access to tools to all of our agents in our network. And so they need to be as productive as possible. There's opportunities to improve their productivity, their sales effectiveness. And so we're working on that through training programs as well as other educational forums for them to learn even from each other, not just from us. And then within our own operation, we're using it in many ways to build a more efficient model and a more effective model. One area that we're focused on right now across our brokerage business is making sure that we've got the highest standards of compliance and regulatory standpoint, which is always well for us, but across all of our brokerage durations, which they are in multiple cities, multiple provinces, there's an opportunity to use AI to our advantage in building the right way of ensuring that every transaction we do, every film sale and purchase is fully compliant with all of the regulations required. Jeff Fenwick: Okay. And then just wondering if within that, there was some spend in the quarter. I noticed the CapEx number, hopefully, it was $3 million, which is a bit higher than typical. So was there some investments going on in the business in the quarter? Wallace Wang: No. So that's primarily driven by the increase in the Asian count. So you can think of it as sometimes when we convert larger franchisees to our network, we pay a per agent fee upfront. And that's primarily to help the franchisees kind of offset the conversion cost, right? So they'll need to convert their signs and some of the other costs, and we obviously size these investments upfront based on the ROI of the capital that we're going to invest to make sure that over the lifetime of the contract, we generate attractive ROI. Jeff Fenwick: Okay. Great. And then just in terms of looking forward, I guess, you do have some capacity now with your balance sheet to look to continue to make those sorts of growth investments. At the same time, I know you're sort of juggling an environment that's a bit softer, and you've -- you're deferring some of your dividend payments to Brookfield. So what's the thinking in terms of feeling comfortable about continuing to make those growth investments right now? Spencer Enright: Yes. We feel really confident about it. I think when you take a look at the way we grow our business, in addition to the organic growth that you see with our franchisees growing or our brokerage growing, one agent at a time, there's franchising opportunities. We've got a strong pipeline. And as well as mentioned, sometimes there's a bit of a capital outlay for conversion. But like I said, we're having great conversations ongoing with new potential partners with us, whether they're in a franchise capacity or in the -- in part of our own brokerage capacity as agent teams, large teams. And so there might be a bit of CapEx investment to bring some of that in. As Wallace mentioned, we focus on the long-term and growing our agent count now under 10-year contracts with franchises is that long-term play where we build on top of the existing royalty streams that we have, the existing franchise fee stream. And so there's lots of opportunities to continue to do that. Exactly when those take place is not necessarily streamlined quarter-by-quarter because in terms of a franchisee moving from one brand to another, at the -- that happens at the end of a contract, whether that's with someone that's on a 5-year or some other time frame. So you can't necessarily predict that, that all happen in one quarter or another or that it will be consistent quarter-to-quarter or year-over-year. But that's been our bread and butter in terms of one of the small-scale M&A growth path that we've pursued in the past, and we expect to do more on that. Operator: At this time, I will turn it over to check on web questions. Wallace Wang: Right, there are currently no questions on the webcast. Spencer Enright: All right. Well, thanks, everybody. I'd like to thank everyone once again for joining us on today's call. We look forward to speaking with you again after we release our Q4 results in March. Operator: Thank you, sir. Ladies and gentlemen, this does conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines. Have a good weekend.
Operator: Good morning, and welcome to the ImmuCell Corporation Reports Third Quarter ended September 30, 2025, Unaudited Financial Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Joe Diaz of Lytham Partners. Please go ahead. Joe Diaz: Thank you, Rocco. Good morning, and welcome to everyone. As Rocco indicated, my name is Joe Diaz with Lytham Partners. We're the Investor Relations consulting firm for ImmuCell. I want to thank all of you for joining us today to discuss the unaudited financial results for the third quarter ended September 30, 2025. Listeners are cautioned that statements made by management during the course of this call include forward-looking statements, which include any statements that refers to the future events or expected future results or predictions about steps the company plans to take in the future. These statements are not guarantees of performance and are subject to risks and uncertainties that could cause actual results, outcomes or events to differ materially from those discussed today. Additional information regarding forward-looking statements and the risks and uncertainties that could impact future results, outcomes or events is available under the cautionary note regarding forward-looking statements better known as the safe harbor statement provided with the Form 10-Q and the press release that the company filed last night, along with the company's other periodic filings with the SEC. Information discussed on today's call speaks only as of today, Friday, November 14, 2025. The company undertakes no obligation to update any information discussed on today's call. Please note that references to certain non-GAAP financial measures may be made during today's call. The company included definitions of these terms as well as reconciliations of these figures to the most comparable GAAP financial measures in last night's press release in order to better assist you in understanding its financial performance. With that said, let me turn the call over to Michael Brigham, Special Adviser to the CEO of ImmuCell Corporation for opening remarks. Michael? Michael Brigham: Thanks, Joe, and good morning, everyone. This is an exciting time at ImmuCell. Lots of good change going on. Our financial performance over the first 9 months of 2025 has greatly improved compared to prior year, a turnaround, which was made possible in part by increasing our production output while improving gross margins. We are now in a great position as a company with a stock distribution channel and an energized commercial team. Our CEO and CFO will be commenting on the financial results in greater detail in just a moment. On another topic of change, we are amidst 2 very positive management transitions right now at ImmuCell. First, as most of you know by now, we added Timothy Fiori, our CFO, to the team back in April. Secondly, back in June, we announced the CEO succession plan. This effort was completed successfully effective November 1, 2025, with the hiring of Olivier Te Boekhorst as our new President and CEO. I'd like to welcome Olivier to the company. Olivier brings over 25 years of leadership and results-focused execution experience in animal health to ImmuCell. Before joining ImmuCell, he served as an operating partner of ARCHIMED, a global health care investment firm, where he focused on Animal Health Investments and served as Chairman and Chief Executive Officer of a portfolio company. Prior to that, Mr. Te Boekhorst was at IDEXX for 18 years, IDEXX is a main-based NASDAQ listed company with more than $4 billion in revenue, where Olivier lead strategy and M&A activities from 2004 to 2008 and then served as a Corporate Officer, Senior Vice President and General Manager of several business units from 2008 to 2021, including their livestock and dairy antibiotic residue testing businesses. He has a track record of driving growth and operational excellence in the livestock industry. And as I step away in January after 36 years with ImmuCell, I am very confident that we are in good hands with Olivier and Tim. At this point, I will turn the call over to Olivier for a few comments. Olivier? P. F. Te Boekhorst: Thanks, Michael. I am very excited to be here, and I want to thank you for your support during my onboarding. I appreciate the warm welcome and the investment from employees in my onboarding process over the last 2 weeks as I'm starting to learn the business. In conversations with the team, I've been asked why I joined ImmuCell. And one of the reasons for my excitement to join at this juncture is the importance of the work here. Fundamentally, ImmuCell keeps cats alive and healthy. We don't just make and sell doses of First Defense. We provide protection to newmored animals that cannot protect themselves. Farmers trust us because our technology works and they count on us to help them do their jobs better. And I tell the team that starts with the care and the effort we all put in every day. It is impressive to see the passion, dedication and pride of our staff in Maine and in the field as we support the larger mission of reducing the use of antibiotics in the food supply chain and ensuring the availability of safe, healthy and affordable dairy and beef products. I look forward to the next weeks of my onboarding process as I plan to spend a good deal of time in the field meeting customers, colostrum suppliers, distributor partners, key opinion leaders and the commercial team. I'm a customer-focused leader, and I intend to bring customer perspectives to everything we do at ImmuCell. ImmuCell is poised to do great things, and I'm very excited to be a part of that. The company aims to deliver a strong value proposition for farmers and our financial and operational performance so far in 2025 reflects that. Execution across our supply chain will be laser-focused on quality and product availability from vaccine production, colostrum sourcing, liquid processing, formulation, packaging and shipping of final products, our team is rebuilding confidence in the market and our ability to consistently meet customers' needs. I look forward to working, to regain customers, to capture share and to expand the use of scours preventatives. It's an exciting time to be at ImmuCell as we explore new market opportunities more aggressively. Now turning to our revenue for the quarter. We had an 8% decrease in total product sales during the third quarter of 2025 compared to the third quarter of the prior year. This is in line with previous comments we made about the effect of restocking our distribution channels earlier this year. I'm encouraged that domestic sales were up 2% during the third quarter compared to the third quarter of 2024, and domestic sales were up 9.5% during the third quarter compared to the second quarter of 2025. So we are seeing positive momentum in the U.S. market that represented about 86% of our sales during the trailing 12-month period ended in September 30, 2025. International sales, largely to Canada, were down during the third quarter of 2025 compared to the third quarter of 2024 due to timing of shipments and allocations of our short supply while we're managing our order backlog. This did create the 8% decrease in total sales during the third quarter that I just mentioned, but I do not believe this represents significant deterioration of underlying customer demand. It is worth noting that international sales during the 9-month period ended September 30, 2025, were 15% higher than the same period of the prior year. Longer-term growth trends are also meaningful. When we compare our trailing 12-month sales ending September 30, 2025, to the same period ending September 30, 2022, that is the period before we ran into significant supply issues, the 3-year compound annual growth rate is 11%. Okay. Turning to net income. We delivered net income of $1.8 million during the 9 months ended September 30, 2025, compared to a net loss of $2.7 million during the 9 months ended September 30, 2024, which is a $4.5 million swing in the right direction, driven by a significant improvement in gross margins that Tim will discuss in detail. We are focused on production capacity and quality, and one way to measure that is the approximate level of revenue we can now support. During the 9 months ended September 30, 2025, we demonstrated that we can produce at an annual rate that is very close to our capacity expansion goal of $30 million per year. Our priority now is on operational excellence and execution while we review our next capacity expansion opportunities. At this point, I'm going to turn the call over to Timothy Fiori, our Chief Financial Officer, for a deeper review of the third quarter financial highlights. Tim was my finance leader at IDEXX for 15 years, and it is a pleasure to team up with him again here at ImmuCell. Tim? Timothy Fiori: Thanks, Olivier. I'm happy to be working with you again. To start, I'd like to focus on improvements we've seen regarding the year-to-date net income and earnings per share as compared to prior year. Net income during the 9-month period ended September 30, 2025, increased by $4.5 million over the net loss during the 9-month period ended September 30, 2024. This significant improvement was driven by higher sales with increased gross margins and a 7.4% or $543,000 reduction in operating expenses. Basic net income per share during the 9-month period ended September 30, 2025, was approximately $0.20 per share in contrast to a net loss of $0.34 per share during the same period of the prior year. As Olivier mentioned in his comments, product sales during the third quarter of 2025 decreased by 8% or $505,000 compared to the third quarter of 2024. Product sales during the 9-month period ended September 30, 2025, increased by 7% or $1.3 million over the 9-month period ended September 30, 2024. Product sales during the trailing 12-month period ended September 30, 2025, increased by 16% or $3.9 million over the trailing 12-month period ended September 30, 2024. During the first half of the year, we effectively eliminated our backlog of orders and rebuilt inventory and distribution. Refilling the distribution pipeline after an extended backlog provided a temporary boost to sales. Overall, I'm pleased that we are out of the prior order backlog situation. As we can see in the Q3 results, backlog dynamics have created difficult conditions for year-over-year sales comparisons. During the Q2 call, we anticipated that we may experience a softening in sales during the second half of 2025, and that has happened as predicted in Q3. We believe that difficult comparisons may persist due to the backlog fulfillment in prior periods for the next several quarters. We should lap this backlog dynamic in the second half of 2026, given that we effectively exited the backlog situation as of June 30, 2025. You can see prior year backlog information by quarter in our most recent 10-K and in the 10-Q that we just filed. We have realized gross margin improvements in 2025 as compared to the prior year. Gross margin as a percentage of product sales increased to 43% during the third quarter of 2025 compared to just 26% during the third quarter of 2024. Gross margin increased to 43% during the 9-month period ended September 30, 2025, compared to just 27% during the 9-month period ended September 30, 2024. Gross margin increased to 41% during the 12-month period ended September 30, 2025, compared to just 27% during the trailing 12-month period ended September 30, 2024. Future success will require continued achievement of strong production yields, coupled with strong sales growth. We have several opportunities to drive growth from the existing products, including regaining customers that we may have lost during the short supply in years past. We also have several new product offerings in our functional feed product line. I'd like to talk for a moment about adjusted EBITDA because the impact of noncash depreciation expense on our bottom line is significant. To be clear, adjusted EBITDA includes an add-back of stock-based compensation expense, which is another noncash expense that's included in net income as calculated in accordance with GAAP. We created adjusted EBITDA of $751,000, $4.4 million and $5.8 million during the 3-month, 9-month and trailing 12-month periods ended September 30, 2025, respectively. These strong results compare favorably to adjusted EBITDA of $196,000, $35,000 and negative $175,000 during the 3-month, 9-month and trailing 12-month periods ended September 30, 2024, respectively. These strong results helped us increase cash to $3.9 million as of September 30, 2025, from $3.8 million as of December 31, 2024, while investing about $2.7 million in inventory build as we approach peak selling season. We will continue to closely monitor and manage cash as we balance long-term investment with near-term operational needs. With that, I will turn the call back to Olivier for some closing remarks. Olivier? P. F. Te Boekhorst: Thanks, Tim. We are very focused on the commercial opportunity that we have with the First Defense suite of solutions, including the new products within the functional feed line that were launched in June. There is tremendous runway for First Defense, and we are excited to come out of a supply-constrained environment to execute growth initiatives. The energy in the commercial team is palpable. We are also very focused on operational excellence to ensure consistent supply of quality product. The year-over-year improvement in adjusted EBITDA that Tim just touched on are the results of this focus with increased sales at better gross margin and lower operating expenses. As we discussed before, we are awaiting FDA approval for our Re-Tain product, which addresses an important market need for effective treatment of subclinical mastitis. We believe that treating subclinically infected cows with Re-Tain could enhance best practices in the industry with an alternative to traditional antibiotics that are also used in human medicine. While we wait for FDA approval, we have started investigational product use studies to collect market feedback about product performance in the field in collaboration with Michigan State University. These studies are well underway, and the data we gather from this work will inform us of our best strategies for Re-Tain in 2026. This disciplined approach is intended to support a successful market entry. Our top priority at ImmuCell will be on solid execution across the organization. And I'm very pleased that we can leverage the foundation that Michael and the team have rebuilt and that we can now set our sights on defining and executing our strategy for long-term growth. With that said, we will be happy to take your questions. Let's have the operator open up the lines. Operator: [Operator Instructions] And our first question today comes from Frank Gasca, private investor. Frank Gasca: First of all, and I want to thank Mike for his service, for the years that he put in at ImmuCell, and we go back quite a way, it's about 25 years. So I wish him well in his upcoming retirement as I enjoy mine. As far as my questions, I'm going to take a somewhat more critical turn. I don't see the clean slate that you referred to. I see more -- in regards to First Defense, what has changed? It went from an expansion of capacity. We even committed capital, and now we're uncommitted to that expansion. I think you touch some of the causes of that. But what I'm looking for is what active and steps are you taking to increase that growth that was somewhat anticipated even years ago. P. F. Te Boekhorst: Thank you, Frank, for your question. And let me maybe just start with -- what we mentioned is we are now at a level of capacity that we set out for ourselves when we started the capacity expansion project a few years ago. And while we had a contamination event, we have now arrived at a place where we are actually in a better shape than we even were when we started that capacity expansion project because we have put all kinds of quality measures in place to ensure that we can manufacture at a predictable level. So that is an improvement in our capability. What I'm very excited to report after my first few calls with the commercial team is that after years of managing short supply, they are now able to go win new customers, talk to customers about increasing the use of First Defense if they're already using it. And this is a very different approach that the commercial team can now engage with, and they are very excited. I will be visiting the field next week with -- visiting with customers. And hopefully, we'll be able to report back to you firsthand what that excitement at both the customer and the sales team level is. So we're very pleased to be where we are. There is more to do but it does look quite positive from where I'm sitting. Thank you for your question. Operator: [Operator Instructions] Our next question comes from George Melas with MKH Management. George Melas: Thanks. First of all, I sort of want to reiterate what the previous caller said. Michael, thank you very much for your service and we appreciate it working with you. And I just want to say thank you very much. Olivier, welcome to the team. It's very exciting to have you. My question is a bit about the inventory. The WIP continues to grow. I mean a lot of it is the frozen colostrum, which is, I think we report is $3.3 million. But the finished good inventory right now stands at $2 million, which is the highest it's been, I think, in probably 6, 7 or maybe ever or at least from my model in at least 6 years. I'm trying to see and -- trying to see how you plan to balance sort of production with sort of cash generation or cash management. P. F. Te Boekhorst: Well, first, George, thank you very much for your welcome. I'm going to turn it over to Tim to address the inventory question. Timothy Fiori: George, good to talk with you. Yes, we definitely have seen inventory levels come up a lot. Of course, we started the year with really practically nothing, and now we have a more desirable level, frankly, of inventory and especially as we approach the peak selling season that's coming up in the -- around the first quarter. I meet with the team weekly with sales and the production team personally, and we have a good communication between the 2, and we do a planning process to seek those desired inventory levels. So we're paying a lot of attention to that. And I think we're in much better shape now than in the past couple of years for sure. On the colostrum side, we want to have a considerable amount of colostrum. And I think you're right that we need to carefully manage that and make sure that it doesn't become too much. And that is also on that regular review list of things that we're very focused on. But it is our key ingredient. And you're totally right that, when you look at WIP, that colostrum is a large component of that. P. F. Te Boekhorst: And George, if I could just add, I've worked with Tim for 15 years as my finance leader at IDEXX, as I mentioned earlier in the call, where we managed about $300 million business together. And Tim brings a very disciplined, rigorous process-focused approach to both operational and financial execution. And so I'm very excited to see that in place here and to continue working with him and also to partner with Bobbi Brockmann, our Vice President of Sales and Marketing, who has a very similar approach to commercial execution. And I'm bringing this up because I think that's the way forward for ImmuCell is to build on what Michael has built for us and now to really focus on disciplined day-to-day execution of our plans. Thank you for your question. Joe Diaz: Okay. This is Joe Diaz again, your moderator. I did want to have one question asked before we close the call out. The margin improvement in Q3 was very good. What do you attribute that to? Timothy Fiori: Thanks, Joe. Yes, the largest drivers of gross margin, as we see it, are the improved manufacturing performance as the primary one, but also the price increase. If you look around Page 37 of the recent 10-Q, we talked about our composite price increase in 2025 of around 6%. So those are both definitely important factors in gross margin improvement. And just the volume of sales, so you end up with that scale that's helping in manufacturing and with fixed cost spreading it out over a larger amount of volume is always a big part of that as well. Joe Diaz: Okay. That concludes our Q&A session. I want to thank everyone for participating in today's call. We look forward to talking with you again to review the results of the year ending December 31, 2025, during the week of February 23, 2026. Have a great day. Thank you for being with us today. Operator: Thank you. That concludes today's conference call. You may now disconnect your lines, and have a wonderful day.
Steve Wadey: Thank you, Stephen, and good morning, everybody, and welcome to our half year results for FY '26. Whilst we continue to operate in challenging market conditions, we have taken decisive action to improve our short-term performance and drive long-term growth, creating value for shareholders. And thanks to the dedication and hard work of our highly skilled employees, we've continued to support our customers' operational needs, delivering mission-critical technologies and services. Today, we'll take you through our half 1 results and the actions we've taken to address both near-term challenges and strengthen our market positioning for the long term. A great example is shown here, which illustrates the successful completion of the synthetic trials we undertook with BAE Systems to demonstrate how drones can operate alongside combat aircraft like Typhoon. This was a significant milestone in developing critical sovereign capabilities needed to defend the U.K.'s national interests. Let me start with our key messages for today. First, in tough near-term market conditions that have delayed orders in the U.K., we have delivered robust operational performance and our restructuring program in the U.S. is on track. Secondly, our mission-critical capabilities remain highly relevant to our customers' needs in a growing defense market and combined with our significant order book and substantial pipeline, provide very good visibility for long-term growth. Thirdly, despite near-term headwinds in our home markets, we have focus and visibility to maintain our full year guidance, and we continue to deploy capital with discipline. In summary, we are delivering the actions to improve business performance in the short term and are well positioned to capitalize on increasing defense spending so that we deliver compelling value creation for shareholders. Our agenda this morning expands on these messages. I'll start by giving you our half year in review. Martin will provide a commentary on our financial results. I'll then come back and give you an overview of our strategic outlook. Finally, we'll open up for questions. So to our review of the half year performance. In response to the market backdrop, we have taken proactive and disciplined portfolio actions, achieving good progress on our U.S. restructuring program as well as rightsizing other areas of the business. The improvement actions are delivering benefits and building resilience that will improve both short- and long-term performance. Overall, our first half financial performance was robust in tough near-term markets. We saw this particularly in the U.K., where we experienced delays to orders on our engineering services and R&D framework contracts, in part due to our customers prioritizing major equipment programs. This reduced our underlying book-to-bill to less than 1, excluding the LTPA contract award. We achieved 2 strategic milestones that strengthen our company for the long term. In May, we secured the GBP 1.5 billion extension to transform the LTPA for future warfare through to 2033. As a result, we closed the half with a significant order backlog and substantial pipeline, providing very good visibility for long-term growth. And in September, we announced the strengthening of the EDP contract to accelerate defense productivity by expanding the partnership and augmenting our high-value engineering skills with artificial intelligence. Together, these strategic milestones show how we are playing our part in delivering on the ambitions of the U.K. government's strategic defense review. As normal, we delivered a healthy cash conversion, enabling investment in the business and increased shareholder returns through our progressive dividend and multiyear share buyback program. Looking forward, we have approximately 90% of revenue under contract for this year, which is the same as last year. Whilst market headwinds continue, we're focused on execution and have visibility to deliver our full year forecast. Martin will take you through a bridge of this later in the presentation. I now want to address our half 1 performance and the progress we are making in each of our segments. Starting with EMEA Services. Due to market conditions in the U.K. and ongoing defense budget pressures in the Australian market, we delivered flat revenue with good margin. In the U.K., we grew 2% as a result of delayed orders on our framework contracts. And in Australia, our revenue was lower, predominantly due to the loss of the Land Systems work package under the MSP framework. In response to these dynamics, we took some resizing actions to build resilience whilst protecting core skills for the future. Our performance was underpinned by successful program execution across our long-term contracts. On the EDP contract, delivery performance was strong with 98% of all milestones delivered on or ahead of schedule. In September, we announced changes to the LTPA that will make it easier and cheaper for SMEs and new entrants to use our test and evaluation capabilities across the U.K. The launch of our T&E Innovation Gateway will help drive greater defense innovation and support wider economic growth across the U.K. Notable new contracts in the half include the strategic win GBP 25 million to deliver collective training for the Royal Navy to improve war fighting readiness at pace. This 5-year contract will see us deliver an immersive virtual training environment that realistically simulates the threats and missions that Navy personnel can expect to undertake in the future. Whilst near-term trading conditions remain tough, we have a clear pipeline of orders to win and deliver in the second half. Turning to Global Solutions. During the first half of the year, we've been focused on executing our plan to address the market challenges and operational issues that we highlighted in May. We've made good progress on the U.S. restructuring program. Key actions completed include the disposal of the U.S. Fed IT business, significant headcount resizing and cost base reduction as well as an improved control of labor rates and inventory. This progress puts us on a stronger foundation to move forward. As we forecast, revenue declined with lower margin compared to the prior year. Half of the decline was due to a lower volume of non-U.S. product sales versus a strong prior year comparator and the other half was in the U.S., principally due to the impact of DOGE on our Fed IT business that we have now disposed of and our planned resizing actions. As the U.S. market changed, we repositioned the business to build resilience and be better aligned to national security priorities. Our strategy is now focused on 4 capabilities where we have differentiated long-term incumbent positions and see good growth potential. These 4 areas are space & missile defense, maritime systems, advanced sensors and persistent surveillance. During the half, we secured $290 million of funded orders with a U.S. book-to-bill of 1.5x. Whilst we continue to focus on improving operational performance and winning longer-term programs, this strong book-to-bill underpins our second half forecast for Global Solutions. To summarize, we're making good progress. Whilst we finished the half with a smaller U.S. business, it is more aligned to national priorities and is well positioned to deliver long-term growth. I'll now hand over to Martin to take us through our financial results. Martin Cooper: Thanks, Steve, and good morning, everyone. As usual, I'll start with the financial highlights before moving on to the key financial metrics at a group level and details on our 2 reporting segments. I'll finish with capital allocation and guidance. And for reference, the U.S. dollar rate for the half averaged $1.34 compared to $1.29 last year, which has provided a headwind to the reported values. So turning to the results for the half. Order intake for the half was GBP 2.4 billion, which drove a closing order backlog of GBP 4.8 billion, both reported records for the group. Revenue was 3% down on an organic basis at GBP 900 million, resulting in a book-to-bill of 0.9x, reflecting the sale of our Fed IT business and trading conditions in H1, which impacted contract awards. Underlying profit was down GBP 10 million versus H1 last year at GBP 96 million, but margin at 10.7% was ahead of our half year expectations and underpins our full year target of around 11%. Underlying basic earnings per share of 14.2p were in line with last half as the lower profit was offset by the enduring benefit of the enhanced level of share buyback. Turning profit into cash remains strong at 85%, which again underpins our full year guide of around 90%. The strong operating cash performance, combined with the sale of our U.S. Fed IT business has enabled effective and value-accretive capital deployment. This has enabled us to not only reduce net debt half-on-half, but also to significantly enhance shareholder returns, which totaled GBP 101 million as we made excellent progress on our ongoing 2-year share buyback program and paid the final dividend. And return on capital employed remained strong at 21.1%. Moving to the key group financials and starting with orders. The book-to-bill of 0.9x, as Steve raised, resulted from delays in contract awards in the U.K. impacting EMEA Services. And within Global Solutions, the year-on-year impact on the federal IT market was particularly stark in the order flow in the business we have now disposed of. Whilst book-to-bill was down, total orders at GBP 2.4 billion was a record when incorporating the 5-year LTPA award. This meant we closed the half with an order backlog of GBP 4.8 billion, which does include GBP 0.4 billion of U.S. unfunded backlog, providing good visibility for future growth of core long-term business frameworks. Revenue at GBP 900 million is down 3% on a like-for-like basis when adjusting for FX and the sale of the Fed IT business. EMEA was lower on reduced volumes in Australia, where we lost a competitive land systems work package. And as Steve mentioned, despite being impacted by delays in orders, the U.K. business did grow 2% half-on-half. Global Solutions declined due to U.S. short-cycle revenues, of which a significant part was in the business now disposed of. In addition, our restructuring activities have resulted in us exiting some business lines as we focus on 4 major areas for long-term profitable growth. Within Global Solutions, our products business was lower against a high year-on-year comparative, but demand and outlook remains robust, and we expect a better second half. Recognizing the step-up required in H2 to deliver our revenue guidance, we have detailed on the chart the drivers that bridge us from half year to our year-end assumption of circa 3% organic growth -- like-for-like growth. So taking each in turn. Revenue cover at the half stood at 89%, in line with last year's assumed outturn at this stage, and that includes the core frameworks of EDP and LTPA, established positions on the likes of Naval Combat Systems and MSCA, Maritime training following the MCAST win and in the U.S., the TARS Persistence Surveillance contract and the work we do with the Space Development Agency. Secondly, our Period 7 order flow has added a further 2% to the cover and includes the mission-critical Typhoon support uplift. Thirdly, we have around 7% of orders, which are extensions of current positions or where we are close to finalizing the awards. Examples include the DragonFire laser weapons contract and target sales with predominantly repeat customers. Finally, we have a good visibility on a pipeline of further awards that we assume we shall win and deliver in year to cover the remaining around 2%. Whilst there are clearly market headwinds prevailing in the U.S., U.K. and Australia, we currently have good visibility and are hence maintaining our full year guidance. Moving to operating profit, which was down GBP 10.6 million against last year, reflecting lower revenue and the impact of the group's restructuring activities. Margin at 10.7% was ahead of expectations at the half with good consistent program execution against our backlog, especially in EMEA Services. In May, I talked about rebuilding margin from 9.6% to around 11%, and we are on track through driving strong program execution, cost base efficiency actions and the portfolio actions in the U.S. As usual, we have detailed the table reconciling underlying operating profit from segments to statutory profit. The income from RDEC and intangible amortization are standard reconciling items and predictable. The other 2 major reconciling items reflect the actions being taken to improve the long-term performance of the business. Firstly, our digital investment has increased in the half, driven by a major rollout to over 60% of the business. As a reminder, this is part of a wide -- of a program to enable growth strategy and wider business efficiency. Secondly, we have booked a further GBP 22.6 million of restructuring costs, driven by the portfolio work in the U.S., coupled with the rightsizing activity in Australia and ongoing efficiency activity in the U.K. To complete profit, the sale of the Fed IT business led to a GBP 0.5 million profit on disposal. Now turning to the segmental split of the group performance, starting with EMEA Services, which had a good operational half in difficult near-term market conditions. Orders increased to GBP 2.2 billion. Excluding LTPA, the book-to-bill was down to 0.8x with delays in contract awards in the U.K. and Australia driving the shortfall, albeit as mentioned in the revenue bridge, some of those orders have come through since period end. Revenue was broadly stable with the U.K. defense delivering growth, but this was offset by order delays and lower revenue in Australia with the loss of the land MSP work package. Program performance and cost control was good, ensuring consistent margins at 11.5% and funded backlog is now at a record high GBP 3.9 billion, which supports second half delivery and longer-term visibility. Next, Global Solutions, which posted orders of GBP 247 million at a book-to-bill of 1.3x, including annual funding on our core U.S. franchise contracts of Tethered Aerostat Radar System, Strategic Capabilities Office and Space Development Agency. These contracts also saw good on-contract growth. Securing these orders in the half helps to derisk second half revenue given the ongoing government shutdown. Orders were down half-on-half due to restructuring of the U.S. portfolio and timing of targets and product awards. These dynamics impacted revenue, which was 16% lower at GBP 192 million. And as covered in the bridge, the book-to-bill gives us a foundation to drive the required second half performance. Margin was down half-on-half at 7.4%, but up from last year as we work through the U.S. restructuring actions and was in line with our expectations at this stage. Moving to cash, where operating cash flow continued to be good at GBP 128 million and was in line with last year, delivering a high conversion ratio of 85%. Capital expenditure was GBP 36 million, of which GBP 21 million related to the LTPA. And in line with guidance, we would expect higher spend in the second half with a total for the year around GBP 100 million. To complete the cash analysis, the movement in net debt from year-end is shown here. We generated GBP 63 million of free cash flow. And with the proceeds from the Fed IT sale, that allowed us to deliver a significant step-up in shareholder returns at GBP 101 million as we accelerated the pace of the buyback program and grew the dividend 7%, in line with our progressive policy. Net debt, therefore, closed at GBP 180 million at a leverage ratio of 0.6x, up from year-end, but a GBP 10 million lower net debt than last half year. Turning to capital allocation, which is unchanged. The business is delivering good consistent cash flow and the focus and priority is driving sustainable organic growth at good margins whilst investing in the business. We maintain a rigorous approach to the deployment of our capital, scrutinizing organic investments against shareholder returns and ensuring we have a balanced and value-accretive deployment of capital. During H1, we've demonstrated our disciplined capital allocation policy by investing in our organic growth through CapEx, research and development, digital and major competitive bids. We provided a 7% progressive dividend, completed the sale of our noncore Fed IT business in the U.S. and used the funds from the sale to accelerate our share buyback program. We have a strong balance sheet, which gives us flexibility to drive organic growth and provides optionality for value-accretive capital deployment in excess of the GBP 200 million share buyback already announced. So pulling all that together and moving to guidance, which is unchanged. For the revenue bridge, we still expect to deliver a circa 3% organic growth on a like-for-like basis when adjusting for the sale of the Fed IT business and the higher exchange rate versus original guidance. Margin, we expect to be around 11% and with the buyback progressing at pace, EPS growth of 15% to 20%. Cash, we expect to be around the 90% conversion level and leverage around 0.5x at year-end. As usual, to help with your models, we've included additional technical guidance in the backup slides. This has been a robust half against a difficult market backdrop. And with the action taken and in train, have the visibility to deliver this full year guidance. I'd like to thank all our teams for delivering critical capabilities to our customers and for this half year result. With that, back to you, Steve. Steve Wadey: Great. Thank you, Martin. So to our strategic outlook. Let me start by explaining why we are a differentiated company, highly relevant to the increasing threat with strong fundamental growth drivers structurally aligned to the increasing defense spend. The threat environment has changed the market dynamics. We are in a new era of defense. Our customers have committed to long-term spending increases as we have seen across NATO and are driving major procurement reforms as they seek to rapidly scale existing capabilities and create new disruptive capabilities to overmatch the threat at wartime pace. We are not standing still. Our mission-critical capabilities shown here on the right are highly relevant and are directly aligned to our customers' priorities. We are a horizontal integrator, developing new technologies, testing new platforms and delivering frontline mission support. We play an essential and vital role in helping our customers accelerate capabilities into service and increase war fighting readiness to counter the threat. As the market is changing, we have adjusted our strategy to increase focus in 3 areas: firstly, partnering more closely with our customers to help them build greater resilience, rapidly modernize and deliver innovation at pace; secondly, continuing to pursue focused growth in each of our key domestic markets; and thirdly, leveraging our capabilities to expand and grow into European NATO markets. Let me take each of those in turn. We are increasing our competitive advantage through greater partnering and innovation with our customers and industry to deliver operational advantage and drive growth. We are a strategic partner to the U.K. government and the fourth largest defense supplier to the U.K. MOD. Our capabilities are aligned to the ambitions of the Strategic Defense Review, and we have increasing opportunities to leverage our expertise in partnership with the government into major export programs, such as our engineering services and mission data capabilities into the recent win of Typhoon into Türkiye. On Monday this week, Luke Pollard, the Minister for Defense, Readiness and Industry, visited us in Farnborough and has welcomed our commitment to proactively transform the way that mission-critical engineering services are provided to the U.K.'s armed forces that I mentioned earlier. This includes our investment in new digital and AI technologies to augment our high-value engineering skills, significantly increasing U.K. productivity and innovation. To stay ahead for the long term, we remain focused on investing capital into our people, technology and capabilities. We achieved a major milestone in the half with the successful transition of U.K. and Australian employees onto our new digital workplace to improve our ways of working and business efficiency. And investing in cutting-edge defense technology continues to be a key driver for our future growth. Our long-term R&D created the laser technology that is critical to the growing DragonFire laser weapon program. Investing in the business is core to our strategy to ensure we have a differentiated portfolio and are well positioned to capitalize on increasing defense spending and drive organic growth. The longer-term opportunity in our domestic markets remains significant, and our mission-critical capabilities are focused on areas of priority for our customers, which are robust and set to grow. In EMEA Services, we have deep expertise that we are leveraging on next-generation technologies, capabilities and programs. This includes the launch of our DroneWorks initiative to help SMEs access our expertise and facilities to accelerate drone development for rapid deployment. And we are delighted with a recent significant competitive win to further develop our disruptive laser technology for next-generation laser weapons beyond DragonFire. In Global Solutions, we now have a U.S. business with much greater focus on the 4 differentiated capabilities that I described earlier. As a result, we have delivered significant on-contract growth across our large multiyear contracts that Martin described, SCO, TARS and SDA. And we see significant growth potential for space and missile defense, where our capabilities are highly aligned to multiple U.S. space programs. From a wider product perspective, we are continuing to invest in our maritime, targets, sensors and secure navigation capabilities where we have differentiated offerings to drive organic growth. Our portfolio is now focused and structurally aligned to national security priorities of our domestic customers, underpinning our long-term perspective. We're also increasing our focus to position the business and drive organic growth in adjacent markets by leveraging our core capabilities across the AUKUS nations and into European NATO and allies. We are collaborating with our customers across the AUKUS nations to develop new opportunities. Examples include sharing laser technology from the U.K. into Australia, leveraging our R&D expertise. We're also sharing our engineering services experience to help shape the future of the EDP and MSP contracts, and we are applying our world-leading maritime T&E capabilities in the U.K. to support the T&E opportunity for the AUKUS submarine program in Australia. Over recent years, we have made good progress with European NATO and allies, where we have differentiated capabilities. We've grown the use of our unique U.K. test and training capabilities from nations such as Germany, Italy, Spain and most recently, Japan. We're also increasing our export focus and a key opportunity progressing well is the export of our electronic warfare and mission data expertise into Belgium. And whilst Poland remains an upside opportunity, we're actively shaping further persistent surveillance opportunities in Eastern Europe and the Middle East beyond our U.S. program. We're also well positioned to capitalize on NATO's increasing defense spending, and we see our addressable market growing. With a focused approach to our international expansion, we are creating value across the company to drive further organic growth. Having secured the LTPA extension, we have a significant order backlog of GBP 4.8 billion, providing a firm foundation for the company. This backlog, combined with our qualified pipeline of GBP 11 billion, provides good long-term visibility at 8x our FY '25 revenue. We have built this visibility by focusing on our customers' needs, partnering with industry and winning larger, longer-term programs. On the left, I'm showing our major domestic programs where we have strong incumbent positions that build up to approximately 70% of our annual revenue. This solid base in our domestic markets gives us a platform to deliver on-contract growth and win new programs in our pipeline. This solid base also gives the platform to leverage our capabilities to expand internationally, shown here on the right, including opportunities to leverage both our services and product capabilities into European NATO markets. Whilst we may not win all of these, our pipeline is robust and prudent with many additional growth opportunities beyond the GBP 11 billion shown here. Overall, our significant backlog, combined with our healthy pipeline, gives us very good long-term revenue visibility and underpins our confidence in creating long-term value for shareholders. So in summary, we've taken the necessary actions in tough near-term market conditions, strengthening our portfolio to improve our performance. The fundamentals of the business remain strong, and our mission-critical capabilities continue to be highly aligned to our customers' needs in a growing defense market. Combined with our backlog and pipeline, this gives us very good visibility for long-term growth. Whilst near-term headwinds continue, we're focused on execution and have visibility to maintain our full year guidance. 10 years ago, we launched our growth strategy. As you can see from the chart on the right, this year is a transition year. Having taken decisive action and significantly grown our backlog, we have a strong platform to capitalize on increasing defense spending. This gives us confidence to drive sustained long-term growth and deliver compelling value creation for shareholders. Martin and I'd be happy to take your questions. Steve Wadey: Okay. Rich, first question. Richard Paige: It's Richard Paige from Deutsche Numis. Could you just give a bit more detail about what's going on in Australia, please, and circumstances there? And on -- second one on U.K. Intelligence, again, sort of dig between there because it feels as though you're reasonably confident that there hasn't been a significant deterioration in trading in that business. And then thirdly, just on exceptionals and digital innovation. If you could just outline thoughts for the full year on both of those numbers and particularly digital innovation, how long they -- how long that persists as an exceptional charge, please? Steve Wadey: Okay. Maybe, Martin, I'll start on Australia. Maybe we do exceptionals, and I'll finish off with U.K. Intel. Okay. So I mean, I think on Australia, I think it's a tough market. In some ways, the Australian market has been very similar to some of the dynamics that we've seen here in the U.K. It's absolutely not unique to us. As you heard in my presentation, right at the start of the year, we had a loss of a competitive work package. Whilst we're not the prime through the team that we're on under the MSP program, that has resulted in lower revenue for us. But I think we need to put that in perspective, Rich, Australia now about 6% of the group. And I think what's been important is that in understanding that market dynamic, whilst we've taken the resizing actions, we've also taken actions to strengthen the portfolio and focus on the programs that are going to give us long-term underpinning growth looking forward. Those key areas, if you are interested in those, there are really 4 big drivers that we're focused on for the future in Australia. The customer is going through an exercise in the coming calendar year, so 2026, looking at what program will replace MSP. It's called future MSP. We expect there to be an RFI and RFP for that, and we're in a market shaping phase. I mentioned sharing experience between the U.K. and Australia customers to secure a prime role and position ourselves for the next phase of engineering services. Secondly, we're continuing and we're delivering really well on our threat representation business through the acquired Air Affairs business. That's under our JATTS contract. We expect a renewal of that contract imminently, and that provides long-term underpinning growth. Thirdly, you have heard me talk about lasers. We have quite a lot of progress on lasers. I'm sure we might get some questions on this in the U.K. in a moment. It's really a strong long-term growth driver, but there's a lot of collaboration between our customers and our teams looking at next-generation lasers in Australia, where we're very, very well positioned. And the final driver that I mentioned in my presentation is related to the AUKUS submarine program, again, where we expect over the next 1 to 2 years, a significant program opportunity on providing the range capability or the test and evaluation capability for both the AUKUS submarine program as well as surface fleet. So yes, it's been a tough year. It's not unique to us. There are plenty of businesses, as you know, having to take resizing actions and improve business efficiency we have. But we need to put it in perspective, and we've got some really good solid positions to grow going forward. Do you want to do exceptionals? Martin Cooper: Yes. Thanks, Rich. I mean I think on -- as I covered in my script, then we've had a pretty significant rollout in the first half across a lot of our workforce on one major work stream within that package. So it was GBP 12 million -- just over GBP 12 million in the half. I'd expect the second half to be a little bit less, but a few models, I'd model about GBP 22 million for the year, and then we'd expect it to start to step down next year and then finally complete in FY '28 for us. Richard Paige: [indiscernible] Martin Cooper: Clearly not by the nature of exceptionals, but I mean, you'll notice just to cover the restructuring point, I mean, I think you -- that could be split into 2 major halves, one around sort of roughly 50-50 around headcount impact and headcount reductions. And then as I mentioned, again, as a reflection of some of the work streams we've either exited or really rationalized down in the U.S., then there were around GBP 10 million plus of further write-downs in the U.S. that went through that line. So you should think a bit of headcount reduction and then sort of final balance sheet cleanups. But obviously, we wouldn't expect anything else material in the second half on either line. Steve Wadey: And I think on U.K. Intelligence, I mean, you'll know U.K. Intelligence had a tough year last year. So this year has very much been a transition year for U.K. Intelligence. And I describe the wider context of the U.K. market has been tough, and we've seen a delay to orders, particularly around the R&D, DSTL areas and engineering services. But I think that UKI is positioned well for this year. It actually did relatively well on its orders in the first half and has got a very good pipeline to deliver a much stronger second half performance that we are planning on. And included in that, the business is also well positioned. You would have seen me mention a couple of export-related orders, particularly in the EW emission data area where certainly in the next, let's call it, 1 year, we would expect some of those export-related orders to positively contribute to the rebuild and next phase of growth for U.K. Intelligence. George Mcwhirter: George Mcwhirter from Berenberg. Maybe coming back to Australia again. Just in terms of the competitive land systems package that you mentioned that you lost, can you just talk about the size of that contract, please? And what lessons you can take from that loss? And the second question is on the U.S. What proportion of the business would you say is shorter cycle now that you've disposed of the federal IT services business? And have you seen any impact from the government shutdown? Steve Wadey: You need to start on the Australia side. I'm happy to talk about lessons. Martin Cooper: Right, George. So certainly, the value of package of work was about AUD 50 million. Most of that was reflected in our guidance at the start of the year. We had hoped to perhaps pick up a little bit of subcontract work, but that's not really materialized. So around $50 million impact, but it was baked into the guidance in essence at the start of the year. Steve Wadey: And I think lessons, George, I think, is similar to what we've discussed before and certainly, I'm seeing that is our focus in the U.K., which is really understanding the pressures and the drivers on our customers, all of our markets, our customers, whilst defense is a high priority, they're all trying to get more for less out of their budgets. So therefore, really thinking through innovative proposals and being focused on areas where we can differentiate and be more competitive is absolutely key. There are many examples I could talk about in the U.K. where we're doing that. And the 4 areas that I mentioned in answer to Rich's question is really about how we become more competitive and more innovative to differentiate and then build those longer, larger sustainable positions going forward. Start on the U.S. of short cycle? Martin Cooper: Yes, I mean I think, George, to sort of turned it around a little bit, the 4 major sort of work streams we're focusing on now that Steve outlined reflects more than 80% of the revenue work that we now do in the U.S. And I think as you remember, as we went into this year, we didn't include really any material values on the likes of robots and sort of short-cycle book-to-bill work. And so the coverage that we've got through the half year book-to-bill relies very little on short-cycle impact at all, and that's where it is. Now you'll all know that in the U.S., you do also have annual contracting. So you could describe that as short cycle in some instances as to where it is. But a lot of that real sort of what you would have traditionally called as short-cycle volatility was stripped out at the start of the year and is not in our bridge for full year as we look forward. And I think in respect of the government shutdown, the reflection that we had a very strong book-to-bill in the first half in most of those big contract awards on the likes of TARS, SCO, SDA, the forward-funded contracts came in, in September, which drove the strong book-to-bill, which has given us that cover now like all defense contractors and all contractors. If there's another government shutdown in January again and/or these things get protracted, then obviously, there could be impacts further down the line or for further orders. But in the short run, then we're fine. Steve Wadey: And I think more broadly, I think, as I said in the presentation, we're really pleased with the progress that we're making. I mean the U.S. restructuring program is on track. The disposal of the Fed IT business was a key milestone. As you heard, we've taken some significant cost out and headcount out to resize the business in line with the market that we see. Hence, my comment about we have now got a smaller business. But as Martin has just said, that smaller business is really well positioned because we've now focused on these 4 revenue streams where we have long-term positions, and we can see that growth potential, which reduces the exposure to that short-cycle volatility that you are pointing out. And as Martin says, the book-to-bill of 1.5x gives us the ability this year to drive through that performance then really focus on these growth drivers for the long term. Hopefully -- does that answer your question, George? Great. Joel Spungin: It's Joel Spungin from Investec. Steve, one for you, sort of a big picture question, and I've got a couple for Martin as well. But I was wondering if you could talk maybe just sort of thinking out beyond FY '26 as we look into fiscal '27, '28. You go back and QinetiQ used to grow roughly double nominal sort of defense budget growth for a long time in terms of organic growth. Is that still something you think is achievable even in a world where nominal defense budgets in the West are rising at an unprecedented rate, i.e., could this business get back to being a high single, even low double-digit organic growth business? Steve Wadey: Yes. I think this is a good question. And I think there are a number of things to say. I think, first of all, we're very confident we've taken the right actions. We've taken the right actions to deal with the dynamics as we came into this year. And that ultimately, hence, your question, puts us on the right trajectory to return to higher rates of growth. And we have an exceptionally strong backlog and exceptionally strong pipeline. You've seen that there with 8x FY '25 revenue cover. And therefore, I think your question is a question of timing. And actually, how do we really make sure that we control the things that we can control. And what we've shared with you today is that we are in control of everything that we can. But there are some market dynamics that will determine partly the answer to your question about how quickly we will return to that from a timing perspective. But we're absolutely doing all the things that we can. And then if you go further into that question and say, well, what are the drivers though? But what are the drivers that could -- that become the bridge from this year into that multiyear phase of returning to that higher level of growth. And it is worth just mentioning them because I think that it will help everybody understand how the company returns to those higher growth rates. So the first one absolutely is in our core strength of test and evaluation. The long-term partnering agreement on a multiyear basis is absolutely going to be a contributor to our growth. The modernization work of bringing in hypersonics directed energy, autonomous systems, the increasing in tasking that we expect to see through our test and evaluation Innovation Gateway, the DroneWorks initiative that I mentioned. And I didn't mention it in the presentation, but we've just won a contract to expand quite considerably the capacity of the ETPS training school, which is going to be considerable increasing capacity both for our domestic and international customers. So that's a really important growth driver. The second is actually, and we've talked about this as our strategy for several years, how do we leverage our test capability into training. Note the strategic win of the MCAST contract. It's GBP 25 million. You might say, well, that's not big, but it's a strategic win as we move into training, and that training is absolutely complementing our test capabilities, and there are quite a considerable number of incremental opportunities above MCAST in a short-term period that will add to growth. The thirdly is U.S. I've mentioned this a few times actually in answers. I think we're really well positioned around space and missile defense. Our capabilities with the SDA. We have SATCOM capabilities, and we also have broader sensors capabilities. Space is a very large growing opportunity in the U.S., and we're well positioned in that and alignment with programs that you all know such as Golden Dome, we're positioning to win a role on that. And separate to that, I think it's in our unfunded order bridge. We did actually win an option, a ceiling option with the Space Development Agency worth up to $95 million to provide additional support to them in this coming year. So that's the third growth driver. Fourth one is around advanced weapons. You go back a year, we talked about -- in fact, it was May, wasn't it? We talked about the 2-year renewal on the weapons sector research framework. That is really starting over this next multiyear period to bring benefit, particularly in the directed energy area, both radar frequency as well as lasers. Martin mentioned the importance of DragonFire. And I just mentioned, we've had another win in next-generation laser technology. And then finally, the focus on Europe and 2 particular areas I would highlight. The framework contract that we signed now 2 years ago with NATO to allow access to our T&E ranges continues to bring and be attractive to nations like Germany, Italy, Spain, Netherlands. And the second area I mentioned in response to Rich's question is our greater focus on export. And we're in a really mature partnering position with HMG and looking at exports together. I mentioned 2 examples around our EW emission data capability with Belgium and with Türkiye opportunity on Typhoon, and those will contribute. So those 5 areas, I think, answer your question is the bridge from this year to those higher rates of growth. Clearly, not everything there is under our control. So it's a matter of timing. But certainly, over that few year period that you've mentioned, I would expect us to really get back into much higher growth rate. So hopefully, that answers your question. Joel Spungin: Can I -- sorry, just a couple of quick ones, Martin, I'm a bit more dull. The -- sorry, I lost you a bit on the guidance, the GBP 22 million. Is that the digital investment that you expect for the full year? Or is that the... Martin Cooper: Yes. So the total cost of digital investment, I expect to be around the GBP 22 million. Joel Spungin: Right. And you're not at the moment, expecting any more restructuring charges? Martin Cooper: Correct. Joel Spungin: Right. Okay. And then sorry, very final one. Fed IT, I was just wondering if you could say how much did Fed IT contribute to revenue and profit in the half? Martin Cooper: Yes. So in revenue in the half, it was about -- you should have modeled around GBP 10 million to GBP 11 million, so around $13 million to $14 million. And it does have a second half weighting, which is why when you're adjusting your models, you'd expect more like $20-plus million in the second half, which is why we want obviously the adjustment in the full year guide. It is fairly low margin. We will get to you, sir. Sash Tusa: Sash Tusa from Agency Partners. Just a very quick one first. I think that you slightly implied that there have been some delays to target orders in the first half. If I understood that right, is that something that has subsequently occurred or that you sort of expect to occur in the second half? Steve Wadey: So do that one first. Yes. So you are right, there has been a slight slowdown. Nothing particular in the market other than a general slowdown. But as Martin showed in our bridge, targets are part of a pickup that we expect in the second half. It is worth saying that we did achieve some initial target sales in the U.S., relatively small in the half, but we did. And we expect to be focused on additional task orders through the ATS-3 contract that we signed 12 months ago in that second half bridge. Sash Tusa: And then just a sort of broader question about U.S. space and Golden Dome and so forth. I mean clearly, you've seen an awful lot of hopes for procurement reform over your careers. And it's possibly quite jaundiced about sort of claims that politicians make for that. But Secretary Hegseth does seem to want to go faster and break a lot of things. And he doesn't seem to be particularly in favor of what he calls legacy contractors, which might be a category that you fall into. How do you make yourself relevant to new defense technology companies whose business model seems to be extravagant claims on PowerPoint, build stuff, it blows up, moves on as opposed to a rather more measured approach in terms of test and evaluation. Steve Wadey: How long have you got? You make a number of points. I mean, first of all, you touched on space and SDA. We have an excellent relationship with the SDA. We're the largest contractor working in with them. And therefore, we partner very closely with them, and we help them deliver their programs at pace. So by being relevant, by deeply partnering and helping them achieve, to your point, their programs faster, that's how you position well. And I think SDA contract was an example of significant on-contract growth in the half. That comes down to good performance and good partnering. And please note what I mentioned about the option that we've had added to that contract for the next few years, which could build even greater on [indiscernible]. So I think the core in that is being close to your customers, understanding the drivers. I think more generally, I think all of our markets are looking for reform. I don't think that's specific in the U.S. And I think that is a nature of what is being driven by the threat. And therefore, all of our governments, whilst they want to spend more money, that money is going to take time to come. And therefore, they want to get more from their money quickly, and that means doing things differently. And I come back to how well positioned we are. And if you look at our 4 capabilities, creating new technologies that create disruptive military capabilities to overmatch the threat quickly. Lasers, the case in point is really good. Focused on engineering services. I mentioned, I think, twice the importance of proactively investing in how do we augment our high-value skills with artificial intelligence. That's not about replacing our people. That's about doing what we do faster and at greater scale to help them drive efficiencies and scale their capabilities. So I think these are the dynamics, Sash, and I could go on further that by being really relevant and partnering, but coming up with different ways of working to support them on their reform, that's how you grow in difficult markets and position yourself well for the long term. I think that's the fundamental ethos. We have 2 more questions behind you. Benjamin Pfannes-Varrow: Ben Varrow, RBC. On the -- maybe kicking off with the second half growth, I think you've addressed it in the slides there, but just maybe on EMEA Services, looking at the second half, I think you need to grow around high single digit. Is the message from the slide there that those prospective orders coming in are pretty much derisked, so you're not concerned there of meeting those numbers. Is that the general takeaway? Steve Wadey: I'll do that one. Maybe I can start generally. I mean we've sort of talked about the market being difficult. And clearly, we've had delays, Ben. But we've got really good focus on execution and what the bridge that Martin showed is the visibility. If you're referring to the 7%, there are really 3 main drivers for that. The first is around EDP-related task orders. Secondly is around laser-related programs. That's not just DragonFire. It also includes the win that I've just mentioned on next-generation lasers because that was post AP7. In fact, it was last night. And then thirdly, targets. They are the 3 biggest drivers in there. And what really we're showing is in that 7%, they're really specific and identified, and therefore, they are high confidence. And we also have a pipeline of further awards that go beyond that and hence, the way that Martin presented it. Benjamin Pfannes-Varrow: Two more. In terms of maybe asking Joel's question slightly differently, over the next couple of years, you've spoken you can get back to that sort of high single digit, low double digit. Is there anything to be mindful of that's working against you or prevents you from getting there over the next couple of years to keep in mind? Steve Wadey: Well, I guess the most straightforward is the things that aren't in our control. So the market dynamics are partly the timing that I mentioned to the answer to Joel's question, but are we doing all the proactive thinking of investing, changing what we're offering, engaging with our customers. We're absolutely all over that. So we're doing everything in terms of the actions on short-term performance and positioning us to shape and win these proposals. So I think it's the things that aren't in our control, which is actually just the flow of orders really. But no, I think we're very well positioned, hence, the answer to Joel's question. Benjamin Pfannes-Varrow: Last one on the sort of upcoming U.K. defense investment plan, thoughts or expectations what could come out there? Steve Wadey: Yes. I mean we've been through a lot in the U.K. market this year. We had a strategic defense review in June, defense industrial strategy in September, defense reform initiative, July, was it? And then we've got the defense investment plan let's say, before Christmas, wherever it's going to be. So we've been through a lot. And I think that getting through, in some ways, the last big block of this reset and renewal of defense in the U.K. will be good. I think it will bring clarity. It will bring confidence. And I think what we expect from it is with that clarity, I think there will be a lot of focus on innovation and R&D and building different capabilities. Clearly, we're well positioned for that. And then more fundamentally, I think it will be calling even more so for initiatives of innovative capabilities to do more for less. And hence, some of the proactive changes that we've been making around the future of EDP and the AI-related investments. So I think clarity and confidence is going to be good. We'll welcome that. And then we really expect innovation and bringing proactive proposals to be part of the implementation and then sort of build that position as support to our government going forward. David Richard Farrell: David Farrell from Jefferies. Two questions for me. Just going back to the exceptionals and the digital platform. Could you just remind us what capabilities that will give you as an organization? What exactly are you doing? What efficiencies does it drive? Steve Wadey: So if we go back a couple of years maybe to when this whole project was launched, I think we talked very openly that the company infrastructure had been built really on the back of a legacy IT infrastructure from the U.K. government. And it went back 20 years. Hence, why this was a fundamental discrete investment project to fundamentally build a digital platform and set of applications for the company globally. And really, that project has been in 3 phases. The first phase was to put a fundamentally different secure network in place across the company using state-of-the-art digital technologies. That is done and complete. Secondly, the next phase was then effectively migrating our people onto the new devices. As both Martin and I have said in our presentations, that is largely complete. And now we're on the sort of the final phase, which is really now all about migration of apps and then new tools, whether that's engineering tools or a project that's very close to Martin's heart, which is around the business system finance tools. So hence, this was that multiyear discrete project to really bring the company digital infrastructure into state-of-the-art capability. And I think it's going very well. And I think both of us use slightly different language. This will change the way that we work. It will allow us to share information, share technology, drive collaboration and also build greater business efficiency into the way that we operate. Feel free to add. Martin Cooper: Yes. I mean I think, David, I think -- I mean, this actually enables us to bid into some contracts as well and be prime lead in some areas Steve mentioned Australia and other areas by having these advanced and better systems that will enable us to actually bid and hopefully win more work going forward as well. I would also make the point that we meant there, and you might be about to touch on margin anyway. But I mean, I think anyone who's been through these digital rollout programs, it is quite disruptive to organizations. And you'll remember at the start of the year, we were a little bit cautious, more cautious on margin just around that operational impact, and there has been some impact and that continue there will be for the rest of the year whilst we're going through that. But as Steve says, we're getting on with it and it will have long-term efficiency benefits as well. David Richard Farrell: I see my second question was about growth. I've really touched on the Polish TARS opportunity. But can you just kind of detail how that works? Who selects the winner? Is it the U.S. government? Is it the Polish government? Has the U.S. government shutdown in any way delayed the award of that project? Steve Wadey: Yes. I mean the first thing is a reminder to ground us all, Poland is not in our base plan, and it is not in our forecast. So just to be really clear on that. In terms of the process, it's an FMS sale from the U.S. government to Poland. Therefore, the decision-making is with the U.S. government. But clearly, they will have dialogue and exchange with the Polish government. And to your point, partly related to shutdown, I mean, there is no public announcement so that remains, as I would think about it more as an upside opportunity. But I think more important to that, you mentioned the phrase TARS, is really thinking about our TARS capability, which if everybody is not familiar, this is where we are running a really significant national program along the Southern U.S. border, providing persistent surveillance between U.S. and Mexico. That is another contract. There are 2, in fact, one called TARS, one called [ TAS ]. And both of those also have delivered good on-contract growth over recent years. And from our perspective, we're really positioning to grow that capability as one of our 4 priority streams, and we're positioning to grow that both domestically in the U.S. We expect further on-contract growth to come this year, and we also expect to grow it internationally, and we're actively shaping a number of opportunities in different countries around the world, both in Eastern Europe and Middle East. Unknown Analyst: It's [ Francois ] from Barclays. Just coming back to the digital investments you've been doing. You mentioned the fact that you can increase your win rates because of that investment on the line. So -- which is obviously good for growth. But just in terms of margin, is this investment going to generate any margin benefits down the line? Or is it just a function of making your business better positioned to win new contracts and fund growth? And then secondly, going back to the U.S. business with those 4 key areas you outlined before. Can you discuss the medium-term growth profile for the business there, compare that with the rest of the group? And then how should we think about the margin in the U.S. in the medium to long term? That would be very helpful. Martin Cooper: I'll start with the digital. I mean, just to be clear, I mean, this is -- as Steve says, this is around also building good long-term business resilience, and you'll all be very aware of, obviously, heightened cyber threats and other things. So this is predominantly around, obviously, having the right systems to be effective for our employees and other things. It does give us the opportunity in some parts of the world where we don't have the current capabilities to be able to bid into things, but this is predominantly an efficiency thing, but also we do need to clearly continue to invest in the business. So I wouldn't want you to think this is going to make a huge step-up in margin going forward as we work through this program, but it should definitely help efficiency drive as we go there. Perhaps in the U.S., just on margins, and then I'll hand over to Steve around growth. I mean, clearly, all the actions we're taking are about designed to drive margin up in the long term. I referenced a couple of areas where we actually also actively took ourselves out of some contracts in the first half because they were lower margin and were noncore to us and things. But I think you should think about this business in the long run as more of the sort of high single-digit margin business in line with sort of peers, so sort of in the 7% to 9% would be the margin, and that would then, therefore, push Global Solutions more up into around the 10% level, as I think we've outlined in the past, but that's the kind of benchmark that we're pushing that business through these actions. Steve Wadey: Yes. And rather -- on the U.S., I mean, rather than giving growth rates and comparisons because as we know, we'll be giving an update on our growth in May. Maybe what I can talk about is the growth drivers. I've sort of talked about a few of them. So just to go back over. So space and missile defense is an absolute growth driver where we are positioned. And I use the phrase multiple space programs. It's worth just touching on. So clearly, we have the SDA program. We also have a SATCOM related engineering services program. And I've just briefly touched on Golden Dome, where we can see some of our engineering services and our sensors capability relevant for that. So we have a series of capabilities, and we're well positioned in our customer relationships to see good growth coming from that program. Second one, Maritime Systems. We know if we look back in time, the company has been very well positioned in its relationship with General Atomics and the U.S. Navy as part of the electromagnetic launch and recovery system on the Ford-class carriers. The Ford-class carrier is a long-term franchise program for us, and we see good opportunity, particularly coming in the next year and bringing further growth on the carrier program. Many of you will remember about 3 years ago, we said we would take those capabilities and position into the submarine program. We initially won some business on to the Virginia-class carriers. That has expanded on to 2 or 3 subsystems. And in the last 12 months, we're very pleased that our track record of performance in Maritime Systems has led to us winning business on the Columbia-class submarine. So we have strong performance with the carriers moving on to Virginia. We've now moved on to Colombia, and we see that -- we see steady but good long-term growth coming on a multiyear basis and then moving into surface fleet programs as well. So that's the second driver. Third one is around Advanced Sensors. This is from our prior MTEQ capability where we have some really good advanced R&D and next-generation sensors. What might be a small win in the half was winning a Phase 0 contract on a program called FALCONS. This is the next generation of really long-range IR sensor for the U.S. Army. It's potentially a very large program of record in the U.S. We've got a very novel and clever design, and we're delivering that Phase 0 program and looking at key strategic partnerships of how we will position ourselves to win. That's a multiyear opportunity. And the last really is the broader franchise opportunity that I discussed around persistent surveillance, which is TARS, [ TAS ] and the domestic growth that we expect on that and then our focus on the wider international expansion. Those really are a bit more color in the growth of those 4 areas. Any more questions? Any questions online from anyone? Operator: There are no questions coming through from our conference call. I'd like to turn the conference back to Steve Wadey for any additional or closing remarks. Please go ahead. Steve Wadey: There's one more opportunity in the room. Okay. Well, thank you very much for your time. We'll both be hanging around if anybody in the room would like to follow up with any additional questions. Thank you.
Operator: Good morning, and welcome to the Neo Performance Materials Third Quarter 2025 Earnings Conference Call. For opening remarks and introduction, let me turn the call over to Karen Murray, General Counsel for Neo. Please go ahead. Karen Murray: Thank you, operator, and good day, everyone. Today's call is being recorded, and a replay will be available starting tomorrow in the Investor Center on our website at neomaterials.com. Our call will be accompanied by a live webcast presentation. If you are joining us online, the slides will advance automatically as we progress through the discussion. You can also download a copy of the presentation from our website. On today's call are Rahim Suleman, Neo's President and Chief Executive Officer; and Jonathan Baksh, Neo's Chief Financial Officer. Please note that some of the information you will hear during today's presentation and discussion will consist of forward-looking statements, including, without limitation, those regarding revenue, EBITDA, adjusted EBITDA, product volumes, product pricing, income and expense measures, cash returns, operational changes and future business outlook, including potential expansion plans and agreements. Actual results or trends could differ materially from those discussed today. For more information, please refer to the risk factors discussed in Neo's most recent financial filings, which are available on SEDAR+ and on our website. Neo assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates. Financial amounts presented today will be in U.S. dollars. Non-IFRS financial measures will be used during this conference call and the information regarding reconciliation to the IFRS measures is set out in the financial statements and MD&A. I will now turn the call over to Rahim. Rahim Suleman: Good morning, everyone, and thank you for joining us today. Let's move to Slide 4. The third quarter was another strong period for Neo, marked by continuing to execute our growth strategy in global rare earth magnetics, momentum across the business and end markets and solid financial results. We are advancing our strategic growth plans as an integrated rare earth magnetics and critical materials company. Our product platforms and technologies continue to benefit from megatrends in electrification, robotics, AI and clean energy. And the industry is accelerating its need for critical materials from both robust and localized supply chains. It's important to note that for Neo, we are well prepared to grow into this generational opportunity in rare earth magnetics. Neo, of course, has been in the rare earth magnetic space for 30 years and already has an integrated supply chain with rare earth separation in Europe for decades. Thanks to our operational history, we are extremely well positioned to capture more opportunities with the focus in critical materials to serve our long-standing customers as they need to be served. Moving to Slide 5. Our new European Permanent Magnet facility held its grand opening in September, a major milestone for Neo and indeed, all of the critical materials space in Europe. The event drew senior government officials from the European Commission and customers from major automotive and technology OEMs from across Europe and North America. Our successful grand opening of this European magnet plant is a tangible demonstration of how industrial policy, customer commitment and private investment can converge to create a resilient and regionalized supply chain. Our partnerships with government and industry stakeholders in Europe underscore the strategic value of this project. It's not just a plant. It's the cornerstone of a European magnet ecosystem designed to support the transition to electrification, clean energy and digital technologies. The early feedback from customers has been exceptional, with OEMs recognizing that Neo's European presence provides the reliability, transparency and ESG assurances, all increasingly required in critical material supply chains. This facility is designed as a scalable platform. Phase 1a establishes 2,000 metric tons of annual capacity, supporting both pilot production and initial customer programs for traction motors and eDrive systems. The next step, Phase 1b is already being planned and will expand the site to approximately 5,000 tonnes. Given overwhelming customer demand, Neo will also expand its product offerings and magnetic solutions toward additional applications, including accessory drive systems, wind turbines, robotics, drones and automation. This endeavor will be one of the new largest integrated magnet facilities in the Western Hemisphere. Importantly, this growth can be achieved within the existing site footprint, providing an efficient pathway to scale as customer commitments, responsible launch time lines and policy incentives align. At the grand opening, Neo also showcased our European rare earth separation business, highlighting the integrated nature of Neo's existing business. We are in the process of installing a heavy rare earth separation line in Europe as well, building on the vast infrastructure, skills, technology and operational history that we already have. We expect to start separating heavy rare earth at small scale later in 2016 -- 2026. Moving to Slide 6. Equally important this quarter was the signing of our expanded strategic partnership with Bosch, one of the world's most respected automotive technology leaders. This memorandum of understanding extends a long-standing relationship and formalizes collaboration on the supply of advanced rare earth magnetics for Bosch's next-generation e-motor platforms and other applications. The agreement provides a multiyear framework for magnet supply from our new European facility and underscores Bosch's confidence in Neo's technical capabilities, execution record and alignment with their commitment to resilient localized supply chains. This MOU represents a pivotal commercial milestone and a clear validation of our strategy of investing in Europe. It directly connects Neo's new magnet capacity with another leading Tier 1 supplier. The multiyear nature of this agreement shows Bosch's desire to secure long-term capacity while reflecting one of the key mantras at Neo, it is about working together and managing responsible launch curves. In addition to Bosch and our first awarded customer Schaeffler, Neo continues to advance qualification programs and contract discussions with additional automotive, industrial and renewable energy customers. These engagements are translating into providing long-term demand visibility and supporting our path to scale. I think what should be of particular interest to our shareholders and partners is the nature of Neo's awards and Neo's customers. These are firm awards for real multiyear programs with difficult technical specifications and for which we have already delivered samples. These programs are with some of the most advanced and largest motor manufacturers in the world. After all, to a magnet maker, the motor manufacturer, which is sometimes an OEM and sometimes a Tier 1 is the customer and Neo and Magnequench has served motor manufacturers for decades. These are our customers. They know us well, and we will continue to grow with them. Shifting gears to Slide 7. We are making meaningful progress in simplifying our portfolio and focusing our capital allocation on the highest value segments. In 2025, we have continued to deliver steady EBITDA expansion driven by operational efficiencies, improved product mix and a disciplined approach to cost management. In our 2 largest manufacturing facilities, including the environmental catalyst facility we opened in 2024, we are seeing significant conversion cost savings with the introduction of new automation and advanced data analytic techniques applied to our established manufacturing processes. We have also made advances in sustainability. Neo's rare metals business continues to expand its recovery and recycling capabilities, including gallium and hafnium supporting both environmental and economic goals. These capabilities not only reduce waste but also strengthen our supply chain security. From a liquidity standpoint, our balance sheet gives us the flexibility to advance Phase Ib of the European magnet expansion, invest in next-generation processing technologies and pursue additional opportunities that enhance our downstream value-add capabilities. And as this Slide 8 illustrates Neo continues to be a pure-play beneficiary of the global shifts reshaping supply chains for critical materials. This is the convergence of 3 powerful forces. The macro demand for electrification, robotics, AI and clean energy technologies, public policy tailwinds and customers driving regionalization and our own unique asset base, technical experience and years of operational excellence. Neo is positioned at the center of these 3 key success factors. Our differentiated platform enables us to meet customers' needs across geographies and technologies from magnetics to catalysts to rare metal recycling. These markets are supported by enduring macro trends rather than short-term cycles, which gives us the confidence in the durability of our growth plans. Our teams have done a remarkable job executing on complex projects across multiple geographies, maintaining safety, cost discipline and a long-term focus on profitability. I would like to thank them for their hard work and dedication. And with that, I will now turn the call over to Jonathan for the financial review. Jonathan Baksh: Thank you, Rahim, and good morning, everyone. Moving to Slide 10. For the third quarter, Neo generated $122 million in revenue and $19 million in adjusted EBITDA, reflecting a resilient demand and strong execution across all 3 business segments. Year-to-date adjusted EBITDA stands at $55 million, up 27% compared to the same period last year. Given the solid results so far this year, we have raised our full year 2025 guidance to a range of $67 million to $71 million up from $64 million to $68 million when we last reported in August. Growth this quarter was driven primarily by increased magnet volumes up about 20% year-over-year, combined with solid contribution from emission catalyst and rare metals recycled. Our margin profile remains resilient despite market volatility, reflecting the benefits of operational efficiency, pass-through pricing and previous portfolio actions to divest highly volatile assets. With that said, during the quarter, we experienced some benefit from customers pulling demand forward, along with favorable movements in rare earth prices. While we continue to use pass-through pricing mechanisms in our customer contracts, short-term margin impacts from price fluctuations may still occur. These dynamics underscore the importance of our disciplined approach to managing volatility and maintaining predictable performance. Moving to Slide 11. I'll touch briefly on performance by segment. Magnequench delivered strong profitability and volume growth in the third quarter with volumes up 21% year-over-year and adjusted EBITDA rising 27% to $8.1 million. Year-to-date adjusted EBITDA reached $22.4 million, up 20% from last year, supported by higher volumes, operational efficiency and disciplined cost management. Growth reflected solid underlying demand and customer restocking activity amid evolving supply chain and geopolitical conditions. Bonded magnet shipments reached a record quarterly high up 38% year-over-year, driven by demand in automotive, AI data centers and energy-efficient applications while bonded powder volumes increased 18%, reflecting continued market share gains and healthy downstream demand. Moving to Slide 12, the Chemicals & Oxides segment delivered another strong quarter with adjusted EBITDA up 213% year-over-year and 358% year-to-date, reaching $4.1 million and $16.4 million, respectively. These results are reflective of higher rare earth prices, portfolio transformation and continued operational discipline. Following the sale of the Chinese separation assets and the relocation of the emission control catalyst operation, the business is now focused on higher-margin growth areas, including emission catalyst and wastewater treatment solutions. Demand remains robust with emission catalyst volumes up 20% in the quarter and wastewater treatment volumes up 42%, driven by global sustainability and environmental regulations. The segment also continues to strengthen its European capabilities, operating one of the region's few noncaptive separation facilities and advancing a new heavy rare earth separation pilot line, which remains on track and on budget as construction nears completion. Products continue to benefit from tighter environmental standards globally, particularly in Asia and Europe. Moving to Slide 13. The Rare Metals segment delivered resilient financial performance with adjusted EBITDA of $11.5 million for the quarter and $30.9 million year-to-date, down 30% and 10%, respectively, from last year reflecting the anticipated normalization of hafnium prices after record highs in 2024. Despite this, end market demand remained strong across aerospace, industrial gas turbine and semiconductor applications supported by continued global investment in advanced manufacturing and clean energy technologies. While hafnium margins declined 41% year-over-year as pricing stabilized, the gallium business performed well, benefiting from solid performance and regulatory tailwinds. Neo also remains one of the only gallium recyclers in North America, a key competitive advantage that supports long-term growth and market resilience. Across all 3 businesses, our teams have executed extremely well in balancing near-term profitability with long-term growth priorities. Moving to Slide 14 and turning to the balance sheet. Neo's financial position remains very strong. We ended the quarter with a net debt position of approximately $28 million and total liquidity exceeding $110 million, including credit facilities and government grants. Importantly, this includes a healthy gross cash balance of $61 million, reinforcing our strong financial position. Our disciplined approach to working capital and low leverage gives us the financial flexibility to fund ongoing growth projects and weather any near-term macro volatility. We also continue to prioritize shareholder returns. During the quarter, we maintained our regular dividend and NCIB while continuing to invest in growth capital projects. As we move into the final quarter of the year, we expect to maintain steady momentum across our core platforms. Reflecting this confidence, we have raised our 2025 adjusted EBITDA guidance to a range of $67 million to $71 million underscoring our ability to deliver strong financial performance. And as we move into 2026, our priorities continue to center on operational efficiency and capital discipline. With that, I'll turn the call back to Rahim for closing remarks. Rahim Suleman: Thank you, Jonathan. And moving to Slide 16. As we approach the end of 2025, Neo is in a strong position, strategically, operationally and financially. We are executing on a long-term strategy to grow our industry-leading permanent magnet business, enabling supply chain diversity and robustness and supporting the global energy transition and technology advancements in multiple arenas. Our focus remains on operational excellence, delivering reliable, high-quality critical material solutions to our customers, investing in innovation and maintaining financial discipline. With our strong balance sheet, solid customer demand and a pipeline of long-term strategic growth projects, Neo is well positioned to deliver profitable growth and long-term value for our shareholders. Thank you for joining us today, and we will now open the call for questions. Operator: [Operator Instructions] Our first question comes from Daniel Harriman with Sidoti. Daniel Harriman: Congratulations on the great quarter. I'll start off with 2, and then I'll get back into the queue. But starting off with Narva now online after the grand opening and export controls continuing to tighten, I'm wondering if you're hearing from interest from customers if they are explicitly requiring localized magnet supply? And if so, how do you think that's going to change the volume or quality of the programs you've been invited into. And then secondly, just with Magnequench and magnet volumes seemed exceptional in the quarter. Once again, I'm curious if you could kind of break down how much of that strength feels structural from traction motors, data center cooling and industrial automation versus maybe just short-term restocking from your customers. But I really appreciate it, guys. Rahim Suleman: Sure, thanks for both questions. So in terms of the first question with respect to the grand opening and the continued export controls, I think you're right in terms of we are seeing increased customer interest. Although I kind of break it into 2 pieces. I think there was already significant customer interest when we began the planning for this facility, and we did the groundbreaking of this facility, call that 2, 3 years ago, I think the customers already knew that they had a concentration risk issue that was important to them. I think with the restrictions that were put in place in early April, it absolutely ramped up that level of tension, that level of urgency and those requirements. Those requirements remain today. The grand opening facilitated more customers, more potential customers coming and asking for more agreements and more opportunities. So the MOU that we have with Bosch raised more customers to come to the door to ask for similar type of contracts for alternative type of opportunities. But for us, the issue is never actually about customer demand. There is absolutely plenty of customer demand and our customers know our capabilities, and they trust us and they work with us. It's really just about time to launch. I think we're pretty darn confident in the sales funnel. We're pretty darn confident in our operational and technology capabilities, but we are also darn confident in understanding how a plant of this size gets launched and what a responsible way to do that is. So from a demand perspective, there's really no issue. It is figuring out what the right launch curves is and how you bring each customer on board with all of the related PPAP documentation and kind of control mechanisms that we have. When you are an automotive supplier or another supplier on mass production levels. You put a lot of controls in place around your production process for every part. And every part that we win, remember, every platform, at least the traction motor platforms that we're winning, these are $50 million to $100 million cumulative revenue programs. When you launch them, you better be good, you better be right, you better have your costs in place, and that's the way that we approach that. With respect to the Magnequench volumes, your second question extremely high quarter for Magnequench volumes, extremely impressive for us. And I think you pointed it out correctly. It's actually both. It is demand across virtually all of the applications, but we do think some of that is a response to geopolitical environments. The question that is in front of everyone will really be, is this resetting people's inventories pipelines so that people feel more comfortable on how much inventory they're holding? Or was this a temporary -- like is this a pull forward that will get reversed in a future quarter? I think it's more likely that the pipelines are being filled and that customers want to hold more inventory through the system. So -- but I think we'll see if that means that some of these volumes unwind or volumes just return to normal or if there's kind of continued pipeline growth, but I think that the volume number of Magnequench was kind of above our forecast and expectations of what the normal business looks like. But the normal business continues to grow, traction motor business continues to grow even in the existing Magnequench segment, AI data centers continue to grow. So I think all of those elements of the business are performing extremely well. And I think that they'll continue to perform extremely well. Operator: And the next question comes from Nick Boychuk with Cormark Securities. Nicholas Boychuk: Coming back to the Bosch partnership, and you mentioned that other partners are coming to you looking for similar deals. Can you give any update on how those negotiations are going? Expectations with Bosch to convert that into a formal order and your appetite to sign similar type contracts with other partners? Rahim Suleman: Yes. So when you say negotiations per se, really not negotiations in the traditional form. They're more -- everybody talks about what partnership means and the supply chain all needs to be partners, this, that and everything else. I'd say it's one of the first times in my career that I feel that this is a partnership-based conversation that we're having dialogues with our customers and for others that are coming to the door, and we're talking about, look, these are the reasonable launch windows we have available at this point. And this is what the development time line for any particular product would be and people are really understanding in terms of how do they fit into that development type pipeline and how do they fit into the launch curves. I would say the factor here at play is not negotiating over price or negotiating over specifications or this, that or anything else. The factor here is saying, okay, in order for us all to be successful on this path, they require both a level of urgency, better level of reliability. And we require a level of cost certainty. So margin confidence as well as not putting other customers in jeopardy. And I think both sides appreciate the openness of our dialogue. So the opportunities are there, and we'll pivot our pace depending on how launches go and depending on what types of programs. We're having conversations with customers on look, certain types of programs that have certain compositions are probably faster for us to also go through a development cycle for than compositions that are different. So we just kind of make choices with the customer, but we do it in a fairly transparent and open environment because everybody wants everyone to be successful here. Nicholas Boychuk: So just to clarify then, that in these development partnership conversations you're having, you're able to directly express the margin or the pricing that you need in order to justify investments and they're comfortable with that type of a negotiation or? Rahim Suleman: Yes. Look, we're not talking about specific prices at this point. Like when we talk about specific pricing those things, we have a sample developed, the composition established, the product flow established and all of those types of things. They understand that there is a difference between the Chinese cost and cost and manufacturing elsewhere in the world. I think we're fortunate and our manufacturing location is actually quite cost effective. I think our customers appreciate that, that cost effectiveness matters. But it doesn't mean that it's the same price or the same cost is producing it in Southeast Asia. So Therefore, there is an open dialogue on the costs are not the same. It's not hostage pricing. It's dialogue around costs are not the same, margin expectations are not the same, new capital in place and return on capital expectations are not the same but let's work together to figure out how we solve the ultimate challenge, which is a diversified supply base. So they're very good conversations. There -- it's less about price negotiation more than it is about understanding what the requirements are and what that path to success looks like. Nicholas Boychuk: And what impact if any is that having on your thoughts around developing out Phase 1b? Is this potentially pulling that forward, giving you a little bit more certainty to make that investment maybe sooner? Rahim Suleman: Yes. I think it's about certainty and comfort on making the investment. I think that the investment will proceed on a time line that makes sense for the operation to -- it's not just about winning the programs, but each program has its own launch curve, too, right? So it's about finding the right time that matches all the various launch curves that we have of the programs that we have of those that we're onboarding and when that capacity will be required. Again, the factor is managing the launch curves and then just planning so that we're not spending capital unnecessarily and that we're just finding the right time line for it. So certainly, huge visibility into demand. I guess if you were to -- I'd say it this way, when we started this project 3 years ago, and we evaluated financial risk, customer risk, technical risk, operationally, we evaluated a whole series of criteria for us to move forward on these. And then we had levels of confidence on each of those that ultimately led to the business decision to move forward with this. If you look at one of those criterias, which was customer acceptance, it's more than 100% now. If we were to look at what our criteria was our score on customer acceptance would be greater than 100%, but we still have to get through the time to launch. Operator: [Operator Instructions] The next question comes from Ian Gillies with Stifel. Ian Gillies: Could you talk a little bit more about the heavy rare separation expansion plans in Estonia, maybe a bit around ultimately how large you would like that to be, if possible, what you intend to produce? Do you expect it to be a material financial contributor and the like? Rahim Suleman: Sure. So what I'd say is on heavy rare earth separation, we also follow the same methodology of step by step. So what we are producing here is a mini production line. It's not a lab. We've done lab stuff all through our career. We have our Singapore lab that's been doing heavy rare earth related stuff for 30 years. We have one of the most advanced earth magnetic labs in Estonia already, obviously, and all the infrastructure attached to it. So this line is not lab line. It is -- but it is a mini production line. And the purpose of building the mini production line at first is to roll it out and see some of the dynamics to be able to separate for a while and get real-life experience on some of the time lines and some of the chemistry and some of the purity levels that we're going to get. It will then lead to subsequent decisions on how do we integrate that with the existing light rare earth line and there's various points in time that one can make choices around how one would integrate it or whether one would build an expansion into the light rare earth line as well and whether one would do that on a parallel basis or an integrated basis. So there's lots of decisions and planning and engineering that we would still do again, and I would say that because we have the history, the knowledge and the technical expertise to make what I say is the best decisions, right, to make the right decisions, not to just run forward with whatever one thinks is the right thing to do. We have the ability to play out different options and model different options and see how all of that comes together. So to get it back to your question, the scale remains small. We haven't said specifically what the scale of the product will be. It depends largely on the feed that we're receiving. So we have some heavy rare earths in our existing sets of feed, but not enough. So we'll be working through stockpiles while we're also receiving material from our feed for our existing feedstocks. We need more feedstocks of heavy rare earth generally in the world. In terms of the availability of NDPR, like separate it into the 2 pieces, do we need more feedstock to support separation? Or do we need more feedstock to support magnets. Magnets can buy feedstock from other people like raw material as well and they do. So there isn't -- this isn't an issue that is tied to our ability to make magnets. This is just an opportunity that tie to our rare separation business of scaling that business to be larger. So we'll scale the heavy rare earth line in due course when we have better visibility to more rare earth feed, but we wanted to get this mini production line in place. A, it does provide some rare earth to Magnequench, not enough, but more particularly -- and it's never intended to be enough. We always want Magnequench to be multi-sourced. So we'll always partner with Lynas and MP and others in the industry for sourcing for Magnequench. We've been partnering with them and Lynas in particular for a decade. So we'll continue to do that, but like there's no dialogue on us not continuing to partner with others in the rare earth industry and wanting supply. It really doesn't matter how much we build in our Silmet separation business, our philosophy will always be to be dual sourced or multisourced in those environments. In terms of the actual economics, I think you have to wait to answer that question until we actually have a better view on what the largest and most likely form of next feedstock will be, what the exact heavy composition will be. In terms of what we will separate, I appreciate this getting to be a long answer now. In terms of what we will separate this is always to start by separating Dy and Tb because of the imminent need in magnetics for more Dy and Tb, but the reality is because we've been doing heavy rare separation for 30 years, we have customers around the world for all of the various different heavy rare earth elements. We have one of the largest global technical sales forces in rare earths. So we'll have opportunity to separate other materials as well, working with our customers to satisfy their demands. But we haven't made those decisions as yet. So as I said, we approach it on a step-by-step basis. Sorry for the long answer. Ian Gillies: Understood. No, thoroughness is always appreciated. Similarly, around capital projects, one of the things that came up during the Estonia tour and the investor presentation, was a potential expansion of Korat in Thailand? Is that a formal project yet? Or is it a thought on the back of a napkin, like where would you define that potential opportunity at this point in time? Because it also seems like some promising. Rahim Suleman: Yes. It's certainly not a thought on a napkin, but it's also not yet and I think it's -- times are going to be measured in weeks here, not months or quarters where it will become an official project, which is to say I extensively believe it's already official project within the Magnequench planning team, but it still has to be reviewed and go through the appropriate approval process. So I'm very confident in the growth rate of magnets in general, very confident in having more capacity. So probably what's really the focus of the review process that are coming are things around capital efficiency more than opportunity. So it's likely going to happen, but it has to go to the right proof of processes and have the right metrics attached to it before we say yes or no. Ian Gillies: Are you willing to disclose how much you think that debottlenecking could improve production by that facility? Rahim Suleman: Probably not yet. And I think what we would be doing in Thailand would be partially debottlenecking, but frankly, it would actually be adding gross capacity because there's just more business. And it would be the types of capacity and the types of programs that we would be focused on within the review process. But it would be like primarily volume and product related style capacity more than trying to solve an existing problem. Conversion costs and everything else are separate projects. There is capital that goes into conversion cost improvements, and it has its on return on capital metrics that we measure. Those things kind of continue in everyday life. Expansion capital goes through a different review process. Ian Gillies: Understood. Listening to your remarks on Phase 1b of the Estonia expansion or Phase 2, however we choose to frame that. It sounded certainly a bit more optimistic even than a few months ago. A question I get often is why isn't the decision being accelerated from early '27? Like are you putting any thought to pulling that decision forward given what you're seeing? Rahim Suleman: Yes, I think so. But I mean, like I said, I think that there's a number of different decision criteria that go into whether we would pull that forward. The decision -- the limiting factor, as I said, is not customer interest, it's not demand. That is crystal clear that, that is not the limiting factor in our decision-making process. Our decision-making process, it's so much -- frankly, it's not even about an if, it's merely about when. And the when is merely tied to capital efficiency and ensuring the greatest returns on shareholder capital. It's like it's -- we haven't committed to it, so it's odd for me to say it's not an if decision. It obviously isn't if decision. It still need to see proper economics. We still need to go to the board. We still need to do a number of things. But from a customer demand perspective and from what we know about our ability to make the magnets and ability to understand pricing and have customers like all of those things are well established for us by now. So again, the decision on -- I'll say, the decision is primarily one related to timing, and that's really just about capital efficiency and the greatest return on capital to shareholders. Ian Gillies: Last one I'll ask. At this juncture, given your conversations with whether it be the EU or specific European governments, like do you get any sense yet as to whether any sort of similar pricing arrangements could happen in Europe similar to what's happened with the DoD in the United States? Rahim Suleman: So I'll break the question into 2, which is to say, unfortunately, we're not going to comment on specific conversations that we're having with various governments around the world. So we won't provide any specifics on those dialogues. But in terms of the general concept around price floors or price supports or this, that or everything else, let's bear in mind that for Magnequench, which is the magnet-making portion of this kind of supply chain and probably the most important element of the dialogue for us, the raw material is on pass-through. So it's less of an economic consideration for Neo in terms of Magnequench. It just affects the viability to the customers' side of things and provide certainty to a customer in terms of pricing, and I think those things are valid and -- but there's pros and cons to both. In terms of the separation side of the business, I think it does have a bigger impact to the separation side of the business, but we're not a mining company, so it doesn't have that level of impact. So a couple of different dynamics to put into the mix. But as I said, we won't comment specifically on government conversations. Ian Gillies: Fair enough. I had to try. Rahim Suleman: Absolutely. But we are everybody's favorite phone call these days. Operator: Thank you. And I'm showing no further questions at this time. Ladies and gentlemen, thank you all for joining us. This now concludes today's conference call. You may now disconnect.
Operator: Good morning, and welcome to the Third Quarter 2025 Lifeward Ltd. Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star, then zero on your telephone keypad. After today's presentation, to withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Almog Adar, CFO of Lifeward Ltd. Please go ahead. Almog Adar: Thank you, Operator, and thanks to everyone who has joined us on the call today. My name is Almog Adar. I am Lifeward Ltd.'s Chief Financial Officer, and with me on today's call is our President and Chief Executive Officer, William Mark Grant. Earlier this morning, Lifeward Ltd. issued a press release detailing the financial results for the third quarter, which ended September 30, 2025. I would like to ask you to review the full text of our forward-looking statements from the press release. We anticipate making projections during this call, and actual results could differ materially due to several factors, including those outlined in our latest filing with the SEC. And with that, I will turn the call over to William Mark Grant. William Mark Grant: Thank you, Almog. Good morning, everyone, and thank you for your time today. Since joining Lifeward Ltd. in June, I have completed a sober and comprehensive assessment of the business, starting with our strategic direction down to our commercial model and operations. What I found is a company with innovative, powerful technology, deep clinical knowledge, and a mission that matters. Also, a company that needs sharper focus, stronger discipline, and a rebuilt foundation to unlock its potential. Over the past few months, we have taken meaningful steps to rebuild those fundamentals. We have simplified how we operate, strengthened the processes that matter most to patients, payers, and providers, and begun reshaping our go-to-market approach around global access, distribution scalability, and a data-driven commercial model. The progress we have demonstrated this quarter is encouraging, an early sign that this work is taking hold. We delivered another record quarter for ReWalk placements for Medicare beneficiaries. This is our second consecutive record since CMS established their fee schedule in April 2024. We implemented meaningful operational efficiencies, manifesting in a 16% reduction in quarterly cash burn and a 27% reduction in non-GAAP operating loss compared with last year. We also expanded patient access, including receiving our first Medicare Advantage commercial revenue for our ReWalk 7 personal exoskeleton. Now with our CE Mark approval, we have expanded our access to the European market, which represents roughly about 40% of our global addressable exoskeleton opportunity. These results are demonstrating that Lifeward Ltd. is becoming a more focused, more efficient, and more patient-centered company. Earlier today, alongside our earnings release, we also announced the completion of a $3 million loan with Oramed. This capital enhances our near-term liquidity and supports ongoing execution of our transformation plan. We are still early in a multi-quarter rebuild. I understand there is more work ahead, and I have confidence in the commitment and dedication of our teams across our company to complete this transformation. We are highly encouraged that soon after implementing these measures, we are already seeing real momentum and a clear direction. We are rebuilding the fundamentals and positioning Lifeward Ltd. to serve more people, scale more efficiently, and create durable long-term value. With that, I will turn the call over to our CFO, Almog Adar, to review the financial results from this quarter. Almog Adar: Thank you, Mark. As we review our results, I will discuss both GAAP and non-GAAP figures. The non-GAAP results exclude the items detailed in the reconciliation table in today's earnings release and, in our view, provide a clear picture of the company's underlying operating performance. I encourage you to refer to the GAAP results in the reconciliation table as we go through the third quarter 2025 financials. And now, let's discuss revenue. Lifeward Ltd. reported revenue of $6.2 million in 2025 compared to $6.1 million in 2024, an increase of $100,000 or approximately 1.1%. On a quarter-over-quarter basis, Q3 revenue increased approximately 8% from $5.7 million in Q2 2025, driven primarily by higher Medicare unit sales in the U.S. Now let's break it down by product line on a year-over-year basis. Revenue from our traditional product and services, which include the ReWalk personal exoskeleton, the MyoCycle FES bike, and the ReStore exosuit, totaled $3.1 million in Q3 2025 compared to $2.5 million in Q3 2024, an increase of about $600,000 or 24%. This increase is driven by a year-over-year increase in Medicare-related sales. During 2025, we delivered 15 ReWalk units compared to four ReWalk units delivered in Q3 2024. Revenue from the ATLAS G product and services was $3.1 million in Q3 2025, down from $3.6 million in Q3 2024, primarily driven by timing factors and quarterly revenue mix. Across both product lines, our commercial pipeline remains healthy. For the ReWalk product line, we closed the quarter with a pipeline of more than 117 qualified leads in process in the United States. In Germany, with 49 leads in process at quarter-end, 33 active rentals, which historically convert to sales within three to six months. So, altogether, we closed the quarter with 2023 systems in backlog. Moving to gross profit, in 2025, our GAAP gross profit was $2.7 million or 43.7% of revenue, compared to $2.2 million or 36.2% of revenue in 2024. On a non-GAAP basis, the 2025 gross profit was $2.7 million or 43.7% of revenue compared to $2.6 million or 42.5% of revenue in 2024. The year-over-year increase was primarily driven by lower production costs following the December 2024 closure of our Fremont, California manufacturing facility. Now pivoting to operating expenses, GAAP operating expenses were $5.9 million in 2025 compared to $5.4 million in 2024. The increase was largely driven by a $2 million earn-out write-down that we recognized in the prior year quarter. On a non-GAAP basis, adjusted operating expenses were $5.7 million in 2025 compared to $6.7 million in 2024. The decrease primarily reflects greater efficiency in reimbursement activities, improved efficiencies in marketing and sales operations, and lower R&D spending after the completion of major development programs. We expect this positive trend to continue into 2025, supported by the ongoing impact of our efficiency measures. Our GAAP operating loss for 2025 was $3.1 million compared to $3.2 million in 2024. On a non-GAAP basis, operating loss was $3 million compared to $4.1 million in the same period last year. We expect our quarterly operating loss to further reduce in 2025 as sales volumes continue to grow and efficiency measures continue to take hold. Net of balance sheet and cash flow, we ended 2025 with $2 million in cash and cash equivalents and no debt. This amount includes the full gross proceeds raised through our ATM facility, which totaled approximately $1.2 million. Our operating cash usage in 2025 was $3.8 million, compared to $4.5 million in 2024. The improvement reflects the benefits of operational efficiencies and the consolidation of our manufacturing facilities. Following the end of the quarter, we entered into a $3 million loan agreement with Oramed, providing additional capital support to further strengthen our liquidity position. Based on our current plan, we remain a growing concern with sufficient cash to fund operations into 2026. We continue to evaluate all opportunities to support our operations and growth plan while continuing to implement cost management initiatives to preserve resources and maintain focus on our core businesses. Lastly, financial guidance. Lifeward Ltd. is reaffirming full-year 2025 guidance, including expected revenue in the range of $24 million to $26 million and a projected non-GAAP net loss in the range of $12 million to $14 million. With that, I will turn the call back to Mark. William Mark Grant: Thank you, Almog. Since June, we have been focused on rebuilding the fundamentals of Lifeward Ltd., defining our strategic direction, sharpening our commercial model, improving operational discipline, and aligning the organization around a more scalable and data-driven approach. The progress we delivered this quarter shows that the foundation we are putting in place is working. We are executing with more consistency, more focus, and greater alignment across the company. As you heard from Almog, part of this transformation is that we are consistently assessing opportunities to enhance our financial position. We have had a number of productive conversations across the landscape, and we will continue evaluating all options that could support our long-term strategy. We are also not dependent on any single path. Our focus remains on making decisions that position Lifeward Ltd. for durable value creation. We have meaningful opportunities in front of us across our existing markets, in global expansion, and through the strategic avenues we are exploring. We are committed to building a stronger, more efficient, and more impactful Lifeward Ltd. for the future. Thank you for joining us for the call today and your continued support. Operator, let's open it up for questions. Operator: We will now begin the question and answer session. On your telephone keypad, if you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. Again, it is star then 1 to ask a question. At this time, we will pause momentarily to assemble our roster. The first question comes from Yale Jen with Laidlaw and Company. Please go ahead. Yale Jen: Good morning, and thanks for taking the questions. And I just have a little bit of detailed things here. First of all, I just want to confirm that you mentioned that the 33 systems in rental. Is that correct? If so, what's the breakdown between the United States and Germany? William Mark Grant: Can you repeat the question, Yale? Breakdown for the rental. How many rental systems are for the ReWalk of the quarter, and what's the breakdown between the United States and Germany? Yale Jen: So we may, as I mentioned in the call, we have 33 active rentals, all of them in Germany. Yale Jen: All in Germany. Okay. Great. That'd be great. Okay. And my second question is that in the previous quarter, you have a collaboration with CoreLife. Just curious what kind of impact you may have felt in the third quarter or even going forward? William Mark Grant: Yale, thank you for the question, and good to hear your voice today. So the partnership with CoreLife has been going well, and so we have both been diligently working into this partnership and building the pipeline over time. It has grown each quarter, and we are learning the training processes and what it takes to reach those patients for marketing efforts. So we are excited about that partnership and looking for it to expand in the future. Yale Jen: Okay. Maybe the last question here is that you mentioned that you have the highest percentage of ReWalk from Medicare, which is a great development. Just curious, do you have any colors in terms of what percentage of, I guess, from the dollar sense, that were from Medicare versus others? And thank you. William Mark Grant: So it is reflecting that this page is approximately 50% of our total revenue for ReWalk products only, not taking into account the other G product. Yale Jen: Understood. Understood. And maybe just to tag one more. What's the actual rough revenue in the two of ReWalk within the $3.1 million of the traditional product sales? William Mark Grant: $2.9 million is related to the ReWalk product, and the other is mainly the MyoCycle. Yale Jen: Okay. Great. Thanks, and I really appreciate it, and the best of luck for you guys. William Mark Grant: Yeah. Thanks for the questions. Operator: The next question comes from Swayampakula Ramakanth with H.C. Wainwright. Please go ahead. Swayampakula Ramakanth: Thank you. And this is RK from H.C. Wainwright. Good morning, Mark. And Almog. Morning, RK. A few questions from me. So starting off from the top, Mark, as you said, you looked down through the different aspects of the company and did a review. What have you learned in that compared to when you did the due diligence coming into the company? And what sort of what aspects of the operations do you think require changes so that we get to not only the inflection point but also the growth stage of the company? William Mark Grant: Okay. Thank you for the question. So quickly, I think first and foremost, the fundamentals of the business really have to be established from the ground up. You know, good visibility into KPIs, understanding data, and deploying resources where data supports it. And that's number one, kind of the first thing. I saw a little bit of that coming into the role, but not as much as I got into it a little deeper. Secondarily, we have the opportunity to form some great strategic partnerships and channel management, and that comes in two flavors. One is it allows us to gain broader access to patients through all the payers across the U.S., and secondarily, it's a population of patients that are really targeted in our environment. So I'm excited because I've got roughly twenty years or twenty-five years of experience in that channel management and also across payer access. And so the channel partnerships coupled with payer access and payer policy development are key for our success going forward. And then the last piece around operations is frankly just scale. We've got a good growth plan in front of us, so we have to make sure we can keep up with it and be reproducible with high quality. So I think if I boiled it down to four different pieces, one of which is establishing true and solid fundamentals. The second is making sure we are leveraging channel partners as strongly as we can and ensuring access for everybody. The third is access across all payers across the globe, so no patient is left behind. And the fourth is ensuring we scale for the future with good COGS. Swayampakula Ramakanth: Thank you for that, Mark. And then, when you talk about channel management, what triggered the increased sales into Medicare this quarter, the third quarter, and how much of that could be sustained into future quarters? William Mark Grant: The good news is the channel management is starting. So as we go into Q1 of next year, you will see the reflection of that. So right now, we are just cleaning up the fundamentals. The channel partnerships take a bit to develop, and so you are not seeing a reflection of it at all. What you are seeing right now is a focused Salesforce where we divide the Salesforce into two pieces. We have one that's focused on capital sales and one that's focused on the patient, payer, and access. Okay. But more to come on that one. That's the good news. Right? That is true. Swayampakula Ramakanth: So Almog, you reaffirmed the guidance to $24 to $26 million for 2025, which means you are asking for a 21% growth from the Q3 number, I think, if my calculations are correct. And you grew based on your own press release, you grew 8% between Q2 and Q3. So what gives you the confidence that you can get that 21% growth? Almog Adar: First, hi, RK, and thanks for the question. As you know, Q4 is usually the strongest quarter for us at ReWalk for both products, AlterG and ReWalk, and what gives me the confidence that we will achieve our guidance is the existing backlog for both products and the strong pipeline that we are managing. Swayampakula Ramakanth: Okay. Thank you for that. And then on the AlterG, what happened there? Because it looks like there was a 15% decline. What needs to be done so that we can kind of just stabilize the ship and let it sail again? William Mark Grant: Yeah. RK, this is really about the core focus of the sales teams. We have a neuro rehab team that has been selling capital and selling into the neuro rehab space. And, frankly, what that does is that loses some of the focus that you really need. So we have started a couple of beta programs, which will expand out to the broader community as we go into the next year. But where we have a dedicated capital team that will be selling AlterG, and we will have a highly focused neuro rehab team that will be selling ReWalk. And this is in particular to the U.S. Just as a comment, Germany continues to be very successful in both efforts. We are really refocusing the strategy here in the U.S. Swayampakula Ramakanth: Okay. And talking about Germany, you were commenting a little bit on ReWalk 7, and Europe could be an opportunity as much as 40% of your total sales. So to that end, how is ReWalk 7 being introduced? And is it still the workers' comp insurance that you are looking into, or is it outside of that insurance segment, you have any visibility or actually could gain some adoption in other segments of the market? William Mark Grant: Yeah. When you look at Germany, I think the one thing, the key indicator, and I'm going to reinforce where we started, is there are 33 active patients that are in their rental period now. There's a high percentage of those that actually convert, and a high percentage of those convert in three to six months. And so for me, that's really the health of their pipeline and looking at how that business is growing, so it's a solid pipeline. Secondarily, we do have good coverage. About 40%, we have coverage directly, but we have 100% access to all patients. So the good news is when you look at Germany in particular, not the total European nation, but you look at Germany, we've got exceptional access. We have opportunities to expand outside of Germany as the MDD listings and other things come together. So we still have to actually get ReWalk 7 across all the payer entities and countries, but it gives us great access because of the CE mark. So more work to do on access, but trust me, we're doing really well. Swayampakula Ramakanth: Okay. The last question from me. I have been watching Lifeward Ltd. for a long time. And you know, the company did have a few situations where the financial overhang became quite a bit to bear. But, again, we are in that position now. And from your experience and from how you see it, how comfortable are you to get over this hump? And hopefully, is this the last time we do that? William Mark Grant: Yeah. RK, look. I'm not naive. Right? So, you know, this is a tough place for any company to be, but as you can tell from my voice and the plan that we put together and also my experience, I'm actually excited to be standing where I'm standing. And so it may feel and look like the bottom, but the reality of it is, you know, those in business actually feel like this is a great place. What I'm excited about is we have a good turnaround story. The fundamentals of the business are repairable in short order. There wasn't really anything broken. And so I'm excited about that. Secondarily, the innovation is exceptional. And so if you look at the products in the portfolio with the ReWalk 7, how strong the hardware is, how easy it is to iterate against for the software, same thing with AlterG, first in class name, first in class brand. Something you can also get after on innovation. And there are other products in this space that are available for aggregation at good value discounts. I'm excited about where we are. But, again, I want to start off. I'm not naive. This is not going to be an easy path. Hence, why we've been having so many conversations across the landscape. To make sure we can find the best partner to suit with. You know? And I'm optimistic that we're going to find the right one. Swayampakula Ramakanth: I am very optimistic too because I have seen this company go through a lot of things and they've always come out, you know, better than the previous, you know, better than the situation that they were at. So good luck, and thank you for taking all my questions. William Mark Grant: Yeah. Thank you. We'll talk to you soon. Operator: Once again, if you have a question, press 1. And we have a follow-up from Yale Jen with Laidlaw and Company. Please go ahead. Yale Jen: Thanks for taking my follow-up questions. And in terms of the AlterG, I remember last quarter, you guys were talking about expanding to the sports arena versus just in the medical space. Just like to get some updates on that effort, and thanks. William Mark Grant: Yale, you got a great memory, and I'm glad you brought that up. That is part of the broader strategy. So we have two beta regions right now within the U.S. where we've actually switched to having a capital sales team and to having a neuro rehab specialist. So the capital sales team focused on AlterG, rehab specialist, and the other focused on ReWalk 7. And so those efforts have just started. So I would expect that you're going to see some stronger results as we turn into the new year. But we've already made those fundamental changes. We do know from our customers and from our pipeline that we're seeing good growth. But we also haven't rolled it out across the entire U.S. So more to come on that as we actually execute against the transformation. But we were opportunistic. As we had changes in the space, we went ahead and put it into play. So we are going to have a team that's focused on high school sports, elites, and up. They're also going to be focused on rehab facilities, but they're going to get the support of the neuro rehab specialist that call on ReWalk. So you kind of get the double dip. So we're going to cover the rehab centers explicitly with two different people, and then you're going to have a dedication of a capital goods sale and then also someone who could work with patients, payer, and providers in the neuro rehab space. So bifurcating the space, we know from outside the U.S. Also, I know from my history is really important for the end user, for the customer and the buyer. So bifurcating the Salesforce will give us the focus needed to deliver against better fundamentals and also the growth you expect. Yale Jen: Maybe just to add on here is which is that in terms of the sports arena, would that be practically all self-pay instead of any other venue of reimbursement? William Mark Grant: You know, for sports, yes. But we do get a tremendous amount of the business from government and grants outside the U.S. So there is a good blend. Right? So it's all not just self-pay. So the DOD and others support us very well with all of our products. And then it's likewise outside the U.S. You know, we get tenders for these products on a daily basis. Yale Jen: Okay. Great. That's very, very helpful, and thanks a lot, and best of luck going forward. William Mark Grant: Thank you. Appreciate it, Yale. Operator: This concludes our question and answer session. I would like to turn the conference back over to William Mark Grant for any closing remarks. William Mark Grant: Hey, again, I want to thank everybody for joining the call today and just let everybody know that we're at a unique inflection point here at Lifeward Ltd., we're excited to be here and appreciate the support that we get from you. We're looking forward to meeting the expectations that you guys set in the market. With that, I'll close the call, and appreciate everybody's time. Talk to you soon. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Hello, and welcome everyone to the Iterum Therapeutics Third Quarter 2025 Financial Results. My name is Becky, and I will be your operator today. All lines will be muted throughout the presentation portion of the call. I will now hand over to your host, Kevin Dalton, Senior Director of Legal Affairs. Please go ahead. Kevin Dalton: Thank you, Becky. Good morning, and welcome to Iterum Therapeutics' Third Quarter 2025 Financial Results. The press release with our third quarter results was issued earlier this morning and can be found on our website. We are joined this morning by our Chief Executive Officer, Corey N. Fishman, our Chief Financial Officer, Judith M. Matthews, and our Chief Commercial Officer, Christine Coyne. Corey and Christine will provide an update on the commercial launch of Orlynda in the U.S. Corey will also give an update on the business generally, and Judith will provide details on our financial results. We will then open the lines for Q&A. Before we begin, I would like to remind you that some of the information presented on this conference call will contain forward-looking statements concerning our plans, strategies, and prospects for our business, our ability to continue the commercialization of Orlynda in the U.S., our ability to expand into new territories and put additional resources in high-prescribing geographies, and to expand the payer coverage of Orlynda in the U.S. Our ability to raise funds either through capital raise and/or revenue generated from sales of Orlynda, the development, therapeutic, and market potential of Orlynda, and the protection provided by our patents. Actual results may differ materially from those indicated by these forward-looking statements as a result of various factors outside our control. These include our ability to build and maintain a sales force and continue the commercialization of Orlynda in the U.S., the market opportunity for our potential market acceptance of Orlynda, the actions of third-party suppliers, manufacturers, and contract sales organizations, our ability to continue as a going concern, the accuracy of our expectations regarding how far into the future our cash on hand will fund our ongoing operations, and finally, other factors discussed under the caption "Risk Factors" in our annual report on Form 10-K and 10-Q filed with the SEC this morning. In addition, any forward-looking statements represent our views only as of the date of this call and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligation to update such statements. We will also be referencing non-GAAP financial measures during the call. We have provided reconciliations of GAAP reported to non-GAAP adjusted information in the press release issued this morning. With that all said, I'll turn it over now to you, Corey, for your opening remarks. Corey N. Fishman: Thank you, Kevin. Welcome to everyone, and thank you for joining us today. We are excited to be talking with you today and especially looking forward to sharing information about the early stages of the Orlynda commercialization. Just to remind you, we launched Orlynda into the market on August 20. Now I'd like to turn the call over to our Chief Commercial Officer, Christine Coyne. Christine Coyne: Thank you, Corey, and good morning to everyone. As with nearly every new product launch, changing behaviors and old habits is paramount, particularly in a category where prescribing habits have been ingrained for decades due to lack of innovation and limited new branded options. Changing healthcare provider behavior involves frequent office visits and getting time with those prescribers and their office staff. Our field team has been calling on our providers and ensuring they remember that there is now a better way to help treat their uncomplicated urinary tract infection patients with Orlynda. As with any promotion, message retention and behavior change increases over time and with frequency. That is our current focus with our customers. Each week, this improves. Having said that, we made steady progress in educating providers about Orlynda and driving early Orlynda use among patients suffering from uncomplicated urinary tract infections, especially in the most recent weeks. Our momentum with customers has been growing consistently. Through November 12, we generated more than 280 prescriptions, which were driven by more than 100 unique prescribers. Nearly half of those prescribers have broadened their experience by prescribing Orlynda to more than one patient. This is an important signal of both physician and patient experience with Orlynda. As physician comfort with Orlynda continues to grow, we have seen a number of these physicians broadening out their use, especially in the most recent weeks. Another important indicator which we follow closely is the fill rate of Orlynda prescriptions through our specialty pharmacy partner. This step in the process has a few parts to it. With new product introductions, in many instances, payers have yet to make their decisions on formulary inclusion, which provides coverage for patients. That said, there's usually a path forward to help these insured patients get their prescriptions, and we are working our way through all of this now. As with a large proportion of launches, once payer decisions are made and coverage and access are achieved, this fill rate should improve. However, even during this period of launch, while awaiting payer coverage, we have found that approximately 40% of Orlynda prescriptions have gone through these payer approval processes and have been filled, which aligns with our expectations. As for the patient's out-of-pocket exposure, we have a co-pay support program that helps defray the cost for appropriate commercial patients. While this may be of help to some patients, it is our intention to work with insurance carriers, including Medicare plans, to gain access to and coverage of Orlynda to help optimize this adjudication process and patient out-of-pocket exposure over time. We will discuss more on our progress here in just a moment. With Orlynda promotion gaining momentum each week, we have received a number of inquiries from physicians interested in obtaining Orlynda to whom the specialty pharmacy is outside of their business practice model. Given the number and frequency of inquiries such as these, we have been working with two of the most widely used specialty distributors, McKesson and AmerisourceBergen, to tuck into these particular physicians' ways of practicing. This specialty distribution model allows these physicians to purchase Orlynda through their preferred distributor and it supports how they like to practice. At this time, we have already shipped Orlynda to McKesson, and we will be shipping Orlynda to AmerisourceBergen shortly. Customer feedback and insights continue to be received as our efforts expand weekly to a wider set of healthcare providers and as utilization deepens with those providers who have already prescribed Orlynda. Some of the important learnings include physicians welcoming Orlynda as a new alternative for physicians to help treat their uncomplicated urinary tract infection patients effectively, but especially where resistance is a challenge. Physicians can clearly see a place for Orlynda to help them break the cycle of patients being treated with multiple antibiotics which have been resistant. Orlynda provides physicians with a new option. Additionally, our customers have reported the importance of Orlynda helping them to keep their patients out of the hospital. Being able to treat with a new oral option that helps keep their patients at home has been reported of great importance by our physicians. Also, physicians' clinical experience with Orlynda and their patients has been as expected. Lastly, customer feedback coming from our recent presence at the Infectious Disease Week conference, which was held last month in Atlanta, our efforts included a poster session and a learning lab presentation, confirms very high interest from both key thought leaders and large infection disease group practices with requests for follow-up discussions. Overall, we are pleased with the steady progress we have made, particularly given the modest commercial infrastructure we currently have in place. The field team continues working with healthcare providers as trial and adoption of Orlynda continues. Now regarding our field operations, we continually monitor an array of performance metrics to help us capitalize on opportunities quickly as we discover them, as well as optimize areas where effectiveness needs to be improved. Based on these diagnostics, we reduced the in-person field team to 10 representatives from our original plan of 20 and are in the process of augmenting our efforts with both in-person and virtual sales representatives. Once fully in place, the combination of the existing resources and our new supplemental resources should provide Iterum the equivalent coverage in at least the initial 20 target geographies, if not more, and it will be done with greater efficiency. Christine Coyne: Now I'd like to spend a few moments and talk about managed care and market access. Overall, Iterum coverage discussions are advancing well, with positive feedback from both pharmacy benefit managers and health plans across both their commercial and Medicare Part D formularies. Iterum's national account managers continue to engage strategically with key stakeholders across the U.S. payer landscape. Orlynda's differentiated value proposition and ongoing formulary discussions with state, regional, and national health plans, including the three largest pharmacy benefit managers, have been met with strong interest and positive feedback. Today, we are pleased to announce that we have a signed rebate agreement with one of the top three Medicare Part D pharmacy benefit managers. This agreement enables Orlynda to be added to their Medicare Advantage prescription drug plan and Medicare prescription drug plan formularies for coverage beginning in 2026 or 2027, depending upon the individual plan structures. Also, Iterum has been invited to bid for formulary inclusion across commercial, Medicare Part D, and government segments managed by these pharmacy benefit managers. With submissions now complete, we are aiming to secure long-term formulary positioning later this year and into Q1 2026. Orlynda's access continues to grow, with or without prior authorization or medical exception pathways. Coverage now reaches 16% of insured lives with increasing adoption by employer groups and payer formularies integrating Orlynda into their standard benefit designs. We expect additional decisions in the coming quarters and continue to see an increase in patient access and early prescription growth, reinforcing our confidence in the commercial trajectory. Now I'd like to turn it back over to Corey. Corey N. Fishman: Thanks for the update on Orlynda's commercialization, Christine. I'll make a few additional remarks. With regard to our patent estate, we continue to expand our coverage. We've been granted a patent in China that covers a combination of probenecid and valproic acid for treating specified diseases. This patent is expected to expire in March 2041, absent any patent term extensions. We have also been granted a patent in Mexico that covers a bilayer tablet comprising sumopenemethodroxil and probenecid, methods of preparing the tablet, and the bilayer tablet for use in treating specified diseases. This patent is projected to expire in December 2039, absent any patent term extensions. I now would like to provide some financial guidance. As you may have seen in our financial statements, Iterum generated net product sales of $400,000 in the third quarter, which included some stocking at our specialty pharmacy. We expect modest sales in the fourth quarter of this year as well. As we look ahead to 2026, with our existing field organization continuing to call on their targets, the additional resources we plan to add that Christine mentioned earlier, as well as obtaining coverage in key pharmacy benefit manager insurance plans, we currently expect our full-year 2026 net product revenue to be in a range between $5 million and $15 million. It's important to note that if Iterum were to achieve this revenue guidance for next year, it will have done so with a modest field organization relative to other antibiotic launches in the U.S. As it relates to total operating expenses, we currently estimate these will be between $25 million and $30 million for the full year 2026. Our existing cash and cash equivalents provide an operating runway into 2026. In order to continue commercialization throughout 2026, we will need to raise more capital. We have and will continue to discuss potential financing opportunities with available sources of capital, including non-dilutive funding options, but to date have yet to secure a viable transaction. As such, we will likely look to obtain approval from our shareholders at an extraordinary general meeting over the coming months to grant our Board of Directors authority to issue additional shares. If we are successful in getting this approval and raising incremental capital, we would use those funds to continue the ongoing Orlynda commercialization as well as potentially putting additional resources against high-value territories or expand into other highly valuable territories not yet tapped by us, or both. Of course, our goal over the next couple of years is to generate revenue in excess of the amount of expenses we have and be self-funding. In summary, the feedback from physicians, payers, and patients has been very good for Orlynda, and we are encouraged by the results we've achieved to date. If we're successful in raising additional capital, we believe we can continue to drive revenue growth and position Orlynda for broader market adoption. Now I'll turn the call over to Judith Matthews for our update. Judith M. Matthews: Thanks, Corey. Net product revenues were $400,000 in 2025 with the launch of Orlynda in the United States in August 2025 and included initial stocking at our specialty pharmacy locations serving our targeted territories. Total operating expenses were $8.1 million in the third quarter of 2025 compared to $4.9 million in the third quarter of 2024. Operating expenses include cost of sales, the amortization of an intangible asset, research and development expenses, and selling, general, and administrative expenses. Cost of sales expense for the third quarter of 2025 was $20,000 and primarily consisted of royalty payments pursuant to our license agreement with Pfizer. Note that prior to approval in October 2024, costs incurred for the manufacture of Orlynda were recorded as research and development expenses. Amortization of intangible asset for the third quarter of 2025 was $300,000 and related to the finite-lived intangible assets recognized in relation to the regulatory milestone payment payable to Pfizer upon approval by the FDA. R&D costs were $1.3 million for the third quarter, compared to $3.1 million for the same period in 2024. The primary driver of the decrease in R&D expense for the third quarter was lower chemistry, manufacturing, and control or CMC-related expenses. Following approval, costs incurred for the manufacture of Orlynda have been capitalized to inventory. SG&A costs were $6.5 million for the third quarter compared to SG&A costs of $1.8 million for the same period in 2024. The primary driver of the increase in SG&A expense for the third quarter was commercialization activities associated with the August 2025 launch of Orlynda in the United States. Our net loss on a US GAAP basis was $9 million for 2025, compared to a net loss of $6.1 million for 2024. On a non-GAAP basis, which excludes certain non-cash adjustments, our net loss was $7.3 million in the third quarter of 2025 compared to our non-GAAP net loss of $4.8 million in the third quarter of 2024. The $2.5 million increase in our non-GAAP net loss for the third quarter was primarily a result of commercialization activities for Orlynda, partially offset by lower CMC-related expenses. As of September, we had cash and cash equivalents of $11 million. Based on our current operating plan, which includes our forecasted sales, we expect that our cash and cash equivalents, together with $2.6 million of net proceeds raised under our at-the-market offering program from October 1, 2025, through November 13, 2025, will be sufficient to fund our operations into 2026. As of November 13, 2025, we had 52.8 million ordinary shares outstanding. Now we will open it up for questions. Operator: Thank you. If you wish to ask a question, please press star followed by one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We will pause momentarily while we compile the Q&A roster. Our first question comes from Ed Arce from WestPark Capital. Your line is now open. Please go ahead. Ed Arce: Great. Thanks for taking my questions and congrats on the initial launch here. A few questions. First of all, I appreciate all the detail here with the launch metrics around the commercialization. I am wondering if these specific numbers around patients and prescribers and reps coverage are data points that you intend to report for the first few quarters of the launch for us to track. And related to that, I was wondering if you could discuss the number of actual physician details and also the number of sales regions that you currently plan to continue. And I have a follow-up. Thanks. Corey N. Fishman: Yep. Thanks for the questions, Ed. I'll cover this. The question around the metrics, yes, we do plan to report the, you know, the kind of the prescription, the growth, the number of physicians, the general information so people have a sense of how the launch is going. I think at some point, if all goes well and we're generating, you know, tons and tons of scripts, we'll do things like most other companies do, which is report the growth quarter over quarter, that kind of thing. So we will be more specific in the first couple of quarters till we have some data behind us. And then we'll probably branch out to providing the same information, but maybe not quite as granular. With regard to details and territories, we're not talking about specific number of details. What I will tell you is what I think is important. We started out our initial thinking was having 20 territories with high-value targets. And I think with this change in the organization as Christine mentioned, as well as the supplemental resources we will be putting on, we will be in a position to at least effectively cover 20 of those territories, maybe a little more, but ultimately, more efficiently. So I think that's probably the range that we'll be in. And again, we'll continue to report that as we do going forward with regard to how our performance is. Ed Arce: Great. Okay. And then around the guidance for net sales next year, you in your release, discussed two particular drivers: payer coverage, which I think you said, is currently at 16% of insured lives, and uptake. I'm wondering if you could give a bit more color or details around those two drivers. And in particular, with uptake, if there's any initial feedback you've gotten from physicians around, you know, the product profile of being oral and keeping the patients at home and how that's driving their interest. Thanks. Corey N. Fishman: Sure. So I will cover the second part first, which is the feedback. Feedback from physicians has been very good. I think there's a variety of reasons that physicians are using the product, as Christine mentioned. One of them is certainly to keep those patients that are most at risk out of the hospital. One of them is when you have recurrent infections, you want to make sure you're treating that infection appropriately since these folks have been on potentially multiple drugs over a short period of time that haven't worked. And also the folks who have those comorbidities and who are on that higher end of the risk spectrum, I think physicians see this as an excellent option. And we'll continue to work with physicians to get that message across. Your other question, I think, was around, you know, access and coverage. We are, I think, in a good spot as most of the folks on this call know, you really don't get coverage in the first six months from any plan post-launch. That is just something that the PBMs, the pharmacy benefit managers generally do not do. And so we're approaching that six-month time frame in kind of February time frame for us. And as mentioned, we have submitted bids to all of them. So now it's just a question of being able to get on those plans and get coverage, which will make the process even more efficient. Even though there is a process in place, of course, where you can get those prescriptions filled, we can make it a more efficient process through the addition of Orlynda to those formularies. So I think we're really looking at that as an opportunity to have additional efficiency in the system so more and more scripts can be filled while you're continuing to have strong uptake with these physicians who are prescribing. And again, we've got a lot of physicians that have written multiple scripts already. And I think that's really an important metric because oftentimes, especially in these places where you haven't had a new product for many, many years, and we know that this has been that place. Twenty-five, thirty years, docs are pretty ingrained in what they're writing. So it does take a few visits to get them to write, and the folks who have written many of them have come back and written again and again and again. So I think we're feeling like we've got a real opportunity here to continue that momentum, and that's really the drivers for us of how we're arriving at the revenue guidance. Ed Arce: Thanks so much. I'll jump back in the queue. Operator: Thank you. Our next question comes from Jason McCarthy from Maxim Group. Your line is now open. Please go ahead. Jason McCarthy: Hi, Corey. Nice job of getting things off the ground so far. So just to follow-up on the prior question, did I catch it right you expect formulary I guess you submitted this already, with PBMs in February? Of 2026 or sometime in the first quarter? Corey N. Fishman: Yes, we're hoping that's the case. Obviously, we don't have control of that, Jason. But all of our, you know, we're doing everything we can on our end to make that as feasible as possible by having our bids already submitted. So we have now submitted our bids to all the three big PBMs as well as the big Medicare Part D plans. So as we said, we've secured one contract so far on the Medicare Part D side. So these will hopefully be coming in over the end of this quarter and the first quarter. And that would give us that opportunity to really kind of give an extra boost to the efficiency of the process. Jason McCarthy: Is there any effort by Iterum or strategy rather in terms of advertising or using social media outlets to get the word out on Orlynda to try to drive uptake? Corey N. Fishman: Yeah. It's definitely something we've thought about. We are, you know, at this stage, we have put the majority of our investment into the field organization and the materials necessary to support that, but it's definitely something that we continue to look at and think about the ways to optimize that social media presence and how we can get that message across. Given that we've got that modest infrastructure. Jason McCarthy: Okay. Do you plan on, and I this might have been covered already. Do you plan on in addition to script data down the road, releasing any information on the types of patients that are being treated? I don't know if that data is being accumulated, meaning are they high risk or even further, specific types of comorbidities and high-risk aspects to these patients that you'll gain access to? Corey N. Fishman: Yeah. We're not going to have a lot of those specifics because that, you know, that gets into the doctor-patient relationship. I think what we'll end up having is more anecdotal information from those prescribing physicians. And, you know, we certainly will always be cognizant of who's writing, what information can we get from them about the patients and how it's working, we can optimize? And to your point, if we find that a certain comorbidity has been really important for a number of doctors, you know, we certainly can get that from them through the sales organization. And then figure out a plan to, you know, to optimize that. But it's a little bit trickier just because of all the confidentiality around patient information, and, you know, you can't really know any of the details on the, you know, the name and anything like that of the patient. It would really have to be more just anecdotal from the docs. Jason McCarthy: Got it. And lastly, and this is not really sure the type of answers you expect from this. This is more of a broad thinking question because I've been doing this for a long time, and I see a lot of one-product companies drug launches that they're slow to start, they're choppy. Some people question what that road is going to look like. But my pushback in this case has been, oral has been sought after for decades, and it's not just for community infections, like urinary tract infections. Have you do you think people are going to want this oral pendant for a variety of things? Have you got an inbound interest, in getting access to the drug, for any kind of infection? Corey N. Fishman: Yeah. We've gotten a lot of inbound interest from people that aren't on our call list, that people that we're not covering infectious disease physicians, etcetera. So I think there's a lot of interest in that. You know, we obviously have an indication that we will promote on, and that is, you know, that's the only thing we'll be talking about. But to the extent that there are physicians who call us up and ask for the product, we will absolutely supply it simply because we believe that it's an important piece if a physician's asking for it. And that's why we've gone to McKesson and AmerisourceBergen because going through a specialty distributor like ours is out of the kind of their business model for these types of physicians who are giving us inbound calls. So we obviously are going to be very, very mindful as an organization to stay within our approved indication. But we will certainly respond to physicians' inquiries because that may very well be for uncomplicated UTI. We just we don't know. And a physician has the flexibility to write it for whatever it is they choose to write it for. Jason McCarthy: Great. Thank you, Corey. Corey N. Fishman: Thank you. Operator: We have another question from Ed Arce from WestPark Capital. Your line is now open. Please go ahead. Ed Arce: Great. Thanks for taking the follow-up. I just wanted to ask about this effort to augment the now 10 reps with the virtual effort, especially because you've characterized this as at least replacing the other 10 from the original 20 that you had targeted, and perhaps a bit more. And so I'm wondering if you could provide some more detail in terms of the capabilities and the ability to engage with physicians through these different virtual platforms. Thanks. Corey N. Fishman: Sure. Thanks, Ed. So I want to be really clear. We will probably do a combination of both in-field and virtual, to get to that at least 20 effective territories, if not more. And so on the virtual side, I think what you have seen, and you've probably seen this in your experience as well, many companies have used virtual reps who tend to be very efficient because they are using the same target lists but they're doing this all virtually. So it's all through phone and computer as opposed to reps who are out there having to drive, having to wait, etcetera. They can schedule meetings. They can be quite a bit more efficient on the interactions with physicians simply because they are sitting at a desk not trying to drive around and find people and or get in through the office. So those people tend to be based on the experience that Eversana has had as well as a lot of other companies that we've all spoken to have had a very good reputation of being efficient in terms of producing performance. So we believe that those virtual reps can be a very important part of our organization in addition to the in-field reps. I don't want to minimize one or the other because they're both incredibly important. But we do think the combination of the two is really going to give us the opportunity to reach a lot of targets in an effective way and hopefully drive that performance to the place where we, you know, we are we're talking about. Ed Arce: Okay. At this point, are you considering other marketing channels like medical journals or engagement via social media or other channels like that? Corey N. Fishman: Yeah. I think, you know, what we've talked a lot about with our partners at Eversana is, you know, things like social media tend to be more effective nowadays than the traditional kind of journal ads and things like that. But we will continue to look at them. We'll continue to look at historical return on investment for those types of investments over various companies like ours that have used them. And we'll try to optimize those as best we can. Again, we're trying to be as mindful as we can about the capital we have. And putting it where we believe we're going to get the biggest bang for the buck. And right now, that tends to be the field organization. Hopefully, we'll have a little more flexibility if we're successful in raising more capital to put some of those other things into play. And, you know, altogether then, it makes everything more efficient. It's just a question of having that flexibility. Ed Arce: Sounds good. Thanks again, and congrats and best of luck as you continue this launch. Corey N. Fishman: Thanks for the questions. Operator: This concludes our Q&A session. So I'll hand back over to Corey N. Fishman for closing remarks. Corey N. Fishman: Thank you, Becky. In closing, we believe we've made some very solid progress in the first ten weeks of Orlynda commercialization. Physicians see a place in the market for Orlynda, and many physicians have begun prescribing for multiple patients. We will continue to work tirelessly toward growing the Orlynda patient base and driving incremental revenues. We really appreciate your support as we continue the Orlynda commercialization and are looking forward to keeping you updated as our key milestones are met. Thanks again for joining us today and have a good day. Operator: This concludes today's call. Thank you for joining us. You may now disconnect your lines.
Operator: Good morning, and welcome to MiNK Therapeutics, Inc. Third Quarter 2025 Conference Call and Webcast. Please note this event is being recorded. If anyone has any objections, you may disconnect at this time. I would now like to turn the conference over to Stephanie Perna Nacar, Chief Communication Officer. Stephanie? Please go ahead. Stephanie Perna Nacar: Thank you, operator, and thank you all for joining us today. Today's call is being webcast and will be available on our website for replay. I'd like to remind you that this call will include forward-looking statements including those related to our clinical development, regulatory and commercial plans, timelines for data releases, and partnership opportunities. These statements are subject to risks and uncertainties. Please refer to our SEC filings available on our website for a detailed description of these risks. Joining me today are Dr. Jennifer Buell, President and Chief Executive Officer, Dr. Terese Hammond, Head of Development, and Christine Klaskin, Principal Financial and Accounting Officer. I'd like to turn the call over to Dr. Buell, to highlight our progress from this quarter. Dr. Jennifer Buell: Thank you, Stephanie. Good morning, everyone. This quarter marks a defining period for MiNK Therapeutics, Inc. We are now a fully independent operated company focused, agile, and singularly dedicated to the advancement of our INKT cell therapy platform. Over the course of this year, we have not only strengthened our science but also elevated our global visibility, presenting major new findings at ASCO GI, AACR IO, the inaugural meeting, and most recently last week at the Society for Immune Therapy of Cancer, the SITC Annual Meeting. MiNK was founded on a bold idea: that a single naturally derived immune cell type, one of the most highly conserved cells in immunology, the invariant natural killer T cell, a very potent subset of T cells, could be harnessed to both ignite and regulate immunity. In this quarter, that idea became a reality. We are going to go through this in some detail. At SITC this year in Washington, D.C., we presented updated clinical data from our ongoing trial of AGENT-797, our allo, off-the-shelf iNKP cell therapy. This product was administered alone or in combination with approved anti-PD-1 in patients with relapsed or refractory solid tumors. These were patients with heavily pretreated immune therapy-resistant and in most cases without remaining clinical options. What we observed was really nothing short of remarkable. Patients who received 797 in combination with PD-1 achieved a median overall survival of approximately 23 months. This is really unexpected given this Phase I clinical trial in a refractory setting, we would expect survival to really be under six months. We observed a complete remission in a patient with metastatic testicular cancer who had failed prior chemotherapy, stem cell rescue, and checkpoint inhibition. We also observed a durable partial response in the second-line gastric cancer patient who has failed prior therapies. We also saw disease stabilization with prolonged survival across multiple other difficult-to-treat cancers. These cancers include thymoma, cholangiocarcinoma, renal cell carcinoma, and adenoid cystic carcinoma, with survival extending beyond two, even three years in some cases. These observations demonstrate not only the durable activity of 797 but also its potential to restore immune function in patients who had exhausted all available therapies. And crucially, this was achieved without the hallmark toxicities that have limited other cell therapies. We observed no cytokine release syndrome, no neurotoxicity, no graft-versus-host disease. The most common treatment-related event was mild fatigue. In just a few moments, you are going to hear from Dr. Terese Hammond. She will delve deeper into our findings, the immune mechanisms underlying the results, the translational data that explains Agent-797's unique biology, and how these insights are shaping our next generation of trials. What we are seeing in our data is beyond a response. It's really a substantial improvement in immunity, immune restoration. These NKT cells are doing what the immune system was really designed to do: detect danger, coordinate a response, and resolve inflammation with precision. In the case of cancer, what we observed is a controlled inflammatory response that was correlated with prolonged survival and in some cases with deep, durable, and complete remissions in some cancer types. Mechanistically, 797 operates through dual pathways, both a T cell receptor-dependent and a T cell receptor-independent pathway. These cells recognize glycolipid antigens through CD1D. They are naturally engineered in that way, enabling them to target both malignant and cells in ways conventional T and NK cells cannot. At the same time, these cells can reprogram the immune microenvironment. We have published these data and presented them publicly from our clinical trials. What we have observed is that INKT cells can activate dendritic cells, repolarize macrophages towards an M1 pro-inflammatory phenotype in cancer, and reinvigorate exhausted T cells. The result is a potent but controlled immune reaction, a rise in interferon gamma, IL-2, TNF alpha within 48 hours of infusion that turns these cold, otherwise cold tumors hot without systemic toxicity. Our data over the course of this year really reinforced 797's position as a platform therapy, and that's how we intend to advance it. It also underscores how MiNK Therapeutics, Inc. has become the most clinically advanced company in the world developing allogeneic iNKT cells. Our science alone isn't the only component that makes MiNK unique. It's really how we are building with public-private partnerships and with very disciplined capital use and a clear sustainable strategy. I'll go into that in a little bit more detail. This quarter, we were honored to witness our leadership and Board of Director member Dr. Robert Kadlec participate in his confirmation hearing by the U.S. Senate. Dr. Kadlec is a national leader in biodefense and preparedness whose partnership has helped us forge deep collaborations with federal and academic institutions that have really propelled MiNK forward. As Dr. Kadlec continues his honorable life of service, and upon his recommendation, and to our tremendous enthusiasm, we also just recently welcomed Dr. John Holcomb to our Board of Directors. Dr. Holcomb is a U.S. Army colonel, trauma pioneer, and author of over 700 scientific papers whose work has saved countless lives. These two leaders embody what MiNK stands for: science with purpose, innovation, and service of human survival. Building on that foundation, we have established a strategic partnership with experts from the University of Wisconsin Carbone Cancer Center to advance our INKT program in immune reconstitution following stem cell transplantation. Each year, tens of thousands of patients face the risk of graft-versus-host disease, infection, and relapse following hematopoietic stem cell transplantation. And in fact, this impacts more than half of the patients undergoing stem cell transplantation. Our invariant natural killer T cells, by enhancing immune balance and also naturally preventing graft-versus-host disease, we believe, help prevent these complications and improve recovery and outcomes for these patients. We have two major public-private grants that are now supporting our work in delivering these therapies in the prevention and treatment of graft-versus-host disease. First, the Department of Defense and NIH STTR awards enabling MiNK and the University of Wisconsin teams to develop and test 797 in preclinical transplant models. And a second, a philanthropic clinical grant to our team at the University of Wisconsin that directly funds patient enrollment, immune monitoring, and biostatistical operations for the trial. These awards allow us to execute a first-in-human Phase I study with minimal capital impact, demonstrating how MiNK's partnership model can amplify scientific impact while preserving shareholder value. As we advance these programs, we are also preparing for a global Phase two, possibly Phase two/three clinical trial in acute pulmonary dysfunction with multidrug-resistant infections. This is a setting where immune failure drives mortality. The study will launch within weeks in collaboration with a network of critical care centers that mirror U.S. patient demographics. Our objective is to confirm that INKT can restore immune homeostasis, reduce ventilator days, and improve survival in critically ill patients. These studies are building on the phase one findings that Dr. Terese Hammond published in Nature Communications a short time ago. We believe that these cells and in this critically ill population can potentially transform how we treat immune collapse in both civilian and military populations. As we prepare for a more formal and comprehensive public announcement of the imminent launch of our grant-funded clinical trial in graft-versus-host diseases and the advancement of our late-stage program in severe pulmonary inflammatory disease, I want to underscore the clinical leadership now guiding these efforts. Today marks the first participation of Dr. Terese Hammond as a member of MiNK Therapeutics, Inc. Therese is a nationally recognized leader in pulmonary and critical care medicine with extensive experience advancing registration stage programs in severe pulmonary and inflammatory diseases. She has served as principal investigator on pivotal trials and including those at MiNK is the lead author of our landmark Nature Communications publication demonstrating the clinical impact of AGENT-797 in patients with acute respiratory distress syndrome. Importantly, Therese will be leading the charge as we advance our INKP platform into a broader range of inflammatory diseases, areas where patients face a profound lack of effective therapeutic tools. This includes interstitial lung disease, idiopathic pulmonary fibrosis, and other immune-driven conditions where our translational data and clinical observations point to compelling opportunities for impact. Her leadership, grounded in real-world ICU and pulmonary critical care medicine, will ensure that these programs are shaped by scientific insight and patient need. With that, I'm pleased to turn it over to Dr. Hammond who will take you deeper into the biology, mechanistic underpinnings, and the clinical findings that make these opportunities so meaningful for patients. Dr. Terese Hammond: Thank you so much, Jen, and good morning, everyone. At the heart of our work lies a fundamental question: What if the immune system could be retrained to heal itself? As both a physician and a scientist, I've spent decades caring for patients with cancer, respiratory failure, and severe infection. Watching them decline not because we lacked medicines, but because we lacked a way to reconstitute the requisite immune function. Our INKT cell data now show for the first time that such restoration may finally be possible. In much the same way that AGENT-797 has been able to rescue patients with heavily pretreated solid tumors, we've observed that these cells can also rescue critically ill patients in respiratory failure who have failed all available standard of care treatments. Building on Jen's summary of the Phase one solid tumor study, I want to emphasize the depth and breadth of what we've observed. We treated patients with relapsed or refractory cancers, 82% receiving AGENT-797 alone, and 18% receiving combination therapy with PD-1 blockade. These patients had a median of four prior lines of therapy, so heavily pretreated. Nearly half had already failed PD-1 ligand inhibitors, and most had exhausted every standard option. Yet AGENT-797 drove meaningful and durable activity across a diverse range of tumor types. The complete remission observed in metastatic germ cell testicular cancer, now ongoing for more than two years following a single infusion of AGENT-797 in combination with PD-1 blockade, is, to our knowledge, unprecedented in this population. The durable partial response in second-line gastric cancer is equally impactful in a disease where expected survival is typically measured in single digits. Beyond these published cases, we also saw exceptional survivors across both monotherapy and combination arms. A patient with myeloma treated with AGENT-797 monotherapy remains progression-free more than three years after a single infusion. This finding is scientifically intriguing given the immune dysregulation inherent to thymic malignancies and the association with autoimmune conditions such as myasthenia gravis. In the combination cohort, a patient with metastatic renal cell cancer and another with adenoid cystic carcinoma each demonstrated prolonged survival far exceeding historical expectations, remaining progression-free beyond two years. These cases underscore the potential breadth of the platform and reveal a consistent pattern: when you restore immune coordination rather than simply intensifying cytotoxic pressure, you get long-term survivors. What made these outcomes even more compelling was what we observed when we analyzed the patient's tumor biopsies and peripheral immune signatures. In responders, we saw dramatic infiltration of CD8 positive T cells, NK cells, and antigen-presenting dendritic cells into the tumor microenvironment. We also detected transient, well-regulated increases in interferon gamma, granzyme B, TNF alpha, and VEGF D, reflecting a localized and productive pro-inflammatory burst rather than systemic immune toxicity. RNA sequencing confirmed broad activation of cytotoxic pathways with gene set enrichment demonstrating strong cytolytic and innate immune signatures emerging after treatment. These findings collectively revealed that AGENT-797 does not merely lyse tumor cells; it reprograms the tumor microenvironment, shifting it from exhaustion to activation. Tumors that have been immunologically cold became immunologically hot, and previously exhausted T cells regained killing potential. Mechanistically, this makes sense. Our translational research work shows that AGENT-797 acts through dual TCR-dependent and TCR-independent pathways, recognizing glycolipid antigens presented by CD1D and stress ligands, such as MICA through NKG2D. This dual targeting enables direct cytolysis of malignant cells while simultaneously triggering a cascade of immune-modulating events. We saw dendritic cell activation and maturation, reversal of an immunosuppressive M2 macrophage phenotype back to the inflammatory M1 phenotype, and rescue of particularly exhausted tumor-specific T cells. In co-culture experiments, exhausted T cells that had lost killing function regained it in the presence of INKTs or even the soluble factors they secrete, the so-called secretome. Demonstrating that AGENT-797 acts both as a killer and as an immune orchestrator, which I think is the most profound statement here. This mechanistic foundation helps explain why long-term survivors emerge even from monotherapy and why the combination cohorts show such disproportionate benefit despite small numbers. This immune reprogramming capacity extends far beyond oncology. In preclinical ARDS and respiratory injury models, INKTs protected the alveolar barrier, prevented the runaway inflammation of cytokine storm we often see in the ICU, and reduced bacterial and fungal outgrowth in the lungs. They restore coordination between innate and adaptive immune systems in settings where this coordination usually collapses. These findings form the rationale for the upcoming global Phase two trial with potential expansion to Phase three in acute pulmonary dysfunction. Importantly, this trial uses endpoints already accepted by the FDA: ventilator-free days and 28-day mortality. Finally, our work in transplantation advances its immune restoration theme even further. Our University of Wisconsin graft study, supported by the Department of Defense STTR grant and a federal clinical grant awarded to UW, will evaluate AGENT-797 as a means to accelerate engraftment, reduce relapse, and prevent graft-versus-host disease, all without lymphodepletion. The concept is simple yet profound. Rather than suppressing immunity to control inflammation, we aim to reeducate the impaired immune system so it can function correctly from the outset. This is what sets MiNK apart. We are not layering another drug onto existing regimens. We are not iterating on old ideas. We are redefining the architecture of immune recovery in cancer, infection, critical illness, and transplantation. And the opportunities ahead are vast. I look forward to sharing more of our aggressive clinical and translational plans for 2026 during our next call. And with that, I'd like to turn the call over to Christine Klaskin to review the financials. Christine? Christine Klaskin: Thank you, Therese. During 2025, we executed and implemented an at-the-market sales agreement and ended the quarter with a cash balance of $14.3 million. Since quarter end, we have raised an additional $1.2 million through this program, providing a runway through 2026. Our net loss for the quarter ended September 30, 2025, was $2.9 million or $0.65 per share, compared to $1.8 million or $0.46 per share for 2024. For the nine months ended September 30, 2025, our net loss was $9.9 million or $2.39 per share, compared to $8.3 million or $2.24 per share for the same period in 2024. These results reflect ongoing support of our operations and the activities supporting our AGENT-797 programs discussed by Jen and Therese. I will now turn the call over to Jen for closing remarks. Dr. Jennifer Buell: Thank you, Therese and Christine. As you've heard, we've strengthened our leadership team with the onboarding of Dr. John Holcomb and Dr. Terese Hammond. We've also fortified our balance sheet and expect to continue to do so through strategic and collaborative partnerships. With this foundation in place, we're entering a period of meaningful execution. As Christine highlighted, there are select areas where our spend has expanded beyond the same time period of last year. And I want to reiterate some of these activities are reimbursed through our STTR grant and that the upfront spend associated with our pulmonary and GVHD programs is reimbursable under the innovative awards from our government and collaborators. In addition, we have prospectively acquired critical reagents to ensure a seamless and uninterrupted U.S.-based manufacturing supply of our allogeneic iNKT cells as our programs advance. These proactive steps reflect intentional and disciplined investment aligned with our development priorities. During 2025, we also executed and implemented an at-the-market sales agreement to leverage a substantial more than 700% increase in our equity price. This enabled us to access cash that limited dilution to shareholders and extend our cash runway through 2026, covering critical deliverables and meaningful inflections. In the coming quarters, we will advance our grant-funded GVHD study, progress our late-stage program in severe pulmonary disease, and broaden our INKT platform to inflammatory conditions where patients have few or no effective therapies. And by this time next year, we expect to have multiple clinical programs actively enrolling patients, early readouts emerging from our GVHD and pulmonary cohorts, and a clear line of sight towards pivotal enabling pathways across our inflammatory and critical illness portfolio. Each of these represents potential value-creating inflection points supported by strong biology, peer-reviewed activity, and data, and a defined regulatory framework. We look so forward to updating you as we continue disciplined, patient-focused execution. With that, I'll turn the call back over to the operator to open the line for questions. Operator: Thank you. To ask a question, press star then 1. To withdraw, press star then 1 again. And our first question comes from the line of Emily Bodnar with H.C. Wainwright. Your line is open. Emily Bodnar: Hi. Good morning. Thanks for taking the questions. I guess, first one, obviously, very nice to see long-term survival in some of the combination monotherapy patients that you presented at SITC. I was curious, given the combo portion was pretty small with six patients, have you thought about maybe expanding this cohort to include more patients or potentially initiate a dose expansion based on some of the tumor types that you've seen the most benefit in? And then separately, if you could provide a bit more details surrounding timing for the launch of the severe pulmonary disease trial and any kind of funding updates for that trial. Dr. Jennifer Buell: Thanks. Hi, Emily. Thank you so much for your call and your questions as always and your continued support. With respect to the combination with PD-1, as we are seeing an enormously growing population of patients who are previously treated with anti-PD-1 therapies, and what we've now published on a few occasions is that we could salvage patients who have failed PD-1 therapy, and we've seen this now in areas where PD-1 is standard of care as well as where it's being experimentally used. So the opportunity to add the cells on and see this salvage opportunity I think is really quite enormous. The patients that we have seen the most dramatic responses with are patients who have otherwise failed PD-1 but have continued it on. And indeed, the data that we've observed does set us up to expand this cohort. We're actually doing so very creatively right now, and we'll be announcing relatively soon an expanded cohort that will be moving into a phase two that we anticipate will be largely externally financed to support some of this effort in tumor types that we have previously demonstrated this combination benefit. The data that we've observed in second-line gastric cancer have set the stage for a study that is currently active at Memorial Sloan Kettering, and Yelena Janjigian's group presented data at AACR IO, and we'll continue to read out clinical findings now that we've achieved some lengthy follow-up time. That gives us an indication of the survival benefit. So we see immunologic activity, and next will be the clinically associated clinical activity in second-line gastric. Those data will help us understand where to take the program next in second-line gastric cancer or in an earlier disease setting, and that's something that we're currently discussing. Secondly, the data that we observed that was a complete clinical response in a patient with testicular cancer, seminoma, germ cell, opens up an enormous opportunity for us, we believe, in a cohort of patients that could be super selected. This is not the only case that we observed in the germ cell family where these cells have been quite active. So this is a study that's also very much under discussion. It allows us to homogenize the patient population and really interrogate dose and combination benefit in a population of patients that could enable a relatively rapid development pathway in an area of high unmet need. So the findings, I agree, have really set us now to do a deeper investigation. We have a small cohort where we saw some profound benefit and really quite remarkable long-term survival in a very refractory population. And so those data are now leading us to take these into extended cohorts, but really, I'd like to get them into a more formally designed phase two study as opposed to an expanded cohort in the phase one where we could have some stepping-off points with early signals of activity into rapid development pathways. Your second question was, I'm sorry. I forgot it. Can you remind me your second question? Emily Bodnar: Sure. Just around timing of launch for the severe pulmonary disease trial and any funding updates. Dr. Jennifer Buell: Uh-huh. Okay. So we are in the activation phase right now. And we're hosting the team is hosting a couple of activation visits really imminently as we speak, which will set us up for dosing of our first patient. We were targeting this year, but it will be no later than very early next year. So our goal is to work to get a patient on the cohort imminently this year, but we're working with the centers and the holidays, and so it's going to be at the latest very, very early Q1 of next year. So it's moving. Emily Bodnar: Great. Thank you so much. Dr. Jennifer Buell: Thank you. Operator: Our next question comes from the line of Mayank Mamtani with B. Riley. Your line is open. Mayank Mamtani: Yes. Good morning, team. Thanks for taking our questions. And appreciate the progress here on the broader allogeneic platform. So on the prior comment about the GVHD and the severe pulmonary inflammation condition, this program looks like multiple trials. Could you maybe share any details on the endpoints you're evaluating and maybe the number or kind of patients being enrolled? And, obviously, relative to where standard of care, for example, is in acute GVHD, what does clinical success look like? Would be good to hear. And then I have a follow-up. Dr. Jennifer Buell: Okay. Thanks very much, Mayank. There are a couple of clinical trials that are moving forward. There's quite a bit of interest in the products. And these are areas that we've been building on. Our preclinical models support advancing in our data now do so specifically in the pulmonary disease setting. Start with GVHD. This is a trial that's been funded preclinically and now clinically. So the preclinical activity is being conducted in advance in partnership with government collaborators at the NIH, the DoD, through an STTR grant. And those data are building off of one of our scientific advisors' really seminal findings that INKT cells have an important role. Not only do they prevent GVHD, they naturally do not induce GVHD. They prevent it and can mitigate it as well. Mechanistically, Jenny from the University of Wisconsin has elucidated that in some elegant publications. We are building on that work in both preclinical settings as well as now in the clinical setting. The clinical study will be funded and has been announced through the University of Wisconsin by an award that will enable us to interrogate number one dose, number two engraftment success. So dosing the cells after engraftment to increase the probability of success for engraftment. And currently, as you know, these cells do not require cytotoxic lymphodepletion and can be administered without the lengthy hospitalization that's required and sometimes intolerable to many patients that are undergoing these procedures. Therefore, there's an opportunity and an unmet need for patients who either cannot tolerate the toxic lymphodepletion or who are at high risk for engraftment failure or GVHD. The standard endpoints here from a regulatory perspective would be the GVHD presence or absence, essentially continuously, but finally, at day 100. So a relatively rapid readout in this setting. Based on the tolerability profile of these cells, the lack of a need for cytotoxic lymphodepletion, there is an opportunity that's really quite differentiated here. And we believe with the cell's durability of response, expect that this could be quite a differentiated therapy for patients beyond what is currently available. Success here currently still about half of the patients undergoing hematopoietic stem cell transplantation do succumb to GVHD. And so bringing that down by a fifty percent improvement or more would be substantially beneficial. And in fact, in interactions with experts in this field, even a twenty percent reduction could be really quite meaningful. But we're looking for not an incremental change, but a substantial benefit to patients. So that is moving along, and we're looking forward to continuing to announce some upcoming milestones associated with the program. And we'll also expect to have some clinical data early next year. We've already been meeting with teams on building on the findings based on some of the success observations we anticipate. And what would registration interactions with the agency look like. So we're in the process of those FDA interactions as well to ensure that this program is set up to move quickly. Pulmonary diseases. Well, I have no one better than Dr. Therese Hammond to speak to you about the selection of patients in this population. Now we will soon be posting the detailed eligibility of these of the patient population to clinicaltrials.gov the moment that formally activate the program for enrollment. So this will become publicly available relatively soon. In collaboration with Dr. Hammond, her experience with the cells in critical care and with patients who have really had a substantial benefit both on trial and through emergency use, we've designed a population of patients in which we're going to be able to interrogate a few very important endpoints. And I'll have Therese come on and speak a bit about the eligibility of those patients. We're being somewhat broad, effectively looking at patients with hypoxemic pneumonia. That's a substantial number of patients. We have some technical definitions that we've designed, and they're consistent with interactions with the regulators to interrogate survival, ventilator-free days, and other regulatory endpoints. What's different about our program is we also believe that we may, based on our observations from the phase one, we may also be able to prevent secondary infections as we had seen in a very strong signal of that in our earlier trials. And we may be able to combat some substantial challenges that we anticipate could be an important advancement, and those are atypical bacterial issues or fungal complications that could result in premature death in this population. So I'll turn it to Therese to build on that. Dr. Terese Hammond: Thank you, Jen, and thank you so much for your question and interest. I think all told, the idea behind this is to try to use endpoints that have been well established in acute respiratory distress syndrome and hypoxemic respiratory failure. So as Jen said, our primary endpoint will be 28-day mortality. But as we release more public information as we post this on clinicaltrials.gov, I think you'll find that there are some really intriguing secondary and also exploratory endpoints here. The concept of using these cells in respiratory disease and critical illness, I think, is really timely. I always say that I've learned so much of what I know now in medicine from listening to oncologists. And I think as a pulmonary critical care doctor, we are now the time is nigh for us to start incorporating cell therapies into the treatment of these really ill patients, patients that oftentimes have higher mortalities than most solid tumors or hematologic cancers these days. So the concept will be to look at a broad population of patients with severe pneumonia, who also have moderate to severe hypoxemic respiratory failure, and get a better sense both clinically and immunologically of what these cells are doing in this setting. So we're excited. I think we're excited on multiple fronts to use these cells and to see the results more as, almost as an agnostic treatment for a variety of organ failures. And I'll just sort of end this by saying that I think the integration between our knowledge in solid tumors, especially tumors that are very immunologically active like thymoma, and our increased interest in illness and pulmonary disease will be a very exciting avenue for us to pursue as we head into 2026. Mayank Mamtani: Super helpful color and look forward to that clinicaltrials.gov posting on the protocol. And then as you think about, like, having a product here, that can be commercialized, Jen, if you can maybe help us understand the manufacture scale-up activities, and how do you think of having a scale here, knowing that you've been investing in manufacturing for a little while, and how you may be thinking of maybe even a nondilutive financing or funding in case there are some stocking requirements for some of the use cases you are discussing? Thanks for taking my questions. Dr. Jennifer Buell: Fantastic question. And I'm remiss that I didn't bring this up sooner. The manufacturing team, as you know, has just have such an incredibly talented group of manufacturing experts and manufacturing scientists. We've been able to get ourselves, even since our last earnings call, we continue to exponentiate the number of cells that we can really pull out of some of our donors. We're working with a new team of donor groups that can bring in new donors. And what we're observing right now is that we not only can optimize our donors for enrichment, but also our manufacturing process could has continued to increase the number of cells. We're getting billions of cells per donor that give us not only substantial cost advantages but also the ability to stockpile. We currently have quite a bit of material on hand to launch our trials, and we're going to continue to build that stock. Now as I think about the future, and I particularly think about data that's coming out of this large study with potential multidrug-resistant organisms and benefits on mitigating those as well as addressing a substantial need in patients with severe pulmonary complications. We have, we expect and have launched some interactions for nondilutive financing that would allow us to expand beyond the current infrastructure that we have today. So I'll say stay tuned, but I think there's an opportunity for us. The cells are stable. We can store them for now stability beyond two and a half, almost three years. And we can demonstrate that they still function. Therefore, there's an opportunity for us to continue the production at scales that we as an organization don't necessarily need unless there is a substantial threat that would require a treatment beyond what our current commercial needs would be. And those are that's what we're getting ready for, and those are discussions that we currently have underway. And I think it's best fit for collaborators who either have substantial scale in the private sector or substantial interest which is in the public sector, and both of those discussions are actively underway. Mayank Mamtani: Thank you, Jen. Dr. Jennifer Buell: Thanks so much, Mayank. Operator: Seeing no further questions at this time, this concludes the Q&A session. I now turn the call back to Dr. Jennifer Buell for closing remarks. Dr. Jennifer Buell: Thank you all very much for your continued support. And I look forward to continuing to update you in the future. Operator: This concludes today's call. A replay will be available in the events and presentation section of our Investor website at https://investor.minktherapeutics.com/events-n-presentation. Thank you for participating. You may now disconnect.
Operator: Greetings. Welcome to the NET Power Inc. Third Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. Please note this conference is being recorded. I would now like to turn the conference over to Bryce Mendes, Director, Investor Relations. Thank you. You may begin. Thank you. Good morning, welcome to NET Power Inc.'s third quarter 2025 earnings conference call. Bryce Mendes: With me on the call today, we have our Chief Executive Officer, Danny Rice, and our Chief Operating Officer, Marc Horstman. Yesterday, we issued our earnings release for 2025 along with an updated presentation, both of which can be found on our Investor Relations website at ir.netpower.com. During this call, our remarks may include forward-looking statements. Actual results may differ materially from those stated or implied by forward-looking statements, due to risks and uncertainties associated with our business. These risks and uncertainties are discussed in our SEC filings. Please note that we assume no obligation to update any forward-looking statements. With that, I'll now pass it over to Danny Rice, NET Power Inc.'s Chief Executive Officer. Danny Rice: Thanks, Bryce. Thanks, everyone, for joining our call today. We are going to reference some slides in our latest Investor presentation. So I'd ask you to have this handy and follow along. Then after our prepared remarks, we'll open the line for questions from the analysts. Let's start on Slide three, talking about our mission. So back in 2021, the team at Rice Acquisition Corp. Two, which included myself, noted there had been a major underinvestment in baseload power generation for the better part of the prior decade. This is really driven by a confluence of three things. First, a broad social desire to decarbonize. Second, very healthy subsidies for renewables, which made these intermittent forms of power highly economic to deploy. And third, we had a very healthy grid system that didn't appear to need additional baseload power generation capacity. Load growth was flat. We could supplant existing baseload capacity with intermittent renewables and we'd be okay. However, what was really missing from this viewpoint was the reality that at some point, we'd eventually need to replace our nation's aging fleet of baseload facilities. In the U.S., the average active coal, gas, and nuclear plant is over 40 years old. And we ascertained that if we experience a load growth scenario, one that suddenly forces an industry that's been dormant for the last decade to have to begin building again and doing so in a regulatory environment that is increasingly making it harder, more expensive, and longer to get things built, we're going to be in a little bit of trouble. Unfortunately, that's the situation we find ourselves in here in North America. For the first time in a long time, we're seeing unprecedented demand growth for power primarily driven by artificial intelligence and data centers, also from reonshoring of U.S. manufacturing and growing residential demand for power. So it really begs the question, how do we balance the desire to reduce emissions without compromising access to affordable, reliable energy? The answer to that question will come from the companies that are innovating supply-side decarbonization solutions that don't compromise energy affordability or reliability. When most people think of clean power, they think of nuclear, hydro, geothermal, wind, and solar. But the metrics that really matter are carbon intensity, land intensity, water intensity, and air quality. Those are measurable. And more importantly, they are energy agnostic. So we took a somewhat contrarian view, one grounded in science and economics, that said, the lowest cost form of clean, reliable power can and should come from natural gas. Yes, we'll need to advance technologies to make it happen, but so too does every other form of energy in order to deliver the energy trifecta: clean, affordable, reliable power. We believed that back then, and we still believe today, that the lowest cost form of clean, reliable, affordable power will come from natural gas. And NET Power Inc. has stood out in its singular mission to transform natural gas into the lowest cost form of clean firm power. And we decided it was important that we pursue this mission in the public spotlight to educate and to help inform the paradigm-shifting narrative of natural gas as the cleanest, lowest cost source of baseload power. So the industry today is at a really pivotal point as are we at NET Power Inc. We can choose to continue to allocate our scarce resources, namely our financial capital and our human capital, towards what we've all been doing for the last decade or two, or we could take a step back, reassess, and allocate those resources towards solutions for what the world really needs looking ahead. The market is saying the highest value solutions are those that are reliable, scalable power that can be deployed as quickly as possible. This isn't just the hyperscalers saying it. It's local communities, grid operators who understand if we don't build new generation fast enough, the cost of power for ordinary Americans and small businesses will go way up. It's also the federal government who sees losing the AI race as an existential threat to America. The common denominator here across these cases is our ability to build reliable, scalable power as quickly as we can. And if this power can also be clean, that's the icing on the cake. With all things power, you can't have icing without the cake. Reliable, affordable power is that proverbial cake. I believe this is becoming an arms race for AI and this really is a call to arms moment for the energy industry. If you're a company that possesses the ability to design, build, and operate power plants safely, and in a timely manner, you should do it. If you have access to the natural resource inputs and outputs for power generation, I think you should find ways to utilize them towards power. If you know where and how to do this in a way that minimizes the impact on the environment, those resources should certainly be prioritized. That is the pivotal moment we really find ourselves at NET Power Inc. We have a choice to singularly keep our heads down the path of proving our oxy-combustion technology, which I would say is a very noble path and one that we believe is the right power solution long term. Or we can take our differentiated and valuable resources and skill sets and prepare to allocate them towards more pressing and more valuable near-term opportunities, ones that have proved to be successful will help fund our long-term ambitions in a more accretive way to our shareholders. The pivot that we'll discuss with you all today is one that stays true to our mission. To transform natural gas into the lowest cost form of clean, reliable power. At a cost that people can afford with reliability that we cannot afford to lose. And as I mentioned above, speed to market is paramount. We, as an industry, cannot afford to wait five to seven to ten years for new generation. We need to get building now for the benefit of our shareholders, our prospective customers, and the communities where power demand is increasing. That's what we intend to do. Responsibly, but with conviction. So turning to slide four. As we've noted on previous calls, the power sector faces unprecedented load growth through the end of this decade to support AI and data center build-outs. The market has shifted dramatically in favor of natural gas for all the reasons I've mentioned. Conventional gas turbines, reciprocating gas engines, all of them are being deployed as quickly as they can to meet data center demand. The U.S. is in a very fortunate place where we have over fifty years of ultra-low-cost natural gas reserves. In fact, we in the States have essentially stopped exploring for new gas many years ago simply because we possess a very deep inventory of proven reserves across the major sedimentary basins from Northeast Appalachia to Texas and everywhere in between. Our energy resources are totally different than any other country on earth. Unlike places like China, India, and most of Europe, the U.S. doesn't necessarily need to pursue new forms of energy today. We have the lowest cost energy to last us for many, many decades. What we really need to ask ourselves, are we advancing these other forms of energy because we need the energy or are we doing it to reduce emissions? Nuclear is probably the greatest example. It holds great long-term promise, but it's not necessarily needed to meet our energy needs today. Nuclear is more competitive in places that are short energy today and more so ones that are short natural gas. Europe comes to mind. But not here in the U.S. If the U.S. has sufficient low-cost gas to supply the AI industry, can we advance the technologies that reduce natural gas's environmental impact? Now if you thought we weren't going to need to build new gas power generation, you probably wouldn't think about CCS. But here we are at the beginning stages of a natural gas power super cycle and I think folks are just now beginning to see the relevance in the importance of CCS. For example, Google just signed the industry's first power offtake for a gas plus CCS project in Illinois. We think with the right projects in the right areas, there should be a lot more to come. Gas plus CCS can be meaningfully lower cost than any other scalable clean, firm power solution. That's always been our thesis, and we think it's about to begin playing out as such. So the signals beginning to form that natural gas with CCS is being embraced. Simply because natural gas power generation is quickly being accepted as the only scalable power solution that can be deployed on the hyper-accelerated timeline to meet accelerated need for 24/7 power. So let's flip to slide five and talk about the steps we're taking to best position our company for success. So we can call this an expansion of our business. We can call it a pivot. But at the end of the day, it's really focusing our resources on actionable opportunities to transform natural gas into clean, affordable, reliable power. Over the past decade, we at NET Power Inc. have built an incredible team of technical leaders to develop our oxy-combustion power generation technology. Which is arguably one of the most challenging and promising technologies in the energy sector second, probably only to nuclear fusion in both complexity and potential. And while the team has been diligently working to design, develop, and improve our technology both in the lab and at our pilot plant in La Porte, Texas, we've been assembling a small portfolio of ideal locations to site these NET Power Inc. projects. And you can really see that on the bottom of this slide. We really consider this setting the table for successful future commercial deployments. So within NET Power Inc., we possess a very good understanding of where our projects, where these NET Power Inc. projects make really, really good economic sense and also where they don't. And in most cases, for them to make economic sense, you really need three things. You need access to gas, the lower the cost, the better. You need proximity to a high-quality carbon sink. The lower the cost to transport and sequester, the better it is for the power economics. And if you can find someone to purchase the CO2 for an industrial use, that's even better. That just means lower power prices at the end of the day. And then there's proximity to high-capacity transmission lines. And in North America, the optimal combination of these features that I just mentioned are predominantly within deregulated competitive power markets, where anyone with the capability to build, own, and operate a power plant can do so. So for the last couple of years, we've assembled a couple of high-quality locations that were really meant to prove and commercialize our initial NET Power Inc. deployments. Because we had always been planning to license our oxy-combustion technology, we didn't really see the rationale to continue to secure additional high-quality locations in these and other areas. But I'll come back to the bottom of this page in a second. One of the setbacks we've faced at NET Power Inc. is the rising cost for our first facility and learning it was going to be much more expensive than we previously anticipated. And we've come to that hard realization that trying to fund and then build a $1.7 billion 200 megawatt first-of-a-kind facility before completing all of our testing is a low probability event. In a best-case scenario, we'd be looking at a COD of that first plant in 2030 or 2031. But just given the persistent inflation that we're seeing in the industry sector, in the energy industry sector, those costs could be higher in a few years. So we can either keep our heads down and continue investing 100% of our capital to advance our oxy-combustion technology, which we have great confidence can be the right long-term solution, or we can slow down that spending in order to free up some of our resources for near-term accretive opportunities. We strive to allocate our capital in a responsible manner that maximizes shareholder value and is aligned with our mission. The day that we can't do that will be the day we return that capital to shareholders. But today is not that day. I'm really excited to talk about the right side of this page for a few reasons. Conventional gas power with post-combustion carbon capture technology, or PCC for short, conventional power side of the facility, gas turbines and gas engines, are proven bankable technologies. The other half of that configuration, the PCC side, has also been proven, but it hasn't been widely deployed or as quickly as it should. And it's not necessarily a technology issue, it's been an economic and timing issue. It could take a long time to permit sequestration wells. It could take a long time to permit new CO2 pipelines. And if you're in areas where it's uneconomic to transport and sequester, or the underlying power project doesn't operate at sufficient uptime to justify the capital investment in PCC, in those instances, it's just not economic to install PCC versus just doing a simple cycle or combined cycle facility. But as we all begin to see the tangible support for adding new 24/7 power and the differentiated value the market is willing to pay for clean firm power, PCC becomes very interesting in the right geographies. So for us and everyone else in the power and data center space these days, speed is everything. We believe gas turbines with PCC can and should be the fastest to market and most cost-competitive clean firm solution for our prospective customers. So we connected with the Entropy team over the summer and discussed ways we could work together to accelerate the deployment of clean gas projects together in the U.S. Entropy, which I'll cover on the next slide, is a Canadian-based company. They're a bit under the radar here in the States, but they have the only operational natural gas CCS facility in North America and it's been running for a few years now. They've fine-tuned their solvent mixture for carbon capture from natural gas. And between our two companies, we recognized an opportunity to combine NET Power Inc.'s power generation and site origination skill set with theirs on PCC, to accelerate the deployment of clean gas power projects in the U.S. Which takes me back to the bottom of the page. One of the immediate commercial synergies we can realize with Entropy is the ability to accelerate deployment of their technology at NET Power Inc. sites, specifically starting with our Project Permian site in West Texas, and our second originated site in Northern MISO region. I think each of these locations is great in their own right. Our West Texas project has real potential to be the lowest cost clean firm power project in North America. We're targeting a below $80 LCOE for the first phase of this project and below $70 per megawatt hour as we scale to 300 megawatts and beyond. In our Northern MISO project, we can add much-needed 24/7 power to a grid system that is not seeing enough new baseload power showing up in the queue, not to mention zero new clean firm baseload showing up. So by utilizing our existing sites, we have the instant ability to deploy up to 600 megawatts in these key power markets with the ability to do even more through additional interconnect upgrades or behind-the-meter colocation. And through this exclusive partnership, both us and Entropy will have the ability to co-invest in equity of the projects we develop. So the price of this partnership is building high-quality, clean firm power projects in markets that value 24/7 clean power on an accelerated timeline. And over the course of the next several months, we'll be working several work streams in parallel with the Entropy team. First, we'll be finalizing definitive documents of the LOI. Second, we'll wrap up technical diligence to fully confirm this is the right path. As well as complete design work around our first project, which Marc will talk about in some detail. It's worth flagging that if we choose to complete this transaction, we'll be making a small strategic investment into Entropy to help fund their ongoing business and technical work supporting our joint development. I have to mention there's no binding obligation on the part of either of us or Entropy to consummate the transaction. But sitting here today, assuming everything continues to track the progress we've made to date, we expect to finalize the JV in 2026, in conjunction with preparations to FID the first phase of our West Texas project. So when we take a step back and we think about what NET Power Inc. is becoming, we're still a company with a singular mission to transform gas into the lowest cost form of clean, firm power. But instead of just having one solution to do it, we now can have two. And in a market that's operating with a very near-term focus, on scalable, reliable power, but still thinking about a cleaner end state, we think us having a high-impact deployable solution today to complement our game-changing long-term patented product is the optimal setup for our business, our shareholders, and our future power customers. Turning to Slide six, we wanted to briefly summarize the landscape of our new product portfolio, which has really evolved to prioritize speed to market and technology readiness. In summary, we have a technology in the oxy-combustion, the top line, that looks a lot like new nuclear. Ready in the 2030s, an LCOE in the mid one hundreds, with a pathway to sub-one $100 LCOE. Or lower with an extremely low environmental impact. We are keeping that technology in our arsenal and will methodically advance its development on the right timeline. But then skipping down to the bottom of the slide is where we'll be with Entropy today. Conventional turbines with capture, proven technologies, ready to be deployed today, in the right areas, areas that we control with very compelling breakeven economics. We think this can be the most competitive near-term solution that the market needs. Now. So turning briefly to Slide seven, I wanted to provide a brief overview of Entropy. As I mentioned before, we've signed an LOI to partner with them. To deploy its proprietary aiming-based solvent, solution for the build-out of clean firm power in the U.S. Entropy is based in Calgary and has a world-class ownership group that includes Advantage Energy, Brookfield, and the Canada Growth Fund. They operate the world's first and I believe it's the only natural gas facility equipped with post-combustion carbon capture and sequestration at the Glacier gas plant in Alberta, which has been operating consistently since 2022. 90% of CO2 emissions associated with gas power generation, we put it at the highest level of technology readiness, a TRL nine, which enables us to develop and deliver clean power hubs before the end of this decade. We're really excited to work with the Entropy team and get these clean firm power projects off the ground quickly because that's what the market wants. The Entropy solution coupled with our power generation knowledge and product approach, allows us to deploy a clean natural gas-fired solution meeting the current market demands. I think it would be helpful if we could share some of the early work we've already been doing around this program and these projects. So with that, I'd like to turn the call over to Marc Horstman, NET Power Inc.'s Chief Operating Officer. Marc Horstman: Thanks, Danny. Slide eight details how we'll be leveraging the existing infrastructure that has been established through our project permitting efforts to develop our first clean power hub. Where we're preparing to deploy gas turbines with post-combustion capture in a modular scalable configuration. This site represents a pathway to ultimately deliver up to one gigawatt of capacity as we expand over time. We are leveraging the existing Project Permian land position near Midland Odessa. Phase one is being structured around a 60 megawatt module and a clear expansion path to one gigawatt as demand and offtake agreements mature. Our gas turbines for Phase one are being prepared by Relevant Power Solutions or RPS. Carbon capture will be delivered through Entropy's proprietary amine solvent technology, which is designed to achieve greater than 90% CO2 capture. On the commercial side, we have already begun to set this project up for a successful FID in 2026. We've reached indicative terms with Oxy to purchase 30 megawatts and 100% of the captured CO2 under a long-term agreement. And we're in advanced discussions with another major oil and gas off-taker for the remaining capacity. One of the core advantages of this project is the ability to use the existing Permian infrastructure. Land, interconnect, gas supply, and offtake. With that foundation in place, we can deliver our clean firm power by utilizing gas prepared by RPS and paired with Entropy's PCC technology. This approach enables a faster development timeline and lower cost relative to greenfield alternatives. Strengthening Project Permian's position as a repeatable, scalable build-out platform. Our current schedule targets a financial decision in 2026. Assuming that is achieved, construction will begin in 2026 with commercial operation expected in 2028 or 2029. This project is structured to demonstrate speed, repeatability, and long-term commercial durability of our clean power product. Key steps in building a gigawatt-scale footprint in the Permian. Turning to slide nine. Slide nine focuses on our development pipeline. I want to provide an update on our Northern MISO project, which represents our next major clean firm power build-out alongside our Permian project. This project continues to progress on schedule. We're targeting commercial operations between 2029 and 2030. We secured the project site and are actively working with a local carbon capture and sequestration development partner. This partnership is central to our plan as the project is expected to utilize Class six sequestration for long-term CO2 storage. Our partner currently holds two Class six well applications and both are on track for permitting in 2028. Similar to the Permian, we're designing Phase one of this project to utilize gas turbines paired with Entropy's PCC technology. FID is targeted for 2027 and we expect commercial operations to come as soon as 2029. NET Power Inc. is in active dialogue with strategic off-takers for the power at this site. Overall, MISO is moving forward as an anchor site for our next phase of growth. Complementing the Permian program and reinforcing the scalability of our Clean Power product platform. Slide 10 shows that project permitting remains on track for its first power in 2028. Phase one is designed around a 60 megawatt module with more than 90% carbon capture and target availability of 95% plus. Our current estimates point to a levelized cost of energy or LCOE under $80 per megawatt hour. With interconnect capacity secured at 300 megawatts, we see a clear path to more than 750 megawatts of future expansion at this site. Our MISO project is progressing with first power targeted for 2029. The project features similar performance expectations, 95% availability and greater than 90% carbon capture. With a projected LCOE of roughly $100 per megawatt hour. This site also holds 300 megawatts of interconnect capacity and supports more than 400 megawatts of future phases. Moving to the right-hand side of this slide, we'll continue to leverage our people and skill to build a robust project pipeline. Following the same blueprint we have thus far. Finding the bright spots, securing interconnect spots, securing the pore space to sequester CO2, negotiating long-term supply and offtake agreements, and leveraging our strategic owners to establish clean firm power hubs that can scale into large multi-gigawatt campuses in the early part of the decade. These actions set the foundations for scalable, repeatable project execution. Big picture, we're designing these clean firm power hubs to come online beginning 2028 through 2030 with the potential to expand into multi-gigawatt campuses by the early to mid-2030s. We're excited for this next stage of our story and look forward to sharing updates on our progress in future quarters. With that, I'll pass it back to the operator to open up the line for Q&A. Operator: Thank you. We will now be conducting a question and answer session. Our first questions come from the line of Nate Pendleton with Texas Capital. Please proceed with your questions. Nate Pendleton: Good morning. Thanks for taking my questions. With the pivot you announced here, can you provide your perspective on what makes NET Power Inc. uniquely positioned to take advantage of this opportunity compared to some of the others, given your prior focus on the Oxy-combustion cycle? Danny Rice: Yes. Good to hear from you, Nate. That's a great opening question. I think when you really get down to it and you look at the skill set that NET Power Inc. has, you know, it's not just about the skills, but it's about, like, the resources and assets that we possess today. I think it starts with having a fundamental understanding of both power, really the above-ground piece, along with a really, really solid understanding on the subsurface. I think, you know, when we take a step back and you just ask yourselves, like, why hasn't, like, gas with CCS really taken off in the past? I think it's because when you look at all of these potential projects that have really been proposed on the CCS side for PCC, it's always been through, like, a first sort of approach. Where's the best place to put a power plant? And then secondarily is, well, can we do PCC here? And if you're not close enough to the sink, if you're not close enough to a high-quality reservoir, the PCC economics fall apart pretty quickly. So it's all about, like, location, location, location, and finding the best place to be able to put these sites. You kind of pair that up with, as I mentioned in, like, the prepared remarks, how long it takes to actually permit a lot of this stuff? This isn't something where you can just wake up tomorrow and say, let's start doing PCC here. It takes years to be able to permit the wells, years to be able to permit the pipelines. That will be changing over time as you see permit reforms start to accelerate and shorten those timelines to get this infrastructure built. But sitting here today, I think the biggest differentiator, who has actionable projects in the right areas to be able to deploy. So I think one of the unique synergies that I sort of mentioned earlier was we're kind of sitting in this unique position where over the last several years, we've started to originate high-quality sites to put these NET Power Inc. plants. And these sites work just as well for PCC as they do for NET Power Inc. Because it's the same exact inputs and outputs, the same quality of natural gas comes in and the same amount of high-quality, high-purity CO2 comes out. And so as we think about the best places to be able to put PCC, NET Power Inc. is sitting here today with a couple of high-quality sites to put these projects. And so part of just the obvious synergies that we saw with the Entropy folks is, hey, we've assembled, like, really great sites to be able to put on NET Power Inc. plants. The deployment and commercialization of those NET Power Inc. plants is many years away, so we're going to have interconnect ready for 300 megawatts in West Texas, 300 megawatts ready in Northern MISO that could potentially sit there unutilized if all we said was we're going to wait to deploy NET Power Inc. This opportunity that we see in front of us is we can actually accelerate the deployment of a clean gas technology on these sites much sooner than we would if we just waited for NET Power Inc. And so you kind of end up in this place where, you know, when Marc's talking about getting to FID in '26 and COD in that first plant in 2028, that positions us to have the first clean, firm gas power plant online in the United States. Years ahead of the next guy. And that's really just the first phase. Right? I think over the course of '28 through 2030, 2031, if we do this right, we're going to have the ability to scale and develop multiple phases across both West Texas and Northern MISO. And so I think when you get to 2031, 2032, when the next competitor's clean gas project comes online, we're going to have three to four years of operational run time as well as three to four years of multiple deployments under our belts by the time the next project comes online. But the key to all of this is having the right location in the right areas that are really conducive to clean gas power and NET Power Inc. just coincidentally possesses those today. Nate Pendleton: Yeah. It seems like a compelling opportunity. So thanks for laying that out. Then if I may, looking at Entropy, there seems like a phenomenal partner from what I understand about their history and what they've been able to achieve. So with our Glacier project and their Entropy 23 solvent, it does seem quite a bit better than what's in the market today. On an array of metrics. So can you maybe elaborate on why specifically you chose to partner with them? And what you see in that technology that may make post-combustion carbon capture truly competitive economically? Danny Rice: Yes. I'll start and then Marc can certainly fill in the holes. I mean, first and foremost, I think they're just a great group of people. And I think, like, one of the things I've learned over my career is it's always better to work with great people. It makes the experience a lot more fun. And I think that ultimately is what leads to, like, the best potential economic outcome at the end of the day, partnering with good people. And the Entropy guys are top of the class. I think what is really differentiating about the Entropy folks is their operational experience with the solvent technology. I think because the industry as a whole hasn't really gotten off the ground, the real differentiators are the ones that have actionable real projects in the ground today and the Entropy guys have done that. And as a result of being able to have, like, real projects, you're able to fine-tune the technology. You're able to fine-tune the assets to optimize for performance. And so being able to have three years of runtime on the facility, they've been able to optimize and improve the performance of their technology, which is both the infrastructure, but also the solvent technology. And so they've been able to optimize their essentially, cocktail for capture. I think when you take a step back and you said what differentiates one solvent from the next, you know, there's a couple ways to measure it. It's the amount of energy it takes to separate the solvent from the CO2. It's the capture efficiency of the CO2. It's the degradation rate of how long does it take before that solvent breaks down. And then it's also the inhibition of that solvent to or the amines to become nitrosamines, which is not good. And the Entropy solvent, they've done a phenomenal job, you know, essentially, like, building what is a peer-leading sort of technology. And so that's really where this whole synergy comes in is they have what we would say is a TRL nine product that should and can be deployed in the power markets that need clean power the fastest. That happens to be the U.S. And we have these sites that are ready for clean power projects. So this sort of coming together of us enables them to accelerate the deployment of their technology in the largest market in the world, the U.S. power market. And for us, it allows us to accelerate the deployment of clean power projects that stays true to our mission. And I think where we both sort of win is we both will be participating in the equity in the investment of these projects side by side. So the goal here is let's stand up and develop, build, own, and operate high-quality, clean, firm power projects leveraging Entropy's solvent and PCC expertise, combine that with our power generation and site development expertise, we end up with this win-win situation for both of our firms. Nate Pendleton: Got it. I really appreciate the detail and thanks for taking my questions. Danny Rice: Yeah. Thanks, Nate. Operator: Thank you. Our next questions come from the line of Martin Malloy with Johnson Rice. Please proceed with your questions. Martin Malloy: Good morning. I wanted to ask if you could maybe talk broadly about the financing strategy with Phase one and then follow-on projects. It sounds like from Marc's comments with Phase one, you've got potentially all the power, you've got an offtake for and as well as the CO2 going to Oxy. Maybe if you could talk about just broad terms of the financing strategy in terms of being able to put debt on these projects? And also, I did see on Entropy's website that Brookfield is an investor in them. If that plays a role here at all? Danny Rice: Yeah. No, Marty. Great to hear from you. Those are really awesome questions. Yeah. I think starting on just the financing of these projects, I think when you take a step back and you look at just what we were planning to do on the NET Power Inc. side because, you know, NET Power Inc.'s oxy-combustion technology was going to be a first-of-a-kind facility. One of the things we told the market is, hey, we're most likely going to have to equity finance the entirety of that first facility. It's talking about $1.7 billion of what would most likely need to be 100% equity finance because there's no, you know, quote, unquote, bankable technology within that plant. And that's okay. And that's sort of common across new first-of-a-kind technologies. I think you contrast that against what we're doing here with Entropy with the gas turbines and the PCC. Like I mentioned before, you know, half of that facility is existing proven bankable technologies, the gas turbine, steam turbine, the HRSG, that's all stuff that is financeable because these are proven equipment that has real value in the market. So you buy the equipment, it maintains its value if you want to transfer or sell it. So that becomes very financeable on the project financing side. And so the way we kind of look at it is we know we're going in with at least half of the CapEx very, very bankable. With just project financing. So it's not going to require equity financing. I think you kind of wrap this whole thing within long-term contracted cash flows. And, you know, we're talking ten to fifteen years. Contracted cash flows, and you get to a place where you could probably project finance a good chunk of the total CapEx spend of this project. That is really just because, like, sort of what we're targeting in terms of how competitive is this from an LCOE perspective. I think LCOE isn't the end all be all in what project economics are. But knowing if you're on, like, the low end of the LCOE range, and you're able to command a higher price for that power, that implicitly says these are going to be, you know, mid-single to mid-double-digit sort of IRRs, 10% to 15% on a levered after-tax basis. That provides sufficient capacity to be able to have project financing on the whole thing. And so as we look at the financing piece, this isn't going to be NET Power Inc. is going to have to put up 300 or $400 million of equity dollars for the first project. It's going to be a much smaller portion of that. And then one of the arrangements that we have with Entropy is their ability to participate alongside us in these projects. And that certainly becomes really interesting for Entropy's investors, for Brookfield and CGF and Advantage. And potentially for other Entropy investors to be able to participate through Entropy in these projects alongside us. So the equity capital burden that we're going to be looking at on West Texas phase one, but also on the future phases as we expand this thing, the equity capital needs are going to be a whole lot less intensive on a per megawatt basis, on a per dollar of CapEx basis. Than we would have otherwise seen with NET Power Inc. projects. So it's sort of like a perfect setup where we're enabled to deliver clean firm power sooner. It's more accretive to our equity dollars that we're investing. On an accelerated timeline in terms of speed to market with new power generation. Martin Malloy: Great. That was very helpful. And then, for a follow-up question, just wanted to see if you could share with us maybe any anecdotes of conversations that you have had with potential off-takers in the data center market that are looking for this type of solution for their power needs and might be willing to enter into a longer-term offtake agreement. How they're viewing this? And I know you mentioned the Google announcement recently. Danny Rice: Yeah. I mean, it's quite interesting. I mean, today is really, like, us like, this is sort of, like, our coming out party as far as starting to say, these are the projects. This is the timeline for the projects. This is the carbon intensity profile. This is the reliability profile. Of us doing this in both West Texas and in Northern MISO on these sites that we control. I think the conversations have historically been around the NET Power Inc. technology. Which is a great technology, but I think the one just challenge on the NET Power Inc. piece is you're talking about projects that would start in 2030 or 2031. And then the second plant in 2033 or 2034. And I think when you think about the urgency of power for the hyperscalers, for these data centers, for AI, 2030, 2031, is eons, I mean, in dog years or cat years or pick any other animal that has a really short shelf life, like, the way they think about time value is totally different than we do to, like, a traditional financial lens where we think of time value as like a 10% or 12% cost of capital from year to year. I think they're thinking about things like multiples, multiples, multiples of that. And a project that comes online in 2031 is a 100 times less valuable than the same project if it could come online in 2027 or 2028. And so these conversations that we can now start having with strategic off-takers become a lot more real and a lot more interesting because we're talking about projects on a very accelerated timeline than the conversations we've been having with them in the past about projects starting in 2031 or 2032. And that all plays into, like, why this sort of partnership eventually makes a whole lot of sense that accelerates not just the deployment of these projects, but it really starts to bring forward a lot of the strategic conversations around strategic offtake with folks that are in dire need for as much clean, reliable power coming onto these grids or behind the meters as soon as realistically possible. So, I think this really sets us up to have much more constructive, much more tangible and real conversations. But at the end of the day, it all depends on our ability to continue to progress these projects and deliver the right solutions on the right timeline. And I think this partnership with Entropy allows us to do that. Martin Malloy: Great. Thank you. That was very helpful. Danny Rice: Yep. Thanks, Marty. Operator: Thank you. Our next questions come from the line of Betty Jiang with Barclays. Please proceed with your questions. Betty Jiang: Hello. Good morning. I want to ask about slide 10. And then just unpacking the economics of the project, what enables the sub $80 LCOE in the Permian compared to roughly 100 in MISO. And if you could just speak to maybe how you're thinking about the CapEx cost and then some of the other credit stacking attributes on the Permian project. Danny Rice: Yeah. No. That's a great question, Betty. And I think this is an important one for everybody to understand. You know, it really comes down to, like, two simple things that make a clean firm power project in West Texas lower cost than anywhere else. I would say almost in the world. And it comes down to the cost of the energy feedstock for the power generation. And in our case, it's natural gas. It just happens to be lower cost in West Texas than just about anywhere else in the country. That's really thanks to the oil and gas industry that's been able to unlock the shale gas potential out there. So there's that factor. And then the other really, really important differentiating one, and this into the subsurface side of things is you have the ability to utilize that CO2 versus having to just permanently sequester. And so what that really means is we have active buyers of that CO2 that are able to ascribe real value to the CO2 because it has an industrial use. So most other places where you're just permanently sequestering the CO2 and there's no value, you're having to pay somebody to take the CO2, transport it, and permanently sequester it. And so that comes out of the 45Q proceeds that you get. So in a place like Northern MISO, you know, we're going to collect the $85. And then from the $85, you'll pay a certain fee per ton to transport and sequester the CO2. And that's the way it works. In most of these applications for CCS. West Texas is a totally different animal. West Texas is an area that's been purchasing, you know, 10, 15 million tons of CO2 per year. For industrial use. For enhanced oil recovery specifically. And so that's a market where they can ascribe the value to purchase the CO2. Without you having to then pay to transport and sequester it because they have real industrial value there. And so in a place like West Texas, the plant is going to get paid the $85 per ton. But rather than paying somebody 20 or 30 or 40 or if you're in a bad area, 50 or $60 per ton, out of that $85 that you're getting paid from the 45Q, you're actually getting paid on top of the 85. So you can kind of think about it as, like, carbon stacking where you're getting paid the $85 in the 45Q, and then you're collecting another amount per ton to sell the CO2 to an industrial user. And the biggest industrial user of that CO2 in West Texas is Oxy. They have been pioneers in enhanced oil recovery for a long, long time. We're going to be using oil in this country and in the world for a long, long time. And so there's real industrial value that then gets valued back to these plants. So what that really means is the more value that we can capture on the CO2 side of this facility, the lower the power price can be. And so that's really, like, the really interesting setup that we see in West Texas is this is arguably the lowest cost place to do clean gas power. And so I think a lot of people are now starting to see a lot more power projects pop up in West Texas more so than anywhere else. In the United States. And it's specifically because of the low-cost nature of natural gas there. Then I think if you take it a step further and you say, okay, well, where's the most economic place to do clean gas power projects? It also happens to be in West Texas. Because of the utilization of the CO2. So, you know, we kind of recognized this way back in the day with NET Power Inc. We said, hey. The absolute best place to do our first NET Power Inc. oxy-combustion project is West Texas. And so that's why we already have the infrastructure in progress with the interconnect, with the site, with the offtake stuff for the CO2 is because we've been working on it for the oxy-combustion the same thing applies to what we're going to be doing with Entropy on the PCC side of things. So it's a great place to be able to demonstrate that clean, reliable, affordable power can come from natural gas. In the right areas. And so that project Permian site is going to be a great place to be able to demonstrate that on a very accelerated timeline with the Entropy folks. Betty Jiang: Got it. That makes a lot of sense. My second question, bigger picture. So if I think about your business model now, or prior, it was capital light. It was a licensing model. And others spend the money on the big capital dollars to build these plants. And now since you're pivoting to a more capital-heavy model, where in order to scale you have to grow and spend more money to build these plants. So how are you thinking about the project financing or just the longer-term capital needed to scale this business? Danny Rice: Yeah. No. It's a great question, and I think that's one of, like, the exciting parts about what we're trying to do here. And it all comes down to making sure that we're sizing these things appropriately for what NET Power Inc. can accommodate with its balance sheet and its access to capital. I think one of the things you're seeing with what we're doing on phase one, you know, we could just as easily say, hey. Let's go do a 300 megawatt facility right out of the gates. There's really not going to be any technology scale-up risk because we're deploying this PCC technology in a very modular small-scale fashion. So we could do four or five of what we're doing in phase one. We could just replicate that to do full 300 megawatts right out of the gate. But in doing that, you're going to get to a really large CapEx number, which is going to require a lot more equity capital than NET Power Inc. has access to today. And that's a position we don't want to put our balance sheet or our shareholders in that position. What we're really doing is we're really right-sizing the scale of these facilities to be able to accommodate NET Power Inc.'s ability to participate to its fullest in the economics of these projects, to be able to participate for our full economic potential without it being dilutive to the balance sheet or to our share count. And so phase one of that project is going to be smaller, but it's smaller by design. Both to prove this modular concept, which isn't really a concept that we have to prove because this is what the Entropy folks have been doing. Up on their Glacier facility. But it's really sizing in the way that we can establish a commercial project that requires only a small portion of our existing cash on hand. And so we're in this unique position where, you know, we're going to exit the year with around $390 to $400 million of cash. And one of the capital allocation decisions that we're actively assessing is, okay, how do we slow down some of the spending that we're doing on the oxy-combustion side? Because that frees up capital that we can then allocate to an equity investment into economic commercial projects on the turbine and PCC side on an accelerated timeline. And so we're in this unique position where we're going to be able to get project financing, expect to be able to get project financing for a good chunk of the capital spend on this first project. But because we're doing it at such a smaller scale compared to what we ultimately could be able to do it at, it makes the equity requirements on our side a lot more manageable and a lot more palatable knowing that what we really need to do is establish clean firm power generation prudently and then prepare to scale quickly to the 300 megawatts and above. And that sort of strategy is really, like, what we're running with at both West Texas and at the Northern MISO site, where we're going to start smaller. These are going to be sites that are expandable up to a gigawatt or larger. And so we're going to do that very prudently using our available capital on our balance sheet. But we know that if we do it right, and we're able to demonstrate that these are highly economic, highly strategic, and differentiated projects, that will really open up the door on our access to additional capital because the real prize for us is if we can put billions of dollars to work in projects that generate 15 to 20% after-tax returns to us. Access to capital becomes a lot easier to get. So the first key piece for us is being able to demonstrate economic differentiated projects at a small scale and that's ultimately what we're going to be doing with the first phase of this West Texas project. Betty Jiang: That's great. Thank you. Danny Rice: Yeah. Operator: Thank you. Our next questions come from the line of Wade Suki with Capital One. Please proceed with your questions. Wade Suki: Good morning, everyone. Appreciate you all taking my questions. And I might have missed it, but maybe just to dovetail on, I think, the Betty and Marty questions. Can you give us a sense for what Phase one might cost in West Texas or MISO for that matter, sort of including the carbon capture component? Again, might have missed it, but wonder if you could clarify that for us. Danny Rice: Yeah. Absolutely. We didn't really provide any specifics, but, you know, I think, you know, we're still going through a lot of the final preliminary engineering work over, like, the scope of the facility. The rough number just to put it out there for everybody is total installed CapEx on that facility will be between, call it $375 million and $425 million. And then when you just kind of go through the math, Wade, in terms of what that could be on an equity piece to NET Power Inc. If we're doing 50% or 51% of the equity and Entropy is doing the balance, if we can get project financing for 50% to 70% of the total CapEx, you know, that leaves you with around $200 million to $150 million to $200 million of total equity. And so if NET Power Inc. has taken 50% of that, you're talking about $75 million to $90 million on the equity side. Now it could be a little bit more, could be a little bit less depending on where things shake out on total CapEx. And total financeability. But that's probably a good rule of thumb of where we're going to be in terms of potential capital invested in that project. Like, a pretty compelling setup in my mind because we're sitting here with $400 million, you know, at the end of the year, $390 to $400 million. And so you kind of have 2026, you know, capital spend allocated to this of $80 million to $90 million that leaves sufficient capital for us for any projects that we want to FID in 2026 or 2027, whether it's West Texas Phase two or whether it's MISO Phase one. I think the real timing of being able to FID those phases, it's probably less on, like, availability of the real key stuff, which is the turbo machinery. I think Marc's done a good job, an excellent job, not just with securing these turbines for the first phase of West Texas, but really designing this facility so we've become very turbine agnostic. This isn't going to be one where we can only convert, we can only fix this thing with one of, turbo machinery. This is going to be one where we want to do this with recip, we can. If we want to do it with small-scale turbines, we can. We want to do it with larger-scale turbines, we can. So the product design that we're doing on this integrated plant is going to be a lot different than how people have thought about PCC in the past, which is every single plant is bespoke. On the PCC and power side. This is going to be very customized to be flexible to accommodate any which number of turbines. And so we think about the supply chain looking forward for phase two in West Texas, phase one in Michigan, it's not going to be about the availability of the turbo machinery. It's really going to come down to our ability to be able to contract the offtake for the power. To be able to secure the gas supply, the inputs, and the outputs knowing that a good chunk of the economics is already spoken for. The 45Q. And that's, you know, $85 per ton for each ton that you're capturing. And that really is helpful to being able to, like, have, like, a fully contracted cash flow for, I mean, that's twelve years. That really helps underwrite a lot of the upfront investment and the financing that we can get in place for these facilities. So we're pretty excited about what the setup could be on that, the timing, the cadence, and really, like, how accelerated this thing could take off. But the key thing that we're really focused on is let's make sure we have a highly successful FID on this first phase in West Texas. Wade Suki: Fantastic. That's very helpful. Appreciate it. Would you mind just expanding a little bit on the Entropy investment to the extent you can at this point? Danny Rice: Our investment in Entropy? Wade Suki: Yeah. Exactly. Danny Rice: Oh, it'll be a small investment. I mean, the Entropy team is a fantastic organization. You know, as we look at collaborating with them on this program, it's going to require technical resources from both our side and their side to make this happen. Really, it's not so much on, like, the project side, but it's on, like, if you think about the product, and the product roadmap and the program that product is within, it's going to require engineering resources from both their side and ours. And so we said, hey. We'll make an investment on your behalf into your business. So it's a small equity investment. But it's an important one because it gives them the resources to be able to contribute their people and their skill set to ensure that we deliver the right product on this accelerated timeline. Wade Suki: Thank you. One last one if I could, Minh. I apologize. I don't mean to press it here. But, yeah, look. Just kind of taking a step back and, you know, you and I might have discussed this in a previous conversation, but as I look at the business now, kind of new strategy, I guess what's the rationale for being a public entity? And again, hate to ask, mean to be abrasive or anything, but just kind of curious how you think about that. The current chart pivot, I guess. Danny Rice: Yeah. I think, no. It's a totally fair question. It's a question I ask myself every day. And it's not because we don't like being a public company. I think it's really important that we're a public company. The access to capital as a public company is unparalleled. But I think it's really important that if you're a public company, you have the ability to access that capital and that is really a function of do you have places to invest that capital, right? And I think on the NET Power Inc. side, for the standalone oxy-combustion, it is pretty hard to justify why do you need to be a public company if you have all the dollars you need to advance the technology. And the capital needs you're going to need for that first project are way more than you'll be able to capture as a public company, it becomes a harder proposition for standalone oxy-combustion. I think when you now introduce a business that has real actionable projects that can use capital sooner rather than later, and use capital not for the sake of being able to spend money, but invest money into economic projects. That becomes a lot more compelling setup for us to be a public company. And then I think, like, the other part of it is there's no other clean, firm public power company in the space today. Going to have projects online this decade? Yeah. You have the nuclear folks that are out there, but they're in, like, 2030, 2040 sort of time frame. And so this new sort of NET Power Inc. I think, is really differentiated for public market both the institutional crowd, but also for the retail crowd of hey, at the beginning of a natural gas super cycle. What is the absolute best way to be able to play this thesis if clean firm power coming from natural gas is going to be the prevailing source of clean firm power for the next decade. Right now, there's really no the only way to play that really is NET Power Inc. But NET Power Inc., you're making a huge technology bet. A technology that's going to be commercialized in 2030 and beyond. Now, we really bring a whole lot of that actionability forward. With projects that can come online in '28. Years ahead of the competition. And so I think NET Power Inc. now becomes a really interesting position where we have the ability to be not just the premier clean, firm power company, but the one that's actually able to put more capital to work in a very accretive manner both at the project level, but also on behalf of our shareholders. So I think all of a sudden, we're now in a much more compelling place to be able to why it makes sense for us to be a public company. Wade Suki: Understood. Great. Thank you so much. Appreciate it. Danny Rice: Yeah. Thanks, Wade. Operator: Thank you. We have reached the end of our question and answer session. I would now like to turn the floor back over to Danny Rice for any closing comments. Danny Rice: Yes. Thanks, everybody, for joining us today. I know the world is quickly evolving. The market is changing. Power demand is exploding, and it's an exciting, exciting time to be in power. And I think, what you really see from us here today is the ability for our team to proactively and at the same time responsibly adapt to this quickly changing market. And I think, you know, when we look forward a couple of years and look back on today, I think everybody hopefully, everybody says, wow, that was a really, really smart expansion of your business to be able to capture this market faster than everybody else. While still preserving not just the mission, but preserving this really differentiated oxy-combustion technology. That combined with our ability to become experts on all things clean gas, really sets NET Power Inc. up for long-term success. So this is the beginning of it. And we're really excited for your support. And we're really excited to come back and visit with you all in a few months and show the progress that this team's going to make. So thank you again for your time today, and we will always be available to answer any additional questions or comments you all have. Thank you. Operator: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines at this time. Enjoy the rest of your day.
Operator: Good morning or good afternoon. Welcome to Swiss Re's 9 Months 2025 Results Conference Call. Please note that today's conference call is being recorded. At this time, I would like to turn the conference over to Andreas Berger, Group CEO. Please go ahead. Alexander Andreas Berger: Thank you very much, and good morning or good afternoon to all of you. I appreciate that you're taking the time today to listen to us and also to engage into a hopefully very vivid Q&A. Before our Group CFO, Anders Malmstrom, walks you through the details of our 9 months results, I'd like to start with some brief remarks as usual. After another strong quarter with a profit of USD 1.4 billion, we're pleased to report a net income of USD 4 billion for the first 9 months of 2025, corresponding to an annualized return on equity of 22.5%. This puts us very well on track for our full year net income target of more than USD 4.4 billion. We benefited from exceptionally strong P&C results in the third quarter, helped by a low burden of large claims. These amounted to around USD 200 million in the quarter, well below expectations across P&C Re and Corporate Solutions. The result of the second consecutive benign large-loss quarter is that both our P&C units are tracking well ahead of their respective targets. This is the principal reason why we're in such a good position at this point in the year. You've heard me stress our two key priorities, and they are unchanged. Firstly, deliver on the more than USD 4.4 billion group net income targets; and secondly, increase the group's overall resilience to improve long-term delivery. Now on resilience. This journey started with a complete turnaround of Corporate Solutions and the implementation of a new reserving philosophy, which we subsequently extended to P&C Re, 2 years ago. We also successfully addressed P&C Re's in-force U.S. liability reserves last year. This year, we've been focused on further improving the resilience of the third business unit, Life & Health Re. After 3 quarters, Life & Health Re net income stands at USD 1.1 billion, which is actually a quite solid result and a very important contribution to the group's earnings. But Life & Health Res' result has been too noisy. As mentioned at our half year results, we continue to focus on reducing volatility in smaller portfolios, where experience has lagged expectations, thereby producing negative variances to our expected results. These negative variances are unacceptable, even as our largest portfolios, including U.S. mortality, performed in line with expectations. In the third quarter, we, therefore, decided to partially accelerate efforts to strengthen the resilience of the in-force book based on detailed reviews of underperforming portfolios. Some of these are still ongoing and will be completed at the end of this year. We have full confidence in reaching the group's net income target of more than USD 4.4 billion over the year. But given where Life & Health Re stands after 3 quarters and given our focus on resilience, we feel it is prudent to flag that in a base case, we are likely to fall short of the USD 1.6 billion Life & Health Re full year target. We will do what's required to get this business to produce results closer to expectations. At this point, and I emphasize, we do not expect significantly outsized impacts from Life & Health Re in the fourth quarter relative to Q3. So you heard me emphasizing that. We will update you on this on December 5 at our Management Dialogue Event, and we're looking forward to that. Let me also briefly touch on new business CSM generation across our segments. We remain focused on disciplined underwriting as profitability continues to be our priority. To reemphasize again, we don't have a top line target. New business generation remained resilient with a new business CSM of USD 3.9 billion for the first 9 months, slightly down from last year's USD 4.2 billion. The decline versus last year, partially reflects the more challenging pricing environment that we're facing in some lines of business in the P&C business, but also in Corporate Solutions. It also reflects our continued focus on portfolio quality, including the setting of prudent initial loss assumptions. Overall, we're still satisfied with the margins we're able to generate across the businesses. Importantly, we continue to maintain discipline on terms and conditions and attachment points. I look forward to presenting further details on our group priorities at the upcoming Management Dialogue Event on December 5. On that date, we'll also announce our financial targets for 2026. I'll be joined by our Group CFO, Anders Malmstrom, to provide an update on key topics across our businesses followed by then an extended Q&A session. I think with that, I'm happy to hand over to Anders to give you more flavor. Anders Malmstrom: Thank you, Andreas. And again, good afternoon or good morning to everyone on the call. I will make a few remarks on the results we released this morning before we go to the Q&A session. Andreas has taken you through the highlights of our overall strong results for the first 9 months of the year. Let me add a few further details. On revenues, the group's Insurance revenue amounted to USD 32 billion in the first 9 months, down from USD 33.7 billion last year. The USD 1.7 billion decline has a few major drivers, most of which were already highlighted in the first half of the year. At Q2 2025, we had indicated that group revenues in the second half would be around USD 1.5 billion higher than in the first half. In line with this guidance, Q3 revenues were around USD 600 million higher than the average quarterly revenue in the first half of the year, reflecting the increased claims seasonality. While Q4 is also projected to be higher than Q1 and Q2, we now expect revenues in the second half to be slightly below the USD 1.5 billion previous estimate, primarily due to our continued focus on portfolio quality in P&C Re. As you have heard from us by now, we do not manage for top line. Let me move on to the Insurance Service result of our businesses. In P&C Re, you will continue to notice a decline in the CSM release versus last year's period. The USD 2.1 billion release in the first 9 months is down from last year's $2.7 billion. This decrease is driven by the earn-through of prudent initial loss picks, including impact of new business uncertainty allowance and slightly lower margins. Experience variance and other, which captures all variances relative to initial reserving assumptions, contributed positively by USD 549 million in the first 9 months, including $447 million in the third quarter alone. This quarter's positive experience was mainly attributable to large nat cat losses that came in $678 million below expectations, bringing year-to-date favorable nat cat experience to USD 900 million. In addition, P&C Re benefited from a one-off risk adjustment release in the third quarter in the amount of USD 170 million. Against this very favorable backdrop in the third quarter, we selectively added to both current and prior year reserves. Year-to-date, we have added around USD 300 million to our current year reserves in P&C Re. Nominal prior year reserve releases stand at around $150 million for 9 months, which means we added around USD 100 million in the third quarter. Please note that no further actions have been necessary on the U.S. liability portfolio we strengthened, a year ago. On the back of all the pieces I just described, P&C Re reported a very strong combined ratio of 71.3% in the third quarter, resulting in 77.6% for the first 9 months, well below the 85% target we have for the year. Moving on to Corporate Solutions. The 9-month CSM release of USD 668 million is above last year's $628 million, driven by higher in-force margins. Experience, variance and other was positive at USD 111 million. This reflects favorable large loss experience and a positive prior year reserve result, partially offset by an allowance for potential late claims reporting. Large nat cat claims of USD 60 million came in below expectations for the first 9 months, while large man-made claims of $282 million were slightly above, partially offsetting the favorable nat cat experience. Corporate Solutions continues its track record with a 9-month combined ratio of 87.1%, below our target of less than 91% for the full year. Finally, on Life & Health Reinsurance, as Andreas mentioned, we decided to partially accelerate our efforts to strengthen the resilience of the in-force book, following detailed reviews of underperforming portfolios. This resulted in negative assumption updates hitting the P&L in the amount of around USD 400 million for the first 9-months, [ there ] was USD 250 million in the third quarter. The large majority of the third quarter's impact related to selected Health business in the EMEA and ANZ regions. The fact that this hits P&L mostly reflects the onerous nature of these portfolios under IFRS, and this makes it particularly important that we strengthen them sufficiently. We have also seen negative claims and volume developments of approximately USD 250 million year-to-date, primarily in the third quarter. Q3 was mostly driven by the Americas region, which had a relatively poor quarter in terms of experience, driven by volatile large claims. Importantly, over year-to-date claims experience in our largest -- overall year-to-date claims experience in our largest portfolios, which includes the U.S. Mortality, which was strengthened before our transition to IFRS, continues to perform in line with expectations over the first 9-months. Despite all of the actions and impact, Life & Health Re has produced a net income of USD 1.1 billion in the first 9 months with $280 million achieved in the third quarter. While some of these assumptions reviews also affected our CSM balance in addition to the P&L, our CSM overall remained unchanged at USD 17.4 billion compared to year-end 2024, supported by attractive and prudently priced new bases and favorable FX impact. A few words on investments before concluding with SST. We benefited from a strong investment result, with a return on investment of 4.1% ahead of last year's 3.9%, supported by strong recurring income standing at USD 3.0 billion in the first 9-months. We estimate the group's SST ratio at 268% as of 1 of October 2025, 11 points higher from where we started the year. That's where I will leave it for now, and I'm happy to hand over to Thomas to kick off the Q&A. Thomas Bohun: Thanks, Andreas. Thank you, Andres. Hi to you from my side as well. [Operator Instructions]. With that, operator, could we start with the first question, please? Operator: The first question comes from Kamran Hossain from JPMorgan. Kamran Hossain: A couple of questions. The first one was just on the Life side. I think the commentary you've given around like quantum in Q4 versus Q3 is helpful. I just wanted to clarify a few things. So when you say it's not going to be a much larger quantum than Q3, I'm just trying to understand whether you mean the $250 million you flagged or the $450 million negative experience in Q3 stand-alone? Because there's quite a difference between the two numbers. So any kind of clarification on kind of what that comment kind of meant slightly more precisely? And the second question is in terms of like portfolios left to review, can you maybe talk through kind of the proportion you've got left to review, like what proportion is of kind of Life reserves? How meaningful is this? I'm hoping you're going to say a low number, but I just kind of wanted to hear what you say on that. Alexander Andreas Berger: Thanks, Kamran, maybe I should give Anders the first words on the size, and then I might jump in to give you a bit of background then. Anders Malmstrom: So, Kamran just on the -- when we talk about outsized or not outsized impact in Q4, we basically mean the $250 million impact that we saw in Q3. That's what kind of puts it in a box. So it's not much left. There's a few portfolios that we have to go through. We need to finalize that. And yes, by the end of the year, we should be done. Alexander Andreas Berger: Yes. And maybe just to give you the perspective, the bigger picture. So we have three phases that we looked at, and that's exactly why we come to that small number in comparison. So Phase 1 was introduction of IFRS. That's where we addressed the large portfolios, in particular, critical illness in China and U.S. mortality. Then we had, as a second phase, midsized portfolios, that also have been digested. And now we were turning the attention to the remaining smaller portfolios that are distributed across the regions and also lines of businesses. So what we needed to do, is really to address the individual noise in those many small portfolios, they are actually quite modest, but we needed to address the accumulation of this noise. And that's exactly why we took this view now, and that's the background to the question that, or the answer that Anders gave you. On the details of the regions, I think we will give you more details in the management update on the 5 of December. Operator: The next question comes from Andrew Baker, Goldman Sachs. Andrew Baker: First one, just on the Insurance revenues. So I hear what you're saying on you don't manage the top line. But are you able to give a bit more detail on which areas of the business has led for the, I guess, change -- slight change in view in the second half. Obviously, you previously said it was sort of $1.5 billion, you're expecting it to be higher than the first and now it seems like slightly below that. So just any more color there would be really helpful. And then secondly, are you able just to confirm how much of the uncertainty allowance you've added so far this year and what you expect this to be by the end of the year? Alexander Andreas Berger: Okay. Maybe I'll take the first one on the revenues. So maybe just to give you a bit of context again, and I think maybe it's a bit repetition from the first half. But overall, when I talk about $1.7 billion year-over-year lower, $1.5 billion, I think we already told you. First of all, it's the pruning actions on the P&C Re side, which is about $0.5 billion. It's the termination of an external retro transaction on the Life & Health Re side, which is $400 million, it's a nonrenewal of the Irish MedEx business, which is about $400 million, and it's then the sale of the P&C EMEA IptiQ, which is about $200 million. So that explains basically the majority of that. So overall, the remaining piece is then really coming from the P&C side, where we have this NDIC feature that we talked about, the netting of the commission with the -- that we didn't do before that and then just continued management of the business itself. So I think that explains it. I think that should be clear now. Anders Malmstrom: On the uncertainty note, I think this is a prudency measure. We're not quantifying it. Operator: The next question comes from Shanti Kang, Bank of America. Shanti Kang: So it was just mainly on the Life & Health side. So I understand that the L&H miss today won't derail the group net result target. But I think it does raise a couple of questions about the run rate into 2026. So I'm just curious whether or not the adjustments today will adjust the forward view on the run rate of the Life & Health book, i.e., if that's like a structural concern today that we should be thinking about? And then just given the fact over last 6 quarters, we've had a number of assumption updates. I get that you're saying you'll complete that in the full year, this year. But do we need to take some more caution on our assumptions for those into the next year, i.e., can we get a bit more comfortable as you think about there being no more updates or repeats in the future? Alexander Andreas Berger: Maybe let me do the intro and hand over then to Anders. Maybe just to clarify, we could have let the noise continue, that is another option. But -- and then we could have made our targets also in Life & Health. That's the one option. But again, we want all our business units to look healthy across all portfolios. We want all business units to play their role that they play in the portfolio of Swiss Re Group. We'd like to see the diversification benefits come through over time and consistently. Life & Health is decorated to P&C. That's the strength of our portfolio. Within the P&C, CorSo is not so correlated to the P&C Re business because we buy external reinsurance. So we think we've got a pretty clean setup at group level with all 3 business units. That's why we want all units to play their role and also to have a healthy portfolio to play optimal role. Anders Malmstrom: So maybe just to add to what Andreas said, I mean, I think it's really critical that we get that through. And that's the last phase of -- we started with large portfolios and now we're doing the small ones. But then this is done. We're going to give an update on the target and the expected run rate for the next year's -- at the management dialogue. And that's where you can also then expect a bit more details how this will perform going forward. Operator: The next question comes from Ivan Bokhmat from Barclays. Ivan Bokhmat: My first question would be on Life & Health as well. Maybe you could talk in a bit more detail about the underlying reasons for deterioration in those Health portfolios. Maybe there are any common drivers in these markets that developed negatively and what would make them unique compared to the better performing ones? Just to see if there's some trends that we can monitor from our side. And my second question, I mean, Anders, considering you suggested that the Q4 adjustment will be smaller than $250 million and your run rate is still quite comfortably getting you above $4.4 billion. I was just wondering if you consider taking any additional steps to add prudence in Q4 beyond the run rate that you have shown so far? And maybe if you could just highlight a bit more color on the movements in reserves that you have done year-to-date by portfolios. Anders Malmstrom: Okay. So let me start on the Health side. And this is -- I mean, all the actions are really driven on Health portfolios in EMEA and then APAC. And I think one that I can actually highlight is Australia. You might have seen also the press release that we put out, that in Australia, we're actually pausing new business because the environment is just not sustainable, and this is a market issue. This is not a Swiss issue. This is a market issue. That's really driven by the environment that we have higher claims than what we expected, and that's why we paused that business. So that's -- I would say that's the core. We give you more details then at the management dialogue also on the other portfolios, but that's a key element here. And we're not afraid of actually stopping or pausing a new business, if that's necessary because it's not sustainable in the market. I think overall, when you look at the reserve development, I mean, I can reiterate what Andreas just said in the beginning, I think we have two main objectives. One is to meet our financial targets and the other one is to then strengthen the resilience. We've done that already, I think, year-to-date, you can see that clearly. P&C, we talked about. Life & Health, we also -- and P&C, we also used the benefit of having a risk adjustment release in Q3 of $170 million. We immediately kind of re-purposed in that because we also had a very positive development coming from the nat cat. So all that together helped us to put more resilience in the balance sheet. It has nothing to do with the U.S. Casualty. It's completely different to that, but we took the opportunity now, very strong nat cat results, risk adjustment release to strengthen the balance sheet that I mentioned in my opening remarks. Operator: The next question comes from Iain Pearce, BNP Paribas. Iain Pearce: They're all on new business CSM. So when I look at the new business CSM for the non-Life divisions, if I just look at Q3 stand-alone, they're down by 30% to 35%. I'm just wondering if you could run through why there's been such a big move? I know it's not a massive quarter for P&C Re, but for CorSo, it seemingly is quite a big quarter on new business CSM. So why are they down so much in Q3 standalone? And same for the Life business, where clearly, ex-MedEx, it still looked like the new business CSM would be down quite a lot. So just trying to understand that as well. Any comments would be really useful. Alexander Andreas Berger: Just quickly before Anders answers this MedEx that was mentioned here, not Life & Health, that's actually the CorSo MedEx business in Ireland where the minus $400 million was stated. Anders Malmstrom: Yes. So I think CorSo is clear. I think Andreas mentioned it. It's really the MedEx business. On the Life & Health, you -- I mean, it can be a bit lumpy here because Life & Health, obviously, it also depends on the transactions. We didn't have transaction in Q3. So year-over-year, we were slightly down. Actually, compared to Q2, we're up. So I think overall, I think I'm actually pretty pleased with the Life & Health CSM despite having not had transactions. Obviously, when you have transactions, you have additional CSM. And then on the P&C side, I would say it's mainly driven by the property prices that are coming down that we see. I think other than that, we're pretty comfortable with the new business that's coming through. Alexander Andreas Berger: Yes. And let me make a general statement again on this top line growth aspect versus profitability bottom line view, and the reason why we don't put out growth targets because and I repeat myself again, in our industry, there's no problem to grow. If you want to grow, you can grow. And we learned our lessons, by the way, ourselves also in Swiss Re. The importance here to manage volatility and to manage cycles. And this is critical. Our customers, the [indiscernible], but also the corporates and the public entities, they rely on us being resilient even in stressful market cycles and market environments. And that's why we put the emphasis really on the healthy portfolio and also on growing the bottom line, which is that forces us also to find attractive growth pools where we can then go after. So that's the general statement I wanted to make. Operator: The next question comes from James Shuck from Citi. James Shuck: I'm probably going to go over a couple of areas again, if you don't mind. So on Life & Health Re, I think on the call last time, Anders, I was kind of asking you about the outlook for the experience, variances and loss components, which have been negative previously. And obviously, we've got the same thing coming through just now. You previously indicated you expect those to trend to zero. I presume that the actions you're taking today means that, that trend should actually accelerate. So really kind of just getting an insight into that kind of glide path to getting to zero. So should we expect 2026 to be a clean slate in terms of the experience, variance? And I kind of think linked to that, it's kind of the CSM amortization rate is much higher than the 8%, and I think when I asked previously, you suggested that it would come down. It wasn't clear to me why it would come down. And obviously, you've guided 8%, it's running around 10%. So just keen to get an outlook for the amortization, please. And then secondly, it was also actually on the P&C new business CSM, which is obviously down very sharply in the third quarter, as Iain highlighted. I understand what you're saying about not having top line targets. And -- but on the other hand, margins are very good and should be able to deploy capital incrementally. So if I look at your target capital over time in recent years, you haven't actually managed to deploy any incremental capital over the last kind of 2 or 3 years, and I'm kind of wanting to get an insight, particularly on that P&C Re new business CSM, in terms of the outlook there? And I appreciate you might return to this at the Management Dialogues Day, but I think it's an important point to try and get this feel for, are you still able to grow your earnings through a soft cycle? Anders Malmstrom: Yes, sure. So maybe, James, I'll start on the Life & Health side. I think you're absolutely right. I mean the whole objective of what we're doing here is to reduce the experience variance, and it should come to zero. I mean you will always see normal volatility. That's clear over the quarters, but the volatility for the full year should be close to zero, if not actually positive. That's where we're going to go in the long run. So that's why we took these actions. The other reason also, I think when we looked at this portfolio, all assumption changes here went through the -- because it's onerous business. It's even more important that you take these actions upfront because you don't want to have that noise in the P&L. I think that's really the driver. On the CSM release and the CSM amortization, I think we mentioned a couple of times now that we're running higher than the guidance we gave you. I think this is something that we will address at the Management Dialogue. We give you full guidance where we're going to expect that coming forward because we need to make sure that the guidance is what we see, and we saw a higher release than what we guided you to. On the P&C new business CSM, that's down year-to-date. I mean maybe another -- just -- I think you mentioned this before, your colleague mentioned before, we obviously talked now about the smaller portion that was renewed in Q3. That -- because until Q2, the CSM was actually in line with the previous year. Now you see it coming down from a small portion that got renewed, mentioned, of course, it was driven by the prices, also driven by the casualty pruning that we still continue -- that we say continue on a relative basis. I think Casualty overall, I think we're fine now with the market positioning. I mean, look, the outlook, I think we will see. We're very comfortable with the margins that we're writing. Andreas mentioned that before. We're still in a good position, but we manage to margin, and we just don't manage to volumes. And actually, in our view, that's why CSM is a good measure. That's why we're also explaining it to you that way because it talks about value. It doesn't talk about volume, it talks about value. But obviously, it reflects, if you have business mix changes in the business where you basically move to the more profitable ones, and that's exactly what we did. I don't know, Andreas? Alexander Andreas Berger: Yes. And I mean I can maybe just report out quickly from the discussions I have on the renewal side. We're just in the midst of the negotiations. So I don't have any indication to panic. We're still in very healthy territory, and I'm very careful to say, to guide you here because we're in the midst of the discussions. But you can already sense that I'm not pessimistic here about the outcome of the renewal. It's very constructive. And in cases, even, I would say, for me, quite optimistic. So let's see. The teams are working hard. Operator: The next question comes from Vinit Malhotra, Mediobanca. Vinit Malhotra: I mean some of these topics have been addressed. So I will just have maybe one theoretical question really. The fact that we've had 2 good quarters on tax means obviously, the targets are achievable easier, a bit easier. So I would say, was that one of the reasons why this Life & Health review was initiated? Or actually you were -- you would have initiated that even if 2Q and 3Q were normal cat quarters? Because in that instance, it might have been that the targets would have been a bit more difficult to reach. So I'm just curious about that. And also one question, if I can ask on Corporate Solutions, where the price cuts is a bit worse, minus 7% on just a quick check of 3Q. Could you comment on how the inflation or business mix or something else is changing to get good numbers on CorSo? Which obviously are helped by cat, but I understand even the underlying is good. So could you explain a little bit about the margin management at CorSo with minus 7% pricing? Anders Malmstrom: Just maybe quickly on the first one. Yes, of course, I mean, we are doing quite well at group level. And that helped us to take the decision on the Life & Health actions, and this is very clear. And by the way, we're consistent with all the meetings that we had before the call, in the last quarters or months where we continuously were telling that resilience of the group is really one of our two priorities. And should we be in a position to do that and still make our group target, why wouldn't we do this? So I'll bring this what you call theoretical question to a very concrete action now. On CorSo, I think CorSo, like all other companies in that sector have produced very good numbers. They're in a very healthy margin space. If you see slight reductions on rates, that's the same as in reinsurance, we're still very, very healthy in the longterm pricing adequacy as we call it. So I'm not nervous about this. Now the -- what's the focus of CorSo? CorSo doesn't want to play in this very commoditized space where the pricing pressure is really increasing due to increased competition. CorSo wants to play their advantages in the differentiation, international programs and alternative risk transfer. And I think this is a sweet spot because some of the very large corporates take premium out of the market, and manage it via their captives. And there, they need support through alternative risk transfer tools and solutions. The same actually also you can see also in the reinsurance market. The very large players think of taking business, reinsurance premium out of the market and try to find structured solutions, maybe some access to alternative capital solutions, et cetera. And again, here, we are best positioned to give not only advice but also solutions and those also generate revenues. So overall, for us, not a situation to be nervous in, but we're observing, obviously, and we're growing in areas predominantly where they're not correlated with the lines of business that have a stronger decline in rates. Operator: The next question comes from Will Hardcastle from UBS. William Hardcastle: The first one is just coming back to something we discussed a bit, but just trying to verify that $250 million of our outsized comment a bit relative to that. Are you saying there's not much chance that it could escalate further from this $250 million already done or another $250 million? And just to be clear on it, have you moved up on an actuarial margin basis? Or this is still best estimate still? Coming back to the $1.5 billion higher revenue 2H on 1H. FX hasn't really changed too much, and I guess you knew the parameter deviation already. Of the reduced number that you're thinking about now, how much of that's been a bigger NDIC impact and therefore, maybe a combined ratio offset? Or is it purely organic growth driven? Anders Malmstrom: Okay. So just to confirm on what we said -- what we meant is that for Q4 because we continue to clean up the Life & Health, the smaller Life & Health portfolios. You should not expect an impact that is bigger than the impact we saw in Q3. So to your question, to be very precise, this would be on top of the $250 million that we see. It's not more than $250 million in Q4, that's in a way, what I would expect. Now we haven't done it. We're not fully done. So we're going to give you the final update at the Management Dialogue. That's where you should then see much more details, but that's kind of the direction of travel that we're telling you as a floor. On the revenue side, yes, I think once we have the final run rate now, I think we're fully on this new -- with the full adoption of the NDIC methodology that we introduced last year. So you should then see based on that, a smaller revenue just for the same business on a relative basis, which has marginal impact on combined ratio. That's absolutely correct. Operator: The next question comes from Ben Cohen from RBC. Benjamin Cohen: I had two questions, please. Firstly, on the Life & Health side, could you talk a bit more about the areas in where you did see new business CSM growth? I think you flagged U.S. Mortality and Health and Longevity in EMEA. And specifically, I guess, the reasons why you feel confident to kind of grow those business lines, perhaps particularly with regards to Longevity? And my second question was in CorSo and P&C, I think on a 9-month view, the expense ratios rose reasonably materially year-over-year. Were there some one-off features in there? Do you need to do more to address costs because of the top line pressures that you're seeing? Anders Malmstrom: Okay. So maybe I start on the Life & Health side with the new business CSM growth areas. I think you will continue to see new business CSM growth on Mortality, the classical mortality that we write, that's still a big driver. We have a lot of contracts there and there's new business coming in there, which is good. Longevity is, I would say, a new area that for us became quite important, and we saw some traction there during the year. It's something that will develop. I would love to be more in the U.S. on the Longevity side. I think the problem there is just I think people need to start to realize that they actually have an issue because the local RBC framework in the U.S. doesn't really reflect that and you don't have a longevity chart. But I think the discussion we already have with clients is that this is a topic that will come over the next few years. And then still Asia is a growth driver where we will see CSM growth and particularly also on the Health side, after we have fixed all of the issues on the in-force. Alexander Andreas Berger: So maybe on your expense ratio, the increase of expense ratio is not business driven, and the reason why in Q3, we've got 3% year-on-year increase, that's mainly due to restructuring costs. We have restructured parts of the businesses. For instance, in CorSo, we have decided to exit the Aviation business and concentrate the underwriting on the Reinsurance side. So there were costs attached to that, the restructuring costs. Then we have a slight increase in volume-driven commissions. That's due to shift of some of the businesses, in particular, when you go into businesses that are more volume or facility-driven, those have -- and also specialty lines, those have elevated commission levels and then also slightly the lower insurance revenue. I think that I would look at it. Now we don't look at a quarterly basis for the expense management side because overall, we see a very positive trajectory by reducing actually the expenses because the actions that we took now are coming through and we see it in earning [indiscernible] and also. So I actually applaud then CorSo to address these things in a situation where CorSo was really performing very, very well. So that's the moment when we need to address those things. So you will expect the expense ratio going down. So remember, we put out the number bigger than $300 million cost savings target overall, and we are very, very well on track to achieve this. So even alone this year, we are exceeding the $100 million. So we're well on track to achieve this by 2027. Benjamin Cohen: And we will provide details on that management... Alexander Andreas Berger: Yes, absolutely. Operator: There are no more questions from the phone. Thomas Bohun: There seems to be maybe one more. Alexander Andreas Berger: We actually lost him. So he probably decided not to ask the question anymore. Thomas Bohun: Thank you very much for all the questions and your interest. Should there be any questions outstanding, as always, please do not hesitate to contact the IR team. With that, thank you for attending the call, and have a good weekend. Alexander Andreas Berger: Thank you. Operator: Thank you all for your participation. You may now disconnect.
Operator: Greetings, and welcome to the TechPrecision Corporation Fiscal Year 2026 Second Quarter Financial Results Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Mr. Brett Maas with Hayden IR. Sir, the floor is yours. Brett Maas: Thank you. On the call today is Alex Shen, Chief Executive Officer; and Phil Podgorski, Chief Financial Officer. Before we begin, I'd like to remind our listeners that management's remarks may contain forward-looking statements which are subject to risks and uncertainties, and management may make additional forward-looking statements in response to your questions. Therefore, the company claims the protection of the safe harbor for forward-looking statements as contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from those discussed today, and therefore, we refer you to a more detailed discussion of risks and uncertainties in the company's financial filings with the SEC. In addition, projections as to the company's future performance represents management's estimates as of today, November 13, 2025. TechPrecision assumes no obligation to revise or update these forward-looking statements. With that out of the way, I'd like to turn the call over to Alex Shen, Chief Executive Officer, to provide opening remarks. Alex, please continue. Alexander Shen: Thank you, Brett. Good afternoon to everyone, and thank you for joining us. Please excuse my raspy voice, a little bit of cold here. Fiscal 2026 second quarter consolidated revenue was $9.1 million or 2% higher when compared to $8.9 million in the fiscal year 2025 second quarter. Consolidated gross profit totaled $2.5 million or $1.4 million higher when compared to the second quarter of fiscal year 2025. At both Ranor and Stadco segments, favorable customer mix has resulted in improved margins. Fiscal year 2026 second quarter Ranor revenue was $4.4 million, with operating profit of $1.6 million. Second quarter Stadco revenue was $4.8 million, with operating loss of $0.5 million compared to the same period a year ago. Stadco had an $873,000 improvement in operating income. For second quarter, operating income was $0.9 million, and favorable customer mix enabled 3 drivers. One, better throughput at Stadco, resulting in higher revenue; two, lower provision for losses from specific first article costs; and three, lower provision for losses from onetime one-off contracts. We remain highly focused on aggressive daily cash management, a critical piece of risk mitigation. We continue to manage and control expenses, capital expenditures, customer advances, progress billings and final invoicing at shipment. Our tactical execution focus and success enables us to continuously resecure strategic customer confidence at both segments. At our Ranor segment, sustained delivery and installation of new equipment continues as we specifically execute the $21 million plus of completely funded grant money from our U.S. Navy-related customers. Customer confidence remains high at both Stadco and Ranor. Our customers have expressed their strong confidence as we continue to maintain on-time delivery of quality components. This delivery performance is leading both Stadco and Ranor to new quoting opportunities in air defense and submarine defense sectors with the same customers that already know and trust our capabilities. Both subsidiaries are continuing to experience meaningful new capture of business awards from these same customers, adding to our already strong $48 million backlog. We expect to deliver this $48 million backlog over the course of the next 1 to 3 fiscal years with gross margin expansion. Now I'd like to turn the call over to our Chief Financial Officer, Phil Podgorski, to continue with the review of our second quarter and 6 months ended fiscal year 2026 results. Phil? Phillip Podgorski: Thank you, Alex. As Alex just mentioned, for our fiscal 2026 second quarter, consolidated revenue increased by 2% to $9.1 million compared to $8.9 million in the same period a year ago as we continue to focus on building our strong recurring revenue customer base. Consolidated cost of revenue decreased by 16% or $1.3 million as throughput and customer mix improved at both segments. Consolidated gross profit increased by $1.4 million in Q2 fiscal 2026 to $2.5 million, resulting in double-digit year-over-year consolidated gross margin improvement of 16 percentage points. Consolidated SG&A increased slightly by 1% to $1.5 million in the fiscal 2026 second quarter due to increased office -- general office expenses, but partially offset by a decrease in outside advisory and consulting costs. Fiscal 2026 second quarter interest was higher due primarily to interest rates -- our interest cost rates related to higher borrowing under the revolving loan. Net income was $0.8 million for the quarter, with $0.08 per share on a basic and fully diluted basis. For the 6 months ended September 30, 2025, consolidated revenue was $16.5 million or 3% lower when compared to the same period a year ago. Consolidated cost of revenue was $13 million or $2.7 million lower than the same period a year ago, again due to favorable customer mix and productivity gains at both Ranor and Stadco. As noted, favorable customer mix and productivity gains increased gross profit by $2.2 million or 14 percentage points year-over-year. SG&A decreased by 2% as lower outside advisory and consulting costs more than offset the increase in general office costs. As a result, operating income increased by 126% to $0.5 million. Interest costs increased by 3%, again on higher borrowings under our revolver loan, resulting in net income of $0.2 million or $0.02 per share on a basic and fully diluted basis. Moving on to our financial position. We continue to actively manage our cash flow, as Alex had mentioned. Net cash flow -- net cash provided by operating and investing activities totaled $0.2 million for the first 6 months in fiscal 2026. Net cash used in financing activities totaled $0.2 million, primarily to pay down principal under our revolver and term loans. Our debt was $7.3 million on September 30, 2025, compared to $7.4 million on March 31, 2025. Our cash balance on September 30, 2025, was $220,000 compared to $195,000 on March 31, 2025. Now let's take a little deeper dive into the segments for fiscal 2026 Q2. For Ranor, second quarter revenue was down year-over-year by $0.4 million. However, overall strong margin growth was evident across all projects, resulting in improved margin drop-through of 7 percentage points and contributing $2.2 million in gross profit for the quarter. Stadco Q2 fiscal 2026 revenue increased by $0.6 million compared to the same period last year as we continue to focus on repeat work. Stadco experienced Q2 year-over-year revenue -- year-over-year gross profit margin improvement of 9 percentage points or $800,000. The Stadco improved gross profit versus prior year is primarily the result of improved contract pricing, customer mix and improved production efficiencies. While this is an improvement, the company continues to face headwind on legacy contracts and underpriced onetime contracts. As Alex mentioned, we continue to actively work with our customers on these contracts towards recovery and new pricing. With that, I'll turn the call back over to Alex. Alexander Shen: For those on the call who may not be very familiar with our company, TechPrecision is a custom manufacturer of precision large-scale fabricated components and precision large-scale machined metal components. The components that we manufacture are customer-designed. We sell to customers in 2 main industry sectors, defense and precision industrial markets, predominantly defense. We do most of our work in industries that are highly sensitive to confidentiality, which preclude us from speaking publicly about many things that a company not operating in TechPrecision's specific environment might discuss. Please understand there are real limits as to what I can discuss, and sometimes, those limits do change. TechPrecision is proud and honored to serve the United States defense industry, specifically, naval submarine manufacturing through both our Ranor and Stadco subsidiaries and military aircraft manufacturing through our Stadco subsidiary. We aim to secure and maintain enduring partnerships with our customers. Overall, at both the Ranor and the Stadco subsidiaries, we continue to see meaningful opportunities in our defense sector, as evidenced by the strength -- by the continued strength of our backlog. We are encouraged by the prospects for growing our revenue and increasing profitability in future quarters. In summary, we had a profitable consolidated quarter. We are showing progress and have more work to do with our Stadco subsidiary to get it into the black. We filed on time, and we are targeting to build and sustain this trend. We want to build this trend. Operator, please open the line for Q&A. Operator: [Operator Instructions] We have a question from Ross Taylor with ARS Investments. Ross Taylor: First, I didn't think I'd ever live to see the day you guys actually reported inside the time horizon. So congratulations, really fantastic turnaround on that. What percentage of your Stadco business is still needing to be reworked to become profitable or needs to -- is one-off contracts that you need to run out to become profitable overall? Alexander Shen: I don't know about the percentage, but I think the -- let me parse that question and split it into three chunks. As far as the one-offs, I think those will need to continue. As far as the -- well, I say they continue. They will need to continue, but the ones that are experiencing losses and loss reserves have been dealt with very vigorously in the last quarter that we're reporting on. So that's really good. As far as another piece of it that was causing loss reserves was basically our first article activity. That doesn't mean just the first unit. It means the whole first article activity for our repeating part numbers. So it might be the first one, the second and third one, or it might be the first 10. It depends on the situation. But first article activity, until we can get to a stable, repeatable, sustainable cadence and expectation of manufacturing throughput, those have also been rather vigorously dealt with in the quarter we are reporting on. How much is left? Well, it will be imperative to continue to capture new business with new part numbers. So the first article activity needs to be watched carefully. The risks need to be mitigated. The customer collaboration, we will increase that to the point where we deal with the first article loss reserves. We want to deal with them more effectively. I don't know that we can deal with them as effectively as we did in the reporting quarter that we're reporting on now. But certainly, we've set ourselves a target. We're not going to keep missing these targets. We're going to work towards the target, hit the target. And I'm here to build a trend together with Phil Podgorski. Ross Taylor: Okay. So you said there are three aspects. So you have the one-offs, and you basically -- those are either run through or you -- future one-off contracts, we should expect to be able to be profitable. You've got the first articles, which obviously -- first articles always tend to carry -- they have issues or risks with them, so they tend to carry lower margins that you believe. Is the problem there more -- did you see it more as a -- was it a design issue? Was it the customer changing the designs? Was it underbidding? What did you sense the issue was in those first articles? Alexander Shen: So as I pulled out my playbook of analyses and tried to get these things down to what's the one big thing, it turns out that because we are really concentrating on rather complex, highly complex items and critical items that are critical to the war fighters, it's really dependent on the situation, Ross. I'm not trying to be funny about this. I'm just trying to tell you the truth. The -- it's a case-by-case basis on each part that we're attempting to build. So it's not one thing. It's a number of one things. So when you've got a lot of people touching it and when you have a lot of different people on the customer side also touching it, the number of touches increases the chances of something not going quite right on the handoff back and forth. That certainly happens quite a lot more when it's first article time. Neither side have been working with each other on this particular part number before. So even if we build a second one, it's not going to repeat the same way that we did the first one. It's much more complicated than to try to generalize and tell you that I've identified the main culprit or the first -- top three culprits. They tend to take turns. We need a little bit more experience with these things to understand how to deal with them in aggregate. But the execution and detail, the nuts and bolts are really important for us to grasp each detail. And it helps me quite a bit when I'm on-site and dealing with these things in person, as well as through my subordinates. Ross Taylor: Is this an issue both at Ranor and Stadco? Or is it more concentrated at Stadco? Alexander Shen: I think the first article problems -- so characterizing Ranor being mostly NAVSEA, Electric Boat, Newport News, Virginia class submarine and Columbia class submarine specification-driven. So the overall and overreaching specification sets our Virginia class and Columbia class. At Stadco, it's a little bit more than one set of specifications or two sets of specifications. So the idea is to focus ourselves and make sure we go back to the same customers because we've already proven ourselves at both Ranor and Stadco to these same customers. That we know their specifications, we know how to manufacture and really sustain our on-time delivery, delivering quality parts to their specifications. So as we continue that focus, that's going to lead us towards full recovery in the black at Stadco consistently. Am I making sense? Ross Taylor: Yes, you are. Having spent some time in the defense industry, some of this stuff actually is things I remember and I'm familiar with. If the Korean -- South Koreans turn the Philadelphia Shipyard into a submarine manufacturing facility initially for their boats, which are somewhat different than our boats, but there would be a probably likely overlap in many systems and components, is that an opportunity for you? And is it something that you would have the ability to service out of your current industrial base? Alexander Shen: I'd love to be able to answer that question, and it falls into the area where I can't speak. Can you rephrase or something? Ross Taylor: Do you see the -- at the shifting of the Philadelphia -- former Philadelphia Naval Shipyard to a submarine manufacturer to be an economic opportunity for you? Alexander Shen: We will look at every single opportunity, yes. Ross Taylor: And I would assume that there are things that go into submarines, generally Western submarines that you produce that in this country would -- you would produce in -- since what, 90% or so of your business is, effectively, you are the sole source. I would assume that a lot of that stuff would still end up in allies' boats as well as U.S. boats? Alexander Shen: You've got great assumptions, Ross. I don't mean that in a funny way. I am aligned with your assumption and that way of thinking. Ross Taylor: We went out of the helicopter this time. Can you walk through -- Phil, can you walk through the -- how you guys handle the grants that you've gotten from the federal government and the characteristics of those grants and what restrictions, if any, exists with them? Alexander Shen: Maybe we can answer this jointly. So the restrictions as far as what parts we may use the equipment for, the Navy parts that they're meant for have priority. And if there are none, then we do have the ability to use these assets for non-Navy parts that weren't designated. Ross Taylor: Or other Navy parts? Alexander Shen: Or anybody's parts. Ross Taylor: Anyone's part. And how does it sit on the balance sheet? Alexander Shen: That's a Phil question. Phillip Podgorski: So certainly, when we receive the cash, we certainly have an obligation to protect that, so we do segregate. We do have liabilities also that are established upon receipt of that cash, whether it's to the supplier or to a vendor that we're working with to secure that equipment. Likewise, as we onboard those assets onto our balance sheet, we do have -- depending on what the agreement is with our customer -- I mean, our supplier, we then, at that stage, will create a offsetting liability and depreciate over the useful life of that equipment. So we have assets and liabilities set up to handle each unique agreement that we have. Ross Taylor: Okay. And are any of the liabilities basically future performance or future services delivered that they give you this money and you are required to provide them something or you get paid for everything you build with this new equipment? Phillip Podgorski: We have paid for everything that we build, right, with this equipment. And there is a -- I can tell you on one contract, for example -- sorry, one funding -- that we do have a 10-year agreement with that, whereby we need to continue to perform for that period of time. Ross Taylor: Okay. And one last one for me is you've talked about the ability to garner new business. You're in an industry where a number of suppliers have struggled to either meet quality or timing and things of this nature. Have you -- what kind of new business have you seen? Are you seeing -- are you thinking things on -- by part number? Outside of TPCS, a lot of us think of it as programs. Are you getting involved in any new programs, particularly out of the Ranor operation? Alexander Shen: We are in the giant program mix of Virginia class and Columbia class submarines. There are programs within those two classes of submarines that we are on. Ross Taylor: Is there an opportunity for you in the larger undersea unmanned vehicles? Alexander Shen: Those are different sets of specifications. Ross Taylor: So at this point, no, but if they were to develop things such as -- there's talk that they want to build something that sits on the bottom of the Taiwan Strait, then when the Chinese decided to invade that, they automatically launch missiles. I think of you guys as being involved in that aspect of U.S. submarines. Would that be an opportunity for you guys if we were to go that direction? Alexander Shen: I think at this point, we are -- we have a lot of opportunity with the same customers and the same design shipyard. So if our customers lead us to that type of opportunity, we're absolutely ready to take a look. We just need to make sure that whatever first article activity we choose, it's going to be something that we can mitigate the risk and stay resilient with good backup plans and good planning for advanced countermeasures to counteract the learning that we tend to do as a community on new first article parts and new first article programs. Ross Taylor: It was -- it just strikes me as it would seem that with things like longitude doors and things that there might be a technological capability overlap that as we develop more war fighting unmanned underwater vessels that your skill set would become more in demand. I'll pass it to others. I've taken up a fair amount of people's time. And congratulations for getting back on time. One thing I would love to see that I'm going to leave you with, insiders actually buying stock instead of selling stock would be a nice change of pace. Phillip Podgorski: Duly noted. Operator: Ladies and gentlemen, we have no further questions in the queue at this time, so this will conclude our question-and-answer session. I would now like to turn the call back over to management for any closing remarks they may have. Alexander Shen: Thank you, everyone. Have a great day. Operator: Ladies and gentlemen, this does conclude today's call. You may disconnect your lines at this time, and we thank you for your participation.
Operator: Greetings. Welcome to Moving iMage Technologies, First Quarter 2026 Earnings Call. [Operator Instructions] Please note the conference is being recorded. At this time, I'll turn the conference over to Chris Eddie with Investor Relations. Thank you. You may now begin, Chris. Christopher Eddy: Thank you, operator, and good morning to all of you joining today's call. Moving iMage Technologies CEO, Phil Rafnson, will make some opening remarks, followed by a business update from President and COO, Francois Godfrey; and then CFO, Will Greene, will conclude with some financial highlights, after which we will open the call to investor questions. Today's conference is being recorded, and an audio replay and written transcript will be posted to the Investors section of the Moving iMage website in the next few days. As a reminder, except for historical information, the matters discussed in this presentation are forward-looking statements that involve several risks and uncertainties. Words like believe, expect and anticipate mean that these are our best estimates as of this writing, but there can be no assurances that expected or anticipated results or events will take place. Actual future results could differ materially from those statements. Further information on the company's risk factors is contained in the company's quarterly and annual reports filed with the SEC. I will now turn the call over to Moving iMage CEO, Phil Rafnson. Philip Rafnson: Thanks, Chris, and thank you all for your interest in Moving iMage Technologies. Our quarter 1 performance was bolstered by the acceleration of some projects we had expected later in the year and by solid operational execution, both in terms of margin and operating costs. The combination of higher revenue, increased gross margin and lower operating expenses enabled us to achieve our goal for profitability for the quarter while also bolstering our working capital position. I'm very proud of the operational progress our team has made that enabled us to achieve profitability results. This progress will benefit MIT as we move forward. However, our ability to achieve profitability in any given quarter remains a function of the timing of customer projects as well as normal seasonality of our business. Visibility into longer-term customer spending plans remains limited despite the substantial scope of industry-wide cinema technology upgrades still to be completed. We believe a major factor in supporting laser projection and audio upgrade investments is the health of the exhibition industry. To that end, domestic box office receipts for the third quarter of the calendar year were approximately $2.4 billion, nearly matching the year ago period. And we are now entering the all-important holiday box office season that offers the potential for improvement given a strong film lineup and steady improving attendance trends. Our strategy within our target markets has been to continue building on our value proposition with new products and capabilities. We believe our recent acquisition of DCS Cinema Loudspeaker line represents an exciting step in executing this strategy. Overall, I believe MIT is making good progress in enhancing our operational and financial performance while also taking steps to expand our capabilities. Through these initiatives, we are improving our ability to support our customers in navigating their cinema technology requirements from design and engineering to equipment supply, installation and system commissioning. Now I'll turn the call over to Francois Godfrey, our President and COO. Francois Godfrey: Thanks, Phil, and good morning, everyone. I'll start by echoing Phil's comments on our team's solid start to fiscal year 2026. Our Q1 revenue exceeded our expectations on the top line as certain projects were accelerated by customers into the period. In addition, our bottom line benefited from the meticulous project execution for which MIT is known, enabling us to achieve an operating income of $350,000. We are particularly gratified by achieving profitability in the first quarter as this resulted from many quarters of work in reducing our overhead, cost structure and building our project pipeline focused on higher-margin opportunities. Given our size, the seasonality of our industry and the variability of project sizes, their timing and revenue mix, we continue to expect operating losses in the future until we are able to scale our business to consistent profitability. To reach that important goal, we continue to advance a range of internal and external initiatives designed to build our revenue base. On the project side, our team continues to engage in a variety of new build and technology refresh discussions with exhibitors and other specialty entertainment venues. These projects range from individual auditorium upgrades to full site refresh or new build initiatives incorporating state-of-the-art laser projection technology, coupled with immersive audio technologies. As we have often said, the timing of these opportunities remains fluid as they are largely dependent on our customers' capital cycles and strategic decision-making. Accordingly, this makes it difficult for us to predict project timing, particularly on a quarterly basis. Fortunately, the scope of legacy equipment in the market is quite considerable. Our ongoing engagement with new and existing customers confirms that there remains a very substantial base of potential work over the next few years. So we continue to believe that it's not a question of if a broad base of upgrades will take place. It's more of a question of when and at what pace. In this environment, we have turned management attention towards the things we can control, which include our cost structure, margin profile and our product and services offering, where we have made good progress. An exciting recent development from these efforts was our purchase of the DCS Loudspeaker line from QSC. DCS is a proven and highly regarded line of premium cinema loudspeakers with a global customer footprint recognized as a de facto standard across cinema, post-production, studio and screening room environments. Like MIT, DCS has an over 20-year reputation for quality, reliability and service, making it a perfect fit with our cinema audio solutions. We believe DCS can become an important part of our growth strategy. The purchase was completed on October 31, and we are now working to integrate the operations and build out our go-to-market strategy, including a couple of select hires to help drive the business. The DCS assets included all intellectual property, customer lists and finished inventory. We purchased for $1.5 million in cash from our $5.5 million in net cash at the close of our first quarter. We feel the acquisition terms should enable DCS to be accretive to our bottom line, and we see real potential to return our full investment in as little as 2 or 3 years. Now it's up to us to go and execute on that potential. We expect it to take a few quarters to integrate the business and get it fully up to speed with MIT. Now let me backtrack and touch on a few reasons why we are very excited about DCS. First, it immediately expands our addressable market, product portfolio, competitive position and brand recognition within the cinema industry. The DCS product line is known, respected, and deployed in auditoriums around the world. The acquisition elevates MIT's visibility while enhancing our audio capabilities and complements the LEA amplifier offering to create a stronger cinema audio offering for a wide range of auditoriums and venues. Second, it builds on our expertise and global distribution relationship with LEA Amplifiers, another hallmark cinema brand, creating an even more compelling audio offering. Third, it provides us access to the exciting base of DCS customers, some of whom are new to MIT and positions us for future opportunities. Fourth, it opens MIT to a range of new overseas markets, particularly in Europe, the Middle East and Asia, where we have had little or no exposure, while also providing potential for cross-selling opportunities for other products as we grow. So far, the feedback from customers and industry partners has been very supportive. We already begun discussions with potential international distribution partners and have received opening orders from both domestic and international customers while we onboard the inventory. Turning back to the overall business. We continue to progress our efforts to trim cost as reflected in our first quarter results. At the same time, we have focused effort on business development that seeks to forge new relationships as well as build on existing accounts. Looking ahead, we remain optimistic regarding the exhibition industry outlook as Hollywood content continues to build after the strike and other impacts. Domestic box office trends continue to improve and should be supported by a stronger and more consistent release calendar on the horizon. Assuming continued progress at the box office, we believe exhibitors will have improved access to capital to pursue deferred cinema technology upgrades and new theaters. The potential for more available capital, combined with continued aging of legacy cinema systems should provide increasing opportunities for MIT. Keeping our solutions front and center in the industry, our business development team will attend CineAsia in Thailand next month from December 8 to 11, and participate in 2 events early next year, the ICTA Seminar Series in Los Angeles in January and the Dine-in Cinema Summit in Austin in February 2026. All are ideal forums to showcase our new DCS line and our other capabilities with key customers and technology partners. To sum up, our team delivered strong Q1 performance, both operationally and strategically, and we remain focused on these disciplines that enabled that success. The DCS Cinema Loudspeaker line is an important and complementary addition to our suite of offerings that elevates our value proposition and should support long-term growth. Our pipeline of project dialogues remains active. Our partnerships are strong, and our focus on innovation and execution continues to differentiate MIT in the marketplace. We are grateful for your investment and support and look forward to updating shareholders as we move forward. Now I'll turn the call over to Will Greene, our CFO, to address some financial highlights. William Greene: Thanks, Francois. We published our financial statements in the press release this morning and expect to file our Form 10-Q by the close of business today. I will touch on select financial results and gladly answer any questions during the Q&A session. MIT's Q1 '26 revenue rose 6.2% to $5.6 million, reflecting the benefit of delivery of a custom cinema project and other client work. Our Q1 '26 gross profit rose 22% to $1.7 million, supported by higher revenue and an improved gross margin of 30% compared to 26.1% in Q1 '25 primarily due to a favorable mix of products and execution efficiency. MIT reduced operating expense by 8% to $1.32 million in Q1 '26 compared to $1.44 million during Q1 '25 due to reductions in compensation, headcount, rent and travel costs. As noted in our Form 10-K for the fiscal year ended June 2025, we streamlined our organization from 32 to 25 full-time employees. We expect continued benefits from this leaner operating model as we move forward, offset to some degree by selected new hires for the DCS operations. Q1 '26 operating income improved to $350,000 versus an operating loss of $68,000 in the same period last year. The improvement reflects revenue growth, a focus on higher-margin opportunities and ongoing expense management initiatives. Similarly, Q1 '26 net income improved to $509,000 or $0.05 per share compared to a net loss of $25,000 or breakeven per share in Q1 last year. Q1 '26 net income included a $128,000 noncash gain from payables extinguishment that more than offset a decrease in net interest income, largely due to lower interest rates. Our Q1 '25 results underscore MIT's potential to achieve profitability and positive cash flow on higher revenues with the benefit of our cost and margin disciplines. Turning to our balance sheet. Working capital rose 12% to $4.8 million at the close of Q1 '26, keeping us in a solid position to fund our business compared to year-end ' 25 working capital of $4.3 million, but below year ago working capital of $5.1 million. MIT continues to have no long-term debt. We closed Q1 '26 with net cash of $5.5 million or approximately $0.55 per common share compared to net cash of $5.2 million in Q1 '25 and net cash of $5.7 million at the close of fiscal year 2025. Our solid cash position enabled us to complete the purchase of the DCS Loudspeaker assets for $1.5 million in cash on October 31, at roughly 1/3 of the way through our fiscal second quarter. Turning to our revenue outlook. MIT anticipates Q2 '26 revenue of approximately $3.4 million, reflecting the impact of the holiday season on cinema exhibitors capital spending and our current window of customer projects and decision-making. As you may know, the exhibition industry seeks to maximize its potential box office potential during the holiday season and as a result, cinema technology and other upgrades are generally limited in scope to prevent any disruption. Reflecting the slower pace of business and the expected revenue mix, we also expect our Q2 '26 gross margin percentage to return to a more historical lower level. We continue to believe that MIT is well positioned to navigate the opportunities and challenges of our industry to pursue growth, profitability and stakeholder value. Our operating structure improvements, business development efforts, the recent acquisition of the DCS loudspeaker line and the long-term scope of that opportunity are key factors supporting our confidence in achieving those strategic goals. With that overview, operator, we are ready to begin the Q&A session. Operator: [Operator Instructions] First question is from the line of Neal Fagan, a private investor. Neal Fagan: First of all, great quarter. It's really, I guess, the word from me is exciting to see that even a modest revenue level of $5.5 million gives you strong GAAP profitability. I was curious just to learn a little bit more about the DCS speaker line. Did I understand that you think you can recoup the purchase cost with revenue over the next 2 to 3 years? Is that the metric you were using? Philip Rafnson: I can take this one. Yes, that is the intent that we modeled out as we're trying to bring the -- that line toward where it used to be. Neal Fagan: Okay. Well, that wording is interesting because here's kind of where I'm wanting to understand this. It was a very small purchase price, $1.5 million. And from your prepared remarks, it sounds like this is a line of speakers that is embedded in a lot of the large displayers, a lot of the medium-sized displayers. Is this a case of where the DCS line in you guys' opinion has enormous potential that wasn't being realized by the previous owners for whatever reasons. Are you guys feeling like you can take this to a much higher level than what was being done when you acquired it? Philip Rafnson: Correct. It's -- this line is well respected around the world, and it has extreme potential and market acceptance. Neal Fagan: Okay. And you talked about how it's a good go-to-market compatibility product with the LEA power amplifiers. So I'm thinking of it, we have DCS, which is an established name and has customers around the world. We have LEA, which is just trying to get into the cinema industry through you guys. I mean, are you feeling like going to market with both is going to potentially accelerate the acceptance and adoption of the LEA power amplifiers? Philip Rafnson: There are synergies there, and so that would be the intent. Neal Fagan: Okay. And when you acquired -- when you got the rights for the -- for LEA, you gave us metrics about the average selling price per power amplifier and the number of power amplifiers that would be used in a typical single-screen cinema. Can you give us a few numbers around the DCS speakers like a typical theater, a single-screen room, what's the revenue opportunity if it was outfitted with new DCS speakers? Philip Rafnson: I don't have those figures in front of me at this time. Neal Fagan: Okay. And final question for me is, you guys have highlighted several times in the announcement pursuing international markets and opportunities. You called out Middle East and Europe. When do you think that you might, in one of these calls, kind of go into more of the detail about the status, how we're approaching that and kind of a game plan, is that something we might hear about soon? Philip Rafnson: Once we finish the process of onboarding the business, we'll have a clear picture. Operator: [Operator Instructions] At this time, this now concludes our question-and-answer session, and this will also conclude today's conference. Ladies and gentlemen, thank you for your participation. You may now disconnect your lines at this time, and have a wonderful day.