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Annie Bersagel: Good morning, and welcome to the presentation of Orkla's third quarter results. My name is Annie Bersagel and I'm the Head of Investor Relations and Communications. Our President and CEO, Nils Selte, will begin with a summary of the highlights from the quarter. After that, our CFO, Arve Regland, will go into a deeper dive in the financials. Nils will come back with some concluding remarks before we go over to the Q&A. So just a reminder, we have a video Q&A with analysts first. And after that, we will take all of the questions that come through via the web. So you're welcome to submit your questions via the web at any time. So with that, I think I will now leave the floor to you, Nils. Nils Selte: Thank you, Annie, and good morning, everyone. This quarter, we continued to execute on our active ownership model and capital allocation strategy. The focus is on improving our core business in the portfolio companies and investing in opportunities that drive long-term value. To start with a highlight this quarter. In Q3, Orkla delivered 4.4% organic growth across our portfolio companies. Of this volume mix contributed positively with 1.3%. Underlying EBIT adjusted growth grew by 1.1%. This quarter, we see a mixed development across the portfolio companies. Adjusted earnings per share was NOK 1.85, a 9% increase year-on-year. And the IPO, Orkla India. I said at the Capital Markets Day in November 2023 that we were initiating IPO readiness study. Last week, we reached a major milestone with the IPO of Orkla India. It is the result of a year of steady work, and I'm proud of the persistence shown by our team in India and at headquarters to reach this point. Since we bought MTR Foods back in 2007, we have had an amazing journey starting with strong local brands and strong local management team. Orkla India acquired Eastern -- in Eastern in 2021, and have steadily grown the company to what it is today. Let me be clear, this is not -- this IPO is not an exit for Orkla. Orkla will remain committed -- a committed major owner of the company. As a listed company, Orkla India now has its own currency and the flexibility that comes with it, a tool that will support growth over time. The proceeds from the sale of Orkla India provides additional financial contribution alongside Orkla's robust cash flow from operation. To optimize the capital structure and return excess capital to shareholders in line with our capital allocation policy, we have decided to initiate a NOK 4 billion share buyback program. The program will begin on November 17, 2025, and conclude by the end of December 2026 at the latest. Moving on to organic growth development for the consolidated Portfolio companies here shown over the past 2 years. Nearly all of the Portfolio companies contributed to growth in this quarter. Orkla Food Ingredients and Orkla India had the largest positive contribution to volume mix. Orkla Snack, also a larger positive contributor to price growth due to extraordinary cocoa price situations. Turning to a breakdown of the Portfolio companies' performance. We see a more flattish development in the results this quarter compared to a strong quarter last year. With our continued focus on long-term value creation, we see positive underlying development in several of the companies. Profitability varied across our Portfolio companies, and Arve will present a more detailed picture of the individual companies, but a couple of developments deserve mentioned. Jotun continued to deliver strong results during this quarter with double-digit underlying EBIT growth in local currencies, while maintaining the high margin levels. Orkla Food Ingredients delivered lower EBIT growth compared to past quarters. This led to a weaker development in the Bakery segment, in addition to volume growth, in lower-margin categories in plant-based. The positive growth in the Sweet segment continued. Excluding the impact from Cocoa, Orkla Snacks continued to have a positive underlying development. Moving on the 12 month -- the trail rolling months, EBIT adjusted margin for the consolidated portfolio companies held at 10.3% in the third quarter, a 0.3% improvement year-on-year. This improvement was broad-based with corresponding margin improvement in 7 of the 9 consolidated Portfolio companies. In terms of input cost, the development remains polarized. We continue to expect raw materials prices in sum to stabilize in 2025, excluding cocoa. Beyond 2025, we expect a continued polarized cost development across sourcing categories and for the Portfolio companies with an overall neutral cost outlook despite inflationary market sentiment. At our Capital Markets Day, we laid out our 3-year financial targets for the consolidated Portfolio companies. At the same time, I said that improving the performance of our existing portfolio will create the most value in the short term. I'm impressed by the progress of our Portfolio companies so far delivering EBIT adjusted to compound annual growth rate of 11.8%, margin expansion of 1.3 percent points and an improvement in return on capital employed by 2 percentage points. All in line with our financial target for this strategy period. At the same time, a lot of work remains. We will be fully focused on delivering on each of these goals in 2026, concentrating particularly on continued organic growth, cost management and capital discipline, achieving our 2024-2026 target is central to delivering top-tier long-term shareholder return, which is our overarching mission. I'll now hand over to Arve to walk through the quarter in more details. Thank you so far. Arve Regland: Thank you, Nils, and good morning. Let's start with the income statement highlights for the third quarter. Operating revenue was NOK 17.9 billion, up 4% year-over-year, and EBIT adjusted was NOK 2 million, up 2%. Lower cost in Orkla ASA and the business service companies contributed positively. Other expenses was NOK 401 million in the quarter, and the main element was a write-down of NOK 240 million of trademarks in Orkla Health and a write-down of NOK 130 million in the European Pizza Company equal to the remaining goodwill in New York Pizza's German operations. Profit from associates, which is mainly Jotun, was NOK 603 million, up 10% year-over-year and then landed at profit before tax at NOK 2 billion. And the improvement compared to last year is mainly due to the substantial impairment charges last year. And as Nils mentioned, adjusted EPS at NOK 1.85 per share, up 9%. Year-to-date cash flow from operations was NOK 4.8 billion. We are around NOK 400 million below record last year for 2 reasons. Some working capital buildup due to higher trade receivables and inventory, and increased net replacement investments primarily related to Orkla Foods, Orkla Food Ingredients and Orkla Snacks. These include replacement project at various factories, ERP projects and new long-term leases. Dividend from Jotun is unchanged versus last year at NOK 948 million, and we received the second installment in the third quarter. Turning to capital allocation bridge, and I will comment on specific development in the quarter. Expansion CapEx is around NOK 400 million year-to-date, of which NOK 250 million in the third quarter. And the increase in the quarter is related to -- mainly to increased production capacity in Orkla Snacks and Orkla Food Ingredients. Purchase of companies increased with roughly NOK 100 million and is related mainly to bolt-on acquisition in Orkla Food Ingredients. We maintain a robust balance sheet with a net debt at NOK 17.7 billion, equal to 1.7x EBITDA and 1.3x excluding Orkla Food Ingredients. Moving to some more details on the Portfolio of companies. And as usual, we'll start with Jotun. And please note that the figures and graphs relate to Jotun is the end of August year-to-date as Jotun do not publish Q3 results. However, I will discuss some highlights from the quarter. Operating revenue declined 2% in the quarter, excluding negative currency translation effects, the sales growth was plus 4%. This follows a continuing trend, revenue growth driven by higher volumes as well as increased premium sales in the decorative segment. EBITA increased by 6% over the quarter and 12% excluding the currency effects related to a stronger Norwegian krona. Both higher sales volumes and gross margin from lower raw material cost contributed positively. Jotun had financial gains related to currency hedging in the quarter, but the amount is still much smaller than the negative impact to EBITA related to the stronger NOK. We guided that we expect to report 2025 results on par with last year. We continue to expect currency headwinds to negatively impact growth year-over-year in the fourth quarter. That said, given the strong underlying operational development year-to-date, Jotun's contribution to Orkla results for 2025 tracks ahead of our outlook. Orkla Foods had organic growth of 0.8%. It was a temporary negative volume mix impact in Q3 due to ERP modernization in the Czech Republic. And the go-live process created challenges for our main warehouse resulting in lost sales. Adjusted for this, volume mix growth was slightly positive for Orkla Foods in total. Orkla Foods Norway had a negative volume mix but with a significant improvement compared to the second quarter. Market share in growth categories increased in line with the strategy communicated at the Capital Markets update. Underlying EBIT growth was 2.4% and came primarily from increased sales. Input costs increased during the quarter and Orkla Foods expects higher prices for beef, dairy, marine and berries to continue into next year. Orkla Snacks had organic growth of 7.5%, driven entirely by price. The Chocolate segment was the main driver of the price growth as well as a drag on volumes. Organic growth in the Snacks category was flat in the quarter, while biscuit contributed positively. Underlying EBIT declined 8.4% year-over-year reflecting impact of higher cocoa prices. BUBS launched in the U.S. in September through a production and distribution agreement with Mount Franklin Foods. The BUBS U.S. launch was promising, but was not material in Orkla Snacks P&L for the quarter. We expect limited EBIT effect from BUBS in the coming quarters as we continue to invest in A&P and SG&A to support the rollout. Orkla Home & Personal Care had organic growth of 0.9%, driven by continued volume mix growth in Norway and Sweden. And this was partly offset by lower volume mix in contract manufacturing and Finland. Underlying EBIT growth was 7.6% year-over-year, primarily cost-driven. Organic growth in Orkla Food Ingredients was 8.3% with 3.9% from volume mix. The plant-based cluster drove the volume mix growth but on lower margin products with limited impact on EBIT growth. There was a volume mix decline in Bakery across business units impacted by softening consumer sentiment and intensified competition. Underlying EBIT growth at 1.6% for the quarter was impacted by continued improvement from sweet ingredients, offset by a loss of volume in Bakery as well as lower margins in plant-based, as mentioned. Organic growth in Orkla Health was 2.5%, with volume mix growth of 1.6%. The main positive contributors were Wound Care and Food Supplements in Europe. The growth was offset by continued weak development in both Oral Care and Functional Personal Care categories for B2B customers. Underlying EBIT decline was driven by contribution margin pressure, increased SG&A costs and higher advertising spend in food supplements. The new Orkla Health CEO, Mats Palmquist, joined in mid-August, and initiatives are launched to reduce complexity and improve growth. And we will find the right opportunity in 2026 to present an update on Orkla Health to the Capital Markets. Orkla India reported quarterly results yesterday, so I will only name a few points here. And please note that Orkla India reports to the Indian Stock Exchanges in local currency according to Indian Accounting Standards with the financial year starting April 1. The quarterly numbers we report are according to IFRS, given in NOK and presented on a calendar year basis. Organic operating revenue growth was 4.3%, with positive volume growth and a decline from price. Underlying EBIT declined by 1.8% due to higher advertising costs related to early festive season. Transition expenses associated with recent sales tax reform in India and also Orkla India recorded financial incentives from the government of India in the same quarter last year. Excluding the impact of government grants, underlying EBIT adjusted growth was 6.2%. Organic growth in the European Pizza Company was 2.2% in the quarter with consumer sales growth in the Netherlands, Finland and Poland. Underlying EBIT increased with 7%, driven by consumer sales growth and cost control. And lastly, Orkla House Care had a top line organic growth in the quarter, while the development was flat in the Health and Sports Nutrition Group. But there were substantially improved profitability in both companies compared to the same quarter last year. With that, I'll hand it back to you, Nils, for the closing remarks. Nils Selte: Thank you, Arve. Having now entered the second half of our statutory period 2024 to 2026, I'm pleased with the progress we have made across the 3 strategic pillars presented at our Capital Markets Day. Driving organic value in our existing portfolio, simplifying the portfolio structure and executing value-adding structural transactions. As we enter the last part of the strategy period, we remain committed to delivering on these 3. At the same time, we have initiated development for our next strategy plan, which will guide Orkla through 2030. This work is being carried out in close collaboration with our Board and grounded on the same principles of focus, discipline and long-term value creation. We look forward to presenting the next strategy plan to the market towards the end of 2026. In closing, I want to thank our employees across Orkla and our Portfolio companies for their hard work and our owners for continued support. We entered Q4 with determination to finish the year strong and with confidence in the path ahead. We have more work to do, but we are pleased with the direction. Thank you for your attention. Arve and I are now happy to take your questions. Annie Bersagel: Welcome back. We are now ready to begin our Q&A. [Operator Instructions] So our first question is from Hakon Nelson from Kepler Cheuvreux. Hakon Nelson: I have 2 from me. The first is about Jotun, they delivered a very solid quarter. Could you elaborate on the key drivers by the solid volume growth and margins? And whether do you see this level of performance as sustainable into 2026? And the second is regarding the transformation and exit portfolio. How should we think about the remaining assets in terms of timing? And are there business outside the current transformer exit classification that you could consider opening for a strategic review or potential sale if the right conditions arise? Nils Selte: Let's start with the Jotun question. I think as we describe the result and the good performance of Jotun is very much due to the higher volume and also improved gross margin. I think also we have said that we guide now ahead of what we guided for the total year 2024. So we are -- I think we will be a bit above what we guided early this year. We don't want, at this stage, guide for 2026, but I guess we will get back to that on the Q4 presentation. So can you repeat -- so when it comes to transform or exit portfolio, we have 2 companies left we have never guided on structural deals. So I think we will stick to that policy and not guide on any structural deals. And that goes for the whole portfolio to say so. Annie Bersagel: Our next question is from Ole Martin Westgaard from DNB Carnegie. Ole Westgaard: I'll start with a quick 1 on Foods. You highlighted delivery issues in the Czech Republic in this quarter. Just to be clear, are these issues now resolved? Or is this -- will this also impact Q4? Arve Regland: They are resolved. So that's -- this is also a Q3 incident in relation to implementation of the ERP system, which had -- we had some problems in the main warehouse related to that, but that's resolved at the end of Q3. So it shouldn't be impacting Q4. Ole Westgaard: Yes. And on Snacks, can you be specific on how much snack or sort of chocolate demand was down in Q3? And when do you expect this to stabilize or has it stabilized now? Arve Regland: It has stabilized, but we don't give any clear guidance on exact numbers. But as we have said earlier, we have at least a 10% volume decline on -- due to chocolate price increases. But it's stabilizing, but it's still obviously affecting the numbers year-over-year, as you can see in the report. Ole Westgaard: Yes. And then on the write-downs. I understand this is -- majority of this is related to Nutrilett. What is the remaining book value of Nutrilett on your balance sheet as of now? Arve Regland: There's nothing left on Nutrilett, but it's also several trademarks in Orkla Health that was written down in the quarters. Nutrilett was 1 of them, but they are also consolidated a few other trademarks into Sana-Sol as a new main brand for some of the trademarks or it's a combination of several trademarks that's written down, which then in total was the number, as I presented. Ole Westgaard: Yes. And then last 1 on Foods and Snacks. Can you comment on how you see your market share development in this quarter and how the competition is from private label? And I'll join back in the queue. Nils Selte: I think, in general, we see that we are flattish, more flattish when -- if you look at the prioritized categories within Foods, we see that we are taking market shares. Otherwise, in the other categories in Foods, we are more or less flat. Also that goes for -- but it's a few variation between the different categories in Snack, but all in all, it's more a flattish development this quarter. Annie Bersagel: And it looks like the next question we have is from Petter Nyström in ABG Sundar Collier. Petter Nystrøm: So just a very quick question for me. And that is, could you share some insight on how you see raw material prices developing into 2026 versus 2025? Nils Selte: As I talked about that briefly in my presentation earlier this morning, and I think this -- we are expecting flat development, including cocoa prices going into 2026. And that's the picture we see as of today. A bit fragmented, there are a big variation between the different categories, and it might see the different Portfolio companies differently. But in general. Annie Bersagel: I see Hakon Fuglu has a hand up, if you have another question. Hakon Fuglu: This is the first. But yes, I have a couple of ones, and I'll take them 1 by 1. In the second quarter, you talked about inventory rebalancing within Food for a couple of your clients. Did we have any impact on that this quarter as well? Arve Regland: That was a very limited impact this quarter. Hakon Fuglu: Okay. And looking at your headquarter costs, they continue to decline sequentially also in this quarter. Are we sort of reaching a sort of more normalized level in this quarter? Nils Selte: We don't want necessarily to guide on the headquarter cost. But I think this quarter, we see a reduction in FTEs in the IT part of the Orkla IT AS, and we also see a reduction in number of FTEs in the headquarter, as well as a reduction in bonus cost due to the share price development in this quarter. But we don't want to guide for going forward. Hakon Fuglu: And final 1 from me. Talking about your hero brands. Elevating those brands, now you're going to sort of help and what sort of the expected impact for the other Portfolio companies there? And are you seeing any impact from the ambitions that you launched on the CMU? Nils Selte: Implementing new ways of actually running our portfolio of different brands takes a lot of time, and it takes also time before it gets effect into your performance as well. So I think all the companies are now implementing this new way of thinking. And we presented the Snack and Food, how they are working on the Capital Markets Update in May this year. So this is work going on. We see progress as we have said that in prioritized categories in Food over the last few quarters. And I think that's a good sign on that this will work and this is working, but it takes time before it hits into the P&L to say so. Annie Bersagel: And I see our next question is from Ole Martin Westgaard in DNB Carnegie. Ole Westgaard: Another question for me. When it comes to your marketing spend in this quarter, how is that year-on-year? And what was the underlying margin improvement adjusted marketing spend? Arve Regland: Yes. We haven't given a clear number of that, but it's fairly flattish compared to the last year. Ole Westgaard: Yes. And then just on BUBS. You -- can you say a bit more on how you see the performance of BUBS in Q3 relative to your expectations? How has it changed any perception of how you view the attractiveness of the U.S. market? Arve Regland: No. In U.S., it's still early days. So as we also stated in the report, it's a promising launch in the U.S. Limited, however, limited impact to the numbers in the third quarter given that we launched at the end of the quarter. And we are also now very keen to support that rollout, meaning that we're going to support the sales with SG&A resources and also A&P. So on the back of that, it's promising, but I wouldn't expect a huge impact to the P&L in the coming quarters due to the efforts that we put behind the rollout. Nils Selte: We will in that for the long term in the U.S. market when it comes to BUBS. Annie Bersagel: That seems to be the last video question. So we're going to turn it over to questions from the web. It looks like we've had a couple coming from Marcela Klang, Handelsbanken. The first question from Marcela is on the strategy. Can you give an indication of the continued strategy plan that you will present towards in 2026? What areas are you contemplating on targeting real estate, M&A? Nils Selte: I think that's way too early. I said this is a process that we just started with the Board. It's ongoing discussions, and we have made a plan on how to make a good strategy for the future heading towards 2030. We also, in this process, will dive into the Portfolio companies, and the Portfolio companies will make their own full potential plans and strategy plans, and we need to see the totality before we can give any guidance to the market. And we would wrap in the end of 2026 with a new Capital Markets Day to tell about our strategy for 2030. Annie Bersagel: And the last question from Marcela here is, do you expect the NOK 4 billion share buyback program to be spread across Q1, Q2, Q3, Q4 2026 evenly or more in the first half? Arve Regland: The share back program will be run according to the MAR regulations meaning that we will buy a volume not affecting the share price, meaning up to 25% of the volume in the recent periods. So that it will take the time it will take. And we're not going to give a clear guidance on how many months it will take, but obviously, it will take some time to accumulate that volume in the market. Annie Bersagel: And that appears to be the final question on the web. So before we conclude, let me just remind you that we will report results for the fourth quarter on February 12. So with that, thank you for joining, and please enjoy your day.
Operator: Good morning, ladies and gentlemen. Welcome to Syn's video conference about the third quarter results. This conference is being recorded, and you will be able to access the replay on our website, ri.syn.com.br. The slide deck will also be available for download. [Operator Instructions] And right after the presentation, we are going to have a Q&A session. We will provide further instructions then. I would like to provide that the information that will be informed are related on the information that are responsible or available right now. However, since future results may differ substantially from the results presented and herein due to the various important factors, among other factors, investors, shareholders and stakeholders need to take into account that there are other circumstances responsible for the decisions other than the information contained in this presentation. Here, we have Thiago Muramatsu, the Director at Syn; and Hector, the Investors Liaison Director. Now I'd like to give the word to Thiago Muramatsu for the presentation. Thiago, please go ahead. Thiago Muramatsu: Welcome, everyone. Thank you very much for joining on this call to talk about our results. We are going to start talking about some of our achievements from the third quarter. So let's start with capital reduction that we had for this quarter. It was announced at the end of the month of July, a little bit before we had the second quarter results, we had a total of BRL 330 million reduction, which is about BRL 2.16 per share on the date of September 18. We are also moving on with the Shopping D transaction where we are selling our participation along with XP Malls. The sale of our entire stake represents a total of BRL 8.9 million, and we expect to finalize this transaction in the next coming weeks. Finally, as we mentioned at the beginning of the year, we also closed the sale of Brasílio Machado. We have already received the first 5 installments. There is a final one to be received at the end of this year where we are going to close the entire deal. Now a little bit about our operational performance. Let's start with shopping malls. In this quarter compared to the third quarter of last year, we had an increase of physical occupation of about 1%. Throughout this last year, we started with new rentals and exchanged 7% of our total number of stores focused on food, entertainment and services. We also reduced our share in clothing stores focused on those 3 main factors. When it comes to financial occupation, we also had a slight increase, but we continue at about 95%, which we consider to be a healthy occupation. Now a little bit about our sales. When we talk about sales evolution, we can see that we had an increase of 5.5% with BRL 55 million coming from same-store sales, BRL 44 million from new locations or new stores and 18% from kiosks and events. So when we consider the total sales in percentages throughout the 9 months of this year, we can see an increase of 4.2%, and the same-store rent with an increase of 5.6%. Despite the fact that we had these increments of 5.6% compared to 4.2% in sales, we were able to keep our turnover that represents very healthy levels as well. And the majority of this increase or this growth of BRL 18 million was considered also with this growth in portfolio compared about 50% compared to last year. Now about corporate buildings, we maintained basically the same level of physical occupation compared to the same period of last year. And when we look at 82.7% against 91.6%, we had the vacancy of Brasílio Machado, which was a building that we have sold. So when we take that into account, we go from 91% to 93.8% as well as in financial occupation going from 91% to 92.6%. Lastly but not least, talking about our warehouses, the CLD. As we have been seeing over the last quarters, we have already delivered Phases 1 and 2. Both of them are 100% rented, already occupied. We expect to deliver the Phase 3 on December this year. When it comes to the Phase 4, we expect to deliver that fourth phase on the first semester of 2026, but we have this expectation of being able to deliver the last phase already in the first quarter of 2026. We are already having some conversations about occupation. We already have a proposal for the rental of part of this warehouse of about 30%. And in terms of location, we are talking about 10% compared to the last value of Phases 1 and 3 -- I'm sorry, Phases 2 and 3. Now I would like to talk -- to give the floor to Hector to talk about financial results. Hector Bruno de Carvalho Leitao: Well, on the first phase, we can see the performance of our properties compared to the same period of last year. And in the first quarter, we had a very robust growth of 13.7%. And throughout the 9 months, 11.8%, both for shopping malls and offices. The main driver or leverage of those results are in revenue for malls. We had this increase of 10%; and offices, 11%. This is basically due to the fact that we had an increase of revenue of same stores. As Thiago has mentioned, there were some store exchanges with the best portfolio as well as best profitability. There's another factor for shopping malls, though, which has to do with media and kiosk, events and other merchandise campaigns that have been growing at about 20% rate, which is something that has been providing great results for us. For offices, the results are basically focused on reviews -- or I'm sorry, revisions where we are focused on 3 main buildings, 2 at JK Triple A as well as Leblon in Rio de Janeiro. This growth is above the inflation rate. And also for the last 9 months, we can see the same impact where we grew 11.8%, total 13% in malls getting to BRL 48 million, and 8.7% in offices, bringing us to 17% or BRL 5 million in the year. On the next slide, we can see 2 very important indicators. The adjusted EBITDA. In the third quarter, we can see a growth that is cohesive to the ROI, 15.5%. Our EBITDA of BRL 20.8 million. Looking specifically at the 9 last months, we can see that 5 months of this portfolio happened 5 months before the transactions that we have closed. So there is this decrease of 36.8%. So BRL 95.6 million of last year compared to BRL 60.4 million this year. However, when we look at the adjusted FFO, we can see that there is this growth of about 120% in the first quarter where we had this BRL 20 million FFO adjusted to sales effect, and specifically for the 9 months of 2024. In this, we had BRL 35 million last year and this year, 45.6% (sic) [ BRL 45.6 million ] showing a growth of 30%, showing that specifically for the fourth quarter on, we have already distributed BRL 960 million. So even considering that we have this return for shareholders, and we still have an FFO that is consistently better than the same period of last year. In this slide, we can see the evolution of our net debt. From one quarter to the other, we basically maintained the same level of gross debt. In terms of cash, we have closed at BRL 231 million, and this drop is due to the reduction of capital that we have had at the end of this quarter. So with that, we closed with a total debt of BRL 271 million, which is about 3x our adjusted EBITDA, which is still considered to be a quite healthy level of that, and very important pay for our investors and shareholders as well. So when it comes to our indebtedness or amortization schedule, we can see the profile of our debt, which is mainly focused on IPCA, which led us to reduce our average cost with a very important spread compared to the CDI of 85% over the CDI. And I think now we can go to the Q&A session. Operator: [Operator Instructions] The first question is by [ Reinaldo Veríssimo ]. Unknown Analyst: Congratulations for the results. How do you intend to reduce your gross debt until 2028? Do you have any plans to expand the ABL beyond the CLD warehouse? Thiago Muramatsu: Reinaldo, well, about our leveraging. Yes, we have increased our leveraging rate because we had some extra cash. So specifically for this 3% of gross debt that Hector mentioned, it is already considering this reduction, and it goes hand in hand with our practices keeping the gross debt level. That is due to the fact that our debt is focused on IPCA, which is a great cost. About the next coming years, this leverage is going to happen due to the expansion of our portfolio. This is the picture of the last 12 months, but over the course of the year and the coming years, we expect that due to the evolution of our portfolio results, we can reduce this leverage rate until we get to lower levels that may be even allow for us to leverage our company. This deleverage result is coming again from the results of our assets. And when it comes to the expansion of ADL, specifically for CLD, unfortunately, we don't have any more room on that land. So as soon as we finish the last phases, we get to the limit of its constructed area. But of course, we are still analyzing new developments or maybe some new acquirements or expansions, okay? Operator: [Operator Instructions] So with that, we would like to close the Q&A session. We would like to give it back to Thiago Muramatsu so he can give his closing remarks. Thiago Muramatsu: Okay. So once again, I would like to thank you all for your presence. We had a very positive quarter, and we are at your disposal to clarify any other questions. Thank you very much. Operator: So with that, we will close our video conference. Thank you very much and have a great day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Operator: Welcome to Twist Biosciences 2025 Fourth Quarter Financial Results Conference Call. [Operator Instructions] Please note, this conference is being recorded. I would now like to turn the call over to Angela Bitting, Senior Vice President of Corporate Affairs. Please go ahead. Angela Bitting: Thank you, operator. Good morning, everyone. I would like to thank you for joining us for Twist Bioscience conference call to review our fiscal 2025 fourth quarter and full year financial results and business progress. We issued our financial results press release before the market, and it is available at our website at www.twistbioscience.com. With me on the call today are Dr. Emily Leproust, CEO and Co-Founder of Twist; Adam Laponis, CFO of Twist; and Dr. Patrick Finn, President and COO of Twist. Today, we will discuss our business progress, financial and operational performance as well as growth opportunities. We will then open the call for questions. We ask that you limit your questions to one and then requeue as a courtesy to others on the call. This call is being recorded. The audio portion will be archived in the Investors section of our website and will be available for 2 weeks. During today's presentation, we will make forward-looking statements within the meaning of the U.S. federal securities laws. Forward-looking statements generally relate to future events or future financial or operating performance. Our expectations and beliefs regarding these matters may not materialize, and actual results in financial periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include those set forth in our press release we issued earlier today as well as more fully described in our filings with the Securities and Exchange Commission. The forward-looking statements in this presentation are based on information available to us as of the date hereof, and we disclaim any obligation to update any forward-looking statements, except as required by law. We'll also discuss adjusted EBITDA, a financial measure that does not conform with generally accepted accounting principles. Information may be calculated differently than similar non-GAAP data presented by other companies. When reported, a reconciliation between GAAP and non-GAAP financial measures will be included in our earnings documents, which can be found on the Investors section of our website. With that, I will now turn the call over to our CEO and Co-Founder, Dr. Emily Leproust. Emily Leproust: Thank you, Angela, and good morning, everyone. Today, our team delivered a record quarter with $99 million in revenue, exceeding our guidance. This represents an increase of 17% year-over-year and our 11th quarter of consecutive growth. For the year, we reported $376.6 million in revenue, growth of 20% over fiscal 2024. Gross margin for the quarter came in at 51.3%. For the year, gross margin was 50.7% compared to 42.6% for fiscal 2024, demonstrating the leverage of fixed costs with higher volume and reflecting our focus over the last 2 years on continuous margin improvement. I'd like to underscore that over the course of fiscal 2025, we grew our business 20%, leveraging our proprietary silicon chip-based technology platform to deliver high-quality products and services rapidly to our growing customer base. Importantly, through the addition of new products and solutions, we expanded our market share with an eye towards addressing new serviceable market in the year ahead. Our commitment to commercial excellence continues to ensure we meet and exceed our customers' expectations. Today, with our differentiated manufacturing technology, our innovative R&D for the continuous introduction of new products, our base of more than 3,800 customers across multiple industries, our hundreds of SKUs having a wide range of diverse applications and an increasing market share in multiple markets, we're operating with incredible execution and financial discipline. And with adjusted EBITDA breakeven within our reach by the end of fiscal 2026, this year, we focus on setting the stage for future growth acceleration. Turning to our results. SynBio revenue came in at $39.5 million, up 17% year-over-year. Our growth in SynBio continues to be led by the Express portfolio, which remains best-in-class in terms of price, turnaround time and scalability. Two years after launch, our customers have come to depend on the rapid turnaround time, high quality and exceptional experience they receive from Twist as their new normal and what they expect regularly. We have decreased the turnaround time for gene fragments, clono genes, high-throughput DNA preps and high-throughput IgG proteins, and we now run assays and provide antibody characterization data as part of our offering for many customers. One area of substantial growth for SynBio and Biopharma offerings came from customers choosing Twist to power their therapeutics discovery initiatives, both traditional drug discovery and AI-enabled discovery because our platform delivers precision, scale and speed at enabling economics. While traditional discovery continues to be a focus of many customers, the rapid expansion of AI-enabled drug discovery creates powerful new opportunities and amplifies the value of our technology. Recently, this AI-driven discovery fueled significant growth for Twist. In fiscal 2025, orders from customers working on AI discovery projects grew more than $25 million versus fiscal 2024. These projects primarily fall into the SynBio and Biopharma bucket today and a customer pursuing AI-enabled discovery delivered our single largest purchase order to date. And the emergence of dozens of new organizations across pharma, biotech and big tech, pursuing new discovery approaches expands the market opportunity for SynBio and Biopharma groups today. Rapidly, as we have moved further up the value chain from fragment to genes to prep to protein to delivering characterization data and beyond, the strategic connection between our SynBio and Biopharma groups tightens. More customers now leverage both products and services to accelerate discovery and identify breakthrough therapeutics. This growing convergence highlights the power of our integrated platforms and reinforces Twist's unique position to serve the full spectrum of innovation and discovery with more products and services to facilitate this growing opportunity coming in the months ahead. Over the last several years, our product introductions are focused on pharma and biotech customers pursuing therapeutic discovery as well as academic research. As we analyze the future market opportunities, we believe this continues to be the right areas of focus for additional tools and services. Moving forward, we have a robust road map and planned product introductions to augment our portfolio that we believe will continue to drive revenue growth in 2026 and in the future. Turning to NGS. We reported revenues of $53 million, growth of 16% year-over-year, driven largely by continued commercial success from our diagnostic customers' clinical assays. Our NGS products are an integral component within many commercial diagnostic workflows. Recall that we provide tools for customers offering tests for therapy selection, liquid biopsy, comprehensive genomic profiling, rare disease, noninvasive parental testing and progression genetics. In addition, we continue to support minimal residual disease customers with several of these groups targeting commercial launch in late 2026 and planning commercial scaling into 2027. And we are beginning to see conversion of the microarray to FlexPrep sequencing workflow. Introduced about a year ago, we believe this product provides significant potential growth opportunities, both for population genetics and AgBio applications. During the quarter, we had 2 significant population genetic wins with the funnel growing in serviceable opportunity for the $500 million market that uses SNP microarray technology today. Customers in both segments run millions of samples. So once converted, the business is bulky. We have maintained our sequencing agnostic strategy throughout our NGS product portfolio with all sequencing platforms. While the majority of our customer continues to use the Illumina platform, and we have an active OEM agreement with Illumina, we also see growing interest in other platforms. To this end, we announced an advancement of our agreement with Element Biosciences last month that enables us to gain exclusive access to Element's new Trinity Freestyle workflow, facilitating the use of Twist, a full lineup of library prep for the IVT system. Together, Element and Twist shortens the workflow from sample to sequencer from more than 20 hours down to 5 hours, a true time savings. In addition, we are powering the gene by gene population genetics test that runs on the Illumina Genomics sequencing platform. This complements our work with PacBio, Oxford Nanopore and others. We continue to see traction building for RNA-Seq workflows, having customers who offer diagnostic tests as well as labs offering clinical services with growth expected across all areas of our NGS portfolio in 2026. Looking at Biopharma Services, we reported $6.4 million in revenue, an increase of 22% year-over-year. Importantly, orders of approximately $11.5 million for the fourth quarter of fiscal '25 reflect a large order that spans both SynBio and Biopharma from a key account that we do not expect to repeat every quarter. More customers now partner with Twist across the full design, build, test and learn cycle for developability assays and characterization data. This trend continues to grow, especially among AI-driven drug discovery companies. Many of these customers operate without a wet lab and rely on Twist to execute the critical experiments that bring their designs to life. We help them move fast, generate robust data and advance programs with great confidence. We see much more integration between our SynBio and Biopharma businesses as customers increasingly use both our products and services to power their discovery pipelines. To capture this opportunity, we aligned our sales organizations to deepen collaboration and fully leverage the synergies between the two. We also received valuable feedback from investors that our SynBio and Biopharma names for revenue grouping [indiscernible]. Reflecting on this progress and feedback, we will combine SynBio and Biopharma revenue for reporting going forward under the term DNA synthesis and protein solutions, indicating synthesis and manufacturing of sequences for DNA, RNA, protein and data for customers going through design, build, test, learn cycle. DNA synthesis and protein solutions more accurately represents our customer base, and we intend to provide additional insight into industry groupings that better reflects how we serve a broad range of customers. Our NGS tools will now be called NGS applications as its products and services facilitate DNA reading, sequencing workflows. Beginning in the first quarter of fiscal '26, we will be breaking out industry groupings into therapeutics, diagnostic, industry and applied markets as well as academics and government. In addition, something that is underappreciated about Twist is a number of organizations that buy products from Twist and then resell them under a different brand name. As such, we will also share global supply partner revenue encompassing distributor and OEM partners as part of our industry breakdown. These new groupings enhance transparency and better align with how our business operates, providing investor insight into our strong growth engine. I would now like to turn the call over to Paddy for commentary on our growth initiatives for 2026. Patrick Finn: Thanks, Emily. As we close fiscal 2025, it's remarkable what we have achieved in the last year, and I'm even more excited about what is to come. While my comments during earnings throughout the last year focused on margin initiatives, we have now crossed the important threshold of 50% margin, almost 20 margin points increase over the last 2 years. We expect to continue to remain above 50% margin moving forward. And this year, my remarks will focus on our growth plans. Today, I'd like to talk about a remarkable and differentiated product introduction for our NGS product line aimed at empowering our customers in an area of increasing importance for cancer diagnosis, monitoring and treatment. I'm pleased to share that we're in the final stages of optimizing an express product for minimal residual disease, or MRD, which we expect to introduce commercially in early calendar 2026. As you know, MRD for therapy selection, cancer monitoring and early treatment of recurrence offers tremendous promise. We already work with many MRD customers providing library prep and target enrichment panels for tumor-informed and tumor-naive panels as well as whole genome sequencing approaches. And we continue to hear from customers developing tumor-informed assays that they gain better sensitivity and specificity using hundreds or thousands of sequences specific to a patient's tumor. The data presented at recent medical meetings back up these beliefs. Importantly, recent studies also show that physicians desire, the capability to sequence the cancers present and have a test in hand for a patient with cancer within a 4-week window. While we currently manufacture enrichment panels within about 5 business days, we hear the desire for delivery of a tumor-informed panel as fast as 12 hours. Using our proprietary DNA synthesis platform, we developed a process to do just that, manufacture and ship an individualized panel as fast as 12 hours after receiving the sequence data. Our MRD Express solution provides the speed and simplicity of a tumor-naive test while maintaining the precision and sensitivity of a tumor-informed assay, something not possible using any other method of DNA synthesis. Taking a step back and looking at the broader implications, we all know family and friends and maybe many of you personally impacted by a cancer diagnosis. In the midst of the storm, turnaround time is critically important, both to determine treatment and create a personalized panel to monitor recurrence of disease. At Twist, we believe it's our responsibility to respond rapidly, potentially offering a path to enable reduced treatment time or pursue therapy at an earlier stage of disease. This higher calling motivates all of our Twisters to go above and beyond for our customers to play a role in transforming cancer into a manageable chronic condition. On the business side, we believe Twist MRD Express has the ability to support our customers in changing the diagnostic and treatment paradigm, lowering the operational barrier of entry for personalized MRD. We enable this shift through our synthesis platform along with automation, delivering personalized panels in a time line equivalent to tumor-naive workflow. We believe our connection to the customer, our ability to turn a customized panel in as few as 12 hours, all underpinned by our proprietary platform will enable increasing availability of tumor-informed cancer assays. On top of this, we have the capacity today to serve these markets, future-proofing customer supply chain constraints and vulnerabilities. With that, I'll turn the call over to Adam to discuss our financials. Adam Laponis: Thank you, Paddy. Revenue for the fourth quarter increased to $99 million, growth of 17% year-over-year and approximately 3% sequentially. For fiscal 2025, revenue increased to $376.6 million, growth of 20% year-over-year. Gross margin came in at 51.3% for the fourth quarter of fiscal 2025, with the margin for full year of 50.7%, an increase of 8 margin points versus fiscal 2024, with approximately 90% of revenue growth in FY '25 dropping to the gross margin line, supported by our continuous process improvement efforts. Taking a deeper dive into revenue. SynBio revenue increased to $39.5 million, growth of 17% year-over-year. For the full year, SynBio revenue increased to $145 million compared to $123.5 million in fiscal 2024, an increase of 17%. NGS revenue for the fourth quarter grew approximately $53 million compared to $45.5 million in the fourth quarter of fiscal 2024, an increase of 16% year-over-year. For the quarter, revenue from our top 10 NGS customers accounted for approximately 39% of NGS revenue. For fiscal 2025, NGS revenue increased to $208.1 million, growth of 23% year-over-year. We served 588 NGS customers in the quarter with 159 having adopted our products. For Biopharma, revenue was $6.4 million for the quarter, growth of 22% over the same period of fiscal '24, with orders of $11.5 million. We had 84 active programs as of the end of September 2025, and we started 47 new programs during the quarter. Compared to last quarter, these programs are more substantive as we see a shift to AI discovery-driven projects. For fiscal 2025, revenue was $23.5 million, growth of 15%. Looking geographically. Americas revenue increased to approximately $57.3 million in the fourth quarter compared to $52.7 million in the same period of fiscal 2024, growth of 9% year-over-year. For the fiscal year, the Americas accounted for 60% of revenue. EMEA revenue rose to $34.6 million in the fourth quarter versus $25.5 million in the same period of fiscal 2024, exceptional growth of 35% year-over-year. For the fiscal year, EMEA represented 33% of revenue. APAC revenue increased to $7.2 million in the fourth quarter compared to $6.5 million in the same period of fiscal '24, an increase of 9% year-over-year. APAC accounted for 7% of our revenue in fiscal 2025. China continues to be a relatively small portion of our revenue at approximately 1% of total revenue for fiscal 2025. Moving down the P&L. Operating expenses, excluding cost of revenues for the fourth quarter were $80.8 million compared with $74.3 million in the same period of 2024. Operating expenses, excluding cost of revenues for fiscal 2025 were $327.3 million, which marks our third consecutive year of relatively flat operating expenses, excluding cost of revenues. Looking at our progress and our path to profitability. For the fourth quarter of fiscal 2025, adjusted EBITDA was a loss of approximately $7.8 million, an improvement of $9.2 million versus the fourth quarter of fiscal '24. For fiscal '25, adjusted EBITDA was a loss of approximately $46.9 million, an improvement of approximately $46.6 million versus fiscal 2024. Cash flow from operating activities continues to improve, and we are driving to breakeven. For the 12 months ended September 30, 2025, net cash used in operating activities was $47.6 million compared to $64.1 million for the equivalent 12-month period in 2024. Capital expenditures in fiscal 2025 were $28 million, reflecting our investment in growth for fiscal 2026 and beyond. We ended the fiscal year with cash, cash equivalents and short-term investments of approximately $232.4 million. As Emily mentioned, beginning next quarter, we will provide new revenue by industry for the following categories that increased clarity around our key customer groups and transparency on how we are progressing as follows: Therapeutics customers, which include both large pharma and early-stage biotech, diagnostics customers who use our products to deliver a clinical report for a patient; industrial and applied customers, including agricultural bio; academic research and government customers; global supply partners, which will include distributor and OEM partners servicing customers across a variety of industries. We believe these new categories will provide added color and metrics for investors to track our progress in reaching different end markets and customer segments. We do intend to share a retrospective view on the new industry group performance in our fiscal first quarter reporting. Turning to guidance for fiscal 2026. We expect total revenues of $425 million to $435 million, growth of approximately 13% to 15.5% year-over-year. For our DNA Synthesis and Protein Solutions Group, we expect revenue of $194 million to $199 million, growth of 15% to 18% over fiscal 2025, reflecting strong demand from our AI discovery customers. For our NGS Applications Group, we expect revenue of $231 million to $236 million, growth of 11% to 13.5% over fiscal 2025. We see a path back to 20% growth year-over-year by Q4 as we expect a large diagnostic customer will begin ramping their commercial volume in the second quarter. As added color, our NGS forecast assumes approximately 1 to 2 points of growth for MRD in fiscal '26, with the ramp for this particular product group coming in late '26 into '27. We expect gross margin to be above 52% for fiscal 2026, and we expect to exit fiscal '26 with our fourth quarter achieving adjusted EBITDA breakeven. For the first quarter of fiscal 2026, we expect revenue of $100 million to $101 million, growth of 13% to 14% compared to the first quarter of fiscal 2025. Our guidance includes the expectation that our Q1 revenue will be impacted by a large cancer diagnostics customer who is transitioning their assay from research to commercial with a reacceleration of purchasing in the second quarter of fiscal 2026. We also see significant revenue from the record AI drug discovery order such that our 2 product groups will be relatively equivalent to the first quarter. With that, I'll turn the call back to Emily. Emily Leproust: Thank you, Adam. Our team executed exceptionally well throughout 2025, delivering strong results and building the foundation for what comes next. At Twist, we often say for a strong finish, we go again. We see substantial opportunity ahead across all our markets. Staying close to our customers continues to be our greatest competitive advantage. It allows us to anticipate emerging needs and identify the next set of products that would move the needle for growth. Like our customers, we have an ambedance of ideas and a disciplined approach to prioritization. Over the past 2 years, we deliberately focused on gross margin expansion and with gross margins now above 50%, we have successfully positioned the business for continued profitable growth. As we reallocate R&D resources towards growth, we're investing in innovation that we believe will drive sustained top line acceleration. Our road map remains robust and well sequenced to deliver growth over the next several years. Looking forward, we expect balanced growth across our DNA synthesis and Protein Solutions and NGS applications with some normal quarterly variation. We're advancing new products that support customers leveraging AI and drug discovery as well as those using traditional therapeutics development methods. Fiscal 2026 is about translating our margin strength into durable revenue growth. We know where we need to go, and we are already on our way. With that, let's open the call for questions. Operator? Operator: [Operator Instructions] One moment for our first question and it comes from Catherine Schulte with Baird. Catherine Ramsey: Maybe first on gross margins. Guidance for the fiscal year implies, I think, low 60s incremental margins off of '25. So it would be in that 75% to 80% range if we did it off of '24. But I think the expectation was you'd flow more of the '25 upside through. So I guess the question is, is this pricing driven? Do you have some manufacturing investments that you're making? And when do we get back to the kind of 75% to 80% incrementals? Adam Laponis: Catherine, this is Adam. Thanks for the question. Very much encouraged by the progress of the team over the last 2 years. The 20% growth in gross margin has been extraordinary. While we expect to continue to see the 75% to 80% on average, we are lapping some tough comps, particularly given what we saw in Q3 of this year. For the last quarter, we dropped, I think it was over 80% of gross revenue growth dropped to the gross margin line. And generally, I'd expect that to continue to hold in the future. And if you look at that 2-year metric, it absolutely will, but there will be some noise. And I'd say it is more around the specific customer mix that we see in any given quarter that drives it more than anything else. But we expect it to continue to expand. That said, we will continue to focus on revenue growth as well as gross margin and optimize for the gross profit. Catherine Ramsey: Okay. Great. And then for NGS, I think that guide came in a little bit below Street for fiscal '26. Can you just talk through the drivers there and maybe get a little more granular on the expectations for that customer ramping that moving into production. And I think the guide implies 11% to 13% or 14% growth for NGS. How should we think about long-term growth for that business? Is this kind of the new baseline that we should be thinking about? Adam Laponis: I'm happy to take that one. In terms of growth for NGS, we're very excited about the prospects. We mentioned it on the call last quarter that we have a customer transitioning from their verification and validation that there would be an air pocket in Q4, and that would continue through Q1. We expect that, that customer will ramp as well as other customers. A couple of points of commentary and color that we provided. We expect to be back to 20% growth by fourth quarter in the NGS business as well as we expect to continue to see growth from MRD and other new product introductions. And we've assumed about 1% to 2% of overall growth from the MRD business products in 2026. Operator: Our next question comes from the line of Puneet Souda with Leerink Partners. Puneet Souda: Wondering if you can provide a view into -- in SynBio and with the new segmenting, can you elaborate a bit on the Biopharma order? What -- obviously, that's driven by AI, but just trying to understand how sustainable this is? How much of a momentum? What are you hearing from the customer development teams? How meaningful the AI contribution could be in fiscal year '26? Patrick Finn: Puneet, thanks for the question. We've been talking for a few quarters about strategically how important the biopharma business is and the close ties to the SynBio product offering. And I think you're starting to see real validation of that with the order described in our comments today. It leverages everything that we're good at. Our knowledge from a single gene all the way through to discovery. But what we're seeing with the AI potential is -- it's our throughput and scale that really enables and supports that offering. So we continue to be very optimistic in that space and see a fantastic lineup of the total Twist offering all the way through from one gene all the way through to full discovery that basically puts us in a good spot for our future opportunities. Operator: One moment for our next question. It comes from Brendan Smith with TD Cowen. Brendan Smith: I also wanted to ask just a little bit more about guidance into next year. Maybe just quickly for -- I know you're not guiding to GMs in Q1, but can you give us a sense of how you're thinking about gross margin sequentially from Q4 and then over the course of next year to really get to that 52% plus on the full year 2026? And then maybe just quickly on the NGS portfolio, anything that you're hearing specifically from customers really that's kind of driving some of your assumptions to get to maybe the upper versus lower bound of the guide there? Adam Laponis: Brendan, happy to take the question. In terms of gross margin in the guide, we do see improvements throughout the year. I'd say it is going to parallel with revenue growth being the primary driver of our gross margin expansion as we are continuing to see our efforts from continuous process improvements play out, but we're also continuing to invest in new capabilities across the business to drive our new product initiatives and growth. And as mentioned in the call, a lot of focus on the AI drug discovery and capabilities to support those customers. In terms of the exit point and also where to go from here, we are -- we do see a path to continued gross margin expansion, not just in 2026, but well into 2027 and beyond. But again, optimizing for that gross profit dollar, not necessarily just the gross margin now that we're above 50% and not looking backwards. Operator: Our next question comes from Vijay Kumar with Evercore ISI. Vijay Kumar: I had a 2-part question on NGS. NGS, I think your Q1 guidance, it looks like it's going to be down sequentially, maybe revenues up mid-singles. And I understand that Q4 had the customer transition impact, right? So why would Q1 growth be below Q4? Is there some additional timing elements on Q1 NGS? And sort of related on the MRD Express, did I hear you correctly that sensitivity on a tumor-naive assay would be as good as tumor informed? And is there any data that you highlighted? What kind of interest are you seeing in this product? Adam Laponis: All right. Well, maybe I can start with the NGS guidance, and I'll let Paddy talk to the MRD element of it here. In terms of the NGS guidance, Vijay, thank you for the question on this. We gave the update back in Q3's call that we had a customer transitioning from commercial -- from validation to commercial ramp, and that impacted Q1, and it's going to continue to impact Q4, and we expect to see a sequential growth from that point forward for the NGS business starting in Q2. So we will continue to see that air pocket continue in Q1. And then in Q2 and beyond, we'll see the sequential growth such that by the time we get to Q4, we're expecting to be back at 20% year-over-year growth in the NGS business. I'll let Paddy talk to the MRD portion of the question first. Patrick Finn: Vijay, thanks for the question. I think when we look at recent medical conferences, I think you're seeing that the tumor-informed approach is leading to increased sensitivity in the assay. And that's got us excited about potential with the clinical endpoint for the patients that are going through a tough time. So we see sensitivity enhancements from tumor informed. And again, our scale and speed, we think, is really going to help enable the segment of the market that's focused on that approach. Operator: And it's from the line of Subbu Nambi with Guggenheim. Subhalaxmi Nambi: Paddy, just a follow-up on that MRD. MRD Express is an exciting launch next year. Could you speak to who the end user is? It almost sounded in your description like Twist is executing the MRD assay for the physician or delivering the panel to a hospital to run in-house? Or is it the same customer as your NGS diagnostics? Patrick Finn: Subbu, a great question, and thank you for the opportunity to clarify. Twist's role in the community is an enabler, okay? We don't run the test. We supply our customers and our partners to enable them to drive their assays to the clinic. So again, our role will be to supply and enable them. Subhalaxmi Nambi: Perfect. So how will you approach pricing for the MRD Express? What are the expected margins here? And I'll hop back in the queue. Patrick Finn: Yes, a good question. So pricing has not been set at this point. It will go from our basic principle, Subbu, which is we're here to enable our customers at scale to truly drive their product to market. And we think with this product, in particular, truly the impact of MRD to health care. We've listened closely to the customer base. I think we understand the value to this market segment of speed and this 12-hour turnaround time. And I think our operating scale and quite frankly, derisking any vulnerabilities in supply chain is good value, and we'll share that value with our customers as we go forward and enable them to drive best-in-class differentiated assays out to the market. Operator: One moment for our next question. that comes from Matthew Larew with William Blair. Matthew Larew: You reiterated the expectation to hit EBITDA breakeven in the fiscal fourth quarter. But obviously, the year is starting a little bit lower on the top line. Given growth is contingent on the expectation of an NGS customer ramp and MRD contribution, how much breathing room do you expect to have in the fiscal fourth quarter? And I guess how air tight are you going to hold yourselves to hitting that mark? I guess that's the first question. And the second is, Adam, just what does the guide include in terms of the macro picture, given we've seen perhaps some recent positive updates relative to your pharma and biotech customers and perhaps there may be some more certainty for your academic customers coming over the next few weeks or months? Adam Laponis: Thanks, Matt. And I say I never want to predict the macro environment. So we always will be on the -- on the side of caution and assuming things don't improve from where we are today. So we've got -- we've obviously left ourselves assumption that the environment stays relatively stable. And in terms of the growth opportunities, we do assume that acceleration of the commercial customer -- the customer ramping its commercial product today. We also have only assumed 1 to 2 points of growth for the year from our MRD products. We know that, that ramp is going to come. We're extremely excited about it. The difficulty is always in timing that. We want to make sure we're on the right side of that timing, but we are extremely excited for that ramp and the opportunity it brings to the business, not just in '26, but in many years to come. Operator: Our next question comes from the line of Doug Schenkel with Wolfe Research. Douglas Schenkel: I got a few questions. So thanks for, I guess, getting us in. So first, on SynBio, you had an academic promotion that removed the Express Gene pricing premium for academic customers in response to funding pressure. Is that promotion still in place? And if so, how much longer do you plan on running it? And then building off of that, how should we be thinking about price per gene '26 versus '25? So that's the first topic. The second is there's obviously been a lot of focus on Q1 guidance specific to NGS and the sequential step down. As you have pointed out to others, you have repeatedly noted over the course of the last several months, a pacing dynamic within NGS. Is the guidance simply a function of that? Or is there any change in underlying trends or demand? The third topic, which I think is a pretty important one, and I'm not sure this is the right forum. And if it's not, we can certainly come back to this at our conference next week. But I believe one of the challenges that investors have with Twist is defining the market opportunity. In the newly named DNA synthesis segment, what is the size of the market opportunity and how penetrated are you? And on the NGS side, specific to MRD and MCED, what is the market size? How penetrated are you? And what is average Twist revenue per assay? I think that would make this -- those are questions that I think if people have the answers to, it would help with modeling and frankly, help people basically develop some more conviction in the long-term growth trajectory of the business. Emily Leproust: Thanks, Doug. Great question. This is Emily Leproust. And good job squeezing 3 questions in one. So maybe briefly on SynBio, you're correct that we had an academic promotion where we got customers express for the price that stand out. That has been widely successful. We're in the new year and the price has not changed. It is just working for us commercially. And you can see in the number of genes that the growth in genes from -- in Q4 was really strong, thanks to that. So we are not announcing whether or not it will close. But as long as it's working, we'll keep doing it and it is working. As far as the Q1 guide, yes, it's purely a pacing dynamic in Q1. There's a lot of excitement and we are winning on many fronts. Of course, we've been very, very strong in liquid biopsy. And the MRD bespoke that we're enabling now with adding 12- to 24-hour express delivery. I think that will be a long-term catalyst. Our FlexPrep launch is starting to work well for the AgBio market and the population generic market. So that's another source of long-term strength. We've worked really hard to integrate into a number of sequencers. The workflow of Twist and the Element AVITI really shortens the time between the sample and being on the sequencer. And since you're doing all the washes after the capture on the sequencer, you can be on the sequencer in as low as 5 hours. So there's lots of good things that are happening in NGS. And we definitely don't see a lower demand. It's just that it's the law of big numbers. It's a big customer that has an air pocket. And we've signaled some very good growth coming back in Q4 for NGS. And then the last question around defining market. we totally hear you. Now is not the right forum, but I think we're looking at ways to help our investor base be as excited as we are about the market. We're very far from penetration and we have differentiated product. And so to us, that means that we have a lot of growth coming. It is true that we are a tools company. Right now, diagnostic company have a moment. They deserve it. They worked on their business models. Their reimbursement is really good. And so yes, in comparison right now, maybe our growth compared to diagnostic companies is a little bit lower. But compared to tools company, I think we are -- I don't want to sound arrogant, but I think we are doing really, really well against our competitors. I don't want to say that we're wiping the floor with them, but we're doing really well. And we hear you on finding a metric, like you said, the average test revenue per patient in NGS. We're looking at metrics. Part of the issue, as you may appreciate, is some of the test, people pay more than average and some of the tests, people pay less than average. And that depends on the test complexity. If you have a test that uses 3 million oligos, well, you're going to have to pay more than if you're using 50,000 oligos. The problem is if we have a price per test that's public every quarter, we may have half our customers being really unhappy, even though the value we provide is fair. So thinking about it and not the forum, but we understand that we want to articulate our market sizing better to help our investors. Operator: Our next question comes from the line of Luke Sergott with Barclays. Unknown Analyst: This is Sam on for Luke. Could you talk a little bit about the new DNA Synthesis and Protein Solutions segment and the rough split between Biopharma and synthetic genes in the '26 guide. The combined segment guide came in above Street expectations. And I'm just wondering where that's coming from and if it's driven by that large AI program. Emily Leproust: Thanks for the question. I think the impetus was twofold. One, there was, I think, some confusion with our customer base around SynBio and maybe an under appreciation of how much we are doing in therapeutic discovery and development. So that's number one. Number two, more and more as our sales team go to talk to customers, there was in practice, very little separation from someone who buys a piece of DNA, so DNA synthesis or someone who wants the protein or the characterization. And so as it's one continuous workflow, some customers stop at fragrance, some stop at genes, some stop at protein, some want the full characterization. It just makes sense to put them together. And as far as the numbers, yes, maybe we're getting a little bit ahead of what people thought. I think it's just a reflection of this business is doing quite well. And there are a lot of synergies between the DNA synthesis piece and the protein piece. A few years ago, some people were asking us, why don't you spin-off Biopharma? And we knew that it had strategic benefit. And we are seeing it now. It's not a 1 plus 1 equals 2. It's a 1 plus 1 equals 3. As far as your question around where is the growth coming? Is it coming from DNA and protein. Frankly, the reason we're putting it together is because we -- one, we don't know; and two, it kind of doesn't matter. What's important is that, that growth is there and we meet customers where they are. And customers may change from quarter-to-quarter. Some quarters, they buy the DNA and some quarters, they buy the protein, and we meet them where they are, and we provide great value. Our products are differentiated. We win no matter where they want to be, and we are looking forward to capturing that growth. Operator: Our next question comes from the line of Mac Etoch with Stephens. Steven Etoch: Maybe just a few quick ones from me. Just given this 1 to 2 points of growth from MRD, is it possible to frame up the proportion of MRD revenues in fiscal 2025? And I'll stop there and follow up in a second. Adam Laponis: Mac, great to hear you and happy to share. What we've said in the past is our MRD business is relatively small. It's a lot of small numbers, and we are growing significantly faster than the overall business. Kind of applying that rule, it's a relatively small percentage of our overall NGS business in 2025, but it is growing much faster than the overall NGS business, and we expect that trend to continue, not just in 2026, but well beyond. Operator: Our next question is from Puneet Souda with Leerink Partners. Puneet Souda: Thanks for the follow-up again. I appreciate you providing a lot of input. But I just want to boil down to a key question. What is the real NGS underlying growth ex this large customer in the first quarter and the fiscal year '26? Adam Laponis: Puneet, if you step back a bit and look at where we were in 2025, the overall growth of NGS being around 23% neutralizing for the growth from the one customer, it would be closer to 20%. And if you go into 2026, I'd say the same general dynamic applies as well. Operator: And we have a question from the line of Vijay Kumar with Evercore ISI. Vijay Kumar: Adam. Sorry, on this Q1 NGS question. The -- is the customer headwind -- I know you had the customer headwind in the back half, right? Is that worsening in Q1? Is that what's driving the NGS assumption? And because we already had the headwind in Q4, right? Like why would it worsen sequentially? Adam Laponis: Vijay, you're asking the right question. The air pocket from Q4 is continuing into Q1, but then it will significantly reverse as we expect the ramp to begin starting in Q2 of 2026. Operator: And ladies and gentlemen, this concludes our Q&A session. I will pass it back to Emily Leproust for final comments. Emily Leproust: Thank you for your questions and for your continued support. With our strong execution in 2025 and a clear path to profitable growth in 2026, we remain focused on delivering differentiated products and services for our customers and sustained value for our shareholders. Thank you. Operator: And this concludes our conference. Thank you for participating. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Bavarian Nordic Third Quarterly Report for the 9-month period ended 30th of September 2025 Conference Call on Webcast. [Operator Instructions] Please note that today's conference is being recorded. I would now like to turn the conference over to your speaker, Mr. Paul Chaplin, CEO. Please go ahead. Paul Chaplin: Thank you, and hello, and welcome, everyone, to Bavarian Nordic's Q3 results. Before I start, I just want to make sure you've seen our forward-looking statements on Slide 2. On Slide 3, on today's call, you have myself, Paul Chaplin, and I will walk through the key highlights of the first 9 months and talk a little bit about the excellent progress that we've been -- that we've made. And then I'll hand over to Henrik Juuel, the CFO, who will walk you through the commercial performance and the financials. So if you go to Slide 4, it really has been a fantastic first 9 months of the year. We've recorded close to DKK 4.8 billion in total revenues, which is a 32% increase compared to this time last year, which is a fantastic result and one that is really due to a strong performance across the whole portfolio, both Travel Health and Public Preparedness, and that has resulted in an EBITDA margin of 31%. We've had probably the strongest quarter for our Travel Health business, which is an endorsement of our strategy. And as I'm sure we have many new investors on today's call, I want to just take a few minutes walking you through the graph on the bottom right-hand corner of Slide 4. This shows the financial performance over the last 5 years. And before 2020, Bavarian Nordic was really an R&D-focused company. We had our government business, which we now call public preparedness, and I'll talk more about that. But essentially, we were a loss-making company coming to our shareholders frequently for capital raises. In 2020, we took the bold step on our growth journey to commercialize the business, and we bought 2 assets our rabies and tick-borne encephalitis vaccines, which started our commercial journey. And despite COVID, which obviously had an impact on travel, on travel vaccines, we were able to grow that business. And in '22, we sold more doses of rabies and TBE than any other previous owner. And that's exactly the strategy that we implemented. We thought that we could purchase what I call unloved assets that weren't performing well in previous owners' hands. And with our dedication and focus, we could turn them around. And that's exactly what we've done with rabies and TBE, and that actually are the golden jewels that are really driving the performance for travel health that we have today. In '23, we also added 3 more assets from another company, which complemented our Travel Health portfolio. And one of those was a chikungunya vaccine in Phase III, which is now approved as Vimkunya, which we're launching this year and is also adding not only to the performance in the first 9 months of this year, but is a key driver for the future growth. On top of this, we also had our Public Preparedness business, and I'll talk more about that in the coming slides. But basically, what we've seen over the last 5 years is a complete transformation of Bavarian Nordic from a loss-making R&D-focused company to a profitable vaccine company that is having a huge impact on the global stage in terms of public health. Before I move on, I also want to take note, and I'll leave more of the details in terms of the guidance to Henrik later. But we have refined our guidance today. And I just want to address one comment that I've already read that this is a lowering of our guidance. This is actually not the fact because at the beginning of the year, when we provided the guidance, we had a range for both revenue and EBITDA. This is related to our public preparedness business. And I'll come back to why there's a range, but essentially, this is government contract business where you either get a contract or you don't. And therefore, we had a range. We refined that range during the year. And today, we are recognizing that with 1.5 months left, we have secured -- we have the business that we've secured, which is DKK 3.1 billion which means together with Travel Health and other income, we're at the DKK 6 billion range. While that's at the lower end of the guidance, it is still within guidance. And I would say DKK 3.1 billion in terms of Public Preparedness, I have to remind you, is DKK 1 billion above our annual -- normal annual base business of DKK 1.5 billion to DKK 2 billion. So it's an exceptional year in terms of Public Preparedness, and we are still standing by our revised and high increased guidance for Travel Health of DKK 2.75 billion. So a very strong first 9 months, and I want to actually take this opportunity to thank all the employees for a tremendous effort. It's really down to their focus and dedication that time and time again, I'm allowed to talk on a quarterly basis of our strong financial performance. If we go to Slide 5. On Travel Health, as I said, it's probably the strongest quarter since we've built up this portfolio. We've seen a 23% increase in sales compared to this time last year. And our 2 flagships, rabies and TBE, as I said, these were purchased back in 2020. We've really turned them around. Rabies has gone from strength to strength. We've seen both an improvement in the growth in the market, but also in terms of market share. In the U.S., we've seen a 4% improvement in market share compared to this time last year. And in Germany, we're really seeing a strong growth, a 53% growth in the first 9 months of this year compared to last, which is an outstanding performance. On TBE, again, we have stopped the decline in market share in key markets like Germany since we bought these assets, and we're actually beginning to now see an improvement in market share, particularly in Germany. So we're incredibly happy with the performance that we're seeing in terms of Travel Health, and we believe there is future growth in the months and years to come. If you go to Slide 6. Within our portfolio of Travel Health, we have a vaccine against chikungunya. And chikungunya is a mosquito-transmitted disease. And until very recently, there were no vaccines or treatments available. The vaccine -- our vaccine was part of an acquisition that we acquired in '23 and was approved earlier this year. And subsequently, we've launched our chikungunya vaccine Vimkunya in 10 different countries. So we have had an aggressive launch plan, and we've stuck to that schedule. And we're beginning to see an uptake in the sales of the vaccine, which is great to see. And we're on target to meet the DKK 75 million in the first launch year, which is a very strong performance in our first launch year. We filed for further approvals in Canada and with Swissmedic in Switzerland, and we expect those approvals to be coming next year. And we've already begun some of the post-marketing commitments for expanding the label, and we have a pediatric study and an efficacy study all in progress, which, as I said, are commitments that we've made to the different regulators in the U.S. and Europe. So chikungunya or Vimkunya really represents a future growth potential. Yes, we have to educate and prepare the market, but we believe that this market has the potential to grow to $500 million annually within the next few years, and that's for travel alone. So a great future business opportunity. We turn to the next slide on Public Preparedness. And I want to spend a little bit of time talking about Public Preparedness and what it actually is and why it is different to Travel Health. And the best way of walking you through that is to talk about the revenue graph that's again on the bottom right-hand corner of this slide. And Public Preparedness is actually one vaccine. It's based on a vaccine against smallpox. Smallpox is a disease that has been eradicated. But unfortunately, there is concerns by many governments that smallpox could either reemerge through deliberate release in a bioterrorism attack. It is also closely related to another emerging disease called mpox, formerly known as monkeypox. And we've had a long-standing collaboration with the U.S. government in the development of our vaccine, which is now approved in many countries around the world. And if you look at the graph at the bottom right-hand corner, in 2020, we really had 2 customers, one major customer, which is the U.S. government, where we've secured more than DKK 2 billion in both development and acquisitions over the number -- over the years and Canada. So we had 2 customers. This changed in '22 when there was the first outbreak of mpox. And here, we really saw, and you can see a spike in activity in '22 and '23, where we supplied more than 15 million doses of our smallpox mpox vaccine. And coming through that first outbreak, we were left with more customers. So we now have the EU, both HERA, which is a new organization, but also other funding mechanisms in the EU, such as rescEU. We had other EU nations like France. So going from 2 customers to a handful of customers. At that point, we said our base business moving forward would be DKK 1.5 billion to DKK 2 billion annually, but we would see these spikes from time to time in revenue due to either future outbreaks of mpox or one-off large orders from different governments. Then in '24, we also had another outbreak or a larger sustained outbreak of mpox in Africa, and that also led to a continued spike, which has flowed over into '25. So in this year, we are guiding to secure DKK 3.1 billion in revenue, which is, as I said, about DKK 1 billion higher than our base business of DKK 1.5 billion to DKK 2 billion. So with Public Preparedness, it is not as easy to guide accurately in terms of growth or the future revenues simply because it's all down to government contracts. Some government contracts can take many years to negotiate. And unfortunately, I've been involved in government contracts, which we thought were coming through that fell down at the very last minute. So it is a little bit more unpredictable than a traditional vaccine sales like with Travel Health. But as I've said, we have since '22, been guiding with a base business of DKK 1.5 billion to DKK 2 billion. But obviously, since '22, we've been recording revenues much higher due to the 2 spikes that I've explained. In terms of where we are, we are obviously secured contracts of DKK 3.1 billion already this year. We're well on our road to securing. In terms of the first 9 months this year, we've exceeded the DKK 2 billion already in the first 9 months, and we're well on track to secure the guidance for the rest of the year. We have secured contracts for next year for a total of DKK 1.1 billion. So we're well on our way to securing our base business of DKK 1.5 billion to DKK 2 billion moving forward. We have ongoing clinical studies that are funded through a collaboration with CEPI, both in a pediatric study, which will hopefully support a label extension to include children in addition to the adolescents and adults that we already have. So if we move on to Slide 8, just to talk a little bit about the pipeline. One area is what we call MVA cell line. This is actually a trial that was initiated a few weeks ago, and this is moving away from the egg-based production that we currently have to a proprietary cell line that we've developed. The trial that has started is comparing the safety and immunogenicity of the vaccine produced in the different processes. And this is really an initiative that we've taken, which will greatly improve our manufacturing capacity so that not only can we deal with an mpox outbreak as we have since '22, but we would, with partnerships, also be able to deal with a much larger global outbreak either of mpox, [indiscernible], even smallpox. And it also makes us much more robust for any competition that may come later down the road. Other activities in the pipeline relate to chikungunya. These are post-marketing commitments that we have with the regulators, pediatric study, expanding the label and also an efficacy study and other activities are either funded through DoD or early stage such as Lyme and EBV, which is still preclinical. And with that, I will hand over the presentation to Henrik Juuel. Henrik Juuel: Thank you very much, Paul. So on Slide #9, just a few more words on the commercial performance for the period. So we delivered for the 3 quarters in Q3 here, we delivered close to DKK 1.8 billion, and that corresponded to an overall revenue growth of 32%. So very significant growth, supported by both our business mix, 50% growth on our Public Preparedness business and 22% on our Travel Health business. If we take the Public Preparedness business, Paul already alluded in detail to this one here. And so that has really been about, first of all, securing orders and executing on these orders this year. So targeting the DKK 3.1 billion for the full year. So strong growth on that front for first 9 months as well compared to prior year. On Travel Health, it is really our Rabies and our TBE business that has been driving the strong growth we have seen both for the quarter but also for 9 months, 22% overall growth, 23% from our Rabies business, 18% from Encepur And I think for both products, I think we can say here, it's driven by both strong market growth, but also strong brand performance and actually market share gains for both products. So very strong performance. Vimkunya, our new vaccine against chikungunya as we launched earlier this year. We are so far very pleased with the performance. We have in a very short time managed to launch in 10 countries, after the Q3 in the Nordic countries, Italy and Spain as well. So we have in record time, I would say, we have actually made quite a wide launch possible. From the start of the year, we guided on Vimkunya DKK 50 million to DKK 100 million, and we are now refining that to the midpoint. That's DKK 75 million, and we have so far delivered DKK 42 million after 9 months. So going very well and in accordance with our expectations. Vivotif, our typhoid vaccine, we are -- on a 9-month basis, we are seeing a positive growth. We have been struggling somewhat with this product, but we are finally starting to see positive growth, and it's being driven by initiatives taken to gain market share. Unfortunately, the typhoid market has been down by approximately 7% these 9 months compared to prior year, but we have actually year-to-date managed to compensate for that market decline by gaining market shares. Third-party products at the end, these are the main driver of that one is our Japanese Encephalitis product that we have a partnership with Valneva that comes to an end by the end of this year and our partnership on hepatitis B vaccine, HEPLISAV-B with Dynavax comes to an end as agreed April next year. So all in all, very strong growth on both parts of our business, 32% for the quarter and actually the same for the full 9 months. So performance that we are very pleased with. On the next slide, we are looking at the full P&L, where we start with the revenue we just talked about DKK 1.8 billion for the quarter. We have a gross margin of 50%, which is significantly up compared to the same quarter last year. This is driven by volume, obviously, the higher volume, the more busy we are in the production area, the more efficient we can be and the easier it is to absorb all the costs to the products being manufactured. But it's also explained by what we call other production costs, which is typically cost -- it could be cost of idle capacity. It could be cost of scrap. It could be caused by less efficient yield coming out of manufacturing. So we have been successful in all these parameters. And therefore, we are seeing a gross margin of the 50% versus 43% last year. R&D cost varies a little from quarter-to-quarter. You will see that we are actually spending less than last year, both for the quarter and for the 9 months. This is mainly due to timing of some of the committed studies we have on chikungunya that is progressing. And on SG&A, you see quite a substantial increase. It's mainly or very largely explained by the launch efforts we are putting behind Vimkunya, the chikungunya vaccine and also by Bavarian Nordic entering into new markets. We have, during the last 12 months, established ourselves a commercial presence in a number of countries, including Canada, it's U.K. and it's France, which, of course, will give us further opportunities to drive growth going forward. If you look further down the P&L, that gives an EBIT of DKK 1.2 billion nearly. Then we have included in that one other operating income of DKK 810 million, which comes from the sale of the priority review voucher that was recognized in the third quarter. Further below, you can see the EBITDA margin, excluding the other operating income, that is DKK 515 million, which corresponds to an EBITDA margin before special items of 29%. So on a 9-month basis, that takes us to an EBITDA, excluding other operating income of nearly DKK 1.5 billion or an EBITDA margin of 31%. So again, strong performance, all in line with what we have communicated previously and in line with our expectations. On the next slide, a quick overview of the cash flow and balance sheet. We saw positive cash flow from operating activities for the 9 months, driven, of course, by the positive profit that the business delivered, but also impacted by the proceeds or the income we earned from the sale of the priority review voucher. Cash flow from investment activities, here, we recognized actually the last milestones that we paid to Emergent BioSolutions and GSK for the acquisitions we did previously. They were recognized here, not all of them paid yet, though. And then finally, cash flow from financing activities is the sum of the share buyback we did previously in the year and then employee warrant exercise that was executed as well. So all in all, a net positive cash flow for the period of DKK 500 million approximately which obviously improves our cash position, which you can see on the table to the right. We do today have a cash position of close to DKK 3 billion. I have to say here, though, that our accounts payable are somewhat inflated at the moment as we still owe DKK 70 million to GSK, and we also owe royalties on the voucher we sold to NIH and taxes to be incurred in connection with the voucher. But a strong cash position of close to DKK 3 billion. Then one slide on our outlook here. As we talked about already, we have refined our outlook. We have confirmed the outlook within the range that was previously communicated. So right now, we are looking at a guidance without an interval as we are so close to the year-end. We do not operate in an interval for the Public Preparedness business any longer, but are expecting DKK 3.1 billion. We confirm the upgraded guidance that we issued in connection with Q2 for the Travel Health business. So that is now DKK 2.750 billion. And then we have some other income adding up to a total of DKK 6 billion. So a confirmation of all previous guidance, but a refinement now being so close to year-end. We are anticipating an EBITDA margin for the full year, excluding the impact from the voucher of 26% and including the voucher, it will be approximately 40%. The 26% is sensitive to how the last 2 months here pans out when it comes to the R&D projects running at the moment. And depending on how they end, there is an upside here that it could be closer to the 27%. But given the current plans, I think we are guiding 26%, and that's most likely where we will end. We have not guided for '26, obviously, but what we have stated here is that we have previously announced an order to BARDA of USD 143 million. Most of that goes into '26. We also announced recently the HERA framework agreement where there is a commitment of 1.1 million doses, where of 750,000 is impacting next year. So if we add the commitments we have so far, we right now have an order book worth DKK 1.1 billion for '26. And we will, of course, keep communicating to the market when there are material orders being added to this order book. The next slide is simply just a slide we brought to sort of round off the process that we have just been through. I don't want to read out every word here, but basically, it has been a longer process with the takeover attempt on Bavarian Nordic. And we just feel it's important to understand that the company was not for sale. We were approached with an offer, which the Board of Directors rejected to start with later in the process, there was an offer where the Board basically judged that now it is at a level where we have to ask the shareholders -- the shareholders has voted. The offer did not succeed. So that is the situation. And we, of course, we acknowledge that and we respect that decision by the shareholders, and we remain an independent listed company, and we continue to execute on the growth strategy that was in place even before this process started. I think we are very pleased to be today to be able to report these numbers here, and we are very grateful to our organization who have actually demonstrated that they have maintained a focus on the business while this process has been running. That has been extremely important to us. We have even seen in our engagement surveys that the company or the employees have really stayed engaged in the company. So thanks to the organization for that. Without that, we wouldn't have been able to deliver these fantastic results that we're seeing here today. And in order to -- to make sure that the market is well informed about the strategy that we talk about, we have called for -- and we call it an investor information meeting on December 11 during the morning. More details will be announced. It will be in Copenhagen. There will be a possibility to attend in person, but it will also be live streamed and recorded. And yes, basically, the agenda will be about give an update on the business and a recap of our growth strategy. But as I said, more details will follow. We will issue a press release once we have the details in place. So with that, I will give the word back to the operator and open up for Q&A. Operator: [Operator Instructions] we are now going to proceed with our first question. The questions come from the line of Romy O'Connor from VLK. Romy O'Connor: I have 2, if I may. The first being on your thinking about reaching the DKK 75 million for Vimkunya. I'm just wondering what steps you're now taking given that there's only 1.5 months left in the year? And also maybe a bit on the launch steps of into Canada? And then secondly, just maybe a little bit of color on the bid outcome. I was just wondering what your thinking is by future business development or M&A? And yes, what's your thinking now in terms of focus on value creation into the coming months? Paul Chaplin: Yes. Thank you for the questions. The first one related to Vimkunya and the projections of DKK 75 million. It's true there's only 1.5 months left for the year, but we only reported to the first 9 months. So we haven't reported some of the months that we've already gone. So we have launched according to plan. We are seeing good traction in a number of countries, slower in others due to some of the national recommendations, but we are confident that with the launches that we've made and the traction that we're seeing that we will be able to meet that target. I think your second question related to the bid outcome and our future growth strategy. I think it's clear, it's important to stress again that our strategy that we put in place back in 2020 was a growth strategy. It was to grow the portfolio of the assets that we purchased over a number of years to grow public preparedness, but it also included additional M&A. I think in my introduction to the presentation today, I tried to highlight the successful history that we've had of not only acquiring assets, but turning these, what I call unloved assets around and also bringing in manufacturing. It's a capability that very few others have demonstrated, and I think it's a key strength. And I think what we want to do is when the opportunity arises is to continue that M&A journey and bring more commercial assets on board. And that's a strategy that we've had in place since 2020. We've been successful at it, and we will continue to execute on it. Operator: We are now going to proceed with our next question. And the questions come from the line of Thomas Bowers from SEB. Thomas Bowers: A couple of questions. So firstly, just on shareholder returns. Can you give us any color on the current plans for any share buybacks now that we are out of this M&A process? So I think that you were talking a little bit about share buyback of excess cash. So anything that could sort of reflect the PRV sale you did here in the summer? And then second question, just on JYNNEOS. So just wondering the delta between the previous guidance range, so looking at that DKK 3.7 billion at the high end of the range. So we have around DKK 600 million delta compared to the DKK 3.1 billion guidance. So I'm just curious, normally, you only guide for something that you are sort of where you are in negotiations with governments or potential customers. So those DKK 600 million, is that something that we should expect could simply or likely move into 2026 and of course, not part of that DKK 1.1 billion? Or is there something else that we need to be aware of in terms of those -- of that delta? And then maybe just a question on Travel Health, super, super strong momentum, surprises me every time. And now looking at your guidance for '25, so you're sticking to that DKK 2.75 billion. Of course, there as you hit up with some of the [ typhoid ] vaccines. But you are now DKK 400 million short of reaching that DKK 2.75 billion. And looking at the numbers, so you're sort of implying that [indiscernible] should be flat or even slightly decreasing for the remainder of the year. So is there anything here that I'm sort of not seeing? Or are you just maybe a little bit conservative given it's normally a weak quarter, of course? And then maybe if I can squeeze in number 4 here, just on the R&D phasing, can you provide any color on the scenarios from Vimkunya? So we know that this outbreak in Thailand is pending or potentially ongoing. So is there any think that indicate that this should shift into '26? And what could be the R&D spend cost reduction range, so to say, for the '25. So you're guiding still for DKK 900 million. So I'm just understanding whether it's going to save you DKK 100 million or where we are here. Yes, I'll stick to that. I can repeat if... Paul Chaplin: Some of them. But let me take the JYNNEOS guidance. And then maybe, Henrik, I'll let you take the other one. So on JYNNEOS guidance, a few years ago, we would only really guide on Public Preparedness on contracts that we had in hand. And that reflected the fact that we had very few customers. So we didn't have the confidence a few years ago to guide broader I would say that has changed over the last number of years that we're guiding, obviously, with contracts that we know we have in hand, plus what we also think that we can secure within the next 12 months. So it's not actually only things that we're negotiating, it's things that we believe that we can secure. I mentioned in the presentation that sometimes, unfortunately, part of the unpredictability of the part of this business is that it's with governments, right? And even though you can be very -- one day, you're incredibly confident that you're going to secure a contract, there may be a change in a political leader or the government may change, and it completely stops overnight. So it is unpredictable. What I would say is where we guided is where we thought the range would be. That's why we gave a range. Already in Q2, we stressed that DKK 3.1 billion was secure, but that we thought we could secure more. You've seen that we have announced an agreement with HERA. That could have come earlier in the year potentially that could have led to more revenues this year, but it's now pushed into next year. Obviously, that doesn't account for the whole DKK 600 million that you're referring to. But I would say what the guidance reflects is that some contracts came later than we anticipated and some contracts were still unsure whether we can secure. I hope that answers that question. And then Henrik, maybe. Henrik Juuel: Yes. Let me try the other 3, Thomas. I think, first of all, on the share buyback thing, I think what we have communicated previously is that our capital allocation policy, priority #1 there is to pay back the milestone payments to GSK and Emergent. That's soon behind us. It is not yet though. We still owe EUR 70 million to GSK, which we expect to be paid early Q1. Number 2 priority, of course, is to invest in the business, and that means R&D, it also means sales and marketing to grow the top line. And then I think third priority would be to look into our M&A strategy and eventually consider returning money to the shareholders. It's very clear we are not a bank, and we are constantly evaluating that situation. So what is the current need? What do we have on the balance sheet? Is that appropriate for the plans we have? If not, then we will return money to the shareholders. At this point in time, so that as this is a continuous evaluation, I cannot give you any more update right now. But of course, we evaluate the situation constantly. On Travel Health for the fourth quarter and our outlook, we are still guiding the DKK 2.750 billion. And here, I think you need to remember that some of our travel vaccines are seasonal vaccines. We sell in all quarters, but some quarters are better than others. So typically, the fourth quarter is not the strongest quarter. So we are still targeting DKK 2.750 billion for the full year. And on the R&D phasing, we are still targeting the DKK 900 million in R&D for the full year to a large extent driven by the Vimkunya committed trials that we have to do. I'm just alluding to that, there could be some of it phased into next year. And typically with the clinical trials, I think a lot of the steps you go through there, the timing can change. So some of it could slip into next year of the R&D spend. If that happens, then, of course, it could impact our EBITDA margin positively this year. But let's see, the plan is still DKK 900 million. And we're only raising this as it's a little out of control with the exactly at what pace these trials they run. Operator: [Operator Instructions] we are now going to proceed with our next question. And the questions come from the line of Lucy Codrington from Jefferies. Lucy-Emma Codrington-Bartlett: Just regarding chikungunya then. In terms of the U.S. launch, I was wondering how important is the MMRW publication when it comes to launching in the U.S.? And then maybe a bit niche, but in similar lines, have you thought about the potential substitute that the New England Journal of Medicine and Public Health Group have talked about replacing the MMRW? And any thoughts on that at all? Paul Chaplin: Yes. Thank you. Yes. So this is a tricky one. So yes, in the U.S., post approval from the FDA, you need an ACIP recommendation, which we're very fortunate that we have for chikungunya. And that recommendation, as you then say, is then published in the MMWR, which is a publication from CDC. And many of the distributors actually want to see the publication, even though it's recommended and it's posted on the website before they will start to purchase. And obviously, the situation where we're in is the MMWR has not been published. And it has, as we said, has slowed down the traction, I would say. The one thing I would also give as another example is that when we launched JYNNEOS in the private market in the U.S., the same situation. We had a recommendation from ACIP, but actual fact, the MMWR was only published earlier this year. And what we did in that situation was that we were able to convince the distributors that they could start to acquire the product before the publication, and that was successful. And I would say we're in that phase right now. We've convinced some already to go ahead with chikungunya, and we're still convincing others. So it has certainly slowed down the traction, but it's something that we've already had experience of with JYNNEOS. And again, one of the main arguments for that is there's always been sometimes a lengthy delay between the recommendation and the publication. And right now, it's very uncertain with ACIP and CDC what would the time will be. And as you say, that is leading to many others talking about alternatives and whatever, but we'll have to just see how that develops. Operator: [Operator Instructions] We are now going to proceed with our next question. And the questions come from the line of Thomas Bowers from SEB. Thomas Bowers: Just a quick follow-up here for me. Just on the sales and marketing cost spike you can say here in the third quarter related to mostly Vimkunya, of course. But should we see this as sort of a new baseline going forward? Or is there some one-off expenses in that Q3 S&M number that we should be aware of just to sort of have an indication on how we should model at least going forward? Henrik Juuel: I think that there's certainly an element of one-off in there because typically when you launch a new product, you will be in a launch phase that will require promotional costs for a period of time. So it's for a period of time, but such a launch can easily stretch over like, let's say, 2 years perhaps. And then you will see at least the promotional spend part of it to normalize again. But right now, I think we are spending money establishing the awareness of chikungunya and Vimkunya in particular, in the markets. It's a nonexisting market in most places we go into. So therefore, there is a need to build the awareness. But it will normalize after a couple of years where you can no longer argue you're in a launch phase. Operator: That does conclude the question-and-answer session. I will now hand back to Mr. Paul Chaplin for closing remarks. Paul Chaplin: Thank you, and thanks, everyone, for joining the call and for your interest and the questions. Thanks, and have a great day and a good weekend. Operator: This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you, and have a good day.
Operator: Good day, and welcome to the Creative Media & Community Trust Corporation Third Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Steve Altebrando, Portfolio Oversight. Please go ahead. Hello, everyone, and thank you for joining us. Steve Altebrando: My name is Steve Altebrando, the portfolio oversight for Creative Media & Community Trust Corporation. Also on the call today are David A. Thompson, our Chief Executive Officer, and Barry Neil Berlin, our Chief Financial Officer. This call is being webcast and will be temporarily archived on the Investor Relations section of our website, where you can also find our earnings release. Our earnings release includes a reconciliation of non-GAAP financial measures discussed during today's call. During this call, we will make forward-looking statements. Forward-looking statements are based on the beliefs of assumptions made by, and information currently available to us. Our actual results will be affected by known and unknown risks, trends, uncertainties, and other factors that are beyond our control or ability to predict. Although we believe our assumptions are reasonable, they are not guarantees of future performance and some will prove to be incorrect. Therefore, actual future results can be expected to differ from our expectations. Those differences may be material. For a more detailed description of potential risks, please refer to our SEC file which can be found in the Investor Relations section of our website. With that, I'll turn the call over to David A. Thompson. David A. Thompson: Thanks, Steve, and thank you to everyone for joining our call today. I'll begin with an update on the progress we're making with our strategic initiatives and then review our results for the quarter. As a reminder, our key priorities remain focused on two main goals: strengthening our liquidity and our balance sheet and growing our multifamily business. To advance these objectives, which we first outlined last September, we've been executing a significant refinancing program and evaluating selective asset sales. Earlier this week, we announced that we have entered into a definitive agreement to sell our lending business. This business is primarily focused on originating SBA seven loans for limited service hotels and it was considered a non-core asset for the company. As of September 30, the purchase price was estimated to be approximately $44 million and yield the company about $31 million after repayment of debt transaction and other expenses. The transaction remains subject to Small Business Administration approval as well as certain closing conditions. At the same time, we continue to make meaningful progress on our refinancing initiatives. Since last September, we completed financings on seven assets and put in place a warehouse facility for our lending division. This facility will be retired at the close of our sale transaction. We are also working on an upsize of our mortgage up on Penfield, our creative office asset in Austin. After closing this financing earlier this year, we signed a lease with an investment-grade tenant, which should allow us to upsize the loan. We're now finalizing the loan documents with the lender. Taken together, these actions were important steps for the company. They provided proceeds that allowed us to significantly reduce our recourse debt, including the full retirement of our $169 million recourse credit facility earlier this year. They also supported our growth initiatives, including lease-up activity at our Beverly Hills, Culver City, Brentwood, San Francisco, and Austin properties. We completed renovations at our hotel asset and new loan originations in our lending business enabled us to continue paying preferred dividends. Overall, we're encouraged by the progress we've made in improving liquidity. We are working to position the company to benefit from a recovering commercial real estate market, which is supported by lower interest rates, a significant uptick in office leasing activity, and improving economic conditions in the San Francisco Bay Area. Turning to third-quarter results, our core FFO was negative $10.5 million, reflecting several items that impacted performance during the quarter. Our overall net operating income was $7 million compared to $9.8 million in the prior quarter. Within our office segment, NOI declined by approximately $500,000 from the second quarter, largely due to lower appraised value at one of our JVs. NOI modestly increased at our wholly-owned properties. Hotel NOI was $850,000 in the quarter compared to $4.2 million in the second quarter, primarily reflecting disruption from our renovation of the public space. Q3 is also a seasonally slower quarter for the hotel. Multifamily NOI increased by approximately $600,000 from the prior quarter. Improvement was primarily due to a lower appraisal at one of our JVs that impacted Q3 results as well as a decrease in real estate tax expense at our consolidated properties in Q3. And finally, NOI from our lending segment increased by approximately $360,000, primarily due to a higher reserve taken in the second quarter. Looking ahead, we see opportunities to improve cash flow in 2026, supported by several key drivers. Continued improvement in office leasing activity, the full completion of renovations at our hotel asset, and steady gains in multifamily performance through higher rental rates, improved occupancy, and delivery of new units. We also expect to benefit from a more favorable interest rate environment. Before I turn the call over to Steve to provide more detail on the portfolio, I want to take a minute to thank Barry Neil Berlin for his years of service. As part of the sale of our lending division, Barry will be stepping down as CFO in order to join the acquirer of the lending business. Brandon Hill will assume the role of CFO once the transaction is closed. Brandon has been intimately involved in Creative Media & Community Trust Corporation for years, and we expect a seamless transition. Steve? Steve Altebrando: Thanks, David. We remain focused on improving property-level performance across all segments and growing our premier newer vintage multifamily portfolio. This continues to be a key growth area for us. Including our joint ventures, we now have four operating assets: 1150 Clay and Channel House in the Bay Area, and 701 South Hudson and 1902 Park Avenue in Los Angeles. We are making steady progress on the lease-up of 701 South Hudson, the residential portion of our partial office-to-residential conversion completed late last year. Multifamily occupancy at the property was approximately 81% at the end of the third quarter, up from 68% at the end of the second quarter. As a reminder, the top two floors of the building were converted into 68 high-end residential units, while the Ground Floor creative office component known as 4,750 remains 100% leased. As mentioned on our prior calls, we believe there's an opportunity to develop additional units on the back surface lot of the property given recent zoning changes, and we continue to make progress on those plans. Our fifth project, 1915 Park in Los Angeles, will deliver this month. This 36-unit ground-up multifamily development is a joint venture with an international pension fund and is located adjacent to our office building at 1910 West Sunset in Echo Park, a highly desirable walkable submarket with attractive dining and entertainment options. In Oakland, we saw a modest improvement in total occupancy during the quarter. We believe our properties will benefit from limited new construction in the Oakland residential market, as well as the ongoing recovery across the broader Bay Area. In San Francisco, multifamily properties continue to improve with area vacancy at its lowest level since 2011. The third-quarter rent growth of 5.2% in San Francisco is the strongest year-over-year growth rate since 2015. In addition, in January 2026, Samuel Merritt is opening its new campus, which is located just steps from our class A multifamily asset at 1150 Clay. The new campus is expected to draw 2,000 students and 500 faculty members. We see meaningful opportunities to grow our multifamily net operating income through a combination of rising rents, increasing occupancy, lowering operating costs, and the delivery of our fifth asset this month. Turning to the office segment. Earlier this year, we noted that our leasing pipeline was very active, and that translated into very strong leasing activity. Through the first nine months of 2025, we executed 159,000 square feet of leases, a 69% increase compared to the same period last year. This follows 176,000 square feet of leasing activity in 2024. At the end of the third quarter, our office portfolio was 73.6% leased. Excluding our one Oakland office property, our lease percentage was 86.6%, which was up from 81.7% at the end of 2024. Importantly, we believe the headwinds from COVID are largely behind us, and we're now beginning to see the benefits of return-to-office trends, which are creating tailwinds for our portfolio. Turning to our hotel, we believe we're entering 2026 from a position of strength following a couple of years of renovation-related disruption. We're nearing completion of our $11 million renovation of the public space at the Sheraton Grand Sacramento. This project includes upgrades to the ballroom, banquet space, public space, and food and beverage areas. The renovation was funded through a combination of $8 million of key money received as part of the extension of our management agreement with Marriott, cash flow from the property, and future funding on the mortgage. As a reminder, we also renovated all 505 guest rooms last year. With that, I'll turn the call over to Barry, who will provide an update on our financial results. Thank you, Steve. Good morning. Barry Neil Berlin: I'm going to spend a few minutes going over the comparative year-over-year financial highlights for 2025 versus 2024, starting with our segment NOI, which was $7 million in 2025 compared to $7.6 million in the prior year comparable period. Broken down by segment, the decrease of approximately $600,000 was driven by decreases of $400,000 for our office properties, $174,000 from our lending business, and $123,000 from our hotel property. Partially offset by an increase of $284,000 from our multifamily properties. Our office segment NOI for Q3 2025 was $5 million versus $5.4 million during Q3 2024. The decrease was primarily driven by a decrease in NOI at an office property in Los Angeles, California, and at an office property in San Francisco, California, attributable to lower rental revenues resulting from a decline in occupancy, as well as NOI at an office property in Austin, Texas, as a result of higher real estate taxes. Our lending division NOI was $314,000 compared to $688,000 in the prior year comparable period, primarily due to a decrease in interest income as a result of loan payoffs and lower interest rates, partially offset by a decrease in interest expense resulting from net loan paydowns and a decrease in additions to current expected credit losses. Our hotel segment NOI for Q3 2025 was $850,000 compared to $1 million in the prior year comparable period. The decrease was driven by a decrease in food and beverage sale revenues, partially offset by an increase in room revenue. Operations at our hotel property were negatively impacted by our lobby renovation project during Q3 2025, and our room renovation project during Q3 2024. Our multifamily segment NOI was $792,000 during Q3 2025 compared to $508,000 from the prior year comparable period. The increase was primarily driven by reductions in real estate taxes at our multifamily properties in Oakland, California, during 2025. Partially offset by a decrease in revenues at our multifamily properties in Oakland, California, as a result of declines in occupancy and monthly rent per occupied unit net of rent concessions compared to the prior year comparable period. Below the segment NOI line, we had an increase in depreciation and amortization expense of $922,000 due to incremental increases to the depreciable asset base at our hotel property following our renovation projects, as well as an increase in interest expense of $782,000 driven by higher aggregate debt outstanding. Our FFO was negative $11.1 million, negative $14.75 per diluted share, compared to negative $28.4 million in the prior year comparable period. The positive results in our FFO were primarily driven by decreases in redeemable preferred stock redemption expense of $16.1 million and through a reduction in redeemable preferred stock dividends of $2.7 million. Partially offset by the previously discussed decrease in total segment NOI and the increase in interest expense. Our core FFO was negative $10.5 million or negative $13.96 per diluted share compared to negative $11.5 million in the prior year comparable period. This increase in core FFO is attributable to the previously discussed reductions in redeemable preferred stock dividend offset by the decrease in segment NOI and higher interest expense. Core FFO calculations reconciliation items to determine FFO, that relate to preferred stock redemptions, transaction-related costs, and deemed dividends. I would like to conclude by thanking David A. Thompson for his guidance over my roles with Creative Media & Community Trust Corporation since becoming public in 2014. More importantly, as my mentor for my roles in CIM, since then. Thank you, David. And while I am very excited to be following the lending division over to its new home, and I'm looking forward to helping its ownership grow and expand its horizons in the lending arena. I will truly miss the interaction with the ownership and executive management team at CIM that has supported me in my roles with the firm. And lastly, to the amazing teams that I've had the pleasure to work with and that have made my job easier. That includes Brandon Hill, who was on the call today, who has guided the financial oversight for Creative Media & Community Trust Corporation since before I took the CFO position and who has patiently awaited his opportunity to take on the job of CFO. He is well suited to take on the role, and I congratulate him on being provided this opportunity. With that, we could open the line for questions. Operator: We will now begin the question and answer session. To join the queue, please press star and then two. It appears there are no questions. I would like to conclude the conference. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, thank you for standing by. Welcome to the LM Funding America, Inc. Third Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Cody Fletcher. Please go ahead, sir. Cody Fletcher: Thank you, operator, and thank you all for joining LM Funding America's third quarter 2025 earnings conference call. Joining us today are Chairman and CEO, Bruce Martin Rodgers, President of US Digital Mining Ryan H. Duran, and CFO, Richard D. Russell. For today's call, we have uploaded an accompanying supplemental investor presentation which can be found under the events section of LM Funding's investor relations website. Before we get started, please note that our remarks today may include forward-looking statements. These statements are subject to risks and uncertainties, and actual results may differ materially. We will also reference certain non-GAAP financial measures today. Please refer to our 10-Q filing and our website for a full reconciliation of these non-GAAP performance measures for the most comparable GAAP measures. For a more comprehensive discussion of these and other risks, please refer to our filings with the SEC, available on sec.gov in the investors section of our website at lmfunding.com/investors. I'll now turn the call over to our CEO, Bruce Martin Rodgers. Bruce Martin Rodgers: Thanks, Cody. Good morning, everyone, and thank you for joining us. The third quarter was one of execution, integration, and disciplined capital allocation as we continued building LM Funding America, Inc. into a vertically integrated Bitcoin miner with a simple ambition: increase Bitcoin per share and grow intrinsic value over time. We entered the quarter with momentum from our Oklahoma site and growing Bitcoin treasury. As summer progressed, we added meaningful scale and strengthened our foundation. In August, we bolstered our balance sheet with $21 million of capital designated primarily for Bitcoin accumulation. We quickly deployed a large portion of those proceeds to purchase 164 Bitcoin, accelerating our treasury growth. Just weeks later, we closed on the acquisition of an 11-megawatt facility in Columbus, Mississippi, bringing our total capacity to 26 megawatts across two wholly controlled sites. This move expanded our operational base, our power and climate exposure, and gave us full control of energy and uptime across a second location. By September, we had integrated and energized additional capacity and exited the month with approximately 304.5 Bitcoin in treasury, valued at nearly $35 million, versus a market capitalization of roughly half that amount. That disconnect between our treasury value alone and our equity valuation underscores what we are working toward. Then in October, we advanced two core priorities simultaneously. We enhanced our per-share economics and positioned our mining fleet to improve productivity. In a private securities repurchase, we retired more than 3.3 million shares and over 7.3 million warrants in a single transaction, reducing dilution, simplifying our capital structure, and increasing our Bitcoin per share. Subsequently, in early November, we announced a $1 million stock buyback, further committing our resources to increasing Bitcoin per share. During the same quarter, we secured Bitmain S21 immersion cool machines to grow our immersion systems at our Oklahoma site. We expect these machines to come online in December. Importantly, October is also our first full month with Mississippi operating at steady state, and the results validate our strategy. Bitcoin production increased 28% sequentially, rising from 5.9 Bitcoin in September to 7.6 Bitcoin in October. Taken together, Q3 and October were about strengthening control of our energy, expanding our mining footprint, growing our treasury, and reducing our share count, all in service of improving Bitcoin ownership on a per-share basis. We strongly believe in Bitcoin as a growth asset and built our company to take advantage of Bitcoin's growth and long-term value proposition. We find inexpensive power machines to add to our Bitcoin holdings, and we are active in the capital markets trying to increase our total Bitcoins held and our Bitcoins per share. It's a long game, and it starts with sound mining operations. With that, let me turn it over to Ryan H. Duran for an operational update. Ryan H. Duran: Thanks, Bruce. Operationally, the last four months were about turning owned infrastructure into accelerating hash power and building an asset base that compounds efficiency over time. We moved from a single-site facility at roughly 0.48 exahash in June to exiting October with roughly 0.71 exahash energized, plus additional growth coming online in December, representing roughly 50% hash rate in one build cycle. That growth came from owning and controlling our power, upgrading fleet mix, and integrating our second site at Mississippi. The acquisition added roughly 7.5 megawatts of energized capacity and approximately 230 petahash of installed hash rate at an attractive 3.6¢ per kilowatt-hour power cost, giving us a second low-cost self-managed facility and a diversified operating base. Equally important, we quickly integrated Mississippi, and the site immediately started contributing to our mining operations. When we reached our first full month of steady-state operation in October, total production of the company increased, as Bruce mentioned, 27% month over month from 5.9 Bitcoin to 7.6 Bitcoin. This gain reflects not only expanded capacity but also the compounding benefits of tighter operational control, optimized firmware, refined curtailment and power sales scheduling, and more efficient fleet deployment in warmer months. We now operate approximately 6,700 machines across the fleet and additional units staged for deployment behind immersion. Our energized hash rate held stable through high heat periods, supported by curtailment and energy sales that directly improve our margins. We position the fleet for stronger winter uptime when performance conditions naturally improve. Looking forward, we are entering our next efficiency phase. We secured Bitmain S21 immersion-cooled units that will add roughly 70 petahash of compute power to our Oklahoma site and are scheduled to energize in December. This upgrade is meaningful. Immersion cooling improves heat transfer, reduces thermal strain, tightens fan load overhead, and increases uptime, especially during seasonal peaks. Combined with the S21's efficiency profile, this gives us a step change in efficiency and should meaningfully increase Bitcoin per megawatt at the site. This is the same philosophy that guided our site acquisition: combine owned power with modern generation hardware and operate it with discipline. We now operate a cleaner, more efficient, and fully controlled mining platform, improving uptime and next-gen hardware and emerging coming online. The foundation is built. From here, the focus is simple: increase production, efficiency, and Bitcoin per share. With that, I'll turn it over to Richard D. Russell to walk through the financials. Richard D. Russell: Thanks, Ryan. For the third quarter, revenue was $2.2 million, up approximately 13% sequentially and 74% year over year. The sequential increase reflects stronger average Bitcoin pricing of $114,000 and contributions from the newly operational Mississippi facility for September. Mining margins improved to 49%, driven by a shift from hosting fees to self-mining, utilizing our curtailment and energy sales to offset mining expenses and higher fleet efficiency. Curtailment in energy sales totaled $152,000, down from $223,000 in Q2 due to cooler seasonal temperatures. We reported a net loss of $3.7 million and a core EBITDA loss of $1.4 million, both driven by increased staff costs and payroll expenses. Following quarter-end, we executed a substantial balance sheet and equity enhancement initiative, completing an $8 million private repurchase of around 3.3 million shares and 7.3 million warrants, financed for our $11 million Galax facility secured by Bitcoin. This transaction removed a large warrant overhang and materially reduced the share count, improving per-share economics and shareholder alignment. We paired that with a newly authorized $1.5 million public share repurchase program, which gives us flexibility to act opportunistically when our value trades meaningfully below our Bitcoin holdings and infrastructure value. In terms of our balance sheet, at quarter-end, LM Funding held cash and cash equivalents of $300,000 and 304 Bitcoin valued at $34.7 million, nearly double our market cap, while our equity was $50 million, nearly three times our market cap. As of October 31, our Bitcoin treasury stood at approximately 295 Bitcoin valued at roughly $31.9 million or $2.60 per share compared to a stock price near $1.07 on 12.2 million shares. Our liquidity, treasury, and credit capacity give us flexibility to support operations, growth, and continued share repurchases while limiting dilution and preserving long-term value for shareholders. The numbers tell a clear story: expanding hash rate and improving operating leverage, disciplined cost control, and a balance sheet and cap table built to improve per-share value over time. Bruce Martin Rodgers: Thanks, Rick. Our focus remains clear: increase Bitcoin per share, expand owned infrastructure, and close the gap between intrinsic value and market value. We built a vertically integrated platform that gives us operational control, cost efficiency, and treasury leverage. With Mississippi fully online, Oklahoma adding immersion, and Bitmain S21 machines coming online in December, we are entering a phase where scale, efficiency, and productivity converge. From a capital strategy standpoint, we will continue to balance Bitcoin accumulation, strategic investment, and opportunistic share repurchases that we will use only when it strengthens the balance sheet without sacrificing per-share value. We have no interest in growing for growth's sake. We are interested in growing per-share Bitcoin and per-share intrinsic value. We believe deeply in the long-term value of Bitcoin. We believe just as deeply in the long-term value of LM Funding America, Inc. Every action we take, every machine deployment, every site decision, every capital move, is designed to improve per-share ownership, per-share cash flow, and per-share Bitcoin. We like the path we are on, and we like the structure we have built. LM Funding is one of the few micro-cap miners with active invested management. We have built this business to endure volatility and to scale into the next cycle. Our focus is to keep executing methodically, patiently, and with conviction. Thank you for your continued support. We'll now open the line for questions. Operator: Thank you. As a reminder, to ask a question, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. One moment, please. Our first question is going to come from the line of Matthew Galinko with Maxim Group. Your line is open. Please go ahead. Matthew Galinko: Hey, good morning, guys. Thanks for taking my question. Congrats on all the progress over the last few months. With your mining infrastructure pretty radically different from where it was entering '25, I'm curious if you could maybe give us some thoughts on how you think about your path in '26 as far as the Bitcoin mining infrastructure and equipment go? Bruce Martin Rodgers: Sure. The Mississippi acquisition has worked really, really well. First off, it's doing what it was supposed to. And then secondly, Greene's left behind some low-hanging fruit. And they did some things to grow there that they didn't take advantage of that we are now kind of slipping into. And so we've got a nice runway there that we didn't. So I look for more growth there and on the magnitude of what we've achieved this year. It seems foreseeable. So that's there. Oklahoma, we're adding the two immersion machines in there. We'll have that thing built out pretty soon. And then it just starts paying for itself and making money after that. That is going to be a long-term Bitcoin mining site. Even the energy pricing there. And this is Rick. We also have the ability to expand in Mississippi by an additional four megawatts. Matthew Galinko: Got it. Okay. So if I read between the lines there, it sounds like you're not necessarily pursuing or close on any additional site acquisitions or that something you're still exploring, but just nothing appealing at this point? Bruce Martin Rodgers: We always have people exploring site acquisitions when we do it based on where the energy tariffs are, and then we look for property that goes with those energy tariffs. Matthew Galinko: Got it. And last question for me, and I'll jump back in the queue. Just with the perspective that you have the mandate now to maximize your Bitcoin per share, how do you think about allocating between mining business and directly acquiring additional Bitcoin? Bruce Martin Rodgers: We always say you have to take a dollar and decide whether the price of Bitcoin, the price of the infrastructure, etcetera. And then it's a target of where in the future you want that to pay off. And so we kind of play a long game five years on that. Looking at what do we think the price of Bitcoin is. And that means you don't necessarily make a dollar-to-dollar decision based on the current circumstances. You have to make it on a pro forma basis. Which makes it a little more black magic. I get it. But it's a long game. So growing the mining helps pay the bills, and it has the potential to be accretive to the overall treasury strategy. And then the treasury strategy is a balance between your equities market and the Bitcoin market. Operator: Thank you. And we'll move on to our next question. Our next question comes from the line of Kevin Dede with HCW. Your line is open. Please go ahead. Sky Moore: Hello, Melissa. This is Sky Moore calling for Kevin Dede. Thanks for taking my call. I've got two questions for y'all. The first is going to be with about 15% of your old machines in storage as reported in the company's October update. Are you guys managing your fleet of these machines going forward? Bruce Martin Rodgers: Ryan, do you want to handle that? Ryan. Sorry. Hey, Sky. Ryan H. Duran: A second to get off mute there. So yeah. Those machines are kind of sitting in the wings. As we've hit on, we do have build-out capacity available already immediately at Mississippi. And as Bruce already alluded to as well, we're exploring other opportunities, and we feel strongly that having those machines in the wings is a great way to quickly deploy once that power becomes available. And then as we're doing in Oklahoma, we kind of set our roots in and then, you know, upgrade the fleet from there. So that's generally our strategy. Sky Moore: Awesome. Thanks for that. My final question is, you know, you mentioned more efficient machines being placed at your current sites. Could you guys provide a current cost of mining one Bitcoin or perhaps a range of mining one Bitcoin? Richard D. Russell: Yeah. This is Rick. Our current mining costs right now for Bitcoin for this most recent quarter was $66,000. Last quarter, it was, like, $70,000. So we've been able to reduce by direct mine cost quarter over quarter. Sky Moore: Awesome. Thank you so much for taking my questions, and I look forward to speaking with you guys next earnings. Operator: Thank you. This will conclude today's question and answer session. Ladies and gentlemen, this will also conclude today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.
Operator: Good morning, and welcome to the Edible Garden AG Incorporated 2025 third quarter business update conference call. At this time, all participants are in a listen-only mode. The floor will be open for questions following the presentation. If anyone should require operator assistance during the conference, please note this conference is being recorded. I will now turn the conference over to your host, Ted Ayvas, Investor Relations, Crexendo Communications. Ted, the floor is yours. Ted Ayvas: Thanks, Jenny. Good morning, and thank you for joining Edible Garden AG Incorporated's third quarter 2025 Earnings Conference Call and Business Update. On the call with us today are Jim Kras, Chief Executive Officer of Edible Garden AG Incorporated, and Kostas Dafoulas, Interim Chief Financial Officer of Edible Garden AG Incorporated. Earlier this morning, the company announced its operating results for the three months ended September 30, 2025. The press release is posted on the company's website, www.ediblegarden.com. In addition, the company has filed its quarterly report on Form 10-Q with the US Securities and Exchange Commission, which can also be accessed on the company's website as well as the SEC's website at www.sec.gov. 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. Before Mr. Kras reviews the company's operating results for the quarter ended September 30, 2025, and provides a business update, we would like to remind everyone that this conference call may contain forward-looking statements. All statements other than statements of historical facts contained in this conference call, including statements regarding our future results of operations and financial position, strategy and plans, and our expectations for future operations are forward-looking statements. The words aim, anticipate, believe, could, may, plan, project, strategy, will, and the negative of such terms, in other words, and terms of similar expressions, are intended to identify forward-looking statements. These forward-looking statements are based largely on the company's current expectations and projections about future events and trends that it believes may affect financial condition, results of operations, strategy, short-term and long-term business operations, and objectives, and financial needs. These forward-looking statements are subject to several risks, uncertainties, and assumptions as described in the company's filings with the SEC, including the company's annual report on Form 10-K for the year ended December 31, 2024. Because of these risks, uncertainties, and assumptions, the forward-looking events and circumstances discussed in this conference call may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. Although the company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, level of activity, performance, or achievements. In addition, neither the company nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. The company disclaims any duty to update any of these forward-looking statements except as required by law. All forward-looking statements attributable to the company are expressly qualified in their entirety by these cautionary statements as well as others made on this conference call. You should evaluate all forward-looking statements made by the company in the context of these risks and uncertainties. With that said, I'd now like to turn the call over to Mr. Jim Kras, Chief Executive Officer of Edible Garden AG Incorporated. Jim? Jim Kras: Thanks, Ted. Good morning, and thank you to everyone for joining us today. The third quarter marked an important step forward for Edible Garden AG Incorporated as we continued executing our strategic evolution towards a CEA-informed consumer packaged goods (CPG) model. In Q3, traditionally our seasonally softest period, we delivered a 9% year-over-year revenue increase, underscoring our strategic growth driven by our product realignment focus on nonperishable product expansion, and the resilience of our higher-value branded portfolio. This growth was driven by key initiatives, the continued expansion of our retail footprint, strong performance from our shelf-stable portfolio, and the early benefits of our operational realignment following the natural shrimp asset acquisition. Together, these actions reinforce our progress in repositioning Edible Garden AG Incorporated as a next-generation sustainable food company that combines innovation, brand strength, and operational efficiency. Building on our heritage in fresh herbs and produce, where sustainability, traceability, and freshness define our brand, we've expanded into categories with stronger margins and greater scalability. Our CPG products, including clean label and functional offerings, extend the Edible Garden AG Incorporated brand beyond fresh produce into shelf-stable products that meet consumer demand for better-for-you plant-based nutrition. During the quarter, we continued to expand our retail footprint, launching our USDA organic fresh herb line at Kroger and introducing Edible Garden AG Incorporated branded herbs at The Fresh Market. We also strengthened our Midwest presence through partnerships with Pete's Fresh Market and Angelo Caputo's Fresh Markets. Internationally, we expanded our reach through key partners, including PriceSmart and Amazon. Collectively, these relationships underscore the growing appeal of the Edible Garden AG Incorporated brand and the momentum of our expanding global platform. Demand for better-for-you CPG products continues to accelerate, creating a powerful tailwind for our business. Globally, the functional food and beverage market is projected to expand from approximately $400 billion to $610 billion by 2030, according to Virtue Market Research. In the US, sales of natural, organic, and functional products are expected to reach $386 million by 2028, according to the Nutrition Business Journal. These trends reinforce the strength of our strategy and highlight the significant opportunity ahead for Edible Garden AG Incorporated as we align our product portfolio with these macro trends. Our CPG portfolio continues to be an important driver of growth, anchored by brands such as Kick Sports Nutrition, Pickle Party, Pulp, and Vitamin Whey. These brands represent a key pillar of our transformation into a diversified, innovation-driven CPG company and highlight the versatility of Edible Garden AG Incorporated's platform. Kick Sports Nutrition continues to build momentum with a clean, better-for-you performance line designed for athletes and active consumers seeking natural energy and recovery solutions. The brand is gaining meaningful traction across both online and retail channels, supported by rising consumer interest in plant-forward performance nutrition. Earlier this year, Kick entered a major Midwest big-box retailer, expanding its brick-and-mortar presence while growing its online footprint to broaden awareness and engagement. By leveraging our expertise in clean functional ingredients, Kick delivers products that combine taste, convenience, and nutritional value—attributes that resonate strongly with the fast-growing health and wellness segment. Vitamin Whey, our protein and supplement line, complements Kick by addressing the broader market for functional nutrition. Pickle Party highlights the engaging, flavor-forward side of our CPG strategy, offering a line of fresh fermented pickles and sauerkraut crafted with clean label, non-GMO ingredients, and natural fermentation. The brand combines bold, craveable flavors with a focus on gut health and sustainability, striking a balance between indulgence and wellness. Its distinctive identity as both fun and functional continues to resonate with younger consumers and health-conscious shoppers seeking better-for-you alternatives in the condiment aisle. Finally, Pulp, our line of organic refrigerated fermented hot sauces, continues to expand through new retail placements and regional growth. The brand has gained meaningful traction through rollouts at Target and Meijer and most recently at ShopRite, further broadening its reach and consumer visibility. Pulp brings culinary innovation to the forefront of the Edible Garden AG Incorporated portfolio, offering bold, clean label condiments that reflect our commitment to flavor, sustainability, and the better-for-you principles driving today's consumer demand. Collectively, these brands showcase how we're leveraging our expertise in sustainability, flavor, and functional nutrition to build a high-margin, scalable portfolio that extends the Edible Garden AG Incorporated brand far beyond fresh produce and positions us to capture meaningful share in the growing clean label CPG market. Turning to our produce business, we remain a trusted provider of sustainably grown herbs and leafy greens. Our new organic program with Kroger is gaining traction, while our presence at The Fresh Market and established retail partners, including Pete's Market and Angelo Caputo's Fresh Markets, continues to broaden retail penetration and increase brand visibility across key markets. Operationally, we've strengthened our platform for growth through enhanced efficiency and scalability. Innovation and sustainability remain central to our strategy, guided by our zero-waste-inspired approach. We're pursuing new categories, including nutraceuticals, sustainable proteins, and functional foods that align with our commitment to health, flavor, and environmental responsibility. As we move into the fourth quarter and beyond, we believe that Edible Garden AG Incorporated is positioned for continued growth. Our focus remains on disciplined execution, expanding retail partnerships, and advancing product innovation to build long-term shareholder value. I'm extremely proud of our team; their dedication and commitment to quality, sustainability, and innovation have been instrumental in driving our progress and momentum heading into year-end. With that, I'll turn the call over to Kostas Dafoulas, our Interim CFO, who will review the financial results for the quarter ended September 30, 2025. Kostas? Kostas Dafoulas: Thanks, Jim, and good morning, everyone. Revenue for the quarter increased 9% to $2.8 million compared to $2.6 million in 2024. With our strategic exit from the floral and lettuce categories now complete, this quarter reflects the strength and resilience of our repositioned portfolio. The growth of $200,000 or 9% was primarily driven by strong performance across our shelf-stable product portfolio, including Kick Sports Nutrition, Vitamin Whey, Pulp, and Pickle Party. Within our core herb portfolio, we saw strength in hydro basil, specifically, this portfolio grew 54% year over year in Q3, up 21% year over year, and wheatgrass, up 59% year over year. Gross profit totaled approximately $300,000 compared to $700,000 in the prior year quarter, reflecting higher labor, freight, and raw material costs as well as inflationary pressures within the nutraceutical supply chain. Selling, general, and administrative expenses were $3.8 million compared to $2.2 million in the same period last year, primarily due to expenses related to the asset pursuits from natural shrimp and the associated depreciation, legal, audit, and accounting expenses. Net loss was $4 million compared to a net loss of $2.1 million in 2024. We ended the quarter with $800,000 in cash and equivalents compared to $3.5 million at year-end 2024. Furthermore, the company refinanced its outstanding debt, securing a lower interest rate and more favorable terms. This refinancing is expected to reduce annual interest expense and reduce financing cash outflows, providing greater flexibility to support the company's strategic initiatives and growth objectives. We continue to manage working capital with discipline, optimizing inventory turnover through improved production planning and distribution efficiency. At the same time, we are diversifying our sources of liquidity at a lower cost of capital to ensure that we have the flexibility to act decisively on strategic opportunities as they arise. With that, I'll open the call for any questions. Thank you very much. We are now opening the floor for questions. Operator: If you would like to ask a question, please press 1 on your phone keypad now. A confirmation tone will indicate that your line is in the queue. You may press 2 if you would like to remove your question from the queue. For anyone using speaker equipment, it may be necessary to pick up your handset before you press the keys. Please wait a moment while we poll for questions. Our first question is coming from Anthony V. Vendetti of The Maxim Group. Anthony, your line is live. Anthony V. Vendetti: Thank you. Just in terms of the natural shrimp facility that you acquired, can you talk about the build-out of that? How you intend to utilize that initially, and then over the next six to twelve months? And then what specific product lines will be going in there? Any color on that would be helpful. Thanks. Jim Kras: Sure, Anthony. Good morning. How are you? Thanks for being on the call. Well, first of all, it's an impressive facility. So we're gonna be 6.2 acres. It's about an hour from Des Moines airport. It's right there in the center of the country and gives us access to all types of different raw materials and whatnot to do all types of products, some of which we've already started. Our near-term plan is, the facility is going through a gap analysis right now with a third party. We will be doing some R&D for next-generation products. Whether they're nutraceuticals or food is sort of in the works right now. We have some major opportunities with our retailers. One of the great things about Edible Garden AG Incorporated, and there are many, is that we have significant relationships with major retailers. Being on trend with the type of products that we're offering, clean labeled, fermented, all those products that we are currently pushing out are only growing in demand as people are focusing on having less processed products. Walmart, for example, just came out and said, within the last month, that they're mandating their suppliers of their private label to remove all artificial colors and dyes and sweeteners from their products. Something Edible Garden AG Incorporated has been doing for the last year and then some. The fact that we are growers, and we grow the actual raw ingredients, plants that go into many of these products, and can harvest some of the therapeutics without additives and without artificial dyes or colors or things that just aren't really needed. That trend, we're at the forefront. We're being asked by major companies to come in, work on their private label products. Many of which I think will go into Harlan. I think it will be an incredible nutritional hub and sustainability hub in that part of the country. We couldn't be more excited. Timing and happenstance sometimes work to your advantage, and I think we're just at that intersection of having the ability, the right products at the right time. Now we're gonna have the right vertical integration to deliver on it. I couldn't be more excited. It's all come together quite well. A lot of it's really the team as well. I want to give the people that work with us quite a bit of credit because it's been a big effort here to not only tool up with the facilities that we currently have but to get focused, get efficient, let some of the business that we knew was a drag on the business kind of go, and bite the bullet the previous quarters a little bit. But we're back on track. Q4 is always a strong season for us, and we're excited about that. It looks great. We're in the heat of the battle right now with Thanksgiving, which is our Super Bowl. Once again, Kroger, Fresh Market, ShopRite, they're all coming to us not only for our branded product but some of these other innovative things that we're doing. I think Edible Garden Prairie Hills, which is what we named Iowa, will be at the forefront of driving that innovation and volume for us, frankly. Anthony V. Vendetti: Okay. So just to follow up, it sounds like the big grocery stores in particular are where the largest opportunity is. Would you say that's also the largest opportunity moving into '26? Jim Kras: It's the ShopRite's, the Kroger's, the Fresh Market. These bigger grocery chains where you see the most opportunity in 2026? Yes. I see our core business is that we're a business that has excelled in produce where many have failed. Whether established companies that have been around for quite some time or upstarts that came in sort of drafting us and spinning a similar story. We're one of the last standing, and we're accelerating the business. So, yes, what's happening is not only is it our produce business, it's the existing branded business that we have in there, whether it's Kick Sports Nutrition or Pickle Party. Then there's private label. We have a substantial private label business currently with key players like Meijer. We're getting asked to do more of the next-generation products from the likes of the big-box retailers coming to us and saying, alright. We love what you're doing. You're on trend. The current political environment is pushing for less processed foods. Research is coming back and saying as such, what can you do for us under our label? We like what you're doing. We can do some in your label, but a lot of it's being driven by these big-box retailers saying, hey. Private label is such a powerhouse now. What can you do to allow us to be in step with you with these innovations and have those offerings out on our shelves as quickly as possible? 2026 is gonna be a great year, and, yeah, it's gonna be driven by retailers coming to us and saying, hey. What can you do for us? Because we like what you're doing, and we want more of what you have. It's a great place to be, and it doesn't always happen. Timing is just on our side, and a lot of it's just driven by who we are and what we've been doing for the last decade. It might end up looking like overnight success, but, ultimately, it's been ten years in the works to get to this place. Anthony V. Vendetti: So on the margin side, Jim, so you know, sometimes private label is tougher to get a larger margin on, but if they're asking for the natural products, the ones with less additives, that's right in your wheelhouse, are you able to push back and say, look. We can do that for you. But those are higher-priced products. You know? And then maybe talk about the margin related to that as well as your Kick Sports Nutrition program, you know, the protein. How's that doing, and what do you see the outlook for that in '26? Jim Kras: So I think on the private label piece, yes, to a certain extent, I think you can. That's, you know, I think some of it's also sort of modulating the words that we use. Right? I think "commands" is a strong word. I don't think you know, I think when you're Edible Garden AG Incorporated, we're a smaller company that's nimble and can move quickly. I've always told my crew that we're a customer service company that makes things. I think that's boded well for us because we are quick to respond. I would tell you that I think there's an opportunity to have a fair margin, but what you're getting is volume. You're gonna get contracts, consistent volume. You're gonna have a relationship with major retailers that, like we have currently with some key retailers now that we're doing private label, where you build on. So, yes, there's the margin play, but there's the additional products. There's a deeper relationship, and it's long-term. Most private label relationships come with a contract and commitments to take a certain base amount of product. You can call it an off-take agreement. It's key, and it's key to the business. It gives us security that we can support the facilities. It also gives us visibility down the road for a long period of time that we know that as long as we don't do anything catastrophic to the business, or there's a black swan event, we are in business with a major retailer making something that has their label on it that's got upside. So, yeah, there is that pushback that will allow you to say, hey. You guys are getting this first. We're putting the focus of the company on this. But the idea is, you're gonna get all this. This is how you grow the business, frankly. Ideally, you have a blend. You have a blend of retailers, private label, and then you have, obviously, your branded products, and then maybe you even make stuff for other brands that can command a higher margin. That gives you a blended margin on the manufacturing. That's where we're going. With Iowa, with some of the new products that I can't disclose, but that we're gonna be putting in there that are gonna offer significant upside. I think you had another question regarding Kick Sports Nutrition. I don't know if I answered that or not. Anthony V. Vendetti: Yeah. So let's say you want guaranteed product availability of certain products that are private label that maybe aren't as high margin. But we'll provide that to you. But, you know, alongside that, you have to take our higher margin protein product even if you're using somebody else's, or you have to take some of our branded products as well. There's some of that leverage there? Jim Kras: Okay. Yeah. There's some of that. I mean, look. It's business. Right? It's not an exact science. It's in everybody's best interest to support, especially if you're a major retailer. I mean, pick one, and whoever it is, it could be CVS, I don't know, somebody who, let's say, we're doing our nutraceutical product, for example, for them. You know that it's usually a two or three-year contract, sometimes longer. We always want the longest ones possible. They realize it's in their best interest to support the company because it takes time to tool up. When you look at a facility like Iowa and the things that we're looking to do, that takes, and we've already started spending money on getting the place up and running last quarter, and we'll continue to get the place ready for prime time. These retailers understand it's in their best interest to put other products in, maybe your branded product or a higher margin private label that they know will help underwrite the higher volume, lower margin business that they want to compete in. Those are the type of strategic conversations that we're having at multiple major retailers. You're already starting to see some of that come to fruition, and you will see more as we move forward into 2026. So, yeah, there is that type of relationship. It's like anything else. You gotta have something that they want, you gotta work hard with them. There's a whole certification process, and their people come in and inspect everything. We've gotten pretty good at it, and we got a great crew. I couldn't be more excited. But yeah. So, yeah, that's definitely the way that it should go. Not everybody does that, but they should work with you understanding it's in their best interest to help give you some fuel to build out the business. You can't just rely on us to bring in our own capital. Some of that's gotta be cushioned with products that they know are established that they give to us that allow us to offset. Sorry that was so long-winded, but yeah. Yes. I guess there is that opportunity. Did I answer your Kick Sports Nutrition question, Anthony? I don't know if I did or not. Anthony V. Vendetti: Yeah. No. That was good. I'll hop back in the queue. Appreciate it. Jim Kras: Alright. Thank you, Anthony. Operator: Thank you very much. Just a reminder, if there are any further questions, you can still join the queue by pressing star one on your phone keypad now. Wait to see if anybody else jumps into the queue. Okay. I'm not seeing any further questions in the queue. So I will now hand back over to the management team for any closing comments. Jim Kras: Thanks again, everyone, for joining us today. The third quarter was another important step forward for Edible Garden AG Incorporated. We're executing our strategy with focus, expanding our retail reach, growing our higher-margin CPG brands, and strengthening our operations to support scalable, profitable growth. Momentum continues across Kick Sports Nutrition, Pickle Party, Pulp, and Vitamin Whey. These brands show that our approach is working and that consumers are responding to clean label, better-for-you products. At the same time, our core produce business remains strong, grounded in freshness, sustainability, and quality. As we approach year-end, our priorities are clear: continue executing at a high level, advance our innovation pipeline, and deliver lasting value for our shareholders. We're excited about where we're heading and look forward to sharing more of our progress in the months ahead. Thank you. Operator: Thank you very much. This does conclude today's conference. You may disconnect your phone lines at this time and have a wonderful day and a wonderful weekend. Thank you for your participation.
Operator: Thank you for standing by. This is the conference operator. Welcome to WildBrain's Fiscal 2026 First Quarter Earnings Conference Call. [Operator Instructions] The conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Kathleen Persaud, Vice President of Investor Relations. Please go ahead. Kathleen Persaud: Thank you, everyone, for joining us today for WildBrain's First Quarter 2026 Earnings Call. Joining me today are Josh Scherba, our President and CEO; and Nick Gawne, our CFO. Before we begin, please note the matters discussed on this call include forward-looking statements under applicable securities laws, which reflects WildBrain's current expectations of future events. Such statements are based on a number of factors and assumptions that management believes are reasonable at the time they were made and information currently available. However, many of these factors and assumptions are subject to risks and uncertainties beyond WildBrain's control, which could cause actual results and events to differ materially from those that are disclosed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to, changes in general economic, business and political conditions. WildBrain undertakes no obligation to update such forward-looking information, whether as a result of new information, future events or otherwise, except as explicitly required by applicable law. Please note, all currency numbers are in Canadian dollars unless otherwise stated. After our remarks, we will open the call for questions. I will now turn the call over to our President and CEO, Josh Scherba. Josh Scherba: Thanks for joining us. Fiscal 2026 is off to a strong start, reflecting the continued execution of our strategy to focus on our core brands in higher growth areas across Global Licensing, Content Creation and Audience Engagement. As you can see in the results announced after market yesterday, we're demonstrating the value of our strategy to focus on franchise building across content, engagement and licensing, supported by a simplified operating model. We are encouraged by the underlying strength of our business today and continue to see significant opportunities ahead to grow our profit across these core segments. Global Licensing once again led the way, delivering strong double-digit growth in Q1 of 29% year-over-year, driven by sustained momentum across our key franchises, Peanuts, Strawberry Shortcake and Teletubbies. Demand remains broad-based across many categories and markets around the world. Underscoring the strength of our 360-degree franchise strategy, the depth of our local expertise and the worldwide appeal of these evergreen properties. At Brand Licensing Europe in October, the leading consumer products and licensing trade show in Europe, there was tremendous enthusiasm from partners and retailers for both Strawberry Shortcake and Teletubbies, which continue to benefit from refreshed creative direction and robust consumer engagement. There was huge buzz for Peanuts as well, which celebrates its 75th anniversary this year. With a healthy pipeline of new licensing deals across all key markets and the holiday selling season on the horizon, we remain increasingly confident in the sustained momentum and visibility of the Peanuts business. Our franchise management team hosted its second annual summit with retail partners this week in Los Angeles. Building on last year's inaugural event, attendance more than doubled and a clear sign of the growing momentum behind our WildBrain brands, we saw nearly as many attendees for WildBrain brands as we did for Peanuts. Fan engagement for Strawberry Shortcake continues to remain strong, which is translating into licensing revenue. Watch time on YouTube was up 20% and average view duration was up nearly 300% for Strawberry Shortcake in the quarter, and we continue to see social media engagement rising. Consumer demand for Strawberry merchandise continued to grow with consumer products revenue for Strawberry up 115% year-over-year with healthy diversification across licensees. Looking at Teletubbies, revenue was up more than 20% with strong performance, particularly with our POP MART collaboration, which taps into the collectible nature of the Teletubbies and merchandise has been flying off the shelves. The licensing pipeline for Teletubbies continues to build as we're ramping up to the brand's 30th anniversary in 2027 with a global activation program designed to celebrate and amplify the strong fan affinity for these beloved characters. Similarly, watch time and average view duration on YouTube plus social media engagement were all up year-over-year. In Peanuts, we had a strong quarter across nearly all geographies with particular strength in North America, APAC and EMEA. The 75th anniversary is continuing to drive increased awareness and engagement. And as we've said before, the success we're seeing in anniversary promotions unlocks further licensing opportunities and collaborations. The Touring Blue Dragon Art Exhibition, which celebrates Peanut's 75th anniversary through immersive art, fashion and experiential installations has proven highly popular with fans in APAC, and we continue to see meaningful growth potential for Peanuts in the region. WildBrain CPLG is also off to a great start to the year with growth across all regions and revenues from Peanuts, WildBrain brands and third-party brands, all up year-over-year. CPLG is a unique and highly differentiated business within the licensing industry, and we saw that in spades at Brand Licensing Europe. The buzz around our portfolio was palpable and the strong execution by our team continues to attract new partners. Over the past few months, WildBrain CPLG has expanded the licensing program for PLAYMOBIL, rolled out a robust international program of brand activations and cross-category partnerships for Strawberry and Teletubbies and was appointed agency rights for the highly popular miraculous franchise and the Van Gogh Museum. This performance highlights the strength of CPLG's global infrastructure and its ability to translate brand momentum into meaningful commercial outcomes across regions and categories. Turning to Content Creation and Audience Engagement. Subsequent to the quarter, we were thrilled to announce the renewal of our multiyear partnership with Apple TV for Peanuts content extending through 2030. This renewal includes a continuation of the Peanuts library deal, which will be recognized in our Q2 numbers and a new commitment from Apple TV for more original series and specials. The renewal reaffirms the enduring demand and substantial value of the legacy content, while the commitment for new content further reinforces the long-term value of this iconic brand. In Audience Engagement, our AVOD and FAST channels continue to grow steadily. These platforms build awareness and affinity for our brands, create incremental monetization opportunities and extend the life cycle of our content. Owned franchises like Degrassi and Strawberry Shortcake as well as partner brands such as Pokémon remain consistently in front of fans worldwide, keeping them top of mind and fueling demand that carries through to consumer products licensing. Our channels are distributed across major platforms, including Samsung, Roku and Amazon Video, ensuring our content reaches audiences wherever they're watching. WildBrain is already the global leader in FAST for kids with approximately 180 channels launched. And as the FAST ecosystem matures, we are well positioned to monetize this growing opportunity across both our owned and partner IP. We are the scaled and trusted partner for platforms seeking high-quality kids and family content. In Media Solutions, our in-house advertising and brand partnership arm, we held our first ever upfront in London this October. An upfront event is a key commercial touch point where platforms highlight their capabilities and the successful event has already generated some meaningful deals with new partners. We're increasingly confident in the growth potential for this business. Media Solutions offers a differentiated capability within WildBrain. Very few kids media companies combine global brand management and channel reach with in-house media sales and activation at this scale. The rising engagement across our digital platforms, growing pipeline of Media Solutions and the significant growth in licensing all underscore how we are building a meaningful platform at the center of the ecosystem where today's kids and families are watching content and engaging with brands. Our scale across YouTube, FAST and AVOD not only keeps our brands front and center with global audiences, but also demonstrates the strength of our model in driving awareness, engagement and monetization. Before I hand over to Nick, I'd like to provide a quick update on the asset review we've referenced in recent quarters. We've been approaching this work with a clear set of objectives to sharpen our strategic focus, enhance balance sheet flexibility and create long-term value for shareholders. With the progress we've made simplifying the business and focusing on high-margin brand-driven growth, we continue to actively evaluate further opportunities to simplify and unlock value for WildBrain and our stakeholders. As we updated you in our full year report in September, the process is continuing to advance in line with our expectations and discussions with a targeted group of interested parties are ongoing. While these conversations remain confidential, we're encouraged by the level of progress and expect to have more to report soon. We remain focused on outcomes that strengthen the company and position us for sustained growth. We've had a strong start to the fiscal year. We have great brands, which were on full display of Brand Licensing Europe in October, where Strawberry Shortcake and Teletubbies drew tremendous excitement from partners and retailers. We also have a strong offering in FAST and Media Solutions that positions us to capture emerging opportunities as viewing and engagement models evolve. And we continue to see positive returns from our focus on premium content capabilities, reinforcing the strength and long-term value of our Content Creation business. With that, I'll turn it over to Nick to review our financial results. Nick Gawne: Thanks, Josh. As a reminder, in accordance with IFRS accounting rules, in Q2 and Q3 of 2025, we have classified Canadian Television Broadcasting as held for sale and presented the historical results of this business as discontinued operations. With the termination of the television sale agreement in August, the segment no longer met the threshold for held for sale in Q4 of 2025 and Q1 2026. And we have reinstated the Canadian Television Broadcasting unit back into held for use. Television will return to discontinued operations in our Q2 2026 results, reflecting the cessation of the business in October 2025. All the results I'll be referencing include television, unless I specifically refer to them as being excluding television. First quarter revenue was $126 million, up 13% year-over-year. Revenue, excluding television, was $121 million, up 16% year-over-year. Global Licensing revenue in the quarter was $81 million, up 29%. The growth in licensing reflects management's deliberate focus on high-growth, higher-margin brands. By leveraging our expertise to drive engagement through social and digital strategies, we've expanded consumer reach, attracted new licensees and translated that momentum directly into revenue and profitability. We also saw strong growth in WildBrain CPLG, which continues to benefit from its unique globally integrated platform that brings together brand strategy, retail expertise and best-in-class execution. The team had an exceptional reception at Brand Licensing Europe, where partners responded enthusiastically to our portfolio and the expanding opportunities across our owned and represented brands. Revenue for Content Creation and Audience Engagement in the year was $40 million, down 3%. The revenue decrease in the period was driven by a reduction in content distribution revenue in the quarter, offset by stronger production revenue as compared to the prior year. Television revenue for the quarter was $5 million. As mentioned, television ceased operations in October and the broadcast licenses were surrendered to the CRTC. As a result, WildBrain is no longer subject to applicable Canadian control restrictions under the Broadcasting Act. Gross margin percentage for the first quarter was 51% compared to 47% in the prior year, driven by a mix shift towards Global Licensing. SG&A was $29 million, an increase of 7%, up due to the impact of translating foreign currency-denominated expenses at less favorable rates than in the prior year and also due to higher variable compensation. Adjusted EBITDA was $21 million, up 37%. Adjusted EBITDA, excluding television, was $17 million, up 53%. Net loss in the quarter was $33 million compared to net loss of $11 million in the prior year. Free cash flow in the quarter was negative $11 million compared to positive $5 million in the first quarter of 2025. Q1 2025 benefited from lower interest payments in that quarter, driven by the timing of our refinancing. And in addition, first quarter tends to be our lightest period for collections within our Global Licensing business. Our leverage at the end of the quarter was 4.96x, comfortably in compliance with our financial covenants. Turning to guidance and our outlook for fiscal year '26. We reaffirm our previous guidance and expect strong growth in the core underlying business. In that core business, which excludes television, we expect revenue growth of approximately 15% to 20% and adjusted EBITDA growth of approximately 15% to 20%. In September, we provided incremental color on our growth drivers. First quarter results are in line with our expectations on those drivers. Licensing continues to deliver strong momentum, while we are seeing some headwinds in content distribution as anticipated. Within Global Licensing, we continue to expect growth across the full portfolio of our owned brands as well as growth within WildBrain CPLG. With Peanuts, we are building on our social media strategy, expanding category presence and deepening penetration in key markets. With WildBrain brands, we expect to grow -- we expect growth in new territories, while WildBrain CPLG is expected to deliver growth both through representation of owned brands as well as third-party brands, with WildBrain brands and CPLG contributing at higher margins at EBITDA level. As we conveyed last quarter, in order to fully capture the growth opportunity in our Global Licensing assessment -- segment, we need to invest upfront, both in franchise marketing and SG&A, which acts as a light headwind for fiscal '26. However, for Peanuts, Strawberry Shortcake and Teletubbies, the data points, demand and pace of growth we've seen over the past 15 months, in addition to third-party research we've undertaken tell us that the upside opportunity is significantly larger. The headwind today with SG&A up an expected 10% creates a tailwind for the future. In Audience Engagement, we expect Media Solutions, our direct advertising business to meaningfully grow. In FAST, we expect new third-party revenue opportunities as brands like Pokémon look to leverage our established presence in the market. While monetization still likes the engagement we're seeing, we're fully confident that this discrepancy will result into a significant opportunity in the future. Traditional distribution remains constrained across the broader industry. Timing on this part of the business is always variable due to point-in-time revenue recognition. In fiscal '26, we have the benefit of some deals that slipped from '25, such as the Peanuts renewal we closed in Q2 this year. In Content Creation, we expect continued growth driven by the Peanuts feature and episodic content for high-quality partners like LEGO. Including the television business, we expect revenue of approximately $560 million to $590 million and adjusted EBITDA of approximately $80 million to $85 million. Moving on to our expectations for free cash flow. This is subject to material timing variances. Fiscal '25 did have some timing benefits, which we do not expect to repeat in this coming fiscal year. Additionally, with television ceasing operations, we expect free cash flow to be down year-over-year. With a more streamlined cost structure and clearer focus, we're positioning WildBrain for stronger financial performance and sustainable value creation over the long term. I'll hand it over to Josh as we wrap up. Josh Scherba: Thank you, Nick. As we look ahead, our priorities remain clear: driving growth in Global Licensing, advancing our premium content partnerships like Peanuts with Apple TV, and leveraging our Audience Engagement platform to build global reach for our brands and our partners. We're confident in our strategy and in the power of our IP portfolio to deliver continued growth. With a strong start to fiscal 2026 and a focused team, WildBrain is well positioned to build momentum through the balance of the year and beyond. With that, I'll open up to questions. Operator? Operator: [Operator Instructions] And your first question today will come from Drew McReynolds with RBC. Drew McReynolds: I'll start with the Peanuts renewal and deal, I think, through 2030. Just, Josh, can you just kind of comment on what's necessarily kind of new in this agreement versus kind of just the extension? I know in your opening remarks, you provided a little bit on that, but just wondering if you could provide a little bit more. Second, on Teletubbies, could you kind of remind us -- I know it's smaller, much smaller than the Strawberry Shortcake franchise at the moment, but kind of how do you see Teletubbies being kind of sized up here relative to Strawberry Shortcake as we go forward? And then lastly, just a quick update on third-party service revenue, the extent to which kind of that volume of business has come back or what your expectation is for the rest of the year? Josh Scherba: Thanks, Drew. So I'll kind of go in order here. So starting with the Apple deal. So look, Apple has been a tremendous partner for us and for the Peanuts brand. Beyond the distribution platform that they provide and the funding of content, they've also -- we've also had the added benefit of additional programs like the Snoopy watch, screen savers that we've done for iOS devices. So there are some -- there's additional benefits that a partner like Apple bring to the brand, and we continue to value that. Their commitment to the classic specials for the next 5 years is a meaningful component of this deal. And the fact that we're on our third renewal continues to demonstrate the long-term viability of these classic specials. And also a commitment to new content shows that they are valuing what we've been producing for their platform. So overall, it's more of what we've been doing with Apple, but that's ultimately a really good thing. And I would also note that our presence on YouTube is increasing with some of the content that we've produced with Apple over the years. And they've proven -- they've shown more flexibility in this space than they had historically. which is also a really good thing in terms of our exposure for the brand to drive further growth. The next question, I think, was around Teletubbies. And while we haven't been sizing that specifically, I think that we are bullish on what we can achieve on Teletubbies. I referenced the POP MART collaboration in the script. And those are really kind of vinyl -- collectible vinyl toys in the vein of LABUBU. And those are selling extremely well, which I think is really showing the viability of the brand in the cultural zeitgeist. And so I would categorize that growth as non-kids related. That's really nostalgia driven. And as we're seeing with strawberry and with Peanuts, the appeal of multigenerational brands is really important these days. So the opportunity to be able to do deals that tap into how adults want to remember their childhood with certain products as well at the same time, growing a kids business. And I would say on Teletubbies, that's where the biggest upside is for us. We continue to invest in new strains of content. And as those roll out in the coming months and years, and when I say investing in content, we're really talking about social content and digital-first content that is intended for YouTube as well as other social platforms. We expect to grow the fandom and engagement amongst kid audiences, and that has the ability to unlock tremendous upside from a consumer product standpoint. Drew McReynolds: Yes, that's great, Josh. Just -- yes, the third-party service piece? Josh Scherba: Yes. So are you -- when you're referring to third party, are you referring to our CPLG business or the Content Creation business, kind of our studio work? Drew McReynolds: Yes, just the studio work. Josh Scherba: Sure. So look, why don't I take an opportunity to talk a little bit about the content market in general then because I think that plays into it. So look, there's no question there's been challenges in the content market over the past few years. Really, in kids and family, you've had Netflix and to some extent, Apple being the commissioners that were actually moving projects ahead. The conclusion of the merger of Skydance and Paramount and Paramount kind of taking decisive action around reinvesting in content, we think is a really positive development for the industry. We think that while there's still some uncertainty around the future of Warner Bros., that will be resolved sooner than later. And we think that once this is resolved and kind of reset, we'll be bringing back a dynamic to the market that's really important, some competition. And I think one could argue that over the past few years, the lack of investment, particularly in kids and family, will demand some sort of catch-up period where there will be increased investment from these streamers. Not that we're seeing that at this point in any meaningful way. But I would say that our pipeline of projects at the studio, there -- we're putting up more bids today than we would have been a year ago. So I would -- while I don't think we're seeing that return to competition yet amongst the streamers, I will say that there is more activity happening, which gives us confidence in our slate for the next couple of years. And I think we look -- we spent a lot of time talking about the -- what is now the traditional content market, including all of the streamers. And in the meantime, there is this new form of content distribution and platforms that have become really meaningful, specifically non-YouTube, AVOD and FAST. It's a space that we've been in really since 2019. And we've seen our engagement and viewership grow every year since we've been in the space. And it's getting to a place now that it's maturing and becoming a place of -- an area of profit. Specifically, Tubi mentioned in their last quarter that they achieved profitability for the first time. Tubi has been commissioning original content, and they've signaled that they're going to be doing more in this space. For us, we've -- again, we've been really encouraged by the engagement. But as Nick mentioned in the script, the monetization has lagged. And over the last year, we've been investing more and more in our Media Solutions team who have expertise at selling inventory against kids content. And kind of worth noting that there are added challenges to selling inventory against kids content. There's COPPA compliant requirements that really put some guardrails on how you can sell against this content. And we've built a group of experts that know how to sell this inventory. And so the goal for us is really to take on inventory from these AVOD and FAST platforms that is currently being underutilized by sales teams that aren't experts in selling against kids. So we see that as an area of high consumption right now and an area of increased monetization as we move forward. So I apologize for the long-winded response, but I think it's worth kind of giving a whole picture of the current content landscape because it is expanding just beyond those handful of streamers that have been the key commissioners over the past few years. Drew McReynolds: Yes, Josh, yes, that's a really thorough answer. And you got my fourth question there on the monetization side. Just for clarity, when you talk about maybe taking over some of the monetization, is that all kind of through the Media Solutions piece of your business? Josh Scherba: Yes, that's right. So we would be taking back inventory from these AVOD and FAST platforms where we'd have the ability to sell inventory. They will continue to sell inventory as well, the platforms directly, but for us to take on some of this inventory. And really, what we do is we add -- it really becomes a value add for agencies and advertisers because we can take this inventory, which when you think about it, is really the closest analog to linear inventory. And you think about all of the money that has flowed out from Nickelodeon and Cartoon Network and services like this over the years, this is a really logical place for it to go because it looks and feels like linear television. So we can take that inventory and then we combine it with our premium inventory on YouTube. And that packaging of it together, we're finding as a real value add for agencies and advertisers. Operator: [Operator Instructions] This will conclude our question-and-answer session and today's conference call. You may now disconnect your lines. Thank you for participating, and have a pleasant day.
Operator: Good morning, everyone, and thank you for participating in today's conference call to discuss SUI Group Holding's financial and operating results for the third quarter ended September 30, 2025. Joining us today are SUI Group's Chairman of the Board, Marius Barnett; Chief Investment Officer, Stephen Mackintosh; Chief Executive Officer, Douglas Polinsky; and Chief Financial Officer, Joseph Geraci. By now, everyone should have access to the company's third quarter 2025 earnings press release, which was issued yesterday afternoon at approximately 4:05 p.m. Eastern Time. The release is available on the Investor Relations section of the company's website at www.suig.io. This call will also be available for webcast replay on the company's website. Following management remarks, we'll open up the call for your questions. Please be advised this conference call will contain statements that are considered forward-looking statements under the Private Securities Litigation Reform Act of 1995. The forward-looking statements are subject to certain known and unknown risks and uncertainties as well as assumptions that can cause actual results to differ materially from those reflected in these forward-looking statements. These forward-looking statements are also subject to other risks and uncertainties that are described from time to time in the company's filings with the SEC. Do not place undue reliance on any forward-looking statements, which are being made only as of the date of this call. Except as required by law, the company undertakes no obligation to publicly update or revise any forward-looking statements. For important risks and assumptions associated with such forward-looking statements, please refer to the company's SEC filings. Marius Barnett: Thank you, and good morning, everyone. I'm pleased to welcome you all to our first earnings call as SUI Group Holdings. I'd like to start by giving you a brief background on myself and why we believe the Sui ecosystem is one of the most promising blockchain ecosystems in the world. By way of background, I'm the Co-Founder of a London-based hedge fund named Karatage, focused on emerging technologies across digital assets, AI and gaming. Throughout my career, I have focused on identifying high-impact technologies with global adoption potential, and I believe Sui blockchain represents one of the most promising technological platforms of our time. What initially drew me to Sui was the unmatched intellectual capacity and technical pedigree of its founders, now known as Mysten Labs. The team was originally hand selected by Mark Zuckerberg to develop Diem, formerly Libra, Meta's ambitious blockchain project aimed at building a global digital currency. These engineers designed the Move programming language and the underlying blockchain architecture that enabled secure, high-speed and scalable transactions within Meta's ecosystem. When Diem was discontinued, its core architects carried their vision forward, founding Mysten Labs in 2021 to create what would become Sui. The same world-class engineering rigor that began at Meta now powers the Sui network, and it was this combination of technical excellence, scalability-focused design and real institutional credibility that made me believe that the Sui ecosystem has the ability to define the next era of blockchain infrastructure. For those of you who are unfamiliar with Sui, Sui itself is the next-generation Layer 1 blockchain designed for speed, scalability and real-world application. Its object-centric architecture and horizontally scalable design allow for near-instant finality, enabling use cases across finance, gaming, artificial intelligence, stablecoins and beyond. We see SUI as the infrastructure layer for the next chapter of the Internet, a blockchain built for mainstream institutional-grade adoption. The Sui stack represents one of the most advanced comprehensive architectures in blockchain infrastructure today, purpose-built to support real-world high-throughput applications. At its core is Move, Sui's native programming language, which enables fast, secure and scalable smart contract execution. Layered on top of powerful tools like Walrus for decentralized storage, DeepBook for on-chain liquidity and Seal for enterprise-grade data security. Beyond its scalability and security, Sui is purpose-built for the next era of agentic AI, a world where autonomous software agents can independently transact, learn and execute tasks on behalf of users and institutions. Its [ paralyzed ] architecture and programmable transaction blocks make it capable of handling the high-volume, low-latency activity required for real-time AI-driven commerce. This design was recently showcased through the agent to payments AP2 protocol, a collaboration between Google and Mysten Labs, which demonstrated how Sui enables multiple verifiable transactions to settle atomically within a single block. By combining sub-second finality, secure on-chain execution and identity solutions like zkLogin, Sui provides a technical foundation for a new class of machine-to-machine transactions with digital agents to manage value, permissions and data autonomously. In short, Sui is the only blockchain designed to power the coming intersection of AI, automation and decentralized finance, positioning it at the center of agentic Internet. Our conviction in the Sui ecosystem is not theoretical; it is both strategic and operational. When we first partnered with the Sui Foundation earlier this year, our vision was clear: to position SUI Group as the first publicly traded company with an official relationship with the Sui Foundation and to build a foundation-backed digital asset treasury company anchored to the native cryptocurrency of the Sui blockchain. Through this relationship, we are aligned with the foundation's mission to advance decentralized technologies that can scale globally, and we believe this partnership positions SUI Group to deliver both institutional exposure and deep insight into one of the fastest-growing blockchain ecosystems in the world. Since launching that initiative, we have executed by establishing our Sui treasury, completing our corporate rebrand and scaling our holdings to over 100 million SUI tokens as of quarter end, transforming our vision into measurable progress. On the regulatory front, we are encouraged by the momentum emerging across the digital asset landscape, which continues to support our long-term strategy. The GENIUS Act is helping clarify the treatment of yield-bearing stablecoins, establishing a framework where transparent on-chain yield models can operate within defined regulatory boundaries. The CLARITY Act, if passed by Congress in its current form will provide long-overdue guidance distinguishing digital commodities from securities, a critical step towards unlocking broader institutional participation in blockchain markets. In parallel, Project Crypto, a joint initiative by the U.S. Treasury and Federal Reserve is exploring the use of blockchain-based settlement systems signaling the federal government's recognition of distributed ledgers as the future foundation for financial infrastructure. Collectively, these developments create a constructive regulatory tailwind for platforms like SUI Group. We've also seen SUI recognized at the forefront of agentic commerce innovation through its participation in Google Cloud's Agents to Payment Protocol (sic) [ Agent Payments Protocol ] initiative. This new framework enables AI agents to autonomously initiate and settle payments using blockchain infrastructure. Sui was selected as a launch partner for AP2, where it demonstrates how its programmable transaction blocks and object-orientated architecture can support concurrent multiparty transactions in a single atomic block, exactly the type of scalability required for AI-driven financial activity. The collaboration with Google DeepMind and the broader AP2 ecosystem highlights how Sui's architecture is uniquely suited for the coming convergence of AI, digital identity and real-time programmable payments. For SUI Group, this further validates our decision to align our treasury and infrastructure strategy with the Sui blockchain, positioning us to participate directly in the next era of intelligent autonomous finance. Before turning it over to our Chief Investment Officer, Stephen Mackintosh, I want to emphasize that this is a long-term infrastructure thesis, one grounded in scalability, transparency and value creation. We believe Sui is capable of defining the next generation of decentralized applications and that SUI Group will stand at the center of that transformation. With that, I'll pass it over to Stephen to walk you through our third quarter operational updates. Stephen Mackintosh: Thank you, Marius, and good morning, everyone. Before diving into our operational updates, I'd like to take a moment to share my background. Prior to joining SUI Group, I worked alongside Marius as a Co-Founder of Karatage. My career is centered around identifying and scaling emerging technologies at the intersection of AI, automation and digital assets. Prior to Karatage, I served as Chief Commercial Officer at Re:infer, a natural language processing company that was acquired by UiPath in 2022, where I helped integrate machine learning into enterprise automation. I've also served as an adviser to the Web3 cohort at Entrepreneurs First, an incubator that has launched more than 600 start-ups with a combined valuation of over $11 billion. That background, combining venture investing, AI commercialization and Web3 strategy is what informs how we're building SUI Group's digital asset platform today. We launched SUI Group with a simple promise to create the world's first publicly traded digital asset treasury company with an official relationship with the Sui Foundation. The digital economy is entering a new phase where blockchain networks, AI and real-world assets are converging, and institutional investors need a regulated transparent vehicle to participate in that growth. Our goal is to meet that demand through a treasury model that combines the discipline of traditional capital markets with the scalability and yield generation of blockchain infrastructure. At its core, SUI Group was designed to drive long-term shareholder value through 3 key objectives: accumulate and stake high-quality digital assets, beginning with SUI, the native token of the Sui blockchain to generate recurring yield and price appreciation potential; deploy capital into an on-chain ecosystem opportunities that produce real returns such as validator operations, lending and stablecoin infrastructure; increase SUI per share, our primary performance metric by executing accretive capital raises, using proceeds to acquire additional SUI at favorable terms and repurchasing shares when trading below net asset value. Every decision we make from partnerships to treasury deployment is designed to expand our SUI per share, enhance our earning capacity through staking and DeFi yield and strengthen our alignment with the broader Sui ecosystem. In short, we are working to build a scalable yield-generating digital asset balance sheet that provides value for shareholders while advancing one of the most innovative blockchains of our time. Our vision is to build a robust Sui treasury that serves as the liquidity engine and capital allocator for the Sui ecosystem. As our holdings scale, we aim to operate as a strategic focal point within the network, deploying capital where it accelerates infrastructure growth, capitalizes ecosystem adoption and generates sustainable SUI-denominated returns. Rather than limiting our treasury to passive staking, we intend to structure creative, yield-accretive partnerships with core infrastructure providers, DeFi protocols and application builders on Sui , financing the deployment of real businesses that enhance network utility while delivering returns that outperform native staking yields. With our experience at Karatage and long-standing relationships across the digital asset industry, we have the institutional credibility, operational depth and capital discipline to execute this strategy. In essence, we believe SUI Group could function as the on-chain balance sheet of the Sui ecosystem, a scalable source of liquidity designed to strengthen the network's economic foundation while compounding long-term value for Sui shareholders. A key example is our collaboration with Ethena and the Sui Foundation to launch suiUSDe and USDi, the first native stablecoins on the Sui blockchain. This initiative represents an industry-first collaboration between a publicly traded digital asset treasury company, a blockchain foundation and a leading stablecoin issuer. The structure is expected to be capital efficient, launched at low cost to our business and designed to generate cash flows that will be used to grow our Sui treasury and strengthen our balance sheet. These stablecoins leverage Sui's high-speed composable Layer 1 infrastructure to combine dollar stability with decentralized performance, unlocking new utility for DeFi applications, payments and institutional use cases. The formation of this partnership marks a step in our evolution from a traditional treasury company into an infrastructure builder, driving ecosystem liquidity, fostering adoption of the Sui network and creating scalable recurring economic value for shareholders through yield, token buybacks and ecosystem participation. More recently, we launched a partnership with Bluefin, the leading decentralized exchange on the Sui blockchain to expand institutional participation across the Sui ecosystem. Under the agreement, we will lend 2 million SUI tokens to Bluefin. And in exchange, we will receive a 5% revenue share from Bluefin payable in SUI. This partnership is intended to extend beyond just capital. It is about building the bridge from Wall Street to Sui, leveraging Bluefin to accelerate the entry of hedge funds, asset managers and market makers into decentralized markets. As adoption scales, Sui shareholders are expected to benefit from the growth of institutional trading activity on the Sui blockchain, creating a differentiated recurring value stream separate from the traditional staking yields. We are proud to partner with the Bluefin team to deliver a leading trading experience on-chain, demonstrating our ability to deploy liquidity strategically, drive network adoption and capture long-term ecosystem value. To summarize, over the past quarter, we expanded our treasury holdings, established innovative partnerships and completed certain value-accretive share purchases, all while laying the groundwork for new revenue-generating initiatives within the Sui ecosystem. Under our new authorized $50 million stock repurchase program, we repurchased approximately 276,000 shares of our common stock, a high-conviction investment that we believe is immediately accretive to existing shareholders and underscores our confidence in our long-term fundamentals. These actions reflect our commitment to building a scalable, transparent and durable platform that aligns long-term shareholder value creation with the growth of the Sui network. I will now turn the call over to Doug Polinsky, SUI Group's Chief Executive Officer, to provide an update on our specialty finance operations. Doug? Douglas Polinsky: Thank you, Stephen, and thank you, everyone, for joining today's call. For those who are new to our company, SUI Group's legacy nonbank lending and specialty finance business originated under Mill City Ventures III, providing short-term secured lending solutions to businesses and individuals seeking nonbank financing for real estate, inventory and other liquidity needs. These loans typically have maturities under 9 months and are backed by collateral or personal guarantees, generating revenue through interest income, origination fees and closing fees. Our legacy lending business continues to perform well, providing a profitable and cash-generative foundation for SUI Group. All outstanding loans are performing as expected, generating consistent returns through both interest income and origination fees. For the quarter, we reported approximately $1.6 million in interest and origination revenue, more than double the $711,000 recorded in the same period last year. We also recognized $525,000 in unrealized gains on our investment portfolio compared to an unrealized loss of $305,000 in the prior year period. Together, these results highlight the strength of our lending operations, a profitable nondilutive business that limits cash burn and provides steady earnings and liquidity to support the growth of our digital asset treasury initiatives. While we remain opportunistic with our specialty finance opportunities, our primary strategic focus has now evolved towards building an industry-leading digital asset treasury platform aligned with the Sui blockchain. With that, I'll turn the call over to our Chief Financial Officer, Joseph Geraci, to take you through our financial results. Joe? Joseph Geraci: Thank you, Doug. A quick reminder, as we review our third quarter financial results, all comparisons and variance commentary refer to the prior year quarter unless otherwise specified. Please note that these results reflect only 2 months of our activity from our newly implemented Sui treasury strategy, which launched on July 31, 2025. Due to our recent strategic shift from our specialty finance business toward blockchain native treasury management, our historical financial condition and results of operations for the period presented may not be comparable. Gross revenue and portfolio investment income for the third quarter of 2025 increased to $2.6 million compared to approximately $711,000 in third quarter 2024, driven by the generation of staking revenue following the adoption of our new treasury strategy. Our third quarter 2025 results included $60.7 million noncash unrealized loss related to mark-to-market accounting adjustments on our Sui holdings. Please note, this is a U.S. GAAP required treatment that reflects changes in estimated fair value and does not represent an actual outflow of cash or impact to our liquidity. As a result, total operating expenses, excluding net realized and unrealized gain on portfolio investments in the third quarter of 2025, were $64.7 million compared to approximately $420,000 in the third quarter of 2024. Excluding the aforementioned unrealized loss on digital assets and stock-based compensation, operating expenses for the third quarter of 2025 were $1.7 million. Net loss for the third quarter of 2025 was $44.3 million or $0.72 per share diluted compared to net income of approximately $464,000 or $0.07 per diluted share in the third quarter of 2024. The decrease was primarily driven by the aforementioned noncash unrealized loss on our Sui holdings. As of September 30, 2025, cash and equivalents were $42.7 million compared to $6 million as of December 31, 2024. As of September 30, 2025, the last day of the quarter, SUI Group held 105,681,292 SUI with a net value of $344.5 million. This concludes our prepared remarks. We will now open it up for questions from those participating in the call. Operator, back to you. Operator: [Operator Instructions] Our first questions come from the line of Brian Kinstlinger with Alliance Global Partners. Brian Kinstlinger: When evaluating deployment of capital to companies like Bluefin or other protocols, what key metrics or criteria do you prioritize: yield, security, network activity or something else? How do you weigh counterparty risk versus returns? And then lastly, on Bluefin, what's the duration of that agreement? Marius Barnett: Brian, thanks for that. First of all, the duration of that agreement is 3 years, and it's in our options, SUI Group's option to extend that agreement for 3-year terms at its election. In terms of looking at the counterparty risk here, currently, they're annualizing approximately $14.5 million per annum of fees. Looking at that, that represents circa 15% return year-on-year in SUI paid in SUI, which gets paid on a bimonthly basis. In terms of looking at the counterparty risk, this is a group that is very well known to the Sui ecosystem, interacts with the Sui Foundation on a daily basis. We conducted due diligence on this together with the Sui Foundation, including all the founders. And we believe it's a very robust business that's supported by the Sui Foundation. They continue, as part of their DeFi rewards program, to support their perps [ stake ] and all the other products, and we're very bullish on their products that they are currently bringing to market. One of their new products is the Vaults [ section ], where they're now running many different vaults on the decks, and we will work with them very closely to continue to expand that business. Brian Kinstlinger: Great. That's helpful. And then can you talk about the application development progress being made on Google's Agentic Payment Protocol, maybe when you might see some of the initial apps and when you expect it will generate early transaction volumes? Marius Barnett: Sure. Steve? Stephen Mackintosh: Brian, thank you for the question. The agentic framework stack is expanding quite rapidly on Sui at the moment. In addition to the Google AP2 partnership, there was a company announced just in the past 2 weeks called Beep, which has a founding executive team from PayPal and also from, I think, Walmart, who've been in the payments and merchant space for a long time. And that agentic wallet is now live on Sui, where users can deposit into that wallet, speak to the wallet's UI through a natural language [ combined ] online interface and actually get automated agentic yield return. As part of the Google partnership and in answer to your question, it's actually a broad consortium of different partners, so it's very much up to the different industry players to come together to start pushing through those agentic use cases into production. I think that when there will be an announcement for the public, we will be sure to communicate that through the Sui Foundation. But as of right now, I would just stay tuned into the social pages and the official channels to see which of the industry partners are demonstrating how that comes to life. Brian Kinstlinger: Great. My last question is maybe you can just touch on your native stablecoin launch, how you'll generate -- for investors, how you'll generate incremental revenue in SUI from that? Marius Barnett: Sure. We're looking at launching that in the next 2 to 3 weeks. We believe that it will launch with approximately $100 million of liquidity in that stablecoin. There are 2 stablecoins. One is suiUSDe and the second one is USDi, which is a one-to-one DAT stablecoin. We have a revenue share agreement with the various parties, including Ethena and Sui Foundation, who all participate in it. It is variable in terms of what we're looking at earnings depending on how much is used in the ecosystem. But long term, we believe that this can be a very good core driver of accumulating Sui in the ecosystem. Operator: Our next questions come from the line of Devin Ryan with Citizens. Devin Ryan: A couple, I would say, maybe high-level questions. First off, on just the theme of agentic AI. So obviously, you've touched on why Sui is kind of differentiated there. But can you just talk about functionally how you see AI and blockchain coming together over time? And we're still in the very early days of both technologies so kind of your vision of that, why it's important, where you see kind of value developing? And then if you can just maybe just weave in a bit, too, around why Sui is truly differentiated in your mind from some of the other blockchains. Stephen Mackintosh: Thank you, Devin, for the question. Yes, I would like to, first of all, kind of address it by drawing a line of differentiation between the Sui blockchain architecture and some of the other high-performance blockchains that the kind of community and the investor audience might be familiar with such as Ethereum, Solana, Avalanche. Those 3 blockchains and many others in the ecosystem are all account-based models, whereas Sui is an object-orientated blockchain. And that came from the team's background as the heads of research and heads of product on the Libra and Diem initiatives at Facebook, which was a rather ambitious goal to release a blockchain network out to 3 billion users. At the time, the Sui team realized that in order to achieve that type of scale, there needed to be a new implementation in the smart contract programming language. So the team invented Move. And when the Libra and Diem project kind of disbanded, the team left and they created Mysten Labs, which built Sui. An object-orientated model is very interesting because it allows for really limitless programmability, which is exactly what you need to execute on the agentic payments future or the agentic commerce kind of future by treating every asset or every agent as an object. What that means is that it can scale in parallel across the network. So account-based models, typically, everything has to settle through one till, one ledger, whereas in the object-orientated blockchain like Sui Move, objects can be agents and assets can be objects, and they can all have parallel settlement, and that can scale really across the network in a number of different use cases. Right now, we have a huge bottleneck when it comes from going intent -- from intent to action with these LLM interfaces. And what the Sui team realized when they set out on this ambitious journey to build a blockchain network that can scale to 3 billion users, they built core pillars of infrastructure that come together to support the canonical high-performance blockchain Sui. They built a protocol called Walrus, which is decentralized programmable storage. They built a product called Seal, which is for key encryption and secrets management. They built a product called Nautilus, which is for verifiable off-chain computation. And they also built a very novel identity protocol called zkLogin, which allows both humans and agents to log in with perhaps your Google single sign-on credentials. And when you put all of those things together, that's actually what's called the Sui stack. And a good parallel is to think through the SaaS industry that's proliferated over the past 10 to 15 years that had really kind of core pieces of infrastructure such as Kubernetes on GCP. They had compute storage, identity querying. All of that came together to allow SaaS to flourish. In Sui now, we have all of those products that come together to resemble the Sui stack, and that's what will allow agentic commerce to flourish. And as I mentioned from my previous response to Brian's question, we're now starting to see the breakout use cases. Beep went live on the network 2 weeks ago. The announcement with Google AP2 was announced about 6 weeks ago, and there are many more kind of exciting agentic breakthroughs coming to the network in the next 6 months. Devin Ryan: That's excellent. And then as a follow-up, obviously, some nice momentum on partnerships with Bluefin and the connection with Ethena as well. Can you just talk a little bit about the pipeline of partnerships and kind of where you guys are having conversations and where you expect kind of from a use case perspective, kind of next partnerships to come from? Marius Barnett: Sure. I think from that perspective, we've spoken about this previously that we believe that there's a few core fundamentals of building the business out in the long term, one being liquidity and how we drive liquidity. That includes the partnerships such as Bluefin. The second piece being infrastructure, and that's where we bring on infrastructure to the whole ecosystem, which drives the flywheel of the whole ecosystem. That example is the Ethena stablecoin, and we're looking at various different partnerships, one -- the next one being an ETF -- of launching an ETF in the U.S., which will drive that and we'll again be able to participate in the fees long term of the ETF and being able to drive those types of innovations across the stack. So we have about 5 or 6, but the main priority going forward is the ETF. Operator: Thank you. That does conclude our question-and-answer session. And with that, I would like to bring the call to a close. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.
Operator: Good day, and welcome to the P3 Health's Third Quarter 2025 Earnings Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the call over to Gabby Gabel of Investor Relations. Please go ahead. Gabriella Gabel: Thank you, operator, and thank you for joining us today. Before we proceed with the call, I would like to remind everyone that certain statements made during this call are forward-looking statements under the U.S. federal securities laws, including statements regarding our financial outlook and long-term target. These forward-looking statements are only predictions and are based largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These statements are subject to risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations. Additional information concerning factors that could cause actual results to differ from statements made on this call is contained in our periodic reports filed with the SEC. The forward-looking statements made during this call speak only as of the date hereof, and the company undertakes no obligation to update or revise these forward-looking statements. We will refer to certain non-GAAP financial measures on this call, including adjusted operating expense, adjusted EBITDA, adjusted EBITDA per member per month, normalized adjusted EBITDA, medical margin, medical margin per member per month and cash flow. These non-GAAP financial measures are in addition to and not a substitute for or superior to the measures of financial performance prepared in accordance with GAAP. There are a number of limitations related to the use of these non-GAAP financial measures. For example, other companies may calculate similarly titled non-GAAP financial measures differently. Please refer to the appendix of our earnings release for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures. Information presented on this call is contained in the press release that we issued today and in our SEC filings, which may be accessed from the Investors page of the P3 Health Partners' website. I will now turn the call over to Aric Coffman, CEO of P3 Health Partners. Aric Coffman: Thanks, Gabby. Good morning, and thank you for joining us today. As we discuss our third quarter results, I want to begin by framing where we are in the evolution of the business. This continues to be a transitional year, one focused on improving stability, strengthening operating discipline and maturing the clinical foundation of the organization. Throughout this period, we have remained focused on execution in our core markets, deeper provider alignment and consistent delivery of our Care Enablement Model. There are several positive indicators that reinforce the progress we are making. First, our capitated revenue is up roughly 6% and normalized medical cost trend has remained flat year-over-year, even as cost trends across the industry have risen, demonstrating the impact of our clinical programs and utilization management efforts. Second, the operational improvement plan communicated last year is now embedded in the business, achieving over $100 million in EBITDA improvement year-over-year. Third, as discussed last quarter, we are moving forward with the strategic joint venture that will add approximately 13,000 fully accretive ACO members, improving profitability and cash flow and providing a more stable membership mix. As we previously discussed, we have an additional 25,000 Medicare Advantage lives in the pipeline for 2026. Lastly, we are intentionally rationalizing our provider network to improve margin performance. This includes exiting groups that do not align clinically or economically and growing where our Care Enablement Model consistently delivers strong outcomes. Taken together, these elements strengthen the foundation of the business and position us for meaningful profitability in 2026. With that context, I'll provide a brief overview of our quarterly results before Leif walks through the financials in more detail. For the quarter, membership was approximately 116,000 members in line with expectations. Adjusted EBITDA loss for the quarter was $45.9 million, and year-to-date adjusted EBITDA loss was $85.2 million. Adjusting for prior year items, normalized adjusted EBITDA year-to-date was a loss of approximately $70 million, which we believe provides a clear reflection of the underlying performance of the business. As we discussed on our last call, there are $120 million to $170 million of EBITDA opportunities over the next 5 quarters, which we will cover in more detail. Despite the numbers for the quarter, we have addressed and strengthened the processes that support visibility and predictability. The core business continues to show positive signs of stabilization across medical management, quality performance and alignment to population burden of illness. Given this, we are revising our full year adjusted EBITDA guidance to a range of minus $110 million to minus $95 million, which we believe accurately reflects our current expectation for the year. With that reset in place, I want to speak to the underlying performance of the business. The progress we are seeing in the core business is being driven by the Care Enablement Model, which embeds clinical support and data-driven workflows directly into provider practices. This approach is improving documentation accuracy, quality performance and care coordination. We have strengthened utilization management and care management capabilities, improving predictability across inpatient, post-acute and specialty stack. We are also deepening provider alignment with a growing share of lives attributed to Tier 1 providers who consistently outperform lower engagement groups on both cost and quality metrics. For example, Tier 1 providers performed 17.4% higher in [indiscernible] closures compared to non-Tier 1 providers in the first half of this year. In addition, we are advancing payment integrity and contract hygiene efforts to ensure that terms are aligned with the value being delivered. This includes targeted renegotiations, standardization across payors and clearer accountability for execution. Together, these initiatives are building a more stable, consistent and scalable operating platform and reinforcing the earnings durability of the model as we move into 2026. As we look ahead, we are positioned to translate the operational progress we've made this year into meaningful earnings expansion in 2026. We continue to execute against the $120 million to $170 billion EBITDA expansion opportunity, driven by improved alignment with our population of burden of illness representing roughly 40% of the total opportunity, scaling of clinical and operational programs that are delivering measurable impact, which represents roughly 30% of the opportunity, contractual improvements, both secured and in progress, which represents roughly 20% of the opportunity and the remaining portion made up of product and benefit environment stabilization which we've seen from our partners going into 2026. The work underway to strengthen provider alignment, [invested] Care Enablement Model in standardized clinical and financial workflows is laying the foundation for earnings expansion in '26 and the model is becoming more stable and scalable time. With that, I'll turn it over to Dr. Amir Bacchus to discuss our clinical performance in more depth. Amir Bacchus: Thank you, Aric. At the clinical level, our focus remains on consistent execution of the Care Enablement Model. This model embeds care coordination, utilization management and quality support directly into our highest engaged provider practices, enabling clinicians to proactively identify and manage their high-risk patients. This remains a key driver of the stable medical cost trend we are seeing in the business. We are also continuing to deepen alignment with Tier 1 providers, and the share of lives attributed to these higher-performing practices continue to increase. These providers consistently demonstrate stronger documentation accuracy, higher quality performance and more effective management of chronic and complex patients. In addition, our clinical programs in post-acute management, chronic care management and specialty utilization continue to operate consistently across markets. These programs are designed to ensure appropriate care transitions and avoid unnecessary inpatient stay, improve chronic condition stability through longitudinal care engagement and provide clear pathways and oversight for high-cost specialty treatment. Looking ahead, our focus is on expanding Tier 1 participation, continuing to standardize these clinical workflows across markets and further integrating data and clinical insights into day-to-day provider practice support. With that, I'll turn the call over to Leif to discuss our Q3 results. Leif? Leif Pedersen: Thank you, Amir. I want to start by providing context on the quarter and then walk through our financial performance, liquidity and our 2025 full year outlook. As Aric noted, this remains a transitional year focused on strengthening the operating foundation of the business, improving clinical and financial execution, deepening provider alignment and supporting long-term scalability. We are aligning our cost structure to the scale of our model, and we are encouraged by the stable medical cost trends and the impact of our Care Enablement Model is having across the core business. With that, I'll walk through the financial performance for the period. Total capitated revenue for the quarter was $341.6 million or approximately $982 per member per month. The quarter reflects the recognition of unfavorable midyear settlement, reconciling previously estimated accruals to actual settlements receipts. We have reviewed the drivers of the variance and strengthened both our teams and our process to support greater visibility and predictability in future settlement recognition. These improvements are now in place and are embedded in our current operating cadence. On a normalized basis, adjusted for prior year items, capitated revenue PMPM is approximately 6.4% above the 2024 full year average, reflecting continued improvement in burden of illness documentation and impact of our improved contract terms. Medical margin for the quarter was $4.4 million or $13 PMPM compared to $500,000 or $1 PMPM in the prior period. The reported results this quarter reflect the impact of the major settlement adjustments recognized in capitated revenue. Excluding this effect, underlying medical cost trend, normalized for prior year adjustments, remained stable, consistent with the pattern we have seen throughout the year. On a year-to-date basis, medical margin was $52.2 million or $50 PMPM. On a normalized basis, adjusted for prior year items, year-to-date medical margin was $80.8 million or $78 per member per month. Importantly, as Aric touched on in his opening remarks, normalized medical cost trend has remained essentially flat year-over-year, reflecting the progress we are making in clinical execution and cost management discipline. Operating expense for the quarter was $21.1 million compared to $31.6 million in the prior year period, an improvement of $10.4 million or 33%. This improvement reflects targeted reductions in core administrative headcount and support cost as we continue to align our cost structure with the operating model and scale the business. At the same time, we have reinvested in market operations, provider support, utilization management and care coordination roles that directly influence clinical performance and medical cost trends for those. The result is a more focused and efficient operating model with resources concentrated on the areas that drive performance, predictability and long-term sustainability. Adjusted EBITDA for the quarter was a loss of $45.9 million and year-to-date adjusted EBITDA loss was $85.2 million. On a normalized basis, adjusting for prior year items, year-to-date adjusted EBITDA loss was approximately $70.1 million. We believe this normalized view provides a clearer reflection of the underlying operational performance and the progress made throughout the year. This normalized trajectory reflects stable underlying medical cost trend, continued maturation of clinical and utilization management programs and ongoing alignment of our provider network towards higher-performing Tier 1 practices. Taken together, these elements provide a sound starting point as we move into 2026 and continue to execute against our plan. From a balance sheet perspective, we ended the quarter with $37.7 million of cash. We are maintaining a disciplined approach to working capital management and resource allocation as we execute through the remainder of the year. Given the year-to-date performance and the normalization adjustments discussed, we are revising our full year adjusted EBITDA guidance to a range of $110 million loss to a $95 million loss. This range more accurately reflects our current run rate performance and incorporates the improved controls now embedded in our operating cadence. It provides a clear, durable baseline from which to execute going forward. Stepping back, it's important to look at our performance and trajectory over a multiyear horizon. In 2024, the business operated at a normalized adjusted EBITDA loss of approximately $191 million reflecting structural challenges and prior year dynamics. 2025 has been a year of reinforcing the operating foundation, positioning the business to scale more effectively. As our efforts mature, we continue to execute against the $120 million to $170 million in adjusted EBITDA opportunities for 2026. We have line of sight to achieve meaningful profitability next year. With that, I'll turn it back to Aric for closing remarks. Aric Coffman: Thanks, Leif. Before we open it up for questions, I want to leave you with three key takeaways that reinforce our confidence in the opportunity ahead. First, our core operating model is working. We have seen stable medical cost trends throughout the year, driven by consistent execution of our Care Enablement Model, stronger Tier 1 provider alignment and disciplined clinical program delivery. This stability is foundational, and it is what allows us to scale effectively. Second, we see favorable macro tailwinds heading into 2026. Payors have already signaled a shift towards more sustainable benefit designs, and we expect to benefit from the improved rate environment communicated by CMS. Together, these trends support more rational competitive landscape and improved economics for value-based care models like ours. Third and most importantly, as we've highlighted earlier, on an apples-to-apples year-over-year comparison, we have demonstrated the ability to improve EBITDA over $100 million from 2024 to 2025 and have identified $120 million to $170 million in EBITDA expansion opportunities from '25 to 2026 that we are actively executing against today. In short, the foundation is in place. 2025 has been about disciplined execution, align the network, reworking our contracts, maturing the Care Enablement Model and establishing a disciplined operating cadence. This work positions us to deliver meaningful profitability in 2026 and support a more durable business going forward. With that, let's open it up for your questions. Operator: [Operator Instructions] Our first question comes from Josh Raskin with Nephron Research. Joshua Raskin: I wanted to start on the renegotiation efforts, and I know you talked about this last quarter and having made some good progress. But I guess the question that sort of I keep coming up with is, what convinces the plans to sort of see margin in their MA books, especially when they're trying to increase their margins for 2026? And now that you can see the benefits for all the plans for 2026, do you think the changes they made were consistent with the conversations when you guys were going through that recontracting process? Aric Coffman: Josh, thanks for the question. This is Aric. Yes, I think so. And there's differences across each geography in terms of how they approach benefit design and there is a mix across the markets, but it meets our expectations in terms of what they did to the benefit designs in those geographies. And then when I think about like why on renegotiations, like what is the motivation for the payors, there's a lot of investment that happens from our business into their membership, and they need the help, especially on things around high-risk patients, net expense reduction as well as Stars and quality. And so those are the things that I think are really driving those conversations. Joshua Raskin: Okay. And then maybe just a quick follow-up on that. Have you made an attempt to sort of have the plans have more skin in the game, sort of participate in a potential surplus that you can create? Are all of your contracts for 2026 full capitation? Aric Coffman: So the -- it's a good question. And I think one of the things that we're doing in terms of them having skin in the game, we take the risk from the payors. They get their administrative margin, and then we have a percent of premium that we use to run our business. So in terms of the skin in the game for them, it's really around the execution on the business that may be outside of our business, and then they also have to hit the things that drive Star's performance that are plan-related. Joshua Raskin: On their side, Okay, yes. Yes, I was just thinking like how do you align the incentive around medical management and making sure that they're doing everything that they can. It just seems like we keep getting some of these prior year things or prior period things and the payors keep coming back with updated data. I just know if there was a way to sort of think about getting them to pay more attention, but you still think just taking 100% cap. That's the model, and that's been working, right? That's your idea? Aric Coffman: Yes, that's correct. And I agree with you. I mean, I think the partnership that we have and that we're developing with the payors on a go-forward basis, there's bilateral accountability for outcomes on the things that we're supposed to be doing. And we've increased the cadence that we're doing in those meetings. We have a lot more visibility, and we've set probably different levels of expectations for them moving forward, if that's helpful. Operator: [Operator Instructions] Our next question comes from Lyon Langston -- Ryan Langston with TD Cowen. Ryan Langston: I think in the last one or two calls, you've talked about some of the issues being sort of targeted at a single payor, single market kind of dragging on performance. Was the guidance reduction sort of driven by that payor, by that market or is it sort of more broad based? Leif Pedersen: It was a little more broad-based, Ryan. It's a good question. Really, the guidance reduction was primarily related to two things. One is the midyear settlements came in less than expected. And so as we talked about, we've got new structural controls put in place around the process, both with how we're coordinated between our MRA function and our finance function moving forward. In addition, that was one of the last areas that we've restructured in early 2025. So our expectations going into '25 were based upon some old processes that we feel like we have corrected moving forward at this point in time. And then a smaller portion of the guidance reduction was related to our back half assumptions on some of our medical cost initiatives just got pushed out and that will flow into 2026. And so that was a smaller piece of the reduction as well. Ryan Langston: Okay. And then just on that, I think you also called out last quarter some noncore assets dragging on the performance. I'm sure that's intermixed with those -- that one market, one payor. But any sense on how those particular assets are performing? And I guess, is there an opportunity to just maybe shed some of those into '26 or maybe even into '27? Leif Pedersen: Yes. It's another good follow-up question, so I appreciate that. We are still experiencing in 2025 headwinds associated with one of our markets. And as part of our expectation for 2026 in the $120 million to $170 million EBITDA opportunities that Aric outlined, part of that expansion of EBITDA is related to contractual adjustments related to that market. Operator: Our next question comes from David Larsen with BTIG. David Larsen: I'm sorry, can you please repeat what the prior period dollar amount was in the third quarter? And I thought I saw some language about settlement in the third quarter. How much was that either favorable or unfavorable? Leif Pedersen: So the prior period net in our P&L, David, was a $3 million decrement. So we had $3 million of actual headwind in the quarter. And part of -- and when we say prior period, our prior period for the definition of what we're talking about here is 2024 related, not anything 2025 related. The midyear true-up was a $21 million impact to Q3 specifically. And that is effective of the fact that Q1 and Q2 were running at a higher revenue rate based on expectations than what materialized in Q3. And thus, we took the adjustment in Q3. David Larsen: So it was a total $24 million unfavorable impact in 3Q? Leif Pedersen: Yes. David Larsen: Okay. That's helpful. And then, I guess, it's great to hear that the trend is normal is how you described it. I guess my question is, what are the odds of another sort of, I guess, prior period adjustment in 2026 related to 2025 claims? I guess, wasn't -- why weren't those claims expenses booked in 2024? I guess, what caused the lack of visibility, I guess? Leif Pedersen: Yes. Some of this is the fact that we do have nondelegated plans, and we get data later than expected. And so some of that is just materialization of how that data comes through our P&L. The expectation for 2026 would be that we will have a more consistent method of how we are booking our expenses and our revenue that should preclude that normalization from having to happen. And why we're normalizing to a large degree, is because we want to compare our 2025 results to 2024. And 2024 was effective -- was really, really lumpy. Yes, it's very back half loaded to how expenses hit the P&L. And then in Q1, we had a material cost adjustment on the MEDAC side that related to 2024. My expectation moving forward is that you will have normal fluctuation of how IBNR settles out and runs out, but that we won't have these material swings moving forward. Aric Coffman: And just to add to that, just based on Josh's question about how the relationship with the payors and how that's working through. This is another element there where with our improved JOCs that we're having with the payors and us laying down a different set of expectations and having some new people, too, that are doing some of this work, we're going to be able to eliminate some of those miscommunications or late communications from what you've seen previously. David Larsen: Okay. And then just in terms of like PMPM revenue growth expectations in '26, what percent increase would you expect to see based on number one, improved coding? And then number two, rate increases, which I would assume would flow through from the favorable MA rates the plans are going to get? Aric Coffman: Yes. This is Aric. I'll take the first swing. And so we've done a pretty deep look at the rate changes that are coming through. And as you know, it varies by county in terms of how that works out. So if you look at the whole country, the aggregate is about a 5% net improvement in premium. And it turns out that in our 4 markets, that's exactly where we land in aggregate is a 5% improvement in premium in terms of those overall dollars. What we've talked through with the expectations for the burden of illness operations, we are seeing improvements year-over-year in those numbers, David. We won't have full guidance on the impact for that until we get into the next quarter. David Larsen: Okay. So the 5% includes coding improvement and also the premium? Aric Coffman: No, 5% is just the base rate improvement. And then as we look at the coding improvement, we'll have better line of sight into that as we get into the next quarter, but we are happy with the progress seen year-over-year. David Larsen: Okay. And just one more quick one. What was the PMPM cost trend in the quarter? Did I hear it was flat or normal? What was the percent? Aric Coffman: So when we compare -- when we say -- our Part A and our Part B costs, David, are flat when we say normalized 2025 year-to-date versus full year normalized 2024. That is the flat trend. David Larsen: Okay. So if that continues, you should see at least 500 basis points of gross margin expansion in theory in '26? Aric Coffman: Yes, correct. Operator: [Operator Instructions] At this time, there are no more questions. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the Sagicor Financial Company's Third Quarter 2025 Earnings Call. [Operator Instructions] This call is being recorded on Friday, November 14, 2025. I would now like to turn the conference over to George Sipsis. Please go ahead. George Sipsis: Thank you, operator, and hello, everyone. Thank you for joining us today to discuss Sagicor's Third Quarter 2025 Results. I'd like to point out that our disclosures are available under the Investor Relations tab on our website at sagicor.com or at investors.sagicor.com, which includes a press release, financial statements, MD&A and the supplemental information package containing core earnings, drivers of earnings and additional disclosures. The link to our live webcast is also available on our website. This conference call is open to the financial community, investors, the media and the public with a reminder that the Q&A period is reserved for financial research analysts. I will begin by referring you to the cautionary language and disclaimers in our materials and public filings regarding the use of forward-looking statements and the use of non-IFRS financial measures and ratios, which may be mentioned as part of our remarks today. I would also like to remind the audience that actual results regarding forward-looking information could differ materially. And please note that a detailed discussion of Sagicor's risk factors is provided in our MD&A, which is available on SEDAR+ and on our website. A discussion of the assumptions underlying our expectations is provided in our previous filings and earnings releases. Unless otherwise noted, all dollar amounts referenced will be in U.S. dollars, consistent with our reporting practice. Joining me today is our President and CEO, Andre Mousseau; our Chief Financial Officer, Kathy Jenkins; and Anthony Chandler, our Chief Controller. We'll begin with prepared remarks by Andre and Kathy, followed by a Q&A session. With that, I'll pass the call to our President and CEO, Andre Mousseau. Andre Mousseau: Thank you, George. Good morning, everybody. Thank you for joining us. I'm very pleased for us to announce another outstanding quarterly performance. On a core basis, our results reflect broad-based strength. Our Canadian business continues to show outstanding profitability. Our U.S. business grew its assets by about $250 million from the prior quarter and continues to generate strong spreads. And both of our Caribbean operating segments showed strong core profitability, reflecting progress on initiatives that we've been working on for years. Our net income to shareholders was $81 million reflecting those strong core numbers plus a reversal of some of the income volatility that have gone the other way earlier in the year and seems endemic under the IFRS 17 standard. With these strong results, coupled with some opportunistic share buybacks, we're at a record book value per share, whether you follow in Canadian or U.S. dollars. Before handing off to Kathy, I would like to acknowledge the absolutely outstanding job our team in Jamaica has done in the leadership -- in the lead up to and the aftermath of Hurricane Melissa. Our business continuity plans were flawlessly executed, and we were out there serving clients across the island within hours of the storm passing. We have rallied our troops and are leading the recovery effort. While this may cause a temporary setback in the Jamaican economy, we're confident in the country and our company there, and we will build back stronger than ever. Now I'll hand over to Kathy to result -- to discuss the results of the quarter in a bit more depth. Kathy Jenkins: Thank you, Andre, and good afternoon, everyone. As Andre mentioned, we're reporting an outstanding third quarter of 2025. Our core earnings to shareholders were up 45% from Q3 2024 to $35 million. Revenues were $974 million for the quarter compared to $1.1 billion for the same quarter last year. New business CSM up $41 million for Q3 continues to reflect strong sales across all segments. You will recall that the third quarter is when we perform our annual actuarial review of nonfinancial insurance assumptions like mortality and policyholder experience. As we adjust our assumptions, some of the impact comes through the income statement and is captured in noncore within our drivers of earnings, while other adjustments affect our CSM. This time around, the effect was positive as we recognized net income but negative to CSM. In Q3, the impact on our earnings of the actuarial assumption changes was $5 million of after-tax noncore net income. CSM decreased in aggregate this quarter driven by the adjustment of assumed mix on Universal Life products in Canada and lapse assumptions in the U.S. as we take a more conservative CSM posture on our annuity products. Now I'll give you some more details on the segment financials. Sagicor Canada's sales production of $16 million of analyzed -- annualized new premium for the quarter was consistent with management expectations, resulting in new business CSM of $10 million for the quarter. Core earnings to shareholders of $27 million increased $7 million compared to the same quarter in the prior year, reflecting strong insurance experience gains from favorable mortality experience. Net income to shareholders of $53 million for the quarter was higher than core earnings to shareholders due to favorable market-related impacts from lower interest rates and higher-than-expected equity market returns. Net CSM was $559 million, a decrease of 2% quarter-over-quarter on a Canadian dollar basis. Sagicor Life USA's new business production of $335 million for the quarter grew 16% over the same period in the prior year. Core earnings to shareholders for the quarter of $10 million were lower than Q3 2024 due to favorable insurance experience in the prior year, while in line with expectations this quarter. The impact from higher MYGA mortality claims from the quarter were offset by positive experience from other business lines. Net income to shareholders of $21 million for the quarter was higher than core earnings to shareholders due to favorable market experience from interest rate movements. Net CSM was $151 million, a decrease of 5% quarter-over-quarter. As I noted in my remarks last quarter, we expected the negative market experience that rose in the first half of the year in both North American segments to reverse over time. Accordingly, as Andre noted, this quarter, the favorable market experience in both segments reversed much of the previous period's negative market experience. Sagicor Jamaica recorded strong insurance sales, evidenced by ongoing growth in insurance revenues and net premium income from last year. Our share of Sagicor Jamaica's core earnings to shareholders of $12 million for the quarter increased over the same quarter in the prior year due to price repricing in the short-term business, sales growth in the long-term business, and improved net interest margin and fee revenue in the Commercial Banking business. Our share of Sagicor Jamaica's net income to shareholders of $14 million for the quarter was higher than core earnings to shareholders due to positive experience adjustments from changes to lapse assumptions. Net CSM was $293 million and net CSF to shareholders was $144 million, both of which increased 6% quarter-over-quarter. Sagicor Life's business fundamentals remain strong with improving margins on short-term businesses and insurance experience aligning to expectations for long-term businesses. Core earnings to shareholders of $9 million increased 23% from the same quarter in the prior year, driven by repricing initiatives on renewal and adjustments on product offerings on short-term business. Net income to shareholders of $13 million for the quarter was higher than core earnings to shareholders, primarily due to positive market experience from lower interest rates in the U.S. and higher interest rates in the Trinidad and Tobago market. Net CSM was $255 million, a decrease 2% quarter-over-quarter. At our head office, other operating companies and adjustment segment, core loss to shareholders was $22 million for Q3, an improvement of $1 million year-over-year, reflecting lower interest costs from favorable debt refinancing that was completed in 2024. Net loss to shareholders was $20 million. As mentioned by Andre, our colleagues in Jamaica have done an extraordinary job supporting colleagues, clients and communities impacted by Hurricane Melissa. With respect to the economic impact on our business, our preliminary estimate is that the impact in Q4 will be either immaterial or just marginally material to Sagicor at a group level. So today, we would say a potential net income hit of $5 million to $10 million to SFC. Our small P&C business in Jamaica is heavily reinsured and could only generate losses of less than $3 million. It will take more time to assess the impact on our lending portfolio through our bank in Jamaica. But again, our major clients are insured with other companies, and so we are talking primarily about the knock-on effects to small borrowers. We are assessing forbearance for a number of smaller customers doing the right thing for customers in affected areas as they sort themselves out, not ultimately economic losses necessarily, but we'll see how those run through our ECL. And we have also given well over $1 million so far directly to relief efforts that we and other private sector leaders are championing and we will expense those. Once you factor in the fact that we own 49% of the Jamaican operations, our view today is that SFC's net exposure will be below $10 million. Prior to this event, Jamaican businesses -- our Jamaican business was really hitting on all cylinders. So we believe our Jamaican business will come back strong in 2026 and beyond as rebuilding efforts may stimulate the economy there. So having said all that, Sagicor remains well capitalized in Q3. The group's LICAT ratio was 141%. Our financial leverage ratio was 26.6%. Our book value per share significantly increased to USD 7.74 or CAD 10.78. As we saw the effect of the reversal of market experience increase our retained earnings. Our deployable capital for shareholders' equity plus net CSM to shareholders was $2.2 billion or USD 15.93 per share or CAD 22.18 per share. Subsequent to quarter end, on October 21, Global Credit rating agency Fitch Ratings upgraded Sagicor's long-term issuer default rating to BBB from BBB-, and also upgraded Sagicor's senior unsecured debt to BBB- from BB+. This upgrade provides a unanimous view from our credit rating agencies that Sagicor senior unsecured debt is investment grade. This is further validation of Sagicor's strong capitalization as we pursue stable and profitable growth. This upgrade will provide Sagicor with enhanced access to capital as we execute on our strategy, and we will examine our refinancing options as we move into 2026. With the continuing strong capital position, we are announcing our 24th consecutive quarterly dividend to shareholders since we've been listed on the Toronto Exchange and the third dividend at the higher level of USD 0.0675 per quarter or annualized USD 0.27 per year. We do intend to reassess the dividend payout following the release of our Q4 results as we are tracking dividend payments so far in 2025, below our targeted payout range of 30% to 40% and due to our core net income gain so much higher than our original guidance. With that, I will hand it back to Andre. Andre Mousseau: Thank you, Kathy. This quarter provides us with further validation of our current operating strategy to focus on return on equity, improving initiatives and delivering shareholder value. Our annualized core ROE was nearly 14%, well ahead of our original time line to achieve mid-teens core ROE and net income and book value growth followed significantly. We continue to see opportunities to further increase our ROE, whether through growth in our U.S. annuities business at high marginal returns on capital, active balance sheet management with our improved ratings and technology-driven improvements to our operating models across all of our subsidiaries. We look forward to presenting revised strategic plans for future periods when we deliver our year-end results in March of next year. Until then, we're very pleased to take your questions if there are any. Operator: [Operator Instructions] Your first question comes from the line of Gabriel Dechaine from National Bank. Gabriel Dechaine: A quick one on the fixed annuity sales. You had another good quarter and it looks like you're well on track to exceed the $1.3 billion number you floated on the last call. Just wondering if there's any expectation that would lead to a different outcome or maybe even a better outcome? Andre Mousseau: Thanks, Gabe. It could be better. We deliberately originally set out a target that was a little short of what we were trying to do internally. We still do see strong return on capital. We're seeing some of the strongest returns on capital in some time for the new business that we're putting on the books this quarter. That said, the production can ebb and flow. So I don't want to be too specific about any individual quarter, but it's fair to say that our target for 2026 will be to build on wherever we end up for 2025 and exceed it. Gabriel Dechaine: Okay. I would get back to fixed annuities in a minute, but just on the -- the couple of numbers thrown around there, on the Jamaica situation, which, of course, is unfortunate, very unfortunate. But you said USD 5 million to USD 10 million that's the potential hit to your P&C business profits, correct? And then there was another $10 million reference that just... Andre Mousseau: No. No. So $5 million to $10 million is the aggregate ZIP code of net income exposure to SFC in total. As Kathy said, the P&C business -- there is building blocks to get up to it. The P&C business is about -- is heavily reinsured. And so in aggregate, the loss there is going to be less than $3 million. We've spent, call it, $2 million on relief efforts with kind of with the multilaterals and the things that we're doing internally. And then there's a bit of an unknown for as we give forbearance through the bank, how much that's going to be. And so if you say that, that number would be -- work its way as a $5 million ECL, that would be a $10 million total net income hit in Q4. And then we own half of that. So if you look at that stack, which, if I had to give a best estimate, it would be in and around that. It would say, okay, we're in the ZIP code of $10 million. We own half of that. It's $5 million off of our -- off of SFCs to Q4 P&L. Don't know how much of that is core versus noncore. I haven't really thought about that. It's not about the accounting today. But that's kind of the ZIP code. And what Kathy was talking about is we want to give ourselves some room in the guidance in case it turns out there's a little bit more. But because we're focused in Jamaica on the long game. And if it's the right thing to do for our customers, maybe we extend more forbearance. And so this is all on a week-to-week basis. But the point here is that it's just scratching the edge really of materiality for us. Gabriel Dechaine: Got it. Now getting back to the fixed annuities business, I know there's a lot of components to this year's actuarial review, but the one that stuck out for me was the $30 million or whatever strengthening of reserves for multiyear guaranteed annuities. I believe -- and related to lapse, I believe this is the third year in a row that's been requirement or an outcome rather. Can you remind me what's going on there? I believe it's that you assume there's a certain persistency, I guess, retention or renewal of these policies as they mature, but that renewal rate was lower, so you're having to pay more renewal commissions or something -- what sort of behavior are you witnessing? And if I'm correct in my numbers there that this is maybe the third year that this has happened. What's the confidence level that we've cleared that this issue has put the rest, so to speak? And then what have you done on new product sales to adjust for this issue in your back book? Andre Mousseau: So what you're seeing here is two different things. There's the insurance behavior piece of it. But there's also the -- there is also continuing refinement and improvement of how you reserve for these products under IFRS 17. And so there's -- some of what you're seeing is related to lapse behavior and the mitigants that we have to take care of it. More of it is around us refining our views with our advisers of how much CSM should be in these products when you reserve for them. And how much of the profitability should come out through other parts of the drivers of earnings. We're in a bit of a unique situation because we're an IFRS reporter in the U.S. market. Most of the folks in the U.S. market aren't dealing with this issue. So it does feel as we work with our actuarial advisers and with our auditors that we're plowing new snow, so to speak. And so if we could go back in time and take, even with -- even without any effect of policyholder behavior, we would have had lower CSM in retrospect 2 years ago when we did the transition to IFRS 17 because we're seeing more of the profitability come out through the investment earnings and other pieces of the drivers of earnings. So that's a really big part of it. You're right. This is a couple of years in a row. It's more about wanting to really take a conservative position and not have to deal with this again. The unit economics of the business that we're selling are very strong. We're able to add the assets at the pace that we feel good about. And the aggregate return on equity on the portfolio, if you look at the profitability, plus the other $10 million or so a year that we're taking out of our U.S. business and profits through internal financing on our surplus notes, tell you that the business is strong and it's really, really running well. So this is really about resetting for the new way that we're looking at the accounting. In terms of what we have done, we did put in place a more robust renewal commission program in place as we -- and that helps retain more business. It's a really interesting question on a statutory basis about whether you -- whether you're better off retaining all the business versus writing new business, if you -- in today's environment, the way you ask statutory accounting works, you have to stick with your old assumptions from when you wrote the business when you renew it. And what that means is for Vintage 2020 and 2021 and 2022 policies when they were written in lower interest rate environment, it's actually more punitive to hold the renewing policy than it is to write a new one, which means we're trying to be -- we're trying to take a relatively sharp pencil and decide on a week-to-week basis, are we better off retaining versus are we better off just selling more, and it's a hard concept to get through in a 5-minute answer to an earnings call. But big picture, we can observe the gross margin on our book getting bigger every quarter, and we think it's marked properly now. Operator: Your next question is from the line of Mike Rizvanovic from Scotiabank. Mehmed Rizvanovic: A couple of quick ones for me. I wanted to start with the natural disaster in Jamaica, obviously very sad to see. But just in terms of how you sort of put the parameters on that tail risk and your reinsurance approach. I'm just wondering, should we think about this as irrespective of the type of natural disasters we may see in the future. It is an area that's prone to these that you're basically covered off and you are, in fact, hedging through reinsurance, the majority of that tail risk? Andre Mousseau: Yes. That is the lesson you should take. It is -- the region is prone to this. That said, Melissa was the worst to hit the region and Jamaica, in particular, in a generation. This is not -- it's hard to tell the future in today's world, but this is not Florida at the moment, which is getting the one in 100-year storms seemingly every year. But I agree with your fundamental point that this kind of puts a bow around -- this is as bad as we've seen a storm in our region, and we -- this proves that our reinsurance works and it's less than a $10 million hit today. Mehmed Rizvanovic: Okay. That's very helpful. And then a quick one on the ROE. Obviously, you had an outsized quarter in Q2, well above your 13-plus target. This quarter, you're a little bit above your target? And just thinking about some of the momentum you have in some of your business lines here. And when you have that 13-plus target, like what does that target represent? Do you have any updated thoughts? I'm not sure to think about it as more of a 3- to 5-year target, like we hear with some of your -- some other financials. They tend to have that longer view. But like you're already there, and I'm wondering if we shouldn't be maybe starting to think about getting to a better number in, say, 2 to 3 years? Andre Mousseau: You sound like a board member. The original -- when we put the 13-plus guidance, that was a medium-term guidance, and that was supposed to be code for year-end '26 going into 2027. Kind of to your point, that was supposed to be towards the end of the 3-year planning cycle. And so that's where we were going with -- in my commentary, where I've said we have hit it early. We are pleased with it. It's a couple of quarters in a row that we're running through 13%. We will update our forward guidance as we get through strategic planning, and that will come in the next call. What I would say is that the last 2 quarters, validates a certain base, and you can call that 13%, 14%. And we have a lot of options on the table to continue to enhance our ROE. Kathy talked about the final re-rating up to full investment grade. So we have the opportunity to improve our cost of capital throughout the system. Every dollar we put into the U.S. on a marginal basis is improving our ROE. There's a lot of opportunity to achieve efficiencies in our business and better serve customers using technology. These are things that will be observable over a couple of years, but will allow us to get targets for return on equity well through the 13% or 14% as we look forward. And every time you can also buy a share back at a 30% discount to book, you're only jacking it even more. So we do see the opportunity over the medium term to get to a higher return on equity. And our intention is to be a bit more granular about that next year as we put forward our revised medium-term guidance. Operator: Your next question comes from the line of Trevor Reynolds from Acumen Capital. Trevor Reynolds: I think just following up on kind of the guidance, there is no real update with the quarter. In terms of kind of where you sit about $110 million of core earnings year-to-date and the previous guidance of $120 million to $130 million. It looks like that's more than achievable. I just want to kind of get a sense of where that -- where your kind of outlook that's here in the near term on that. Andre Mousseau: Yes. I think more than achievable is a good term. We want to -- we'll see how Q4 turns out. Sitting here, I think we have an idea that Q4 will be a little lighter than Q3, just given the inflow that we have on Jamaica. But we haven't put a lot of thought yet into how much of that is core versus noncore. And even with the big daily volatility, there hasn't been a lot of aggregate volatility in either rates or equities. So we were managing -- we're trying to manage on a longer-term basis, but we feel good that we're not going to embarrass ourselves on the guidance. Trevor Reynolds: Okay. And then maybe just on the CSM as well, like you had about $125 million year-to-date, like looks more like the range is kind of the target there? Andre Mousseau: Yes. If you take the commentary that I talked about to one of the earlier questions on CSM, we've come to this revised view working with our advisers -- our outside actuarial health that we should just be putting less CSM into these annuities products than we thought before. And so our sales -- the volatility in the CSM for new business is really -- versus guidance is really out of the U.S. because Canada and the Caribbean has been pretty consistent with how we build up to the guidance. So it's really about less CSM coming through in the U.S., even though we're hitting our sales targets and on a statutory or economic basis, the business that we're writing is right on budget or better, and our numbers have been ahead of guidance. So it's really all part and parcel with that. Trevor Reynolds: Okay. And then last one is just, I guess, around your free cash flow priorities, I guess. You hinted that there's maybe some room for upside on the dividend. How do you weigh that against the share buyback given your discount to book today? Andre Mousseau: Yes. You saw in our public disclosure that we did buy back some shares in Q3. I'd expect us to continue to do that in Q4. If you look at our shares today in the $8 range, to us, if you look through to the core earnings generation, they're as cheap today at $8 as they were a couple of years ago at $6. And you could observe that when it was below $6, we were buying as much as we could. So you look at our leverage ratio or our LICAT or however you want to look at it, we're very well capitalized today which, to me, I think there's room for us to continue to grow and at the same time, return capital to shareholders. So I would expect we would continue to buy back shares. We've been pretty open that we're going to look at our dividend every year in March as well. And so we intend to do so. Operator: Your last question comes from the line of Darko Mihelic from RBC Capital Markets. Darko Mihelic: I just wanted to return to the tragic events in Jamaica, and I really appreciate the color, it's very helpful for Q4. But I'm thinking beyond Q4. I just wanted to think about how you view the situation with respect to earnings power beyond Q4 and momentum that may be lost as a result of this event and thinking about the economy, currency, top line impacts. What's your early read on how we should think about your segment for '26? Andre Mousseau: Yes. So that's a great question, Darko. And I think it's really the one that's topical. And the reason that we don't have a firm view on this is that there's a lot of pushes and pulls on this, just from a macro point of view. And when you're as big as we are, there is a pretty robust correlation between economic activity and the performance of our business. I mean, our Jamaican business has been an incredible performer since -- over the last generation kind of 12, 15 years since Jamaica got its fiscal house in order and has had strong growth. So there is certainly a significant near-term hit to GDP and a near-term first order hit to foreign currency remittances and that a lot of the worst affected areas were farming areas. And so Jamaica in the near term, well, these are cash crops that turn over a couple of times a year. But in the near term, there will be more importation of food. They're still taking stock of Montego Bay, which was relatively harder hit and a meaningful percentage of the hotel stock in Montego Bay may end up missing the Christmas season, that's bad first order for foreign currency as well. Now, on the other side, we're seeing positive remittances from friends and families that send foreign currency directly to the country. The country did avail itself of some catastrophe bonds that will now be in the money. And so there's hundreds of millions of dollars of hard currency that flows in through that way. And as infrastructure and housing and commercial pieces are rebuilt, you have funds that are coming in from international reinsurance that carry the catastrophe losses for businesses that are owned under multinationals, which is a lot of the big, big stock. And there is a stimulative effect to an economy of going out and rebuilding roads and building. So it's very difficult to really establish what is this going to do for economic activity and for new business sales next year and for our loss ratios on our group businesses. And at this point, we don't have a view as to -- is it not a big step back from a budgeting point of view as the Jamaica business was really growing or is this net neutral. And that's really the challenging part of the budgeting exercise for next year that we -- it's hard to speculate on until we take stock a little bit more. Darko Mihelic: Okay. I appreciate that. That's a good fulsome answer and giving me more to think about, too. And so just my last question then would be with respect to Sagicor Life. Maybe you can speak to sort of where you are with the repricing initiatives. And also there, what I'm interested in understanding is the potential benefit into '26. I'm not so interested in Q4. What I'm really looking for is sort of how you see that developing into '26? Andre Mousseau: SLI, the repricing initiatives do continue to be helpful on an economic basis. I think we saw a little bit of onetime help in Q2 compared to what we had in Q3 as sometimes -- when you change your assumptions sometimes stuff comes through all at once. Big picture, when you step back from the quarterly noise, we would continue to -- all things being equal to continue to see margin expansion in SLI in 2026 and 2027. Darko Mihelic: Okay. And then just lastly, back to the U.S. business. If this is essentially a shift in the accounting less CSM, more investment sort of income, what is it that you're doing there? Is it just a higher risk adjustment? Or is it something else to fulfillment cash flows? Can you just give you a general rough idea? Because I do think from a geography point of view, I want to understand better how to model this business into '26 and '27? Andre Mousseau: It's prevalent throughout the drivers of earnings. We've gone through and we had a project to go and -- to go and really retool the way in which we reserve for it. And part of it is around conservatism and wanting to make sure that we get away from negative quarterly noise, but part of it was also an effort to minimize the actual reported earnings volatility a little bit. And so there was a change throughout. I think that we should get together with the folks in the research community and find a forum to educate on the way to model it going forward, and take the time to do it properly. It's hard to wrap it all in a bow on a call like this. Operator: There are no further questions at this time. I would like to turn the call back to George Sipsis for closing comments. Please go ahead, sir. George Sipsis: Thank you, operator, and thank you, everyone, for joining the call today. A reminder that a replay of this call will be available for one month on our website and a transcript will be posted as soon as available. If you have any additional questions, please do not hesitate to reach out to any one of us. With that, thanks again for your participation and interest today. Have a great day, everyone. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you very much for your participation. You may now disconnect.
Joshua Schulman: Good morning. We actually have some seats here in the front row. This is like the first day at school. No one wants to be -- it's not like a fashion show because at the fashion show, they really want to be seated in the front row. It's all about your seat. In any case, good morning, and welcome to our interim results and our update on the Burberry Forward strategy. I'm Josh Schulman, CEO of Burberry, and with me is Kate Ferry, our Chief Financial Officer. One year into Burberry Forward, my belief in this extraordinary British luxury house is stronger than ever. Since we met last November, we have moved from stabilizing the business to returning to growth. I am encouraged by the signals I'm seeing throughout the business, which provide initial proof points that our Burberry Forward strategy is working. With our timeless British luxury brand expression and an improved product offer, our brand has become more desirable. We're attracting new customers to the brand while welcoming back existing customers, resulting in sequential improvement in customer growth. And these customers are responding strongly to our autumn and winter collections with a significant increase in sell-through rate compared to last year. We're accelerating our momentum in our iconic categories, outerwear and scarves, and now this growth is extending into additional categories. In Q2, we returned our retail business to comp sales growth for the first time in 2 years. And now our most important wholesale partners are seeing the momentum as well. We recently completed our Summer 2026 wholesale market, and the reaction has been very positive with a significant increase in orders from key opinion leading partners in the U.S. and Europe, an incredible vote of confidence in our product and Burberry's relevance. While I am pleased with what we've achieved in our first year of Burberry Forward, these are just the first steps to reigniting desire. There is a lot more to do, and I am looking forward to building on these foundations in the year ahead. I will now turn it over to Kate to take you through our first half financial results, and I will then update you on our strategy, our progress and our priorities as we look to year 2 of Burberry Forward. Catherine Ferry: Thank you, Josh, and good morning, everyone. For the first half, comparable retail sales were flat with sequential improvement between quarters. In the second quarter, we delivered growth of 2%, our first positive comp growth in 2 years. Total revenue was GBP 1.03 billion in the first half with adjusted operating profit of GBP 19 million. Free cash outflow was GBP 50 million, an improvement from this time last year and in line with our expectations for the half. When we launched Burberry Forward a year ago, we talked about actions to drive sustainable performance. We've returned to adjusted operating profit in the first half. Our gross margin is recovering, up 410 basis points at constant exchange rates versus last year to 67.9%, driven mainly by a healthier inventory position. We continue to bring scarcity back to our inventory model. We have tightly managed buys throughout the half with net inventory down 24% versus last year. Following the expanded restructuring program announced in May, we're on track to deliver GBP 80 million annualized savings by the end of the year. And finally, we continue to invest our capital where we know we can get the highest returns with continued focus on cash generation. I'll now take you through a more detailed review of performance, starting with revenue by channel. I'll refer to changes at constant exchange rates. Retail revenue declined by 1% during the half. Space reduced by 1%, while comparable retail sales remained flat year-on-year. Wholesale revenue decreased by 11%, slightly better than our guidance of a mid-teens decline, reflecting phasing and some uplift in in-season orders from our key strategic partners following improved sellout of Autumn '25. Licensing revenue was down 8% versus last year with ongoing strength in our fragrance and beauty businesses, including the Goddess and Her franchises, offset by the planned destocking of older fragrance lines. As a result, total revenue for the first half declined 3% at constant exchange rates or 5% on a reported basis. Turning now to regional performance. Comparable retail store sales were flat or positive in all 4 regions in the second quarter. Traffic at our stores remained challenging throughout the first half of the year, but we're pleased with the improvement in conversion we've seen. Greater China led with the strongest improvement as compared with Q1 with 3% comparable retail sales growth in the second quarter. This was supported by a strong Chinese Valentine's Day. Globally, the Chinese customer group slightly lagged the regional performance with growth in locals offsetting the decline in outbound tourist flows. Asia Pacific also improved to flat in the second quarter with the first half down 2%. Japan returned to growth in the second quarter, up 2%, offsetting decline in South Korea. Americas saw 3% growth in the second quarter and the first half. The region is continuing to benefit from new customers, offsetting lower tourist spend in the United States during the summer months. EMEA remained in line with the first quarter despite reduced tourism activity, growing 1% in Q2 and the half, supported by growth in local and returning customers. Moving on to the income statement and staying with changes at constant exchange rates. Gross margin was 67.9%, a 410 basis point improvement year-on-year. I'll give more detail on this in just a moment. Adjusted operating expenses were down 5% year-on-year at constant exchange rates following the delivery of our expanded cost savings program as well as nonrecurring store impairment headwinds in the prior year. We remain on track with our cost program, expecting to deliver GBP 80 million in annualized savings by the end of the year. As mentioned the last time we spoke, we're investing behind our journey to reignite desire, restore growth and continue on our path of sustainable value creation. We've prioritized investment in the first half using some of these savings to invest in consumer-facing areas such as marketing. This year, we continue to invest a high single-digit percentage of sales in our brand with a focus on maximizing our return on investment. We delivered an adjusted operating profit of GBP 19 million with an operating margin of 1.9%. Adjusting items amounted to GBP 37 million. This primarily related to restructuring costs resulting from the transformation program announced in May. The business has demonstrated resilience during this period, allowing us to progress swiftly through the program over the summer. Our full year guidance remains unchanged with restructuring costs expected to be around GBP 50 million. As a result, we've reported an operating loss of GBP 18 million for the first half. The net finance charge was GBP 30 million, of which GBP 23 million was interest charge on lease liabilities and GBP 7 million was other financing interest. Gross margin benefited mainly from the non-repeat of inventory actions taken last year. As a reminder, these inventory actions were a combination of provisioning and discounting. This year, we have significantly less inventory, down 24% at the end of the first half. We're also seeing the benefits of our transformation program in gross margin. We experienced a free cash outflow of GBP 50 million in the first half, an improvement versus this time last year. Working capital was GBP 43 million outflow given the seasonal inventory buildup ahead of the festive period, albeit still reflecting tighter inventory management than this time last year. Capital expenditure for the period was GBP 38 million, with investment targeted to those projects with the highest return on investment. In our retail network, we're focused on amplifying our most iconic categories. We've launched over 100 scarf bars to date and are on track to deliver 200 by the end of the year. We also opened a new showroom at our headquarters here in London, which is already driving cost efficiencies and enabling closer collaboration across our global retail teams. Borrowings reduced by GBP 221 million following the repayment of our September 2020 bond, and we closed the period with net debt of GBP 93 million or GBP 1.1 billion, including lease liabilities. At the end of the period, net debt to adjusted EBITDA was 2.2x. We remain comfortable with our liquidity and headroom and are focused on continuing to reduce our leverage through the actions we are taking to rebuild profitability. Turning now to the outlook for full year '26. While we remain in the early stages of our turnaround, we're encouraged by the progress made so far and expect to see the impact of our initiatives build into the second half and beyond. The macroeconomic environment remains uncertain, but our focus this year is to build on the momentum and reigniting brand desire as a key requisite to growing the top line. We will deliver continued margin improvement with a focus on simplification, productivity and cash flow. To help you with modeling, in full year '26, we expect no changes to our guidance with retail space remaining broadly flat and annualized savings of around GBP 80 million alongside a GBP 50 million restructuring charge. Within wholesale, we expect a mid-single-digit percentage revenue decline for the full year, slightly ahead of our original expectations and returning to growth in the second half. This reflects our key wholesale partners' confidence in our new direction. We expect capital expenditure of around GBP 120 million, slightly lower than initial guidance as we've been very intentional in our investment approach, focusing on the highest return on investment projects during this year of transformation. And finally, we expect currency to be a headwind of around GBP 50 million on revenue and around GBP 5 million on operating profit, all based on the 24th of October spot rates. Further detail can be found in the appendix of this morning's statement. As we move into our second full year of Burberry Forward, we are confident that we can build on the progress we've made in quality of earnings, continuing to improve performance and driving sustainable long-term value. I will now hand back to Josh. Joshua Schulman: Thank you, Kate. As we move into the second year of Burberry Forward, we are increasingly confident that we're on the right path to build brand relevance and value creation. If the strategy for the next year of Burberry Forward looks very similar to what we presented last year, this is intentional because we are now focused on accelerating and delivering on our 4 pillars with consistency, placing the summer -- sorry, placing the customer at the center of everything we do. We will continue to anchor Burberry Forward in timeless British luxury as we enhance our product, marketing and customer experience to engage a broad luxury audience. This will be underpinned by an organization that is fit for purpose and executing at pace. Starting with our brand. Our traffic and sales inflected in August as we launched our Chinese Valentine's Day campaign, followed by the Back to the City campaign focused on a more polished expression of city dressing against a backdrop of iconic London landmarks appealing to our investor customer. Next, the elegance of our winter runway campaign set in a quintessentially English country house attracted our opinionated customer, while the winter wardrobing campaign showcased looks that could be worn every day, appealing to all of our customer archetypes. Collectively, these campaigns have driven an improvement in brand engagement in September. In addition to these fashion campaigns, we have continued our institutional outerwear campaigns with the latest installment of It's Always Burberry Weather: Postcards from London, which launched in October across all of our channels. [Presentation] Joshua Schulman: Looking forward, we will continue to fully embed our timeless British luxury brand expression across all touch points, creating universally recognizable stories and imagery, balancing town and country. And our marketing initiatives will celebrate our customers' cultural occasions around the world with a dose of British warmth and wit. We are looking forward to celebrating our 170th anniversary next year with a series of campaigns and activations to celebrate our iconic trench. This will include disruptive amplifications across product and marketing initiatives to drive broad global appeal. Even global icons are leaning into our most beloved Burberry codes and showing that when we have -- where we have the most opportunity, where we have the most authenticity. When influential personalities of the world come to Burberry, they are selecting to wear our most beloved brand codes. From Olivia Dean wearing a modern interpretation of our iconic Check to Tommy Paul and Jack Draper dressed in our Ready-to-Wear and Dua Lipa wearing a full Check dress. It's clear that Burberry continues to resonate in popular culture. Just last week, we launched our festive campaign, bringing a warm and joyous rendition of the British holidays to our customers around the world. Amid the charm and commotion of party preparations, Jennifer Saunders is joined by an all-star cast, including Naomi Campbell, Rosie Huntington-Whiteley and Son Heung-min, who each share beautiful Burberry gifts with their friends and family. [Presentation] Joshua Schulman: We are so excited about the early reaction to Twas The Knight Before..., our festive campaign. And we look forward to bringing other extraordinary experiences, including at Claridge's, where Daniel is designing a special tree decorated with Burberry textiles alongside a pop-up shop featuring iconic Burberry gifts. Building on our momentum in China, we are looking forward to celebrating Lunar New Year, the Year of the Horse. We will be increasing our investment in product and marketing with a more complete product capsule and an immersive campaign, including 4 well-known ambassadors. Moving to product. Our customers are clearly responding to the timeless British luxury brand expression and the synchronicity between our runway looks and the commercial core that is allowing us to reach a broad luxury audience. Here, you can see how the spirit of our runway shows has been interpreted to appeal to a broad luxury audience. On the left is an extraordinary, fringed runway trench from Daniel's Winter '25 show. The item retails for almost GBP 10,000, and we had preorders from our most elite clients from the moment this walked down the runway. And now Daniel, together with our merchandising team, has reworked this inspiration into different silhouettes appealing to a wider audience. These looks are among our best sellers for the season, retailing at around GBP 2,500. Building on our success with Winter '25, on the right, you can see we are taking the same approach to our Summer runway collection. Summer '26 captured the intersection between fashion and music and was yet another uniquely British story that only Burberry could tell. You can see the beautiful leather fringed trench that walked the runway and how this inspiration has been reinterpreted into classic gabardine with leather detailing to reach a broader audience. The product mix and strategy is capturing the attention of new customers and attracting existing customers to return with sequential improvement in customer growth over the course of H1. In particular, we're seeing new customer growth among Gen Z. I was just in China a few weeks ago and walking stores with our teams there, and they were sharing how the evolution in our collection architecture is attracting different customer profiles to the brand. These customer profiles are now fully embedded in our product development cycle. Looking forward, we will be integrating even deeper consumer insights to ensure we're meeting all of our customers' wardrobing needs. As we enter the second year of Burberry Forward, we now have significantly greater knowledge of our customers, which is informing our product strategy. One of our priorities is to refresh our heritage rainwear assortment in the new year. We will be introducing lighter tropical gabardine and strengthening the trans-seasonal appeal of our iconic trench. This will enhance customer centricity, allowing our trench to be worn in global markets year-round. Another observation is that we are only scratching the surface with wardrobing. Building on our foundational strength in outerwear, we are now completing the look with a stronger assortment of knitwear, trousers, skirts and dresses. Across the assortment, we are developing with customers' needs in mind, including the right fabric, the right fit and the right silhouettes for men, women and children. And in accessories, we've made progress on our foundation with the amplification of scarves and resetting the base in handbags. Looking forward, we are strengthening our assortment of leather goods and shoes with a focus on both subtle and overt branding, driving commercial shapes with clear brand signifiers. Across categories, we now feel more confident to place bigger bets on selected families of newness to fuel our growth and improve our productivity. Moving to distribution. In our stores, we are creating more warmth and desire by increasing product density, enhancing our displays and encouraging cross-category selling. We are so excited to have the majority of our scarf bars open for the festive season. These stores are already outperforming, positioning us strongly for the season ahead. Our stores now offer a richer experience, one I hope that you will all enjoy during the festive season. Our e-commerce channel was the first to turn positive and continues to outperform. We've elevated our product storytelling, seamlessly integrating shopping journeys with rich editorial imagery and improved our styling across the offer. Building on the success of our monogramming and scarf personalization services, we're expanding our personalization offer to knitwear and capes launching in the weeks ahead, just in time for festive. Looking ahead, our focus is on driving productivity. Building on our momentum with scarf bars, we're launching more category destinations in the year ahead, including for trench coats and polo shirts. We are also investing in clienteling capabilities, deploying new AI-enabled tools to support our client advisers and serve our customers with a warm and personal approach informed by data. And while wholesale only accounts for around 13% of our business, it serves several very important purposes. Our opinion-leading digital wholesale customers are the ideal place for customers to discover the evolution of Burberry alongside our luxury peers. As I mentioned, we've seen growth in our wholesale order book from these opinion-leading wholesale customers globally who are enthusiastic about the new direction of Burberry. Being present on luxury platforms allows us to share our refreshed brand expression with a broader array of consumers than visit our own sites. And our omni-channel department store partners provide visibility in key locations. I am so excited to get on a plane next week and go to New York. We are literally lighting up the facade of Bloomingdale's, an iconic flagship, with an enormous sparkling Burberry Check scarf. And this activation is going to -- is anchoring dedicated Burberry windows and pop-up shops throughout the store in the flagship and in key branch stores, which tell our brand story. One of the things I am most proud of this year is reigniting our culture. I continue to be encouraged by our incredible team around the world whether it's the product triangle of design, merchandising and marketing coming together, the regions working with the center or our teams across stores, manufacturing sites and warehouses, delivering exceptional service for our customers. We are rekindling the creative and commercial alchemy that is unique to Burberry. We continue to uphold our commitments to social and environmental responsibility. This remains an integral part of who we are and is important to our colleagues and customers around the world. As we move into our 170th year, we are embedding the spirit of Burberry Forward into our purpose. [Presentation] Joshua Schulman: In the first year of Burberry Forward, we moved at pace to execute our strategy and stabilize our business. With the consistency of our timeless British luxury brand expression and an improved product offer, we now have begun to capture the attention of new customers while seeing existing customers return to the brand they love. This has resulted in comparable store sales growth for the first time in 2 years. As we look ahead, our ambition is to deliver sustainable performance, growing the top line while expanding our profit margin and delivering strong free cash flow. As I mentioned earlier, my belief in this extraordinary British luxury brand is stronger than ever. We now have proof points that illustrate that Burberry is at its best when it forges its own path, grounded in timeless British luxury and guided by authenticity. Although it is still early days and there is a lot more to do, as we approach our 170th anniversary, we are confident that Burberry Forward is the right strategy to build brand relevance and value creation. I will now hand it over to Lauren for Q&A, and Kate and I will take your questions. Thank you. Lauren Leng: So we'll kick off the Q&A. I'll just ask that you limit to 2 questions each so we can reach everyone in the room, and please state your name and your firm before you ask your questions. I can see Carol here right in front of me and then we will move over to this side to Luca, Erwan and then I think I saw Grace as well and Thomas. I thought you were there, too. Thank you. Carol Mathis: Carol Mathis from Barclays. So 2 questions then. The first one, I think you mentioned that you went to China or Asia just recently. So can you come back on what you're seeing there in terms of trends mostly on the macro environment? Any sign of stabilization that you saw on the ground on top of, I guess, you've been doing some more work to see improvement of your China performance down there? That's the first question. Second one is about the improvement of, I guess, increasing new consumers at the brand. When you think of the chart you talk about the consumer being investor, conservative, hedonist, what kind of new consumers were you able to attract more if there is a way to put them in those categories? Joshua Schulman: Yes. Two great questions. So I'll start with China. It was a really wonderful trip that I took with several of my colleagues to China. And ironically, it was 1 year to the date that I took my first trip to China last year as part of Burberry. And so literally, we could see the difference in the market year-on-year, but we could also see the difference in the expression of Burberry year-on-year and hear from our field teams, the people who interact with customers every day. In terms of the market, clearly, I do think there is a little bit of stabilization happening in the market. I do think that our inflection in China this quarter was probably driven more by our internal changes that we've made. It was really wonderful to walk through our store estate and to hear about customers literally returning, people who they had been trying to get in for the last couple of years who didn't see themselves in the product that we were offering. And now they were coming in and they were -- and their conversion was way up. We really saw customer engagement globally improve as we went through the quarter but particularly in China. Our earned reach was up 129% in China, which translated into new customer growth of 10% in China. And so they really led. And on a global basis, we had 18% customer growth customer in Gen Z with substantially higher growth in Gen Z in China. So this -- I think, in the past, there may have been an idea that in order to attract younger customers in China, you need to be super edgy and kind of do what other brands are doing. But actually, what's working in China now is this authenticity, the timeless British luxury, the authenticity, and we're seeing that across all of our customer archetypes. We're seeing that against younger, cooler customers. We're seeing that against more mature, sophisticated customers. And the breadth of our customers coming back to the brand in China and globally and starting to attract new customers, especially in China and in the Americas, has been one of the most gratifying things that we've seen in the last couple of months. I would also say that if you double-click on some of these metrics, you really see the quality of the business changing year-on-year in terms of the types of products we're selling, in terms of the channel mix, in terms of the breadth of customers that we're touching. So it just gives us a lot of encouragement for what lies ahead. Luca? Luca Solca: Luca Solca from Bernstein. I have a question on these metrics and the double-clicking in particular, what you're seeing in terms of full price sell-through. One of the pushbacks we're getting is that Burberry has been discounting a lot and is discounting a lot. But I think -- and I assume that, that is connected with the phasing out of the old Burberry. And if you could give us a couple of data points on how you see that has been evolving and how that is impacting, for example, your used dependence on off-price and factory outlets and discounts. Maybe a second question, again, going back to the point about China. I see that there's a lot that you're doing yourselves in terms of improving your predicament there. Do you have a view based on what you see from the landlords and the shopping malls where you operate, how the broader Chinese consumer nationality is doing? Joshua Schulman: Okay. So I really appreciate both questions. But on the first, let me walk you through how we're thinking about this and why I'm so encouraged about what I call the quality of sales. Normally, we don't talk about what's happening in the full-price channel versus the outlet channel. But I think it's important in this case because what we saw in the quarter was that the strength in the newness that we were delivering in our full-price channel fully offset the declines that we were having in the outlet channel, the declines in traffic that we were having in the outlet channel. And traffic has been challenging in that channel in general, but also, we just have less inventory going through that channel now, and we are discounting less. And so all of that is really good for brand health and for brand heat. And you'll see that really across the business. In our full-price stores, last year, we did an exceptional public clearance, and we did that online and in stores, and that contributed about 3 points to our comp in the festive quarter. This year, we're not doing that. We're reverting to our normal end-of-season activities, which are substantially smaller, more discrete, shallower and less. And all of these are contributing to what I call the quality of earnings. Finally, in our wholesale channel, where we're seeing the growth is from our strategic partners. These are the luxury pure-play digital partners. They're the U.S. department stores. They are even travel retail. And they're coming back because they're seeing their sellout of Burberry in the autumn and winter collections. Their sellout is going up. They're coming to our showroom, enthusiastic about finding opportunity, and they loved what they saw from the summer collection, and they believe that their customers will likewise love it. And so that builds a virtuous cycle with the strategic wholesale partners, and that is helping us to offset the planned decline in nonstrategic partners. So overall, I would say [ this print ] is, as you said, no drama, but under -- if you double-click under the covers, there's a lot going on that we feel very positive about and that sets us up in a good way looking forward. In terms of China, what I would say is there does feel to be a little bit of a market stabilization that is happening. But what we understand is that it's very bifurcated and very specific in terms of how a brand is performing there, probably more polarized than the rest of the world. Erwan Rambourg: Erwan Rambourg from HSBC. Congrats on the consistency of messaging and execution quarter after quarter. So I'll stick to 2, even though I have probably 15. So you historically talked about good, better, best coming back with maybe more palatable price points after being disconnected for a while. You just flipped positive in terms of like for like. Can you maybe just talk about the role of volume as part of that equation? I suspect mix is negative. I suspect pricing is limited. But yes, maybe can you talk about how that like for like is built up and what we can expect for the longer term? And then you just mentioned that the disposition channel, the cleanup of obsolete inventories last year meant a 3% headwind on comp for H2. How should we feel about like for like for H2 in that context? And I think historically, Kate, you mentioned whether you were comfortable or not with consensus, so I'm going to be the one to ask the question. What do you think about consensus in terms of sales and EBIT? Are we at a reasonable level today? Joshua Schulman: So Kate, why don't I let you start on the headwind and the -- our view on consensus, and then I'll come back on the other piece? Catherine Ferry: Yes, sure. So yes, I think it's the usual veiled ask about current trading. So I think as usual, I'll say we're not going to comment too much on current trading at this stage, but I will say that Q3 has started well in line with the previous quarter. But Josh has already helpfully highlighted the very public markdown that we had last year. As Josh said a moment ago, that was 3 points on last year's comps, so we're not repeating those activities. So I will just highlight that again. And of course, although we're pleased with performance so far in the quarter, we're mid-November. We've got Thanksgiving, Christmas, Lunar New Year, everything to come, so it would be premature to call it. But in terms of, I guess, half 1, half 2, we would anticipate sequential improvement there. I think on the consensus point, probably similar answer in that, look, we're broadly happy with consensus. Again, really, really important trading period ahead of us. So I think it would be premature to change guidance at this point, but I would just add that we also want to leave ourselves some firepower to invest. So depending on where we get to, you've heard it in the presentation there, we are spending more year-on-year on the kind of consumer-facing areas, specifically marketing. You heard there, we are investing more in Lunar New Year, for example. So I think leaving consensus where it is today feels the right thing to do for the business. Joshua Schulman: So then I'll pick up on the retail equation and what we're seeing in terms of pricing. So we start -- our inventory is down 24%. And then when we look at our traffic in the stores, traffic remains challenging across the board and continues to remain challenging. However, our conversion is up in the low teens, and our AUR is down slightly, which was planned because we did the realignment of pricing along good, better, best and with certain key categories like scarves outperforming, so all what we would want to see at this point in the turnaround. Erwan Rambourg: And the element of pricing in any market? Joshua Schulman: Not so much. We took some surgical increases in the U.S. specifically earlier this year, but pricing is relatively in line globally. And any pricing that we took on individual items was somewhat offset by the difference in mix. Lauren Leng: Grace and then Thomas. Grace Smalley: Grace Smalley from Morgan Stanley. My first question would just be on marketing. You mentioned a few times there that you've increased the marketing spend. You seem very happy with the results you've seen from the marketing campaigns. So just how are you thinking about the return on marketing spend and whether you're still tied to that marketing as high single digit as a percentage of sales or if there's actually room to further increase that and take kind of, I guess, capitalizing on this moment in time and shouting about what you're doing in terms of the brand? Joshua Schulman: Yes. Well, I mean, I think this also relates to what Kate was saying about consensus. We want to leave ourselves more firepower to invest in marketing. And my Chief Marketing Officer is in the front row over there, so he's listening very carefully to this. But we're very focused on having an ROI, and we're pleased that the initiatives we've had have resonated. We are seeing a direct impact from the marketing into the sales. So a year ago, we didn't have that luxury to even consider given where the P&L was. And now we want to be very mindful of those opportunities and not let a moment pass without investing appropriately. I don't know if you have anything to add, Kate. Catherine Ferry: No. And I think the key is, yes, for now, maintaining the high single-digit percentage of marketing, but let's see where we get to. Grace Smalley: Very clear. And then my second one would just be on gross margin. Thank you for the helpful bridge slide. As you think about gross margin in the second half, could you just perhaps talk through those dynamics in terms of the inventory benefits, transformation benefits? And then also given the -- Josh's comments on the improved full-price sell-through, how we should think about that impacting gross margin in the second half as well? Catherine Ferry: Yes. So I mean, recap, obviously, H1, you can see that, that -- there's that -- it's 330 basis points, which essentially is the tailwind from this time last year, all of that inventory actions. I then did flag that we had, which was probably the bit over and above what you might have expected, was what we have badged as transformation benefits. And I think the message there is that although most of the transformation benefits have been in OpEx, we've been looking at cost across the business, and we have actually seen some benefit in gross margin. In terms of then what to expect for the full year, which will help you with the second half, I think guidance there remains the same. We talked about a 300 basis point tailwind for the full year, and that remains the same. You'll remember that, of course, in the second half, in terms of phasing, the trend of the last 2 years has been for H2 to be lower than H1. You'll see that again. But in terms of absolute H2-to-H2 margin improvement, yes, you'll see that because you'll remember, it really was this time last year where we did a lot of nonrepeatable heavy discounting. So I think you'll certainly see that come back, so remaining the same on full year gross margin guidance. Lauren Leng: Thank you. Let's go to Thomas. Thomas Chauvet: Thomas Chauvet from Citi. Two questions. The first one on product newness and categories. If we look at your H1 performance, retail, wholesale by category, I know it's a bit diluted by the wholesale performance, but womenswear was already positive in the half, which is quite an achievement. Menswear, accessories, down 3%, 4%. Has menswear and accessories improved sequentially in Q2? And then when you look at your upcoming spring/summer product, is there anything that excites you in terms of menswear, accessories offering to drive a bit of a catch-up and bring these categories back to growth where they should be? Joshua Schulman: So we are very pleased that the initial improvement in the strength of outerwear and scarves is now spreading, and we're obviously seeing that, first and most importantly, across women's, which historically has been challenging for Burberry. And yes, both men's and accessories improved sequentially during the quarter. As we moved into, I'd say, mid-August, September and that winter wardrobing came into the stores, that has really ignited those categories, specifically on leather goods and shoes. So again, if you double-click here, we reduced our inventory the most in leather goods. So this is really where we really took out a giant amount of inventory, and we said that we would test and learn this year. And we have been doing that, and we have some areas where we have green shoots where now we're going back and building those back. So I think we talked about the B Clip bag. Last time, that family has been strong. We've recently refreshed -- done the first stage of a refresh of our iconic vintage Check. We introduced a vanity case, which has been very strong. We currently have a novelty color in ruby, which is performing well. And we -- and this is all in advance of a bigger relaunch of vintage Check in the coming seasons. And so we've been very deliberate in how we've approached that category. But it's interesting because there's -- we're seeing success in the good, better, best strategy across the estate even in a category that we don't talk about a lot like shoes. And on the runway, there were these beautiful riding boots. And we took a big bet on those beautiful riding boots, even though we had no history of selling very elevated product with minimal branding, frankly. It's GBP 1,500 and up for the Cavalier boots. And they have become among our best shoes and are meaningfully contributing to the growth of this small category. And that was such an important lesson for me because it's such a quintessentially Burberry item. It's something that, in your mind, you would think that you could go to Burberry and find a beautiful English riding boot. And when we put it there, in the context of that beautiful fashion show collection, the customer responded, and actually, it was one of the items leading to customer acquisition. So I know I sound like a broken record with our team talking about the timeless British luxury brand expression and the good, better, best pricing architecture, but it really is resonating with our customers. Thomas Chauvet: My second question on licensing. Could you give a bit of an update on your relationship, first, on eyewear with EssilorLuxottica and of course, beauty? I think Coty's CEO, Sue Nabi, gave interesting numbers recently, implying Burberry has been growing at about mid-teens percentage since 2019. So curious to hear your view here. And just on the cleanup of the older fragrance line that impacted your licensing revenue down high single digit in H1, I understand it will be the case also in H2. That shortfall of licensing revenue, if you gross that up to wholesale, i.e., Coty sales, there's quite a big number of bottles. So I was just curious what's happening to these models. Are they heavily discounted by Coty? Are they being destroyed, gifted? What is Coty doing to drive such a big decline in revenue given Goddess and Her, your top fragrance line, are actually doing very well? And as I said, Sue Nabi mentioned mid-teens sales for Burberry beauty in the last 6 years. Joshua Schulman: Yes. So broadly speaking, we think we have 2 best-in-class licensing partners in Luxottica and Coty, and we are pleased with the trajectory. Within beauty and fragrance specifically, the fragrances that you mentioned, Her and Goddess, have been very strong. And similar to what we're doing in the core brand of focusing on the quality of sales, they're doing the same. They are -- because Goddess and Her are in a position of strength, they're able to destock on some of these lines that are older and less relevant. And so that is why you see this significant decrease this quarter in the channel. Kate, I don't know if you have anything to add. Catherine Ferry: Yes. I mean, I think the key being that we're still seeing good steady growth in those core lines. And in terms of the look forward, obviously, it's not something that's just done in the quarter, so we would actually expect the destocking to continue into the second half. Thomas Chauvet: And be over by the end of fiscal '26? Catherine Ferry: Yes. Lauren Leng: I think we've got one final from Daria. Daria Nasledysheva: It's Daria from Bank of America. And congratulations on your results. I have 2 questions. The first one, could you please talk about what you're seeing in the U.S. market? You saw flattish, no acceleration in trends in this geography. So I was just wondering, could you please help us understand how it's shaping up into the holiday season? And if I can just ask my second question straightaway, outside of some marketing reinvestment that, Kate, you already mentioned, are there any other initiatives that we should be aware of for the cost savings for the second half, like bonuses, remuneration, anything that we should be modeling? Joshua Schulman: Kate, do you want to take the cost savings, and then I'll talk about the U.S.? Catherine Ferry: Sure. So yes, I mean, I guess there are a number of moving parts within cost. We've been very open about the incremental investment in marketing. Of course, the other pieces to consider, as always, there's inflation in our cost base. We've got a very high fixed cost base, 80% of fixed costs. That will be inflating at around 2%, 3%. You talk about people costs. Yes, there's the usual merit in there, and there will be potentially incremental performance-related pay reflecting the performance being below what we would have expected for the last couple of years. And I guess those are probably the key moving parts. It will be people, inflation and marketing. And then the U.S.? Joshua Schulman: And then in the U.S., the U.S. was the first region to return to growth for us. And what we've seen is that the brand expression and the way that we're showing up at retail in exciting ways is really resonating with the customer there. Our team in the U.S. has been very creative in terms of how in a market where retail traffic is so, so, how they're really going to the customer. They hosted over the summer. They hosted an exciting VIC event in the Hamptons, inviting customers from across the country to stay with the Burberry team and have a one-of-a-kind experience in the Hamptons. They're planning something similar for the VICs for Aspen, and that's really for our top-of-the-pyramid customers. And then we also have an opportunity there to really build on the broad universal appeal of the Burberry brand. And that's why this Bloomingdale's takeover -- facade takeover and activation is so powerful for us, because it gives us an enormous stage to share with people the Burberry story and who may or may not come into our network of stores. And so it's that mix of how we do really high-end elite events and then customer-centric events with broad universal appeal for customer acquisition. And so we're really excited about the trajectory there. I would just kind of step back from the U.S. specifically and just reiterate, as we're at the end of the -- I think we're at the end of the Q&A. I would reiterate that after our first year of implementing Burberry Forward, that we are more confident. I am more confident than I was 12 months ago. 12 months ago, this was really a thesis. It was a thesis that we were too niche. We were trying to be kind of a me-too of other brand strategies and that we weren't true to our own unique DNA. And as we've leaned into that at all levels from the runway to the marketing campaigns to the type of visual merchandising you see in stores to our sites, that's resonating with customers. It's resonating with the customers we want to have. And long term, I see this as a bigger opportunity than I envisioned a year ago. We're going to do the right thing with the brand and do it in a steady, slow way, and we're not going to chase sales for the sake of it. But we're feeling confident in the Burberry Forward framework that this is the right path for value creation and for the brand relevance. Lauren Leng: Great. Thank you, Josh. I'll hand over to you for closing remarks. Joshua Schulman: I think I made the closing remarks, but I'll come up here. So really, as we approach 170 years, I want to thank all of my colleagues around the world who have been working so hard to drive Burberry Forward. You only see Kate and I up here, but this is literally the work of thousands of people around the world. And I'd also like to thank all of you, our investors, analysts and partners who have supported us on this journey. So thank you.
Operator: Good afternoon, ladies and gentlemen, and welcome to our conference call for discussing the results recorded by Romgaz Group in the first 9 months of 2025. After introducing the speakers, Mr. Gabriela Tranbitas, Chief Financial Officer, will make an opening speech. Thereafter, the Q&A session will take place. Please be advised that this conference is being recorded for internal purposes. On behalf of the company, the following speakers attend this conference: Ms. Gabriela Tranbitas, Chief Financial Officer; Ms. Gabriela Mares, Strategy, International Relations and European Funds Director; Mr. Ion Foidas, Production Director; Mr. Radu Moldovan, Energy Trading Director, and our Investor Relations department. Now I would like to give the floor over to Ms. Gabriela Tranbitas, who will open the conference call with an opening speech. Gabriela Tranbitas: Good afternoon, ladies and gentlemen. Thank you for joining our conference call to discuss the results recorded by Romgaz Group in the first 9 months of 2025. We published today the quarterly report and the consolidated interim financial statements for the first 9 months and the third quarter of 2025, which presents our economic and financial achievements in the period. Also, an updated presentation of the group is available on our website in the Investors section. I will start with some aspects of the gas market context in the first 9 months of 2025 compared to the same period of the previous year. Natural gas consumption in Romania advanced marginally by 2.5% to 72 terawatt hour, while gas imports recorded a significant increase of 65%, reaching a 32% weighting in the domestic consumption according to our assessment. On the Central European Gas Hub, the average reference price rose by over 30% according to data provided by the National Authority for regulation of the Mining, Oil and CO2 Geological Storage Activities. Similarly, we assessed that on the Romanian Commodities Exchange, the wholesale average price increased significantly in the first 9 months. The market is still having a weak trading liquidity as a result of the current regulation in force. Regarding the fiscal framework in the energy sector in Romania, Romgaz activities continue to be influenced mainly by government Emergency Ordinance 27 issued in March 2022 and government Emergency Ordinance No. 6 applied starting April 1, 2025. Let us remind you of the main legal provisions applicable to gas producers. Regulated gas selling price of RON 120 per megawatt hour for the gas sold households and suppliers -- of households, key producers and their suppliers for the production of thermal energy for households and to the transmission operator and distributors for maximum 75% of their technological consumption. This price level is applied until the end of March 2026. For the gas sold at regulated prices, payment of the windfall profit tax is exempted and gas royalties are computed based on these regulated prices instead of CEGH reference price. We continue this presentation by highlighting the operational and financial performance recorded by Romgaz Group in 9 months 2025. Production of natural gas reached 3.68 bcm, marginally higher by 0.1% year-on-year and overcompensating for the committed natural decline of maximum 2.5%. In Q3 alone, we succeeded to increase our gas production by 0.5% compared to the same period of 2024 to the level of 1.19 bcm. The significant performance achieved in the first 9 months was due to the steady efforts undertaken to consolidate the potential of our onshore output of which I will mention: continuous rehabilitation projects of the main mature gas reservoirs in order to maximize production and increase the recovery factor. We completed investments in production infrastructure, which allowed us to stream in production of 5 wells. We reactivated a 133 inactive wells through specific investment works with an initial daily flow of over 1.72 million cubic meters in total. Also, we finalized the 6 surface facilities, have 6 other facilities in execution, another 17 in different preparation stages, and we perform reactivation and capitalizable repairs or a total of 167 production wells. We can also mention that all these measures led to a significant 57% increase in our condensate production to the level of 39,944 [ tonnes ] in the first 9 months of 2025 due mostly to higher production in our Caragele commercial field. Regarding Caragele Deep, works are progressing with 76 Rosetti well, preparing for production testing, 54 Damianca well in execution, 78 Rosetti well in production, while 7 other wells are in different stages of drilling preparation. Compared to last year, we improved even more our strong position already held on the Romanian gas market. Our market share climbed almost 55% of total consumption in Romania and reached 80% of the consumption covered from domestically produced gas according to our assessment. We recorded total revenues from the gas sold higher by 8.3% year-on-year to RON 5.25 billion compared to RON 4.85 billion in the same period of 2024. This good result was due to gas volumes sold elevated by 12.4% year-on-year to 3.63 bcm (sic) [ 3.68 bcm ] in 9 months 2025 based on net volumes extracted from underground storages and lower deliveries to Iernut power plant. Revenues from storage services increased by 16% year-on-year to RON 432 million, with revenues from injection services 53% higher. Revenues from electricity declined by 20% year-on-year to RON 245 million as production of our old power plant has expectedly decreased to 480 gigawatt hour in 9 months 2025 still supporting the security of supply in the energy market in Romania. Overall, Romgaz Group reported total revenues of RON 6.05 billion, higher by 7% compared to RON 5.63 billion a year ago based on the strong contribution of our upstream segment. On the expenses side, we can point out that windfall profit tax decreased by 24% year-on-year to RON 597 million in the first 9 months of 2025 compared to RON 791 million last year due to higher gas deliveries at a regulated price. Gas and UGS royalties adjusted by 2% to RON 421 million. Altogether, the main taxes were lower by 16% year-on-year and representing an expense of RON 1.03 billion compared to RON 1.24 billion last year with a positive effect on our profitability. Bottom line, net profit amounted to RON 2.43 billion elevated by 7% year-on-year, representing the highest value ever recorded over this period by Romgaz Group. All profitability rates were substantial. EBITDA margin at 54.8%, EBIT rate at 46.4% and net profit rate at 40.3%. For Q3 alone, we can underline a net profit of RON 755 million elevated by 73% compared to '24 being at the highest value ever reported in Q3 as well as a highest net profit margin of 42% have reported in this quarter. On the CapEx side, Romgaz Group invested a total consolidated amount of RON 2.84 billion in 9 months 2025. Of this, RON 2.07 billion represented the investment of Romgaz Black Sea Limited and RON 732 million, the investments made by Romgaz alone mainly in exploration and production modernization. With respect to Neptun Deep, we continue to focus on permitting activities, construction works, equipment manufacturer and development drilling. Our strategic project is currently in the execution phase and progressing according to plan. As a result of the significant developments, Romgaz and OMV Petrom are on track to safely deliver the first gas from Neptun Deep in 2027 and the project remains within the budget level. Another important objective is the combined cycle gas turbine power plant in Iernut, for which the completion rate was 98% for the overall turnkey project consisting of the execution of the initial work contract and the execution of the new works contract and 90% of the less EPC contract. As publicly announced on the Bucharest Stock Exchange, Romgaz and the termination notice of the design and works contracted the contractor on September 11, 2025, and the contract ceased on October 13. Romgaz has also taken steps to execute the performance guarantees established by the contractor according to the contractual provisions. The reason for the early termination of the contract was nonexecution of the contractual obligations by the contractor, including failure to meet contractual deadlines. Romgaz has repeatedly flagged execution delays of the contractor and informed periodically the capital market on the status of the project. Following the contract early termination, Romgaz becomes a general contractor will assign the contracts of essential subcontractors, and we will directly purchase the services and products necessary for the testing and commissioning of the plant. Regarding our strategic development, we remind that Romgaz Board approved the company's decarbonization strategy for 2025-2050 on October 22. This strategy was developed in the context of European and national policies aiming to mitigate greenhouse gas emissions. The project was developed with the support of EBRD and KPMG and resulted in a strategic document outlining the company's objectives for decarbonization and transition to green energy. These net zero trajectory shall be periodically reassessed based on technological progress, availability of funding and the clarity of regulations. In line with this strategy, please recall that on September 9, Romgaz and Electrica signed a memorandum of understanding for the development of green energy production and storage capacities of up to 400 megawatts exclusively through greenfield projects. The partnership represents a step towards diversification and energy transition strategy of Romgaz. Another important event is the second issue of bonds under the EMTN Program, which was oversubscribed 7x on October 28. The new EUR 500 million bond issue has a 6-year maturity and a coupon of 4.625% per annum. The result of the second bond issue confirms Romgaz capacity to access the international capital markets and the confidence of institutional investors in the company's development strategy. At the end of this presentation, I would like to highlight the strong performance recorded by Romgaz shares on the Bucharest Stock Exchange. The share price surged over 90% this year due, among others, to the company's development potential, solid position on the market and good perspectives for the energy sector. With this, I would like to close our presentation, and thank you for your attention. Operator: [Operator Instructions] Ms. Ioana Andrei, please address your question. Ioana Andrei: Congratulations for the appealing figures. I have a couple of questions. First, if you could please disclose the volumes sold at the regulated price during this quarter. I know it was estimated around 9.5 terawatts, but please just to be sure. Second, again, regarding the Iernut power plant. It was not clear for me and from the presentation. In this point, when do you expect the first production for testing? And when do you expect the first commercial production? Third, regarding the decarbonization strategy. Can you please disclose what are your plans for the next 5 years until 2030? I'm interested about the CapEx plans related to this issue. And last, regarding the case filed against the European Commission for the pro rata contributions to the CO2 injections. I am curious what are the investment obligation of Romgaz until 2030, if you don't receive a favorable rule on this issue? And what are the CapEx plans if you do receive a positive outcome? Basically, I would like to know what is the CapEx under the both scenarios. Gabriela Tranbitas: Thank you for your questions. In Q3 alone, we sold 87.65% of our gas at regulated prices. Ioana Andrei: 87%, please? Gabriela Tranbitas: Yes, 87.65%. Ioana Andrei: Do you have a figure in terawatt? Gabriela Tranbitas: Yes, 10.14 terawatt hours. Regarding Iernut, as you know, the contract was terminated in October. The contract with the former contractor allowed for the assignment of subcontractors through Romgaz. We asked the contractor to assign this contract was to inform us what are the works still needed to be done to complete the project. Unfortunately, the contractor doesn't want to cooperate with us in this respect. So we need to find other legal ways of contracting these works. The site supervisor is working on identifying the works left to be done. So that we can start the acquisition process for the remaining works. As we are under the provisions of the public procurement law, the process of appointing the subcontractors may take some time. We estimate that after we have all the contracts in place, it will take around 9 months to complete. On the decarbonization strategy. I would like to point out that it contains the main framework of the steps to be taken to achieve the net zero target. Our initial -- the most important plan for now is to complete the Neptun Deep project. Afterwards, we will identify the projects that we will perform until 2030. We will have to check the feasibility of these projects, identify the investment plans. And after we have all this information, start implementing them. Gabriela Mares: With regard to the NZIA regulation, as you have probably heard from the press, yes, Romgaz filed against the Commission because we think that the delegated act was not fairly decided. There was no impact assessment on oil and gas producers, which are very much impacted, especially the Romanian oil and gas producers. Of course, we are doing our research in parallel, not disregarding what will happen at the European Union Court of Justice because we do not know what will happen. In the meantime, Romgaz is assessing its technical potential to make possible capacity storage. However, no investment should be taken, no matter what the outcome from the EU Court of Justice will be. Romgaz will investigate and will only invest in such projects if such project will confirm its economic and technical economic and commercial feasibility. Thank you. Ioana Andrei: So just to be sure, you don't have for the next 5 years, a plan for investments based on this? Gabriela Mares: Well, there is a plan because the plan -- actually the obligation is given to us by this NZIA regulation. And it means for Romgaz to create storage capacity of 4.12 million CO2 per year. The investment associated to this is around EUR 600 million. Before investing in such project, we have to do our analysis. And the first thing we are doing now and are currently under the process of evaluating is to assess the technical feasibility in order to use depleted gas fields for CO2 storage. This is where we are now. Analysis are, of course, going forward. And at the moment, that such project will turn out to be economic and commercial feasible. Of course, we will invest. But if not, no matter if we will win at the European Court of Justice or not, we will only invest on the basis of economic -- technical, economic and commercial feasibility. Ioana Andrei: And if I may, 1 more question regarding Azomures, can you give us an update? Gabriela Mares: Yes, we are currently in a due diligence analysis. It's approaching its end. We have 2 consultants in this process. We have a consultant for the technical, economic and environmental due diligence. And we have another consultant for the legal due diligence. The reports, we expect the first interim reports probably next week. And our plan is to evaluate them and to come with final reports and if the case may be with a binding offer by the end of the year. Operator: We received a written question from Mr. [ Adrian Maresh ]. Do you have an estimated finalization date for Iernut power plant? Gabriela Tranbitas: As already mentioned, we have to assign the contracts for the remaining works to be performed in order to commission the plant. It will take sometime. We need to first identify the works remain to be done and then start the procurement process. After we have all the contracts in place, it will take about 9 months to complete. We are working with a target of end of next year. However, achieving this target is not entirely under our control. Operator: We received 3 written questions from Mr. [ Christian Petrem. ] The first 1 would be, can you detail next steps regarding Iernut and what are your expectations for project to become operational? And the second 1 was related to Azomures and they received previously the answers. And the third question is can you outline main objectives after decarbonization strategy? Gabriela Mares: In the decarbonization strategy, the consultant analyzed a few scenarios. The first scenario was what will happen with our carbon footprint, with the company's carbon footprint if we do not invest at all, if the emissions will only drop due to the decrease of gas production until 2050. The other, of course, this was just to make the comparison on what there is to do. Then there was another scenario where we also analyzed, let's say, a minimum investment in order to decrease the emissions, envisaging, first of all, to reduce emissions from our own activity for the exploration and production activity. And then comes the third scenario, where we have tried to see what the road map will be and what projects we will need to implement in order to get the net zero target by 2050. And the outcome of this third scenario, which we are looking at as an aspirational, let's say, target, is to have to, let's say, to focus on the following type of projects. First of all, of course, we will focus on reducing the emissions from our own activities, which means Scope 1 emissions by electrifying -- by mitigating methane emissions. Secondly, then we are looking to the new technologies in order to make the green transition possible. And these type of projects include, first of all, the [ RES ] winds and solar plants. Then the second would be the CCS, which as mentioned before, is regulatory obligation. Then we are looking also at the possibility to have green hydrogen production and biomethane introduction. And if -- you can find the summary of the decarbonization strategy on our website, and there's a good presentation there where you can see the percentages of investment for each of these technologies. However, I remind you that this third scenario, the net zero scenario is for us an aspirational pathway. But each and every project is firstly analyzed to see the feasibility perspectives of -- and the potential of implementation because as we speak, what we plan in this decarbonization strategy has a degree of, let's say, uncertainty regarding regulation, financing, the evolution of technologies, which are at the very early stage right now. Depending on these evolutions, of course, the strategy will be periodically revised and reanalyzed. And in parallel, the projects also -- each and every project will be analyzed to see if it has a feasibility potential. Operator: We received written questions from Mr. [ Jorn Marios Calin ]. The first one, can you provide details on the memorandum with Electrica, implementation time? What will be the company's financial contribution? Gabriela Tranbitas: The memorandum as a framework under which we will work with Electrica to develop the greenfield projects envisaged. Electrica must first identify the project, run feasibility tests. Until now, we were not informed of any project being selected. The contribution to the projects will depend on the actual projects being presented to us and whether they are feasible for us. Operator: The next question is, can you provide news on the next project, ERP retail clients invoicing, Azomures procurement and the 40-megawatt photovoltaic park. Gabriela Tranbitas: Regarding the ERP, currently, we are developing the platform that will facilitate the relationship with the clients in this new market. Aside from this, we are also having discussion with the banks and payment processors to implement online payments that will be embedded into this platform. Also, we are running acquisition procedures for other software that will be needed in this activity for online contracting, call centers. Specifically regarding the ERP, we estimate that by the end of this year, it should be operational. However, until we actually access the market, there are still other steps to be taken. So we estimate that the first deliveries will only start in April. On Azomures, we already provided an answer. We are currently in progress with the due diligence process. And on the photovoltaic park of 40-megawatt hours, we still haven't signed the contract. The acquisition procedure was selected for review by the National Agency for Public Procurement. This is a standard procedure. They randomly select some acquisition procedures, but this review has delayed the awarding of the contract. Operator: The next question from Mr. Jorn Marios Calin. Do we envisage better results on the electricity production side after elimination of the cap in July 2025? Gabriela Tranbitas: Results on the electricity segment were fairly similar to Q2 2025. So in Q2, we had a loss of RON 93 million. In Q3, we had a loss of RON 96 million. The evolution, as I said, is pretty similar. On the liberalization of the prices of the market, we sold at free prices even before the liberalization. The mechanism for centralized acquisition at which we sold under a regulated prices of RON 400 per megawatt hour was optional in 2024 and 2025. So we didn't apply it. Operator: The next written question from Mr. Oleg Galbur. Can you please comment on the results of the Power segment in Q3 2025, which were slightly worse in comparison to Q2 2025 despite the end of the electricity price regulation. What has led to a higher loss of the segment in Q3 2025? Gabriela Tranbitas: In Q3 2025, the plant was stopped for -- due to breakage of the old plant. As such, we had to purchase from the market, the electricity that we contracted for our clients. So in order to meet the delivery obligations, we had to purchase from the market, the electricity that we can produce. Operator: The next written question from Mr. Jorn Marios Calin. Can you please tell me the value of your investment in Neptun Deep project? Gabriela Tranbitas: Do you mean the investment for the entire project, the investment in this period? Not sure. Operator: The next written question is from Mr. Oleg Galbur. What is the volume of gas assigned to be sold by Romgaz at regulated prices in Q4 2025 and Q1 2026? Gabriela Tranbitas: In Q4, we estimate we will sell 10.6 terawatt hour. And in Q1 2026, 9.67 terawatt hour. For the full project, the investment is estimated to cost EUR 4 billion, of which our share is 50%, so EUR 2 billion. Operator: If you have any other questions, please feel free to address them. We received the written question from Mr. [indiscernible] Hello, will you consider to buy electricity from the market in the future to meet clients' needs similar to Q3 2025? Gabriela Tranbitas: Normally, our current strategy is to only sell the quantities, the electricity quantity that we produce. If the plant breaks down suddenly, then of course, we will have to buy electricity from the market and meet delivery obligations. But it's not something that we want to do. Operator: We received another written question from Mr. Oleg Galbur. Were the technical issues at the Iernut power plant sold? Is the plant now up and running? Gabriela Tranbitas: Yes, currently, the plant is running. Operator: Another written question from Mr. Jorn Marios Calin. Do you intend to have other issue -- bond issues in the next 2 years? Gabriela Tranbitas: Currently, based on our existing projects, we already covered the finance needs for next year. However, if some unforeseen projects appear or depending on the situation in the market, we may issue another bond under the current EMTN Program. As you know, we already had 2 issues of EUR 1 billion out of our EUR 1.5 EMTN Program. Operator: If you have any other questions, please feel free to address them. We received the written question from Mr. Christian Petrem. The EUR 2.76 billion in decarbonization strategy includes the EUR 600 million you mentioned for CCS? Gabriela Mares: Yes. They're included. Operator: If there are no further questions, we will conclude this conference call. Thank you for your questions. If you need further information, please contact our Investor Relations team. The conference is now concluded. On behalf of Romgaz team, thank you for attending today's conference call.
Operator: Good morning. Welcome to Alithya's Second Quarter of Fiscal 2026 Results Conference Call. I would now like to turn the meeting over to Alithya's management team. Please go ahead. Unknown Executive: Thank you for joining us today for Alithya's Second Quarter Fiscal 2026 Results Conference Call. The press release, along with the MD&A containing condensed financial statements and related notes was published this morning and is now accessible on our website. The webcast presentation can also be found on our website in the Investors section. Please be advised that this call will contain forward-looking statements, which are subject to various risks and uncertainties that may cause actual results to differ materially from those anticipated. These statements include our estimates, plans, expectations and statements regarding future growth, operational results, performance and business prospects that do not solely relate to historical facts. These statements may also refer to future events, including expectations around client demand, business opportunities, leveraging our services, IP, AI and expertise to meet client needs, excelling in a competitive market, achieving our 3-year strategic plan and deploying our smart shoring capabilities. For more information, please refer to the cautionary note included in our presentation and the forward-looking statements and Risks and Uncertainties section of our MD&A, which are accessible on our website. All figures discussed on today's call are in Canadian dollars, unless otherwise stated, and we may refer to certain indicators that are non-IFRS measures. Please refer to the cautionary note included in our presentation and to the non-IFRS and other financial measures section of our MD&A for more detail. Presenting this morning are Paul Raymond, Alithya's President and Chief Executive Officer; Bernard Dockrill, Chief Operating Officer; and Pierre Turcotte, Chief Financial Officer. I will now turn the call over to Paul Raymond. Paul? Paul Raymond: Thank you, Dominic. Good morning, everyone, and thank you for joining us today. Before we begin, I want to take a moment to thank our clients for their trust and to recognize the dedication of our teams across all of Alithya. Our people's commitment to excellence continues to drive our success and deliver meaningful impacts for our clients. Alithya is not small, it is focused. Our second quarter operational results demonstrate the benefits and long-term potential of our strategy as we continue to execute our plan. Our company has transformed, and we are seeing the benefits of this approach in a challenging economic environment. So despite Q2 being our summer quarter, Alithya has continued to progress on many fronts. The first KPI that should stand out from our second quarter is our gross margins. We continue to work our way up the value chain. Our gross margin percentage is now above many large integrators in our sector. This is not luck. Our focus on higher-value services has now reached a maturity level that enables us to differentiate at a larger scale and fight above our weight. We win on the quality of our services and our delivery reputation. This brings us to the second KPI that should retain your attention. Our revenues have decreased in the past as our shift to higher-value projects has replaced some of our past commodity services. However, in Q2, despite market uncertainties and a wavering economy, it is not our global year-over-year revenue growth of 11.5% that should hold your attention, but rather our industry-leading 34.8% growth in our U.S. operations. This impressive result by most standards comes from a combination of organic growth and the rapid integration of our eVerge acquisition. We realigned our U.S. operations a few years ago with our long-term strategy. Since then, our enterprise application and transformation services have become a key differentiator and a strategic priority for clients looking to leverage enterprise-wide AI solutions. It is also showing the potential of our platform in the largest market in the world for these services, the U.S.A. When you combine this strategic focus with strong execution, you get these growth results. This realignment is the same that we are implementing across all our operations. Finally, the third KPI that should pique your interest is the continued progress of our adjusted EBITDA margins and cash flow generation. Our trailing 12 months adjusted EBITDA is now over $52 million, which is a new high watermark for Alithya. Our transformation into a high-value trusted advisory has brought us to this point at just the right time. The industry is evolving fast. AI is influencing everything we do, and our clients are looking for value creation and new ideas more than ever. Cost savings will only get you so far. We have demonstrated that we can be the trusted adviser to accompany our clients in their AI-driven digital transformation. And we know our model is scalable. You could say Alithya has arrived. Before I pass it over to Pierre, I will also mention the noncash impairment charge we took in the second quarter as part of the ongoing repositioning of our business. And with that, I'll pass it over to Pierre to provide some financial highlights for the second quarter of fiscal '26, followed by Bernard to share some operational updates. Pierre? Pierre Blanchette: Thanks. Good morning, everyone. I'm happy to join this conference call and highlight some of the company's achievements this past quarter. Our second quarter of fiscal 2026 was marked by year-over-year growth with improvement across several of our key metrics. Let's begin with a review of these numbers. In the second quarter, consolidated revenue came in at $124.3 million, up $12.8 million or 11.5% on a year-over-year basis. Looking at our continued profitability, we are reporting another quarter of year-over-year improvement on gross margin in dollars and as a percentage of revenues. Gross margin reached 34.4% in the quarter, up from 30.6% last year. This performance reflects our focus on delivering higher-value services, improving utilization rates across core geographies and leveraging efficiently our smart shoring capabilities. Let's look at our performance by region, starting with Canada. Revenues in Canada reached $55.2 million in the second quarter, down $4.4 million or 7.4% on a year-over-year basis. The decrease in revenue was due primarily to reduced revenues from government contracts and certain clients' projects reaching maturity, partially offset by revenues from the acquisition of XRM Vision, higher billing rates and a continued recovery in the banking sector. Our gross margin in Canada as a percentage of revenue increased compared to the same quarter last year, mainly due to a positive margin contribution from XRM Vision, higher hourly billing rate, a decrease in the use of subcontractors and an increase in utilization rate. On a sequential basis, gross margin as a percentage of revenue also increased. In the U.S., revenues increased by $16.3 million or 34.8% to $63.1 million. The increase is due primarily to organic growth in enterprise transformation services, higher billing rates in certain areas of the business, revenue from the eVerge acquisition and a favorable U.S. dollar exchange rate. The U.S. now represents over 50% of our revenues. Gross margin as a percentage of revenues from our U.S. operation increased compared to the same quarter last year, primarily due to increased utilization rates, increased use of our smart shoring capabilities and higher billing rates. In our international business, revenue was slightly higher versus prior year with lower gross margin as a percentage of revenue. The increase in revenue was primarily due to organic growth in enterprise transformation services. International gross margin as a percentage of revenue decreased compared to the same quarter last year, mainly due to one client project coming to maturity, which historically had a higher gross margin. When looking at the geographies we operate in, our U.S. operation continued to represent a growing share of total revenues. Combined with our ongoing expansion of Smart Shore capabilities, this has contributed to a stronger consolidated gross margin aligned with our strategic objectives. Now looking at SG&A expenses. We are continuing to focus on optimizing our cost structure to ensure greater efficiency and long-term performance. In the second quarter, SG&A amounted to $31.3 million, an increase of $4.5 million or 20.8% year-over-year. The increase in SG&A primarily reflects costs associated with the acquisition completed since the same quarter last year, increased employee compensation, professional fees and share-based compensation. This is partially offset by a decrease in the information technology and communication costs and business development costs. SG&A as a percentage of revenue increased to 25.2% in Q2 compared to 23.2% in the same quarter last year. On a sequential basis, SG&A increased by $0.7 million from $30.6 million. The increase takes into account salary increases that came into effect at the beginning of our fiscal year and expenses from our recent acquisitions. Looking at adjusted EBITDA, we are reporting $12.8 million or 10.3% of revenues in Q2, up compared to $9.3 million or 8.3% of revenues last year. The increase was due primarily to increased gross margin, partially offset by increased SG&A. As Paul mentioned, this represents an adjusted EBITDA of over $52 million on a trailing 12-month basis. Net loss for the second quarter was $31 million due to an impairment charge of $38 million. The variation includes impairment charge of $26.5 million from the Quebec portion of the Canadian cash-generating unit and $11.5 million from the industry solution cash-generating unit. This impairment became necessary for both cash-generating units as we continue to -- our repositioning to align with our long-term strategic plan, just like we did with our U.S. operation over the past few years. Our adjusted net earnings came in at $9.5 million or $0.10 per share year-over-year, representing an increase of $4.2 million. Finally, turning to our cash flow and financial position. Cash generating from operating activities in Q2 was $11.7 million, offset by noncash items of $10.6 million, resulting in a net cash from operating activity of $1.1 million in the quarter, a decrease of $1.9 million compared to the same quarter last year. As part of our capital allocation strategy, we put in place a normal course issuer bid in the quarter, which allows us to purchase shares under certain conditions determined by the TSX. As of September 30, 2025, net debt increased by $28.1 million to $122 million from $94 million as at March 31, 2025. This change is mainly driven by the acquisition of eVerge and the payment of the balance of sale. Our leverage ratio stands at 2.3x net debt over our trailing 12-month adjusted EBITDA compared to 2.4x for the first quarter. I will now let Bernard share the operational highlights. Bernard Dockrill: Thank you, Pierre, and good morning to everyone with us today. Our results truly highlight the depth of our expertise across our teams and our ability to demonstrate value for our clients amidst uncertain market conditions. In the second quarter, we delivered year-over-year double-digit revenue growth at our global operations. As Paul and Pierre highlighted, our U.S. segment grew by 34.8% year-over-year. This is a result of our focused strategy within this market as we expect it to grow faster than others. The acquisition of eVerge has accelerated this growth along with continued demand for our services. Bookings for the quarter were $9.9 million. This translates into a book-to-bill ratio of 0.73 for the quarter and 0.91 on a trailing 12-month basis. The book-to-bill ratio for the quarter is 0.80 when revenues from the 2 long-term contracts signed as part of an acquisition in the first quarter of fiscal year 2022 are excluded and 1.01 on a trailing 12-month basis. We also signed 22 new clients during the quarter, including a global leader in engineering and construction within our Oracle practice in collaboration with our recently acquired eVerge team. By combining Alithya's multipillar approach with the enhanced human capital management capabilities from eVerge, we have opened new doors, enabling us to pursue opportunities that were previously out of reach for both parties. The uncertainty in the market continues to result in longer sales cycles and many larger engagements being contracted in multiple smaller phases, which has impacted bookings in the quarter. As we look forward, we are focused on solutions that deliver the greatest value to our clients and continue to be in demand. This is reflected in our pipeline, which grew by double digits over the same quarter last year. The largest increase in our pipeline is for new business within existing clients and a larger proportion of higher-value project services. One area in which we see growth potential is our AWS-related services as organizations continue to transition from legacy systems toward cloud-based solutions. Our teams deliver high-value cloud migration and modernization projects, leveraging proven, repeatable processes. Our recent work with Beneva, a major Canadian mutual insurance and financial services company is a testament to our expertise. We deployed our cloud migration factory methodology to migrate several applications to AWS. The project was delivered on budget and ahead of schedule, achieving immediate savings and operational stability for Beneva. As Paul said, we are not small, we are focused. And that starts with our focus on being experts in the industries we serve and our commitment to stay current with the latest trends, technologies and tools so we can best support our clients. For example, for a global B2B food company, our experts and FDA regulatory requirements migrated their on-premise ERP applications to the cloud on time and under budget, solving several complex manufacturing challenges. For a global pharmaceutical manufacturer, we completed a multisite ERP implementation, leveraging our custom pharmaceutical solution and deep sector expertise to align our clients' operations with FDA and USDA validation requirements. We also enabled our client with AI-powered tools so they can harness the robust capabilities at scale. And to ensure our teams remain at the forefront of innovation, we've invested in continuous learning, including AI-related competencies, accumulating over 5,000 hours of training during the second quarter. To help our clients with most of their investments in technology, we continue to invest in our IP, proprietary frameworks to accelerate the time to value for our clients. Our diverse portfolio of IP spans multiple business applications and industries and differentiates Alithya in the market. For example, our Alithya FoodXpress accelerator, a proprietary framework designed to support rapid deployment of D365 to food and beverage manufacturers. For Roskam Foods, a leading contract manufacturer, we are leveraging this IP and our industry expertise to implement D365 for finance and supply chain. Similarly, within the health care sector, we're developing the Alithya Vital program, a strategic enabler that combines Oracle ERP, human capital management, supply chain management, advanced analytics and AI tailored for health care. Vital will empower health care systems to harness data to address challenges related to labor productivity, workforce scheduling and cost of care. Another example is our Microsoft Copilot-enabled data agents we develop for our clients operating in complex manufacturing environments, helping them overcome limitations within their existing systems by enabling fast, accurate access to detailed inventory data. Our focus continues with our partnerships among leading solution providers, including Oracle, Microsoft, AWS and Salesforce. Our track record, commitment and investment with these providers enables us to provide our clients with the right solutions for their business challenges, including the adoption of Gen AI and agents. Oracle invited Alithya among a select few Tier 1 partners to assist in building AI agents for Oracle Fusion Cloud applications. I'm proud to say that 2 of our agents, a sourcing assistant agent and a resource manager assistant agent will be available on Oracle's marketplace and will be accessible to all Fusion customers. Our commitment, expertise and ability to innovate is recognized by our partners. In October, we were named finalists in the 2025 Oracle Partner Awards in the Global Industry Solutions category for Health and Life Sciences. We earned this nomination for our work implementing workforce scheduling at Oklahoma State University Medical Center, becoming the first health care client to implement this solution. And finally, as we execute our focused growth strategy, we continue to build our global talent pool through our Smart Shore delivery centers. Following our recent acquisitions, we now have more than 13% of our workforce in our Smart Shore centers. We have access to the top talent and can scale to deliver global projects with higher margins and fewer contractors. In summary, we continue to make steady progress on all pillars of our growth strategy and remain focused on executing our plan. I will now turn it back to Paul for closing remarks. Paul Raymond: Thank you, Bernard. As you can see, it was a positive quarter for Alithya. We continue to demonstrate our ability to create value for our clients, our employees and our shareholders. Our financial position is strong, providing us with the flexibility to execute on our strategic plan. As we believe our shares are significantly undervalued, we will continue to use our cash wisely and buy back our stock when appropriate, reinforcing our confidence in Alithya's long-term value and our commitment to delivering shareholder returns. We will now open the line for questions. Joelle? Operator: [Operator Instructions] Your first question comes from Jerome Dubreuil with Desjardins. Jerome Dubreuil: The first one is on the U.S. results, very strong congrats there. I'd like to dive a bit there. Maybe if you can talk about which verticals are working best because we haven't seen resumption in discretionary spending with some of your peers. And maybe so if you can talk about the verticals and if there's significant cross-selling from past deals, too. Paul Raymond: Jerome, thanks for the question. I'll comment on the first part, and then I'll let Bernard comment on the industries. But I think what people misunderstand about our business coming back to what I said at the beginning, we're different than the other players. We are really focused on niche high-end market for solutions that are in very high demand for large organizations who want to roll out enterprise-wide AI. If you want to roll out AI at scale, you need data, you need one source of truth. Many organizations in the past years have gone through acquisitions, divestitures, consolidations and most organizations, regardless how well they run IT, have multiple different systems with different sources of data, and they're struggling to get all their data in one place to leverage AI like it should be. So rolling out an ERP platform is a great way of getting there. And you can see that these hyperscalers, Microsoft, Oracle, AWS, I mean, you name them, are putting a lot of money and adding capability to their platforms around AI. So we see huge demand for those services around what we do. And that's the bulk of what we do today. We've gradually gotten there. And of course, the U.S. being the largest market in the world and where the most investments in AI are going into, it is influencing demand for our services. In terms of the industries, I'll let Bernard comment on that because he's more familiar with the funnel and how we're doing. Bernard Dockrill: Yes. Thanks, Jerome, for the question. And first, I'll start. The U.S. had good results, a lot of it is driven by our enterprise application transformation practice and our Microsoft practices. And as you know, we focus there in the health care space on the Oracle side and in the process manufacturing, you saw a couple of examples I used around food and beverage. And these organizations are looking to take advantage of AI and other things. And to get there, they do need to modernize the back end. And so you're seeing some of that there. One of the big drivers in the quarter was our EPM practice. That's our enterprise performance management practice, where we see these are large multibillion global organizations. And they're looking to get better insights from their financial information for planning and whatnot. So that's an area where we've seen growth. And you actually hit on it as well. Over the last 18 months, we've been really focused on cross-selling and getting our teams to develop that motion to be able to bring more to our clients from other areas of the business. And that has driven some of our growth as well as we're seeing more of that, and that's going to continue to be a focus for us as we move forward. Jerome Dubreuil: That's great. Second question for me is on the bookings, a bit weaker this quarter. So we're wondering if we should be expecting some slowing down of the organic growth next quarter? Or maybe it was just some maybe onetime event like with the government business in Canada. So if you can comment on that and what this double-digit pipeline growth exactly means? Bernard Dockrill: Yes. Thanks, Jerome. Bookings, and I'll highlight what I said in the call, there's 2 things we're seeing is decisions are taking longer than they have traditionally, and that's some of the uncertainty in the market that we're seeing. But the other phenomenon we're seeing is large deals are getting broken up into smaller phases. So typically, we would have had a an 18-month booking, it will end up being a 3- or 4-month. So that impacts the booking side of the house. So we're seeing some of that in the market. The pipeline, as I mentioned, and some of this is a direct result of the cross-selling activities, where we're seeing pipeline growth of new business within our existing clients. And again, typically, that's a higher win rate business from where we've already established a relationship there. So we're seeing that there, but it is in the past quarter. And then Q2 traditionally has been a softer quarter for us in bookings just due to the fiscal years of our key partners that we work with. It is a slower quarter. They go through a restructuring typically in the summertime. So we do see some softness there in Q2. Operator: Your next question comes from Gavin Fairweather with Cormark. Gavin Fairweather: Congrats on the strong results. Maybe just to start on your macro comments about longer sales cycles and projects being kind of topped up into smaller pieces. Curious how much that applies to the U.S. as well as Canada. I think your prior commentary was that the macro environment was kind of a tale of 2 markets with the U.S. continuing to be quite strong. Curious for any differences you're seeing between the 2 main geographies in the current state. Bernard Dockrill: Yes. Thanks, Gavin. Good question. When I look at the pipeline and the growth in the pipeline, we've got growth across all geographic segments. And the same comment with the existing clients, we're seeing that in Canada as well as the U.S. on that as well as the proportion that's in more of the project services work versus the traditional consulting work that we've done in Canada. So a little more of a switch there on that. But I don't see anything unique to Canada or the U.S. I just think kind of where we are in our evolution, we're further ahead in the U.S., and we're seeing the results there earlier than we will see them in Canada. Gavin Fairweather: Appreciate that. And then maybe just on the U.S. gross margin. I know you don't specifically disclose it, but I suspect and I think you've talked about it being kind of around that 40% previously. I'm curious if you're seeing further upside opportunities there. I mean you kind of ran off all the different drivers of strong performance this quarter in terms of utilization and smart shoring and higher-value projects. Do you see an ability to drive that further? Or are we kind of topping out on U.S. gross margin? Bernard Dockrill: Yes. As I look at the U.S. across the company, there are some areas of the business that we're operating very well, but there are areas that I still see opportunity to increase utilization. And also when I look at the smart shore operations, there's areas for improvement in certain areas where I think we can do more as we look at the business and we're pursuing new business, and we're bidding on new business. we are structuring our deals with a larger portion of that being done smart shore. So that, I do believe, provides some upside there. But in other areas, we're kind of at the targets where we expect it to be. Paul Raymond: Maybe, Gavin, I'll add to what Bernard was just saying that every proposal that we put in now has an offshore component. So you've seen the steady growth of that. We're over 13% now. We've stated in the past, kind of our long midterm view is to get to 30%. So that alone is going to be improving gross margins across the board as we keep pushing that. Gavin Fairweather: That's great. Very helpful. And then maybe just lastly on Canada. We've talked about you walking away from some lower-margin work and being very deliberate about the work that you're going after, and you discussed the work that you did in the U.S. business several years ago to really kind of transform the margins higher. So maybe you can just discuss kind of your longer-term plans for the Canadian business and how you're thinking about the ability to kind of transform that to look more like the U.S. and what kind of time lines you think you can execute on that? Paul Raymond: Yes. Great. Thanks for the question. Well, if you look back at the U.S., it took us about 3 years from the start of the major shift to get to where we're at today. We're in the middle of that in Canada. It's going faster in some areas than others. But yes, the plan is that within the next couple of years, we're going to be there. That's the plan. And hopefully, all the tariff issues and free trade stuff and everything else, all the noise around it goes away between now and then, which would also help, I think. Operator: [Operator Instructions] Your next question comes from Vince Qiricchio with Barrington Research. Vincent Colicchio: Yes, Paul, you had mentioned that the Q2 tends to be a slow booking quarter. I'm curious, thus far in the current quarter, how bookings are trending? Paul Raymond: Vince, thanks for the question. I can't comment on the current quarter. But Q2, which is our summer months for us, always slower. And as Bernard was saying, there's 3 factors. One is the summer months, obviously, a lot of less people working. But despite that, we did better than last year. So year-over-year, our bookings have grown in the summer, which is a good sign. The other 2 things is if you look at our strategic partners, these hyperscalers, whether it's Microsoft, Oracle, these other guys, our bookings tend to follow their year-end. And their year-end is in a different quarter than ours. And so typically, if you look at our -- the quarters where we have the highest bookings, usually tend to align with their year-end. So if you look at where Oracle is finishing, that's usually a good quarter, where Microsoft finishes, that's usually a good quarter. So -- but I can't comment on the current bookings, sorry. Vincent Colicchio: No worries. And what are your... Paul Raymond: The funnel is strong. As Bernard is saying, the funnel is growing, so... Vincent Colicchio: Okay. And what are your thoughts on how well you're leveraging AI to generate programming efficiencies? Paul Raymond: I think we're doing well. I think there's always room for improvement. I look at our operations today, Vince, and we -- 13% for us, to about 3,000 people, so just under 400 people in our smart shore centers. If you had asked me this question 2 years ago, I thought we'd be 3x larger by now. I think we've maintained that size just because of the use of the AI tools. I think our people are much more efficient in our smart shore centers than they were 2 years ago. You also have to remember that our people in our smart shore centers aren't commodity. I mean we don't do maintenance and support and these types of things. We have Oracle experts and Microsoft experts and AI experts that support our clients around the world. So by definition, these people use these tools every day. And we're also helping Microsoft and Oracle integrate AI tools into their own platforms that we end up using after. So I think we're ahead of the curve on that. Is there room to improve? Always. There's always room to improve. So we like to stay -- we like to believe we're in front of the parade, and we want to stay there. Vincent Colicchio: And last question. In Canada, the government contract business was weak in the quarter. Do you have any expectations of a rebound there? Paul Raymond: So yes, great question, Vince. So we -- as we said in the past, we are deliberately exiting some government -- low-margin government business. And it was a conscious decision. You might say it's difficult because it impacts our revenues in Canada, as Pierre was mentioning. But by the same token, our margins are growing. So the idea is as we do that transformation is how do we focus on the higher-margin government projects, and we are winning some. We are growing our government business in areas of higher-margin projects instead of the lower-margin commodity stuff where you're only competing on price. When you compete on price, there's always somebody cheaper and you never win in the long term, and you can't invest in the new things we want to do. So we made a conscious decision there. It reduces, but we're still winning some very interesting projects. We've won several around Microsoft. We talked about XRM earlier. We've won some project management or Microsoft project type stuff with some large organizations in the government that want to improve their project management. That's a very common theme right now in government circles. And you're also looking at -- there's going to be massive investments in defense in the future. There are many announcements today, but before that trickles down into the machine, I think you're several quarters away before that impacts the business. It usually takes time to trickle down. The big announcements sound good, but they usually take quite some time to trickle down into the machine. Operator: There are no further questions at this time. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
Operator: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Koil Energy Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded today, Friday, November 14, 2025. A detailed disclaimer related to Koil Energy's forward-looking statements is included in the press release issued Friday morning and filed with the SEC. It is also available on the company's site, koilenergy.com or upon request. A reconciliation of non-GAAP financial measures used in the press release and on today's call is included in the press release and on the website. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date made. Koil Energy also undertakes no obligation to revise any of its forward-looking statements to reflect events or circumstances after the date made. At this time, I'd like to turn the call over to CEO, Erik Wiik. Erik Wiik: Good morning, ladies and gentlemen. Thank you for joining us today. I'll begin with an overview of our third quarter performance. Following my remarks, Kurt Keller, our Chief Financial Officer, will deliver a detailed analysis of our financial performance. I'll then provide an outlook for coming quarters. Finally, we'll be happy to answer any questions you may have. We increased revenue by 22% this quarter. Koil energy is growing again. During the quarter, Koil Energy generated revenues of $6.4 million, this is 22% higher than last quarter and 22% higher than Q3 last year. Both services and fixed price contract experienced significant growth. Service revenue grew 33% and fixed price contracts or product sales increased by 15% compared to Q3 last year. This was driven by an exceptional order intake over the past 4 months. Services have expanded into renewables with a significant contract handling the spooling of power cables for a wind farm project. I would like to thank our service team for successfully assisting in winning this project and receiving excellent feedback during the ongoing project execution. I would also like to share with you that we have been awarded our 2 first contracts in Brazil. These are not significant in value and have, therefore, not been announced earlier. This includes a maintenance survey on a production vessel off the coast of Brazil and a rental agreement for the 3 subsea deployment frames. These are currently being fabricated in country. I would like to thank our team in Brazil and those that are supporting this initiative from Houston. This is a big step forward in our growth strategy. Adjusted EBITDA was negative 3% of revenue or a loss of $249,000 caused by a write-off of a receivable. Payments from a client located in the U.K. have been outstanding for more than 7 months without any explanation or communication from the company, OMSI Limited. As a precaution, we have decided to write off the receivable this quarter. Koil Energy intends to collect the full amount of $569,000 and has filed a lawsuit and serve it to our customer. And with that overview, I'll now turn the call over to our Chief Financial Officer, Kurt Keller. Kurt Keller: Thank you, Erik, and good morning, everyone. As Erik mentioned, for the 3 months ended September 30, 2025, coil generated revenues of $6.4 million, a 22% increase compared to revenues of $5.2 million for the same period last year. We generated strong revenue across all product lines, but particularly in services. Gross profit for the quarter totaled $2.1 million or 32% of revenues compared to $2.1 million or 40% of revenues during the third quarter of 2024. While profitability was unchanged on a dollar basis, the margin decline reflected a higher mix of pass-through procurement costs in our Service segment. Selling, general and administrative expenses equaled $2.5 million for the quarter, up $928,000 from the prior year. Much of the increase was driven by the OMSI write-off, followed by higher legal costs tied to patents and master service agreements and by the addition of key personnel. We recorded a net loss for the third quarter of $413,000, translating to a loss of $0.03 per fully diluted share. This compares to net income of $523,000 or $0.04 per fully diluted share recorded in the third quarter of 2024. The reduction in earnings reflected an increase in bad debt expense, a project mix containing lower gross margin contracts and investment in building our Brazil operations. Turning to our balance sheet. As of September 30, 2025, Koil reported $4.9 million in working capital, including $1.9 million in cash and $5.4 million in net receivables. This compares to $5.7 million in working capital at year-end 2024 with $3.4 million in cash and $3.1 million in net receivables. The shift is primarily due to the timing of billing and collections tied to our fixed price contract milestones. We remain highly focused on cost discipline and consistent execution. Our business carries significant operating leverage, and that negatively impacted our financial results earlier in this year. However, with a solid backlog and a strong sales pipeline, we expect operating leverage to work in our favor and positively impact performance going forward. I'll now turn the call back to Erik for his closing remarks. Erik Wiik: Thank you, Kurt. Before we address any questions, I'll provide an update on order intake and our outlook for the coming quarters. In August, we announced that Koil Energy had been awarded a significant contract for the supply of control equipment for a subsea isolation valve system. At the Q2 earnings release, we also shared that we received a significant subsea tieback project in the Gulf of America and a significant cable management services project as well as a major international greenfield project with a large quantity of flying lead cables. In October, Koil Energy announced the award of another significant contract, including steel tube flying leads and associated equipment. That's 5 big projects in a short amount of time. Thanks to these successes, we now have a record high backlog, which bodes well for the future quarters. Furthermore, the bidding activities have continued to increase, leading to a historic value of submitted quotation during the third quarter. We have discussed in previous calls that the global demand for subsea equipment and services is on the rise. This is a combination of: One, continued discoveries of large reservoirs in subsea basins; two, subsea tieback opportunities to increase production of existing fields; and three, customers addressing maintenance needs on their aging subsea infrastructure. As part of this quarterly update, we have recently received positive client feedback from the U.S., Brazil and Norway, indicating that future subsea tieback activities may become significantly higher than previously anticipated. This is welcome news since Koil Energy brings unmatched expertise in subsea tieback projects. In summary, we remain highly confident in our ability to deliver on our long-term growth strategy. Recent wins have positioned us strongly for the upcoming quarters. On profit margins, we are proactively increasing project contingencies to manage cost volatility and project returns. Additionally, the strength of our backlog provides a solid base load, giving us the flexibility to strategically test and optimize price points in future bids to enhance profitability. That concludes our prepared remarks today. So I will turn the call back to the operator to take investor questions. Operator? Operator: [Operator Instructions] At this time, there are no questions. This concludes our question-and-answer session. I would like to turn the conference back over to Erik Wiik for any closing remarks. Erik Wiik: Thank you, operator. And our thanks to all of you who joined our call today. We appreciate your interest in Koil Energy and look forward to the next earnings call. This concludes our call. Thank you. Operator: This concludes the conference. Thank you for attending today's presentation. You may now disconnect.
Unknown Executive: Welcome to Dentsu FY 2025 Third Quarter Earnings Call, and thank you for joining us today. My name is Morishima. I'm from the Group IR Office, and I will be your conference operator today. Please be reminded that today's call is being recorded. This call will be held in Japanese and English with simultaneous translation for those joining online. Please choose your preferred language from the bottom of the Zoom screen. For those joining on the telephone line, you will only be able to hear the original language spoken. Today's presentation material is available on our website. Joining me today. Global CEO Dentsu, Hiroshi Igarashi. Hiroshi Igarashi: [Foreign Language]. Unknown Executive: Global COO Dentsu and Chairman and Acting CEO Dentsu Americas, Giulio Malegori. Giulio Malegori: Hi, everybody. It's Giulio here. Hi. Unknown Executive: CEO Dentsu Japan and Deputy Global COO Dentsu, Takeshi Sano. Takeshi Sano: [Foreign Language]. Unknown Executive: And Global CFO Dentsu, Shigeki Endo. Shigeki Endo: [Foreign Language]. Unknown Executive: They will be responding to your questions after the presentation. Today's agenda will begin with business and strategic update from Hiroshi Igarashi, followed by a financial update from Shigeki Endo. We will invite you to ask questions after the presentation. Mr. Igarashi, please start your presentation. Hiroshi Igarashi: Thank you very much for joining the third quarter FY 2025 earnings call today. Let me start with the 9-month summary and outlook. The 9 months organic growth rate was 0.3%, in line with our expectations, while the operating margin reached 13.0%, exceeding both the previous corresponding period and our expectations. Based on these 9 months results and the outlook for the fourth quarter, we are upgrading our full year profit guidance. As for the year-end dividend forecast, which is currently undetermined, we will announce that once it is determined, based on profits from business, progress on asset sales and future capital allocation. As we announced in August, to achieve fundamental improvements in our international business, we will continue to explore and implement strategic alternatives, including forming comprehensive and strategic partnerships. Lastly, we will review the current midterm management plan as necessary with the aim of achieving sustainable improvement in corporate value to maximize shareholder value. Let me move on to the highlights of the third quarter and the recent period. We secured a 3-year media count for Vodafone across EMEA. And also won a new Vodafone 3 account in the United Kingdom. We also won Carlsberg Britvic in the United Kingdom, while we continue our global relationship with Carlsberg. In Japan, we have a new client, Zurich Insurance, to which we will offer the integrated solution of media and creative. In the United States, Hy-Vee, a leading supermarket chain, has appointed us as their media agency. This expands upon our existing retail media partnership. In APAC, we have welcomed the fashion brand, COS, as our new clients. In addition, in the creative domain, we have been recognized at various advertising awards this year, including being named MAD STARS Agency of the Year. Additionally, at the MINSKY Awards, one of India's largest AI festivals, Dentsu Global Services was selected as a leading global capability center in the AI innovation category. Next, a business update. The Japan business is performing strongly, driven by growth from existing clients and revenue recognition from new clients. The key to this success is our integrated growth solutions. For example, even when a project starts as a simple media assignment, we identify the core challenge and go beyond addressing it directly. We explore and propose solutions across a broad range of domains that truly support our clients' growth. Our strengths lie not only in advanced marketing powered by AI, data and technology, but also in our broad capabilities spanning BX and DX, combined with our proven execution capabilities. Our track record of accurately capturing clients' needs, proposing optimal solutions, and delivering them to completion builds trust. This contributes to our competitiveness that drives high-pitch win rates. Looking ahead, we will continue to expand our integrated growth solutions to ensure stable growth for our Japan business. As outlined in our midterm management plan, Dentsu is working on advancing our Media++ strategy in our international business. Media++ is a strategy designed to drive clients' business growth by integrating media with CXM, creative and data and technology, while elevating the core value of media services by harnessing the power of AI, data and new insights to deliver greater added value. By incorporating new media such as retail media and social commerce, Media++ aims to deliver a more integrated and performance-driven approach that maximizes clients' marketing return on investment. Media++ has already contributed to a new business win with Dollar General, one of the largest discount retail chains in the United States in the retail media category. In EMEA, we have seen strong traction in major media pitches such as for the Vodafone and BMW, enabling us to secure wins in those pitches. The positive impact is becoming increasingly evident across regions. Looking ahead, we will further accelerate its expansion across markets, including the U.S., the UK, Germany, and China. Media++ will be positioned as a key growth driver of our international business, and we will be focusing our internal investments more intensely in this area going forward. Next, I would like to talk about the progress of our midterm management plan. First, the rebuilding of our business foundation. As of the end of the third quarter, we recorded a cost of approximately JPY 8.6 billion. For the fiscal year, we expect to record approximately JPY 28 billion. While we will continue to book costs from fiscal 2026 onward, we remain on track to achieve the anticipated annual cost reduction in fiscal 2027 that will be needed for us to achieve an operating margin of 16% to 17% in that fiscal year. Next is about our internal investment. After a thorough review, we are now allocating approximately JPY 12 billion this year to internal investment, with a strong focus on enhancing our AI as well as data and technology capabilities. Moreover, we will further sharpen our focus on the Media++ strategy in order to restore our competitive advantage. Now I'll hand over to our Global CFO, Shigeki, to give you an update on our financial results. Shigeki Endo: This is Shigeki Endo. Let me take you through the financial results for the third quarter of fiscal 2025. I will start with our key metrics. The organic growth rate in the first 9 months was 0.3%, which was in line with our guidance disclosed on August 14. For the 3 months of the third quarter, it turned positive at 1.4% year-on-year. Following on from the first and the second quarters, the Japan business continued to perform well in the third quarter, exceeding our August expectations. Meanwhile, the international business showed mixed results by region. The Americas and EMEA were generally in line with expectations, but APAC fell short. While organic growth was positive, the negative impact of exchange rates and other factors led to the group net revenue to JPY 851.3 billion, a 0.8% decrease year-on-year. Subsequently, underlying operating profit was JPY 111.0 billion, a 14.1% increase, and the operating margin increased 170 basis points year-on-year to 13.0%. Operating margin for the 3 months of the third quarter was 15%, higher than 12% for the same quarter the previous year and our August expectations. The year-on-year increase is mainly due to the strong performance of the Japan business. On a statutory basis, an operating loss of JPY 7.4 billion and a net loss of JPY 61.5 billion were recorded. The difference between the underlying operating profit and the statutory operating loss was mainly due to the goodwill impairment loss recorded in the international business in the second quarter. I will now explain the results by region for the first 9 months. Japan, the largest region accounting for 42% of the group's net revenue, continued to perform well in the third quarter, with high organic growth exceeding 5%, as it did in the first and the second quarters. Meanwhile, all regions of the international business recorded negative organic growth rate for both the 3 months of the third quarter and the first 9 months. By market year-to-date, the United States, the United Kingdom, China, and Australia reported negative organic growth, while Spain, Poland, Taiwan, and Thailand saw positive organic growth. Moving on to the detailed explanation of each region. Japan saw organic growth of 6.8% in the first 9 months, with both net revenue and underlying operating profit reaching record highs. It marked the 10th consecutive quarter of positive growth and the 4th fourth consecutive quarter of growth of 5% or more. The 9.9% organic growth rate in the 3 months of the third quarter was due to strong growth in all of the domains, including BX and DX. In particular, internet media led the Japan business, achieving double-digit growth and turnover for the 7th consecutive quarter, driven by business expansion with existing clients, and revenue recognition from new clients won through pitches. Events, such as sports events and turnover of TV media, increasing year-on-year for the first time this fiscal year, also contributed to Japan's performance. In Japan, we have increased staff costs as we continue to enforce talent expansion for future growth, but the increase in net revenue more than offset this, resulting in a high operating margin level of 24.6%, continuing the trend from the first and the second quarters. I will explain in more detail later, but based on the strong performance, we are raising our full year forecast for the Japan business. In the Americas, which accounts for 28% of the group's net revenue, organic growth in the first 9 months was negative 3.4%, which was generally in line with our August expectations. By business domain, CXM is relatively stabilizing as we confirm the sequential improvement by quarter in the organic growth rate. However, given the ongoing uncertainty in the macro and industry environments, we will continue to carefully monitor the situation. On the other hand, as mentioned at the time of second quarter earnings announcement, creative saw reduced client spends and losses, resulting in a low single-digit decline in the first 9 months. Media continued to remain stable, with results broadly at the same level as the previous year. Hence, the top line decline as a result of the SG&A expenses control, the operating margin for the first 9 months improved 220 basis points year-on-year to 22.7%. However, as mentioned earlier, this also included the impact of the allowance of trade receivables recorded in the third quarter of the previous year. EMEA's organic growth in the first 9 months was negative 1.9%, broadly in line with our August expectations. By business domain, CXM and creative were weak, while media remained stable. For the 3 months of the third quarter, the U.K. continued to face challenges in CXM, while Italy showed weakness due to client losses in the previous year. In contrast, Spain recorded positive growth in all domains, maintaining its mid-single-digit organic growth. As for operating margin, it remained at 7.9% for the first 9 months of the year, despite our efforts in controlling the SG&A expenses. APAC's 9-month organic growth rate was negative 10.1%, below our August expectations. By business domain, CXM and creative continued to struggle with double-digit negative growth. Meanwhile, media remained stable. In the 3 months of the third quarter, India and Thailand showed solid performances, with Thailand in particular maintaining favorable momentum with a high market share. Meanwhile, Australia continued to face difficulties. Despite continued efforts to control SG&A expenses, APAC recorded underlying operating loss for the 9-month period, as was the case at the end of the first half-year period. Next, I would like to explain the year-on-year changes in the underlying operating profit. Underlying operating profit for the 9 months increased from JPY 97.2 billion to JPY 111 billion at this fiscal year. Net revenue increased by JPY 22.8 billion in Japan, but decreased by JPY 22.3 billion in international business, excluding currency impact, resulting in a JPY 500 million net revenue increase for the group as a whole. Staff costs increased by JPY 9 billion in Japan, mainly due to talent expansion, but decreased by JPY 12.5 billion in total in the international business, primarily in the Americas and APAC, resulting in a group-wide cost reduction of JPY 2.6 billion for the period. As for operating expenses, Japan recorded a reduction of JPY 1.8 billion and international business a reduction of JPY 9.3 billion. Consequently, the group as a whole registered a decrease of JPY 11.7 billion during the period. This decrease in the international business does include the impact of the allowance for trade receivables recorded last year, as I mentioned earlier in the Americas part. However, even if we exclude this impact, we were still able to reduce operating expenses. Lastly, I would like to go through our guidance for the fiscal year. As explained earlier, consolidated organic growth rate for the 9-month period was in line with the guidance announced in August and with the international business falling short and the Japan business exceeding our expectations. In light of these factors, we have maintained our full year guidance for consolidated organic growth rate at broadly flat. However, we will update our regional forecasts with Japan business revised up from circa 3% to circa 4%, and the international business revised down from circa negative 2% to circa negative 3%. As for the Americas and EMEA, forecasts remain unchanged. As for underlying operating profit, we will upgrade our August guidance of JPY 141.6 billion, to JPY 161.2 billion in reflection of the strong performance of the Japan business, scrutiny of internal investments, and the anticipated realization of some cost reduction effects from our initiative in rebuilding our business foundation. As a consequence, we will upgrade our consolidated operating margin guidance from circa 12% to in the 13% range. With the upgrade of underlying operating profit guidance, we will also upgrade our guidance for statutory numbers with operating loss of JPY 3.5 billion, revised up to operating profit of JPY 17.6 billion. And a net loss attributable to owners or parent of JPY 75.4 billion, revised up to a net loss of JPY 52.9 billion. While these revisions in our guidance primarily reflect improvements in profitability, our international business is still expected to post negative growth for the full fiscal year. As such, we acknowledge that the situation remains to be uncertain. In concluding my presentation, I would like to stress that rebuilding our business foundation that we have been focusing on this year is making steady progress. With a month and a half remaining this fiscal year, we as the management remain fully committed to driving the reform and in achieving the guidance presented today. Thank you for your attention. I will now hand back to the operator. Operator: We will now begin the Q&A session. [Operator Instructions] The first question is from Abe-san of Daiwa Securities. Please state your name and affiliation before asking questions, please. Masayuki Abe: My name is Abe. I'm from Daiwa Securities. I have two questions. One is about Japan business. 10% increase in profit given the TV media business is very difficult. Well, CXM need a good change. And in the next year, can we expect the same level of profitability? My second question has to do with the impact of cost reduction initiative. I think the probability of success is rising. That's my impression. But of the JPY 52 billion cut target, how much will you achieve this fiscal year? And what would be the pace of achieving toward JPY 52 billion next year. So the intention must be to achieve upside through cost reduction next year, but I would like to ask about that. Unknown Executive: Abe-san, thank you for your question. Unknown Executive: Thank you for your questions. Two questions. So your first question regarding Japan business, 10% profit increase in TV media. Given the CXM business, further growth can be expected next fiscal year. So what is the kind of situation we are envisioning for this business next year? Sano-san will respond. So cost reduction of JPY 52 billion must be achieved, it is assumed. And so what is the amount that's achieved this fiscal year and how much is expected next year? Endo-san will respond to that. Okay. First, over to Sano-san. Takeshi Sano: Abe-san, thank you very much for your questions. Yes. 9.9% growth, which was very good this year. What's going to happen next year? Of course, we will see some impact from Fuji TV, but it's not just TV media, but internet media is also growing at a very high level. As I mentioned earlier, business transformation, digital transformation, and AI, these areas are growing. We are receiving lots of orders. So to a certain extent, I think we will be able to achieve a robust growth. However, as was explained earlier, last fiscal year, Q4 was 8.4%. So 5 consecutive quarters, we've been achieving above 5%. So there's pressure to achieve more year-on-year. We cannot promise anything at this moment, but mid-single-digit growth is something that we can expect -- we hope. Thank you. Shigeki Endo: Endo speaking. With the midterm management plan announced in February, JPY 50 billion of expenses to be spent on rebuilding management foundation. So investing that amount and 2027 and onward, a JPY 50 billion of cost reduction impact is to be achieved. This year, we're expecting to invest about JPY 28 billion. And in December, mainly staff, we will see impact in terms of staff in December. So in terms of the effect or the impact next year and onward, I think we are likely to see an impact of over JPY 50 billion. For the numbers this year, we're still examining them at this moment. Operator: The next question is from Mr. Harahata from the Nomura Securities. Ryohei Harahata: My name is Harahata from Nomura Securities. Also I'd like to ask two questions. The first is in regards to international business. I understand that you are considering various alternatives. I think you said that previously and this time as well. What is the most important thing, things that you don't want to change? In terms of your customers, what are things that they don't want to see changes in you? So if you could share that as a hint to understand your course of direction going forward. Second is in regards to cost. My question overlaps some of Abe-san's question that the cost is the key point. That's what I wanted to ask about. And so what is the cost to be achieved next fiscal year for the three years? And were there any changes in terms of internal investment amount? These are my questions. Thank you. Unknown Executive: Thank you very much Mr. Mr. Harahata for your question -- two questions. So in terms of the partnership for the international business, was -- for your first question, we are considering various alternatives. What are things that we don't want to change? Or, from the perspective of the clients, what are things that they don't want to see changed? I think that was your question. And I will answer that question. And the second question was to do with cost. Now this fiscal year, so what are some of the costs that have been kind of delayed in terms of being realized? And how much will there be in the next fiscal year onwards? And Mr. Endo will respond to that question. So please allow me to answer the first question, partnership for the international business. And so this is something that we communicated in August. So in many ways, we have been working on comprehensive and strategic partnership. We've been considering to look into this. Now we have been working on the various initiatives that we are trying to rebuild our business foundation. We are focusing on internal investment as well. And so to ensure strong growth, is something that we are focusing on. And in that regard, we want to work with partners who are able to contribute that. So to be able to secure that element is an absolute necessity. So in what areas are we going to enhance? And where are we able to secure growth? This is what we are currently looking into and reviewing right now. From the clients' perspective, I think they are quite varied. And the clients have entrusted us for many years and the value that we provide. And they have assessed this favorably. And for those customers who have continued to work with us and continued to be partners, to be able to continue, that is probably something that the clients don't want to see changed the most. And the enhancement that we are doing for us to achieve growth and then to raise the expected level of the expectation from the client perspective, that's the kind of partnership that we want to realize. So that's all from me. Endo-san will respond to the second question. Shigeki Endo: This is Endo speaking. And so as I said earlier, the amount of investment this fiscal year is JPY 28 billion, and majority of that is onetime expenses, retirement allowances related to people. So in this regard, now in the third quarter, we've invested about JPY 8.6 billion, and the remainder will occur in the fourth quarter. And as for the total amount, in the midterm management plan, we have already shared the number, and that's JPY 50 billion. And if we see the breakdown, about 80% will be onetime expenses, retirement allowances. The remaining 20% is essentially improving the efficiency, automation and also standardization of business or the expenses related to that. So for that part, the amount of investment has not changed in a significant way. It essentially remains the same. That is all for my response. Ryohei Harahata: And just a follow up. So there were no -- the execution that has been delayed in comparison to the -- in comparison to the previous announcement, the amount has changed, but there is nothing that has been delayed. That's what I wanted to ask. Shigeki Endo: This is Endo speaking. We are making progress in accordance with the plan, but partially for Europe, in particular, in regards to onetime retirement allowance in Europe, we still need to get the acknowledgment of the person in scope. So in that portion, that could potentially be pushed back into the next year, but the amount of reduction, amount that we will realize as a target, remains unchanged. Operator: The next questions will come from Tokai Tokyo Intelligence Lab. Yamada-san, please. Kenzaburou Yamada: Yes, Yamada from Tokai Tokyo. So I would also like to ask two questions. First, I would like to ask about the details of the background to Japan business, which is performing very well. Internet media is growing fast. TV media is robust as well. It seems that Dentsu is doing better than your competitors. So internet media is growing very robustly. What is the background to that? If you could please elaborate? As you said, integrated solutions are being increasingly appreciated by your clients. Is that the case? As a result, you are getting more orders and expanding business? That's my first question. Second question is as follows. This is also about the Japan business. Next fiscal year. Internet media growth expectation. How much growth are you expecting next year? Well, this year, you are performing very well. So the hurdle must be higher for next year. Do you think you will be able to outperform the market's average growth next year? Unknown Executive: Yamada-san, thank you very much for your questions. Two questions. Regarding Japan business. So the background of Japan's well-performing business, it seems that one of the factors behind this strong growth in internet media. Why? So before we were talking about proposals for integrated solutions that had a positive impact, but is that the answer today as well? And second, again, on internet media business, what is the expectation next fiscal year? Do you expect to outperform the market next year? Both questions will be answered by Mr. Sano. Takeshi Sano: Sano speaking. Thank you very much for your questions. And we have recorded and remembered my answer that I gave previously. Thank you. As you mentioned, internet media is a means for clients. The purpose is to improve our marketing ROI. And various medias are combined in our proposals, and we're chosen. As a result, internet media business is outperforming our competition. So as you rightly mentioned, that is the factor behind our success. As I said, business transformation is ongoing, and that is broadening. As a result of that as well, we are performing well. There are some market forecasts that are put out. Compared to this fiscal year, 2025, next year's market growth will be somewhat slower, but it will continue to grow. Is Dentsu going to be able to outperform the market? Sorry for being conservative, but so that we can outperform the market, we would like to further strengthen our integrated solutions, make proposals based on that so that we will be able to outperform the market next year as well. That's all for my answer. Operator: The next question is from Barclays, Julian Roch-san, please. Mr. Roch, can you hear us? Julien Roch: Can you hear me? Operator: We can hear you. Julien Roch: Thank you very much for letting me ask questions. Two, if I may. The first one is, if I put together your three regions outside of Japan, your organic in the first 9 months was a decline of 3.8%. How much of that decline was net new business loss versus how much was existing clients spend declining? And the second question is following up on the strategic review of the international business. In your previous answer this morning, you said you were looking for partners that could help you accelerate growth while continuing to service your existing clients. Can you give us any idea in what areas you believe you would need partners? Media, creative, Merkle, somewhere else? Unknown Executive: Thank you very much, Mr. Roch, for your question. I have received two questions. The three regions other than Japan for the 9-month period, we ended up with a minus 3.8% organic growth. So the loss of the existing client? Or are we losing the new client? In terms of pitch I think you're asking about. So asking as to whether these were the factors behind the minus 3.8%. I would like to ask our Global CEO of Dentsu Group, Giulio, to respond. And for the second question, in regards to us looking at the partnership, what are the partnerships for accelerating growth or what area? I will respond to that question. So I would like to ask Giulio to respond to the first question. Giulio Malegori: Thank you. Thank you, guys. And thank you, Roch, for the question. It depends on the practices, I would say. So your question is, how much is existing client and how much is lost client? Well, when we look at the media practice, it's not there are some losses, but most of it is also decline on spend from existing client, I would say, which is probably 60-40 in that regard. When we look at the Merkle, the CXM business, clearly this is a project-based business, so it's not that much losing, not the loss of client, but it's more the variation on the number of projects for existing clients. So I would say that on the CXM area, there are no major losses of clients. It's just a number of projects by clients that diminished. On the contrary, when we look at the creative practice, which, as you probably know, is the smallest of the international business, there has been a component of lost clients. These are especially in the US. So for the creative practice area, probably I would say that 70% of the decline is lost clients. The net wins have not been able to compensate the loss. There is variability, of course, on the client portfolio, especially in project-based business like creative, but the issue has been that we didn't compensate some of the losses with enough win, and this resulted in a negative. So I hope this answers your question, Roch. Thank you. Hiroshi Igarashi: So this is Igarashi. Please allow me to respond to your second question. In regards to partnership, so partnership for accelerating growth. And so your question was, what we refer to as our practice, our business domain, whether it be media or creative, or is it CXM? In which area are we going to seek partnership to enable acceleration in growth? I understand that was your question. So my response is that we are considering all types of different possibilities in looking at partnership. It's not the case that we are focusing on one particular area. So we are not just looking at a single area. Of course, there are various processes, and we are looking at whether we can make contribution to enabling growth in certain areas. Of course, we will look at all that. But in regard -- so we are not limiting the partnership consideration to a certain area. We want to achieve a comprehensive growth, and we are looking for partners who will contribute to enabling overall growth. This completes my response. Operator: The next question will come from SMBC Nikko Securities. Maeda-san, please go ahead. Eiji Maeda: Yes. Maeda from SMBC Nikko Securities. I also have two questions. First, comprehensive partnerships that you are examining. To pursue them, unless you have the specifics, you will not be able to announce, I would assume. But partner selection, partner negotiations, in terms of those, do you think you are making progress successfully in terms of seeking partnerships? Or do you think that the hurdle is pretty high for identifying a partnership? And what is the timeline? Are you looking for a partner by the end of next year, for example? My second question. The other day, Hakuhodo, their North America consulting business is recovering, they said. And AI transformation type of business is increasing for Hakuhodo. Well, in your case, DX demand has run its circle. It's deteriorating. But with respect to AI transformation, do you think that the business environment is improving for you as well. Going forward, do you think that AI transformation type of business will be a tailwind for you? So global consulting business, especially centering around North America and other adjacent areas. What are your thoughts? Hiroshi Igarashi: Maeda-san, thank you very much for your questions. To address your first question regarding partnerships that we are studying, and is the process of considering partnerships going well? And when are we going to have a conclusion? Is it a plan for next year? That will be answered by Igarashi myself. Your second question regarding North American consulting business is becoming active due to AI transformation need according to Hakuhodo. Well, at one point in the past, it was not very good, but consulting business in North America is now on a recovery track. What is the prospect? That was your question. For that, the Chair of Americas, Giulio, will be answering that question. So to address your first question, partnerships without restricting ourselves to constraints, as I said, we will consider various types of partnerships. So on a broad ranging basis, we are considering a variety of potential partnerships. The process that we envision, is it moving? Well, I would say that we are moving through the process as planned. However, in partnerships, there are counterparties that we have to work with. So frankly speaking, I will not be able to suggest a timeline at this moment. However, this is something that requires speed given the severity of the external environment and the changes happening in the environment. We need to respond to such changes. And we must enhance the value of our proposals to our clients. So in that regard, at the earliest possible stage, we would like to come to a conclusion on a partnership that we're going to have. So I would like to turn to Giulio for the second question. Giulio, please? Giulio Malegori: Thank you very much, Maeda-san, for the question. In the North America business, you know, the DX offer is part of the offer that we ended, the work that we do at Merkle level in CXM, and therefore, is developing and is recovering slightly. When we look at the AI impact on that as an acceleration, this is more centered on the Media++ strategy. I would say that there's been -- in the recent wins that Igarashi-san mentioned at the beginning of the call, there's been clearly a component of the element of the digital transformation for our clients in terms of integration and delivery of different capabilities within the digital offer. And more specifically, the acceleration that we are looking at in AI is once again referred to the deployment on the Media++ strategy. A good example of that is clearly the AI platform of dentsu.Connect, which is helping our client by using generative audiences and enabling AI-driven target setting, consumer profiling, and last but not least, communication planning. And the same is for generative audience, where, again, this helps within the Media++ strategy in the development of the digital transformation. Thank you. Eiji Maeda: May I ask a follow-up question? Just one, please? So Media++ that you talked about and acceleration through the use of AI. At this moment, in the stock market, your international business is having difficulty on its own, and it seems that the views are pessimistic about your international business next year as well. But through such initiatives that you talked about, do you believe that you will be able to bring the business back to organic growth? Excluding the media environment, because of the factors that you have on your own, do you think that you will be able to come to a turnaround point? Hiroshi Igarashi: Thank you for the question. Igarashi speaking. This is a follow-up question for North America. So let me focus on North America. Regarding North America, as Giulio answered, in the area of CXM, just to explain, we have an asset called the Merkle there, and the portion of North America in that business is very large. For many years, the area of CXM has had challenges, and I think that is understood by Maeda-san and other people. Earlier, Endo reported on our Q3 performance. As he said, CXM in North America, the area covered by Merkle, continues to be tough, but negative growth is becoming better and better quarter after quarter. It's improving. Rather than the whole market improving overall. The new management system that we have put in place since February this year has been conducive in addressing client challenges, and that is leading to an increase in the number of leads. We are also looking at reviewing the pipeline. So month after month, we are seeing recovery. I think -- and next year, I'm sure that we will be able to head toward a more positive direction. Now, another point regarding media. One of the topics is the consolidation of the agencies, and the scale merit is very much focused upon. Our Media++ strategy is generating good results because it combines media and retail media and others, as we discussed. So in this area of media, we are expecting strong growth. The value of international business, especially the United States, which commands a high portion, it is essential that we achieve a turnaround in that business, and that is something that we're looking to achieve so that our corporate value will be acknowledged. Thank you. Operator: We are nearing the conclusion time, but we still have many hands up, so we'd like to extend and respond to your questions. The next question is from Mr. Nagao from BofA Securities. Yoshitaka Nagao: This is Nagao from BofA Securities. I have two questions. First, in terms of internal investment, do you plan to invest JPY 12 billion this year? But AI is causing changes in clients and changing the behavior of consumers more than expected initially. So on that basis, is JPY 12 billion sufficient? And so what will be the size of internal investment that you're thinking of next fiscal year? The second question is in regards to the dividend. And the year-end dividend remains to be undetermined at this point in time, but you have the plans. You should be able to anticipate the profit from business in terms of asset sales. I think this will be management revision as to whether you will sell or not. And the plan that you've changed for this year, so the profit attributable to owner of parent still about minus JPY 40 billion. So I don't know whether you're in an environment of having to make a dividend. Given the fact that you have investment for AI as well, I think in terms of capital allocation, you have more important areas of spending money. But if you could explain as to why you have continued to remain undetermined for the year-end dividend? Hiroshi Igarashi: Thank you very much, Nagao-san, for your question. I received two questions. The first question is in regards to internal investment and for AI. Whether it be customers or the consumers, we are seeing significant changes. And so in that regard, you feel that there is a need to make investment into the AI. So the JPY 12 billion of internal investment for this fiscal year is sufficient, particularly given the fact that you need to invest in AI. And also you wanted to ask about the thinking for next fiscal year. This will be responded by myself, Igarashi, and Endo-san will respond if there is addition to make. And in terms of dividend, the business state and asset sales, and looking at the net profit level, if you take all these into consideration, and also the capital allocation perspective as to whether to pay dividend or not, you should be able to come up with a course of direction and what needs to be focused upon given the fact that you have the investment for AI and that you have referred to earlier. Now, that question will be responded by Endo-san. So I'd like to respond to your first question. In terms of internal investment, we are assuming about JPY 20 billion initially. And so we scrutinize the internal investment for this fiscal year. So the amount has been reduced to JPY 12 billion, as I have explained. In particular for AI, is it sufficient or not? So that was your point. Now, in that regard, our thinking regarding AI is that, of course, we will be making investment on AI on a standalone basis ourselves. But a unique initiative that we have is that we have initiatives with various platforms, and we've been ahead of others in this area for quite many years, whether it be data, whether it be the area of content creation. We have been working with the various platforms, and we have moved in this area ahead of others. So how can we use that in responding to the clients' issues? Now, we have many options to choose from, and we are able to combine those to provide the appropriate AI solution. We are in an environment to be able to enhance that. So it's not just the amount of internal investment as to whether our investment is sufficient or not. Is that sufficient in strengthening our solution? That is not only the perspective that should be used as a basis to make your decision. And for next fiscal year as well, I suppose leading initiatives with the platform providers at the center. We have various unique capabilities that we have, which we will work on enhancing. So that's the major course of direction for us going forward. And here, we want to do a sufficient amount of customization with our clients. And for us to engage in this type of initiatives of others, and that is the unique element of our initiatives with the platform providers. So that is my response. The second question will be answered by Mr. Endo. Shigeki Endo: This is Endo. And please allow me to explain from a few perspectives. First, in terms of the capital allocation and how we think about that. Now, from our perspective, what we are working on right now, we are working on rebuilding our business foundation. And over a medium to long-term perspective, we are focusing on achieving growth, and we're making internal investment to realize that. And we also have the dividend aspect. And also, we need thorough communication with the supply side. We want to engage in such communication with the market too. And on that basis, right now, when it comes to dividend, the securing profit that is distributable, and we are focusing on that. So we've been selling the strategic shareholding. And so dividend of returned earnings from subsidiaries. We are also considering the disposal of some real estate as well. But at the year-end forecast. In that regard, at this point in time, as of the third quarter, we have not registered impairment as yet. But the situation overseas remains uncertain. And so I am unable to say that we are completely free of the possibility of having to take impairment this fiscal year. And as I've explained at a previous occasion in regards to impairment, when we look at the forecast for this year, whether it be net revenue or whether it be for revenue, but the medium to long-term growth of our net revenue from next fiscal year onwards, that will be used in calculating the impairment possibilities, interest rate, the foreign exchange rate. These factors also need to be taken into consideration in discussing with the accounting auditor in the end. So at this point in time, as for dividend, so we want to secure a distributable profit as much as possible, and whether it be strategic shareholding sales, but we will do our utmost to be able to secure those amounts. Yoshitaka Nagao: May I ask a follow-up question? So you're going to make maximum effort in terms of management to secure the profit for distribution, but there could be plus or negative of international business impairment. So that is the reason as to why the dividend remains to be undetermined at this point in time. Am I right? Shigeki Endo: Yes, your understanding is correct. Operator: Next, Mr. Russell Pointon from Edison Group. Russell Pointon: Good morning. I have two questions, if that's okay. First of all, there's been a good mix in the account wins of extending existing relationships and new business wins. So are you able to talk about what you think has helped to contribute to those wins from what you've done in your business? And my second question is, I think there's a slower rate of restructuring spend. So does that mean there's a slightly slower rate of profit improvement through to 2027? Hiroshi Igarashi: Mr. Russell Pointon, thank you for your questions. So account wins, regarding that. Existing customers as well as new customer acquisitions. The pitch wins. The mix is pretty good, and you asked about that. The status of current our accounts for existing customers and new client acquisitions. What is our assessment? How do we view that? Well, I would like to respond to that. If there are any additional comments from Endo, I will ask for them later. And the second question that you asked is about the slow speed of restructuring or the slow spend of restructuring. 2027, toward that, the restructuring spend cost, is it progressing as planned? Do we think that we will be able to hit the goal? That will be answered by Endo-san. First, regarding the status of accounts, we have various pitches we're making and the circumstances surrounding that. While talking in particular about our international business, media, creative, and CXM, in all practices, net wins are accumulating. That is where we are overseas. The current pipeline, of course, we have different projects. And 83% of media pitches are offensive. Creative, 74% is offensive pitches. So maintaining existing customers, that is our overriding assumption. Plus, how many new customers can we acquire? We are looking at that. As a result, we're having this pretty good mix, as you pointed out. So first and foremost, that we're focusing on maintaining existing clients, and that will continue into the future. With respect to CXM, this is a long-range business. We have a new business pipeline, and the pipeline is increasing and growing. Therefore, for CXM as well, inclusive of cross-selling to existing clients and acquiring new clients, how to go about doing that is something that we always focus on. I think we're in a pretty good situation in that regard right now. For Japan, pitch wins are pretty high in different areas. Frankly, here in Japan, we're not having losses of existing clients. So the fact that we're having increasing pitch wins of new customers is contributing greatly to our good performance. And so we have to make sure to achieve pitch wins in all practice areas. That is something that we would like to continue to ensure in the future. Regarding restructuring, I would like to turn it to Endo-san for an answer. Shigeki Endo: Endo speaking. The status of restructuring, we announced our midterm management plan in February. Targeting 2027, we have set several KPIs. One of such KPIs is operating margin percentage. That is to be 16% to 17%. That is the target toward 2027 based on that. The cost base right now, with that as a baseline, we would like to achieve a cost reduction of JPY 50 billion. And so that is the target. Well, achieving JPY 50 billion is not the goal per se. Our ultimate goal is to achieve operating margin of 16% to 17%. As a result, vis-a-vis our competition, we would like to ensure good competitiveness on our part. JPY 50 billion, we are confirming where we are every month as to how much progress is being made. And we're spending part of that for retirement allowances. And there are to be paid considerably in December onwards. We will be seeing that impact next year. So at this moment, we are progressing on plan. And of course, we would like to be speedy to work toward the 2027 target. With the target of achieving JPY 50 billion or more, we are taking actions, and we're on plan. That would be all. Operator: With that, we would like to conclude the earnings call. Once again, thank you very much for taking time out of your busy schedules to join us today. Please disconnect. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Operator: Good morning, and welcome to InRetail Peru's Third Quarter 2025 Conference Call. [Operator Instructions] And please note that this call is being recorded. [Operator Instructions] Before we begin, I would like to remind you that today's call is for investors and analysts only. Therefore, questions from the media will not be taken. Joining us today from InRetail Perú are Mr. Juan Carlos Vallejo, Chief Executive Officer; Mr. Marcelo Ramos, Chief Financial Officer; and Mrs. Andrea Fabbri, Investor Relations Officer. They will be discussing the quarterly report distributed by the company yesterday. If you have not yet received a copy of the earnings report, please visit www.inretail.pe on the Investors section, where there is also a webcast presentation to accompany the discussion during this call. If you need any assistance, please contact the Investor Relations team of InRetail Perú. Please be advised that forward-looking statements may be made during this conference call, and they do not account for economic circumstances, industry conditions, the company's performance or financial results. As such, these forward-looking statements are based in several assumptions and factors that could change causing actual results to materially differ from the current expectations. For a complete note on the forward-looking statements, please refer to the quarterly report, which was issued yesterday. At this point, I would like to turn the call over to Mr. Juan Carlos Vallejo, Chief Executive Officer of InRetail Perú for his opening remarks. Mr. Vallejo, please go ahead, sir. Juan Blanco: Thank you, Mega. Good morning, everyone. I'm Juan Carlos Vallejo. Thank you for joining InRetail's third quarter earnings call. Today, we will discuss the main highlights of InRetail's third quarter results for 2025. Joining me today are Marcelo Ramos, our Chief Financial Officer; Andrea Fabbri, our Investor Relations Officer. I will start with a brief executive summary, and then Marcelo and Andrea will walk you through our earnings presentation. During this quarter, the Peruvian economy continued experiencing a stable economic momentum, benefiting from the low inflation and a strong exchange rate. In spite of the latest presidential transition, country risk and volatility remained low, reinforcing Peru's position as one of the most stable economies in the region. In terms of consumption, this quarter was affected by the high comparison basis in 2024, given the pension funds and compensation time accounts withdrawals, which created a temporary increase in demand, particularly in the month of July. Although general economic conditions are gradually more favorable, consumption is experiencing only a caution recovery given the international context and the pre-election period. In this quarter, we moved forward with determination in the execution of our strategic priorities, advancing in our expansion projects in reinforcing the value proposition of our different formats and in the transformation of our logistics operations, further consolidating our leading multi-format platforms. In general, our businesses continue to show resiliency with the challenging comparison basis mentioned before, posting on a consolidated basis, a positive growth in revenues of 3.5% and a slight decline in adjusted EBITDA of 0.7%. Our Food Retail segment had a moderate growth in revenues of 5.4%. Growth was mainly driven by Mass and to a lesser extent by Makro. Plaza Vea, on the other hand, was the most affected by extraordinary withdrawal mentioned before and by the general slowdown in the supermarket channel. Our Pharma segment had a low growth in revenues of 0.8%, combining a steady growth in our pharmacy unit with an anticipated decline in our distribution unit in Perú, impacted by an important change in its business model that prioritize cash flow generation over top line growth. Finally, as expected, our Shopping Malls segment was still affected by the extraordinary impact related to the incident in the Real Plaza Trujillo Mall. However, this impact had a lesser effect on the financial results of our segment in terms of adjusted EBITDA compared to the prior quarters. Revenues and adjusted EBITDA declined 5% and 12.8%, respectively. Based on the impacts already recognized and on the information we have today in terms of the guidance for InRetail, we remain in line with the guidance given in the prior earnings call of mid-single-digit growth in consolidated revenues and low single-digit growth in consolidated adjusted EBITDA for 2025. Finally, I would also like to highlight that on October of this year, we successfully issued approximately $500 million of senior unsecured notes at InRetail Shopping Malls in 2 bond tranches. The spreads were the lowest ever achieved by InRetail Shopping Malls. These new issuances extend relevant debt maturity beyond 2030. With that, let me pass the word to Marcelo. And as always, we look forward to answering your questions by the end of this call. Marcelo Ramos: Thank you, Juan Carlos. Good morning, everyone. Thank you for joining us on this call. Today, we will review the main highlights of InRetail's third quarter results for 2025. Now please turn to Page 4. As anticipated in our previous earnings call, Q3 '25 had an overall challenging comparison basis given the pension fund and compensation time account withdrawals, which created a temporary increase in consumption during the initial weeks of the quarter. Even in this context, InRetail delivered revenue growth across most segments, resulting in a mid-single-digit growth in consolidated revenues of 3.5%. This growth results from a moderate growth in our Food Retail segment and a slight growth in our Pharma segment. Our Shopping Mall segment, to the contrary, registered a decline in revenues, mainly explained by the closing of the Real Plaza Mall in Trujillo. In terms of adjusted EBITDA, we recorded a slight decline of 0.7% compared to Q3 '24, explained by the decrease in gross margin, the increase in operational expenses from the new stores opened and remaining extraordinary impacts arising from the incident in the Real Plaza Trujillo Mall, affecting mostly our Shopping Malls segment. As it relates to net income, we registered a 12.7% decrease in the quarter, explained by the decline in adjusted EBITDA and the increase in net financial expenses despite a higher net FX gain. In summary, in spite of the challenging comparison basis, our Food Retail and Pharma segments showed the resiliency, while our Shopping Malls segment experienced lingering impacts related to the incident earlier this year. As evidenced by our financial results, these impacts are dissipating towards the end of the year. Overall, based on the information we have to date, we remain in line with the guidance given in the prior earnings call of mid-single-digit growth in consolidated revenues and a slight positive growth in consolidated adjusted EBITDA for 2025. Now please turn to Page 5 to review a financial and operational snapshot of our consolidated figures. In terms of contribution by segment, these have remained similar to recent quarters. Our Food Retail segment continues to gain more participation in revenues relative to the last 12 months, while our Pharma segment has gained a share in adjusted EBITDA. Now please turn to Page 7 to give you a brief update on our continued ESG progress during this quarter. First of all, we're extremely proud that our Food Retail segment obtained its fourth carbon footprint star from MINAM in recognition of its progress in reducing emissions. On the social front, our flagship program, Bueno por Dentro, donated more than 4 million food rations equivalent to PEN 17 million. On the environmental front, we managed to save over PEN 1 million in our Food Retail stores by implementing best practices in energy management and recycled over 3,000 tons of waste. Additionally, thanks to Perú Pasiónó, we generated over PEN 10 million of SME sales through all our channels. Finally, during the third quarter, we released our annual sustainability report with additional and valuable information about our sustainability strategy and projects, which is available on our website for your review. Now we will discuss the results by segment. Please turn to Page 9 to review our third quarter results for our Food Retail segment. Our Food Retail segment registered a top line growth of 5.4% in Q3 '25 with a same-store sales growth of 1.5% despite the temporary closure of stores, including the Plaza Vea store in the Mall in Trujillo and the high comparison basis mentioned before. Growth in revenues were mainly driven by strong growth in our Mass format with a same-store sales growth of around 15% and a moderate growth in our Makro format with a same-store sales growth of about 2%. Our Plaza Vea format, on the other hand, posted a low single-digit decline in same-store sales affected by the short-term boost in disposable income from the pension fund and time deposit withdrawals on the comparison basis, impacting the supermarket channel in general. In terms of categories, our food categories experienced a low same-store sales growth with a modest growth in fresh food and a slower growth in dry food. On the other hand, our nonfood categories registered a slight decline in same-store sales. Revenues were also favored by the contribution of the new stores opened in the last 12 months, including 325 net new Mass stores and 1 new Makro store. During Q3 '25, we opened 53 net new Mass stores, reaching a total of 1,467 hard discount stores. Next week, we will inaugurate our 1,500 store. Our gross profit increased 3.7% with a gross margin of 23.4%, below Q3 '24 due to the change in format mix. Our emerging format account for approximately 50% of our Food Retail revenues with Mass already represented more than 20%. In terms of adjusted EBITDA, Food Retail's adjusted EBITDA grew 2.3% in Q3 '25 with a reduction in margin of 28 basis points. This reduction is mainly explained by the decrease in gross margin and by the incremental expenses from new stores opened, the new minimum wage and the increase in logistic expenses associated with additional warehouse space rented for 8 new dedicated distribution centers for Mass and with a greater presence of our hard discount stores in provinces. Overall, despite the challenging comparison basis, we showed progress in our multi-format strategy, refining our formats and their value propositions. As already mentioned and in line with our strategy, the change in format mix, the progress made in our organic expansion plans and the investments made in our logistic platform involve incremental investments and expenses that affect our short-term results. However, we are confident that they are essential to building a solid and sustainable foundation for strong and profitable growth starting next year. Now please turn to Page 10 to review our third quarter results for our Pharma segment. Our Pharma segment posted an increase in revenues of 0.8% in Q3 '25, combining a positive growth in revenues of 1.9% in our Pharmacies unit with a decline in revenues in our distribution unit. Same-store sales growth for our Pharmacies unit reached 1.2%. Pharma categories were favored by the winter season, driving demand for cold, flu and respiratory-related products. Non-pharma categories posted a slight positive same-store sales growth. And during the quarter, we continue to see growth in consumer-related categories, in particular, personal care, driven by the successful execution of our category diversification strategy. During Q3 '25, we continued innovating with our formats, looking to increase productivity per store. We implemented certain modifications in some of our Mifarma Beauty stores to enhance the experience and increase focus on personal care and beauty care categories. This new format aims to exploit niche categories with high growth potential where our market penetration is still low. Additionally, in our pharmacies unit, we progressed with our expansion plan, opening 48 net new pharmacies. And in the last 12 months, we've opened 87 net pharmacies. In relation to our distribution unit, we posted a decrease in revenues of around 3%, combining a slight growth in Ecuador with a decline in Perú. As mentioned before, our distribution business in Perú is going through an important change in its business model that started late last year, prioritizing cash flow generation and return on invested capital, implementing stricter collection terms and focusing on our main channels, aligned to our core competencies in the Pharma segment. Although these changes have resulted in a drop in revenues, they have also created substantial efficiencies in working capital and in operating expenses. We expect these trends to persist in the near term as we continue to simplify structures, streamline processes and focus on our core categories and competitive capabilities. In terms of gross margin, we registered a gross margin of 32.5%, below Q3 '24, mostly explained by the lower gross margin in our Pharmacies unit, given the high comparison basis of last year, which included an extraordinary reversal of provisions related to shrinkage costs. Gross margin was also affected by the decline in margins in our distribution unit. These effects were partially offset by the higher participation of our pharmacies unit in the revenues mix. Our Pharma segment recorded an adjusted EBITDA growth of 1.1%, driven by the growth in revenues and operational efficiencies despite the lower gross margin. Overall, our Pharma segment continues to deliver a positive growth, supported by the steady performance in our Pharmacies unit despite the changes in business model in our distribution unit in Perú, maintaining profitability and enhancing cash flow generation in the segment. Please turn to Page 11 to review our third quarter results for our Shopping Malls segment. As anticipated in our previous earnings call, the financial results in Q3 '25 for our Shopping Malls segment still experienced some impact arising from the incident in the Real Plaza Trujillo Mall, although to a lesser extent compared to prior quarters. Our Shopping Malls segment registered a decline in revenues of 5%, impacted by the income loss from the continued closure of the mall in Trujillo and by the extraordinary discounts granted to tenants of the mall. Additionally, revenues were hindered by the decrease in variable rent in several tenants from the high comparison basis in Q3 '24. These effects were partially offset by the improvement in performance in other malls. Our tenants registered a negative same-store sales of 2.3% during the quarter, impacted by the high comparison basis mentioned before. Our gross margin was 65.6% this quarter, lower than Q3 '24, mainly explained by higher marketing and maintenance costs due to the phasing in the incurrence of these expenses in addition to the higher rental costs. In terms of adjusted EBITDA, we reached PEN 109 million, a drop of 12.8%. This decline is mainly explained by the extraordinary impact arising from the incident earlier this year, the lower gross margin and the increase in other operating costs. As anticipated, the impacts from the incident are gradually easing towards year-end as evidenced by the lower decline in adjusted EBITDA compared to prior quarters. Now please turn to Page 12. During Q3 '25, we advanced in our organic expansion strategy, opening new Mass stores and new pharmacies together with the expansion of our Real Plaza in Primavera mall. In terms of same-store sales, Q3 '25 presented a more challenging consumption environment driven by a more demanding comparison basis, particularly during July, resulting in lower same-store sales growth across our segments. Now please turn to Page 14 to review our consolidated net income results. InRetail registered a net income of PEN 241 million in Q3 '25, a 12.7% decrease compared to Q3 '24. As mentioned before, the decrease in net income is explained by the decline in adjusted EBITDA and the increase in net financial expenses despite the higher net FX gain. The increase in net financial expenses comes from the larger IFRS 16 related financial expenses associated with the opening of Mass and pharmacy stores and from higher financial debt interest rates related to the liability management strategies executed over the last 12 months in all segments. Now I will pass the word to Andrea, who will discuss our CapEx, cash flow generation and consolidated financial debt. Andrea Fabbri: Thank you, Marcelo. Now please turn to Page 15. During Q3 '25, we invested PEN 230 million in CapEx for our 3 business segments. This was mainly invested in the expansion of our physical network in maintenance of our existing network and in our new Pharma Distribution Center. In our Food Retail segment, CapEx in Q3 '25 was mainly invested in the opening of 57 new Mass stores, 53 net, in the implementation of 2 new Plaza Vea stores in provinces and in scheduled maintenance of existing stores. In terms of openings, we expect to open around 300 Mass stores and 2 Plaza Vea stores in 2025. In our Pharma segment, CapEx was largely invested in the construction of our new distribution center in the opening of 51 new stores, 48 net and in scheduled maintenance of our existing network. We expect to close 2025 with around 100 stores open. Finally, in our Shopping Malls segment, CapEx this quarter was invested in scheduled expansion projects in existing malls, mainly in Piura and in Primavera, the latter inaugurated in August and in new power center in Tarapoto. The remaining CapEx was invested in maintenance of our malls, mainly related to extraordinary investments made of further preventive and corrective measures. In terms of cash balance, we ended the third quarter with approximately PEN 1.5 billion of cash, in line with the end of last year's cash balance despite the higher CapEx investment and the decrease in adjusted EBITDA during 2025. Now please turn to Page 16 to discuss our consolidated financial debt. As of September 2025, InRetail had a consolidated net debt of PEN 5,859 million, with a net debt to adjusted EBITDA ratio of 2x, below the comparable quarter of 2024 despite the decrease in adjusted EBITDA during 2025. The decrease in total net debt compared to Q3 '24 is mainly explained by the higher cash position despite the scheduled amortization and by the appreciation of the local currency, which affects our dollar-denominated bonds related to our international bond issuances. The short-term position of our consolidated debt stood at PEN 798 million, significantly below the prior quarter as we completed the refinancing of our structural medium-term loan during Q3 '25 in our Food Retail, Pharma and Shopping Mall segments. As of September 2025, we have successfully refinanced more than PEN 2 billion in our 3 business segments over the last year. Now I will pass the word back to Marcelo to review our debt by segment. Marcelo Ramos: Thank you, Andrea. Please turn to Page 17. Our Food Retail segment ended the third quarter with a net debt of PEN 2.875 billion below the previous quarter and below Q3 '24. Net debt to adjusted EBITDA stood at 2.6x, in line with the comparable quarter of 2024. InRetail Pharma ended the third quarter with a net debt of PEN 1.518 billion and a net debt to adjusted EBITDA ratio of 1 from a continued increase in cash flow generation given the execution of the strategies mentioned before, despite the higher CapEx. InRetail Consumer ended the third quarter with a net debt to adjusted EBITDA ratio of 1.6, below the previous quarter. We expect to close 2025 with a net leverage ratio slightly below 2024. Finally, InRetail Shopping Malls ended the third quarter with a net debt of PEN 1.477 billion, resulting in a net debt to adjusted EBITDA ratio of 3.4x, affected by the decline in adjusted EBITDA and the pickup in CapEx related to our expansion projects and to preventive maintenance investments. Nevertheless, our Shopping Malls segment remains with a very solid liquidity position and a very comfortable outlook with respect to our limits set by our bond intention. We anticipate our Shopping Malls segment to end 2025 with a slightly higher leverage ratio compared to Q3 2025. Now please turn to Page 19 to give you a brief summary of an extraordinary post-quarter event. On October 9, we successfully issued approximately $500 million of 7-year senior unsecured notes at InRetail Shopping Malls, combining one U.S. dollar tranche of $375 million and one PEN tranche of PEN 428 million at attractive coupons of 5.65% and 7.125%, respectively. The implied spreads were the lowest ever achieved by InRetail Shopping Malls. The proceeds were mainly used to refinance all outstanding 2028 notes, extended material debt obligations for Shopping Malls to 2030 and beyond. The dollar tranche reached an order book oversubscription of around 3x at peak, evidencing investor confidence and trust in the credit given its high predictability, strong liquidity position and resilient nature. As we have done in previous issuances, we executed different hedging structure until maturity to partially hedge the U.S. dollar-denominated principal debt and coupon payments. With that, we cover our presentation, and now we will be glad to answer any questions you may have. Operator: [Operator Instructions] The first question comes from Alonso Aramburú with BTG. Alonso Aramburú: I wanted to ask first on Trujillo, whether you have any updates on the potential reopening of the shopping center? And if you can comment on potential new projects in the shopping center business in 2026? And second, if you could also give us some color as to how sales and consumption has evolved after the close of the quarter in October and November. Marcelo Ramos: Thank you, Alonso, for the questions. Can you repeat -- sorry, the third question? We couldn't hear you very well for the third question. Alonso Aramburú: Yes. No, it was -- the first one was on Trujillo. The second one was on the trends after the quarter, what you're seeing in sales in October and early November. Marcelo Ramos: Okay. Perfect. Thank you. So look, as it relates to the opening of the mall in Trujillo, as we mentioned before, we continue to work closely with the authorities. However, the final decision lies beyond our control, and it's dependent on local authorities, to be honest. Despite our efforts at this point, sadly, we don't have a precise visibility regarding the opening of the mall. We believe it's highly unlikely or nearly impossible that the mall is going to be opened this year. Having said that, as you guys know, in 2024, Real Plaza Trujillo accounted only for 6% of total revenues and adjusted EBITDA. And over the next year and next year, the natural growth of the business will more than offset the income and EBITDA loss from the closure of the mall. And as we mentioned in the call as well, most of the impacts regarding the incident have been recognized to date. And in terms of adjusted EBITDA, the impacts are essentially progressively dissipating. Then the second question on the new projects, I believe, was regarding the -- in Shopping Malls. What we have is this year, we opened not in the third quarter, but we opened in the fourth quarter, a new power center in Tarapoto that was opened a couple of weeks ago. We have a couple of important expansion projects, one of which is already opened in Primavera, the other one in Piura. And as it relates for next year, we have a big expansion project as well in Lurín for the existing mall and one power center as well in provinces that should be opened by the end of the year. And then the third question, as it relates to trends. So important to mention again, Alonso, that if you look at the third quarter results, the effect on the same-store sales and the performance had to do basically with a very negative July, and that's essentially given the high comparison basis that we had in 2024. Beyond July, if we looked at August and September, there was a progressive improvement in same-store sales, all of the businesses with positive same-store sales in August and in September. And October has been pretty similar to what we saw in September. I mean, we have Food Retail at same-store sales of around 2%. Pharma is actually performing slightly better. Same-store sales closer to 4% as opposed to the 1% and the 2% that we saw in the quarter. Still though, as I mentioned in the call, on a consolidated basis in Pharma, if we add the distribution business, distribution business in Perú is still suffering from a decline in revenues given this change in the business model. Operator: [Operator Instructions] Our next question comes from Giovanni Vescovi with JPMorgan. Giovanni Vescovi: From our end, we just wanted to know what are you thinking about the competition in the Food Retail as a whole. Marcelo Ramos: Thank you, Giovanni, for the question. So competition in Food Retail, as you know, we compete against Falabella Tottus and Cencosud. Well, Falabella has 2 formats, Tottus and Bodega and Cencosud with Wong and Metro and a new format, which is a modified version of Metro called Metro [indiscernible]. What we're seeing essentially in terms of organic expansion, still not much going on there, to be honest. I think we've been the player with investing more in organic expansion locally. We've seen though over the last few months, more aggressiveness in the supermarket channel, in particular, as it relates to competitive pricing and promotion and a lot of wholesale revenues from competition, focusing more on wholesale revenues, of course, affecting margins. But that's pretty much it as it relates to these 2 players. As you guys know as well, and it's been out in the media as well, there's another competitor in hard discount called [ 3A ], which recently announced that they opened their store #200. Look, as we've said before, we believe that the opportunity in hard discount in Perú is huge, correct? The informality in the country in food retail is still at 70%, 75% or the traditional trade represents 77% to 75%. So we believe there's huge opportunities, huge space, not only for us, but for an additional player as well. Operator: At this time, we will take the webcast questions. Unknown Executive: The first question, for Food Retail and Pharma, looking ahead to 2026, how do you see the impact of no longer having pension fund withdrawals in 2026, considering that SSS this quarter was under pressure without the withdrawals, especially in sales at Plaza Vea and Pharmacies. Is there any way to mitigate this effect? Marcelo Ramos: Thank you for the question. So I believe the question was whether we believe we can mitigate the effect of the eighth withdrawal that we have in this year or next year. Look, and to be pretty clear, so far, we haven't seen, honestly, in 2025, any material change in consumption related to the pension fund withdrawals. Based on the information we have, honestly, we don't necessarily expect the same effect in this withdrawal compared to the previous ones. Our understanding is that the rate of withdrawal is actually below prior years. And as you guys know, those that can actually withdraw or still have funds in their pensions are typically the higher socioeconomic level population, which don't necessarily consume more because they withdraw their funds. The reality is that subsequent pension funds have and will have lower marginal effect on consumption. We might see some improvement in demand probably in December of this year and earlier next year. But as I said, we don't necessarily anticipate a material change. And so we don't believe that 2026 should be materially affected in terms of a comparison basis to 2025 related to the pension funds. Unknown Executive: Next question. Looking at the net debt levels of Pharma, they are quite low. Do you think that the division could pay more dividends going forward? Marcelo Ramos: Thank you for the question. So the way we look at leverage and allocation of capital, essentially, we divide our leverage and credit in -- even though it's all under InRetail in 2 worlds, the real estate world, which is where the Shopping Mall segment is and then the consumer world. So the way we manage leverage, it's more at the consumer level than independently on each operating entity. And the way we've done that is essentially utilizing cash flows and using cash allocation between both Pharma and the supermarket segments. Given that it combines a high capital-intensive business, which is the supermarket, the Food Retail segment with a very low capital requirement business, which is the Pharma segment. So essentially, in next year and so forth, yes, of course, the Pharma business should pay more dividends, which should be utilized for the growth of the consumer world in particular. Unknown Executive: At this time, I'm showing no further questions. I would like to turn the call over to the operator. Operator: There appears to be no further questions. At this time, I would like to turn the floor back over to Mr. Vallejo for any closing remarks. You maybe muted. Juan Blanco: Sorry, thank you. Overall, as we mentioned, the third quarter was a challenging quarter given the high comparison basis in 2024, particularly affecting the beginning of the period. In this context, our companies continue to show resiliency. We progressed with our expansion plans and with the execution of initiatives that are laying the foundation for growth next year. With this, we are finalizing the third quarter earnings call. If you have any follow-up questions, please do not hesitate to contact any of us. Thank you very much for your participation. Operator: This concludes today's conference call. You may disconnect.
Jarle Dragvik: Good morning, and welcome to HydrogenPro's third quarter presentation. As usual, I'm accompanied by my excellent CFO, Martin Holtet, who will present the financial results. I will take you through the highlights and our recent developments, market updates and our partnership strategy. For those of you who do not know us yet, HydrogenPro is an OEM company, focusing on core technology, which is well suited for renewable energy sources. Our products are pressurized alkaline electrolyzers and a gas separation unit skid. Addressing market for decarbonization of selected large-scale industry segments, which are already using gray hydrogen or where decarbonization is hard to achieve through electrification. HydrogenPro is delivering to 2 of the largest projects in the world. Right now, a 220-megawatt project, which is starting up these days and 100-megawatt project, which we have delivered, all the main components, and now we are producing our third-generation electrodes in our new factory in Denmark. Few other electrolyzer OEMs are delivering to projects of the same scale. Of the recent highlights, our revenue last quarter ended at NOK 35 million. with a gross margin that improved to 55%. We continue our strong focus on technology improvement and expanding our electrode testing and development. The previous announced partnership with Thermax is on a good track. And also our work to establish a foothold in the Middle East is making very good progress. And last but not least, I'm very happy to announce the embarkment of a new Head of Sales and Commercial. Martin, please. Martin Holtet: Thank you, Jarle. Then I will walk you through the Q3 financials. So in the quarter, revenues came in at NOK 35 million, and those revenues are mainly related to deliveries on the ACES project. On top of that, deliveries of electrodes to the SALCOS project also then commenced in the quarter. Gross margin came in at 55% versus 22% in the second quarter. If you recall, in the second quarter, the gross margin was negatively impacted by some cost provisions on the SALCOS project in particular. So we could say that it's -- now we're back more to normalized levels. Personnel expenses was up NOK 4 million, and that increase is due to that we have made severance payments, which is then related to the reduced activities at our factory in Tianjin. The number of FTEs is considerably lower with a lower payroll now going forward. Other operating expenses increased by NOK 9 million in the quarter compared to the second quarter. And the main driver behind that is, first and foremost, project deliveries, where we then accrue more costs when we make a delivery, which is then -- also then sort of accounted for as -- in our financials with revenues and costs simultaneously. In addition to that, we had also some lower level of grants, which means we have then a reduction in the deduction of expenses compared to the second quarter. So the EBITDA came then in at minus NOK 45 million in the quarter. Then let's look into the development in the liquidity position in the quarter. The cash balance at the start of the first quarter was at NOK 107 million, and it ended at NOK 121 million. So the changes in the cash position were as follows: we had an EBITDA then of minus NOK 45 million, changes in net working capital of minus NOK 3 million. NOK 6 million was spent on investments, mainly in the production line in Denmark. So on the production line in Denmark, we have a total budget of NOK 60 million, where we, as of end of September, have spent NOK 42 million. And that line now is fully operational and -- meaning that the remaining investments, which we are now taking, will be then related to further improvements on the line. Financing of NOK 68 million, mainly reflects LONGi's equity investment that was settled in July this year. And last here, the backlog then decreased from NOK 284 million to NOK 252 million, a function of revenue recognition in the quarter and no order intake. On the cost side, so at the start of the year, we set a target to reduce our cost base with NOK 40 million of annual costs or call it roughly 20% of our cost base when we do not include project-related costs. We have now completed that cost program. The number of employees in the quarter were reduced from 147 at the end of the second quarter to 89 at the end of the third quarter, and that is mainly then due to a reduction of the staff in China. So please be aware that the cost program that excludes all project-related expenses, and it's important for us to keep now some competence -- the core competence in the organization in order to deliver on projects. One of our competitive advantages is to maintain a low cost base. And we will, of course, assess further measures going forward in line with the market activity. But our business model with strong partnerships enable us to have a global reach, win contracts on a global scale, but at the same time, remain a lean organization with a low cost base. So with that, I'll give the word to Jarle to give an update on the market. Jarle Dragvik: We have to ascertain that the year has been more challenging than what we saw at this time last year. It's a slower growth than most expected. Only 30% of green hydrogen projects has advanced -- have advanced. However, some completions and feasibilities we do see going forward to FEED and into approvals. But again, 90% of the 2023 and 2024 CODs projects are delayed with more than a year. But we can also see that the delays are getting shorter year-by-year, as we're coming up to 2025 and 2026. As said, we must ascertain that growth is slower than expected. But according to Global Hydrogen Review, the underlying growth is showing strong progress. The installed capacity grew with as much as 145% from 2024 to 2025. Much of the growth is driven by China, but we also see significant growth in other parts of the world, among others, HydrogenPro's project in Utah, United States. Another positive trend is the number of countries developing a hydrogen strategy is growing, which again supports continued growth in project development. So despite a slower growth than expected, a solid progress shows strong underlying fundamentals. Well, this is a busy slide, and I do not intend to go through this in detail, but it is available for the interested reader on our website. The table as such, is not exhaustive, but it is a snapshot of some selected regulations in markets which are in focus for HydrogenPro. And what we see is that more and more of regulations are introduced as well as adaptations of existing regulations like in Europe, where not all regulations have worked according to its intent, but now being adjusted or amended. IEA just issued its annual World Energy Outlook for 2025. Here, they expect the green hydrogen production to increase 70x during the next 10 years. Their forecast is based on adopted policies, proposed measures backed by a market and infrastructure support. The train might be rolling slower than previously expected, but it is for sure rolling. The stated policies are charting the path to a large potential of green hydrogen. And I am very pleased to now introduce Michael Caspersen as new CCO in HydrogenPro. Michael has a strong background, both technically and commercially. He comes from Boston Consulting Group, where he has led several projects along the hydrogen value chain. In addition to several years in Siemens, where he had a key role in starting up and commercializing their electrolyzer business. Michael holds a PhD in hydrogen technology and will, with his background and experience, bring great value to HydrogenPro's management team. His extensive technical and commercial experience will be instrumental in delivering our future growth. Erik Bolstad will continue assuming the role as Director of Partnerships and Key Account according to our strategy. The commissioning of the ACES project is progressing well. All trains have been through the initial start-up. A train here means 2 electrolyzer connected to one gas separation unit. And the electrolyzers are doing their job as the project goes into next phase of operation. On the SALCOS project, we are now delivering the Generation 3 electrodes from our new production line in Denmark. I was recently a few weeks back in India, and I met with several potential customers. And we are now building up a pipeline by submitting firm quotations to project owners, having won in India's hydrogen auctions. Also on the technology side, we are supporting Thermax in developing their gas separation assembly station, and we are progressing well on the Indian market rollout. Based on our strategy, we are also progressing on establishing a foothold in the Middle East. We see that Middle East, together with India, having the lowest cost for producing green hydrogen and are expected to have the lowest cost in 2030. On the way of getting a foothold, we are working together with selected partners and governments where we are building a good relations. As an example, we have appointed now Sheikh Rashid Al Maktoum's Sustainability Adviser, Claudia Pinto, as also adviser to HydrogenPro. The market is driving more and more in the direction of customers requesting total EPC and a complete solutions from power in one end of the plant to direct compressed gas in the other end. This is much driven by strong industrial project developers. HydrogenPro is focusing on core hydrogen equipment. But the customers, they are also occupied with hydrogen equipment and its performance, but then bundled in a total EPC. And together with partners, we fulfill the scope demand, meeting all customers' selection criteria. The electrode coating line in Aarhus is in full operation, producing electrodes for Salzgitter project. We have expanded our testing and development capacity and are now testing electrodes in various conditions, new enhanced materials and longtime effects, and it gives results. As we are developing new and even better coatings combined with technology and design for reducing shunt currents, we are testing out and proving better results with lower energy consumption for producing hydrogen. The goal is to get the power consumption with as little kilowatt hour per cubic meter produced hydrogen with as high current density as possible. The red line in the graph, which is already a very good compared to general market, but as you can see, with a shape which is common for electrolyzers. The bottom green line shows the results of our latest development, which we will now continue to develop for commercialization. The technology strategy and roadmap is to continue to reduce power consumption, commercialize the 30-barg solution, lower the cost by reducing weight of the electrolyzer and optimize the hydrogen production train with increased current density. We have a clear and detailed plan for development and maintaining a forefront position technologically. During the year, projects in our pipeline have been postponed and with further delays. But the pipeline projects, they are being very robust with high-quality company and owners. In Europe, there is a strong traction together with ANDRITZ and JHK with projects ranging from 20 to 200 megawatts. They have been moved from 2025 FID, but now to 2026. Based on funding and regulatory compliance, we believe to see these materialize during next year. And also India, we are now seeing a buildup of a strong pipeline, which we expect some to FID in 2026. 2025 has been a slow year, but based on the pipeline projects, we are remaining optimistic for 2026. And with that, I thank you and invite Martin also for the Q&A session. Unknown Executive: Here comes some questions from the audience. The first one, why does Mr. Espeseth sell so much of his shares and stocks? Jarle Dragvik: We have no influence or saying on shareholders buying or selling shares. Obviously, we welcome every shareholder who is buying shares and are equally saddened with those selling, but there are several motivations for selling and buying shares. And obviously, we're also dependent on the volatility in the shares. To the explicit of Mr. Espeseth, that question has to be asked to him. But we know that, for instance, in Norway, we are burdened with what you call -- [ fortune ] tax, what we call it? Martin Holtet: Wealth tax. Jarle Dragvik: Wealth tax, thank you, which can be one reason, but this would be speculation from our side. I don't know his personal situation. Unknown Executive: What deliveries remain to ACES project, excluding the service agreement? And do you expect any deliveries to the project in Q4? Jarle Dragvik: Martin? Martin Holtet: No. So with regards to deliveries, of course, we are doing now some on-site work still. But as Jarle explained earlier today, the project is now soon to start up. And of course, then there will be sort of the -- call it, the final handover of the project to our clients from our side. But with regards to equipment, everything is delivered from our side. Unknown Executive: And is it possible to disclose how much of the order backlog that consists of the service agreement with ACES project? Martin Holtet: Yes. So we do not provide sort of a breakdown of the backlog on projects. But I think we have previously indicated some sizes of that. And the majority -- the far majority of the backlog is related then to the service agreement on the ACES project, while the -- call it, the other remaining part of the backlog is related now to the outstanding deliveries on or remaining deliveries on the SALCOS order, which is then the electrodes now being produced in Denmark. Unknown Executive: There are several questions regarding the LONGi partnership. So how is the partnership progressing? Jarle Dragvik: The partnership is progressing very well. We are in good discussions and planning of consolidation of the manufacturing capacity in China. We also have discussions on technology side and share of experience and also developing cooperation in other areas, but things like this does take time, but we have an excellent cooperation with LONGi. Unknown Executive: And one question is with all the future optimism and growth prospects you see, why are the insiders not buying stocks to show a commitment? Jarle Dragvik: Well, there are several reasons. First of all, there are some programs of options that has been running. Some has now, what do you call it, been running out in time... Unknown Executive: Expired? Jarle Dragvik: Expired. Thank you. And also, we are often confronted with positions of being an insider position. A small company like HydrogenPro with -- being negotiations with customers, future orders, it could be other strategic discussions, are limiting the windows for buying shares. Unknown Executive: And what would you highlight as the main explanations for the delays in FIDs in Europe? Jarle Dragvik: It's several, and I think we have touched upon it in also previous presentations -- previous quarters, but unclarity in regulations is clearly one major reason. Another reason is that it does take time to build the value chain. So the offtake side, which, again, also dependent on the regulation side has also caused delayed. And then we have had behind us, as we know, a period with high inflation and cost increase, increases in energy prices, which has made a lot of the project owners having to recalculate their investment projections and calculations. And all this together basically has caused much of the delays. Unknown Executive: And how are the contract values allocated between you and Thermax for potential orders in India under your current partnership? And would your electrolyzers carry the same pricing and margin profile as in other markets? Jarle Dragvik: Yes. Good question. Well, in terms of the revenue profile, I think we can say that it's a bit similar profile as you would see with our partner, ANDRITZ in Europe, where Thermax will take the full EPC and basically sell the total plant more or less in a turnkey setting. We will then sell our part of the equipment to Thermax. Now India is a very price competitive market, no question about it. We have yet to finalize, obviously, final contracts with customers in India, although we are in good discussions. But until then, we will see. But I think we have to be realistic to also see that India is competitive. Unknown Executive: And do you -- do the recent project awards in this market represent kind of early signs of recovery or green shoots in your opinion? Jarle Dragvik: Well, recent -- there has been some -- I don't know if the question refers to some of the announcements here in Norway. It's very small projects, although giving a positive sign that project owners are taking the steps toward FID. We see also same kind of movements on larger projects in some place of Europe and also other parts of the world that we have mentioned. So I think we see that project owners are getting more confident and ready to take FID. Unknown Executive: One big news is the recruitment of CCO. So what does this indicate about HydrogenPro's ability to attract strong competence? Jarle Dragvik: I think if you look at the recent recruitment, but also not just that, if you look at the recruitment we have done over the last 1 or 2 years, see that it's very high quality and good competence that we have been able to attract. And I'm very proud that a company like HydrogenPro is able to attract competence several people with PhD and also Masters, but also on the engineering side, commissioning engineers, et cetera, that we have attracted over the year shows that we are attractive. I think it also shows that a lot of people are still looking into -- going into sustainable energy and the green sector and wanting to make a better world and therefore, coming to companies like HydrogenPro. Unknown Executive: And some detailed questions about the projects. So how many projects with LONGi and the Thermax are in FID, if you are able to disclose? Jarle Dragvik: No, we do not disclose details of our pipeline. We will announce projects that's being awarded in due course. Unknown Executive: Okay. Jarle Dragvik: Thank you very much. Unknown Executive: Thank you. Martin Holtet: Thank you.
Operator: Hello, ladies and gentlemen. Thank you for standing by for RLX Technology, Inc.'s Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Today's conference call is being recorded and is expected to last for about 40 minutes. I will now turn the call over to your host, Mr. Sam Tsang, Head of Capital Markets for the company. Please go ahead, Sam. Sam Tsang: Thank you very much. Hello, everyone, and welcome to RLX Technologies Fourth Quarter 2025 Earnings Conference Call. The company's financial and operational results were released throughPR News Wire services earlier today and have been made available online. You can also view the earnings press release by visiting our IR website at ir.relxtech.com. Participants on today's Chief Executive Officer; Ms. Kate Wang, our Chief Financial Officer, Mr. Chao Lu; and me Sam Tsang, Head of Capital Markets. Before we continue, please note that today's discussion will contain forward-looking information made under the safe harbor provisions of the U.S. Private Securities Litigation Reform of 1995. These statements difficultly contain words such as may, will, expect, anticipate, aim, estimate, intend, plan, believe, potential, continue or other similar expressions. Forward-looking statements involve inherent risks and uncertainties. The accuracy of these statements may be impacted by a number of business risks and uncertainties that could can actual results to differ materially from those projected are anticipated, many of which are creators beyond our control. The company, it's affiliate, advisers and representatives do not undertake any obligation to update its forward-looking information except as required under the applicable law. Please note that RLX Technologies' earnings press release and this conference call will include discussions of unaudited GAAP financial measures as well as unaudited non-GAAP financial measures. RLX press release contains a reconciliation of the unaudited non-GAAP financial measures to the unaudited GAAP financial measures. For today's call, management will use English as the main language. We will also provide simultaneous interpretation on the Chinese line. Please note that the Chinese line is in listen-only mode and Chinese interpretation is for convenience purposes only. In case of any discrepancy, management statement in the original language will prevail. I will now turn the call over to Ms. Kate Wang. Please go ahead. Wang Ying: Thank you, Sam, and thank you all for joining today's call. This quarter, we once again delivered robust results in a challenging global environment. Our net revenue surged 49% year-over-year to RMB 1,129 million, with non-GAAP operating profit reaching RMB 188 million. This performance underscores the strength of our industry-leading portfolio and our excellent execution across international markets bolstered by a gradual recovery in Mainland China. It also validates the scalability of our globalization strategy and the outstanding technological innovation that secures our leadership in the e-vapor sector. Turning to Mainland China. Regulatory enforcement strengthened markedly, yield positive shifts in market dynamics. For intent, enhanced customers inspections have curtailed illegal returns of exported products, channeling customers back to legitimate brands from noncompliant alternatives during this quarter's modest Mainland China revenue recovery. That said, the persistence of an unregulated listed e-vapor market remains a significant headwind distorting competition and restraining volume recovery. Our revenue from Mainland China stands at RMB 320 million this quarter or approximately 13% of Q2 2021 level, illustrating the scale of ongoing challenges. True market order can only be achieved through consistent enforcement action particularly against illegal online sales. As a leading compliant player, we continue to advocate for strict enforcement and remain committed to providing adult smokers in China with a superior, diversified portfolio of quality tobacco alternatives. We are also advocating for regulatory adjustments around tobacco flavor formulation. This could align public policy with consumer preferences, helping to foster a more transparent orderly market. Internationally, our strategy continues to gain momentum with 70% to 80% of our revenues now derived from international markets. Amid various headwinds, including the big puff effect, disciplined execution, quality products and vape legal insights continue to drive success. Our new Asia Pacific franchise retail model exemplifies the strategic and execution excellence. By uniting independent vape stores under a cohesive brand to enhance retail execution, amplify visibility, and elevate user experience, we generated meaningful same-store sales growth. Furthermore, our robust R&D capabilities remain a core differentiators in international markets, enabling rapid innovation and local market adoption. Notably, our recent East Asia product launch that industry benchmarks of disposable e-vapor products for design excellence, spurring category growth and exceptional demand. Our expansion into adjacent categories with the [indiscernible] of our modern oral product further strengthen our portfolio and pipeline, unleashing growth potential as we capture demand from previously untapped user segment. Beyond APAC, Europe remains a critical growth market distinguished by regulatory maturity and involve user base. Our strategic equity investment in a leading European EV firm enhances our market intelligence and positions us to capitalize on future opportunities effectively. In the United Kingdom, where the government implemented a ban on this portable e-vapor product in June 2025, we demonstrated strong business adaptability. Through our proactive strategy to make migrate consumers to reusable and sustainable product format reinforced by robust retail execution and strategic category management. We not only safeguarded our market position but also sustain top line strength amid a sharp industry contraction. In summary, this quarter's results reflect our borrowing strength, resilience and leading innovation made a complex macro environment. We are building more than financial value. We are cultivating a global brand with quality and sustainable leadership. Looking forward, we remain confident in our ability to shape the smokeless industry and deliver lasting value to our stakeholders. Now I will hand it over to Chao for a detailed review of our financial performance. Chao Lu: Thank you, Kate, and hello, everyone. Before we dive into the financial details, please note that all figures I present today are denominated in RMB, unless otherwise stated. We are pleased to report another strong quarter marked by robust revenue growth and improved profitability. In quarter 3 of 2025, our strategic emphasis on international markets continue to drive exceptional results. Net revenues reached RMB 1.1 billion, reflecting impressive increases of 49% year-over-year and 28% quarter-over-quarter. Importantly, we reinforced our market leadership in core regions while proactively capturing organic growth and strategic investment opportunities. Selected Asian markets delivered strong organic growth fueled by successful product innovation and introductions, and effective local execution. Additionally, our investment in a premier European e-vapor industry, e-vapor company contributed significantly this quarter. Having consolidated this entity's financials since June, a full 3-month performance is now reflected in our results. Meanwhile, a mild recovery in Mainland China market provided a positive backdrop during this period. Let's turn to profitability. We further strengthened our profitability this quarter, a testament to our disciplined execution and operational excellence. Our gross profit margin expanded by 4 percentage points year-over-year and 3.7 percentage points quarter-over-quarter. This improvement was driven by the consolidation of our equity investment in the European market, favorable shift in geographic revenue mix and margin enhancements in all key international regions. Additionally, we achieved our eighth consecutive quarter of positive non-GAAP operating profit, reaching RMB 188 million. Our non-GAAP operating profit margin expanded by 6 percentage points year-over-year, reflecting both enhanced operating leverage and rigorous cost management. Looking ahead, we remain committed to driving further profitability improvements as we scale globally by relentlessly prioritizing operating efficiency and maintaining a lean organizational structure. Moving on to financial flexibility. We maintained our strong cash position supported by solid financial fundamentals and disciplined capital allocation. Our cash flow generated from operating activities surged in quarter 3, rising to RMB 358 million from RMB 157 million in the same period last year. This performance reflects our efficient working capital management, characterized by a healthy negative cash conversion cycle with inventory turnover days at 25, receivable turnover days at 11, and payable turnover days at 53. As of September 30, 2025, our total financial assets, including cash and cash equivalents, restricted cash, short-term bank deposits net, short-term investments net, long-term bank deposits net, and long-term investment securities net, stood at RMB 15.4 billion, approximately USD 2.2 billion. This strong liquidity position provides ample flexibility to pursue strategic investments that accelerate our global expansion and fuel innovation while also enabling us to enhance shareholder value through disciplined capital deployment and a sustainable return. That brings me to shareholder returns, which I believe is something that you are focused on. With a consistent disciplined capital allocation approach, we have returned nearly all of our non-GAAP net profit to shareholders through strategic share repurchases and dividends over the past 4 years. As of September 30, 2025, we have repurchased approximately USD 330 million in ordinary shares represented by ADS. For this quarter, we are declaring a cash dividend of $0.1 per ordinary share or ADS. Furthermore, since our IPO, including the cash dividend announced today, we have returned over USD 500 million to shareholders through repurchases and dividends. Our capital framework is purpose-built to support durable profit growth while maximizing long-term returns for shareholders, balancing reinvestment in strategic growth with responsible financial stewardship. In closing, this quarter's results are a clear testament to our outstanding execution and distinctive competitive advantages across global markets. We are not just navigating challenges, we are transforming them into opportunities through innovation and tailored local strategy. As we unlock new growth avenues, we remain focused on delivering sustainable value that benefits all stakeholders today and into the future. Thank you for your attention. We now welcome your questions. Operator, please proceed. Operator: [Operator Instructions] For the benefit of all participants on the call, if you will ask your question to management in Chinese, please immediately repeat your question in English. The first question today comes from Lydia Ping with Citi. Lydia Ling: Congratulations on the results. So I have 2 questions. And the first one is like as we now enter close to the year-end. So based on current progression in your international expansion. So could you actually share revenue outlook for 2026 for the company and also the industry? And also, could you also give us some breakdown for the international business, like how is organic growth in the third quarter? And for your invested European e-vapor business, so how did it perform in the third quarter? So this is my first question. And the second question is given that the e-vapor industry has matured, so what areas are prioritized in the R&D to sustain your growth and differentiation? Sam Tsang: Thank you, Lydia, for your questions. For the first question, let me address in 3 parts. Regarding 2026 revenue outlook, we are committed to expanding our brand footprint selectively across international markets, contingent on regulatory clarity and market readiness. Although the time remains fluid, we will maintain our disciplined strategic approach. We will share detailed plans as we finalize them in coming quarters. Regarding our third quarter 2025 international growth, our international revenue grew steadily and outpaced industry averages, driven by robust organic growth in the Asia Pacific region. This reflects the strength of our tailored product innovation and route-to-market strategy, enabling us to deepen market penetration and consumer loyalty. And finally, regarding our European investment performance, our invested e-vapor company in Europe has maintained operational stability despite recent regulatory challenges, including the U.K. disposable product ban. We are optimistic about our synergies and anticipate scaling this company as we advance market integration. Regarding your second question about product innovation and differentiation, amid a maturing industry landscape, we have sharpened our focus on meaningful product evolution that delivers value. Our R&D initiatives emphasize enhancing core user experiences, particularly in flavor of authenticy, device ergonomics and aesthetic design. We have optimized product performance through technological refinements and strengthen regional market responsiveness via localized flavor portfolio. This strategy culminated in a breakthrough product launched in East Asia this quarter, distinguished by innovative design and user appeal. We believe this R&D approach is foundational for sustained differentiation and long-term success. Thank you for your questions. Operator: The next question comes from Guo Yun with CITIC. Yun Guo: Thanks management. This is Yun Go from CITIC and congratulations to the results. My question is about the channel innovation in the select Asian market. Can the management elaborate more? Sam Tsang: Sure, definitely. Our channel innovation centers on transforming vape store experiences. Independent vape store dominates category sales but face branding inefficiencies. Through a franchise model, we provide renovation subsidies that upgrade store enhancement under unified branding. These initiatives have engaged over 450 partners in an East Asian country this year, driving significant revenue growth while enhancing our brand presence and operational control. Thank you for your question. Operator: The next question comes from Zhuonan Xu with CICC. Zhuonan Xu: This is Zhuo from CICC. My question is about our Europe business. First, could you give us some update on the U.K. with company integration? And what is the strategy for Europe further expansion? Sam Tsang: Thanks very much. Following the June consolidation, we are in the early stages of integration, currently prioritizing preservation of brand equity and operational strength. Our strategy is to transform the U.K. operations into a multi-rand retail distribution platform, leveraging supply chain and capital advantages to enhance efficiency. We are actively leveraging local expertise to expand channel development and product localization across Europe, while remaining open to strategic investments that we accelerate geographic and portfolio diversification. Thank you for your question. Operator: The next question comes from Ling Zhour with UBS. Unknown Analyst: Congratulations management for the strong results in Q3. So my question is, what is the current expansion status of the modern oral business? And what are the subsequent promotional strategies of RLX? Sam Tsang: Sure. Thank you very much, for your question. Modern oral is the smokeless industry's fastest-growing segments, reflecting a clear market opportunity. Our ultra-thin fast absorbent products launch in INTERTEC Germany, garnered strong industry validation. We plan to roll out this category in phases starting this quarter. At this stage, our near-term revenue expectations remain prudent as we build market data and consumer adoption. Thank you very much for the question. Operator: Due to time constraints, now I would like to turn the call back over to the company for closing remarks. Sam Tsang: Thank you once again for joining us today. If you have further questions, please feel free to contact RLX Technologies Investor Relations team through the contact information provided on the website or Piacente Financial Communications. Operator: The call has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the DPM Metals Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jennifer Cameron. Please go ahead. Jennifer Cameron: Thank you, and good morning. I'm Jennifer Cameron, Director, Investor Relations, and I'd like to welcome you to the DPM Third Quarter Conference Call. Joining us today are members of our senior management team, including David Rae, President and CEO; and Navin Dyal, Chief Financial Officer. Before we begin, I'd like to remind you that all forward-looking information provided during this call is subject to the forward-looking qualification, which is detailed in our news release and incorporated in full for the purposes of today's call. Certain financial measures referred to during this call are not measures recognized under IFRS and are referred to as non-GAAP measures or ratios. These measures have no standardized meanings under IFRS and may not be comparable to similar measures presented by other companies. The definitions established and calculations performed by DPM are based on management's reasonable judgment and are consistently applied. These measures are intended to provide additional information and should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS. Please refer to the non-GAAP financial measures section of our most recent MD&A for reconciliations of these non-GAAP measures. Please note that unless otherwise stated, operational and financial information communicated during this call are related to continuing operations and have generally been rounded. References to 2024 pertain to the comparable periods in 2024 and references to averages are based on midpoints of our outlook or guidance. I'll now turn the call over to David Rae. David Rae: Good morning, and thank you all for joining us. I'm proud to report that DPM delivered record financial results during the quarter, including record revenue, earnings and free cash flow, results that reflect reliable high-margin production from our portfolio and the strength of the current gold price environment. Highlights from the third quarter include solid production of 64,000 gold ounces and 7.8 million pounds of copper, continued strong margins with an all-in sustaining cost of $1,168 per ounce of gold sold compared to an average realized gold price of $3,635 an ounce. Record free cash flow generation of $148 million, which further strengthens our financial capacity to fund growth. During the quarter, we achieved a major milestone with the closing of the Adriatic acquisition, successfully bringing the high-grade Vareš operation into our portfolio and transforming our long-term production profile. I'm pleased to report that integration activities are progressing very well. From day 1, we focused on embedding DPM's health and safety practices at Vareš, including the well-being of our people, and this remains our top priority. We've also begun to transform training programs for local personnel and engaging with stakeholders, important steps as we build a strong foundation for long-term success. Looking ahead, we are advancing our priorities at Vareš, including driving the decline to the bottom of the ore body and advancing construction of the paste backfill plant. We're on target to achieve a ramp-up to an 850,000 tonne per annum rate by the end of next year. I'm also pleased to note that we're now expecting higher production at Vareš in 2026 than previously anticipated as a result of higher tonnes gold and silver grades compared to the Vareš PFS. We will provide a detailed update on our expectations for 2026, along with our 3-year outlook in February. Turning now to review our operations in more detail and starting with Chelopech. Chelopech produced 44,000 ounces of gold and 7.8 million pounds of copper with an all-in sustaining cost of $671 per ounce of gold sold. Cash costs of $63 per tonne of ore processed were on target for the quarter, reflecting Chelopech's track record of solid efficient operations, and the mine is on track to meet its 2025 guidance targets for 2025, subject to market dynamics. We continue to prioritize in-mine and brownfields exploration work to further extend mine life at Chelopech, targeting a 10-year plus reserve life. During the quarter, underground drilling was primarily focused on the Wedge Zone Deep target, which is located on the northern flank of the Chelopech mine concession, approximately 300 meters below existing mineral reserves. This newly discovered zone of high-sulphidation mineralization is presented as a zone of continuous high-grade mineralization over an interval of approximately 150 meters downhole and has been outlined in two close-spaced drill holes to date. Further drilling is in progress from multiple locations to better understand the extent of the mineralization. Production at Ada Tepe increased in the third quarter as anticipated, producing approximately 19,400 ounces of gold with an all-in sustaining cost of $1,030 per ounce of gold sold. Ada Tepe is on track to achieve its guidance for the year. Turning now to the Loma Larga project in Ecuador. I want to provide an update on recent developments and our path forward. At the end of September, we released the results of an updated feasibility study, which highlighted the potential for the project to deliver attractive returns. During the second quarter, we achieved a significant milestone with the issuance of the environmental license. This was the result of a rigorous process to ensure high Ecuadorian standards were applied to the development of the project. We're confident that our environmental management plan and robust environmental protection measures not only complied with those standards, but also reflect DPM's proven track record of responsible development and our commitment to international best practices. However, in October, we received notification from the Ministry of Environment and Energy that the environmental license for Loma Larga was revoked. We are evaluating all available options to preserve value and optionality for our shareholders, including assessing legal avenues. In line with our capital discipline, we're planning to minimize further spending on the project until this issue is resolved and have reverted back to our original guidance for 2025. We continue to focus on developing quality growth assets such as Coka Rakita. The feasibility study is advancing on schedule and on track for completion by year-end. We successfully completed all surface and underground geotechnical and hydrogeological drilling, and we're now moving the design forward to the basic engineering level. Planning for project execution and operational readiness is proceeding as planned, ensuring that we are well positioned for the next phase of development. As we noted in our news release last night, most of the baseline studies required for the environmental and social impact assessment have been completed. The Certificate of Resources and Reserves has been approved by the technical committee, and we look forward to initiating the Special Purpose Spatial Plan once approved to do so. Based on an updated permitting time line, we now expect mine construction to commence in early 2027 with first production of concentrate targeted for the first half of 2029. We are maintaining close and proactive engagement with the relevant authorities to support this permitting process, and we remain confident in the overall progress at Coka Rakita. Key technical work streams are advancing as planned, and our proactive stakeholder engagement continues to support our path forward -- sorry, our path toward receiving the necessary approvals and advancing development activities on schedule. We're closely monitoring permitting time lines and implementing mitigation measures to ensure that we're ready to move forward with construction as soon as approvals are in place. In terms of our exploration activities at the Rakita camp, we continue to be excited by the impressive drill results which are clearly demonstrating the existence of a large copper gold system analogous to other large porphyry skarn systems globally. Results from Dumitru Potok are continuing to confirm the presence of a large high-grade gold-silver skarn system -- copper-gold-silver skarn system, with the mineralization concentrated along both the eastern and western sides of an intrusion. In September, we released results from one of the most significant intercepts at Dumitru Potok to date with 132 meters grading over 3.9% copper. Down the same hole, there was a 20-meter gap and then another 76 meters at 2.47% copper equivalent. On the western side of the intrusion, we extended the widest extent of mineralization by approximately 200 meters to the south and drilling to date has outlined about 600 meters of strike length of high-grade skarn contact mineralization. We also continue to see strong results in the Rakita North, Frasen and Valja Saka prospects, all located within 1 to 2 kilometers from Coka Rakita. Located adjacent to planned Coka Rakita infrastructure, the Dumitru Potok has the potential to unlock additional value and growth potential for an already high-margin, high-return organic project. We are targeting resource estimates for the Dumitru Potok, Rakita North and Frasen targets by year-end and have increased our exploration budget as we continue to target high potential areas within the 6-kilometer trend that we have identified to date. Based on drilling to date, mineralization has been detected over a 1-kilometer strike length up to 300 meters vertically and up to 500 meters away from the intrusion. I want to pause for a moment in order to acknowledge the significant contribution Paul Ivascanu, our Vice President of Exploration, who tragically and unexpectedly passed away in October. Paul was more than a leader at DPM. His passion, mentorship, which developed an impressive exploration team and his unwavering commitment to our values has left a deep impression on all of those who worked with him. Under his leadership, our exploration team's efforts have significantly transformed the future of DPM, driving the discovery of Coka Rakita, Dumitru Potok and identifying many other opportunities. On behalf of all of us at DPM, I extend our deepest sympathies to his family and friends who we are keeping in our thoughts. I'll now turn the call over to Navin for a review of the financial results. Navindra Dyal: Thanks, Dave. I would also like to acknowledge Paul's contribution and our condolences to his family and his friends. Returning to our quarter results, I'll be touching briefly on the financial highlights for the quarter, provide an update on our guidance for the year and conclude with some commentary on our balance sheet. All of my remarks will focus on results from continuing operations, unless otherwise noted. Looking at our financial results. Third quarter highlights include revenue of $267 million, adjusted net earnings of $129 million or $0.73 per share, cash flow provided from operating activities of $185 million and free cash flow of $148 million. Overall, we saw record financial results during the quarter, which reflected our strong operating performance, the low-cost nature of our operations, a favorable commodity price environment and the initial contributions from Vareš following the closing of the acquisition of Adriatic on September 3 of this year. Looking at our earnings and cash flow in more detail. Revenue was $267 million in the third quarter, an increase of $120 million compared to 2024 due to higher realized metal prices and higher volumes of gold sold as well as the inclusion of $42 million of post-acquisition revenue from Vareš. Adjusted net earnings in the third quarter of $129 million or $0.73 per share increased by $83 million compared to the prior year due primarily to higher revenue, partially offset by higher mark-to-market adjustments to share-based compensation expenses, higher depreciation expense and a stronger euro relative to the U.S. dollar. Adjusting items for the quarter, not reflective of the underlying operations of the company include a $25 million noncash fair value adjustment on inventories at Vareš recognized in cost of sales and Adriatic acquisition-related costs incurred by DPM totaling $10 million. Cash flow provided from operating activities of $185 million for the quarter was higher than the prior year mainly due to higher earnings generated during the period and the timing of sales and payments to suppliers. Free cash flow, which is calculated before changes in working capital was $148 million for the quarter, an increase of $77 million compared to 2024 due primarily to higher adjusted net earnings generated in the quarter. Taking a look at our cost metrics. All-in sustaining costs per ounce of gold sold for the first 9 months of 2025 of $1,136 were 32% higher than 2024 due primarily to higher mark-to-market adjustments to share-based compensation expenses, lower volumes of gold sold and a stronger euro relative to the U.S. dollar, partially offset by lower freight charges. Mark-to-market adjustments to share-based compensation expenses resulted in an increase of $193 per ounce of gold sold compared to an increase of $43 per ounce of gold sold in 2024. We continue to expect our 2025 all-in sustaining costs to be between $780 to $900 per ounce of gold sold, keeping in mind that our all-in sustaining cost guidance remains subject to external factors such as mark-to-market impact of DPM share price as well as metal prices and foreign exchange movements relative to our guidance assumptions. In terms of our capital spending, sustaining capital expenditures of $9 million for the quarter were lower than 2024 due primarily to lower expenditures on mobile equipment at Chelopech as expected and lower deferred stripping costs as a result of lower stripping ratios at Ada Tepe in line with the mine plan. Growth capital expenditures of $10 million for the quarter, excluding $2 million of capital spending at Vareš were higher than 2024 as a result of costs related to Coka Rakita project being capitalized from the beginning of this year. Last night, we provided updated guidance for 2025, reflecting our success year-to-date with our exploration activities in Serbia. Based on positive results, exploration expenses are now expected to be between $49 million, $54 million, up $5 million. In July, we had increased our growth capital expenditures related to Loma Larga. However, following the revocation of the environmental license, we now expect 2025 growth capital expenditures for the project to remain at the original guidance range of $12 million to $14 million in 2025, and we plan to minimize spending at the Loma Larga project until the issue with the environmental license is resolved. Our 3-year outlook does not reflect the operating and financial results of Vareš as we expect minimal production for the balance of 2025, consistent with the Vareš Technical Report that we filed in June of this year. As the Vareš mine ramps up to achieving commercial production by the end of 2026, the mine's 2026 production is now expected to be better than previously anticipated with higher ore processed and higher gold and silver grades when compared to the Vareš Technical Report. We will provide an updated 3-year outlook for Vareš along with our corporate guidance in February 2026. We continue to maintain a strong balance sheet and cash position. At the end of the quarter, after spending $400 million in cash for the Adriatic transaction, $136 million to retire Adriatic's debt and a total of $137 million returned to shareholders through dividends and share buybacks under the company's normal course issuer bid, or NCIB, our consolidated cash position was $414 million. With our strong free cash flow generation, balance sheet, no debt and a $150 million undrawn revolving credit facility, we are in a unique position with the financial strength to fund our peer-leading growth pipeline, invest in compelling exploration prospects while continuing to return a portion of our free cash flow to our shareholders. In closing, we continue to deliver strong performance from our mining operations and continue our track record of generating significant free cash flow. We remain in a strong cash position and are focused on our growth. I will now turn the call back to Dave for his concluding remarks. David Rae: Thanks, Navin. This is an exciting time for DPM and our shareholders as we look to our future as a growing precious metals producer, offering a peer-leading development pipeline, a strong balance sheet and capital returns, all of which are underpinned by our exceptional operational track record. Our portfolio is generating solid consistent results, and we are very well positioned as one of the lowest cost, highest growth producers. We are generating strong free cash flow and delivering peer-leading returns to shareholders. We're focused on executing a safe, efficient ramp-up at Vareš. We're nearing completion on the Coka Rakita feasibility study. We have substantial financial strength to fund growth opportunities and exploration, and we are focused on executing our strategy to deliver above-average returns for our shareholders as a mid-tier precious metals company. DPM has a clear path forward, and we're very excited about our future. I'd now like to open the call for any questions. Operator: [Operator Instructions] And our first question comes from Fahad Tariq of Jefferies. Fahad Tariq: First on Vareš, you mentioned that you expect 2026 production to be higher than previously anticipated. I appreciate we'll get the guidance in the first quarter. But maybe just talk about where the higher tonnage is coming from. The higher gold grades and silver grades, I believe that's a function of probably resequencing and maybe ore sorting, but where is the higher tonnage coming from? What process improvement is leading to that? David Rae: Yes, there's nothing on ore sorting, just to be clear, in terms of our outlook. What it's coming from is we brought in our teams to work with the Vareš team that we've acquired. And we worked on what we can do during the course of next year, that primarily focused on development initially. And then as we open up the different ore bodies, what that then means in terms of our access to those ore bodies translating to tonnages, grades, but also including things like mine recovery, dilution and so on. As we've done that, we've recognized an ability to do more than was in the original plan in terms of copper and gold grades, silver grades and also tonnages. And a lot of that will come down to the efficiency. So this is based on progress that was made ahead of acquisition and in month 1 after acquisition as well as our assessment with the capital investments that we've been making that can increase the reliability, throughput rates and sort of online times that we can anticipate. So basically, it's relatively early still. But based on what we've seen so far, we are optimistic that the PFS has been conservative in terms of its outlook. Just the last comment. It doesn't mean that on day 1 in January that we start off out of the gate at the tonnage that we described and you just divide by 365. Of course, I know you realize that. But we'll give some indication of what that ramp is going to be during 2026. But you'll notice we've been quite deliberate about meeting the 850,000 tonnes rate in the last quarter of next year. Fahad Tariq: Okay. That's clear. And then maybe switching gears to Coka Rakita and the permitting. Can you just provide any additional color on the level of dialogue with the government? Maybe what led to the -- it's a slight delay, but what led to the slight delay in the time line? And yes, just anything else you're keeping an eye on? David Rae: So as you'll understand, we're actually busy completing the next phase of reporting with the technical report. So there's obviously a revision that comes in as part of that. So we've looked at the overall situation. Our ongoing discussions with the government are very fruitful. We're very happy with that. Our ongoing discussions with our stakeholders is the same. And we've just taken the view of where are we at this point and what do we anticipate and recognize that we needed to revise that guidance. So what we've done, we've added 4 to 6 months to that guidance at the moment. Basically, if we look specifically at what's going on, there was an activity in midyear where a number of the different ministries were involved with some technical experts, what we call the technical committee. They looked at the Certificate of Resource and Reserves, where we provide some fulsome disclosure and information, which allowed that technical group to be able to come to a conclusion. They supported the project and that decision then triggers looking towards a spatial plan, and we were just waiting for a confirmation that we could actually start to proceed with that. So in the meantime, none of these things happen as a start-stop sequence. We do preparation while we're waiting for these triggers to occur so that we're ready to engage fully in terms of -- we're not waiting for these things to happen before we get ready with all the information. So it is one of these situations where we continue to work with the authorities. We continue to provide the information provided and answer any questions that come up. But I would say that I'm very happy with those relationships that we have ongoing, and we are confident that we'll be receiving the SPSP within the near future, which will allow us to move this project forward. There's a number of different activities that have got to happen, but really, we're focusing on the ESIA baseline studies and the release of the EIA and the exploitation permit, which would then trigger the construction for Coka Rakita. So where we previously said that time line would be mid-2026, we're now saying early 2027. Fahad Tariq: Got it. And then maybe just a quick one for Navin. I think in the MD&A and in the comments, there was a discussion about the strengthening of the euro. Is there an FX strategy -- hedging strategy at the company? Navindra Dyal: We do have the ability to put on hedges. We actually have utilized, if you recall, we used to hedge the Namibian dollar when we have the smelter. We look at that periodically in terms of whether or not we should be hedging. Typically, what we've done is, though, is that when we have significant capital expenditures that, for example, in the upcoming capital spend for Coka Rakita, we might look to otherwise hedge the FX exposure related to that. But for ongoing business, especially when it comes to euro, you're looking at -- historically, I tend to look at gold and euro kind of moving in the same direction. So as the strengthening of the euro happens, you typically have the gold market kind of improving as well. So it acts as a bit of a natural hedge. So we kind of just kind of watch that. And then if there is any change to that assumption, then we might take some positions there, but typically not in the past when it comes to euro. Operator: And our next question comes from Wayne Lam of TD Securities. Wayne Lam: Maybe just a follow-up at Coka Rakita. Just wondering if there's any read-throughs or knock-on impact from Rio Tinto's mine being deferred in terms of permitting implications? Or do you guys see the two projects as fairly mutually exclusive? David Rae: Yes, we see them as mutually exclusive. Wayne Lam: Okay. Great. And then maybe at Ada Tepe, can you give us an update on the expected timing in terms of the wind down in operations? Is that still slated for midyear next year? Or is there any ability to extend out the operations incrementally given the higher gold price? David Rae: Yes. Thanks, Wayne. So we're still planning that we'll wind down mining and process operations in Q2 next year, no change to that. Sorry, -- so changing in gold price environment, does that mean that, that opens up the opportunity for other material to be brought in? No. Wayne Lam: Yes, exactly. David Rae: In terms of infrastructure, sorry -- thank you to your question. We still plan to obviously disassemble the main infrastructure, which is primarily around the process plants, so crushers, mills, other pumping, piping, buildings, this type of thing. Plan will be that we will start to disassemble that at the end of that period where we close the mine operations, close the process operations. And then we'll disassemble that and we'll refurbish it. A good part of that still at Ada Tepe and some part of that in Chelopech, and then it will be stored ready for movement to Coka Rakita. Basically, as we get the infrastructure in place and we have the civils ready to receive the equipment, it will be moved to time with that. Wayne Lam: Okay. But with the higher gold price, so there's no potential for further extension even with the higher gold price? David Rae: No. Wayne Lam: Okay. And then maybe just last one at Chelopech. Can you talk a bit about the cost pressures you're seeing there on the labor side? And if we think about the levy that was paid in Bulgaria in Q1, should we be thinking about something similar as we think about the year-end here, particularly with the stronger metals price environment? Or was that a one-off event? Navindra Dyal: Wayne, yes, we consider that -- starting with the last question first. That levy we're considering a one-off event. We've got no indications that would suggest that this would be repeated for next year. When it comes to pressures on labor, we have -- every 2 years, we have renegotiated agreements with our workforce. And we just completed one this year and hence, why we're seeing that kind of translate into this year's cost. We planned for this as well, and we take an appropriate amount in consideration to our budget. I think that's just something that we're seeing not just in Bulgaria, but elsewhere globally. I mean, I think labor is sticky when it comes to increases. And -- whereas we're seeing benefits elsewhere such as our freight costs, which have been reduced significantly over the past year, labor certainly is one that we continue to see increases there. But again, our workforce is extremely skilled, as you would appreciate in Bulgaria, and we consider that in the negotiations as well. Operator: [Operator Instructions] And our next question comes from Raj Ray of BMO. Raj Ray: And first of all, I'm deeply saddened to hear about the news on Paul. My sincere condolences to the entire DPM team. I've got a couple of questions. First up on Coka Rakita. With the feasibility study expected, Dave, is there any change of scope or anything you can highlight that we should be looking forward to? And also in terms of the reserves update, what is expected to be included in that? And secondly, on capital returns, it's probably for Navin. Is there a potential for a boost up in capital returns? We see in Q3, there wasn't any buybacks. So as we go into Q4, is there potential for boosting of capital returns? David Rae: Okay. Yes. Thanks, Raj. In terms of changes of scope, we've got the feasibility study coming out in the fairly near future. So I would suggest let's wait for that to come out. It gives you an awful lot more detail. But what I would say is we're very happy with the way that's progressing. No sort of nasty surprises with that. So -- and looking forward to really getting on with that construction. I think the one thing that we've seen sort of touched on, but perhaps maybe some still miss, I'll make this comment for everybody here that we alluded to the fact that having Vareš puts us in a very good position in terms of our operational readiness. So one of the things to keep in mind is we're testing things that we've developed at Chelopech at Vareš at the moment, which feeds into what is going on for 2026 in order to bring us to the production numbers that we have and the efficient numbers that we have, which we'll put out in February next year. That then translates into readiness for Coka Rakita. So there's also that dynamic. So earlier, Wayne asked about what's happening with the equipment and are we still going to move it. There's that dynamic coming in as well, which was not there when we did the pre-feasibility study. So our confidence is obviously increasing as we do more engineering, and you'll see that reflected in the pre-feas. Keep in mind, any significant changes we typically do ahead of pre-feas. And really, all we're doing is we're working through the sort of dynamics of the costing and increasing confidence between the pre-feas and the feasibility study. So at this point, no scope changes. Navindra Dyal: And Raj, I'll just address your second question on capital return. So in the third quarter, as you can appreciate, we were pretty busy wrapping up the acquisition of Adriatic for much of the quarter. We also ran into some -- we had some upcoming disclosures that occurred at the end of the quarter as it related to Loma Larga's technical report. And as you can appreciate also in the fourth quarter, we have a significant amount of news flow up and coming with the Coka Rakita technical report, the initial resources for the three deposits that will carry us through. So I would say that from a fourth quarter expectation around buybacks and the like, I think it would continue to be minimal. However, it remains a considerable implement in our toolbox here, and we definitely consider a return -- a healthy return of capital to shareholders important. And so while you may not see a significant amount for the remainder of this year, I think you can expect to see that we will revisit that next year. Operator: And our next question comes from Jeremy Hoy of Canaccord. Jeremy Hoy: Just a quick one for me. It's on Loma Larga. A lot of momentum building in Eastern Europe there. And clearly, Loma Larga becomes, I think, less critical overall to the story. But has there been any dialogue since the revocation of the environmental permit with the government or stakeholders? Or are you essentially at an impasse there? David Rae: What we've said is that we are engaging with stakeholders, and there will be a necessity to engage with the government. You'll understand that at the time, there was a number of things that were going on and the revocation came about at a time which is most disappointing given what happened with the EIA issue. And the clear demonstration from the environmental ministry that our standards were robust and in line with what was required for this project and would stand the test globally in any place that we operate. So somewhat disappointing that, that happened. And there were a lot of things that were going on at the time. It will be necessary for us to consider what our options are. But basically, we're assessing all of our available options to preserve the value and maintain optionality for our shareholders. And that includes evaluating legal avenues. And I think more than that at this point, I'm not really able to discuss. Operator: I'm showing no further questions at this time. I'd like to turn it back to Jennifer Cameron for closing remarks. Jennifer Cameron: Well, thanks, everyone, for joining us, and we look forward to speaking over the coming months and look forward to sharing some of our upcoming news flow with you all. If you have any further questions, please feel free to reach out. And thank you. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.