加载中...
共找到 25,618 条相关资讯
Operator: Ladies and gentlemen, thank you for joining us, and welcome to the Innate Pharma Third Quarter 2025 Business Update and Financial Results. [Operator Instructions] I will now hand the conference over to Stephanie Cornen, Vice President, Investor Relations, Communication, and Commercial Strategy at Innate Pharma. Please go ahead. Stephanie Cornen: Good morning, and good afternoon, everyone. Thank you for joining us for Innate Pharma Q3 2025 Business Update and Financial Results Conference Call. The press release and today's presentation are both available on the IR section of our website. Before we begin, I'd like to remind everyone that today's presentation includes forward-looking statements based on current expectations. These statements involve risks and uncertainties that could cause actual results to differ materially. To begin, I briefly cover today's agenda. Our CEO, Jonathan Dickinson, will discuss our strategic priorities and path forward. Then our CMO, Sonia Quaratino, will present clinical pipeline updates on IPH4502, monalizumab, and lacutamab. Afterwards, I will present the commercial opportunity for lacutamab before turning back to Jonathan with closing remarks, and we'll open the call for Q&A. With that, I'll now hand it over to Jonathan. Jonathan Dickinson: Thank you, Stephanie. Good morning to those joining from the U.S., and good afternoon to our European audience. Turning to Slide 5. I would like to start with the strong momentum around lacutamab, supported by meaningful regulatory progress and new commercial opportunity insights. A few days ago, we received FDA clearance to initiate the TELLOMAK-3 Phase III trial in cutaneous T-cell lymphoma. This is a major milestone for the program, positioning lacutamab to advance towards potential accelerated approval in Sezary syndrome, supported by robust Phase II data. We expect the study to initiate in the first half of 2026, with filing anticipated following achievement of key enrollment milestones. Our CMO, Sonia Quaratino, will provide additional color on the Phase III trial and the regulatory path. In parallel, we hosted a well-attended lacutamab KOL event in October, featuring leading experts in CTCL. The discussions highlighted the continued unmet medical need for new, effective, and well-tolerated therapies in this space and reinforced lacutamab's unique positioning. During the event, we also presented new real-world claims data underscoring the commercial opportunity in both CTCL, which we believe further strengthens the value proposition for this program. Stephanie Cornen, our Vice President of Investor Relations and Commercial Strategy, will review the real-world evidence-based commercial opportunities for lacutamab towards the end of our call today. Moving to Slide 6. As you know, Innate Pharma's core strength lies in applying our deep scientific expertise to advance life-enhancing cancer therapies. Through our years of pioneering work in antibody engineering, we have built a differentiated high-value clinical pipeline supported by compelling data, positioning us to deliver treatments with truly transformative potential for patients and for all our stakeholders. Moving to Slide 7. As we look ahead, our path forward is clear and focused. As you remember, at our half-year results, we announced the strategic decision to focus our investment on what we believe are our highest value clinical assets, including IPH4502, lacutamab, and monalizumab, to maximize impact and value creation. In parallel, we are advancing our next generation of ADC programs through research, building the foundation for future innovation. Finally, we are streamlining the organization to ensure we remain fit for purpose and aligned with our strategic objectives. I'll now hand over to Sonia, who will take us through the clinical pipeline progress. Sonia? Sonia Quaratino: Thank you, Jonathan. In this update, I would like to highlight the 3 clinical programs we believe hold the strongest potential to create significant value for Innate, IPH4502, monalizumab, and lacutamab. Starting with IPH4502, our differentiated ADC directed against Nectin-4. As a reminder, I would like to pinpoint the preclinical model where IPH4502 has demonstrated the 2 major feature of differentiation to an approved drug such as enfortumab vedotin. The first one is related to the payload of IPH4502, which is exatecan, a potent topoisomerase 1 inhibitor. Exatecan can induce a bystander effect, a phenomenon where it kills neighboring cancer cells in addition to the targeted cells. The exatecan is released from the antibody drug conjugate in the tumor and diffuses into nearby cells. This is beneficial for treating heterogeneous tumors where cancer cells may not all express the target antigens. The second point of differentiation is that in preclinical models, we have demonstrated that IPH4502 can induce potent tumor regression in PADCEV MMAE-resistant models, allowing us to target tumors that are or have become resistant to PADCEV. We have, therefore, built the study design of the first-in-human trial on the basis of these preclinical findings. First, we look for signals in tumor types where Nectin-4 expression may be low or heterogeneous, opening to a very broad opportunity. Second, we enriched the study of urothelial cancer patients in the post-EV setting, where IPH4502 may overcome resistance to EV. This represents an area of high unmet need with no approved drugs and the potential to move rapidly into later-stage development. With this hypothesis, the emerging clinical data will indicate the indication where IPH4502 can make the greatest impact. The first-in-human trial is guided by an adaptive design, and the main objective of this study are to assess the safety, tolerability, and preliminary efficacy of IPH4502 in patients with advanced solid tumors known to express Nectin-4. Enrollment in the dose escalation part of the study is progressing very well. We started the trial in January, and we have now reached already a pharmacologically active dose, and we have started to see early signs of clinical activity. We remain on track to complete the dose escalation by the first quarter of 2026. And after that, the dose optimization part of the study should commence. Now let's turn to Slide 10 to provide an update on monalizumab, which continue to advance in collaboration with AstraZeneca. The double-blind PACIFIC-9 Phase III trial aims to demonstrate improved progression-free survival of durvalumab in combination with either oleclumab or monalizumab as compared to durvalumab with placebo in patients with unresectable Stage III non-small cell lung cancer who have not progressed after platinum-based chemo radiotherapy. The PACIFIC-9 study builds on very strong scientific rationale, supported by earlier studies such as COAST, NeoCOST and NeoCOST-2 trials. This is a large global study that has fully completed enrollment with 999 patients randomized 1:1:1 across the 3 treatment arms. The primary endpoint is progression-free survival with efficacy comparisons for both combination arms versus durvalumab monotherapy. The study is fully recruited, and the independent data monitoring committee recently recommended continuation of the trial following a preplanned analysis, an important validation of the program progress. And we look forward to the data expected in the second half of 2026. Now moving to Slide 11 and to lacutamab. As we highlighted during our KOL event last month, our development strategy is designed to enable a stepwise approach, beginning with Sézary syndrome, an indication with the highest unmet medical need, especially in patients who have progressed after mogamulizumab, then progressing with a larger opportunity in mycosis fungoides, and finally, expanding to peripheral T-cell lymphoma. We are preparing a confirmatory Phase III study in an FNSS, which, once underway, opens the door for our filing of the biologics license application for Sézary syndrome post mogamolizumab based on the existing Phase II TELLOMAK data. This represents a potential path to accelerated approval with a key milestone expected in 2027. The confirmatory Phase III will also include patients with mucosis fungoidis, the largest CTCL subtype, where there remains a clear need for disease-modifying therapies. These results of the confirmatory Phase III trial will support a full approval in 2029 in NF and then full approval for Sézary and help establish lacutamab as a game changer in the therapeutic landscape across CTCL. Our goal is to position lacutamab within the NCCN guidelines as a preferred systemic therapy, not only for late-stage Sézary and mucosis fungoides, but ultimately for earlier-stage CTCL patients who continue to face limited treatment options. Now beyond CTCL, we are also advancing development of lacutamab in peripheral T-cell lymphoma, a particularly aggressive lymphoma subtype with few effective treatment options, and an ongoing Phase II study will help defining lacutamab role in this patient population. Turning to Slide 12. I would like to remind the data that will form the basis for the accelerated approval in Sézary post mogamulizumab. They are the long-term follow-up data from the TELLOMAK Phase II trial that was presented at ASCO 2025. Sézary is an aggressive subtype of CTCL. And post-mogamulizumab, there are no approved drugs that have demonstrated clinical efficacy. In heavily pretreated patients, all pretreated with mogamolizumab, lacutamab demonstrated an impressive global overall response rate of 42.9% with a median duration of response of 25.6 months. The median progression-free survival for the whole population was 8.3 months. Of note, lacutamab was very well tolerated with very favorable safety profile, underscoring lacutamab potential to deliver a meaningful clinical benefit in this aggressive and difficult-to-treat population. Turning now to mycosis fungoides. Long-term follow-up data from the TELLOMAK Phase II trial showed that lacutamab achieved a global overall response rate of 19.6% with consistent activity observed regardless of KIR3DL2 expression level. The median duration of response was 13.8 months, and median progression-free survival was 10.2 months, again, with no difference between the 2 subgroups. Also in MF, lacutamab was very well tolerated with an excellent safety profile that supports its potential use for long-term systemic therapy at an early-stage disease. Turning to the clinical development plan for the confirmatory trial. This is an open-label multicenter randomized comparative Phase III trial evaluating lacutamab in patients with cutaneous T-cell lymphoma who have failed at least one prior line of systemic therapy. In alignment with the FDA, the study includes 2 independent cohorts with distinct statistical analysis plans, one for Sézary syndrome and the other for mycosis fungoides. In the Sézary syndrome cohort, patients who have failed at least one prior systemic treatment, including mogamulizumab, will be randomized 1:1 to receive either lacutamab or Romidepsin, which is currently the only FDA-approved option for patients who progress after mogamulizumab. The primary endpoint is progression-free survival assessed by blinded independent central review, and the key secondary endpoint is overall survival. In the mycosis fungoides cohort, patients with Stage Ib to Stage IV disease will also be randomized 1:1 between lacutamab and mogamulizumab, which represent the current standard of care for this population. Here again, the primary endpoint is PFS, weak pruritus, and quality of life as a secondary endpoint. As the Sézary syndrome and MF study subpopulations are considered as independent cohorts, answering to distinct objective sample sizes are estimated to meet the primary endpoint in both SS and MF cohorts independently. From a regulatory standpoint, we have received clearance from the FDA about this clinical trial protocol. And therefore, we are well placed to initiate the Phase III trial in the first half of 2026. And with that, I will now hand over to Stephanie Cornen, who will walk us through the commercial opportunity for lacutamab and how we plan to unlock its full value across CTCL and beyond. Stephanie Cornen: Thank you, Sonia. Now looking at commercial opportunity an important parameter is about eligible population. CTCL is aware of this diseases and assessment incidence and prevalence remain a challenge, potentially underestimating its true burden. During the occurring event, associates presented the most up-to-date source based on U.S. TELLOMAK data Versus CTCL Patient population, which highlights the higher incidents and prevalence than previously described. So if we look into each of these opportunities, starting with Sézary syndrome, as discussed it should release near-term in U.S. based on the Phase II TELLOMAK data. Sézary syndrome may affect around 3x more patients than previously believed, with an annual incidence was around 300 patients, prevalence around 1000 overall Sézary patients. And according to U.S. TELLOMAK data, approximately 300 patients treated with mogamulizumab annually. Importantly, these opportunities clearly define and actual of approximately concentrating in special and referral centers which accessible with a focused commercial footprint. Our launch strategy will therefore target specialized centers already managing these patients, allowing for a near-term and derisk opportunity in the U.S. Now moving to mycosis fungoides, which represents a larger opportunity. Here again, the TELLOMAK data shows a higher incidence than previous reported with approximately 3,000 U&M patients diagnosed each year in the U.S., and about one in four of these patients received systematic therapy. The goal of our Phase III, TELLOMAK-3, is to establish lacutamab as the new second standard of care, and our primary market research supports the view that physicians would adopt lacutamab as a second line of treatment base. And again, importantly, Sézary syndrome enable a seamless expansion into mycosis fungoides since both indications are managed by sustainable network of prescribers. So in summary, we see Sézary syndrome as our first focused entry point into the CTCL market in the U.S., a manageable and concentrated launch opportunity that will also serve as the foundation for a broader commercial in MA. Turning to Slide 17. This slide illustrates the market potential for lacutamab in CTCL and how we plan to expand over time through a stepwise strategy that Sonia previously described. We expect an initial opportunity of up to $150 million in the U.S. with accelerated approval in Sézary syndrome, where the patient population is small but highly concentrated and addressable through a focused commercial footprint. As lacutamab moves into mycosis fungoides and secures full approval the opportunity could expand to around $500 million across the U.S. and Europe. And beyond that, we see additional upside as part of our life cycle management strategy. Lacutamab offers important standard care for early-stage patients, a segment where systemic treatments are less used today. And the unique profile of lacutamab that combines tumor targeting activity, improved quality of life, and a favorable safety profile makes it a compelling candidate to unlock earlier use of systemic therapy. While the Phase III trial is designed to support registration across all stages of Innate in the second-line setting, we see a broader opportunity in addressing the Innate medical need of patients who are currently managed only with skin therapy and may benefit from lacutamab. In short, lacutamab offers a clear derisk path to commercialization starting with Sézary syndrome, expanded into larger CTCL segment over time, and then an even larger opportunity in PTCL. And now I'll hand the mic to Jonathan for closing remarks. Jonathan Dickinson: Thank you, Stephanie. As part of our focused strategy, we are advancing 3 high-value clinical assets that form the core of Innate's portfolio. Starting with IPH4502, our novel and differentiated Nectin-4 ADC, we see a significant opportunity in bladder cancer, particularly in the post-PADCEV setting, as well as across other solid tumors with low to medium Nectin-4 expression. Enrollment in the ongoing Phase I trial is progressing well, with completion expected by late 2025 or early 2026. We've now reached a pharmacologically active dose level where we're beginning to see encouraging early signs of clinical activity. Monalizumab, partnered with AstraZeneca, continues to advance in Phase III for unresectable non-small cell lung cancer, where enrollment in the PACIFIC-9 trial is now complete. Top-line data are expected in the second half of 2026, and this collaboration remains a key value driver with up to $825 million in total milestones and $450 million already received to date. And with lacutamab, our anti-KIR3DL2 antibody for cutaneous T-cell lymphoma, long-term follow-up from the TELLOMAK Phase II study has demonstrated meaningful and durable clinical benefit in both mycosis fungoides and Sézary syndrome, leading to breakthrough therapy designation in Sézary syndrome. As you know, we've now received FDA clearance to proceed with the confirmatory Phase III TELLOMAK-3 trial, and we're on track to initiate in the first half of 2026, supporting the potential for accelerated approval in Sézary syndrome. To wrap up today's call, I'll remind you that we have several value-driving catalysts ahead across Innate's portfolio. In the first half of 2026, we expect Phase I data from IPH4502, our Nectin-4 ADC program. This will be followed in the second half of 2026 by data from the PACIFIC-9 Phase III trial of monalizumab in collaboration with AstraZeneca. Looking beyond to 2027 and onward, we anticipate multiple milestones, including a potential accelerated approval for lacutamab in Sézary syndrome, the monalizumab BLA filing, and IPH4502 expansion phase data. Finally, we ended the third quarter of 2025 with a cash position of EUR 56.4 million, providing runway through the end of Q3 2026 to deliver on these key milestones. Operator, we can now open the Q&A session. Thank you. Operator: [Operator Instructions] Your first question comes from the line of Christopher Liu with Lucid Capital Markets. Christopher Liu: So I have 2. For the first one, what would you need to get done in the near term for the potential lacutamab commercial launch in Sézary syndrome? And for the second question, for IPH4502 and the upcoming data set, could you give us a little bit more color on what we can see at that readout? Jonathan Dickinson: Okay. Christopher, I can take that. So from a commercial perspective, I think one of the key things that we would need to get done prior to Sézary launch is the work to ensure that lacutamab will be included in the NCCN guidelines. So what we're aiming to be able to do, and we've already started the discussions on this with KOLs, is to ensure that when the BLA is approved for Sézary, that we basically already have lacutamab included in those NCCN guidelines for Sézary syndrome, but also for mycosis fungoides. So that will be one of the key pieces of work that we believe we will need to have in place prior to the BLA. And then IPH4502, in terms of what we hope to have next year, I think we've communicated this on a number of occasions, but what we're aiming to have is a cohort of patients in the PADCEV resistant setting, probably 10-plus patients where we will hopefully see an interesting response rate and be able to show clinical activity as well as safety data. We also hope to have data in 1 or 2 other tumor types in a similar perspective. So 10-plus patients in 1 or 2 tumor types. What we're doing with the study, and I think Sonia mentioned this earlier, is we've set up the study in a way where we can basically chase signals. We can backfill cohorts. So when we see a signal in a particular tumor type, our objective is to backfill and to substantiate that signal. So hopefully, then in 1 or 2 other tumor types, you would have 10-plus patients. And again, hopefully, an interesting response rate that allows us to then move forward into the next stages for the development of the product. Thank you for the question, Christopher. Operator: Your next question comes from the line of Justin Zelin with BTIG. Justin Zelin: You've indicated that FDA views an accelerated approval pathway here for lacutamab as viable once the Phase III study is underway. Could you just expand whether FDA is looking for any additional supplementary analyses beyond the existing Phase II data set as part of that accelerated approval package? And then just second, based off of the feedback from the October KOL event. Do you have a sense of growing momentum from the KOLs for lacutamab to become the preferred second-line option here? And should we expect mogalizumab to naturally move later in the treatment paradigm? Jonathan Dickinson: Okay. So addressing the first part of your question, Justin. So from an FDA perspective, they have not given us an indication that we would require any further substantial analysis. So basically, the BLA approval will be based off the data we have in hand today from the TELLOMAK study and the results that we've already presented that led to the breakthrough therapy designation. So we see that as reasonably straightforward. The key thing to unlocking the BLA submission here is having the confirmatory study up and running and to have established an enrollment trajectory into that study that would satisfy FDA that this study will complete and will deliver the confirmation of the accelerated approval. So that's something that we're obviously working very hard to be ready to do that ASOP because that counts down the -- it's the countdown to the submission of the BLA. We hope to be able to initiate the confirmatory Phase III study sometime around the middle of 2026. We would anticipate potentially a 6-month enrollment period to get the right trajectory to satisfy FDA requirements. And then that would allow us to submit the BLA sometime in early 2027, leading to FDA approval of the BLA, hopefully, sometime in the second half of 2027. So yes, so that hopefully answers the first part of your question. Then in terms of KOL feedback, we do see very good KOL feedback on lacutamab, and we do sense a building momentum around that. I think if you were attending the KOL event, and I think the KOL used the word game changer, which was, I think, something that summarizes what lacutamab can potentially bring not only to Sezary syndrome, but also to mycosis fungoides. I think there's particular excitement around basically what can happen in MF. If we look at the 5-year survival, of patients with MF, we do see a dramatic decrease in 5-year survival when patients progress from Stage 2a to Stage IIb, it drops from 78% to 47%. And we know that physicians want to be able to prevent that progression. And lacutamab, based on its tolerability profile and the excellent quality of life data for patients, is incredibly well placed to be able to slot into that area and be able to treat those patients at Stage b, Stage 2a, and hopefully prevent that progression of the patients to Stage Ib when you see the reduction in 5-year survival. So that's clearly, I think, factoring into the thinking of KOLs and how they will use this drug. So I think particularly in MF, we anticipate that lacutamab will be used ahead of Moga. In Sezary, we're studying post-Moga. So our expectation is that the product will be used post-Moga. Based on the excellent safety profile, I think some physicians may choose to use it in the first-line setting off-label as well. But our main assessment and where we're targeting for positioning the product is post Moga and initially in the Sezary syndrome indication. Hopefully, I've answered your question. Justin Zelin: If I could just fit in a quick question with a potential near-term approval here, could you just comment on your CMC readiness as far as commercial scale manufacturing, PPQ run stability work for lacutamab? Jonathan Dickinson: Yes, I can comment on that. I think the answer is we're in a good place. We're basically ready to go. That won't be on the critical path to submission of the BLA. So we've ticked that box, and we're ready to go from that perspective. Operator: Your next question comes from the line of Swayampakula Ramakanth with H.C. Wainwright. Swayampakula Ramakanth: So I appreciate your comments on how you plan to file the accelerated approval application by the end of 2026. So what -- does this mean you're still hoping to get a partner on board? And in your previous conversations with potential partners, how much stress was there in terms of getting a clear signal from the FDA and a protocol blessed by the FDA? Jonathan Dickinson: Thank you for the question, RK. So in terms of partner discussions, having FDA acceptance of the protocol was an important consideration. It was potentially one of those boxes that we needed to tick for a number of them for us to be able to progress with those discussions. So yes, it was an important clearing event to be able to move forward with some of those partnering discussions. In terms of partnering, commenting on partnering, I think what the company is looking to do is basically to keep our options open. We basically were continuously evaluating a variety of financial options to ensure we're appropriately positioned to support our growth initiatives and create long-term shareholder value. And we remain disciplined and opportunistic in our approach to capital management, and we'll pursue the opportunities that basically support where we're going here. So I think it's important that we keep the options open at this particular stage, particularly with the exciting news that we've seen more recently with lacutamab and the great path that we have forward. Swayampakula Ramakanth: Can I ask 2 quick follow-ups, one on 4502? What specific safety signals would you be looking out for, especially when you would like to see this differentiated against other TOPO1 inhibitor ADCs? And the second question is, so what's the thought process now for the ANKET platform, especially them taking a little bit of a backseat? What's the long-term plan for that platform? Jonathan Dickinson: So maybe I can take the first question, and then I will ask Sonia to take the question on the safety signals that we're looking out for. So -- on the ANKET platform, we are basically waiting -- we're actually finalizing the study for IPH6501. I think we mentioned previously that we've completed the dose escalation phase of the study, and we were basically exploring the MTD at this stage. We're still in the process of doing that. And we'll basically make any future decisions based on -- for IPH6501 based off clinical data. And that clinical data should come sometime in the first half of next year, and then we will be able to make the evaluations and the next steps. In relation to IPH6101, we have now basically have most of the clinical data for the Phase I and Phase II returned to us from Sanofi. So we're now in the process of evaluating that data and trying to understand what next steps could be for the ANKET platform. What I would really like to clearly emphasize, though, is from a prioritization perspective, we're putting most of our time and effort behind IPH4502, behind lacutamab and behind monalizumab, and making sure that we advance those 3 assets as quickly as possible because we believe we have the highest chance to win for those 3 assets. Sonia, if you can take the question on the safety signals we're potentially looking out for? Sonia Quaratino: Well, in terms of signal for IPH45, we try to establish a very well-tolerated and relatively safe drug. And in particular, we try to, of course, avoid all the MMA-specific adverse events like peripheral neuropathy, that is very often not reversible, and ocular toxicity. And so far, we did not see many adverse events or a specific trend in that respect. So the plan is to provide clinical efficacy in, let's say, unusual indication or indications where the Nectin-4 expression is not as high as urothelial cancer, with a very good benefit-to-risk ratio matched by a favorable safety profile. It's difficult to say a prior what you want to see, yes. Operator: Your next question comes from the line of Diana Graybosch with Leerink Partners. Daina Graybosch: Yes, Bill on for Dana. I change it up a little bit, just asking about monalizumab. So I guess I'm just curious, can you just give us some, I guess, expectations for the readout in the second half of '26? Sort of what gives you the confidence that monalizumab, I guess, and durva can actually win out against durva? Jonathan Dickinson: Yes. So maybe I can take that question. So basically, we have good expectations for the PACIFIC-9 study. And what that is based on really is the COAST study, which was the Phase II study, a randomized Phase II study that was replicating the PACIFIC-9 setting. If you look at the results and the Kaplan-Meier curves from that study, they are very interesting. When you added monalizumab to durva, you basically added 12 months median PFS on top of durva. So if we retain a proportion of that effect size going into the PACIFIC-9 study, there's a very high chance that we will have a positive study. So that gives us a, I would say, a relative sense of confidence that this will be a positive study. Hopefully, that addresses your question. Operator: There are no further questions at this time. I will now turn the call back to Jonathan Dickinson, CEO, for closing remarks. Jonathan Dickinson: Okay. I'd like to thank everybody for attending our quarterly earnings call. Thank you for your time and attention, and I wish you a great rest of the day. Thank you very much. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Good morning. Thank you for waiting. Welcome to the earnings release call of Ultrapar to present the results referring to the Third Quarter '25. Our presentation will be conducted by Mr. Rodrigo Pizzinatto, CEO of Ultrapar; and by Alexandre Palhares, CFO of Ultrapar. The Q&A session that will follow will also have Mr. Leonardo Linden, CEO of Ipiranga; Mr. Tabajara Bertelli, CEO of Ultragaz; and Mr. Fulvius Tomelin, CEO of Ultracargo. This call is being recorded and will be accessed later through the website, ri.ultra.com.br. After the initial presentation, we are going to start the Q&A session where further instructions will be provided. I would also like to tell you that the conference is being conducted in Portuguese and there is an option for simultaneous translation by clicking interpretation. For those listening to the earnings release call in English, there is the option of muting original volume. The presentation will be shown in Portuguese and there is a version in English to be downloaded through the company's website and through the chat. Before proceeding, we would like to mention that forward-looking statements made during this call refer to business perspective of Ultrapar. Forecast and operating and financial goals are based on beliefs and assumptions of the company management and on information currently available. Forward-looking statements are no guarantee of performance. They involve risks and uncertainties because they refer to future events and therefore, depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions and other operating factors can also cause results to differ materially from those expressed in such forward-looking statements. I would like now to hand the conference over to Mr. Rodrigo Pizzinatto, who will start with the presentation. Mr. Pizzinatto, you have the floor. Rodrigo de Almeida Pizzinatto: During this quarter, we recognized BRL 238 million in extraordinary tax credits at Ipiranga, resulting from the remaining portion of historical ICMS tax credits included in the PIS/COFINS calculation basis. Furthermore, we made significant progress in the fight against illegal practices in the fuel sector. We have been following with optimism that work carried out by the authorities in recent months, especially the Carbono Oculto Operation at the end of August. It represents a historic milestone in this fight, reinforcing the need for stricter legislation to fight crime and the legalities in the sector. We continue to support authorities and regulatory bodies in fighting crime, strengthening market integrity and ensuring fair competition. Another highlight of the quarter was the rapid reduction in leverage. After assuming control of Hidrovias and starting to consolidate its results in the second quarter, leverage stood at 1.9x. With the strong cash generation in this quarter and Ultrapar's EBITDA growth, we reduced leverage to 1.7x even after paying BRL 326 million in dividends in August. We also continue to advance our growth and strategic positioning agenda. In October, we completed the expansion of the Ultracargo terminal in Santos, adding 34,000 cubic meters of storage capacity. On November 1, we completed the sale of Hidrovias Cabotage operation for BRL 750 million (sic) [ BRL 715 million ] which will enable Hidrovias to focus on more synergistic and complementary businesses while strengthening its financial position. We announced the signing of an agreement to acquire a 37.5% stake in Virtu which operates in the LNG logistics for BRL 102 million. This transaction is aligned with our strategy to invest in sectors where Ultrapar can contribute to value creation with high growth and profitability potential. We also received CADE's approval for the LPG terminal in Pecém for Ultragaz in partnership with Supergasbrás. This project reinforces our commitment to safety and efficiency in LPG supply in the Northeast and North regions of Brazil. Finally, for those who were unable to attend Ultra Day 2025 held in September for the first time at Ultrapar's headquarters, please note that the presentation is available on our Investor Relations website. I will now turn the call over to our CFO, who will walk you through the quarterly results. Thank you. Alexandre Palhares: Thank you, Rodrigo. Good morning, everyone. Before starting, I would like to remind you of the reporting criteria and standards used in this presentation. Now let's move on to the results. Ultrapar's adjusted EBITDA was BRL 1.9 billion, including the recognition of BRL 185 million in extraordinary tax credits at Ipiranga representing a 27% increase year-over-year. Recurring adjusted EBITDA totaled BRL 1.8 billion, an 18% increase compared to the third quarter of last year driven by Hidrovia's record performance. Ultragaz also reported higher EBITDA, which together with Hidrovias, partially offset the lower results from Ipiranga and Ultracargo. Net income for the quarter reached BRL 772 million, an 11% increase year-over-year, mainly driven by the higher operating results and the recognition of tax credits already mentioned which were offset by higher financial expenses and higher depreciation and amortization, mainly due to the consolidation of Hidrovias. CapEx totaled BRL 756 million, 46% higher compared to the same period last year, highlighting the consolidation of investments in Hidrovias and increased investments in Ipiranga, especially for the expansion and maintenance of the service station and franchise network, in addition to investments in the evolution of the technological platform with the replacement of the ERP system. Operating cash generation was BRL 2.1 billion, almost 3x the cash generated in the same period last year, even with BRL 258 million for the settlement of the draft discount. This reflects a better operating result, the consolidation of Hidrovias and lower working capital investment at Ipiranga and Ultragaz. And now moving to the next slide. We ended the quarter with BRL 12 billion in net debt and a leverage of 1.7x compared to 1.9x last quarter. This improvement reflects the strong cash generation during the period, which more than offset the payment of BRL 326 million in dividends in August in addition to the impact of BRL 258 million from the settlement of the draft discount, as I mentioned earlier. Now moving to Ipiranga's results. The volumes sold in the third quarter was 1% higher compared to last year due to the increase in the Otto cycle, mainly in gasoline. It is worth noting that we observed the market recovery following the Carbono Oculto Operation, which has been tackling regular companies in this sector with an acceleration in sales volume in September. We ended the period with 5,812 substations. We added 70 new substations and closed 84 to our network throughout the quarter. Ipiranga's EBITDA totaled BRL 1.85 billion, 12% higher than the same period last year, reflecting the recognition of extraordinary tax credits of BRL 185 million. Recurring EBITDA totaled BRL 892 million in the quarter, a 5% lower compared to the third quarter of 2024. This result reflects a more challenging scenario given the irregularities in the sector, mainly due to the high level of naphtha imports for irregular sale as gasoline and inventory gains in the third quarter of 2024. These effects were partially offset by higher sales volume and lower expenses during the period with lower allowance for expected credit losses, marketing and personnel expenses due to a smaller head count. As a highlight, we also had cash generation zreaching BRL 1.453 billion, more than twice the BRL 723 million in the third quarter of 2024. This performance reflects working capital management, strengthening value creation for Ipiranga. For the fourth quarter, we expect a continued market recovery with volume growth and profitability similar to that observed in the third quarter. Now moving to Ultragaz. The volume of LPG sold in the third quarter was 6% lower than the same period in 2024, with a 3% decrease in the bottled segment and an 11% decrease in the bulk segment, reflecting the competitive dynamics of the market, which continued to be impacted by the pass-through of increased cost of Petrobras auctions. Furthermore, we are seeing signs of an economic slowdown with lower demand in the volumes sold to industries. Recurring adjusted EBITDA totaled BRL 463 million, a 3% increase compared to the same period in 2024, mainly due to pass-through of inflation and the positive contribution from new energies despite lower LPG sales volumes. The fourth quarter is seasonally weaker. We see a gradual recovery in volume and bulk segment is below last year's levels. We also expect EBITDA to be higher than that observed in the third quarter. Now moving to Ultracargo. The average installed capacity reached 1,097,000 cubic meters in the quarter, a 3% year-over-year increase, resulting from the addition of 23,000 cubic meters of capacity in Palmeirante and 7,000 cubic meters in Rondonópolis. The cubic meters sold was 12% lower year-over-year, totaling 3,845,000 cubic meters. This decrease reflects the lower demand from our customers for tanking services related to fuel imports, which resulted in lower handling in Santos, Itaqui and Suape. This impact is partially offset by the higher volume of handling in Opla. As a result, net revenue totaled BRL 243 million in the quarter, a 9% decrease compared to the same period last year, reflecting the lower volume even with better tariffs. Ultracargo's adjusted EBITDA totaled BRL 134 million, 20% below the third quarter of 2024, impacted by lower volumes and higher preoperational and initial costs at Palmeirante, which is still in its ramp-up phase, partially offset by better tariffs. For the fourth quarter, we see a recovery in demand from our customers and the effects of the expansion. As a result, we expect a recovery in EBITDA compared to the third quarter. Finally, going Hidrovias. The volume handled in the quarter grew by 30% when compared to the same period last year, driven by the normalization of navigation in the South corridor, which allowed higher handling of iron ore. Adjusted EBITDA reached BRL 332 million compared to BRL 169 million in the same period last year. Recurring EBITDA reached BRL 361 million, more than twice the BRL 169 million recorded in the third quarter of 2024. This record performance mainly reflects better navigation conditions in the South corridor, as I mentioned earlier, and a better sales mix. On November 4, the Cabotage sale was completed, which will affect the results of the fourth quarter and reduce the company's debt. It is important to note that there is also the seasonality of the fourth quarter, which significantly affects navigability in the corridors. We expect an EBITDA similar to the fourth quarter of 2022. With that, I conclude my presentation. Thank you all for the participation. Let's move to the Q&A session. To contribute to the dynamics of this moment, I reinforce that questions related to Hidrovias will be answered from the perspective of the controlling shareholders. Other operational details should be directed to the Hidrovia's IR team. Operator: [Operator Instructions] The first question comes from Gabriel Barra with Citi. Gabriel Coelho Barra: I have 2 questions. First, let me focus on Ipiranga and all the changes you've mentioned during the data presentation. We've seen a sequence improvement and when we talk with the industry at large, there is an expectation of sequential improvement for the upcoming quarters in terms of volume margin and fighting illegality. I'd like to hear about the end of the quarter and the trend for the fourth quarter, the new events that were observed probably they can be translated into better volumes, better margins. And I'd like to hear about the company's strategy. Would it be to recover the lost market share to the informal market? Or would you thinking about optimizing your margins? What is your strategy? Maybe Linden can help us out. Now looking from a broader perspective at Ultra, you've been making some investments in terms of capital allocation, which is a very important point considering Ultra as a vehicle of investments. So what are the next steps? You still have got a lot to deliver in Hidrovias, of course. But the company has already made all the incorporation of investments and all that. So what is the strategy for the future? Where would you consider future investments, exactly when, what would be the timing? Would you think about greenfield, brownfield, something that would bring results in the short term? So these are my 2 questions. Leonardo Linden: Good morning, Gabriel, Linden speaking. The first question is -- would be probably asked by others, so I'm going to answer it broadly. First, hidden carbon operation, Carbono Oculto has been a very positive movement to our industry. It has contributed to Brazil, to consumers, for those that make investments in the area. But we have to be aware of the fact that it's not over. Investigations have to move on. And we have 2 important projects, one of them of bad debt provision and the other one of the one single phase investment. And these are projects that really have to move on and become law. Similarly to hidden carbon there are 2 points, volume and margin. The volume is coming stronger, and you can see that there is an increasing trend. The end of the quarter was better. The first initiative of hidden occult operational was on the second half of August. And since then, we've been recovering volume. Not only volume really, but we can see selling our gasoline with additives being sold more with an increased share of it in the mix, meaning that consumers are aware of quality, positive news from volume. It's important to regain scale because of lost scale throughout months and months due to the irregularities of the industry. Margin is important, but it's not the only indicator. And the margin in terms of volume has been showing slower recovery, especially in B2B and highways, which is expected because these are markets exposed to problems that still persist, such as non mixing biodiesel. And they tend to be more resistant to changes in prices, at gas station levels, large consumer contracts have parameters. So it takes longer to have adjustments. That's all predictable, and we are okay with that. We have to keep on fighting illegality. We cannot simply assume that everything is solved. No, we have to keep on hitting the regular market because there is still a lot to be done, even though we have already observed significant improvement. For Ipiranga, it's important to recover scale. It's been a number of years with loss of volume due to irregular market, and we want the volume to be back, of course. Thirdly, margin is a consequence of the reaction of the market and how we work internally. We should stick to what we've always done, focusing on internal efficiencies, better processes and those who have been following our results know how much we emphasize that, especially in logistics and smaller operational expenses. Something that we've been working on, reducing and also emphasized by Palhares presentation. So very positive landscape, I have to say. We had been waiting for this action for a long time. But of course, it's not over, the problem is not over. Volumes are picking up, especially in Rio and Sao Paulo, where there was most of the irregular activities and margins are going to naturally be recovered, but of course, depending on market reactions as well. But of course, we are also endeavoring all our internal efforts. Rodrigo de Almeida Pizzinatto: Barra, Rodrigo speaking. Thank you very much for the questions. Capital allocation, our next steps, right? In general lines, we are going to try to look up for companies and projects that have similar characteristics to what we found in Hidrovias. In other words, a good potential to create value that depends on us. So what we can do with a company with an asset, unlocking growth, optimizing operations and assets. But if we don't come across good projects, that's okay, we just increased dividend sharing. We have these 2 options, either we come across good projects or we increase dividend sharing. That's it. Operator: Our next question comes from Gustavo Sadka with Bradesco BBI. Gustavo Sadka: My first question concerns cash generation, which was strong in the quarter, and we've seen deleveraging. Now considering the new taxation of dividends, and the profit reserve you have in your balance sheet, should we expect more dividends to be distributed this year? Second question about capital allocation. As the company has been showing interest and have had exposure to the Agro business, do you think about by a stake at Rumo because the partial investments of that can be offered in the market. Rodrigo de Almeida Pizzinatto: Good morning Gustavo. About cash generation, you're right, it was a very strong quarter. The second half of the year tends to be stronger and probably that's going to be repeated in the fourth quarter. It is following the constant discussion of legislation changes and the taxes on dividends. And yes, this is a possibility, anticipating dividends in the fourth quarter. Concerning capital allocation, I'll just repeat what I've just said. We are always looking for good projects where we can create value, unlocking growth and optimizing operations. If we find these assets, we are going to do that. If not, we increase dividend distribution. That's it. Operator: The next question comes from Bruno Montanari with Morgan Stanley. Bruno Montanari: Quick follow-up with Ipiranga. Could you please quantify in a ballpark figure of inventory variation so that we get an ideal about normalized margins. And could you please tell us more about CapEx, especially in the third quarter, CapEx tends to be high in the fourth quarter. You've anticipated somewhat in the third quarter. So I'd like to know what we can expect for the fourth quarter at Ipiranga? Second question about cash flow. It's been a year of a number of adjustments in working capital because of the draft discount. But in working capital, the level we've seen in the third quarter. Is it sustainable? Or is there still more to be done to unlock somewhat more capital to the company. Rodrigo de Almeida Pizzinatto: Good morning Bruno. Thank you for the question. About inventory levels, we don't talk about the levels of losses or gains because it's a result of our supplies policies. But I also remind you that there was a price oscillation in the third quarter of '24 and not '25. So the variation is more due to the fact that there was a change in '24. Concerning CapEx, in the year, the CapEx would be below what we had announced, probably 10% less than what was announced in our plan for 2025. Alexandre Palhares: Palhares speaking. Concerning working capital, this is a very relevant topic to all our businesses. There are some efficiencies which are captured and they are onetime possibilities included in the ordinary working capital of the company and some of them which result from market dynamics. These are the ones that we can repeat and maintain throughout upcoming periods. Operator: The next question comes from Rodrigo Almeida with Santander. Rodrigo Reis de Almeida: Good morning, Ultra's team. I'd like to talk about Ultragaz. Recently, there were new reference prices published. I would like to understand the net effect of this discussion, a lower reference price, some potential of gaining additional volume. Maybe you can tell us more and help us understand what is the net changes you expect in terms of volume and price? Can you also please tell us more about the compliance of -- with resellers because in the end of the day, prices change at the level of the resellers, right? Tabajara Bertelli: Hello, Rodrigo, Tabajara speaking on behalf of Ultragaz. Thank you for the question. The focus of Gás do Povo, Gas to People, it's a program of the government. I think it's the right program to direct the benefit to the population that really needs it, really fighting against the so-called energy poverty, things which are going into effect in a few weeks, starting in some cities and then being scaled up, but something very positive. We've been supporting the program. The model is direct payment to resellers. We are exactly at the level you talked about communicating the project and trying to get more and more compliance. If the resellers have some questions, we answer them. The government has been presenting data. The last one, there were over 3,000 resellers already on board, showing more and more companies join and it will be maintained until the first to second quarter next year. It takes time. It takes some learnings, but it's following the initial design that was imagined. And we see it very positively as a social benefit of addressing a very important issue to our country. And we believe prices and volumes are going to gradually increase. If the reseller is compliant with the program, they are committed with all the elements of the program and it's a product that is going to be picked up. It's pick and collect, not delivery not delivered at homes. Each reseller is considering how to operate, how the program works and how well it fits their operations. It's been doing and believe it's going to be maintained. In a nutshell, we still see the program with the same perspective. This is just step one of implementation. There are more things to come, certainly. Operator: The next question comes from Gustavo Cunha with BTG Pactual. Gustavo Cunha: My question is about Ultragaz as well. Trying to understand about the change in LPG. Ministry of Mining and Energy called an extraordinary meeting to talk about this issue. And I'd like to see your perspective on this topic and what do you expect in terms of time line? Tabajara Bertelli: Thank you for the question, Gustavo. There is still an ongoing process. You are calling it the reform or the regulatory review of LPG. In the beginning of the year, there were some initial inputs shared with the government. The national agency will probably launch a new review in upcoming months. And in the current schedule, it is expected to be completed in the first half of 2026. So there is still a lot to happen. Different players are getting on board, they're discussing. I think it's following the expected path. We are highly convinced of what is the best for society. It's a model of a high level of safety, well balanced, and that's what has been in place. But that's still an open-ended process inputs are being made, and there are still a number of steps until the final decision regardless of what it is to really change the regulations. Operator: Next question comes from Regis Cardoso with XP. Regis Cardoso: Good morning. Thanks all of you for your availability. In Ipiranga, I understood that you expect a similar level of profitability in the fourth quarter. Can you tell us about one-off effects, especially inventory levels, also the draft discounts of the margin, competitive improvement that we've observed in October. So reconciling really the development of the fourth and the -- third and fourth quarter. And finally, in Ipiranga, could you please tell us about the offenders that you still see to margins. Maybe you can make comments about direct sales to refining entities? And what about CBOIS? How do you see it? And how has it contributed to the operation? Leonardo Linden: Concerning the fourth quarter, the guidance is clear. And once again, it's market dynamics. This is what we've been observing happening in the market. As I pointed out, there is volume impacting the fourth quarter and margin picking up slowly. I don't think I have much to add. In terms of offenders, part of the offenders are still irregular activities that we observed throughout the market and have been covered by the hidden occult operation, Biodiesel, CBOIS, certainly still a problem. But once again, the perspective is better now. We know there's still a lot to be done. And I emphasize once again about bad debt provision and single-phase taxation, which are both essential to address the root of the problem. But we are doing our work as best as we can, fighting irregularities together with the market. But that's it. No big news there. Regis Cardoso: Let me see if I got that straight. There hasn't been any relevant losses of inventory levels, right? Leonardo Linden: Yes. Right. None. Operator: Our Q&A session is completed. Now I would like now to hand it over to Alexandre Palhares for his closing remarks. Alexandre Palhares: I would like to thank you once again for your interest and participation. Our Investor Relations team is here to answer any questions that we might not have answered. Thank you very much. See you next time. Operator: Well, the earnings release call of Ultra is finished now. Thank you very much for your participation. Have a great day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Sean Peasgood: Good afternoon, and thank you for joining us for Intermap Technologies conference call to discuss its financial results for the third quarter of 2025 for the 3 months ending September 30, 2025. We I'm Sean Peasgood, from Sophic Capital. We handle Intermap's Investor Relations. On today's call, we have Intermap's CEO, Patrick Blott, CFO, Jennifer Bakken; and COO, Jack Schneider. [Operator Instructions] Before management discusses the results, I'd like to remind everyone that certain statements in this call may be forward-looking in nature. These include statements involving known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied in our forward-looking statements. For caveats about forward-looking statements and risk factors, please see our MD&A for the third quarter ended September 30, 2025, which will be filed on our company profile at SEDAR+ on November 13. I'll now pass the call over to Intermap's CEO, Patrick Blott. Patrick, go ahead. Patrick Blott: Good afternoon, ladies and gentlemen, and welcome to Intermap's financial results conference call for the third quarter of 2025. I'm Patrick Blott, Chairman and CEO of Intermap. Today, as we review the third quarter results, I'll provide highlights along with the business update and outlook. Then I'll turn the call over to Jennifer Bakken, our CFO, to walk through our recent financial performance, and we'll leave some time at the end for Q&A. A little over a year ago, we were ramping up to execute our new program in Indonesia. Since that time, we permitted both in Indonesia and in the United States... Sean Peasgood: Looks like we just lost Patrick. So give us 1 second, and we'll get them back on the line here. Sorry about the inconvenience. [Technical Difficulty] Patrick Blott: Sorry about that. Okay. So a little over a year ago, we were ramping up to execute our new program in Indonesia. Since that time, we permitted in both Indonesia and the United States. We've hired locally in large numbers, upgraded processing systems and capacity with advanced technology and GPUs, deployed a massive team into the field. We've delivered exquisite data to the customer better than specifications, collected attributes and 3D vectors and built 1:5000 scale base map and unbelievably record time, turnaround that was unimaginable 5 years ago before our process automation. So we accomplished this using AI-driven and advanced GPU-driven models and automation technologies built by our own team, working in partnership with customers all over the world. Our lenders have stepped up offering incredible financial support for our contracting activity, allowing Intermap to comply with financial requirements which reflects a positive credit assessment of the quality of our customer base that delivers our revenue. In addition, our equity and shelf registration, Intermap was able to demonstrate over $100 million of credit support to back its work on large government contracting programs all over the world. That's a huge step forward. We've raised over $35 million of equity capital through a life offering and a base shelf prospectus. We've removed the going concern qualification from our financial statements. In Indonesia, the $200 million integrated land administration and spatial planning project is moving forward as expected. During the quarter, we submitted bids covering all 4 lots of the program. The tender review committee is currently evaluating those submissions. The program remains backed by the World Bank denominated in U.S. dollars, which enhances certainty and margin predictability. We're the incumbent in our technology, local operations and performance history continue to set the standard for national mapping. We've evolved our technology, systems and platform, working with the Air Force, the U.S. Air Force, NGA, DARPA and others. Nothing that we're doing right now for customers is conceptual. It's proven. We're driving growth by hitting the repeat button, not just the create button, and when we do create things, it's for specific customer value gaps where they lead the way with identified demand signals, it's not speculative investment. It's ROI-driven high technology investment. That's why organizations like DARPA and NGA Research want to work with Intermap to better leverage the returns on their own research dollars. We've announced today 2 contracts on IDIQ vehicles totaling more than $500 million combined ceiling to work with NOAA to integrate where water shoreline intersects with terrain. The $250 million Coastal Geospatial Services Contract 5 and the $250 million NGS shoreline mapping support IDIQ, our long-cycle programs that provide recurring opportunities to deliver data analytics across a range of coastal and climate applications. The $21 million equity financing completed in September, increased shareholder equity to more than $27 million and provided the liquidity we need to scale and compete. It also expands our strategic flexibility in a critical moment with major tenders now underway throughout Southeast Asia, the United States and Europe. Revenue for the quarter was $1.7 million compared to $5 million last year, reflecting the timing of government programs, most notably in Indonesia and the slowdown in U.S. government activity caused by the shutdown. More than 90% of revenue came from the United States and Europe. Commercial performance has been particularly strong. Commercial revenue grew 37% year-over-year Commercial is currently tracking around $7 million a year. Working capital was $23.3 million at the end of the quarter, allowing the company to remove our going concern qualification, the company is in the process of uplifting its audit to comply with U.S. securities registrations under PCAOB. Adjusted EBITDA was negative $1 million for the quarter compared to positive $1.6 million for 2024. Net loss was $1.5 million compared to net income of $1.1 million. Operating cash flow year-to-date was $2 million compared to negative $1 million for the same period last year. Cash flows was reinvested to improve our working capital and net of that investment operating cash flow during the quarter improved to negative $1.7 million compared to negative $2.3 million last year. We're expecting continued growth for our insurance segment around the world, driven by continued adoption of our Elevation as a Service and analytics subscriptions along with growing demand for our insurance risk assistant subsystem or IRAS. The product's agentic AI foundation is proving valuable for insurance carriers to price and manage risk and estimate loss to share some high-level metrics on insurance specifically, we currently have several hundred daily users, making more than 5 million 3D data calls in a typical month which we track to analyze properties all over North America, Europe and soon Asia. These numbers surge during and immediately after climate events. The data usage contributes to our understanding and modeling of climate perils we don't compete with these clients for their premium dollars. We empower them to do more profitable underwriting to use our proprietary global flood models, for example, within their own underwriting process. With some capacity providers, we are negotiating incentive compensation arrangements to allow Intermap to capture more of the underwriting value it delivers and participate in premium growth. These existing customers are earning billions of dollars in profitable underwriting and reinsurance premium globally. On the origination side, in the U.S. alone, the private flood market now exceeds $1 billion in premium, with $4.5 billion national flood insurance program retrenching further every year, which extends the protection gap, that also though increases the market opportunity for private flood. Today, our business is supporting more than 60 underwriting programs worldwide with new capacity providers joining us every quarter. Because our data models and analytics are proven, Intermap's programs are drawing capacity from the largest insurance and reinsurance companies in the world. They trust Intermap software to support their in-house underwriting, portfolio management, reinsurance with better analytics, automation, speed, accuracy, tools and data products. They're growing with us, into new global markets because they trust Intermap as an enabler of accurate underwriting, which in turn, enables scalable distribution. A significant amount of growth was contributed by Europe, our first-to-market AI agent there draws on Intermap's proprietary data, allows established multi-peril underwriters and reinsurers to significantly expand automated and rapidly scale their processes, driving very high conversion rates. A typical small capacity provider will consider 250,000 to 500,000 risks a year, representing $200 million of premium, the risk assistant allows this customer to rapidly scale their capacity, providing automated, scalable AI-driven capabilities to confidently execute real-time property-level risk assessment, premium pricing, claims assessment and reinsurance. Subscribers benefit from an independent real-time automated and objective risk assessment that penetrates 3D locations and 3D vectors deeper than algorithms that rely solely on geo-located addresses. This leverages our enormous archive of historic 3D location and data to mitigate basis risk and improve underwriting outcomes. Intermap is the only commercial company with underwriting quality, high-precision 3D foundation of vector data available across the entire globe to support global insurance programs at this level of acuity. The risk assistant also incorporates proven proprietary easy to calibrate and patented global flood models that overlay additional diverse views of risk. The company continues to ramp its operations to qualify for and execute larger contracts, we continue to invest in technology and in our people. Our processing and AI capabilities are expanding, and our aircraft and sensor kits are performing exceptionally. We're building for scale to execute on multiple larger contracts to sustain recurring revenue. So today compared to a year ago, we're better, we're faster, we're more precise. We're definitely more global. We're more integrated within all of our domains, earth, air, sea and space. Compared to a year ago, we have new technology, better platforms, additional talent, more scale, better specs that we're hitting, better data, more liquidity, credit support, growth capital and very, very importantly, incredible past performance after working for a year in Indonesia. Overall, this quarter demonstrated the discipline of our operating model and the strength of our strategy and the ability of the company to generate cash throughout the contracting cycle. We're competing for additional work in Indonesia. So I'm not going to talk further about that specifically other than to say with specific cost performance and well-capitalized balance sheet and having delivered exceptional data products to them already, we're in a much stronger position than we were when we won this program last year. In government contracting, uncertain timing effects can impact revenues, where Intermap is competing for large dollars relative to its current size, where we have greater control over timing, we've converted years of investment into financial stability. We deepened our commercial traction, and we established a significantly stronger platform for growth based upon the work we've done to date, and the focused work happening right now for the remaining weeks of the year, we're maintaining our guidance of $30 million to $35 million in revenue and 28% adjusted EBITDA margin, there's ample identified contracting opportunities to support these dollars in short time frames once our customers decide to work with Intermap. Risks include assumptions regarding future contracts awards revenue recognition timing and uncertainty of subscription renewals. With that, I will turn the call over to our CFO, Jennifer Bakken, to review the financial results in more detail. Jennifer Bakken: Thank you, Patrick. As a reminder, we report our financial results in U.S. dollars. For more detailed financial information, please refer to the financial statements and management discussion and analysis that we will file on SEDAR+ and EDGAR today. For the third quarter ended September 30, 2025, revenue was $1.7 million compared to $5 million in the third quarter of 2024. The difference primarily reflects the timing of program activity in Indonesia and U.S. government programs. Year-to-date revenue was $9 million compared to $10.2 million for the same period in '24. By segment, Acquisition Services contributed, $0.1 million; Value-added Data, $0.4 million; and Software and Solutions, $1.2 million for the quarter. Software and Solutions increased 20% year-over-year, underscoring continued growth in our SaaS and analytics offerings. Operating cash flow for the year-to-date period was $2 million, when you exclude the investment to repay accounts payable compared to $1.4 million use of cash when you exclude the growth of accounts payable last year. Net of accounts payable changes, operating cash flow for the quarter improved to negative $1.7 million from negative $2.3 million in 2024. Working capital at September 30 was $23 million, and shareholders' equity rose to $27.2 million, reflecting the $21 million bought deal financing completed in the quarter. This strong working capital position allowed us to remove the going concern qualification from our financial statements, a major milestone that demonstrates our financial stability and the confidence of our capital partners. Adjusted EBITDA was negative $1 million for the quarter compared with positive $1.6 million last year. The change reflects the expected timing of project execution, partially offset by stronger commercial performance. Net loss for the quarter was $1.5 million compared with net income of $1.1 million last year. Our balance sheet has been transformed. We now have the liquidity and equity base to pursue and execute larger government programs while maintaining investment in our high-margin recurring software business. We ended the quarter with no significant debt maturities and modest ongoing obligations related to our aircraft and equipment financing. From a risk perspective, our primary exposure continues to be the timing of government contract awards for foreign currency volatility, with World Bank funding for the Indonesian mapping program now denominated in U.S. dollars, we expect that exposure to be significantly reduced going forward. In summary, Intermap finished the quarter with a strong capital foundation, improving cash generation and clear visibility into our next phase of growth. Patrick, back to you. Patrick Blott: Thank you, Jennifer. So our focus for the remainder of 2025 and into 2026 is execution. We're converting tenders into contracts expanding our commercial SaaS footprint and leveraging proprietary AI and GEOINT capabilities to deliver value at global scale. We appreciate the continued support of our shareholders, partners and employees as we build a stronger and more resilient Intermap, thanks again for tuning in today. I'm now going to pass the call to you, Sean, to moderate the Q&A. Sean Peasgood: Great. Thanks, Patrick and Jennifer. [Operator Instructions] So first questions are around Indonesia. On the August call, you noted that the technical specifications for the new work were unchanged from your current Phase 1 work, the RFB was revised somewhat. Can you comment on how the final technical requirements compare with Phase 1? Patrick Blott: Yes, the final -- the final specifications are the same. So they're building a country map very important that, that is well understood. They're building a country map. And so that map has very prescriptive specs around what the scale is and what the components of building it are, and those have not changed and those went through multiyear technical process to define those specs. Sean Peasgood: Around technical capabilities. Are you familiar with the technical capabilities of the other companies being on the Indonesia contracts and contrast that with what you offer? Patrick Blott: I'm not going to do that. I mean, I don't -- I'm not sure what the upside to us or anyone for doing that right now in the middle of this process is. Sean Peasgood: Okay. So aside for Indonesia, you previously expressed optimism on other government contract wins in Southeast Asia and potentially South America and other markets. Can you comment on an update from that after the last quarter? Patrick Blott: Yes. I mean we have active pursuit happening on every continent right now. We have dedicated teams on every continent, including Southeast Asia, Latin America, South America, even Africa, Europe. And increasingly in the United States and Canada as well. So there's a lot of activity happening. The shutdown, it did affect certain funding and certain actual task orders but it did not affect -- because essentially, the civilians were getting paid, right? But the uniform personnel were and they kept working and we kept meeting and we kept refining requirements, there's a lot of activity there. So it did not miss a step because the world didn't stop. And so there's lots of stuff going on in addition to Indonesia. Sean Peasgood: I know you did -- so you made a comment about the NOAA contract, but can you provide more insight into those 2 contract opportunities? I don't know if there's any more you can add. Patrick Blott: I mean I think 1 of the key things that is important is the integration of the different domains because solutions today do require multi-domain expertise. Our -- both our sensor kit and processing kit, our GEOINT products are multi-domain designed, and they do bring value into multi-domain, particularly and especially during the integration. So when you're talking about integrating -- we talked about IRAS before and how our architectures build. The 2 defining features: one, global scale and two, it's source agnostic. And so that ability to integrate, particularly around the seams of terrain and maritime, air and space, that's really an important capability, and that is the requirement on that contract. Sean Peasgood: Another question here about the shutdown, just asking if you can quantify or talk to the impact of how the shutdown has impacted 2025? And maybe if you're seeing anything come back or your -- how you foresee that changing in the future? Patrick Blott: I mean it's still -- in terms of -- it's really resolving itself real time right now. Like I said, it did not interrupt our work I do believe that it slowed down because a lot of the administrative stuff is civilian, and it did slow down contracting, but I don't think it's fundamentally changed much for the year. Sean Peasgood: Okay. Sticking with defense. Can you talk about what you're seeing in terms of order potential on Luno A and B and JANUS? Patrick Blott: No, I don't have anything to add since last quarter. I mean, the requirements -- those are GEOINT requirements, they're very specific and they're very different. So they're not generic. Our other contract vehicle, which is JANUS is more generic in terms of the requirement flow, more geography-based, but these requirements are GEOINT, and they're very, very different. And all the teams were put on that contract vehicle for very specific reasons. Sean Peasgood: You talked a lot about insurance on the call. Can you talk about -- a little bit about other opportunities in the commercial landscape for the company, other industries or other opportunities? Patrick Blott: Yes. I mean we purposely designed our commercial because we're still a very small company. The beauty of the kind of data that we create, it really cuts horizontally but that's all well and good because to commercialize it, it's very important, in my opinion and what's worked for us to go very vertically and very focused in terms of business use cases. So we really very deliberately and thoughtfully targeted the main, the large and the fastest-growing segments. And so that started with insurance. That's why we started there first, and that's why it's the more mature of our segments and you hear about it more but we certainly didn't stop there. And the transportation NAV problem set is an enormous opportunity. We're just about to do some upsizing of those contract vehicles because we're making tremendous technology progress in that sector and the demand pull is increasing a lot as well with the commercial customer base. So navigation problems that affect technology, logistics, distribution, is really important. And then finally, the telecom set which is also a really important set because we're now having systems -- commercial systems that are both terrestrial and space based. They're integrating. They're not where they need to be. It's mostly a land-based bottleneck rather than a space-based bottleneck. And I think that's a tremendous opportunity for us. So we're investing a lot of time in it. Sean Peasgood: Switching gears a bit here. What was the catalyst behind switching the company's auditor from KPMG to MNP? Patrick Blott: Yes. So 1 of the things I've said is our goal is to upgrade particularly our U.S. listing and improve the liquidity profile of that listing which is essentially it's been an underutilized opportunity for the company but that requires a whole lot of steps to get there. And probably the most time-consuming one is complying with the audit standards for the U.S. listing. And so we have started, we are a foreign private issuer, that's the capital, F, FPI. So we have taken the step to file our statements on EDGAR, and you can find them on EDGAR and SEDAR now. And we're in the process of upgrading our audit to be PCAOB, which is the public company accounting standards board compliant. That falls out of Sarbanes-Oxley and the financial crisis and new rules and regs around U.S. financial reporting. We're an IFRS reporter at the moment. We report in U.S. dollars, but we're an IFRS reporter, and in order to lift that IFRS audit up to a PCAOB standard, that is a new audit. And so we needed auditors qualified to do that, who were licensed to do that. Our former auditors, the ones -- the audit group that did us for literally decades, they weren't able to do that. Their firm out of the U.S. could have done it. So we considered that and we considered that, and we considered 3 other firms. And we went and hired 1 that we are really comfortable with that we think is doing a great job. So MNP is uplifting our IFRS accounting to that PCAOB standard, which is going to allow us, in turn, to upgrade our listing in the U.S. to a higher exchange and then improve the liquidity which is the whole objective there. Sean Peasgood: Perfect. Okay. There are several people asking about that uplift. So I think that's quite clear that, that's the plan. I think last quarter, you said by the end of the year, we're getting close to the end of the year. There's a lot to do. Do you have an updated time line on that? Patrick Blott: It remains the target, and obviously pushing hard to meet that objective. I mean there are very prescriptive things that need to happen, including upgraded controls, we're a global company. We have employees and revenue and operations all over the world. And so we have a lot of work to do in terms of making sure that everything gets uplifted to that standard and then document it as part of the audit. And so there's just a lot of activity happening there. So we're pushing it as quickly as we can, but there's physics behind it and stuff that needs to get done. So my objective is still the end of the year but we've got to take it 1 step at a time. Sean Peasgood: Okay. We have a number of questions that are fairly specific around companies and probably things that we're not going to answer on a public call. So if I didn't answer your question, please e-mail me or -- and we can get back to you but I don't think we're going to call out specific customers here on this call. Back to insurance, can you further describe the potential size of the insurance opportunity? And how does that contrast to your perception of the opportunity a year ago? Patrick Blott: Yes, that's a great question. So there's a couple of things going on there. One, I believe, the largest potential commercial market in the sector. And -- which is obviously why we've targeted it as a really, really good use case for what we do as well. And we've been doing it now for a number of years. We're quite smart on it, and we have a lot of customers and we learn from them and they learn from us. So there's a dynamic there which has allowed us to expand the scope. So when we grow that -- when we think about that business, there's a couple of things. One, the primary overriding objective has been to grow by customers. We want to prove value to as many customers to start as we can. And so that's been an overriding objective. And our go-to-market in that regard has been software-based and that's worked pretty well for us and has worked pretty well -- very well for the customer because it relieves them of a lot of burdens and a lot of things that would basically be impossible to do on their own, without the benefit of the scale and the benefit of the automation. So we're bringing a lot of value and that's important. And then I think the other thing is we're purposely going to market in a way that allows us to take a global perspective on it, right, since day 1. And -- because, again, our data, Intermap's unique, quite unique because our data set, 3D data set is a global data set. And it's a very, very rich global data set. It's over a very long period of time. We have all kinds of archive and history, and our models are very, very special and they're built on global data sets. And so we're looking at every industry we go in, including insurance from a global perspective. That harmonizes really well especially with the big carriers because they're based -- whether they're based in London or New York or wherever they're taking a global view and they're running a global business. And each market is different and each market is regulated in a different way. But fundamentally, from a risk perspective, the key drivers aren't that different, and they're very, very influenced by what we provide. And so they're global, our customers, we're global, and that's been sort of the approach there. And so that the opportunity set then also becomes Well, hey, there's massive regions of the world where the protection gap the uninsured for perils is really big. It's big in the United States, which I would say is probably 1 of the more mature markets but it's massive in other places. And our customers are looking at the world and we're looking at the world, and we're going into these new markets together because it's taken several years to establish that kind of a relationship. So that's how we're approaching it. So we're going to grow both in scope. We're going to do more for these customers. We're going to grow in terms of the scale and the geographic reach and we're doing that in partnership with the customers. We're going to grow because the industry is growing each market a little bit differently but perils are growing globally, and that's a driver. That's a real tailwind for the entire industry and we're going to grow because governments are stretched. So the one that probably gets the most airtime is the U.S., where the NFIP is extremely stretched, and so that's creating -- as they retrench, they create more market opportunity for private insurers, which is good because that creates incentives and that creates proper price discovery and things happen where they should happen and they don't happen -- people don't build a house where they are not supposed to build it when you have to pay a market rate. So I think it's all good, even though we're dealing with a category that is -- nobody wants to hear about a hurricane, right? But I think what we're bringing to this is very, very constructive and positive. And there's a huge tailwind there because the government programs are stretched. Sean Peasgood: Okay. Great. Another housekeeping one. How is the company dealing with and addressing foreign exchange risk, if there is any? Patrick Blott: Yes in a couple of ways. I mean we do have FX lines. So we will, for certain situations where we feel like there's excessive exposure, we will hedge it. And particularly, we'll hedge it from a cost perspective that's very important. And then we'll also hedge it from a revenue perspective. So it's case by case. It's country by country. Even on the most basic level, I mean, we're TSX-listed Alberta Corp that also reports in U.S. dollars, and we have USD-CAD not as volatile a currency. But -- so FX, we have operations in Eastern Europe. We have operations in Southeast Asia. We have employees in both. So we do have FX considerations, both internally and with our revenue and customers and with our partners and suppliers. So it is -- we have an FX line if need be for special contracts, we can extend and do much more. We can also ensure with there's government programs both in the U.S. and Canada, where we -- our FX lines are insured. So we can extend that way too. So there's a lot that goes on behind the scenes on that. But essentially, the idea is, don't take any exchange risk on cost, and then where there's volatility on the top line, mitigate that as well within reason because if you get too unreasonable, especially in certain markets, the costs could be pretty extreme. Sean Peasgood: Okay, great. Just looking here to see if there's any more. I think we've answered most of these questions. I'm going to give it another minute for anything to show up if there's nothing else, and I think we'll wrap it up here. Okay. I think we're going to wrap it up. I don't see anything else. And if I missed anything, please e-mail me, there were a lot of questions. I tried to put as many together as possible. So we created an informative discussion here. But if I missed anything, please e-mail me, I'm happy to get back to you quickly here. Thank you all for joining the call today. And I'll pass it back to Patrick for quick closing remarks, and we'll close it off. Patrick Blott: Yes. Thank you for joining today, and we look forward to updating you on our progress as we go through future quarters. Have a good night, everyone. Sean Peasgood: This concludes Intermap's second quarter -- or sorry, third quarter of 2025 conference call. Thank you for joining.
Operator: Good evening. This is the Chorus Call conference operator. Welcome, and thank you for joining the Geox First 9 Months 2025 Financial Results Conference Call. [Operator Instructions] Let me introduce you to today's call speakers, the Geox Group CEO, Mr. Francesco Giovanni; and the CFO, Mr. Andrea Maldi. Geox would like to remind that any forward-looking statements disclosed during this call involve risks, uncertainties and other factors that may cause actual results to differ significantly from what is expressed or implied. Many of these factors are behind the group's control. At this time, I would like to turn the conference over to Mr. Francesco Giovanni, CEO of Geox. Please go ahead, sir. Francesco Di Giovanni: Good evening. Thank you very much. Good evening, and thank you all for joining us. Let me summarize in a few statements what has happened over the last 9 months. We report a 3.8% decline in sales compared to the same period of last year on a like-for-like basis, as market conditions and overall consumer dynamics continue to affect sector demand, which remains in significant contraction. However, I believe it is important to notice that despite such market dynamics, our direct retail channel delivered sales substantially in line with the previous year, in line with our most recently adopted strategy, but also taking into account such challenging market conditions. We focused with strong determination on cost rationalization and efficiency measures, which enabled us to achieve a higher adjusted EBIT than the first 9 months of 2024, the previous year. For the full year 2025, thanks to the aforementioned cost containment measures, we forecast an adjusted EBIT margin in line with the previous -- with previous plan expectations and the bank debt in the range of EUR 100 million, EUR 110 million despite the aforementioned high single-digit weakness in sales. The challenging market we live in is further confirmed by the wholesale channel sales campaign for the Spring/Summer 2026 collection, which has been concluded in September, which has recorded a slight decrease in volumes compared to the Spring/Summer 2025 season. Overall, we can say that the company is fostering a change process, as we indicated in the past. A lot of things are happening in the company. We will strive to move on with our turnaround measures. And I'm happy to turn the floor now to Andrea Maldi to talk about the 9 months that has gone by. Thank you very much. Andrea Maldi: Thank you, Francesco, for your introduction, and good evening, everybody. I will try to give you highlights of the 9 months 2025 sales. And just as overall assumption, we can say that the wholesale business remained under pressure, mainly reflecting the softer sell-in for the 2025 Spring/Summer and Fall/Winter '25 campaign across all the geographies. If we talk about retail, we can see a minor decline, which is mainly driven by a perimeter reduction. And instead, if we look at the web, e-commerce in general, we can register a weak performance in the wholesale and marketplace platforms, which has been only partially offset by the very good performance of our own web DOS distribution. Having said that, if you look at the numbers, we set -- we reached the target of net sales to EUR 492 million, which is a 6.2% decrease compared to last year. But if we compare on a like-for-like basis in terms of perimeter, the decline is much lower and is set at 3.8%. The EBITDA adjusted margin is higher than the 9 months 2024. And the bank net debt, as mentioned by Francesco, is in the range of EUR 106 million compared to EUR 103 million of the period December 2024 and EUR 138.4 million as of September '24, if we look at just 9 months. If we try to have a look again more in detail into the sales by channel, we say that we started from a last year of 9 months '24 at EUR 525 million. We are impacted by a perimeter reduction. As you remember, we closed last year 2 important markets, China and U.S. for a total value of EUR 13.4 million. And having restated the perimeter, we can say that the wholesale is declining by EUR 9 million compared to the same period of last year. And this decline is mainly driven by the softer sell-in, as we said, of the Spring/Summer and Fall/Winter 2025 campaign. And the negative performance has been mainly driven, we will see later in France, Iberia region and Russia. At the same time, we have a retail, which is almost flat, as we said. Like-for-like as just said at minus 0.6%, we can say flat, while we have been impacted by a perimeter effect by the reduction of our distribution of EUR 1.3 million. If we look at, again, e-commerce to different speed of pace. Clearly, the -- our own DOS website is performing strongly, is positive and it is growing with a significant -- an important percentage of growth, sorry, 3.7% plus compared clearly to wholesale web distribution, which has been instead negative in the 9 months and by marketplace performance, which is strongly negative, but also is determined by our own decision of winding down some of the platforms that we were not performing in terms of profitability, despite this a conscious decision to exit business, which is lowering our overall profitability. If we try to have a look at the sales by region, -- we can see that Italy is almost flat, EUR 144 million compared to EUR 143 million. Europe, the overall performance moves from EUR 239 million to EUR 235 million with an overall performance, which is slightly negative as the positive results, which is coming from the retail channel has been more than offset by a weaker performance into the wholesale distribution. This is mainly happening in France and Iberia region, as we mentioned. France, overall instead continues to deliver resilient and positive performance in retail, reflecting the solid market leadership while it is underperforming in the other channel . if we look at the rest of the world, clearly worth to mention, worth to notice that the performance needs to be is mainly impacted by the perimeter effect of the closing or the winding down of 2 main -- 2 markets of China and U.S. And at the same time, we have an important decline of the business in Russia in the range of the EUR 16 million within the 9 months. Quick highlight on the sales by product, mainly dividing the world into footwear and apparel. The percentage remain -- in terms of percentage remain unchanged compared to last year, being the footwear business still representing 91% of our own -- of the total business and the apparel is in the region of 9% to 10%. I would like to give you a highlight of the overall structure of the distribution of our brick-and-mortar retail network. As we can see from the chart, we see that we have an important perimeter reduction. We moved from the 616 number of doors in 2024 -- at the end of 2024 to 569 at the end of the 9 months 2025. The reduction, if we look at the structure, is mainly driven by the reduction into what we call franchisee in deal. So the -- our own partners that are working within our own perimeter. We decreased that number from 141 to 111, so a decline of 30 stores in the 9 months, while the structure of the -- our own shops remain substantially unchanged with a slight negative of 4, which is clearly the average between the new openings and the shutting down of the shops, which were not performing. Just again, a quick highlight on the net debt as of September 2025. We mentioned EUR 119 million as overall value of the net debt and the net financial position, which is clearly including a negative fair value of the hedging instrument, which is in the range of EUR 14 million -- sorry, of EUR 12.5 million. Therefore, we confirm that the bank net debt as of September 2024 is EUR 106 billion, which is in line with our forecast, with our expectation for the year and is setting up positively for us the trends to be in line with our expectation at year-end as well as committed to the original budget. I think that in terms of outlook, -- based on the performance that we have recorded in the first -- in the 9 months of 2025, our company forecast is that the 2025 sales for the full year are expected to decline a little bit more than what we have seen in the previous market presentation, moving into the high single-digit area compared to what we have represented in the fiscal year 2024. On the other side, we continue to work to perform and protect on the adjusted EBIT margin, which is -- which we estimate to remain unchanged compared to the target that we set for 2025, thanks to the strong ongoing initiatives into the rationalization and cost saving initiatives. And the net debt -- the bank net debt is expected to be in the year-end in the range of EUR 100 million to EUR 110 million, which is again in line with what we have forecasted at the beginning of the 2025 in January. So thanks for the attention. I think that we are now opening the session of the Q&A, if any. Operator: [Operator Instructions] The first question is from Oriana Cardani of Intesa Sanpaolo. Oriana Cardani: Thank you for taking my 3 questions. The first one is on the Q3 sales performance by category. Is there any difference between men's, women's, children's between the premium and value segments? Or is the weakness of the quarter general across all categories? The second question is on the measures implemented to accelerate savings. Regarding the agreement reached with the trade unions, can you tell us the expected structural savings from these measures starting in 2026? And besides personnel costs, have you found other areas for intervention such as in supply chain or logistic cost? And finally, do you plan to present an update of the business plan next year? Andrea Maldi: Okay. thanks for your question. I tried to give a fair answer to all your point. The first one is on your business mix in terms of decline. Overall, we have seen that we are struggling mostly on women categories, mainly on the [ sandals ], which is resulting in 8.5% decline compared to last year. And overall, if we look at the third quarter 2025, we have a women performance, which is still quite weak in the range of minus 15.4%. Francesco Di Giovanni: This is primarily -- excuse me, Francesco Di Giovanni. This is primarily driven by a very dramatic September result, which in October saw a rebound, not significant rebound in inventory part. Andrea Maldi: Coming to the second point, which is related to the overall restructuring costs on the personnel side, there is clearly some sensitivities. So what I can say so far is that we are working in order to incorporate in our year-end results, the cost of the restructuring or at least, let's say, 70% of the cost of the overall restructuring. We are working on the detail to perform on the number. And the expected saving in 2026 is at least in line with the value of investment that we are going to make in 2024 -- in 2025 to prepare the first side of the restructuring. What I can also say in terms of the overall impact of the -- this project is that the run rate of the savings expected is paying back 1 year completely the investment that we are going to do in -- overall for our restructuring project. I think that we will have much more details clearly at year-end once we will have satisfied all the compliance activity that are currently under way of being performed in terms of determination exactly of the amount that we want to invest, how much of this amount will be cash driven, cash paid in 2025, how much will be just accounted into the P&L. We are working on this detail. But overall, the overall project is really profitable because the payoff in a run rate basis is in less than 1 year. Francesco Di Giovanni: Well, in addition to that, we can say, this is Francesco to join again, we can say that the restructuring plan is moving along quite quickly. We have had thus far approximately 60 people accepting the offer that was made to leave the company out of 120. In addition, we are moving faster than expected on the international network. And thus far, we have approximately half of the international network [indiscernible] Andrea Maldi: Thank you, Giovanni, Francesco. The third question is, I think -- the third question is, I think that if I recall properly, is on the overall approach on the other -- on the base cost on what we normally define as indirect cost. As you know, we have identified an important indirect cost base spending that we are taking. There has been already a significant portion of activity of acceleration and work on this target on the financial target in 2025, which is going to pay off because -- to pay back quite quickly because we are expecting to be on track with the year-end net results. The saving is quite important in the range of the 70% of the overall in direct base cost. And this process will continue in 2026 as well, not only clearly on the personnel and staff cost, as you just mentioned, as a part of the overall restructuring project, but also on the indirect cost as well. Just to highlight again that if you take our announcement to date of the overall results, we have been able to achieve an overall EUR 20 million reduction of cost in the first 9 months of 2025 compared to last year. This is including already overall EUR 5 million of personnel cost saving in the first 9 months. Francesco Di Giovanni: Well, as far as the last question was about the business plan. Andrea Maldi: The last question is about the business plan. I think that we have expectation is that we are working on it and that we -- probably in the beginning of spring, let's say, placing the date in spring next year, we will produce an amended or an adjusted business plan, a revised and updated business plan. Clearly, we will need to catch on the sales and the new cost structure to represent the evolution from 2027 and going forward for the next 3 years of the plan. At the same time, we are working deeply in those weeks in the budget for 2026, and we are trying to commit to remain in terms of cash flow unchanged compared to the expectation of our business plan that we have declared to the market back in March 2024 either. Operator: [Operator Instructions] Management, there are no more questions registered at this time. Francesco Di Giovanni: Okay. Well, thank you very much, everybody. Andrea Maldi: Thank you. Operator: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephone.
Operator: Good afternoon, ladies and gentlemen. This is the Chorus Call conference operator. Welcome, and thank you for joining the results as of the end of September of the ACEA Group. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Dario Michi, Head of Investor Relations of ACEA. Dario Michi: Ladies and gentlemen, good afternoon, and thank you very much for joining the presentation of the results as at the end of September 2025 of the ACEA Group. Francesco Ragni, CFO; and Ms. Valentina Bracaglia, Deputy CFO and Head of Planning, will go through the presentation. I will give the floor now to Pier Francesco for the presentation. Pier Ragni: Good afternoon, ladies and gentlemen. As usual, we shall start our presentation by considering the regulatory and market environment. In Water business, we point out the update of the -- 2-year update of the tariffs, whereas in the Electricity business, we would like to point out the lack of activation of the trigger with reference to the remuneration rate of the capital for 2026 remains at 5.6%. As to the price of commodities, the price of electricity and gas in the first 9 months of 2025 recorded an increase of 14% and 20%, respectively, versus the same period last year. As to the interest rates, I'd like to confirm the trend which was recorded in the first 6 months of the year with a decrease of rates versus 2024, both in the long and short term of the curve. Let's now move on to Slide #4 of the presentation. As to the main highlights of the first 9 months of 2025, the results show a strong growth of economic items and confirm the soundness of the financial structure of the group. First of all, I point out that in line with IFRS 5, the results of ACEA Energia, which is subject to disposal have been reclassified as discontinued operations. For purposes to have the possibility to compare data, we have shown pro forma results simulating the deconsolidation of discontinued operations and of Acquedotto del Fiora in the first 9 months of 2024. Pro forma EBITDA reaches EUR 1.84 billion in -- growing by 8% versus the first 9 months of 2024. The increase of recurrent pro forma EBITDA adjusted to the changes in the perimeter, which you see later on, stands at 10%, which is driven mainly by the growth of the Water Italy business, grids and public lighting and generation. The contribution of regulated activity of the consolidated EBITDA is 95% of the total. The net profit of the first 9 months of 2024 is EUR 415 million, up 46% and among other components is driven by the capital gain of the disposal of the high-voltage network for about EUR 109 million. The recurrent net profit grows by 8% year-on-year following the dynamic recorded at operating level. CapEx growth of grants grew by 6% versus the first 9 months of 2024 and now stand at EUR 1 billion. The operating cash flow is positive for EUR 19 million allowing us to maintain a sound financial structure with a P&F financial structure EBITDA pro forma ratio equal to 3.39x. The ratio takes into account the future cash in of the disposal of ACEA Energia and the cash in of the disposal of the high-voltage network, which occurred in September. Slide 5, we recorded the main indicators of the dynamics recorded in the first 9 months of the year, which, as I said, showed a strong growth trend. As to the EBITDA, ACEA recorded a growth of 10% versus the result of 2024 adjusted for one-offs and change in the scope. CapEx net of grants are EUR 843 million, of which EUR 67 million related to activities of businesses which are disposed net of the perimeter of ACEA Energia which is to be disposed of, and investments CapEx, regulated CapEx represented 95% of the total net profit, which, as I said, includes the contributions of businesses that we disposed, grows by 8% on a recurring basis and reflects the very good operating performance. The net financial position moves from EUR 4.944 billion as at 31st of December 2024 to EUR 5.083 billion at the end of September 2025. I do apologize, but I can no longer hear the speaker. I do apologize, but I do not hear the speaker. The net financial position pro forma to take into account the asset rotation as described in the footnote moves from EUR 4.343 billion as at the 31st of December 2024 to EUR 4.693 billion as at 30th of September 2026 (sic) [ 2025 ] with a ratio debt to EBITDA, which is 3.39x. The EBITDA in the first 9 months of 2025 has grown, which is due to tariffs and the operating activities of water, and it was also driven by the grid operations driven by the RAB and the growth of the results of generation and also because of prices. On the right of the slide, you see the main one-offs and changes in the scope and these amount to EUR 27 million for 2024 and relate to mainly past tariff items related to period 2022, 2023. In 2025, changes in perimeter amounted to EUR 15 million and related to the incentives for a quality in the Water business. Now Mr. Ragni is reconnected. As to the recurrent net profit, on Slide 7, the growth versus the first 9 months of 2025 is due to the operating performance, which contributes positively for EUR 26 million. That effect is partly offset by the financial management because of lower financial proceeds because of the reduction of rates. As to the EBITDA on the right, you see the detail of the one-off components. As to Slide #8 of the presentation. Now considering also the contribution of ACEA Energia in the first 9 months of 2025, we have invested around EUR 1 billion, up 6% versus 2024. Such investments for about 89% is related to regulated businesses of water, grids and environment. The net of ACEA Energia which is subject for disposal, the contribution of regulated businesses to CapEx amounts to 95%. Out of that EUR 1 billion of investment, EUR 167 million were financed by the cash in of the grant. On the slide, you see the activities carried out in each sector like the widening and update of water pipes and sewers and the upgrade of the grid for general electricity distribution. Slide #9. Here, you see cash absorption of the first 9 months of 2025, which is around EUR 140 million and is negatively affected by the changes in working capital related particularly to higher receivables and the network balancing, which we expect to be absorbed in the last quarter. And then also, it is affected by regulatory receivables, which is to be absorbed in the fourth quarter. We have to underline referring to working capital that in the third quarter of 2025, ACEA generated cash for about EUR 66 million, thanks to the efficient management of commercial receivables and payables. To be more transparent as we did when we presented the results of the first 6 months, we represented in a distinct manner the contribution of the company's consolidated equity contribution is EUR 30 million versus EUR 9 million in 2024. This clarifies better the dynamic of the changes in funds, which reflects the reclassification of ACEA Energia among discontinued operation. I will not dwell on CapEx charges, taxes and dividends as these items can be directly interpreted. As to M&As, we need to underline EUR 210 million represented by the cash in from Terna for the disposal of the high-voltage network equal to EUR 227 million. Now let's move on to Slide #10, the financial structure. Here, you can see that the average cost of debt as at the 30th of September 2025 stands at 2.04% versus 2.16% at the end of 2024. The cost of debt is positively affected by the reduction of variable rates connected to the Euribor for the part of debt which is variable and which is equal to 20% of the total at the end of the third quarter. Moreover, let me tell you that in the third quarter 2025, we took out three bilateral bank lines for a total of EUR 350 million, which at the end of September was reimbursed the bond -- green bond amounting to EUR 300 million that was issued in 2025. I'll leave the floor to Ms. Bracaglia. Valentina Bracaglia: Slide #11, we see the main KPI of the Water Italy business. Let me remind you that the results of the first 9 months results were expressed pro forma so as to have the possibility to compare the data. In the first 9 months of 2025, the recurrent EBITDA adjusted mainly because of the incentives for contractual and technical quality goes up by EUR 42 million, plus 8%. That is due to tariff growth guided by CapEx and the increase of results of consolidated -- company's consolidated at equity and also because of operating efficiency. Net of public grants investments grew by EUR 29 million, up 7% year-on-year and related mainly to operations on Acque del Sud and water cleaning plants and maintenance of grids. Net of investments related to Acquedotto del Fiora, growth year-on-year is EUR 61 million, that is up 15%. Let me now move on to Slide #12. Here, you see the main KPI related to the grid and public network. Despite the reduction of the WACC by 40 basis points as of the 1st of January 2025, the recurrent EBITDA of the business goes up by EUR 29 million, up 9%. Such an increase is due mainly to investments made that is growth in RAB and also this is due to the update of the revaluation of the RAB starting in 2025. Investments net of public grants around EUR 210 million are slightly decreasing versus the previous year, whereas investments growth of public grants are growing. In the environment area, net of one-off, the EBITDA is slightly increasing because of the greater margins associated to WTEs. The investments decreased by EUR 28 million versus the previous year. And this is mainly due to the revamping operations on the WTE of Terni out in 2024. Let me now move on to Slide 14. You see here the results of the Generation business unit results. The recurrent EBITDA grows by EUR 17 million, and this is due mainly by the favorable energy scenario and the greater generation mainly to the Hydroelectric and Photovoltaic business. In detail, the energy produced rose by 24% from 485 to 602 gigawatt hour, thanks to an increase of 42 gigawatt hour in the hydroelectric production and -- plus 71 gigawatt hour in the photovoltaic production. Investments in the first 9 months of 2025 amounted to EUR 21 million, growing by EUR 6 million versus previous year. I will give back the floor to Mr. Ragni for the updating of the guidance. Pier Ragni: Thank you very much, Valentina. Now considering the strong growth experienced in the first 9 months of 2025, we have reviewed, as you have seen from the press release, the guidance of the EBITDA for 2025. The new guidance shows a growth of the EBITDA pro forma 2025 between 8% to 10%, starting from the restated result of 2024 of EUR 1.281 billion versus plus 6% and 8% announced in June 2025. The restated 2024 result was calculated starting from the 2024 EBITDA of EUR 1.428 billion communicated last March, adjusted to exclude the contribution of ACEA Energia on disposal. And on the contrary, the contribution of the high-voltage network [indiscernible] help the term, but included here for the first 9 months of 2024. Now as to CapEx, the guidance is EUR 1.6 billion, of which EUR 1.2 billion net of public grants. As to debt -- as to pro forma debt-EBITDA ratio, the guidance is confirmed and expect a range between 3.4 and 3.5x. Such range has been determined, including the debt and the cash in of the price of ACEA Energia expected in 2026. This is the end of the presentation. Operator: [Operator Instructions] The first question is by Francesco Sala with Banca Akros. Francesco Sala: Congratulation for your results. A couple of questions. The first one on the working capital. Can you tell us where is going to be the change for the full year? You said that you expect a reduction in the fourth quarter. Can you tell us something about it? Now I'd like to know something about the closing results after the disposal of ACEA Energia to Plenitude. And how can this change the results? The third question, I'd like to have an update of the incinerator in Rome. Any piece of news there? I'd like to know whether in the next few months, you are going to give us an update of the business plan. Unknown Executive: Let me answer these questions. As to the update of the business plan, we are working on it. The goal is that of providing an update within the first quarter of next year. As to the WTE, we are going on. We now own the land. As to ACEA Energia, we expect the closing as of the beginning of the year, next year. The company is already among the discontinued operations. So there will be no impact on the EBITDA. There will be an impact on net profit, which will be offset by the money that we cash in and the capital gain that we cash in from this transaction. And we will give you the details after the closing of the deal because there are a number of calculations which are to be made and will be defined at the moment of the closing of the deal. As to the other question, I will hand the floor over to Valentina. Valentina Bracaglia: As to the net working capital, we expect a neutral trend, a neutral dynamic. In the last quarter, we expect a similar trend that we observed in the last quarter of 2024. And also as to the equalization receivables or equalization credits, we expect them to be absorbed by the end of the year. And this is the view that we have for December. Thank you very much. Operator: The next question is by Javier Suarez with Mediobanca. Javier Suarez Hernandez: I have a couple of questions to ask. First of all, the 2025 guidance, I have a question which is more strategic in nature. When you presented your last business plan, you talked about a growth of the company around 5%. Now looking at the results, the company is going through a stronger structural growth versus what you indicated in the business plan. So I'd like to know something about it more qualitatively rather than quantitatively. As to the guidance, I'd like to have an indication for 2026 guidance. Maybe you can tell us something about 2026. But in 2025, your guidance for net income, what will it be? As to the working capital, I'd like to know something more strategic. What are the management actions that the company is adopting to reduce the net capital -- net working capital absorption? Unknown Executive: Thank you very much for these questions. I'd like -- I try to answer the first two questions together. Now versus the business plan expectations, we are experiencing a stronger growth. And with the new business plan, we shall update the figures. As to the trend that we expect for 2026 is that in the Water business, considering the consultation document that was published, which doesn't show strong WACC changes and also tariffs have already been approved. We expect tariffs to be in line with what we have experienced or have seen in 2025. In the Energy business, there was no activation of the trigger, and therefore, the regulated return is stable. As to the growth trend of the EBITDA and the update of the numbers, we shall provide indications when we update the business plan. As to the guidance, we do not provide a guidance on the net income, but we can say that we do not expect changes, big changes for recurrent operations. And therefore, the net income should not basically be -- will fall in line with the guidance that we have given for other items. Now as to other activities, we are working on credit collections on customers, activation of all of the capabilities and levels that we have to cash in the money. And then what affects the net working capital are the profiles of cash in of the [indiscernible] bills or equalization bills. And now in the first 9 months, we see the normal results related to the network equalization. So here, the regulatory factor has an effect. Let me also tell you that we are seeing a greater stability of the net working capital in the year, and I think it's going to be stable, stable going forward is what I can tell you, generally speaking. Thank you very much. Operator: The next question by Roberto Letizia with Equita. Roberto Letizia: I'd like to have an update on the electricity or energy distribution concessions. I'd like to know something about it. Do you have indications about it? Do you know something about the timing when this is going to occur? I'd like also to have an update on the -- update of the debt rating on the part of agencies. Is there a moment when you will rediscuss the rating with the agencies? And what are the priorities in that case? What are the main interventions, CapEx, M&As, remuneration of shareholders, all of the three, can you give us indications about it? And then considering the reorganization and after you get out of the Retail business, what are the priorities? What is the focus of the management team? Is there going to be a review or a change in the governance of the company? Are there options opening up in the Water business, for instance, I don't know, Acquedotto del Fiora. So I just want to know what's next for ACEA in terms of its structure. A couple of technical questions. First, why is the tax rate higher, which is now 32.5%. What kind of considerations are to be made going forward? And then are there going to be possible contributions for ACEA in relation to data centers? Unknown Executive: Well, thank you very much, Roberto. Now as to the extension of the concessions for energy grids, well, this is a recurring question, which is usually asked when we meet. We are waiting for the authority to decide. As I have always said, whatever is decided by the authority is something on which we rely on the asset rotation that we made after the disposal of the high-voltage network and the disposal of ACEA Energia to come allows us to focus on our own main business, increasing investments in the Water business and in the environment sector. As to M&As, when we speak of M&As, we do not look at M&As. Of course, if there are opportunities, we shall pursue them, but we have a growth trend, which is related to our own businesses. You know very well that Water business requires constantly investments due to the fact that there is a low supply of water and higher demand of water and networks are to be constantly maintained and updated. As to the energy grids, you need to work on the resilience of such grids. Look at what happened in Spain, in Turin, in Bergamo. Hence, we shall focus our efforts there. As to the dialogue with the rating agency, this dialogue is ongoing. Of course, they would want to see the new business plan. And considering that our business now is 90% regulated, we shall use the greater financial leverage to focus constantly on our RAB and on the environment. Now as to the governance, I don't know what to say. The disposal of the Retail business doesn't change anything in terms of our governance. And of course, we shall see, but I don't have much to say about this. Valentina Bracaglia: As to the tax rate, this is Valentina speaking. The tax rate is in line with the data of December 2024, which was 32.6%. The tax rate are affected by nonrecurrent items, disposals and one-offs. And so we expect a realignment of the tax rate to what we had in our business plan, which is also in line with our historical data. As to the question about the data center, well, I can say that as a manager of the distribution network in Rome, we see the opportunity to strengthen the network and to, of course, serve the needs and demand stimulated by also the data center, and this is part of our plans. Now as to further opportunity related to the Data Center business, we are assessing or looking to see whether there are opportunities, but we do not see for the moment specific developments. Now the Data Center business at the moment is more concentrated in the north of Italy, where there is greater demand whereas our Water and Energy business is more focused in the center and south of Italy. But of course, we shall use our competence and our infrastructures. But this is something that we shall evaluate on a case-by-case basis. Operator: [Operator Instructions] Ladies and gentlemen, at the moment, there are no other questions. No, there is one follow-up question by Roberto Letizia with Equita. Roberto Letizia: Now, I do apologize, I have a follow-up question to ask something about the JV with Versalis. Can you tell us something about this, the timing, the size of the operation? Unknown Executive: Now this JV is for us an opportunity to extract more value from our plants, recovery and recycling of plastic. Now we are focusing on mechanic recycling and on the -- and on polypropylene for food use in terms of recycling. And in this case, we are using the chemical recycling processes. Now we are studying the potential of this partnership, and we hope that this will have further developments in the future. Operator: Ms. Bracaglia, ladies and gentlemen, at the moment, there are no other questions from the conference call. Valentina Bracaglia: Well, thank you very much for joining in. And if you have any other questions, you can call us directly. Thank you very much. Operator: This is the Chorus Call conference operator. The conference is now over. You can disconnect your phones. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Rajeev Sethi: Sure. Thank you, Christopher, and good afternoon, everyone. And thank you all of you for joining in today. Today is an important day. It's the first full quarter of XLSMART's journey. Just to remind you, our merger happened 15th of April -- 16th of April. So the last quarter was 2.5 months of combined operations. This time, it's the first full quarter, and the numbers which we are reporting are a result of that. And I'm pleased to share that the momentum continues to build across our businesses. We've delivered a strong performance. Revenue -- reported revenue is up 38% year-on-year, 9% quarter-on-quarter, underpinned by very strong subscriber quality, improving ARPU and good progress which we are making on the integration. Network integration specifically is progressing well. As you would know, national roaming for Smartfren customers was completed in record time. The MOCN rollout continues to expand, improving both coverage and quality for all our customers. Financially, we are seeing a very healthy growth, underlying growth. Normalized EBITDA and PAT reflect the strength of our core businesses, though the reported results still include temporary one-offs, which are normal for a merger, and they are related to integration and asset optimization. Synergies are taking shape. We'll speak a bit more about that in the next few slides. And we are accelerating value creation across operations, procurement and infrastructure. These initiatives are moving us steadily towards our ambition to become the industry's most efficient and agile service provider. Overall, I believe this quarter demonstrates resilience and strong execution as XLSMART continues to unlock long-term value from the merger. If I move to the next slide, post-merger, our integration engine is running at full speed. One example of that is our Customer Experience and Service Operations Center, CESOC, which was launched in July, a major milestone that allows us to centralize network monitoring, service quality and field operations across all the 3 brands we have. On the network side, we've started and progressed significantly towards consolidating overlapping sites, streamlining our vendor ecosystem and optimizing the tower utilization. All these efforts are resulting in tangible cost savings. I'm happy to report that we are on track to deliver between $150 million to $200 million synergies for this financial year 2025, largely coming from operational efficiencies and vendor rationalization. Full benefits, what we spoke about earlier, $300 million to $400 million run rate pretax. That will come from -- after the integration is complete, but good, solid start towards that direction. Obviously, the next in pipeline would be the IT system unification, which again would be a significant value generator, office integration and expanding our partnerships on the roaming side. And we'll also further align the organization to operate as one unified XLSMART. If I move to the next slide, please, which is talking about the customer experience. As we said earlier, customers and employees will remain at the forefront of whatever we do. Both quality and coverage of our network would be super important in this regard. And through MOCN integration, all 3 brand users, XL, AXIS and Smartfren, are experiencing much better download speed. They have gone up by as much as 70%. And the population coverage, specifically for Smartfren, has gone up by 38%. These network improvements translate directly to a better quality of service, which is a very key differentiator in today's competitive network telecom operations. We also celebrated our National Customer Day in September with nationwide campaigns through XL Point and SmartPoint, reinforcing our commitment to customer loyalty and engagement. We received significant positive feedback, and which is a clear sign that our investments are making a real impact on the ground. If I move to the next, which is on the network update. We have now integrated over 15,000 sites, which is close to 1/3 of the number of sites which we have to integrate, and extended network access for Smartfren users to 192 cities through national roaming. Our total BTS count reached more than 209,000 sites, up 27% year-on-year, with majority being on 4G. MOCN integration is on track to complete by the first half 2026, which is within the 4 quarters of the start of this project. And the results are already visible, as I spoke about earlier, better coverage, higher speeds and more consistent services across geographies. If I have to cite an example, this was the 2025 MotoGP event in Mandalika, where our network handled massive traffic volumes very easily, proving our readiness to deliver world-class connectivity across the country. If I move to the next slide, which talks about the 3 growth pillars. And this is something we've been talking about and we are very excited about. The 3 growth pillars, Mobile, Enterprise and Home. And each pillar by itself represents a focused growth engine, and it has a distinct strategic focus. But collectively, all of these will contribute to company's mission of connecting every Indonesian to a better life. If I talk about the first pillar, which is Mobile, it is represented by our 3 brands, XL, AXIS and Smartfren. I strongly believe that the multi-brand approach enables us to effectively target different customer segments, and it's a unique strength we have as compared to other operators in the market. And post integration, we have seen encouraging momentum driven by a simplified starter pack strategy and optimized product offerings, which is supporting a stronger market recovery and I'm sure will help sustain future ARPU growth also. We're also driving digital engagement through all the apps we have on XLSMART, MyXL, AXISNet, mySmartfren, which is now reaching more than 39 million active users on a monthly basis, which is up 21% year-on-year. This, of course, helps in improving customer stickiness and monetization. The second pillar is Enterprise, which we work under the brand XLSMART for Business. Here, our focus is to become a trusted partner for Indonesia's digital transformation for both private sector and also the government clients. A key milestone in this journey was the launch of ESTA Enterprise Smart Technology and Automation, which was launched in July '25. ESTA provides a full suite of industry solutions across connectivity, IoT, cloud, cybersecurity and automation. This will help position XLSMART not just as a telco, but as a strategic ecosystem partner, enabling digital transformation beyond connectivity. The third pillar is Home, anchored by our brand XL SATU, which continues to gain strong traction in Indonesia's fixed broadband market. We are reinforcing our position as one of the leading fixed broadband providers by focusing on user experience, flexibility and family-oriented solutions with the effort to stabilize the ARPU. XL SATU continues to drive deeper household penetration and strengthen customer loyalty, which is a key differentiator in this competitive market. So if I have to summarize, XLSMART's growth is fueled by these 3 complementary pillars, Mobile, Enterprise and Home, each targeting a unique opportunity while collectively driving sustainable long-term growth for the company. If I move to the next slide, Slide #9. It's talking a bit more about the enterprise business. And as I said, this is expanding rapidly, powered by the launch of ESTA. And it's a comprehensive digital suite, as I spoke about earlier. We also hosted BRAVO 500 Summit in collaboration with Ministry of Digital and Information, bringing together 500 of Indonesia's leading corporations. Our enterprise solutions now reach key verticals such as financial services, manufacturing, logistics, health care and natural resources, combining ICT services and big data analytics to deliver smarter and more integrated outcomes. We believe momentum is strong, and we see continued opportunities and more industries accelerate digital adoption. I'll take a pause now and hand over to my colleague, Pak Antony, to walk us through the financial results. Antony Susilo: Okay. Thank you, Pak Rajeev. I think the next topic will be the financial and operational highlights. Let me start with the operational performance first. So at the end of the quarter 3, our consolidated subscriber base already around 79.6 million customer base, reflecting a normalization following to our starter pack price adjustment, which is, I think, last -- the latest one that we did for Smartfren brand in the month of July or August. So all the 3 product brands starter pack already now, already adjusted. That's the situation on the starter pack price. Then on the -- what we call on the data traffic, I think despite of the decline in the subscriber count, the data traffic continued to grow, reaching to 3.9 exabyte or 3,900 petabytes, up to 53% year-on-year and 2% quarter-on-quarter. The ARPU improved to become IDR 38.9, blended ARPU, this one, from IDR 35,500 last quarter. This is a double-digit growth, which is around 10% Q-on-Q, highlighting our focus on -- focusing on the quality growth as well as the customer value. Okay. Moving to the next slide to the financials. The revenue grew by 38% year-on-year and 9% quarter-on-quarter to IDR 11.5 trillion, driven by the full quarter consolidation of Smartfren and higher mobile ARPU. The normalized EBITDA reached to IDR 5.4 trillion, up to -- increased 9% Q-on-Q and 24% year-on-year. This is reflecting the underlying strength despite of the ongoing integration costs. The reported PAT improved to a loss of IDR 1.38 trillion, while if you look at the normalized PAT, the normalized PAT already turned positive at IDR 1.15 trillion. This is, of course, after the adjustment of the one-off expenses, which is the accelerated depreciation, noncash item and also the one-off integration costs. The margins are stable, with the normalized EBITDA margin at around 47%. These trends actually confirms that the integration is progressing smoothly and the synergy already captured starting -- is already starting to flow through our financial numbers. Okay. Move on. This is maybe to give another explanation how do we calculate the normalized PAT, normalized profit after tax. In here, we are presenting both reported as well as the normalized EBITDA and PAT to provide a clear picture of the underlying performance during the integration period. The normalized figure already exclude one-off items such as integration costs. Number two is the accelerated depreciation, which is related, of course, to network consolidation. And then in Q3 2025, you can see that the reported EBITDA was IDR 4.9 trillion, with the normalization adding from IDR 554 billion in integration expenses. So it brings to the normalized EBITDA to around IDR 5.4 trillion. The reported PAT stood at a loss of IDR 1.38 trillion. But after adjusting all these integration costs, accelerated depreciation and asset impairment, the normalized PAT become positive at IDR 1.15 trillion. This approach basically to ensure we want -- if we want to compare with the previous year. So this is to show a better comparability and better to reflect the company operational performance. Okay. Move on to the next slide. So let me now walk through on the cost structure, our operating expenses. So OpEx increased by 10% quarter-on-quarter and 66% year-on-year, reaching to IDR 6.6 trillion in the third quarter 2025. This increase reflects the enlarged scale of our business because it's a consolidation of Smartfren and XL. So this is already including the -- including a higher infrastructure as well as the regulatory costs, as well as all the integration related activities. Of course, we remain disciplined on the cost management, ensuring that all the expenditures are tightly linked to the synergy realization and also creating long-term values. So that's the end of my presentation. I shall now hand over back to Pak Rajeev to provide the full year 2025 guidance, as well as the closing remarks. Rajeev Sethi: Sure. And thank you, Pak Antony. As Pak Antony mentioned, I'll talk about what's our guidance for 2025 full year. Revenue is expected to grow broadly in line with the market. On a reported basis, growth is expected to be between 20% to 25% year-on-year. EBITDA margin will remain between low to mid-40s range, mid- to 40% range. On CapEx, the capitalized CapEx is projected to be around IDR 10 trillion. And I think it requires a bit of a clarification. This is not a reduction in the investment. If you remember, when we spoke last time, we spoke about a number close to IDR 20 trillion. The orders which we'll be releasing to our vendors would be still close to that number. But what we'll be able to capitalize, which is put on air and start using, and therefore capitalized, would be a number which is close to IDR 10 trillion. And that's the number which we are stating here. The capitalized CapEx would be around IDR 10 trillion for this year. Synergy guidance, last time when we spoke, we gave a guidance of between $100 million to $200 million for this year. This year, we are revising it to the upward part of that guidance between USD 150 million to USD 200 million. It's driven by stronger-than-expected network and vendor efficiencies. We also remain on track to achieve our full synergy potential of $300 million to $400 million annually pretax once the integration is fully completed. And with this, our summary for the third quarter '25 ends, and I hand it back to Chris to take it further. Christopher Kusumowidagdo: Thank you, Pak Rajeev and Pak Antony for the presentations. [Operator Instructions] The first question comes from the line of Piyush Choudhary from HSBC. There are two questions. The first one is -- sorry, there are three questions. The first one is what is the like-for-like -- like-to-like mobile service revenue growth Q-on-Q in third quarter 2025, as 2Q does not have the full impact of merger? I think -- then second question, what is the breakdown of revenue in 3Q into your 3 segments, Mobile, Enterprise and Home? And the third one is normalized EBITDA margin is 47%. Where do you expect normalized margin to be, post-merger integration? For these questions, I would like to invite Pak David to answer the first question. David Oses: Okay. I'll take the first one, Piyush. So the like-to-like mobile service revenue growth quarter-on-quarter will be at 5%. Like-to-like will be at 5%. To the second part of your question about the initiatives taken to increase the mobile ARPU, I can share that, as you can see, we had a double-digit ARPU growth quarter-on-quarter. This has been done by many things, but we have taken out a lot of freebies. We have increased prices by taking discounts out. We have also increased minimum prices, especially in our personalized offers. So we have done a bunch of things in our very clear strategy to focus on quality subscribers. Now you can see, I think you can calculate as well that the yield, the revenue per gigabyte has increased high single digit, well, around 6% quarter-on-quarter. So the yield increased 6% quarter-on-quarter. This means that the revenue that we are getting for each of the gigabytes is increasing, that our prices per gigabyte have increased. So out of the ARPU double-digit growth, from 10%, we can say that more than half is due to the price increases. The other comes from more usage per subscriber. And again, how did we increase the prices? As I was saying, taking freebies out, increasing prices literally nominally, taking some discounts out, increasing minimum prices in personalized offers, et cetera, et cetera. For the second question, I will pass it to our CFO. Antony Susilo: Okay. The second question is about the breakdown of the revenues into 3 segments, Mobile, Enterprise and Home. I think just to give rough figures on the Mobile segment, it contributes around 80% to 82% contribution of revenue. And then Enterprise is around 10%. And Home is the smallest one. It's around, I think, around 6% -- 5% to 6%. So I think that's the breakdown of the revenues. And then number three, the question is about the normalized EBITDA margin, which is 47%. Where do you expect normalized margin after post-merger integration? Okay. So I think we know that this normalized EBITDA margin is already taking out the integration costs, which is, I think, what contributes a significant amount. But I think post-integration, which is after the next 2 years, 2028, I believe, because our plan to do the integration, everything to be completed within 8 quarters. So we are hoping that, of course, this EBITDA margin, 47% will even further improve because the company management always trying to do the cost efficiencies program, trying to make sure that we are aligned with the plan that we have, which is, of course, it's a cost efficiency program. So we are expecting a higher EBITDA margin similar to the other telco players. Christopher Kusumowidagdo: Thank you, Antony. Can you [indiscernible]. Hi Piyush. Piyush Choudhary: Could you also be able to share what's the breakup of your EBITDA margin among the 3 segments, Mobile, Enterprise and Home, at the moment? And one more, like David, are there any kind of incremental initiatives being taken in fourth quarter to further kind of enhance the mobile ARPU? And how are the kind of economic trends at the moment? If you can throw some light on October trends? Antony Susilo: Okay. On the breakdown of the EBITDA per business segment, I think, unfortunately, we don't really make that specific analysis because most of the cost is a common cost. So I think we only measure the -- what we call the direct EBITDA -- the direct gross profit. But I think from EBITDA point of view, I think we prefer to do it as a total basis rather than doing it for 3 segments. David Oses: Okay. So regarding this fourth quarter, yes, we have additional initiatives planned in order to increase the ARPU, one of them being price increases. So we are going to have, I would say, significant price increases in the different portfolios of our 3 brands in the coming weeks. As I was mentioning in our strategy of focusing on value customers, so far, it's looking good. So we are happy with the results. So we are going to continue in that direction. And the next step will be to increment prices of our value propositions, specifically in certain specific products. There was any other question? Piyush Choudhary: Thanks, David. So have these price initiatives already been done in October, or it's something which is planned for future? David Oses: So we are on it. So some small things have been done, some will be done almost -- I won't say as we speak, but relatively soon. Christopher Kusumowidagdo: Let's move on to the next question from [ Irwin Vijaya ] from [ Adana ]. Two questions. First one is, are you going to distribute 100% of the proceeds from treasury share as dividend? And then second one is how much restructuring costs do you have left? Or when will things normalize? I think for both questions, we can -- Pak Antony can answer. Antony Susilo: Okay. Thank you, Pak Irwin. I think -- yes, I think in terms of dividend, I think I forgot to mention it earlier on that one. So like this. I think there is no such relation in terms of the treasury shares that we sold, I think, last month with the dividend amount that we want to distribute. Yes, indeed, that the company was like to do a dividend distribution, which is I think we would like to seek approval from the shareholders where the EGMS will be done next week on Friday. So why the company would like to give the dividend distribution, I think as you can see in our Q3 performance results that it shows that actually, we are -- we can reach to a normalized PAT positive around IDR 1.8 trillion. So this is a healthier -- healthy indicators actually for the company because we can see that some of the performance, the costs, as well as the revenues is improving. So with that reason, then the company would like to distribute the dividends. In terms of cash flow, I think the cash -- how to fund these dividends, it's going to be done through our internal cash from the operations. Today, the company is sitting at a cash balance around more than IDR 4 trillion. So with that one, I think we are able to do a dividend distribution. So all in all, I think the dividends will be approved by the shareholders next week, waiting for the news for this to everybody on this subject. And then on the second question about the restructuring cost, actually, this is not a restructuring cost. I think if you are referring to integration costs because we are not doing any restructuring. It's only integrations. In terms of integration costs, I think you saw it from the slides that total integration cost that we have incurred this year until September 2025 is IDR 1 trillion. The target -- our budget for integration cost for this year is around IDR 1.5 trillion. So the remaining is around IDR 500 billion that maybe this one will be materializing in the next quarter, in the Q4. And when the things will be normalized, I think like I mentioned that the integration period will happen in the next 8 quarters. So I think this is the first -- the fourth quarter, 3 quarters already, Q2, Q3, actually second -- 2 quarters, actually. And then Q4, 3 quarters, hopefully, everything will be normalized starting 2027. Okay. So that's the answer, Pak Irwin. Christopher Kusumowidagdo: Thank you, Antony. Pak Irwin, do you have any follow-up questions? Unknown Analyst: No, thank you. Everything's clear. Christopher Kusumowidagdo: Let's move on now to the next question. This comes from the line of Ranjan Sharma from JPMorgan. What is the -- there is one question. What is the difference between CapEx guidance in 3Q to the one in given in 2Q? And what is the capitalized CapEx for this year? I think for this question, I would like to invite Pak Antony again to address the question. Antony Susilo: Okay. The -- yes, indeed, that the CapEx guidance for second quarter and third quarters, if you look at the figures, was different. I think the difference was because that initially in the second quarter, when we give the guidance around IDR 20 trillion to IDR 25 trillion, that one was on the early post-merger indication, where at that time, we use a PO issuance amount at around IDR 20 trillion to IDR 25 trillion that we want to spend for integration. However, I think we understand that we may want to use a capitalized CapEx instead of PO issuance. So in terms of capitalized CapEx, if we make some estimation this year, this year, approximately around IDR 10 trillion. So we are not changing the -- or making a revision on the CapEx amount. It's -- the amount is still the same in terms of PO issuance around that, IDR 20 trillion to IDR 25 trillion. However, capitalized CapEx is around IDR 10 trillion. For -- I think for Q3, I think we already booked capitalized CapEx around IDR 4 trillion to IDR 5 trillion. So the remaining IDR 5 trillion maybe comes in the Q4 2025. That's the answer Pak Sachin. Christopher Kusumowidagdo: Thank you, Pak Antony. Sachin -- sorry, Ranjan, do you have any follow-up question? Ranjan Sharma: Can I just check one more thing? Did you say you're looking to pay a dividend? Because in the last quarter, you were saying you will not pay dividend for 2 years. Antony Susilo: Yes, indeed, indeed. I think -- correct, I mean, we -- I think I remember last quarter, we think that we will not be able to pay dividends next year actually. Because the company, if you look at the PAT numbers is negative, right? So we will not be able to give a dividend next year. However, we see that there is an opportunity for us to give the dividend distribution this year. Because our -- basically, dividend normally is following the previous year profit, right? So I think if you look at the -- also following the OJK regulations, that we are allowed to give a dividend within this year. So with that consideration from the OJK regulations, from the company performance, the cash situations, so we decided that to give distribution -- dividend distribution to the shareholders. So -- but of course, this is subject to approval from the shareholders here next week. Ranjan Sharma: Sorry. So you're not looking to pay a dividend next year, but you want to pay a dividend for this year? Antony Susilo: Next year, unfortunately, looking at the numbers, we are not allowed to. Because it's a negative retained earnings. At this moment, Q3, I think we see that PAT is negative, right? So we will do it this year. So it's like maybe we can say as an acceleration. Ranjan Sharma: Okay. It's interesting because if I look at your balance sheet and your cash flows, they don't seem in the best position, right? So I'm just surprised to hear you're looking to pay a dividend. Antony Susilo: Well, from our point of view, when we look at our balance sheet cash flow also, I think we are still in the safe position. Like, for example, the gearing ratio, I think we are still below 4. So I think there is -- I mean, by giving this dividend distribution, we are not impacting to any -- to the ratios of the company. So with that one, I think we can -- we are able -- we have some capacity -- we have capability to pay dividend. Christopher Kusumowidagdo: The next question comes from Sachin, Sachin Mittal from DBS. So does revised lower CapEx include integration CapEx? I think this has -- yes, I think Pak Antony has already addressed on CapEx, but you might want to clarify whether this includes integration CapEx, Pak Antony? Antony Susilo: This CapEx, yes, includes integration CapEx. But again, like I mentioned, we don't make any revision on the CapEx amount. It's only that we -- now we are using capitalized CapEx instead of the PO issuance. I hope that one can answer, Sachin. Christopher Kusumowidagdo: Thank you, Pak Antony. Sachin, do you have any follow-up questions to the management? Sachin Mittal: Can you hear me now? Christopher Kusumowidagdo: Yes. Sachin Mittal: Okay. So I understand that you're taking now, longer time to basically to incur the CapEx. Again, I want to understand a little bit of what is the normalized level of CapEx because there is some integration CapEx involved, right? So how much is -- how do we think of the normalized CapEx? Because it seems like you're talking of now, 10 and 10, right, each year, FY '25 and FY '26. Is that the right way to think about it? Antony Susilo: For the integration CapEx, yes, we can say that. Although actually, the IDR 20 trillion, IDR 25 trillion over there is also consists of BAU CapEx. Some of them, yes. Rajeev Sethi: If I may just jump in here, Pak Antony. I would not want to classify this as integration CapEx because the -- as I think we spoke about last time also, it's just not about combining the two networks together where we are spending most of the money. It's readying the network for future, i.e., 5G, for example. So whatever network we are readying, it's readying for future. So it's very difficult to classify and say this is because of integration or this is for modernizing the network. The outcome would be a brand-new network ready for future. So that's one point. The second part is there is no change in the CapEx plan. It's just the way we were stating it earlier. When we spoke about CapEx earlier, IDR 20 trillion, IDR 25 trillion in 2025, it was largely the ordering amount. And that quantum of orders will go out during the course of this year. What we'll be able to put on here and capitalize, there is a process of getting the material in-house, putting it on our site, doing those acceptance tests, that will be around IDR 10 trillion, which again is as per the plan. It's only that earlier when we spoke about, we did not clarify that this is the ordering amount, the capitalization amount would be lower. So that's the second part. And I think one more part of your question was how much will this normalize into. I think after the integration phase is over, after the entire modernization is over, which should be done by -- largely by 2026, I think it will go back to a regular mid-teens level. That's the number which we anticipate in the long term. Christopher Kusumowidagdo: Thank you, Pak Rajeev. Let's move on to the next question. Sorry, Sachin, do you have any follow-up question before we move on? I think you have one question, follow-up on ARPU, please? Sachin Mittal: I mean, it's -- how are you seeing -- your subscriber decline was noteworthy, while other -- your peers did not see the subscriber decline. Was it too much sharp hike? And what does it mean for you in the current quarter? David Oses: Yes, correct. So -- and if you take a look to the subscriber changes, yes, with competitors and also ARPU changes, I think our ARPU growth, it's significantly higher than our competitors. Also, our subs decreased. As I was mentioning before, our ARPU increase comes mostly -- more than 50% from the yield increase. So we are able to monetize better the gigabytes and part also from the usage increase. Is it too much? No, it is not. Actually, again, you can see in the results that it's going in the correct direction. So those subscribers that we lost are -- I don't want to call them a user because they were using the portfolio that we have given to them, right, but are subscribers that were very low ARPU and/or very low yield. So those are subscribers that in our newer strategy don't have a fit in our company. Probably, they found somewhere better where they can -- at those low yields, et cetera, they can fulfill their needs. But I think our strategy is very clear, go for value subscribers. Having said that, again, in quarter 4, we expect -- we hope that the ARPU will keep increasing and that our strategy will keep moving in the same direction. As I was mentioning before, we already have aligned many price changes increases that we are going to implement in the coming days, and that some of which we have already been doing also in the personalized tiers, et cetera. Christopher Kusumowidagdo: Thank you, Pak David, for the clarification. Any follow-up questions? Sachin Mittal: No. Christopher Kusumowidagdo: Now let's move on to the next question from Henry Tedja from Mandiri Sekuritas. There are two questions. The first one, what is the -- what are the three drivers of purchase of bundled device and the software increase under the interconnection and other direct expenses? I think this is under the COGS. And second question is, could you share more details regarding the accelerated depreciation expenses increase? What kind of assets that drive the increase? I would like to invite Pak Antony to address the questions. Antony Susilo: Pak Henry, I think on the first question about the -- what are the key drivers for the increase on the COGS specific to the bundled device, I think as we explained, I think Pak Rajeev already explained that the company now focusing to the Enterprise segment. So like again, I explained, Enterprise segment contributes around 10% of the total XLSMART revenues. So because of this focus expanding this business segment, so we are sort of like have to purchase this device as well as the software to one of our enterprise clients. So of course, this, of course, is along with the increase of the revenue from the Enterprise as well. So I think that's on the explanation for number one. And number two, regarding the accelerated depreciation expense. Yes, I think this accelerated depreciation expense was -- resulted from the -- one of the example is the 900 megahertz spectrum. Because as we know that the company have to return the 900 megahertz spectrum to the government by end of 2026. So with that one, all the assets or the -- any equipment which is associated to 900 megahertz, we have to sort of like making an accelerated depreciation. And also another example also, we know that the company already choose the vendors to do the integration as well as the modernize the network, so -- which is the vendor is ZTE as well as Huawei. So the vendors that currently the existing equipment, which is not this ZTE or Huawei vendor, we have to do some dismantling. So we will not use this asset anymore. So with that one, we have -- also have to do some accelerated depreciation. So I hope that one can explain to you the nature of accelerated depreciation, yes. Why is it increased? Because we have to do it earlier, faster than the -- let's say it's supposed to be another 6 years, but now we have to do it within by end of 2026. Is that answering the question, Pak Henry? Henry Tedja: Perhaps if I can have two or more -- three questions. The first one, I guess, regarding the integration costs. I think you mentioned earlier that this year, the budget or the target will be IDR 1.5 trillion. So I'm just curious, how about next year? What will be the target for the integration cost next year and also for the accelerated expenses? And then the second question, I think regarding the CapEx, just to want to clarify. So does that mean out of IDR 20 trillion to IDR 25 trillion that was guided like the previous quarter, IDR 10 trillion will be capitalized and the rest will be expensed for this year? So that will be booked under the cash OpEx? And then perhaps the third one to Pak David. I think earlier, Piyush has asked about the latest economic trends. So I'm just curious how do we see the purchasing power in the last few weeks or in the last few months? So I think those are my three questions. Antony Susilo: Okay. Let me answer first on the question on the integration cost for the next year, yes. I think like I mentioned that I think the integration cost still continue until end of 2026 or maybe first quarter '27. So the amount of the integration cost, I will say that we don't have the numbers at this moment because we are still calculating the BP for 2026. But I think let's assume the same similar number, what we project. If let's say, this year is IDR 1.5 trillion, maybe approximately the same numbers, integration cost for next year. So that's on the integration cost. And then the second question is about -- second question, Pak Henry? Henry Tedja: Yes. The second question regarding the CapEx, you mentioned that some of the all capitalized. So I just want to clarify on that. Antony Susilo: Yes. So the PO amount, yes, it is around 20 to 25, but the capitalized CapEx is 10. But the remaining actually will not be -- we will not expense this. Or we call it as cash OpEx, no. But the remaining, I think, will happen -- will be materialized next year. So next year will be -- this sort of like will be carry over to next year, the remaining instead of OpEx. Still capitalized CapEx. Okay? So the next question. David Oses: Regarding the economic situation on the consumer side, to be honest, I mean, you can see the results. So for us, the last few months have been positive. I think we see a little bit more of confidence in the consumers, a little bit of [ reparation ], in that sense. Christopher Kusumowidagdo: Thank you, Pak David. Pak Henry, any follow-up questions? Henry Tedja: No. Thank you, Pak Chris. I think everything is clear. All the best for the management. Christopher Kusumowidagdo: All right. Now let's move on to the next question. I think we have the question from Arthur Pineda from Citi. There are one question. There is one question. Can you please remind us about your dividend policy? And do you pay this out of retained earnings or reported earnings? I think maybe, Pak Antony, you can clarify this later on. In addition, what are the considerations for paying for the dividend given that the company is targeting IDR 20 billion to IDR 25 trillion, which is above the operating cash flow? Pak Antony, maybe you would like to address this question. Antony Susilo: Okay. I think we know that our long-term goal is to deliver sustainable shareholders' returns. So I think looking -- as I already explained that the company show a negative PAT, not normalized PAT and the negative bottom line. So with that one, we expect that I think next year, there will be no dividend. So we think that we want to give the dividend within this year while we still can, still following the regulations. So I think with that one, with that consideration and also, of course, looking at our free cash flow and everything, balance sheet, I think it's doable from our side. I think when you mentioned about the IDR 20 trillion to IDR 25 trillion is above PCF. I think, again, like I mentioned, this IDR 20 trillion to IDR 25 trillion is a PO amount that we issued. But again, capitalized CapEx is only like half of it that we booked to our CapEx. This -- what you call, this year will be around IDR 10 trillion. And then from that one, actually, what I would like to say that we get soft payment terms from the vendor itself. So the IDR 10 trillion, although we separately capitalize it this year, we may not need to pay IDR 10 trillion to the vendors. So I think there are some agreement already from the -- from the vendor on the payment terms. So I think with that one, I think we are hoping that all of the shareholders agree for us to give the dividend distribution this year. Christopher Kusumowidagdo: Thank you, Pak Antony. Arthur, any follow-up question? Arthur Pineda: Just wanted to clarify with regard to the cash flow implications on CapEx. I know you mentioned IDR 10 trillion will be booked for this year and the PO is IDR 20 trillion to IDR 25 trillion. I'm just trying to figure out from a cash flow standpoint, how do we view this? The balance of around IDR 15 trillion, is that paid '26, '27? I'm just trying to figure out what it looks like from a cash flow standpoint. Antony Susilo: Yes. I think more or less, the payment will be done next year. But I think from the next year point of view, if I look at the capability from our side, let's say, we can generate like IDR 20 trillion cash flow from operation next year. So I think we are able to pay this CapEx PO. So I think well, maybe we may need to do -- bank some of the borrowings from the banks, but the amount may be not as big as like this CapEx because the plan to fund this PO from this CapEx will be funded majorly coming from our internal cash operations because we are able to generate like IDR 20 trillion per year. Arthur Pineda: Understood. I was just wondering in terms of the decision to pay the dividend now, given that I think there will be spectrum auctions coming up as well. How do you balance the deleveraging of the company and having the cash available for items like spectrum versus paying dividends upfront? I'm just wondering what the philosophy is and why pay now, given that there's still auctions coming? Antony Susilo: It's now or never. I think like I mentioned, next year, it will be difficult for us to give dividends. So the chance, the window of opportunity to give dividend only this year. And looking at the -- again, for me, I reemphasize that looking at our balance sheet, our P&L, our cash flow, it's doable. We can do it this year because like I mentioned also maybe the cash balance at this moment today, we have -- we are sitting like around IDR 4 million, almost IDR 5 trillion. This is our cash balance. So we are able to distribute the dividend. And the gearing ratio, I think, yes, we are still in the reasonable amount. We -- of course, we still monitor this, make sure it is not going to be beyond 4x, the gearing ratio. So with that consideration, that's why we are -- our intention, I think we can give dividend to the shareholders. Christopher Kusumowidagdo: Now let's move on to the next question From Bob Setiadi from CGS. Can you discuss about the accelerated depreciations? Are we going to see depreciation run rate in third Q for the next 6 quarters? Pak Antony, yes. Antony Susilo: Yes. I think, Bob, the accelerated depreciation, as I explained earlier, that this is related to the asset that we have to -- we will not use in the next -- after the integration, which is maybe one of the example, the 900 megahertz and also the other vendors, which is not being chosen one. So we have to do this accelerated depreciation because we will not use it. So are we going to see the depreciation run rate in the third quarter -- in the next 6 quarters? The answer is yes. By the end, I think until the integration period is over, expect hopefully, by -- hopefully, I would say by end of the December '26, next year, it's over. Then starting 2027, everything will be normal -- back to normal. Christopher Kusumowidagdo: Okay. Bob, any follow-up question for us? All right. Next question comes from [ Andy Kurniawan ]. So there are two questions. The first one is, can you share about the ARPU increase in average from your 3 brands, respectively? Was Smartfren increasing more by ARPU compared to your other brands in third quarter? And second one, has your subscriber decline Q-on-Q due to focus on quality subs? Can you share which brand that gave the contribution to the subscriber decline? Pak David, I'd like to invite to address. David Oses: Yes. So it's going to sound like a normalized answer, but to be honest, no. So Smartfren was not the one increasing more, the ARPU, and all the 3 brands have been in the same direction, both in the ARPU increase as well as in the subscriber rationalization. So we will have one of the brands with more or much higher percentage of the subscribers that left or the low-value subscribers. So it's been quite -- let me put it this way, democratic, both the ARPU increase as well the ARPU increase, the yield increase as well as the subscriber rationalization. Christopher Kusumowidagdo: Andy, do you have any follow-up question? Unknown Analyst: No, thank you. Christopher Kusumowidagdo: Let's move on to the question from Norman from CLSA. Congrats on strong ARPU uplift. First one on accelerated depreciation and impairment. Will we see more being booked in 4Q 2025? Second one is on OpEx. 10% Q-on-Q increase is quite significant. Is this a normalized quarterly run rate? Or we should expect some increase? For these two questions, I would like to Pak Antony again to address. Antony Susilo: Okay. Thank you. So Norman, I think on the first question on the accelerated depreciation, a similar question with the Bob Setiadi question. I already explained that, yes, I think in the next quarter, Q4 2025, the accelerated depreciation still continue even further until next year. Because, again, integration period is 8 quarters. That's why please expect that there is an accelerated depreciation until the end of the integration exercise is completed. And then on the second question on the OpEx, I think, yes, but the increase of the OpEx is mainly because of the, number one, that recall in the last quarter was only like 0.5 month's of Smartfren expenses was not there. And the second one, of course, this quarter-on-quarter because of -- mainly because of the integration costs that we have to book in the Q3 2025. But of course, once this integration cost is over, which is -- I think we can see that the integration costs in the previous -- in the slides that it was around IDR 800 billion already booked by September 2025. So by the time that this is -- integration cost is no more -- is already over, then our OpEx amount will become stable and our EBITDA margin hopefully can increase from time to time. So I think that's the explanation, Pak Norman. Norman Choong: I think on the first question, where I'm coming from is mainly because I saw the accelerated depreciation run rate was like IDR 700 billion last quarter. Now it's IDR 1.8 trillion this quarter. I'm just wondering, the first is why don't you just book everything within the short term? Or is it not doable because you are still removing asset? Second thing is I'm just trying to figure out when you say there's more coming, would we get a sense of like roughly how much? Or profit is really not a priority during the integration period? Antony Susilo: Yes. I think, yes, it was quite a surprise maybe to look at the first quarter, IDR 739 billion and then second quarter, IDR 1.8 trillion, I think. But I think my estimation that -- if you look at the numbers, I think more or less, this IDR 1.8 trillion already represent, what you call, represent the numbers for a quarter. But I don't want to say that this IDR 1.8 trillion can go up further. But actually, as a matter of fact, these numbers will go down. Because if there is a site -- there is an equipment where we dismantle faster, then we actually have to write off the assets immediately. I mean, we have to stop the depreciation. So that's the reason I think in Q3 was quite high because actually some of the assets, some of the equipment already dismantled, already turn off, and we cannot make depreciation. So we have got -- so from the 6 years immediately, only like 6 months, for example, that's the accelerating depreciation. So what I'm saying that in the next quarter, I'm hoping that these numbers -- of course, at this -- maybe next quarter still remain the same, but I think the following quarter, hopefully, because the equipment already -- most of them already dismantled, so it will be tapering down to a smaller amount. So to give you rough figures, maybe this year, maybe we will end up like IDR 4 trillion, plus/minus. And I think just to give you an emphasize that this accelerated depreciation is a noncash item. Christopher Kusumowidagdo: I think we still have time for one more question. I think one last question, we'll just address from John Te from UBS. That will be the final question. John, do you want to have your question to the management? John Te: Yes. I have two questions, if you don't mind. First is, I just want to understand maybe where we are in terms of site dismantling. So you mentioned 15,000 already done, and that's 1/3 of the base. Firstly, what is that base? Is this the -- is the 45,000, give or take, an end figure of the combined sites that you have? Or is this pertaining to another number? Second question is, perhaps we can clarify the IDR 500 billion. In terms of integration costs, how much of that would be for personnel and how much of that would be for site dismantling? Because I understand these two are the largest cost drivers for integration charges. The third one being personnel costs, I think the run rate has stayed at IDR 1 trillion, unchanged from the second quarter despite, I guess, some integration. Any comments on how you think of personnel costs as a percentage of sales or maybe the absolute number itself? Christopher Kusumowidagdo: Thank you, John. I think I would like to invite Pak Rajeev to address the first question on site dismantling. Rajeev Sethi: Sure. Just to refresh the memory, when we started this journey, XL Axiata legacy had around 43,000 sites and Smart's sites were around 22,000. Put together, around 65,000 sites, 65,000, 66,000. As we said, between 15,000 to 20,000 of those sites will not be required, which will feed into our synergy savings, which will mean that the end number of sites based on this part of integration would be closer to 50,000 sites. And against that, we are talking about 15,000 sites, which is just short of 1/3 of that number. So that's the number of 15,000. Ending number would be around 50,000 for this space. The second question was about the integration cost of IDR 1 trillion which has been incurred so far. And I think Pak Antony mentioned, we expect another IDR 0.5 trillion for the remaining part of the year. And this is a number which we shared earlier, IDR 1.5 trillion would be the integration cost for 2025. You're right. Most of this is people and the network integration. Unfortunately, I don't have the details to share further. But as you would know that the people integration project would be over hopefully by the first half of next year. We are running that process now, and then this will be a regular run rate. We do not try and drive the people cost as a percentage of revenue as a big driver. I think as management, we believe that people are -- good people are really important for -- in our line of business, in our consumer business. And we'll have an appropriate cost as we move forward. We really not want to benchmark that with other players, but we'll pay the right amount of money for the best quality talent which you can acquire. This was the second part. What was the third one, please? John, was there a third question? John Te: Yes. Well, that was related to the IDR 1 trillion in personnel costs quarterly run rate, but I think you managed to answer that in the previous question. If you don't mind me clarifying just one point that someone raised earlier, it's mid-teens CapEx as a target after the integration. By mid-teens, is this mid-teens CapEx to sales or mid-teens in absolute trillion rupiah? Rajeev Sethi: No, I think mid-teens absolute rupiah would be a bit too high. It will be mid-teens as a percentage to the revenue. Christopher Kusumowidagdo: All right. Thank you. Thank you, John. Thank you, Pak Rajeev. And ladies and gentlemen, that concludes our today's conference call. Thank you once again for joining us today. If you have any follow-up questions, please reach out to our Investor Relations. Stay safe and healthy, and we look forward to speaking with you next quarter. Thank you. Rajeev Sethi: Thank you.
Operator: Good day, and a warm welcome to today's conference call of the PATRIZIA SE, following the publication of the 9-month financial results of 2025. [Operator Instructions] Having said this, I hand over to PATRIZIA's Director, Investor Relations, Janina Rochell. Janina Rochell: Thank you, Sarah. Welcome, everyone, to our analyst and investor call for 9 months 2025. This is Janina speaking, and I'm happy to be back from parental leave and truly excited to reconnect with all of you. I am pleased to have our CEO, Asoka Wohrmann; and our CFO, Martin Praum, with us today. Asoka will start by presenting the highlights of the first 9 months 2025. Afterwards, Martin will guide you through our 9 months financials and provide an outlook for the rest of the year. As mentioned by Sarah, the call will be followed by a Q&A session. During today's call, we will refer to our results presentation, which you can find on our website. If you have any questions, the IR team is more than happy to assist. As usual, this call will be recorded and made available on our website. We will also provide a call transcript for further reference. With that, I'd like to hand over to Asoka to start with the presentation. Asoka, the floor is yours. Asoka Woehrmann: Thank you, Janina. Great to have you back. Ladies and gentlemen, a warm welcome from my side as well. Let me comment on our 9 months 2025 results. Hopefully, you will have already seen our ad-hoc release and financial earnings statement that we published this Tuesday. We have raised our guidance for EBITDA and EBITDA margin, and we also specified our guidance for assets under management for the full year 2025 financial year. Our financial performance in the first 9 months of 2025 showed a strong EBITDA growth to EUR 44.6 million. We significantly improved our EBITDA margin to 22.1%, well above last year's EBITDA margin of 3.5%. This earnings performance is a clear result of our new organizational setup that enables us to scale our operations efficiently while maintaining strict cost discipline. Last year, we established an integrated investment platform, including fund management and asset management. We strengthened our international client division, which is responsible for product management, development, fundraising and client relationships. And we created a new operations platform that is leveraging our technology expertise to streamline processes and strengthen collaboration across all business divisions. This new operational strength enables us to drive efficiency across all platforms and profitable growth in the new cycle. Our assets under management were slightly up quarter-on-quarter to EUR 56.3 billion. This improvement was driven by a small amount of net organic growth as well as reemerging positive valuation effects. And we use open client commitments for additional investments for our clients. Especially in real estate, transaction activity shows that more clients are taking advantage of market opportunities in the new cycle. Let us move to Slide 4. In preparing for the new cycle, our clear aim was to drive cost down and effectively scale our integrated investment platform for smart real assets. Today, our integrated investment platform enables us to leverage our operational strengths in both real estate and infrastructure investment management. As a result, our management fees alone more than [Audio Gap] covered total operating expenses. This is a key step. As already said in our last half year analyst call, we see the new cycle is starting to gain momentum. However, let me emphasize again that this cycle will be slower, tougher and bumpier than previous cycles. As you can see from our results, transaction activities went in quarter 3 with more clients returning to the buy side. Our closed acquisitions surged by around 41% in the first 9 months of 2025, reaching EUR 1.8 billion, a continuation of the positive trend we have seen since beginning of 2024. In the third quarter, we closed 3 major real estate acquisitions with triple-digit euro ticket sizes for international clients, both in Living and Commercial, as you can see on this slide. And let me reemphasize, our sector-specific investment strategies are led by the 4 dual megatrends, the digital, urban, energy and living transition. All dual megatrends are powered by technology as a key value driver. The Living sector remains one of our key investment strategies, offering attractive long-term returns for our clients. Living has been a strategic growth pillar for PATRIZIA for more than 40 years and we have an exceptional track record in Living. Today, modern living goes beyond traditional residential real estate and includes fast-growing attractive subsegments like affordable housing, student housing, co-living, micro living and senior living. And all Living segments are poised for growth in the new cycle. With valuation stabilizing, transaction volumes picking up, we believe this is the right moment to start investing in real estate again. In addition, we also see momentum building in our Infrastructure business. We have signed several transactions which will accelerate Europe's energy transition. We have created a Nordic district heating platform worth over EUR 300 million. This will support our AUM in the fourth quarter after the expected closing, and it demonstrates PATRIZIA's strong mid-market position as a leading investor in Europe's energy transition. Let me continue to the next slide to show you what your clients -- what our clients expect for the future. Our Annual International 2025 Client Survey provides further proof that the new cycle is gaining momentum. This survey captured the views of 110 leading institutional investors of PATRIZIA, representing close to EUR 1 trillion in capital. The main takeaway is that client sentiment has clearly improved in real estate across all major categories, and the survey anticipated that real estate valuations are improving again for the first time since 2022. Another result -- key result is the growing strategic importance of infrastructure investments for institutional clients. Driven by the dual megatrends, the energy transition and digital infrastructure are top priorities for investors, and both areas clearly play to our strengths. Just to give you one example, our strategic investment in aligned data centers in the North America at the beginning of the year that has already performed very well. And with the expansion of our Nordics district heating investment platform, we continue to leverage attractive investment opportunities, the energy transition trend. So you can see our sector-specific investment strategies driven by dual megatrends are gaining traction. Let us move to the next slide. Let me conclude by reemphasizing our 3 management priorities. First, clear client and product focus; second, further improving earnings quality; third, and scaling our smart real asset investment platform. Those 3 pillars are the crucial success factors to win in the new cycle. First, we will deliver outstanding products and services to our clients and step up fundraising. One key investment area for PATRIZIA has always been and will be the living sector with all its attractive subsegments. Second, we want to grow management fees and improve our co-investment results while maintaining strict cost discipline to strengthen our long-term profitability. Third, we will strengthen synergies between real estate and infrastructure, what we call Re-Infra, and scale our integrated investment platform. And we will continue to focus on attractive sector-specific investment strategies driven by the dual megatrends. Thank you for your attention. And now I would like to hand over to our CFO, Martin Praum. He will guide you through our quarter 3 financials and the updated 2025 outlook in detail. Thank you for your attention. Martin, please. Martin Praum: Thank you, Asoka, and hi, everyone. Welcome also from my side. Let's continue on Page 9 of the presentation. As some of you might remember from our last analyst and investor call at end of second quarter, we back then showed a decline in equity raising year-on-year. But at the same time, we were confident that momentum would come back throughout the year. And this is exactly what happened during the third quarter. With equity raised, as you can see here, now at EUR 0.8 billion after 9 months, up 7.6% compared to last year. If you look at this on a quarterly level, we had EUR 0.5 billion in the third quarter, and this is the highest in the last 4 quarters. The subsequent investments for our clients from equity raised and existing equity commitments were the major drivers for continued net organic growth in AUM. Valuation effects turned positive during the third quarter. Remember, at Q1, this chart showed a EUR 0.6 billion negative effect. This turned into a 0 impact at the second quarter. And now you can see a positive EUR 0.2 billion valuation support. However, currency effects still weigh on AUM. This is leading to a virtually stable overall AUM development if compared to the beginning of the year. But if we would exclude these valuation -- sorry, these currency effects, then AUM would be up 1% year-to-date. In my view, it's also noteworthy that open equity commitments have also increased from EUR 0.9 billion last quarter to EUR 1.1 billion at the end of the third quarter. So the overall picture shows a stabilization. And as Asoka mentioned before, the cycle is slower and probably bumpier. That also means that the speed of market recovery is currently slower than what many market participants expected at the beginning of the year. This also drove our decision to move the AUM guidance range slightly down to now EUR 56 billion to EUR 60 billion for the year-end '25, also taking into account the currency effects. Now let's move to the next page, Page 10, on profitability. Basically, what you see here is that we decoupled from the overall market environment. We showed a material increase in profitability with EBITDA up over 500% to EUR 44.6 million, and this is already within the previous full year guidance range of between EUR 40 million to EUR 60 million after only 9 months. Management fees well exceeded operating expenses, and we saw a smaller contribution to revenues from transaction and performance fees compared to last year, driven primarily by a higher share of investment for clients with all-in management fee structures and also continuously slower realizations for clients, which has an impact on performance fees. The key message to me here is overall management fees contributed with 91% to total service fee income. The material reduction in operating expenses and the improvement in net sales revenues and co-investment income, basically, this means rental income of consolidated assets and dividends from co-investments and funds, both significantly supported the strong year-on-year increase in EBITDA. Now let's have a deeper look on the next 2 pages, 11 and 12. You can see that management fees showed resilience in line with AUM, with market-driven fees, like transaction and performance fees, still under pressure. If we look at it on a quarterly basis, on the next page, it shows that management fees had a breakout from the trend in the quarter, which was driven by catch-up fees we were able to invoice during the third quarter So the overall picture is unchanged with resilient management fees and volatility on market-driven revenues, which is why it is so important that the reduced operating expenses are now well covering -- are well covered by management fees. Let's go to the next page, Page 13, to look at the cost development. You will see that we further intensified cost efficiency measures. We've made the platform more efficient, adjusted to the market cycle and made significant progress, both on staff costs and on other operating expenses. We will continue working on platform efficiency. And the reduced cost base provides PATRIZIA and its shareholders with significant positive leverage once fundraising and investment volumes increase more markedly in absolute terms. And as you might know, PATRIZIA runs, as we call it, a dual engine, a business model that is driven by our asset-light investment management combined with the use of our balance sheet capital to co-invest and seed strategic investments. And this is what you'll see on the next page, 14, of the presentation when we talk about the segment reporting. The significant improvement of our EBITDA was driven by both investment management and our balance sheet investments. One driven by cost discipline, resilience in AUM and management fees, the other driven by a normalization of income from consolidated assets and higher rental revenues. Let's look at how we've invested the balance sheet capital on Page 15. You'll see the value creation from using the group's balance sheet equity to invest both in real estate and infrastructure. And we will continue to take selective market opportunities to support new fund initiatives, and we will also crystallize value when the time is right also for our shareholders. We will always make sure that we have a decent financial flexibility, both in terms of balance sheet ratios and available liquidity. Talking about liquidity, Page 16 shows the strong improvement in operating cash flow during the first 9 months. This is, on the one hand, driven by the general improvement of profitability, but also by the successful active management of working capital freeing up additional liquidity. Let's move to Page 17. And this is a financial reporting you are probably well familiar with. You will see the balance sheet and liquidity overview on this page. Net equity ratio is still strong, now closer to 70% and up 1.3 percentage points compared to the last quarter. If we look at available liquidity, this also increased by EUR 20 million compared to the last quarter, now slightly above EUR 100 million, with further financial flexibility shown on this slide. Let me finish with the outlook for 2025. Our key messages here are: first, we expect the stabilization and slow recovery to continue, so the direction of travel is right, and to support the revenue side, while the positive effects from our cost efficiency measures should continue to support our P&L going forward. And this drives the guidance change and the increase of the EBITDA guidance from EUR 40 million to EUR 60 million to now EUR 50 million to EUR 65 million. Subsequently, the EBITDA margin is increased from around about 15% to 21% to now 19% to 24% for the year '25. We will continue to raise equity and use existing equity commitments from our clients to invest along the dual megatrends. However, the overall level of equity raised, the expected timing of closing of investment transactions and currency effects led us to slightly move the midpoint of our AUM guidance from EUR 60 billion before to EUR 58 billion. Also, year-end valuations for real estate and infrastructure will play a role on where we will end the year with this KPI. As a summary, the market is stabilizing and slowly going into growth mode again. And as we said in the past, it's not a V-shaped recovery, but rather a steady improvement. Second key message, we have decoupled PATRIZIA's P&L and profitability from the market and market-driven revenues, and we'll continue to work on efficiency, quality of earnings and overall profitability to the benefit for both our clients and our shareholders. With that, I'm handing back to Sarah, and we're happy to take your questions. Operator: [Operator Instructions] And having said that, let's take a look in the queue. And by now, we have one virtual hand from a person who has dialed in by phone with the phone ending 370. Philipp Kaiser: It's Philipp from Warburg Research speaking. Congrats to the sound operating performance. I have a couple of questions. I would go through them one by one, starting with the EBITDA and the main driver of the EBITDA improvement, the cost-cutting measures. You did a superb job on streamlining your platform. But I can imagine the greatest potential now is lifted. So looking ahead, do you expect that the operating expenses can further decline? Or are you expecting just a kind of a flat development for the next couple of months and the next year? Martin Praum: Philipp, it's Martin speaking. And thank you for your feedback on what we've achieved so far. We will -- as I said, we will certainly continue to work on the expenses side and do everything we can also as a reaction to the market environment to make this platform more efficient. We still believe that there's some room for more efficiencies. And you will also see –- as you see in the number, this is basically an effect of measures we've not taken this week, but a few quarters before. So the full impact of the measures we've taken, take a while to show up in the P&L. So we expect also some further potential here in terms of P&L and cost efficiency going forward. Philipp Kaiser: Okay. Perfect. Then the next one is on the management fees. You also stated in your presentation that they are partly positively, impacted by one-off catch-up fees. Could you provide us with the exact amount of those catch-up fees? Martin Praum: Yes, sure. If you look at the management fees on a quarterly basis, you would see that the third quarter was very strong with EUR 60.6 million of management fees versus an average of, say, EUR 55 million to EUR 57 million in the quarters before. The third quarter was positively impacted by around about EUR 2.5 million of catch-up fees. So if you basically would exclude that, we would talk about around about EUR 58 million run rate management fees in the third quarter. Philipp Kaiser: Okay. Perfect. And my next one would be on the AUMs. You already stated during your presentation that you already have signed acquisition, but not closed yet, which will support AUM development. Could you give us a broad range which volume we can expect for the last quarter of the year? Martin Praum: Sure. I can give you a broad guidance, because what I said is we certainly have a pipeline of a few hundred millions that has been signed already and will close in the fourth quarter as acquisitions. So you have from a net organic growth prospects some upside in the fourth quarter. The somewhat unknown is timing effects of closing of certain transactions and valuations. You might remember that slightly over 25% of our assets are valued in the fourth quarter. So this will have an impact. And then currency effects. But as you can see in the guidance range, which is now EUR 56 million to EUR 60 million. And where we stand today in terms of AUM, we currently expect that the AUM at the end of the year will come in higher than what we've reported for the first -- for the third quarter. Philipp Kaiser: Okay. Perfect. My last question with regards to the EBITDA would be the rental income. So it has come from the balance sheet assets. Do you have any visibility when those assets might, yes, [ went ] out from your balance sheet and you kind of, yes, get rid of the positive impact of the rental income? I think it's roughly EUR 12 million. This year, we will earn those assets. So any visibility on that? Martin Praum: It is actually -- it really depends on the asset because we've got different assets and portfolios on our balance sheet, Philipp. So in terms of exit date, we will have a look at the market and then we'll have a look at the assets, because some of these assets are what you would call core assets with a very stable cash flow. These are the ones that could come to the market earlier. Then we also have some value-add exposure, where we will spend some CapEx and invest to increase the value, and then find the right time to exit. So for your modeling, I would, for the time being, assume that the rental income will stay with us for, say, the next 1, 2 quarters, and then we'll see where the market is and how we've developed the assets further. Philipp Kaiser: Okay. Perfect. My last one would be on your mid-term guidance. I mean it's probably a bit too early to get very nervous, but does anything change with regards to your, yes, EUR 100 billion guidance in 2030? Asoka Woehrmann: Very valid questions. Again, the mid-term guidance is something we agreed that we are looking every year. We are running and looking what the market environment, client behavior, sector developments are. We are very strongly geared, as we mentioned, around our dual megatrends. We are very confident that trends are right, but it is -- we are seeing our clients are getting more confident to invest, but it's much slower, as Martin and I mentioned earlier. So I do think it is always for us to go to EUR 100 billion, is a North Star. And we will go in this direction. We will do everything. We have now the operational leverage, what we are creating. And I do think it a little bit depends on the dynamic. Every year, we have to review how far and how reachable is this magic number. But even though, we are confident that the market will gain some momentum at some point. But I do think -- also '26, I do think it will be slower. It will be, again, not a stabilizing year like '24 and '25. It will see some growth, but not the same expectations as we have created in the plan. So we will consult and go back to our NTP and we will check that, the EUR 100 billion number. But even though, our profitability numbers and expectations, we will keep on a clear eye, and we want to deliver strong profitability to our shareholders. Philipp Kaiser: Okay. And maybe out of curiosity, just purely on operational-wise –- I'm just making up a number, say that by the end of next year, you reached EUR 60 billion in AUM. Then 4 years left for the EUR 1 billion (sic) [ EUR 100 billion ] in AUM, left. Roughly EUR 10 billion net organic growth per year. Just operational-wise, is it possible that your current streamlined platform can handle this transaction volume per year? I guess kind of the overall transaction volume would be a bit higher with like disposals, et cetera. So is it just purely from operational-wise possible to have over EUR 10 billion per year? Asoka Woehrmann: Yes. No, great arithmetic you open up. I think Martin will talk in some second. But let me give you a little bit the philosophy behind the EUR 100 billion number and the clear North Star of our organization. And it's important -- you are right, '26, in our expectation, that will be a growth year for the sector, will come back, as we said, but in a modest way. And that's really good. But it is the jump of base, EUR 60 billion. In my opinion, without guiding now, it's a probable one. And you're arithmetic every year EUR 10 billion. First of all, in the past, PATRIZIA was able to manage, yes, sometimes EUR 9 billion to EUR 10 billion transaction volumes. So that's nothing new. We are experienced. Also, our transaction sizes are much bigger. And don't forget the projects we are involved also in the co-investment area, also in more and more in SMA, they are the big clients, they are coming like in the Nordic district heating platform. I'm not going to name the clients, but they are very big clients. They have sizes. They can come in. And we will -- we are expecting the transaction sizes will be bigger. And again, important for you, we are expecting the infrastructure as well as the heating topics in living, affordable housing, they will get much more, let me say, public support for these themes, and we want to be involved. And I think even we have not definite programs for that, we are seeing, and I do think that all is possible. I don't know if we are ending in EUR 90 million or EUR 1 billion or EUR 110 billion, but the direction is right and the desire. And this North Star is the right direction, as you can see. And that is, in my opinion, important. It's a quite unknown market at the moment because I think as you not see the transaction, the willingness of clients to invest because the fixed income area is so booming and performing. That going a little bit the demand down, I do think the people will turn quite fast for long-term returns in real assets, and we are ready for that. Martin, please. Martin Praum: Yes. I can only second what Asoka just said, and want to go into the same direction. If you compare PATRIZIA and what we've delivered in the past in terms of investment volumes, you shouldn't forget that PATRIZIA's platform has actually grown over the last few years. We've built the platform. And besides the efficiency programs we run, we continue to invest in the platform. We have grown the number of institutional clients over time. We have now access to different pools of capital. And it is a question of ticket size. We are more international than we were in the past cycle. And we now have access to also larger funds like state funds that will give us opportunities to create new investment solutions for these clients. Overall, certainly depends on the market environment. And sometimes in a cycle, there is a point where suddenly, you can say, the powers come to play. And we do expect that as well at some point to happen. But there's a good opportunity we'll reach these targets and we will go into that direction. Operator: And now we will move on with the questions from Lars Vom-Cleff. Lars Vom Cleff: One question remaining, and that would also be regarding your EUR 100 billion North Star. I mean, on the current basis, that implies a CAGR of around about 12%. And if I understood you correctly, you feel that all of that is doable with organic growth. But seeing real estate markets somewhat stabilizing, revaluation -- or negative revaluation slowing down, if not having come to a halt, and taking into account your equity ratio and the available liquidity, would now not be a good time to think about potential bolt-on acquisitions again in order to reach your target faster? Asoka Woehrmann: I think also -- thank you for your view. And also, as Philipp asked the EUR 100 billion and mentioned the EUR 100 billion, don't forget in our thinking there was also revaluation of the market that was included. It's not only pure organic growth, capital raising. And we expect that infrastructure has much more momentum. And I do think you can read and [ smoke ] every day from the newswires how much people are geared to invest in infrastructure. So far not happening than anecdotical evidences like data centers and so on. I do think that will get momentum. But your question -- and Lars, let me say that in -- since I joined now nearly 2.5 years now as PATRIZIA CEO, this question came up, do you don't want -- what's your opinion about inorganic growth? I always -- even though I was always active in my former thinking, I always said we have to press the pause button, because we have to consolidate our platforms, we have to create our efficiency, we have to do -- we are a very fast-growing organization over the last 15 years. We sprinted to EUR 60 billion. I think it's a remarkable growth. That means also remarkable growth of platforms. Different platforms, fragmented platforms have to be consolidated. I do think the effects are playing out for the now investors, as Martin very nicely played out. But again, I am seeing opportunities. I do think as long as lasts the slow, sluggish growth of the sector, and clients demand are going to persist. I do think that small players will have a very -- much difficulties, and mid-sized players, to be in the market. I think there will be opportunities. But we will not do for AUM growth inorganic growth activities. I've been all my career against that, and I will also not do to destroy shareholder value. If that enrich our expertise, open up new markets and client segments, then the right arguments are there -- and the pricing must work for us and for our shareholders, we will do that. This is the way of our organization. I'm thinking we are full of entrepreneurial spirit in this organization, and we are not going to blast our AUM. Even we phrase the $100 billion as a North Star, I do think we have to do the right things. But I do think it will be -- and I think your question is the right timing. Now in my view, Lars, we have to open up our eyes for opportunities, also for strategic partnerships. I do think the market is just going to shape. I can see lot of partnerships are -- programs are coming. And there's a very interesting period, in my opinion, kicking in, in, let me say, illiquid sector space. And I do think, therefore, I am super keen to answer in the next quarterly earning meetings this question. And we will be active. A very clear answer, yes, we will look into that, but various opportunities, not only pure M&A transactions. Operator: And by now, we have one virtual hand left from Thomas Neuhold. [Operator Instructions]. So Mr. Neuhold, please go ahead. Thomas Neuhold: I have 2 questions on your balance sheet investments. Firstly, I was wondering if you can please provide an update on your Dawonia investments. Have there been any new developments there? And the second question is on the strategic seed investments. What is the status of the 3 strategic seed investments? And by when do you expect to be able to release at least some capital there? And I was wondering if you have any additional seed investments in the pipeline? And if yes, if you can talk a little bit about potential size, sector and timing of those? Martin Praum: Sure. Can you hear me, Thomas? Thomas Neuhold: Yes, I can. Martin Praum: Okay. So first of all, on Dawonia, probably a repetition of last quarter's call, but we are still in very constructive negotiations with the investors in that fund. All on track. And we will update the market once we have news on that. The portfolio continues to perform very well. I think this is also in line with what you heard from other listed residential players in the market, and we can also confirm that these developments are also reflected in the Dawonia portfolio. In terms of seed investments, I made a statement on that before. Some of them are on the list for an exit and others will keep for a little while to work on the asset. So there's no detailed time frame for disposal at this stage. We are still happy with the rental income we are generating and the development of these assets. In terms of additional seed investments, you might have noticed we've increased our exposure to Dawonia in this year because we saw good opportunities. And also, we continued to invest in co-investments like in the infrastructure space, where we spent another single-digit million amount in the third quarter to facilitate further investment and product growth. Operator: Thank you so much. And in the meantime, we have received no further virtual hands. So everything appears to be answered by now. Therefore, we come to the end of today's conference call. Thank you, everyone, for joining and your shown interest. And also a big thank you to you, Asoka and Martin, for the presentation. And it was a pleasure to be your host today. And now I hand back to Martin for some final remarks, which concludes our call. Martin Praum: Thank you so much, Sarah, and thank you everyone who attended this call and thank you for your great questions. We are happy to meet as many of you during our next conference attendance. We'll be in London next week and we'll also be at Deutsche Borse's Equity Forum from 24th to 22nd (sic) [ 26th] November in Frankfurt. We'll be there for the full 3 days, and we'll be happy to meet and discuss. And with that, thank you, everyone, and speak soon. Bye-bye. Asoka Woehrmann: Thank you.
Operator: Ladies and gentlemen, welcome to the Aquafil Group Q3 and 9 Months 2025 Results Conference Call. [Operator instructions] I will now hand the conference over to Giulia Rossi, Investor Relator. Please, Giulia, go ahead. Giulia Rossi: Thank you, operator. Good evening, everyone, and welcome to Aquafil investor conference call. Today, we will update you on company's 9 months 2025 results. Before going ahead, let me remind you that this presentation may contain certain statements that are neither reported financial results nor other historical information. Any forward-looking statements are based on Aquafil's current expectation about future events and are subject to risks and uncertainties that could cause results to differ from those expressed by the statement. For a discussion of these risks and uncertainties, you should review the disclaimer in the presentation we issued today. I will now leave the floor to Mr. Giulio Bonazzi, for his remarks. Giulio Bonazzi: Thank you, Giulia. Good evening to all, and thank you again for attending our video conference. The first 9 months of 2025 marked a solid performance compared to the previous year, especially in terms of profitability. The slight downturn in revenues is largely due to the adjustment of selling prices to the raw material trend, in addition to foreign currency translation effect. Volumes showed a positive trend compared to last year, with different dynamics at a geographical level. The United States reconfirmed the strong growth seen in the first half of the year related to the fibers for carpets. Europe and Asia Pacific observed a slower market, which was not fully supported by the expected volume increase in the fibers markets. The Engineering Plastics business continues its growth trajectory, delivering positive performance in terms of both volumes and margins. The cost rationalization project is progressing in line with expectations, generating the first savings already in 2025, with most of the effects becoming visible starting from 2026. The net result for the year was positive despite the impact of the extraordinary items concerning the various reorganization projects, which amounted to over EUR 8 million. The positive trend will consequently be even more pronounced next year. The change in net financial position is mainly attributable to planned strategic decisions. The inclusion of new European suppliers has temporarily led to a change in payment terms. Furthermore, the need for non-EU imports to adapt to the changing raw materials market has lengthened our cash cycle, which will be normalized in the coming periods. We look forward to next quarter with determination, focused on consolidating our position and maximizing operational efficiency. We are now welcoming your questions about our first 9 months results. Operator: [Operator instructions]. The first question is coming from Tommaso Nieddu from Kepler Cheuvreux. Tommaso Nieddu: The first one is on the update of the industrial plan. So volume expectations for both BCF and NTF have been revised from growth to being substantially stable, while polymers were cut from 45% to 15%. So could you elaborate on whether this softness in volumes is due to weaker appetite for your products? Or is it more market driven? The second question is on the timing of CapEx, which has been revised down by roughly EUR 12 million, EUR 13 million versus the previous guidance. So could you clarify what you now expect for the next year, and specifically, if this reduction is mainly deferral of the planned investment in 2025, or just a structural downsizing of the investment plan? Giulio Bonazzi: About volumes, as I have already said during my first presentation, we are seeing a very strong momentum in United States, while Europe and Asia are unfortunately not showing the growth we were expecting. This is not because of a lower appetite on our product -- it is exactly the contrary -- but it's a market situation, which unfortunately is not delivering what was, let's say, hoped at the end of last year, partially because of the uncertainty driven by the U.S. tariffs, partially because in Europe also a strong import coming from China that has deviated from exporting to United States and has started to be more active in our market for certain products. About the polymer, I always remember you that we have two business lines inside this, let's say, larger area of business. One, which is considered more a commodity, where volumes are not of great importance, which is so-called basic polymer business. And it consists in buying raw material, the monomer, caprolactam, transforming it into polymer and selling it to the market. This activity is mostly an activity which is driven by the idea of filling up capacity, utilizing our utilities at a level which is considered cost competitive and of course, trying to strike a contribution margin for covering our fixed cost. But the unit margins of this activity is not so important. On the contrary, the activity that we denominate engineering plastic, it's a different matter. This activity is the strategic activity that Aquafil is targeting and is having an intrinsic marginality, which is definitely much more interesting than the one of the basic polymer. In this second activity, we are also comprehending the activity of the sale of ECONYL polymer in the plastic or engineering plastic market. This second business line is behaving or has behaved in the first 9 months of the year very strongly in comparison with last year and also in comparison with our budget expectation. And this is the activity that we are considering, let's say, very important for our future growth in the European market in the coming years. In this activity, we will also try to push stronger and stronger the sales of our ECONYL polymer for the plastic applications. BCF and NTF, they have shown a very similar trajectory, but with very different moments during the course of the third quarter. We have seen a very slow July and August. On the contrary, the month of September has shown a very interesting demand and sales, and quantities have partially recovered from the downturn of July and August. In fact, the month of September also for NTF was higher than our expectation and close to our, let's say, financial plan that we have delivered to the market last year. Unfortunately, there is a big uncertainty, which is not helping us to give reliable forecast. But for sure, during the coming weeks, we will come out also with, let's say, our idea, not only obviously, for 2026, where we are now currently in our budget activity, but also for the year to come -- '27. About CapEx, as you remember, we have partially anticipated [Technical Difficulty] for the Chinese project, which was the most important project of our business plan, already at the end of '24. So this is partially revising our CapEx for 2025. And in 2025, if you remember, we have also communicated to the market that we were for the time being suspending and postponing the project of automation in our Italian operation because we were starting more interesting projects in the field of energy savings, which are about to come during 2026. In any case, our, let's say, future projections are bringing capital expenditures in a very cautious way. So we will certainly keep investing less than what we have, let's say, foreseen in the previous plan. Also because if volumes are not recovering, clearly, we need less capital expenditures for fulfilling our future demand. Operator: The next question is coming from Dave Storms from Stonegate. David Joseph Storms: The first one I wanted to ask about was in terms of margin defense. How much more room is there for the reorganization projects looking into 2026? My second question is -- thinking upstream, is there more work to be done in terms of further diversifying to European suppliers? And then will that also correlate to further change in payment terms and resetting the clock on cash generation? Giulio Bonazzi: Thank you, Dave, for the question. When we entered into the summer, we have seen that, unfortunately, the market was likely not to respond as strongly as we were forecasting. And so we went strongly to reconsider our organization in order to reconcile direct and indirect labor and all, let's say, the costs that are related to our activity. We have targeted a very strong cost reduction activity for the year '25 and '26, which is amounting to more or less EUR 20 million. Currently, we have already, let's say, agreed between layoff of personnel plus revision of purchasing contracts, a number which is exceeding the EUR 10 million, of course, without considering inflation of '25 and '26. So we are still seeing an inflation trend, in particular for the labor cost in certain areas of the world that will diminish the cost reduction activity that I have just spoken. Nevertheless, let's say, we are very confident that during 2026, between the completion of the reorganization project regarding our carpet collection and carpet recycling activity, and the completion of the energy saving project that is showing very interesting numbers during '26, we will strike the EUR 20 million of cost reduction. So there is still room as well as there is still further room in operational efficiency through, of course, even higher production yield and lower certain grade production in our operations, and we will continuously act in order to reach this better efficiency levels. About the upstream and the supplier side, we are experiencing, in our opinion, a structural modification of the market. We are in presence everywhere in the world, but in the United States with a strong importation of Chinese commodities and raw materials in our industry in the form of monomer, caprolactam, and nylon-6 polymer. The Chinese industry has set up an incredible capacity, and it is now after fulfilling completely the local demand, acting very strongly in exporting this product first to the neighborhood countries and they have already, let's say, closed the shutdown of the caprolactam plant in the nylon industry or the bulk of the nylon industry in Korea. Thailand will close its caprolactam plant in March of '27. And Japan has already announced that they will close another caprolactam plant in March -- Thailand in March of '26, and Japan in March of '27. We, of course, have suffered what the disappearance of our European suppliers. In fact, during '24, we have seen one producer in Poland shutting down during '23, one plant in Germany shutting down. During the first quarter of '25, another plant in Czech Republic shutting down. And at the end of October, an important strategic producer in Holland has announced that they are going to temporarily shut down production capacity. But they have not said in the local newspapers, the news was not temporary, but let's say, full shutdown of the operation in this important plant. And this is, of course, how can I say, an alarm that is sounding on our brain, our head. At the same time, in the month of October, BASF, which is the largest caprolactam producer in Europe, was in its planned turnaround. And when they return from the turnaround and they tried to start up the plant, gosh, they have got a technical problem and they entered in force majeure. So to cut the story short, 50% of capacity of our suppliers has disappeared or is currently not operating in Europe during the last 24 months and today. Is this going to be a contingent situation or a structural situation? Well, thanks God, Aquafil has the fortune of having a very flexible, let's say, operation. So we are capable of importing and using raw materials coming from overseas as well as, of course, we have our ECONYL production capacity that is producing at the very same month. So we have partially reoriented purchasing from different caprolactam suppliers in Europe. Partially, we have increased our import of caprolactam, particularly during this current financial year. And very likely, we will further increase during '26 as well as, of course, we are always careful to see how much ECONYL we can produce eventually. If it is becoming cheaper than the purchasing price, we could also produce ECONYL caprolactam instead of buying, if the marginal incremental cost is lower than the purchasing market price. So in terms of raw material availability, we are confident that we have solved our problem, which is not the case for all our competitors. Clearly, temporary, we have very aggressive, let's say, knock the door to other suppliers, and this has temporarily impacted our net financial position and our cash flow. But of course, with the time, we will be able to adjust also in terms of payment with our suppliers returning somewhat similar to what was before this problem that has strongly impacted our net financial position. Operator: The next question is coming from Gianluca Pediconi from MOMentum Alternative Investment. Gianluca Pediconi: I understand that the visibility is very poor. But I have a question which you can answer also in a qualitative way. There is a EUR 10 million shortfall in EBITDA compared to the previous guidance, and there is also a lower volume growth compared to what you were expecting at the beginning of the year. How the combination of these 2 facts is going to impact 2026? I mean do you expect that thanks to the cost saving program, you will be able to partially offset the lower enter into 2026, or this shortfall will not be recovered because the market conditions are actually worse than expected? Giulio Bonazzi: The cost reduction program will certainly positively impact our EBITDA during 2026, has already positively impacted our EBITDA during 2025. And so clearly, it will be showing even stronger effect during '26. Clearly, the final result will be, let's say, also impacted by the forecast on volumes. And this is now a little more challenging to forecast clearly. Now everybody is very prudent and tend to repeat, or being very close to the volumes that we have seen during 2025. We will see. As I said, and as you have wisely said, it is not easy now to make a forecast. This not only in our industry, but in every industry, if not in AI and in the military sector, at least for the time being. Hopefully, this will come soon. Let's say that we are seeing already the first orders of the new production programs like the maritime, the aviation, the transportation, and also the technical yarns for circular fishing nets and ropes and for the area rugs systems. We are seeing also positive impact on our actions of targeting new customers in the NTF. Of course, we must understand what is the net effect, considering also our traditional customers that are suffering the current crisis of the fashion industry and the sportswear industry. So we are all very positive about 2026. But mostly because our cost reduction program, which we have already, let's say, realized and the one which is under realization for next year are quite tangible and visible. And so this of course will permit us, while reducing cost also, to become more aggressive in the market for gaining market shares and orders instead of import of our, let's say, local competitors. Operator: [Operator Instructions]. There are no more questions at this time. So I hand the conference back to the speakers for any closing remarks. Giulio Bonazzi: Well, I want to thank you all for attending our 9 month financial results for 2025. And we will come back soon, hopefully, with good news for the next quarter and for the next financial year and the next business plan. Thank you all, and see you next time. Operator: Thank you for joining today's call. You may now disconnect.
Operator: Greetings, ladies and gentlemen. Thank you for standing by, and welcome to the Star Equity Holdings Third Quarter 2025 Results Conference Call. Please be advised that the discussions on today's call may include forward-looking statements. Such forward-looking statements involve certain risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. Please refer to Star Equity's most recent 10-K, 10-Q and other filings for a more complete description of risk factors that could affect these projections and assumptions. The company assumes no obligation to update forward-looking statements as a result of new information, future events or otherwise. Please note that on this call, management will reference non-GAAP financial measures, including EBITDA, adjusted EBITDA, adjusted net income and adjusted earnings per share, which are all financial measures not recognized under U.S. GAAP. As required by SEC rules and regulations, these non-GAAP financial measures are reconciled to their most recent comparable GAAP financial measures in our earnings release issued this morning. If you do not receive a copy of the earnings release and would like one after the call, please contact Star Equity at (203) 489-9500 or its Investor Relations representative, Ms. Lena Cati of the Equity Group at (212) 836-9611. Also, this call is being broadcast live over the Internet and may be accessed at Star Equity's website via www.starequity.com. Shortly after the call, a replay will also be available in the company's website. It is now my pleasure to introduce Mr. Jeff Eberwein, Chief Executive Officer of Star Equity. Please go ahead, sir. Jeffrey Eberwein: Thank you, operator, and welcome, everyone. We greatly appreciate your interest in Star Equity Holdings, and thank you for joining us today. As a reminder, on August 22, 2025, the company completed its previously announced acquisition of Star Operating Companies, formerly known as Star Equity Holdings, pursuant to the agreement dated May 21. Effective September 5, the company changed its name to Star Equity Holdings from Hudson Global and our trading symbol on NASDAQ from HSON to STRR. Following the merger, we are now operating as a diversified holding company with four divisions: Building Solutions, Business Services, Energy Services and Investments. I'll begin by reviewing our third quarter results for 2025 at the holding company level. After that, Jake Zabkowicz, Global CEO of Hudson Talent Solutions, will give us an update on the performance of our Business Services segment. Finally, Rick Coleman, our Chief Operating Officer, will provide additional insights into the performance of our Building Solutions and Energy Services segments. Third quarter results reflect the impact of our recent merger with revenue, gross profit and adjusted EBITDA, all showing year-over-year growth. These increases were largely driven by the inclusion of Star Operating Companies beginning August 22. For the third quarter of 2025, revenue totaled $48 million, representing a 30% increase from the same quarter in 2024. Gross profit rose 11%. The company reported a net loss of $1.8 million or $0.54 per share, compared to a net loss of $800,000 or $0.28 per diluted share in the third quarter of last year. On a non-GAAP basis, adjusted net income per share was $0.02 compared to an adjusted net loss of $0.13 per share in the prior-year quarter. Importantly, on a pro forma basis, which includes the full third quarter's results from Star Operating Companies, adjusted earnings per share were positive $0.19 versus negative $0.54 in the third quarter a year ago. Adjusted EBITDA increased to $1.3 million from $800,000 in the third quarter of last year, reflecting improved operating leverage following the merger. Pro forma adjusted EBITDA was $3.1 million versus $600,000 in the third quarter of last year. Total cash, including restricted cash, was $18.5 million at the end of the quarter. I'll now turn the call over to Jake to discuss our Business Services segment. Jacob Zabkowicz: Thank you, Jeff, and good morning. Our Business Services segment continued to demonstrate solid performance in the third quarter despite the challenging macroeconomic environment impacting many industries. While the broader talent acquisition market has contracted in 2025 compared to 2024, our HTS business has been able to maintain its profitability and even saw a slight increase in gross profit for both the third quarter and year-to-date. This resilience highlights the robustness of our business model, our ability to adapt to market shifts and the strength of our long-standing client relationships, which continues to drive repeat business and steady demand for our services. I'm particularly proud to recognize our team has received in the marketplace. HTS was named to the prestigious Bakers Dozen for the 17th consecutive year, a testament to our consistent delivery of high-quality talent acquisition solutions. What's even more notable is that we achieved our highest-ever overall ranking, reflecting the strength of our service offering and our commitment to excellence. Additionally, HTS was recognized as the #1 provider in the Asia Pac region, further underscoring our global reach and our trust in our clients place in us. For the third quarter of 2025, Business Services revenue was $37 million, slightly up from $36.9 million the same period last year. Gross profit remained flat at $18.6 million compared to the prior-year quarter, again, speaking to the quality of our operations despite external challenges. Adjusted EBITDA for the segment was also flat at $1.7 million. This performance reflects our ability to effectively manage costs, sustain margins while continuing to deliver value to our clients in a difficult market environment. Building on our momentum from the first half of the year, the third quarter, we continued to execute our land-and-expand strategy. This strategy, which emphasizes expanding our geographical footprint and broadening our service offerings to both existing and prospective clients, has proven to be highly effective. As a result, we secured approximately $39.8 million in gross profit from renewals and extensions at existing clients, reflecting the strong relationships we have cultivated by our ability to deliver ongoing value. Additionally, we have secured approximately $11.1 million from new logo wins over the past 4 quarters. Looking ahead, we're focused on creating a more resilient, agile and growth-oriented business for the long term. By continuing to invest in new technologies such as our digital offering, we are confident in our ability to drive sustainable growth and create lasting value for our clients and stakeholders. Our commitment to execution and operational excellence will continue to guide us as we seize new opportunities and expand our market leadership. Now I'll turn the call over to Rick, who will discuss the financial and operational performance of our Building Solutions and Energy Services segments. Richard Coleman: Thank you, Jake, and good morning, everyone. Our Building Solutions segment delivered strong growth during the third quarter, capitalizing on the rebound in commercial construction demand while managing through softness in residential markets. In the third quarter, Building Solutions revenue totaled $9.6 million with a gross profit of $1.7 million and adjusted EBITDA of $600,000. On a pro forma basis, which includes results for the entire third quarter beginning July 1, Building Solutions revenue was $21.4 million, up from $13.7 million in the third quarter of 2024. Pro forma gross profit rose to $5.3 million compared to $2.8 million in the prior-year quarter, while pro forma adjusted EBITDA grew substantially to $2.6 million from $700,000 a year ago. The segment ended the quarter with a $20 million backlog of committed orders and the trailing 12-month book-to-bill ratio remained solid at 1.01, reflecting a healthy pipeline and sales dynamics heading into 2026. By focusing on higher-margin projects and ensuring rigorous project management, we've been able to maintain healthy profit margins and strengthen our existing client relationships. Our reputation for high-quality, on-time and within-budget deliveries is key to our continued success and positions us well to expand our footprint across key markets. Our Energy Services segment also achieved strong results despite a broader slowdown across the energy sector impacted by lower drilling rig counts in all oil-producing basins but offset somewhat by growth in natural gas and geothermal drilling activity. As a smaller company in the drilling arena, we believe our growth opportunities are outsized versus our larger competitors and expect to drive future growth through strong sales execution, disciplined operations and targeted capital investments. These initiatives have not only improved sales and utilization rates but have also enhanced customer satisfaction and strengthened our overall market position. In the third quarter of 2025, Energy Services revenue was $1.3 million with gross profit of $300,000 and adjusted EBITDA of $100,000. On a pro forma basis, which includes results for the entire third quarter beginning July 1, revenue increased to $3.7 million, gross profit reached $1.5 million and pro forma adjusted EBITDA rose to $1 million, underscoring the segment's strong overall performance. I'll now turn the call back over to Jeff for closing remarks. Jeff? Jeffrey Eberwein: Thank you, Rick. Following our recent merger, we are operating from a much stronger and more diversified platform, which has significantly enhanced our scale, expanded our exposure to a broader range of end markets and improved our operating leverage. The integration has been progressing smoothly, and we are already beginning to realize efficiencies across shared services. This will continue to improve our cost structure and streamline operations as we fully integrate the businesses. Across all our operating segments, we remain highly focused on operational excellence, ensuring we optimize every facet of our business for improved performance. At the same time, we're committed to prudent capital allocation and a disciplined approach to growth, which will allow us to maximize shareholder returns while maintaining financial discipline. In line with this strategy, we believe our stock price remains undervalued. In recognition of this belief, during the third quarter, we repurchased about 8% of our shares outstanding, demonstrating our confidence in the intrinsic value of the company and our commitment to enhancing value per share. Furthermore, our Board of Directors has authorized a new $3 million share repurchase program, which underscores their confidence in the long-term growth prospects of the company. Looking ahead, we are well positioned to drive shareholder value through a balanced strategy that combines organic growth, disciplined capital allocation and accretive acquisitions. As part of this strategy, we continue to evaluate acquisition opportunities that complement our diversified holding company model. Our focus remains on identifying scalable cash-generating businesses that align with our long-term growth objectives, particularly those businesses with strong local operating management teams and sustainable competitive advantages. By executing this strategy, we believe we'll strengthen Star Equity's foundation for sustained profitable expansion to deliver meaningful value to our shareholders. Operator, can you please open the line for questions? Operator: [Operator Instructions] And our first question for today will come from Theodore O'Neill with Litchfield Hills Research. Theodore O'Neill: For Rick, on the third quarter on a pro forma basis, that looks like a record for the quarter, at least in my book here. Richard Coleman: Yes. Thanks, Theo. I appreciate you noticing that. We're enjoying the throughput from a lot of projects in the Building Solutions division that were held up in 2024. I think we talked about that in prior calls. But throughout the year, we didn't have jobs being canceled, but they just weren't making it through the pipeline as builders and architects and others were kind of daunted, I guess, by interest rates and other things. So we kept pushing jobs to the right, further out in time, and they finally started coming through. Theodore O'Neill: And looking at seasonal patterns here in the last couple of years, your fourth quarter has been higher than your third quarter. Do you think that seasonal trend will continue? Richard Coleman: It's really hard to say, Theo. The fourth quarter is really dependent on a lot of weather patterns. If we have difficulties in Building Solutions, for example, with builders not having the sites ready for us to build on, then there could be delays. But as long as weather holds, we're optimistic. Theodore O'Neill: And when you talk about softness, I know that part of what you had cited as strength was workplace housing and low-income housing. Is that still the view? Richard Coleman: It is an important aspect of what we're doing. Our strategy is more diversified than that, but those are still good opportunities for us. They might be impacted somewhat by government programs shrinking over time, but I -- we expect that will come back. Operator: The next question will come from Michael Mathison with Sidoti & Company. Michael Mathison: Congratulations on the revenue performance, you guys. Just a couple of questions from me. First of all, looking at Business Services and going through your slide deck, it looks like the adjusted net revenue as a percentage of sales is much higher in the Americas versus APAC. I wondered if you could just explain what's behind that. Jeffrey Eberwein: Jake, do you want to walk him through that? Jacob Zabkowicz: Yes. And I'm sorry, can you repeat that question? I apologize. Michael Mathison: No problem. It just -- it looks from your slide deck like the adjusted net revenue as a percentage of sales is higher in the Americas versus APAC. And I'm just wondering why. Jacob Zabkowicz: Yes. We saw some significant growth in our Americas business this last quarter through our land-and-expand strategy, and that has driven some of the uptick for us. And we're really excited to see that as we also launch our digital product, as I mentioned last quarter, and we are seeing the clients really gravitate towards that as agentic AI takes over -- or not takes over, it adds enhanced value to our clients and our partnerships. Jeffrey Eberwein: Michael, this is Jeff. So if we compare that business by region, like if you were to look at some of the old Hudson results, and you'll see this in our 10-Q when it's filed that there's really two different businesses there. There's the RPO business. And in the RPO business, adjusted net revenue or gross profit equals revenue. So there's no cost of sales. All the costs are down in SG&A. In the contracting business, which is about half the revenue, all of the contractors show up as cost of sales, which causes us to have a really low adjusted net revenue and makes the margin percentage really, really low. So that's why we always focus people on adjusted net revenue or gross profit as the real revenue because that kind of ignores that pass-through effect. So contracting is -- our contracting business is heaviest by far in Australia, we -- and Asia Pac. We do very little of it in the Americas. So said another way, RPO as a percentage of revenue is much higher in the Americas than it is in other geographic regions. Michael Mathison: Terrific. I just wanted to confirm that it was the impact of contracting. Just as long as we're on the Hudson business, I think the one region we didn't speak of yet is Europe. How does that look? Jeffrey Eberwein: Jake, do you want to talk about what's going on with Europe? Jacob Zabkowicz: Yes. Europe, we are definitely going through a transformation. And the transformation is looking at not only our land-and-expand strategy, but also geographies that we're entering into. So the Middle East, as I mentioned a couple of quarters ago, we entered the Middle East last year, and we're starting to see signs of that business continuing to pick up. Europe is our smallest region when you look at -- when you compare Europe to the U.S. or the Americas and also to APAC. One of the things, though, that we are looking in Europe is the overall macroeconomic impact that's happening in that region. We did see a downturn in the European market for us this last year. We had a couple of our clients take some of their business in-house, which has impacted revenue. But at the same time, our land-and-expand strategy is picking up in some other geographies in that region as well. So Europe is going to continue to be a focus for us. But when you compare Europe versus our APAC or the Americas region, it is our smallest region so far to date. Jeffrey Eberwein: Michael, I would add, we do have a new management team there that we're very excited about, and we're very optimistic about the Europe segment doing much better in next year than this year. Michael Mathison: Okay. Just one last question from me. Looking at Building Solutions, revenue was significantly higher than I had expected. So again, congrats on that. The gross margin was a little less than I had forecast, though. Is this gross margin sort of what we can expect going forward? Jeffrey Eberwein: Yes. We -- yes, we shoot for kind of mid-20s. And I think that's the best number to use over the medium and long term. In any one quarter, it can be higher than that. It can be lower than that due to business mix and also the vagaries of construction accounting where on some of the big projects, we recognize -- the simple way to think about it is that we recognize expenses more aggressively than we recognize revenue. Sometimes the revenue recognition is delayed. And if we've already recognized all the expenses, that very last piece of revenue that we recognize after we finish the punch list, for example, on a big project, can be at 100% margin effectively because we've already recognized all the expenses. So quarter-to-quarter, it can be a little lumpy, and I wouldn't read too much into it. I think mid-20s on a trend-line basis, rolling 4-quarter basis is what we expect. Operator: [Operator Instructions] Our next question will come from [ David Siegfried ], investor. Unknown Attendee: So just a number of questions. First, regarding Building Solutions. I noticed KBS on September 1, they completed that 10,000-square-foot project in Nantucket. Are there more contracts like that in the pipeline? Jeffrey Eberwein: This is Jeff. I'll take that. There are. I'll just answer it in two ways. We -- on our slides, if you look at Slide 9, we do show our backlog and the backlog did start to improve about a year ago as some of those larger projects, that Rick was talking about that were on hold or frozen, got unfrozen. So we have had a string of projects that we've announced, some of which we've completed, some of which are still in our backlog. And then in terms of our sales pipeline, we continue to have a lot of those opportunities. So we're trying to win them and get them started. But we do have more projects like that one that are -- that will happen in the future. Unknown Attendee: Okay. Good to hear. I noticed you've indicated that you're looking for bolt-ons. Would you be looking for bolt-ons in the region or outside the region? Because you do have that facility in Oxford, Maine that's empty, would you fill capacity -- yes. Jeffrey Eberwein: Yes. Good memory. So I think the short answer to that is kind of D, all the above. Our highest priority is to add more size to our existing businesses. We feel like we have some good operating management teams across all of our businesses. And so we would like to give them more to manage. And so that could be an acquisition in their geographic region. Yes, you're right, we do have an idle factory in Maine, and we constantly explore different ways to reopen that and have more growth. And then the bar is a little bit higher for what we would call an adjacent acquisition where, let's say, it's a business we're in, so we know the business well, but it's in a new geography. We do look at those, but I'd say that's priority #2 after adding to what we have in an existing geography. Unknown Attendee: Okay. Question on the public investments that you have. I think is most of that in Gyrodyne? You have like 150,000 shares. What do you see as a catalyst to get -- to monetize that investment? Jeffrey Eberwein: Yes. So yes, all that is public, our holdings in Gyrodyne. So they are -- if you look at their public filings, they are in the process of liquidating. They have a long history of selling the remaining real estate assets and dividending out those proceeds. And it's very cheap on NAV. I think just based on their publicly-stated NAV, it's got 50%, 60% return to stated NAV. And their plan, per their public documents, is to liquidate their remaining real estate holdings and distribute that out as cash and wind down the entity by the end of, I believe it's 2027. Unknown Attendee: Okay. All right. Good. And then, let's see, so regarding Hudson, I noticed they moved to a larger office in Edinburgh this past quarter. What was behind that change, move? Jeffrey Eberwein: Very good question. I'll let Jake answer that one. He was there for the grand opening of that new location. Go ahead, Jake. Jacob Zabkowicz: Yes, David, as you know, Edinburgh is a hub for us, for our European market and actually, it also supports many of our clients across the globe. One of the things that we like about Edinburgh is the talent there is very dynamic. You get language capabilities, you get a great cost basis and it's a great culture to be a part of, right? So what we did is, over the last year, we really looked at our footprint. And we did this in Tampa, where we actually moved from a previously shared office space into our own office space that we lease. And we did the same principle in Edinburgh this last time around. And so we were in a shared space. We had shared common area, and it wasn't really conducive to the company that we turned into, being Hudson Talent Solutions. So the team has found a unique office space, right off of Princess Street in Edinburgh, great location. It's going to allow us to drive the talent that we need to bring into the -- to our clients, but also, it's going to allow us a spot and place that we're proud of to bring our clients and our potential clients in to see not only the culture, but the quality of team members that we have. So really excited. We just did a ribbon-cutting. Edinburgh is a beautiful area to visit. And like I said, great talent, great culture and we're proud to be there. Unknown Attendee: Yes. Okay, good. What about -- I noticed from Q3 last year, the new logo and expansions and renewals was up considerably from if you look at quarters. So what was behind that uptick? Jacob Zabkowicz: Yes. David, great analysis. As I mentioned before a couple of times, our land-and-expand strategy is really working. And what I mean by that is really looking at the clients that we service today and how do we continue to support them in other geographies and other business lines and making sure we're having those conversations. So we're seeing a pretty significant tailwind with that and allowing us to build on to our existing client portfolio. Not to mention adding the digital offering and our different solutions and our different products, with boutique executive search as well, we are seeing clients gravitate more to that one talent solution. So all of that is allowing us to gain more market share with our clients and provide a better level and a higher quality of level service to them. Unknown Attendee: Got it. Okay. Now last quarter, I think Jeff had mentioned with the AI rollout, there was one company that was interested just in the AI offering. And then it was -- you're hoping that it would expand to other services that you offer. Is there any follow-up on that? Was there any expansion or any other success stories along the lines with the AI offering that you have? Jacob Zabkowicz: Yes, David, we are actually -- we have some clients that now have -- let me take a step back. We've embedded our digital offering into our RPO solution, RPO suite, right? So whether it be TalentIQ, whether it be [ Hudson Flow or Hudson Core, ] every single one of our clients has a different demand, and they're on a different journey. And sometimes that journey takes them to -- they want a full agentic AI solution. Sometimes it takes them, no, they don't want a full agentic AI solution. They want pieces of the puzzle, right? And so we're able to offer that to them. One thing that has been taking off is, as I just mentioned, our TalentIQ solution, which provides real-time market intelligence and market data to our clients so they can make better talent decisions. We have a couple of partners that are on that now. So it's more than one now, and we're getting very good feedback. And the best part about that solution is it's a global solution, right? It's not just looking at the Americas or EMEA or APAC. Clients can come to us and say, we need to understand where is the best area to put an offshore finance facility or manufacturing facility for FMCG. We can help drive and help inform some of those decision-making capabilities with that. Unknown Attendee: Okay, good. And then the goal... Jeffrey Eberwein: Yes, this is Jeff. Sorry. I would encourage you to follow and all of our shareholders really follow the Hudson Talent Solutions website. They sometimes have news and announcements that you wouldn't see on Star's website or might not be a Star press release, but they will have more to say about what they're doing on the digital side going forward. Unknown Attendee: Got it. Okay. Question about the partnering with private equity or growth capital. If someone were interested at some point, how would that impact Star as a company? Would there be like would they have to buy equity in Hudson Talent or in Star Equity? Or I'm just trying to figure that out. Jeffrey Eberwein: Yes, I'll take that. David, it's a great question. The short version is we don't know exactly what that's going to look like. But our first priority is to get back to the levels we were at in 2022. But this time around, do it with a more stable foundation. So if I go back to 2022, the Hudson business was about 70%, we would estimate what we would call enterprise RPO, and that's where it's with a Fortune 500 company. This next time around, we'd like that to be a lot closer to 100%. So when we get back to those 2022 levels of, let's call it, $100 million of gross profit and $20 million of EBITDA, we think it will be more sustainable and a stronger, more stable group of clients. So that's kind of point one. And then if we think about everything going on with this business with all of our clients asking about AI, how is AI going to affect talent procurement, talent assessment. We -- it's just hard to know where that's going to go. So like one of the things we've talked about is, let's say, there's some really interesting investments to make on that side, digital, AI, tech. You're just -- you're not going to see Star invest tens and millions of dollars in something that isn't producing revenue, isn't producing immediate cash flow, but it could make sense to partner with somebody who has that expertise, maybe even somebody that has other investments in digital AI type of companies. So they bring expertise and capital, and they would fund that investment. So there's just so many different ways that could go. I would just tell you to stay tuned. It's not something that's going to happen in the next few quarters, but I'd put a high probability on something like that happening at some point in the future. And I guess the short -- another way to say everything I'm saying is that we're transforming the business from being a very people-oriented business to one that is much more of a tech-enabled, tech-plus-expertise type of a business. And there could be people who could be very interesting to partner with when the time is right. Unknown Attendee: Yes. Good. I know there's value in that division because a much larger company, Heidrick & Struggles, just was bought out this past quarter with similar type services that are offered. So what about the preferred shares? I know you utilize that as a tool for acquisitions. But is there a point where you see interest payments becoming unsustainable for the company to carry? I mean, you can't just offer preferred shares endlessly, correct? Jeffrey Eberwein: Very good question. The way we think about that, if we're going to use preferred shares in an acquisition, the preferred shares, if you just think about it on a multiple basis, it's a 10x multiple if you think about the par value being $10 a share and the annual dividend being $1 a share. So if we can acquire a business like we did earlier this year, that has a cash flow stream that is growing over time, and we can buy that cash flow -- that business and that cash flow stream at 3 or 4 or 5x cash flow, then it's highly accretive to do that acquisition. So in other words, the cash flow from the acquisition should more than cover the dividends that we would issue in an acquisition. Unknown Attendee: Got it. Okay. One last question regarding the mutual funds that were selling since the Star merger was announced. Like you took out 8% of the shares back in September. We're still in the $9 range. Jeff, you were buying at higher prices. Do you -- I know that you feel the company is still undervalued, but I still kind of sense like there's maybe an overhang, maybe there's still a seller out there. Do you think you could do another big block transaction, take those shares out? Jeffrey Eberwein: We're always open to that. We -- I think the most effective share repurchases we've done have been a negotiated transaction with a block seller that is by far the most efficient and effective in terms of how to buy back stock. So if there is an overhang, as you say, or remaining block out there and they want to sell to us, we will certainly entertain that. And as far as we know, there are no longer any holders -- any institutional holders who are above 5%. So if there is a remaining seller out there and they do have a block for sale, it's going to be a block size that's less than 5%. Operator: The next question will come from [ William Kim ] with Presidio Asset Management. Unknown Analyst: So with the merger now closed, I guess, is there any update on the expected synergies that you plan to achieve? Jeffrey Eberwein: Yes. Great question. We still believe that we'll deliver the $2 million in synergies. And that target could be higher over time, but that's the number that we're comfortable using. And where you're going to see that is in the corporate line. So if you look at the pro forma table in our press release, you'll see EBITDA from each one of our four business segments, and then you'll see a column for corporate. And in Q3, that total was $2.6 million for the quarter. That's a pro forma number. And so as we start to realize some of those synergies, you're going to see the corporate costs decline. And so our goal is to get that number down more to like $2 million a quarter or $8 million on an annualized run rate. So that's really where you're going to see the synergies show up if you're going to be tracking it quarter-to-quarter. Unknown Analyst: And do you think that's achievable in the near term? Or is that kind of a year out? Or what kind of timing are we looking at? Jeffrey Eberwein: Yes. It's a gradual -- it kind of comes in steps. We -- I'll put it this way. We have high confidence we'll be at that run rate. I would say, at some point next year, so maybe 6 months from now, we should be at that run rate. So said another way, the $2 million of synergies should be fully realized, I would think, 6 months from now. Unknown Analyst: Great. A couple of more questions on the corporate side before going to the RPO. Could you just clarify for us what the quarter end share count looks like with the repurchase? Jeffrey Eberwein: Yes. You'll see the number on the cover of our 10-Q. I think it's -- I think you'll see it's right at 3.4 million shares, maybe a little bit higher than that. Unknown Analyst: Great. Great. Okay. And then is it fair to say there was a little bit of debt paydown this quarter as well? Jeffrey Eberwein: We have debt at -- on two of our businesses, the Building Solutions and the Energy Services have debt at the sub-level. And on Building Solutions, we have an acquisition loan that we took out when we acquired Timber Technologies, and that loan is amortizing. So we're making principal payments on that every quarter. Same thing with the seller note there at Timber Technologies. So over time, everything else being equal, you'll see our debt decline as those two debt pieces decline. Unknown Analyst: Great. And then last one on the RPO business. I think you previously mentioned the '22 numbers and the kind of environment that we've -- the company has been in the last year or so with very low attrition. Where in the cycle do you think we are now? Jeffrey Eberwein: We are bouncing along the bottom. So we had a very painful decline from 2022 to, say, a year ago. And so it seems to us that we've bottomed and have not seen a strong recovery, but we think it's coming partly because the attrition rates are abnormally low at the Fortune 500. So if you were to have -- if you had attrition statistics available at the Fortune 500, you would have seen it be abnormally high coming out of COVID, so starting in 2021, into 2022, the beginning of 2023. So it was above normal. And now we've had a period where it's been substantially below normal levels. Some people have called it the no hiring, no firing job environment. We are seeing the attrition rate start to return to a more normal level, but it is a very gradual return to normal. So I hope that answers your question. Unknown Analyst: Right. Yes. So if we -- if the business got to a more normal environment, is that where you're getting the $100 million in gross profit, $20 million EBITDA number? Or is that -- are we looking at kind of back to peak type of attrition rate numbers? Jeffrey Eberwein: No, I think getting back to that level would be mid-cycle, not peak. Just in the last 2 years since Jake joined to head up that division, we have -- we now have an offering in the Middle East. We are -- have launched services in Latin America and we did an acquisition in Japan. So those are three pretty significant geographic areas that we weren't in before. And so I guess the significance of the 2022 numbers and the reason why we bring those up is that $100 million of gross profit and $20 million of EBITDA is a 20% margin. If you go back to, say, 2018, we were at a 10% margin. And something I've talked about quite a bit is that once we're at steady state, as we grow, we should have a 30% incremental margin. And so we view getting back to $100 million of gross profit and $20 million of EBITDA as kind of a mid-cycle normalized level, not a peak level with the business that we've built and what we have today with those three new geographic regions and with our digital offering. Operator: [Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Jeff Eberwein for any closing remarks. Please go ahead. Jeffrey Eberwein: Well, thank you all for participating in our call and for listening in. We appreciate your interest in the company and really great questions. And -- so appreciate those. And if you want to get in touch with us, the contact information is on our press release, and you can also look at our website, starequity.com, and we'll be available to answer any questions you have. So reach out. Thanks again for your time today. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Hello, and welcome to the Alstom Half Year Results for Fiscal Year 2025-2026. My name is George, and I'll be your coordinator for today's event. Please note, this conference is being recorded. [Operator Instructions]. I'd now like to hand the call over to your host, Mr. Henri Poupart-Lafarge, CEO; and Mr. Bernard Delpit, Executive Vice President and CFO. Please go ahead. Henri Poupart-Lafarge: Thank you. Good evening, everybody, and thanks for joining Alstom's first half results conference call. I'm Henri Poupart-Lafarge, Group CEO, and I'm joined by Bernard Delpit, EVP and CFO. I will first comment on the highlights of the first half before Bernard will walk you through the financial results. I will then comment on guidance before opening the floor for your questions. So let me start with the key figures for the first half. Orders reached EUR 10.5 billion with strong commercial momentum in Q2, particularly driven by Rolling Stock and North America. The book-to-bill ratio stood at 1.2, fully aligned with full year guidance. Sales came in at EUR 9.1 billion, reflecting 7.9% organic growth with all product lines and regions contributing. Adjusted EBIT was EUR 580 million, up 13% year-on-year, representing a 6.4% margin compared to 5.9% in the same period last year. Free cash flow was negative EUR 740 million as expected, reflecting typical in higher seasonality. The solid performance underscores the strength and resilience of our business model. Let me highlight 3 key competitive advantages that I believe will continue to drive commercial and operational success. First, the multi-local footprint is more relevant than ever in today's macroeconomic and geopolitical environment. It allows us to win business and execute projects effectively, and we are continuing to expand in this direction. Second, the integrated approach across Rolling Stock services, signaling and systems is delivering strong sales synergies. In particular, most of our Rolling stock orders are now linked to long-term service contracts, reinforcing revenue visibility. Third, the harmonization of the Rolling Stock portfolio is delivering results, particularly in high-speed rail. Progress towards the homologation of the Avelia Horizon platform is encouraging, and we have secured additional orders for the platform in the recent months. In the meantime, we continue to execute on our strategic priorities. With the Bombardier Transportation integration now complete, we are focusing on driving industrial and development performance. The transformation plan in Germany, in particular, is progressing well, and we are rolling out efficiency initiatives across engineering and manufacturing. Looking now at Page 6. Alstom's addressable market remained stable for the 3 fiscal year beyond March 2026 at around EUR 200 billion. Europe continues to stand as our first market, concentrating many Rolling Stock commuter and mainline signaling opportunities. American customers will tender train replacement opportunities in the North with mainline and urban network expansions being expected again in the South. Half of AMECA's EUR 31 billion pipeline will be made of turnkey projects, and Alstom stands ready to tap into those. In Asia Pacific, Australia and India will continue to be our main markets with India focusing on freight and urban developments, while Australia could see the exercising of several Rolling Stock optional tranches. Now turning to Slide 7, focusing on orders in the second quarter. The Americas region had a very successful semester this year with 2 landmark orders. This includes a EUR 2 billion Rolling Stock contract with MTA in New York, EUR 1 billion Rolling Stock option exercised by NGT in New Jersey. In Asia Pacific, commercial activity was also strong in the second quarter with key wins such as another metro project in India, confirming Alstom's long-lasting presence in the city of Mumbai, EUR 500 million Rolling Stock and maintenance contract in New Zealand in addition to the KiwiRail signaling project signed by Alstom in 2022, a signaling order in Singapore, enabling faster travel times from the Shanghai Airport. Together with other small order, Alstom recorded EUR 6.4 billion in total orders for the second quarter. This brings the book-to-bill ratio for the first half of the year to 1.2. Moving to Slide 8, highlighting large orders announced and booked since the start of the second half. Let me start with Eurostar. Eurostar has placed an order for 30 Avelia Horizon double-decker, very high-speed trains for a total value of EUR 1.4 billion. The agreement also includes an option for the purchase of 20 additional units. This is a strong validation of the Avelia Horizon platform, which is now close to homologation and has built a very solid order book of more than 170 trains, serving multiple clients, both in France and abroad. On the right-hand side, Polish operator PKP awarded Alstom a contract worth EUR 1.6 billion for the supply of 42 Coradia Max trains together with 30 years of maintenance. This award illustrates the strength of the Coradia platform as well as the increasing share of Rolling Stock contracts being bundled with long-term maintenance. The agreement with PKP also include an option for the purchases of 30 additional trains. Turning now to the backlog on Slide 8. The average gross margin in the backlog stands at 18% at the end of the first half compared to 17.8% at the end of the same time last year. This represents a 20 basis point increase compared to the end of the last fiscal year. Considering the weight of Rolling Stock orders in the first half, the increase in the gross margin in backlog demonstrates the quality of the order intake across all product lines. Our commercial wins this semester have shed a particular light on the North American rail market, as explained on Slide 10. We have seen over the recent years, ridership increasing closer to pre-COVID activity with Amtrak ridership in the U.S. already exceeding the pre-crisis level. The need for enhancing passenger experience and upgrading aging train fleets remain a powerful commercial driver, with 50% of the U.S. installed base needing replacement in the short to medium term. The U.S. railway supply market, as addressed by Alstom has witnessed further concentration with the 3 largest players accounting for about 3/4 of all orders in the last 3 years. Finally, in Canada, Alstom enjoys a unique position, thanks to 5 main sites and 5,000 employees. Continuing with North America on Page 11. On the delivery aspects, we celebrated in August the debut of the Amtrak's high-speed Next-Gen Acela on the Northeast corridor. These are the fastest and most technologically advanced trains in the U.S. that Alstom manufactured at its own hub. This facility in Upstate New York is the largest dedicated passenger rail manufacturing facility in the U.S. Hornell is also where the trains from the newly signed MTA's M9A order will be delivered with further investment made there to manufacture carbody shells. On the West Coast, the Bay Area Rapid Transit, BART in California accepted the 1,000th car from the fleet of the future. This railcar came from Alstom's Plattsburgh facility, where the group is also manufacturing the NGT multilevel 3 double-deck EMUs. Turning our attention to France on Page 12. The first MF19 Metro interlink service on Paris Metro Line 10 has brought the focus back on the widest generation of train innovations that Alstom has seamlessly matured. Within the time frame of only 5 years, no less than 5 new train platforms will have reached operational service stage, among which MF19, AriaNG and Avelia Horizon for high speed. The AriaNG, in particular, commuter trains have been running on the Aria E line since November 2023 and on Aria D line since December 2024. Combining single and double-deck cars, this train embarks numerous capacity, comfort and accessibility innovations. And last, the Avelia Horizon platform witnessed several further milestones with TGV M starting endurance tests in France following completion of certification test and with another high-speed commercial success achieved with Eurostar. On Page 13, we reflect again on car production levels, providing insights into the Rolling Stock business, which together with the train components represents about 50% of sales. Production volumes were broadly stable in the first half compared to last year. Some projects saw an increase in production, including our RER NG and TGV M in France, commuter trains for BART in the U.S. or several German projects where volumes are on the rise. At the same time, some large projects that contributed to volumes last year have now been completed. This includes some tighter metros in Paris, some metros in Sao Paulo, the Tren Maya project in Mexico or the Avelia Liberty for Amtrak in the U.S. In addition to a favorable mix of cars on sales, it's worth noting that more cars produced in the first half were part of projects in ramp-up phase compared to same period last year, which also contributed to Rolling Stock sales growth. Overall, we continue to expect stable production for the full year. Let me now pass it on to Bernard, who will comment the first half results. Bernard-Pierre Delpit: Thank you, Henri. Good evening, everyone. Let's start with the order intake as shown on Slide 15. We recorded EUR 10.5 billion of orders in the first half. The book-to-bill ratio that was 0.9 for the first quarter accelerated to 1.4 in the second quarter, resulting in a book-to-bill of 1.2 for the first half, of which 1.4 for Rolling Stock. The backlog reached EUR 96.1 billion, up from EUR 95 billion at the end of March. This increase was driven by the strong book-to-bill, but partly offset by negative currency effects. Looking at the regions, the Americas had their best semester ever with large orders from New York and New Jersey. Europe remains the largest contributor, supported by strong momentum in France. And the Signaling business had a solid start to the year with contract wins in Italy, Taiwan, Brazil and Singapore. Turning to sales on Slide 16. Sales reached EUR 9.1 billion in the first half, up 7.9% on an organic basis. All product lines contributed to sales growth. In particular, Rolling Stock sales totaled EUR 4.7 billion, reflecting 6% organic growth. This was driven by a strong ramp-up in Germany with double-digit growth across multiple regional train projects, continued momentum in France, notably supported by the RER NG program. In the Americas, increased production volumes for BART in San Francisco offset the completion of other projects, including Amtrak. In Asia Pacific, the locomotive business in India remains an important growth driver. Service sales reached EUR 2.3 billion with a 6% organic growth, supported by strong performance in Italy, the U.K., Australia and airport people movers in the U.S. Sales in Signaling came in at EUR 1.3 billion with 17% organic growth, driven by robust execution in France, Italy and Germany. Reported growth in Signaling was more modest at 4%, mainly due to the deconsolidation of the North American conventional Signaling business as of September last year. Finally, Systems sales totaled EUR 0.8 billion, representing 10% organic growth. Second quarter performance was impacted by the ramp down of the Mexico Tren Maya contract, which was not fully offset by ramp-ups in the Philippines, Taiwan and Brazil. The trend seen in Q2 will continue into the second half. Looking now at inorganic items. Foreign exchange was a 3.3 point headwind driven by euro appreciation against most currencies and scope had a negative 1.2% impact due to the deconsolidation of the U.S. Signaling business that I mentioned above. Scope will be neutral in H2. So as a result, sales grew 3.2% on a reported basis. Looking now at the P&L on Slide 17. Gross margin reached EUR 1.2 billion, representing 13.6% of sales, a slight decrease compared to the prior fiscal year. In absence of a scope and FX impact, the gross margin percentage would have remained stable. The improvement in project execution and industrial efficiencies was offset by regional mix headwind with, for instance, Asia Pacific being broadly flat at current FX rates, while Germany grew solid double digits in the first half, but at lower gross margin. Net R&D costs accounted for 2.7% of sales, notably due to cost discipline, project phasing, but also to the disposal of the North American Signaling business, which was more R&D intensive. Selling and administrative costs have reduced both in absolute terms and as a percentage of sales, now representing 5.7% of sales in the first half, demonstrating continued efforts on cost efficiency. We also benefited from a solid EUR 100 million contribution from the joint ventures. These demonstrate both the resilience of the Chinese market and the dynamism of the broader Asia region to which several of those JVs are exposed. Taken together, the adjusted EBIT increased by EUR 65 million, reaching EUR 580 million this semester. Turning to Slide 18 and the analysis of adjusted EBIT margin development in the first half. The 50 bps improvement to 6.4% is the combination of 40 bps headwind and 90 bps performance. On the one hand, adjusted EBIT margin faced a couple of inorganic headwinds. Scope had a negative 20 basis point impact, slightly less than the impact on gross margin due again to the higher weight of R&D for the North American Signaling business compared to the group average. FX had a negative 20 basis point impact from a translation effect. On the other hand, these headwinds were more than offset by progress on project execution and industrial efficiencies contributing around 20 bps to margin improvement. Fixed costs, looking at R&D and SG&A together contributed to a 50 basis point increase. Other elements, including the increase in net interest and equity investors pickup contributed 20 basis points overall. Looking at net profit on Slide 19. Nonoperating expenses have reduced further to EUR 37 million in the first half. Nonoperating expenses mostly relate to the impact of the German transformation plan and some legal costs. As a reminder, integration costs were nil in the first half of this year as Bombardier Integration program was concluded last year. Net financial expenses decreased to EUR 75 million from EUR 107 million as a consequences of deleveraging plan that occurred in H1 last year. Effective tax rate came back to a structural level of 28% compared to 37% in the same period last year. Finally, adjusted net profit increased by 51% to EUR 338 million for the half year, and net profit group share after PPA reached EUR 220 million, 4x last year net profit. Turning now to free cash flow on Slide 20. Free cash flow came at a negative EUR 740 million, consistent with expected seasonality. Let me highlight a few moving parts here. Adjusted EBITDA, including dividend payment from JVs reached EUR 800 million versus EUR 708 million last year. CapEx and CapDev together amounted to EUR 225 million or 2.5% of sales with some favorable phasing impact of investments that will reverse out during the second half. Financial and tax cash out together amounted to EUR 152 million, coming in close to the P&L expense. This results in a solid increase of funds from operation to EUR 411 million for the first half, up more than EUR 100 million compared to the same period last year, confirming the trajectory observed over the last 3 years. Finally, working capital was a EUR 1.2 billion headwind, slightly better than expected. Talking trade working capital on Slide 21. Trade working capital stood at 43 days of sales at the end of September, broadly stable compared to the first half of last year. The increase compared to March '25 represented a EUR 500 million headwind for cash generation in H1 this year. Inventories increased by EUR 315 million over the 6 months and stand at 87 days of sales, not very different in terms from September 2024. This is largely explained by the anticipated acceleration in Rolling Stock production during the second half of the year with higher value train sets to be manufactured this year. In comparison, days of payables progressed slightly less than days of inventories. Looking now at contract working capital on Slide 22. It went from a favorable 89 days of sales to 79 days at the end of September and stands at negative EUR 3.9 billion, so generating close to a EUR 600 million headwind during the half. Net contract assets and liabilities went from negative 59 to negative 48 days of sales, just below EUR 2.5 billion. The vast majority of the decrease in the net position was driven by Rolling Stock with 3 dynamics. First, the increasing share of projects in a ramp-up phase compared to last year. During this phase, when [indiscernible] cars are being built and homologation milestone is not reached, then Rolling Stock contracts pivot from a contract liability position to a contract asset position and therefore, consume working cap. Second, the phasing of down payments this year is very different to last fiscal year, less down payments in the first half, more to be expected in the second half. And third, a few large Rolling Stock contracts have only recently reached cash milestones, including, for example, Amtrak with the launch of commercial service in August and cash-ins to be collected over the next quarters. We anticipate the 3 dynamics will remain valid through the rest of the year, but the timing of down payment will largely drive the improvement in contract working cap in the second half. Finally, provisions are decreasing as expected with the execution of the legacy backlog. Net financial debt on Slide 23, it increased to EUR 1.4 billion at the end of September, up from EUR 434 million at the end of March. In addition to free cash flow changes, leases and dividends from minorities, combined with a EUR 44 million annual bond coupon paid for the hybrid bond amounted to nearly EUR 150 million total cash outflow during the first half. And the strong appreciation of the euro had a negative translation effect on cash balances held in non-euro-denominated currencies of EUR 65 million. This translation adjustment is, by definition, noncash, but does impact the net debt in euro terms. You will find in appendix of this presentation, the updated bridge computation from EV to equity value, reflecting these evolutions. Finally, looking at cash and debt profile at the end of September on Slide 24. Cash balances stood at EUR 1.7 billion at the end of September compared to EUR 2.3 billion at the end of March. The amount of short-term debt entirely through commercial paper stood at EUR 400 million, while the balance was nil at the end of March, leading to a net cash position, excluding long-term debt of EUR 1.3 billion. These moves are explained by free cash flow consumption as detailed in previous slides, the agreement with the rating agency to earmark a portion of cash to identify future debt repayments and the need to keep a certain amount of cash to run the business. This concludes the financial review. Let me pass it on to Henri for final remarks. Henri Poupart-Lafarge: Thank you, Bernard. So turning to the outlook with first taking stock of the assumptions that we laid out in May and that underpin the full year guidance. First, commercial momentum has been particularly strong, driven by robust underlying demand and some competitive positioning in key markets. Second, car production remained stable in the first half, and we expect this trend to continue through the full year. Third, innovation remains a strategic priority for the group. However, given stronger-than-anticipated sales momentum, we now expect R&D to represent around 3% of sales for the full year compared to slightly above 3% previously. Fourth, exposure to U.S. tariffs remains limited as most projects meet minimum U.S. sourcing requirements, and we have legal safeguards through change in law clauses. Year-to-date, the vast majority of tariffs paid have been agreed for reinvoicing with clients. On that basis and in light of our first half performance, we confirm the objective of a book-to-bill ratio above 1, both at a group level and for Rolling Stock. We now expect organic sales growth to exceed 5% compared to 3% to 5% previously. We confirm the adjusted EBIT margin guidance of around 7%, and we continue to expect free cash flow generation within the EUR 200 million to EUR 400 million range. Finally, as mentioned in the press release issued earlier tonight, medium-term ambitions are unchanged, including the 3-year free cash flow objective of EUR 1.5 billion. This concludes the presentation, and Bernard and I will now be happy to take your questions. Operator: [Operator Instructions] Our very first question this evening is coming from Akash Gupta calling from JPMorgan. Akash Gupta: I've got 2. I have one for Henri and one for Bernard. The first one I have is on the pipeline of projects that you show in the presentation. So we see European pipeline reduced by EUR 12 billion in past 6 months. And the question is, is this largely reflecting the awards that we have seen in the period? Or is there something else that has moved as well? And similarly, if I may also ask what is driving the increase in pipeline in AMECA region where you see EUR 9 billion increase in the next 3 years award. So that's the first one. Henri Poupart-Lafarge: No. Thank you, Akash. On the first -- on the pipeline. So first, let me reiterate that the market is extremely positive. As you know, we have still a long-term market growth, which is estimated around 3% by UNIFE. And that is the kind of macroeconomic view and the pipeline, which we look at, which is the sum of all the opportunities which we have in front of us, as you have seen, is still very positive. So you're right. On Europe, time goes, a lot of -- as you have probably seen in the press and the media, a lot of orders which have been allocated to Alstom, but not only in the recent period. And therefore, there is a slight decrease of the pipeline. On the growth -- the second part was on which region you were asking for the growth? Akash Gupta: It's AMECA region where your pipeline has increased by EUR 9 billion? Henri Poupart-Lafarge: On this -- so we have -- it's true in AMECA, therefore, particularly in Middle East, we have a number of turnkey projects which are coming and which have been rejuvenated, if I may say, Riyadh, for example, Line 7 of Riyadh and so on. So we have increasing turnkey jobs, which are coming in the region. Akash Gupta: Then the question for Bernard is on cash flow. So when you gave EUR 200 million to EUR 400 million free cash flow guidance in May, you had much lower visibility than what we have today. And now we have roughly 6 months gone and H1 outflow was much better than expected. You have already announced couple of large orders for Q3. So my question is, how do you feel about the range? And could we say that upper half of the range may be more likely? Or is it still too early to conclude that? Bernard-Pierre Delpit: Thank you, Akash, for that. Frankly, I will not refine the guidance that we have just reiterated of EUR 200 million to EUR 400 million. It's, by the way, a quite narrow range from my point of view. There is nothing really new. It's true that H1 was better than anticipated, but kind of phasing rather than anything else. All the good news that you have seen from a commercial momentum point of view were also in the initial guidance. So no change. I hope that by the end of Q3, I will be in a position to refine this assumption. But let's keep the EUR 200 million to EUR 400 million range, positive free cash flow as our assumption today. Operator: We'll now move to Mr. Andre Kukhnin of UBS. Andre Kukhnin: Could I ask about the margin first? You've put in a pretty solid H1 performance, and it looks like the revenue guidance increase is coming mainly from Services signaling judging by the beat in Q2 and that R&D intensity is slightly lower. So I was kind of thinking about the 7% now as a number that starts with 7% and could be something around 7%, but 7.12% as opposed to sort of high 6s. Is that -- would that be the right way to think about the way the margin is progressing? And then I've got another one. Bernard-Pierre Delpit: Okay. Andre, I will take this one. No, frankly, we keep the guidance absolutely intact. To tell you the truth, we have some headwinds coming from FX and we mitigate this negative with the R&D new guidance. But for the rest, we keep it as we issued it in May. And I think it's already good to mitigate the FX impact. And sales growth will have limited impact on our adjusted EBIT as well. So here again, I think it's good to keep the same line. I know that you guys are waiting for an upgrade. We have upgraded the sales growth. But when talking cash and adjusted EBIT, I mean, keeping the initial guidance was, I think, a good thing. Let's stick to what we said. Andre Kukhnin: Got it I guess I had to try. Can I just ask a quick follow-up? In terms of -- so you told us the backlog margin has improved by another 20 basis points. Could you comment on where your order intake margin is trending at the moment? Henri Poupart-Lafarge: Thank you for the question. I mean it's a very important and I would say very positive development in the first half. We had indeed a very nice gross margin in order intake in all our segments, in all our activities because as you have seen, as compared to previous years where we had a good gross margin in order intake, but which was supported by the mix, which was, I would say, more favorable to Signaling and Service. Here, we have recorded a number of Rolling Stock orders. And I would say, despite that, which kind of a mechanical negative mix impact, we have recorded a very healthy gross margin in the order intake, so which has enabled us to increase. It's always a slight increase because we are talking a very large order backlog. So of course, 6 months addition has only a relatively limited accretive impact, but still an accretive impact, which reflects a good level of order -- of margin in order intake. Bernard-Pierre Delpit: And if I may, on this. We have also a negative -- Andre, we have also a negative FX impact when we translate all those orders in euro. So having a 20 bps improvement in this environment, including the 1.4 book-to-bill for rolling stock, I think it's a great performance. Operator: [Operator Instructions] The question will be coming from that is from Gael de-Bray of Deutsche Bank. Gael de-Bray: Can I ask you again, I'm curious about the free cash flow performance. I mean, what surprised you to the upside in H1 and is not expected to be repeated in H2? Henri Poupart-Lafarge: Yes. This one is for me, Henri. Yes. So it's really a question of phasing. Things that were expected to be in H1 will be pushed to H2. And we have also some VAT phasing because some of the cash came later than expected. So we had no time to repay that to the treasury. It's limited, of course. But I mean when we are talking EUR 10 million here, EUR 10 million there, it can play. So nothing really changed our view. I remind you that, yes, we said upto and in July, I said I had no visibility to improve that. But there is absolutely no reason why the way we have described the year with seasonality will not happen like we described it. So it's very much like, call it, seasonality or cutoff, but as we planned initially, Gael. Gael de-Bray: Okay. And the second question is on the gross margin development. So you said it was about flat if we exclude FX and scope, but it is only not disappointing given the higher share of Signaling and Service revenues in the mix in H1? Bernard-Pierre Delpit: Well, I wouldn't say disappointing. It's a combination of many things. And maybe something that was not flagged. We have kind of regional mix impact as we have a strong growth of some LRV programs in Germany, and we have some more flattish situation in APAC, for example, it explains why we have this kind of impact on the gross margin. So I wouldn't say disappointing. It was much expected, but I suspect that gross margin will come back to a larger growth in H2. Gael de-Bray: So this regional mix impacts may reverse to a degree in the second half? Bernard-Pierre Delpit: I wouldn't say so, no. You'll see some improvement coming from performance, from volume, from different things, but the increase of our production for programs in Germany will continue in H2. Gael de-Bray: Okay. I guess there is no way you could separate the volume and the mix impact, the 20 bps you mentioned? Bernard-Pierre Delpit: No, no, difficult to refine it more than that. Operator: Next question will be coming from Daniela Costa of Goldman Sachs. Daniela Costa: I have 2 as well. One is kind of a follow-up actually on the topic of Germany and on the topic of the pipeline that Henri commented on, on the first question. Can you clarify that pipeline includes the potential opportunities going forward with German stimulus already? Or shall we think about a top-up to that once it becomes concrete what those opportunities are and what sizes should we think about in there? And then I'll ask the second one. Henri Poupart-Lafarge: Yes. So on Germany, it includes the orders and which are today, I would say, under submission and which are part of our actual commercial plan. But it does not include a kind of theoretical view of the German market, which will be triggered by the investment plan of Germany. So if it has not been translated into actual tender and projects, it's not been included. So the vast majority is not included of basically the EUR 10 billion, which will flow one way or another on the German market for infrastructure. Daniela Costa: Got it. And then the second point relates to Siemens at their Investor Day today was talking to about that being less interested in pursuing metro and CT opportunities given those weren't, I guess, as good on margin for them. Can you talk about sort of like how you view the attractiveness of those type of orders for yourself? And also, I guess, the market share you have and the opportunity that if Siemens pulls out more actively of that market, that could give for you? Henri Poupart-Lafarge: Sorry, I didn't get, what was dropped by Siemens? Daniela Costa: No, I think they were saying sort of that they were less interested in sort of actively pursuing the Metro and the city part and more focused on other segments in rail going forward? Henri Poupart-Lafarge: Yes. So first, thank you, it's a good indication. Yes, it's not new from Siemens time. I mean there's always the difficulties in metro. And their last order was, for example, in London, where they suffered a lot. And we've seen then -- and they were -- it was not their priority, the metro business. City, probably as you've seen, they are still in S-band, for example, in Germany. But they are not our main competitors in that area. As you know, we have different competitors depending on the market. If you are, of course, in India, you have local Indians. If you are in Europe, you have more people like CAF, Stadler just injuring into the metro market. So it's not a surprise to us, what you say. It will not dramatically change the picture. What is interesting is that, as you know, we are more and more in turnkeys in cities, so both rolling stock and signaling. So to some extent, Siemens may have some difficulties to sustain a Signaling business -- normal Signaling business if they totally withdraw from the metro one. So it's probably more complex. So I would say not totally a surprise, not a radical shift, but a confirmation that the market is consolidating around a few players. Operator: Next question will be from William Mackie of Kepler Cheuvreux. William Mackie: A couple, please. Firstly, on cash flow for the second half. I think if I heard you correctly, you said it remains highly dependent on the inflow of prepayments. So could you explain, first of all, how much visibility you have on that? And how you also expect the contract assets and inventories to develop in your working capital calculations in the second half? I'll come back to the second question. Bernard-Pierre Delpit: Will, I will take this one. So yes, definitely, we expect a strong inflow of -- coming from new contracts with down payments expected in H2. I would say that we have good visibility. We still some uncertainty about the amount and the timing of those. But we expect, as I said, a strong book-to-bill in H2. So there is always uncertainty, and it could be a couple of hundred millions by definition, considering the size of certain of our contracts, as you've seen for Eurostar or PKP in Poland. So I wouldn't go beyond those comments in terms of visibility, but it's true that there is uncertainty here by definition, but it was also the case last year, by the way. Contract assets will continue to grow as we are in the ramp-up phase for a lot of projects with some homologation dates that will create some contract assets, namely in Germany or for some local markets. So well, I don't expect the contract assets to go down in H2. Regarding inventories, it will depend on the quality of execution in our second half. We have a strong ramp-up as well. So we are ordering parts. It's what you've seen in H1. It will continue because we have also a strong Q4, but we expect we will consume part of those inventories. So as you've seen in H2, the last 2 years, we have consumed some part of our inventories. So I expect that in terms of turns, it will come back to what we've seen in the past. William Mackie: A couple of -- well, questions to clean up some points on the P&L and how you're building the budget and thinking. I note you've achieved a very good contribution in the equity pickup in JVs, particularly from the [indiscernible] JV. Just how are you thinking about the continuity of that in the second half? Should we expect a similar sort of performance the way that you've been speaking to your partners and the sense of how you expect that to develop? And then on the R&D, I'm just interested, I wasn't sure how you were communicating whether the change in R&D guidance relates to higher sales or whether there's an absolute change in the expectation for spend or provision on R&D? And if there's an absolute reduction, then what is it that's driving that against the backdrop of rising activity across the group? Henri Poupart-Lafarge: Thank you for the question. So 2 things. First, let me say that the joint ventures are doing extremely well on the Chinese market. Just one word on the Chinese market. We have seen contrasted trends on the Chinese market. The mainline market is going fast. The urban market is slower, and we are not -- in the past, I don't know if you remember, there were like 15 lines being opened per year. We are probably half this amount today. There are some extensions and so forth. So it's more than -- it does not mean that the market has halved, but it means that it has decreased. And as you say, the AST, which is our very high-speed joint venture is benefiting from this growth on the high-speed market. Having said that, the phasing of the profitability of the joint venture is such that H2 will be not as good as H1. But don't take it as a sign of any slowdown of the market. It's just a fading of the profitability in the year. For your second question, no, it's just a question of relative terms. So in absolute R&D is as expected, but sales are higher. So we have slightly revised downward the assumptions in terms of percentage of sales, but no change in terms of absolute number and investment. Operator: [Operator Instructions] We'll now go to Delphine Brault from ODDO BHF. Delphine Brault: Sorry, I've been disconnected. So I hope my questions have not been asked already. First, it relates to gross margin. Your gross margin in the backlog further improved to 18%. Do you plan this type of improvement, same kind of improvement by the end of the year? Bernard-Pierre Delpit: Delphine, well, the name of the game is not to grow it up to, I don't know, 20%. So at a certain point, the question is more on the execution of the backlog than growing it, growing it, growing it. So we think that will continue to grow the gross margin in the backlog. Now the magnitude of the growth in H2 might be a little too early to tell you because it will depend also on the mix. We have a large mix of Rolling Stock on the order intake. By definition, it has an impact on the growth of the gross margin. And then FX also, so it's a bit too early to tell you, but I think that kind of 10 to 20 bps improvement is what we could see in the next half. Henri Poupart-Lafarge: We have -- you have heard from us a confident outlook on the order intake. So we have a good visibility of the commercial momentum and orders which are already won but not yet booked and which are containing healthy margin. So this would support the growth. But indeed, some of the service orders are still being negotiated. So it would depend as well on the mix between Rolling Stock and service during the second half. But yes, it will continue to increase. The gross margin in the order intake for the first half is much higher than the gross margin in the backlog. So we still have some way to continue to improve the gross margin in the backlog. Delphine Brault: Okay. And my second question is the European Commission recently called for more standardization in the highway sector, including Rolling Stock. And I'm wondering if you believe that the European operators will follow this recommendation? Henri Poupart-Lafarge: As you have seen, there are several recommendations -- recent recommendations from the European Commission. We had also a long paper on very high-speed development in Europe and investment in Europe for interoperability. So the answer to -- for all these papers basically and also to your question is twofold. On one hand, what say the commission never occurs as planned. So it takes always more time, and it's not as -- I would say, as dramatic as they would like it to be. But at the same time, it pushes the needle in the right direction. And not only when they say they want standardization, it's not only the operators which are at stake, it's also all the national rules. And there is a huge program being made by the ERA, the European Railway Authority -- Agency, sorry, which is trying to make all national rules progressively converging. And this will help, and this is helping the standardization. Now there are some, I would say, some opposite directions because, of course, all the operators, they want to have their own trains, they want to have their optimized trains for 50 years and so forth. So they want to have their own dedicated trains. But at least, the main standards and the main norms are progressively converging. Operator: We'll now move to Martin Wilkie of Citi. Martin Wilkie: It's Martin at Citi. Just to come back to the question on revenue growth, and you touched upon it already. But just to clarify, the faster growth, I mean, normally, of course, you're delivering largely from the backlog and that's sort of defined by the customer schedule. So what drove the -- both the better growth in the quarter and the uplift in the year? Is it sort of alleviating bottlenecks, whether it's labor or supply? Or what allowed you to drive the growth in revenue faster than previously expected? Henri Poupart-Lafarge: You're right. On a number of projects, it's being driven by customer ability to take the trains. But on other projects, when we are delivering infrastructure projects in signaling, it's also our own speed, I would say. So we have some flexibility in some places where depending on our own speed, we can deliver more or less fast the backlog. So on that one, we made some progress. And also, we have some short-term orders, and we have put a lot of attention in the recent period on being much better into what we call gardening, i.e., to have very short-term orders. And this has been particularly positive during the first half. And this has led to also a positive move on the sales. Martin Wilkie: That's great. If I could just have one other question on the pipeline. I mean, obviously, you've announced the Eurostar order quite recently. Obviously, a lot in the press about additional operators using the channel tunnel and not just in London and Paris, but elsewhere. Is that included in your pipeline that, that line could potentially be a lot larger for that particular platform of train? Henri Poupart-Lafarge: We are very pleased because as you have seen, we have been awarded the Eurostar order. But as you've probably seen, it's a very technical decision, but this has quite important consequences. There was a decision by the ORR, so the regulator in the U.K. on the access to Temple Mills, which is one of the maintenance depot in the U.K. And this access has been provided to Virgin and Virgin being our partner also for the Paris to London route with high-speed trains are not coming from the same platform. So it's not a double-deck. It's a single-deck platform, which we are developing in Italy. We have high-speed single deck in Italy and high-speed double-deck in France. And this has been, I would say, awarded to Virgin, which was competing against other operators coming with other trains from competitors. So it's very good news. So yes, we have a particular success of our very high-speed platforms. And they are in the -- so this is in the pipeline. In the pipeline, you have also a number of operators wanting to go outside their domestic markets. You have SBB wanted to go outside Switzerland. You got Trinitalia with some ambition as well in Germany as well as in France. You have private operators trying to also establish new route, whether it's Dutch in the Netherlands, Dutch operators or another French operator. So yes, all that is included in the pipeline. Operator: We'll now move to James Moore of Rothschild & Co. James Moore: A number of my questions have been asked and answered. So maybe I could switch to Germany and German production. It looks to me like your car production in units is relatively stable in the first half, and you're looking for German production to potentially double this year. Could you talk a little bit about German production? Is that something that's more loaded to the second half? And how is that developing? Henri Poupart-Lafarge: So your analysis is correct. The German production is more loaded in the second half, definitively. There have been a start of increase at the end of the first half. So if you look -- I mean, monthly numbers, obviously, but the second quarter was higher. So we start to see the ramp-up. But it's true that the large ramp-up is during the second half. In Germany, we are, in general, at a stage where we are waiting for some homologation and certification. So we have projects which are what we call in the ramp-up phase. So it's after a start-up phase where we are just developing ramp-up phase. So we are starting to produce, but in parallel, we need to monitor very closely the speed of -- and the timing of the homologation and certification so that we adjust our production schedule to the actual ability to deliver the trains to the customer once certified. So we are in this delicate phase. But yes, it's H2, which we will see the growth in production in Germany. Operator: We have a follow-up question from William Mackie of Kepler Cheuvreux. William Mackie: I just wanted to dot the i's and cross the t's on a couple of points. There's a note where you talk, I think, about customer advances being revised from EUR 320 million to EUR 511 million within the half year period, but it's not well explained. Could you provide -- throw a bit of color on what that advanced payment reassessment is within the period that you've put as a note to the accounts? That was the first. And then secondly, with regard to the rating agencies, could -- have you spoken to the rating agencies recently in this interim period? And could you share any feedback from your perspective of the input you may have received? Bernard-Pierre Delpit: Yes. I will take the last one, giving time to my colleagues to look for this note because I can't answer on the top of my mind on this advanced payment scheme. On the rating agencies, by the way, we should say rating agency because, as you know, we are only rated by Moody's. Yes, we've discussed this print with Moody's. And I mean, they are -- I mean, it's up to them to react to our print, but nothing new. Nothing has changed as they've taken a 12- to 18-month view when they issued the last press release. So they are totally aware of the seasonality of our free cash flow, if it's the question. And there is nothing new on that front. And we'll come back to you on this note on prepayments from customers because I don't see exactly what you referred to. William Mackie: Okay. It's on Note 15.2, but I'll try something else then just to answer a follow-up from Andre's question and a couple of points you've made earlier. You've stated that the gross margins on recent order intake has been significantly better than the 18% in the backlog and that the change in the backlog is going to evolve slowly due to its scale. But can you give us a sense of what sort of differential there is between the average in the backlog and what you're typically booking now having changed the nature of your sales acceptance and the landscape of the competitive environment having shifted perhaps to a more consolidated and perhaps sensible or disciplined environment? Henri Poupart-Lafarge: Yes. So good question. So that's -- the scale is significant. We -- basically, this first half, we are again at a record high, again, despite the mix. And we are talking in the vicinity of 4 points. Bernard-Pierre Delpit: Well, on the question of advanced payments, I guess it's just an options or something like that. It's not really a down payment. It's maybe something like that. But we will refine the answer and come back to you. I've just read the note, and I will come back to you with more details on that. Operator: We will now go to Louis Billon of AlphaValue. Louis Billon: So just my question on the order intake. So signed orders were more weighted at the end of the quarter. And therefore, I guess, down payments are not yet reflected in the cash position. So should we expect these amounts to impact future free cash flow? And would it be significant? Henri Poupart-Lafarge: The phenomenon that you are describing is frankly, a nonsignificant impact, very small. We expect a larger amount of order intake during the second half than during the first half. I mean we said that it's book-to-bill above 1. But as you have understood from our comments, we are quite optimistic on this part. So we expect down payments to be higher during the second half on the back of larger orders in the second half. And the phenomenon that you are describing is insignificant. Louis Billon: Okay. And maybe another question. So what is the competition in the America? Do you see less competition with the tariff in place? And what is the competitive environment in North America? Henri Poupart-Lafarge: So the market -- and I think I said it a little bit in the text. The market has consolidated around a few players. So we have Siemens still being present. We have Kawasaki specialized on New York. Stadler has a few orders. So it's -- I would say, it's a classical competition. Traditionally, in the Americas, you have a Japanese player. So Kawasaki is there. And you had Nippon Sharyo in the past, but which is not very present anymore. What has changed recently is in Canada because as they have passed a kind of by Canadian Act, for example, in the metro of Toronto, they are now discussing a kind of direct negotiation with us because we are the only one to be able to provide local manufacturing capabilities. So this has changed the competitive landscape, of course. But in the U.S., I would say, the usual suspect, plus from time to time, some Japanese player that we don't see anywhere else. Bernard-Pierre Delpit: Okay. I come back well to the Note 15.2 to say that it relates to 2 contracts with Deutsche Bank in Germany that are included in a program of hybrid for fighting. So it has increased our progress payments in the first half. Operator: As we have no further questions at this time. Ladies and gentlemen, this will conclude today's conference. We thank you very much for your attendance. You may now disconnect. Have a good day, and goodbye.
Operator: Greetings, and welcome to the Super League Third Quarter 2025 Conference Call. Please note, this conference is being recorded. Before we begin, I'd like to caution listeners that comments made by management during this call may include forward-looking statements within the meaning of applicable securities laws. These statements involve material risks and uncertainties, and actual results could differ from those projected in any forward-looking statements due to numerous factors. For a description of these risks and uncertainties, please see Super League's financial statements and MD&A for the third quarter ended September 30, 2025, available on EDGAR. Important qualifications regarding forward-looking statements are also contained in Super League's earnings release distributed earlier this afternoon and also available on EDGAR. Furthermore, the content of this conference call contains time-sensitive information accurate only as of today, November 13, 2025. Super League undertakes no obligation to revise or otherwise update any statements to reflect events or circumstances after the date of this call. I'd now like to turn the conference call over to Matt Edelman, President and Chief Executive Officer. Please go ahead, Matt. Matthew Edelman: I appreciate it. Thank you very much, and thank you to those who are joining us today. Today marks my third time speaking with shareholders, analysts, partners and others in this forum, and the second time I've reported on Super League's earnings. With confidence, I can say that Super League is in a stronger position to succeed now than at any point since pivoting our business into the gaming media space 4 years ago. Super League is stable and poised for growth from a fortified foundation. In April, when I started as CEO, Super League was facing a myriad of challenges. Today, we are a different company. In April, we needed to raise capital. As of October 28, we reported a final close on $20 million of financing in a private placement, which was the maximum amount approved by our shareholders. We are fully funded with no plans to go back to market other than for opportunistic growth. In April, we had a heavy debt load. As of last week, we have eliminated our debt. Our balance sheet is stronger than it has been in years. In April, we had a complex capitalization table with several layers of preferred shareholdings. We have streamlined our capital structure, creating renewed flexibility to be opportunistic towards the future. In April, we had 3 NASDAQ deficiencies. As of October 29, we are fully compliant with all NASDAQ listing requirements. And we now have a formidable lead investor in Evo Fund, whose strategic backing, including access to its global network and portfolio amplifies our ability to grow our core business and advance a forward looking digital asset strategy designed to unlock new economic value. Achieving profitability and increasing shareholder value remains our highest priority. We recognize that profitability is the foundation for growth and innovation. With the disciplined execution we've demonstrated recently and the new beginning now in place, we are confident in our ability to deliver that result. How will we get there? It starts by leaning into our expertise, which is enabling iconic brands and IP owners to engage the legions of consumers whose daily content consumption includes playing games. I'm not talking about just hardcore gamers who build their own PCs and spend all night collaborating with friends and strangers through a headset on how to win around or defeat an enemy. We help brands reach the 190 million U.S. consumers who play mobile games, Roblox, Fortnite, Minecraft and more. Our addressable audience enjoys Wordle, Subway Surfers and Candy Crush as much as Madden and Call of Duty. That's why we focus on the importance for brands to understand the cultural dominance of the psychology of play. The average member of Gen Z spends more daily time playing video games than they spend daily on all major social media platforms combined. 68% of Gen Z also watches gaming content on these platforms, representing about 30% of their video diet. When you see Super League partnership announcements about expansion into TikTok and Connected TV, now you know why. Even when consumers are not playing, those who love to play, engage more deeply with brands who appeal to that joy through playable ads and gamified content wherever it appears, compared to linear video ads and static billboards. This was reinforced when the International Advertising Bureau created a new measurement framework for gaming as well as through the overwhelming success of the first-ever Gaming Summit organized by Super League in partnership with Advertising Week at AWNewYork in October. Super League worked alongside leaders from L'Oreal, Publicis Media, YouGov and others to guide programming for a first of a kind -- first of its kind event spotlighting gaming's role in the marketing mix. Executives from Walmart, PepsiCo, WPP, Dentsu, Dave's Hot Chicken and more participated in a standing room only 4 hour showcase presenting the value effectiveness and scale within the gaming content and media space. With the Gaming Summit as a backdrop, our recent partnerships have set up Super League for business acceleration that can match our Profound corporate turnaround. With playable media consistently generating superior performance compared to linear ad formats, we partnered with Automatic Worlds, an advisory and investment firm founded by industry veterans, John Rosenberg and Dave Getson, they are the entrepreneurial duo behind g-NET agency, one of the gaming industry's most respected creative agencies. Their expertise in scaling marketing organizations and unlocking growth will elevate the rigor and reach of our go-to-market engine, strengthening client outcomes and creating durable value for our shareholders. We recently signed an exclusive partnership with ES3, a leading technology and media solutions company specializing in interactive content experiences for Connected TV or CTV, and traditional Pay TV environments. Super League will serve as the exclusive third-party sales partner for nGage, a gamified content module, but is activated through ads on CTV devices and platforms, and is designed to transform how brands and advertisers connect with streaming audiences. Our partnership with ES3 opens access to CTV budgets, with the total ad spend in the category projected to grow from $33 billion in 2025 to $47 billion by 2028, when it is expected to surpass traditional TV advertising for the first time, a nice new source of revenue diversification for Super League, aligned with our core business. Client highlights from the third quarter included one of our most compelling recent programs in partnership with Google. Together, we launched an update to their Be Internet Awesome world which we then advance further in October to become one of the first ever AI-themed gameplay experiences on Roblox. The new missions bring Google's AI literacy curriculum launched in September, to life through interactive standards aligned gameplay for grades 2 through 8. As an official agency partner to Google since 2024, we're proud to help one of the world's most influential brands lead the conversation around AI education and responsibility through the power of play. We also delivered a bold first of its kind campaign across both Fortnite Creative and Roblox with Panda Express and their creative agency, The Many. The activation demonstrates the power of playability to drive memorable brand engagement and transform a product launch into a hands-on shareable adventure. It also extends Super League successful track record and expertise within the quick-serve and fast casual restaurant sector, having previously partnered with Dave's Hot Chicken, Dave & Buster's, Freddy’s and of course, Chipotle across the world's largest immersive platforms. We were trusted and excited to bring Juicy Drop, the candy brand known for bold mashups into its first-ever Roblox activation, the Juicy Drop Pop-Up 2025 Tower Obby, produced in partnership with media agency, Beacon Media Group, Bazooka Brands, the company that makes Juicy Drop became one of the first major candy brands to build a full-scale, multilayered campaign inside of Roblox. With more than 4 million visits to the Juicy Drop Super League Pop-Up, the campaign was a blueprint for what's possible when consumer brands embrace playable media. Noteworthy within our Roblox and Fortnite business, and in response to a reduction in demand from brands to build custom destinations on the platforms, we made a decision to pursue a scalable strategy leveraging our Super Biz software developer kit on Roblox. At the IAB PlayFronts in April, we've rolled out pop-ups, many interactive experiences that can appear in multiple UGC games simultaneously. We will have launched 12 pop-up programs by the end of 2025, including renewals from 2 partners within the same calendar year. We expect pop-ups to become more meaningful in 2026 with several campaigns already booked. Pop-ups are a higher-margin product for Super League and custom builds, faster to market and more efficient in delivering against the client's objectives. Additional client partnerships in Q3 included programs with companies across multiple verticals, entertainment with Universal Pictures, Paramount and Lionsgate, Beauty With NYX, Gaming With Sega and Government with the Department of Veteran Affairs and the Food and Drug Administration. Like other brands with a story to tell, even government agencies recognize the power of play, having run in-game and playable ad campaigns with Super League. Turning to our Q3 financials. Q3 revenues decreased to $2.4 million, impacted by the demanding focus of our corporate turnaround. With the financing and related accomplishments now behind us, all of our attention is on making sure Q3 2025 revenue can be a historical low point. Our gross margin was up at 45%, up from 44% in Q2 and 39% in Q3 of 2024. Our pro forma operating costs, which exclude noncash charges were down 23% at the end of Q2 now they are down 29% compared to the respective prior year periods. We saw a 23% improvement in our operating loss on a cash basis for Q3 2025, even with a decline in revenue compared to Q3 2024, highlighting our improved margins and the positive impact that our extensive cost reduction initiatives will have on our bottom line going forward. We will deploy capital with discipline, ensuring our cost structure remains lean, growing only as we scale and only as our revenue merits doing so. Revenue diversification continues. Roblox opportunities now represent only 42% of our pipeline, down from 57% of our revenue in 2024. 20% of our pipeline is now attached to playable and in-game mobile advertising, which also held steady at 15% of Q3 revenue. Our pipeline overall has been -- become increasingly healthy as we neared the conclusion of our corporate restructuring process. We have 8, 7-figure opportunities active, an all-time high occurring simultaneously. Our weighted pipeline has increased by 69% in the past 6 weeks. Perhaps most important, our booked revenue for Q4 is already higher than our Q3 revenue, and our revenue picture for Q1 2026 is already approaching our reported revenue from Q1 2025. With a much stronger balance sheet and a streamlined cost and capital structure, we also have been able to reignite accretive M&A conversations that have the potential to accelerate our path to profitability. Based on recent business momentum, it is even more clear we're bolstering our suite of offerings through inorganic growth will have the greatest positive impact. We also see new opportunity for Super League in the user-generated gaming space. where player levels on Roblox have eclipsed player levels on any other gaming platform in history and where new monetization features have been released on Fortnite Creative. Growth in revenue for individual games makes it attractive to consider taking ownership positions in select games where gross margins are high and our expertise and brand partnerships could lead to revenue expansion. This type of prospective growth is only possible now because of our solid cash position. One final area we have referenced actively in recent communications, where we see meaningful and outsized potential for value enhancement is in the digital asset space. That does not mean we are determined to launch a digital asset treasury and sideline our operating business. The market has made it clear that, that model has its challenges, particularly with non-core crypto currencies. It does mean we are determined to explore and hope to pursue a strategy that has enduring growth potential. We believe in the sector and see emerging evidence that a model in which there is a symbiotic relationship between a company's operating business and its digital asset treasury can become fuel for material growth. We will share more information on this initiative as we progress towards a target launch of the strategy in Q1 of next year. Thank you for listening to our extensive update. It is extensive because of this unique moment in Super League's history. In the past 6 months, we have proven what can be accomplished through a determined executive mission and cohesive team unity. We have taken bold steps to overcome significant challenges, made tough decisions and delivered a structural turnaround that sets the stage for lasting growth and renewed value creation for shareholders. With capital raising now behind us, we can channel the same intensity into scaling operations by recapturing our revenue and partnership momentum, pursuing new avenues for business acceleration and continuing to execute at the highest level. I look forward to celebrating our successes with you on future updates. And with that, I'll turn it back to the operator to start the Q&A. Operator: [Operator Instructions] Our first question is from Jack Vander from Maxim Group. Jack Codera: This is Jack Codera calling in for Jack Vander. A couple of questions. First, kind of a housekeeping question. Do you expect the current OpEx levels to be kind of the go-forward base? Or do you expect to see more efficiencies realized over the next few quarters given that it's at just above $4 million now. Matthew Edelman: Our -- we have really worked diligently to reduce our cost structure. We had 75 people on April 1. We're now down closer to 35 people. And we think there's -- we've hit a good spot and have the right level in order to really accelerate growth with renewed momentum. We don't anticipate increasing our cost structure, but I would say we aren't looking at immediate additional reductions. Jack Codera: Okay. That's helpful. And then I have a more general question. Can you give me a commentary from your view, the sentiment around the broader advertising market over the next 12 months. Are conversations with CMOs, do they seem positive? Or does it seem like it's becoming more challenging? Any content and information there would be helpful. Matthew Edelman: Marketing and advertising budgets are a constant puzzle, and they're a puzzle for everyone at Meta, Google and Amazon, all the way to companies of our size where we are looking for budgets to come into newer channels. What I will say is that over the past couple of quarters and probably through the end of this year, there has been a bit of a flight to safe havens and very performance-oriented advertising solutions, which I think explains one of the impetuses for growth in the advertising results at Meta, Google and Amazon in their Q3 reports. And that did have an impact on the breadth of money available to companies like Super League in more experimental channels. It does seem that the budgets have opened back up. As I mentioned, the renewed acceleration of our pipeline and the growth that we've begun to see really just in the past 1 to 2 months gives us a fair degree of confidence that budgets are becoming a little bit less tight. It remains to be seen what will happen with the economy and how any rate adjustment or lack of rate adjustment may impact advertiser and CMO budgets. But right now, we're seeing encouraging signs. Jack Codera: Okay. That's super helpful. And then if I could ask one more. You mentioned a little bit about kind of the key growth initiatives, mobile, immersive experiences, pop-ups. And then kind of the inverse of that is the Roblox kind of diversification given the changes to that structure. Where do you see that Roblox mix getting to? And kind of what are the most important, most significant buckets that are going to fill that difference? Matthew Edelman: Well, the good news is we're starting to fill the difference now. And Roblox will, I expect, continue to represent a meaningful percentage of our revenue going forward. I would be surprised if it dips below 1/3 in 2026. We do see Fortnite growing, Minecraft has continued to be healthy. But honestly, mobile continues to be the area with the largest growth potential because it is an open platform compared to closed environments where platform policies can shift what's achievable for a brand. And we're quite excited about the Connected TV partnership we recently announced. Connected TV is growing and the opportunity to activate a video ad as a viewer and go into an interactive content experience that's accessible through your television remote is quite exciting. The engagement times are very encouraging, and we see that as an entirely new bucket of revenue that we haven't even been able to pursue in the past. Operator: Our next question today is coming from Howard Halpern from Taglich Brothers. Howard Halpern: Congratulations on the quarter and getting the capital structure where it needs to be, that was very impressive. Matthew Edelman: Thank you, Howard. Howard Halpern: You talked about the digital strategy. Have you tapped anybody? Or are you still going through the process of finding the right person to lead all the different intricacies of that of -- maybe a multifaceted strategy. Matthew Edelman: That's a great question. So we are in an enviable position from our perspective given Evo Funds experience and the principal from Evo Fund is our direct investor and available really on a moment's notice when we have questions and want to discuss ideas and opportunities. So that is a meaningful part of why we have some confidence in evaluating this area. We also have launched a search to bring a Board member into Super League who has deep experience in the digital asset space, have exciting conversations developing there. We, in addition, anticipate bringing in a handful of advisers with strong track records in the areas that we find most compelling in the digital asset sector, and should be able to talk about some of those advisory relationships perhaps even before the end of the year. Howard Halpern: Okay. And when you talked about pop-ups, is that I know it's a high-margin business and expanding, but is that also leading to new customers, like a lead generation that you can prove yourself and then cross-sell into a larger revenue opportunity. Matthew Edelman: It's as if you're in our sales strategy meeting with that question, Howard, yes, the answer is absolutely. We see pop-ups as, in many ways, the starter package, that will help a brand get into an immersive platform like Roblox or Fortnite before they're ready to commit larger amounts of money. And it's a very efficient quick-to-market solution that takes advantage of the creativity and interactivity you can deploy on those platforms. And when they go well, as I mentioned earlier, you have a much easier time getting renewal business. We've already had 2 of our 1 dozen customers this year renew in the same year. And so we do see it as a low-friction entry point to get into these channels. Howard Halpern: And in terms of gross margin, do you anticipate what you experienced in the third quarter to be somewhat of a 4 and you're going to just strive for revenue that provides expanded gross margins, even if it's -- even if first half seasonality is a little low, you're still going to drive gross margin going forward? Matthew Edelman: Our focus continues to be on making our way to profitability. And as a result, gross margin is always on our minds. We do also recognize that there are some opportunities that come to us where a client asks us to take on more of a general contractor role. And when that happens, there can be meaningful portions of a campaign that we end up passing through to a third-party who is supporting our work, where we do the principal amount of work, they help on the back-end execution. And so in those circumstances, while the programs and partnerships are more significant and can really help grow the top line, the margins can be a little bit more challenging. However, we wouldn't want to turn down those significant relationships because they tend to last a long time and bring a lot of rewards as we deliver. Operator: We have reached end of our question-and-answer session. I'd like to turn the floor back over to Matt for any further or closing comments. Matthew Edelman: I would just like to thank everyone again for joining the discussion today and look forward to being back here to talk about the year-end 2025. Thank you again. Operator: Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.
Operator: Ladies and gentlemen, thank you for standing by. I'm Vassilios, your Chorus Call operator. Welcome, and thank you for joining the HELLENiQ ENERGY Holdings conference call and live webcast to present and discuss the third quarter and 9 months 2025 financial results. [Operator Instructions] The conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to HELLENiQ ENERGY Holdings management team. Gentlemen, you may now proceed. Andreas Shiamishis: Thank you very much. Good afternoon to everybody. We're going to be talking a little bit about our third quarter performance over the next half an hour to an hour. And at the end, try and see if there are any questions that we can answer and maybe give you a bit of an insight into how we see the rest of the year closing. The backdrop, first of all, we have a market which is positive for the downstream business, relatively low level of absolute prices, low levels both in terms of the commodity price, but also in terms of the euro-dollar exchange rate because that effectively translates into lower euro prices in the domestic market. That, combined with a regional mostly supply-led shortage of products, especially middle distillates have led to very healthy refining margins, which we have been enjoying for the last few months. If you add to that increased demand not only from the Greek market, but also from the regional markets for a number of reasons. Most of it is supply side led, it gives a very good backdrop for downstream businesses. In terms of operations, we have a very good refining performance after the Elefsina shutdown earlier in the year, revamped and updated refinery is running with very high availability. Aspropyrgos, which is nearing the end of run cycle. It's scheduled for a refinery shutdown and maintenance shutdown in the next few months is also doing very well. And this helps us to capitalize on the strong margins, the increased footprint on the international markets. And of course, the increasing demand that we have, as I mentioned, in pretty much all markets that we operate in. The other businesses have delivered record results, especially on the marketing side, both in Greece and international. And for the first time, we also have the full consolidation of the Enerwave. I'll make sure that I don't call it ELPEDISON I can because that would be sold off by my colleagues here. So Enerwave is the new name of ELPEDISON, which is included in our financials on a fully consolidated basis for the first time this quarter. As a result of that, we have an adjusted EBITDA, which is close to EUR 0.75 billion for the 9 months with EUR 365 million for the quarter. That puts us on a relatively safe trajectory to overshoot the EUR 1 billion, which is something of an internal benchmark for us, given it's going to be the fourth year which we managed to achieve that. And it is helping to deliver strong operating cash flows. Some of it were used to pay the one-off solidarity tax and others for the acquisition of the 50% of the old ELPEDISON, which was partly financed by our own cash flows and also by the disposal on the DEPA commercial business. But still, it leaves a healthy room for an interim dividend of EUR 0.20 per share, which is in line with what we paid last year. And this is effectively a strong signal of how we see the outlook as well. Now on the outlook, we have a number of developments. It's going to take us quite a long time to go through all of these. In summary, positive outlook. The quarter-to-date has been very strong. In fact, it has actually been even stronger than the third quarter. We've started the new business model on the supply and trading with the activities from our Geneva subsidiary, which is gradually picking up speed. And it is coordinating even better with the refining and the Supply & Trading team here in Athens [indiscernible]. Marketing is improving, mostly as a result of improved market, but mostly from the efforts that we put behind our networks and our performance in the pedal stations. Soon, we should be able to announce the commencement of the Thessaloniki-Skopje pipeline. I hope that by the end of the year, we'll be able to do that, which will give us an even better operating model and a better footprint into the West Balkans. And from them -- from there, we could actually think about reaching other markets as well. The green utility, which is effectively the combination of Enerwave and the renewables. It's coming together. It's going to take some time for this to blend into a seamless operation. We know that we're patient, and we'll work diligently to get to the results. The high-level plan is to double the size of Enerwave on a number of fronts and also to double the size of the green utility in the next few years. Now whether that takes 2 or 3 years, I don't know. We're still in the phase where we are relaunching the whole business. But there is definitely room for improvement there. Finally, on E&P, which is part of our business, which attracted a lot of publicity over the last few weeks. The latest one has been the signing of a farming agreement by ExxonMobil into Block 2. I remind people that we were effectively a 25% minority stakeholder there in the joint venture. 25% was owned by Energean, and they were the operator. The discussions with Exxon were led by Energean, and we participated in those discussions as well. I think we're all happy that we have the participation of a company like Exxon, which will not only cover some of the past costs and the well -- the exploratory well that will take place. But more importantly, it's providing the credibility and the experience and knowledge required in difficult explorations. A few weeks ago, we also announced that the joint venture with Chevron is a preferred bidder. And we hope that over the next few weeks, we should be signing that concession agreement as well. Which means that we'll be closing all the areas that might be of interest to us in the Greek [E&P]. Overall, a very good quarter, a good 9 months, not only in terms of results, but in terms of operations, in terms of safety and also in terms of steps in our strategic plan to grow this company even more. So with that, I will turn over to Dinos Panas, who is heading our Supply and Trading and he's also the Deputy CEO for the HELLENiQ Petroleum team to walk us through the environment and maybe shed some light on what he expects things to look like in the next few months. Dinos? Konstantinos Panas: Okay. Thank you, Andreas. Good afternoon, everybody. I have 3 slides on the environment. First slide, Page #6. We see that we had a weak Brent during the last 2 quarters of the year, second and third. We still see, let's say, a global crude [overhang], mostly driven, let's say, by the increased production from the United States and Guyana, but also from the lower, let's say, refining utilization in Russia following the drone attacks from Ukraine, which actually obliged the country to export more crude since they could not run the refineries. We see this type of trend continuing into the fourth quarter of the year. So most probably we will see weakness in crude, let's say, continuing in 4Q. And of course, a quite strong euro versus the USD, plus 6% compared to the last year's same quarter. Now the product cracks were quite strong in Urals gasoline in the third quarter. We see the same trend continuing in the fourth quarter, actually much stronger yesterday, as you all know, let's say, from the prices we had the USD crack of $38 a barrel, and the gasoline crack of $25 per barrel. And we had a refinery benchmark margin of $8.5 a barrel in the third quarter, significantly higher than the third quarter of 2024. We have seen October margins much higher than this number. And of course, November [advance] of the quite high numbers. Most probably, we will see that the middle distillate crack will stay strong during the remaining part of the year. And also remain strong when we have the U.S. sanctions in place in the 26th of January, if I remember correctly, which will make, let's say, imports of middle distillates into Europe more difficult because everybody will have to prove where the origin of this material comes from. Now on Page 7, we can see that natural gas prices were down by 7%. Electricity prices down by 3% and the EUA is higher by 7%. EUAs now are trading a little bit higher than [EUR 81 per metric ton]. And finally, on the gas market, we can see that the third quarter remained strong. We had a 2% increase in gasoline, flat quarter-over- diesel so in 0.5% increase overall. Aviation sales up 7% and the bunker sales 5%. We believe that the lower prices will support further growth in the domestic demand. And of course, with the economic growth that [indiscernible] increase, we expect that this will be the case in the third -- and in the fourth quarter of the year. And with this, we will pass to Vasileios Tsaitas for the group performance. Vasilis Tsaitas: Thank you, Dino. Good afternoon. So moving on to Page 10 to have an overview of our key numbers. So the refining sales up 4.3 million tons, it's an all-time record, driven by the very high production that we'll discuss further on at our system of refineries. Marketing also very strong sales, 4% higher. In terms of power generation, we have the addition of Enerwave that is mainly driving the quadrupling of the production. And similarly, it is also having an impact on the turnover, which otherwise without Enerwave would be lower driven by the lower commodity prices. An adjusted EBITDA of EUR 365 million, double the one of the third quarter '24, driven mainly by refining, the very strong refining margin that we discussed earlier on. Similarly, a very strong performance from marketing and the presentation of our green utility business, which combines Enerwave and renewables becoming a meaningful contribution to the group numbers at just over EUR 30 million for the quarter. In terms of our sources numbers, this number is now less relevant that [indiscernible] now Enerwave is fully consolidated. Finance costs lower than last year. And overall, we're moving a bit further down total capital employed of over EUR 5 billion as we have now fully consolidated Enerwave and total investments for the 9 months exceeding EUR 0.5 billion. Moving on to Page 11. So the doubling of our adjusted EBITDA profitability comes mainly from the very good refining environment comparing with refining margins in the similar period of last year. FX is having an impact given the strengthening of the euro, especially in the third quarter with retreating in the last few weeks. And performance-wise, certainly, our refining operations with Elefsina fresh from the turnaround and yielding very good performance in the third quarter, our marketing contribution as well as the addition of Enerwave. On Page 12, I think it's important to discuss a bit our CapEx and our cash flow for the 9 months. So our CapEx is driven on the downstream side, mainly by stay in business and largely by them and the turnaround at the [indiscernible] turnaround at our Elefsina refinery that happened during the second quarter, which is maintenance CapEx on the one side, but on the other side, it significantly enhances the ability of the refinery to capture the very good refining environment that we're experiencing in the second half. And on our green utility, we have the growth in Romania mainly. So the implementation of one of the wind projects and the acquisition of the hydro project in Bulgaria and the acquisition and the equity consideration of Enerwave. On the top right, effectively, we present how the adjusted cash flow, including normal operations, normal stay in business CapEx as well as accrual-based taxes. So excluding the effect of differences in taxable earnings in prepayments of taxes or any one-off windfall taxes. So that leaves us around EUR 450 million for the 9 months to be able to remunerate our capital providers, both on the debt as well as on the equity side, pursue our growth CapEx, and that should be just enough to have a net debt virtually flat compared to the beginning of the year -- but we have 3 items. One has to do obviously with the acquisition, including the debt consolidation of Enerwave. Obviously, this -- we don't make this level of this size of acquisitions every year. And if we do, it will enhance, obviously, their profitability base of the company. We have the Solidarity contribution in the beginning of the year that you are very well aware of, again, a one-off item. And as a result of the supply chain disruptions in the Red Sea and the increase of offtake of Iraqi crude, it has an impact on our working capital as long as we -- we have to ferry the cargoes around the Cape. So it's a temporary -- just over EUR 200 million of impact on our inventories, again, not recurring. So that brings the net debt to the total of EUR 2.5 billion. Moving on to the next page, a higher net and gross debt similarly due to the reason that we presented just now. The debt servicing cost has escalated significantly. This is driven by the decline in base rates, which we're able to take advantage given our floating exposure. The decline in spreads that we were able to negotiate with all our credit providers during the year and certainly a better cash utilization that eliminates or minimizes to be exact the cost of [indiscernible]. Our maturity curve well has -- I mean, properly amortized. We have a maturity coming up in the next few weeks, which is at the final stages of refinanced for 5 years. So that will move to the end of 2030. On Page 14, Andreas mentioned before, the decision about a flat interim dividend versus last year. We're certainly going to revisit our full year dividend at fourth quarter results as we do every year. I guess, always good to remind combined almost 40% of dividend yield in the last 3 years. That is compounding the total shareholder return over the last 4, 4.5 years to 1.5x of the share price. Now we'll move on to discuss a bit the business segment performance starting from Downstream. So our Refining Supply and Trading business, as we mentioned before, delivered very strong results on the back of good refining margins as well as a record production and record sales. So very good ability to capture refining margins, especially following the completion of the full turnaround at Elefsina refinery. And total sales for the 9 months around 11 million tonnes. On the next slide, we reiterate on the very good operational performance with exports close to 50%, yielding very strong returns, something that is driving -- moving on to the next page, something that is driving the very good overperformance. So as you can see, the $8.7 per barrel on the far right is the highest that we've seen in the last several quarters. That is partially driven by an improvement in the crude spreads given the availability of crude that also Dinos highlighted before as well as the very strong export premia that we are enjoying in the neighboring markets. Moving on to our Petrochemicals business on Page -- sorry, on Page 21. Certainly, we're experiencing a difficult cycle in this business in Europe and globally driven by overcapacity. It looks like that it's going to take some time to clear the overhang. So the returns are going to be much, much lower than the mid-cycle that we are -- would be used in the past. Important to say that our business is almost -- is to a large extent integrated with refining with Aspropyrgos refinery producing polymer-grade propylene, which is then converted to polypropylene at [indiscernible] complex. So that helps manage our position across the supply chain in order to be able to be much more resilient in the downturn and avoid losing money effectively in this business. So still considering the environment, a positive EBITDA of EUR 3 million for the third quarter. Now moving on to our fuel marketing business, starting from our domestic market in Greece. So as we discussed before, a very good result of EUR 38 million for the third quarter and over EUR 6 million of adjusted EBITDA for the year. This is driven by the increasing strength of our brands, especially Eco in Greece, the consistent increase in market shares in all products, in all auto fuel products, increased penetration of differentiated fuels, both in gasoline and diesel, increasing volumes while we continue with the rationalization of our network, so higher ATPs and much higher contribution at the point of sale and much higher profitability. And certainly, as a reminder, ECO is very well placed to take advantage of a very good tourist season in Greece, both on the retail side as well as on the aviation. In the international business, again, another record-breaking quarter and year-to-date with [EUR 30 million ] and EUR 70 million of adjusted EBITDA, respectively, close to 15% higher versus last year, increased volumes, increased profitability. Again, some of the drivers that referred to the Greek market like the very strong NFR contribution to our numbers and the differentiated fuels penetration are the key trends that have helped drive this result. On that note, I'll pass you on to George Alexopoulos, who's going to discuss our Green utility business. George? Georgios Alexopoulos: Thank you, Vasily. Good afternoon, everybody. We're very pleased to be consolidating Enerwave and thus being able to report our green utility segment. And turning to Page 26, I will not repeat the information on natural gas electricity price. I will note that prices were lower and continue to normalize natural gas and electricity. It was a quarter of low consumption in Greece, the third quarter. And also, we continue to have high participation of renewables in the mix, namely 57% versus 44% in the same quarter of last year. Turning to Page 27 and looking at the Green Utility segment with Enerwave on a pro-forma basis for the quarter, we -- it was a weaker quarter in terms of market fundamentals. On the conventional power side, spark spreads were lower. On the renewables side, we saw high curtailments. And given the lower demand, we also saw lower thermal production. So all in all, this translates into lower power generation and lower adjusted EBITDA overall, higher for renewables, but lower for Enerwave, and we will be discussing those separately as well. If we turn to Page 28, we see for the renewables higher capacity. We are at 494 megawatts installed capacity. Of course, higher production as a result of that, better weather conditions on the wind side. And thus getting better performance despite facing more pronounced curtailments versus last year. Quarterly EBITDA at EUR 15 million and 9-month. EBITDA at EUR 37 million, respectively. Turning to Page 29. I think we've discussed this graph before, but I wanted to stress that we are continuing our expansion plans. We focus on Southeastern Europe. We are diversifying both geographically and technologically. We are currently present in 5 countries, including a small participation in North Macedonia, which is not shown in the numbers of the renewables business is shown as part of the international business. We are progressing our installed capacity. And we have secured the path to 1.5 gigawatts by 2028. We currently have over 300 megawatts under construction, and we expect to complete about 1/3 of those within the current year or around the end of the current year. Turning to Page 30, the Enerwave page. I keep repeating it so I don't get it wrong. As we said, weaker market conditions. There was also grid unavailability at one of our sites, which did affect production. So all in all, lower adjusted EBITDA versus last year for the quarter, slightly higher for the 9 months. Yesterday, we relaunched the company under the new brand Enerwave, and we are pushing ahead our strategic transformation, which has several elements, 2 of which are important enough that I will mention here. We have already redesigned our commercial policy, and this is starting to show results. We expect to be launching new products following the relaunch of the company, improve customer service and, of course, targeting a higher market share. On the energy management side, now we have a combined portfolio of almost 1.4 gigawatts if we look at conventional assets and renewables assets. We are managing this portfolio on an integrated basis from Enerwave, and we expect to see better realization and better results for our renewables assets, but also for the combined green utility as well. And with this, I think we've reached the end of the presentation, and I think we will open it for questions. Operator: [Operator Instructions] The first question comes from the line of Grigoriou George with Wood & Co. George Grigoriou: A few questions, if I may. The one regards your production now in the third quarter. If I'm not mistaken, this was a record for your refining output. Just wanted to hear your thoughts on how much more you could actually produce. And my other questions are, I've noticed on your slide that in the third quarter, diesel sales of diesel, all the diesel here in Greece were actually 0, flat year-on-year. I wanted to hear your thoughts on that and how you see it evolving after the third quarter. And my last question goes to what was Dinos discussing before about the refining margins. You obviously mentioned the middle distillate cracks, but I wanted to hear your thoughts on the gasoline cracks as well. Andreas Shiamishis: Okay. Good afternoon George. I would ask Dinos to comment on the production and the cracks. Before doing that on the diesel sales, Well, we are seeing some increase. The market is not growing as fast as it was growing in the previous few years, but it's still growing. If you will, our market shares are growing. And also we're seeing a premiumization of our portfolio. So we're getting more of the premium auto fuels, which has diesel and gasoline 98 and 100 octane gasoline and the diesel, [biofuel] which are growing. Now on the cracks in the production, I will turn over to Dinos, who will answer. Konstantinos Panas: I think that we had a very high utilization in the third quarter. So the target is to keep that level, which is exceptional for -- was exceptional for the quarter and most probably if we keep it, we'll have a very good quarter in the fourth quarter of the year. So what I'm saying is that there is not a lot of space to increase production in the refineries. Now coming in the fourth quarter of the year, I mean diesel has been growing by roughly 2% in the 9 months of this year. We see signs of remaining strong in the fourth quarter as well. And additionally, on top of that, we will be selling gasoline, hitting gasoline in the year. So quite a few qualities of diesel will be shown in our sales in the fourth quarter. And we do have, let's say, a strong demand for diesel around the area. So I think it's going to be a good quarter for the diesel overall in the fourth one. Now regarding, let's say, gasoline, we have this ongoing issues with [RCC], which combined, let's say, with the Russian disruption and the low U.S. inventories makes us feel that the market -- the gasoline market will remain strong despite it's the weaker seasonality, but definitely not as strong as the distillate ones in the fourth quarter. Operator: [Operator Instructions] There are no further audio questions. I will now pass the floor to Mr. Katsenos to accommodate any written questions from the webcast participants. Mr. Katsenos, please proceed. Nikos Katsenos: Thank you, operator. We have 3 questions from Sylvia Richards from Morgan Stanley. The first one is third quarter was very strong on volumes. How do you see volumes for the fourth quarter? The second question is, what would be the CapEx needed to double anyway size? And the third one on your refinancing, do you expect to have lower finance costs? Andreas Shiamishis: Dinos, do you want to take the first question? Konstantinos Panas: Yes, I will take the first question. Q4 until now, we have the refiners operating at capacity. So the volumes are as high as I can get the production volumes. The second one on the CapEx. Vasilis Tsaitas: I'll take the CapEx. Just to be -- just to clarify, Enerwave is the utility business. It includes conventional generation, energy management, commercial business, retail business. So it's not -- it does not include the renewables. The CapEx required to double its size is fairly limited because the improvement in the profitability comes through performance improvements and growth in commercial and energy management and trading. So it's a limited investment. It's not a major CapEx. But as I said, this does not include renewables, which is tracked and reported separately. Andreas Shiamishis: Vasileios, one on the financing? Vasilis Tsaitas: Sure. On the refinancing, by [virtue] of refinancing, there won't be a significant impact on the finance cost. Over the year, we've been repricing all our facilities. So I would say that around 2/3 have already been repriced and we've seen the impact in the second and third quarter. And the last, let's say, 1/3 of our facilities, including the one that will be refinanced, will be repriced in the fourth quarter. So there is some positive impact left, but not as significant, I would say. Nikos Katsenos: We have another question from [Nicholas Payton] from Edison Group. Nicholas asked with regards to renewables are you still confident that you can hit your medium and long-term targets in terms of capacity for the renewables business? Second question, can we have an update on the office that has been set up in Switzerland? Is everything going to plan? And the third one, is there any update on the Suez situation any time that you might be able to resume that? Georgios Alexopoulos: Okay. Nicholas, on the first question, I mean, the short answer is yes. As you saw from the presentation, we have a secure path to -- we are at 0.5 gigawatt today. We have a secure path to 1.5 gigawatts in the next 3 years. And we have a pipeline of approximately 6 gigawatts out of which we can certainly find the rest to the 2 gigawatt target. Of course, every investment is subject to scrutiny and it proceeds when our return goals are met. But the answer clearly is yes, we can. Andreas Shiamishis: Okay. On Suez and the trading office, Dinos, do you want to take it? Konstantinos Panas: Yes. The trading office in Geneva is up and running for quite a few months now. We have the key, let's say, trading team front office in place. We have the middle office also in place, and we have the back office set up here in Athens. So the team is working well. We are looking to start buying and selling a little bit more outside of tenders. And of course, trade some third-party volumes, which will help us to increase our overall volumes above the system ones that we are producing the refineries. Now on the fifth Suez situation, there was an announcement from the Houthis leadership that they will stop the tax, but most of the majors are looking to the situation very carefully. We are monitoring the vessels that are passing through the Suez, and we've seen a little bit of an increase there. As soon as we are confident that the risks are very limited, we will start using the Suez route again, and this will help us both on the cost and on our working capital requirements because currently, it takes 45 days to go around the Cape, while through Suez, now it takes 16 days. Nikos Katsenos: Thank you. And we have another question from Christian Are from Eurobank Equities. Is there a turnaround scheduled for 2026? Konstantinos Panas: Yes. The answer is there is one for Aspropyrgos was scheduled to start at the beginning of next year in the first quarter. So February, March, we're going to have the maintenance turnaround of Aspropyrgos. Nikos Katsenos: Thank you. Operator, we don't have any other questions through the webcast. Operator: Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to management for any closing comments. Thank you. Andreas Shiamishis: Thank you very much for your attendance. As we said, it has been a very good quarter. Our financial performance has been very good. The market backdrop has been very favorable. And in terms of operations, we've been able to make the most of it. From a strategic point of view, we have the upstream announcements over the last few days. We had the Enerwave launch, which effectively repositions and relaunches our power sector ambitions. As we've said, we're not buying to be the #1 electricity company and utility in Greece. We are aspiring to be a decent size, much bigger than we are today, Green Utility centered around our operations in Greece, but also looking to capitalize on opportunities in other markets as well. From a downstream point of view, we have a good setup of the refineries. The trading is doing very well. The international trading office has started picking up speed, and we are gradually seeing the benefits of this model change. The retail business in Greece and outside of Greece is doing very well. And in fact, it is an area where we think we can grow even more. But as you can appreciate, the pace of additional business and profitability is of a different scale between the 3 different businesses, the refining, supply and trading, the marketing and the utility. So we need to make sure that we maintain a balance between the 3 on the capital allocation policy, if you will, and continue our operational improvements irrespective of which business they relate to. So with that, we thank you for your time. And I am sure we will be able to touch base with you again in a few months when we do the full year presentation, which I expect to be and hope to be even better than what we have presented now. Thank you very much. Operator: Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a pleasant evening.
Operator: Good afternoon, ladies and gentlemen. This is the Chorus Call conference operator. Welcome, and thank you for joining the results as of the end of September of the ACEA Group. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Dario Michi, Head of Investor Relations of ACEA. Dario Michi: Ladies and gentlemen, good afternoon, and thank you very much for joining the presentation of the results as at the end of September 2025 of the ACEA Group. Francesco Ragni, CFO; and Ms. Valentina Bracaglia, Deputy CFO and Head of Planning, will go through the presentation. I will give the floor now to Pier Francesco for the presentation. Pier Ragni: Good afternoon, ladies and gentlemen. As usual, we shall start our presentation by considering the regulatory and market environment. In Water business, we point out the update of the -- 2-year update of the tariffs, whereas in the Electricity business, we would like to point out the lack of activation of the trigger with reference to the remuneration rate of the capital for 2026 remains at 5.6%. As to the price of commodities, the price of electricity and gas in the first 9 months of 2025 recorded an increase of 14% and 20%, respectively, versus the same period last year. As to the interest rates, I'd like to confirm the trend which was recorded in the first 6 months of the year with a decrease of rates versus 2024, both in the long and short term of the curve. Let's now move on to Slide #4 of the presentation. As to the main highlights of the first 9 months of 2025, the results show a strong growth of economic items and confirm the soundness of the financial structure of the group. First of all, I point out that in line with IFRS 5, the results of ACEA Energia, which is subject to disposal have been reclassified as discontinued operations. For purposes to have the possibility to compare data, we have shown pro forma results simulating the deconsolidation of discontinued operations and of Acquedotto del Fiora in the first 9 months of 2024. Pro forma EBITDA reaches EUR 1.84 billion in -- growing by 8% versus the first 9 months of 2024. The increase of recurrent pro forma EBITDA adjusted to the changes in the perimeter, which you see later on, stands at 10%, which is driven mainly by the growth of the Water Italy business, grids and public lighting and generation. The contribution of regulated activity of the consolidated EBITDA is 95% of the total. The net profit of the first 9 months of 2024 is EUR 415 million, up 46% and among other components is driven by the capital gain of the disposal of the high-voltage network for about EUR 109 million. The recurrent net profit grows by 8% year-on-year following the dynamic recorded at operating level. CapEx growth of grants grew by 6% versus the first 9 months of 2024 and now stand at EUR 1 billion. The operating cash flow is positive for EUR 19 million allowing us to maintain a sound financial structure with a P&F financial structure EBITDA pro forma ratio equal to 3.39x. The ratio takes into account the future cash in of the disposal of ACEA Energia and the cash in of the disposal of the high-voltage network, which occurred in September. Slide 5, we recorded the main indicators of the dynamics recorded in the first 9 months of the year, which, as I said, showed a strong growth trend. As to the EBITDA, ACEA recorded a growth of 10% versus the result of 2024 adjusted for one-offs and change in the scope. CapEx net of grants are EUR 843 million, of which EUR 67 million related to activities of businesses which are disposed net of the perimeter of ACEA Energia which is to be disposed of, and investments CapEx, regulated CapEx represented 95% of the total net profit, which, as I said, includes the contributions of businesses that we disposed, grows by 8% on a recurring basis and reflects the very good operating performance. The net financial position moves from EUR 4.944 billion as at 31st of December 2024 to EUR 5.083 billion at the end of September 2025. I do apologize, but I can no longer hear the speaker. I do apologize, but I do not hear the speaker. The net financial position pro forma to take into account the asset rotation as described in the footnote moves from EUR 4.343 billion as at the 31st of December 2024 to EUR 4.693 billion as at 30th of September 2026 (sic) [ 2025 ] with a ratio debt to EBITDA, which is 3.39x. The EBITDA in the first 9 months of 2025 has grown, which is due to tariffs and the operating activities of water, and it was also driven by the grid operations driven by the RAB and the growth of the results of generation and also because of prices. On the right of the slide, you see the main one-offs and changes in the scope and these amount to EUR 27 million for 2024 and relate to mainly past tariff items related to period 2022, 2023. In 2025, changes in perimeter amounted to EUR 15 million and related to the incentives for a quality in the Water business. Now Mr. Ragni is reconnected. As to the recurrent net profit, on Slide 7, the growth versus the first 9 months of 2025 is due to the operating performance, which contributes positively for EUR 26 million. That effect is partly offset by the financial management because of lower financial proceeds because of the reduction of rates. As to the EBITDA on the right, you see the detail of the one-off components. As to Slide #8 of the presentation. Now considering also the contribution of ACEA Energia in the first 9 months of 2025, we have invested around EUR 1 billion, up 6% versus 2024. Such investments for about 89% is related to regulated businesses of water, grids and environment. The net of ACEA Energia which is subject for disposal, the contribution of regulated businesses to CapEx amounts to 95%. Out of that EUR 1 billion of investment, EUR 167 million were financed by the cash in of the grant. On the slide, you see the activities carried out in each sector like the widening and update of water pipes and sewers and the upgrade of the grid for general electricity distribution. Slide #9. Here, you see cash absorption of the first 9 months of 2025, which is around EUR 140 million and is negatively affected by the changes in working capital related particularly to higher receivables and the network balancing, which we expect to be absorbed in the last quarter. And then also, it is affected by regulatory receivables, which is to be absorbed in the fourth quarter. We have to underline referring to working capital that in the third quarter of 2025, ACEA generated cash for about EUR 66 million, thanks to the efficient management of commercial receivables and payables. To be more transparent as we did when we presented the results of the first 6 months, we represented in a distinct manner the contribution of the company's consolidated equity contribution is EUR 30 million versus EUR 9 million in 2024. This clarifies better the dynamic of the changes in funds, which reflects the reclassification of ACEA Energia among discontinued operation. I will not dwell on CapEx charges, taxes and dividends as these items can be directly interpreted. As to M&As, we need to underline EUR 210 million represented by the cash in from Terna for the disposal of the high-voltage network equal to EUR 227 million. Now let's move on to Slide #10, the financial structure. Here, you can see that the average cost of debt as at the 30th of September 2025 stands at 2.04% versus 2.16% at the end of 2024. The cost of debt is positively affected by the reduction of variable rates connected to the Euribor for the part of debt which is variable and which is equal to 20% of the total at the end of the third quarter. Moreover, let me tell you that in the third quarter 2025, we took out three bilateral bank lines for a total of EUR 350 million, which at the end of September was reimbursed the bond -- green bond amounting to EUR 300 million that was issued in 2025. I'll leave the floor to Ms. Bracaglia. Valentina Bracaglia: Slide #11, we see the main KPI of the Water Italy business. Let me remind you that the results of the first 9 months results were expressed pro forma so as to have the possibility to compare the data. In the first 9 months of 2025, the recurrent EBITDA adjusted mainly because of the incentives for contractual and technical quality goes up by EUR 42 million, plus 8%. That is due to tariff growth guided by CapEx and the increase of results of consolidated -- company's consolidated at equity and also because of operating efficiency. Net of public grants investments grew by EUR 29 million, up 7% year-on-year and related mainly to operations on Acque del Sud and water cleaning plants and maintenance of grids. Net of investments related to Acquedotto del Fiora, growth year-on-year is EUR 61 million, that is up 15%. Let me now move on to Slide #12. Here, you see the main KPI related to the grid and public network. Despite the reduction of the WACC by 40 basis points as of the 1st of January 2025, the recurrent EBITDA of the business goes up by EUR 29 million, up 9%. Such an increase is due mainly to investments made that is growth in RAB and also this is due to the update of the revaluation of the RAB starting in 2025. Investments net of public grants around EUR 210 million are slightly decreasing versus the previous year, whereas investments growth of public grants are growing. In the environment area, net of one-off, the EBITDA is slightly increasing because of the greater margins associated to WTEs. The investments decreased by EUR 28 million versus the previous year. And this is mainly due to the revamping operations on the WTE of Terni out in 2024. Let me now move on to Slide 14. You see here the results of the Generation business unit results. The recurrent EBITDA grows by EUR 17 million, and this is due mainly by the favorable energy scenario and the greater generation mainly to the Hydroelectric and Photovoltaic business. In detail, the energy produced rose by 24% from 485 to 602 gigawatt hour, thanks to an increase of 42 gigawatt hour in the hydroelectric production and -- plus 71 gigawatt hour in the photovoltaic production. Investments in the first 9 months of 2025 amounted to EUR 21 million, growing by EUR 6 million versus previous year. I will give back the floor to Mr. Ragni for the updating of the guidance. Pier Ragni: Thank you very much, Valentina. Now considering the strong growth experienced in the first 9 months of 2025, we have reviewed, as you have seen from the press release, the guidance of the EBITDA for 2025. The new guidance shows a growth of the EBITDA pro forma 2025 between 8% to 10%, starting from the restated result of 2024 of EUR 1.281 billion versus plus 6% and 8% announced in June 2025. The restated 2024 result was calculated starting from the 2024 EBITDA of EUR 1.428 billion communicated last March, adjusted to exclude the contribution of ACEA Energia on disposal. And on the contrary, the contribution of the high-voltage network [indiscernible] help the term, but included here for the first 9 months of 2024. Now as to CapEx, the guidance is EUR 1.6 billion, of which EUR 1.2 billion net of public grants. As to debt -- as to pro forma debt-EBITDA ratio, the guidance is confirmed and expect a range between 3.4 and 3.5x. Such range has been determined, including the debt and the cash in of the price of ACEA Energia expected in 2026. This is the end of the presentation. Operator: [Operator Instructions] The first question is by Francesco Sala with Banca Akros. Francesco Sala: Congratulation for your results. A couple of questions. The first one on the working capital. Can you tell us where is going to be the change for the full year? You said that you expect a reduction in the fourth quarter. Can you tell us something about it? Now I'd like to know something about the closing results after the disposal of ACEA Energia to Plenitude. And how can this change the results? The third question, I'd like to have an update of the incinerator in Rome. Any piece of news there? I'd like to know whether in the next few months, you are going to give us an update of the business plan. Unknown Executive: Let me answer these questions. As to the update of the business plan, we are working on it. The goal is that of providing an update within the first quarter of next year. As to the WTE, we are going on. We now own the land. As to ACEA Energia, we expect the closing as of the beginning of the year, next year. The company is already among the discontinued operations. So there will be no impact on the EBITDA. There will be an impact on net profit, which will be offset by the money that we cash in and the capital gain that we cash in from this transaction. And we will give you the details after the closing of the deal because there are a number of calculations which are to be made and will be defined at the moment of the closing of the deal. As to the other question, I will hand the floor over to Valentina. Valentina Bracaglia: As to the net working capital, we expect a neutral trend, a neutral dynamic. In the last quarter, we expect a similar trend that we observed in the last quarter of 2024. And also as to the equalization receivables or equalization credits, we expect them to be absorbed by the end of the year. And this is the view that we have for December. Thank you very much. Operator: The next question is by Javier Suarez with Mediobanca. Javier Suarez Hernandez: I have a couple of questions to ask. First of all, the 2025 guidance, I have a question which is more strategic in nature. When you presented your last business plan, you talked about a growth of the company around 5%. Now looking at the results, the company is going through a stronger structural growth versus what you indicated in the business plan. So I'd like to know something about it more qualitatively rather than quantitatively. As to the guidance, I'd like to have an indication for 2026 guidance. Maybe you can tell us something about 2026. But in 2025, your guidance for net income, what will it be? As to the working capital, I'd like to know something more strategic. What are the management actions that the company is adopting to reduce the net capital -- net working capital absorption? Unknown Executive: Thank you very much for these questions. I'd like -- I try to answer the first two questions together. Now versus the business plan expectations, we are experiencing a stronger growth. And with the new business plan, we shall update the figures. As to the trend that we expect for 2026 is that in the Water business, considering the consultation document that was published, which doesn't show strong WACC changes and also tariffs have already been approved. We expect tariffs to be in line with what we have experienced or have seen in 2025. In the Energy business, there was no activation of the trigger, and therefore, the regulated return is stable. As to the growth trend of the EBITDA and the update of the numbers, we shall provide indications when we update the business plan. As to the guidance, we do not provide a guidance on the net income, but we can say that we do not expect changes, big changes for recurrent operations. And therefore, the net income should not basically be -- will fall in line with the guidance that we have given for other items. Now as to other activities, we are working on credit collections on customers, activation of all of the capabilities and levels that we have to cash in the money. And then what affects the net working capital are the profiles of cash in of the [indiscernible] bills or equalization bills. And now in the first 9 months, we see the normal results related to the network equalization. So here, the regulatory factor has an effect. Let me also tell you that we are seeing a greater stability of the net working capital in the year, and I think it's going to be stable, stable going forward is what I can tell you, generally speaking. Thank you very much. Operator: The next question by Roberto Letizia with Equita. Roberto Letizia: I'd like to have an update on the electricity or energy distribution concessions. I'd like to know something about it. Do you have indications about it? Do you know something about the timing when this is going to occur? I'd like also to have an update on the -- update of the debt rating on the part of agencies. Is there a moment when you will rediscuss the rating with the agencies? And what are the priorities in that case? What are the main interventions, CapEx, M&As, remuneration of shareholders, all of the three, can you give us indications about it? And then considering the reorganization and after you get out of the Retail business, what are the priorities? What is the focus of the management team? Is there going to be a review or a change in the governance of the company? Are there options opening up in the Water business, for instance, I don't know, Acquedotto del Fiora. So I just want to know what's next for ACEA in terms of its structure. A couple of technical questions. First, why is the tax rate higher, which is now 32.5%. What kind of considerations are to be made going forward? And then are there going to be possible contributions for ACEA in relation to data centers? Unknown Executive: Well, thank you very much, Roberto. Now as to the extension of the concessions for energy grids, well, this is a recurring question, which is usually asked when we meet. We are waiting for the authority to decide. As I have always said, whatever is decided by the authority is something on which we rely on the asset rotation that we made after the disposal of the high-voltage network and the disposal of ACEA Energia to come allows us to focus on our own main business, increasing investments in the Water business and in the environment sector. As to M&As, when we speak of M&As, we do not look at M&As. Of course, if there are opportunities, we shall pursue them, but we have a growth trend, which is related to our own businesses. You know very well that Water business requires constantly investments due to the fact that there is a low supply of water and higher demand of water and networks are to be constantly maintained and updated. As to the energy grids, you need to work on the resilience of such grids. Look at what happened in Spain, in Turin, in Bergamo. Hence, we shall focus our efforts there. As to the dialogue with the rating agency, this dialogue is ongoing. Of course, they would want to see the new business plan. And considering that our business now is 90% regulated, we shall use the greater financial leverage to focus constantly on our RAB and on the environment. Now as to the governance, I don't know what to say. The disposal of the Retail business doesn't change anything in terms of our governance. And of course, we shall see, but I don't have much to say about this. Valentina Bracaglia: As to the tax rate, this is Valentina speaking. The tax rate is in line with the data of December 2024, which was 32.6%. The tax rate are affected by nonrecurrent items, disposals and one-offs. And so we expect a realignment of the tax rate to what we had in our business plan, which is also in line with our historical data. As to the question about the data center, well, I can say that as a manager of the distribution network in Rome, we see the opportunity to strengthen the network and to, of course, serve the needs and demand stimulated by also the data center, and this is part of our plans. Now as to further opportunity related to the Data Center business, we are assessing or looking to see whether there are opportunities, but we do not see for the moment specific developments. Now the Data Center business at the moment is more concentrated in the north of Italy, where there is greater demand whereas our Water and Energy business is more focused in the center and south of Italy. But of course, we shall use our competence and our infrastructures. But this is something that we shall evaluate on a case-by-case basis. Operator: [Operator Instructions] Ladies and gentlemen, at the moment, there are no other questions. No, there is one follow-up question by Roberto Letizia with Equita. Roberto Letizia: Now, I do apologize, I have a follow-up question to ask something about the JV with Versalis. Can you tell us something about this, the timing, the size of the operation? Unknown Executive: Now this JV is for us an opportunity to extract more value from our plants, recovery and recycling of plastic. Now we are focusing on mechanic recycling and on the -- and on polypropylene for food use in terms of recycling. And in this case, we are using the chemical recycling processes. Now we are studying the potential of this partnership, and we hope that this will have further developments in the future. Operator: Ms. Bracaglia, ladies and gentlemen, at the moment, there are no other questions from the conference call. Valentina Bracaglia: Well, thank you very much for joining in. And if you have any other questions, you can call us directly. Thank you very much. Operator: This is the Chorus Call conference operator. The conference is now over. You can disconnect your phones. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Operator: Welcome to the Atrium Mortgage Investment Corporation's Third Quarter Results Conference Call. [Operator Instructions] A reminder that this conference is being recorded Thursday, November 13, 2025. Certain statements will be made during this phone call that may be forward-looking statements. Although Atrium believes that such statements are based upon reasonable assumptions, actual results may differ materially. Forward-looking statements are based on the beliefs, estimates and opinions of Atrium's management on the date the statements are made. Atrium undertakes no obligation to update these forward-looking statements in the event that management's beliefs, estimates, opinions or other factors change. I would now like to turn the conference over to your host, Robert Goodall, CEO of Atrium. Mr. Goodall, please go ahead. Robert G. Goodall: Thank you for calling in today. Our interim CFO, Jeffrey Sherman, is on holiday, so our Senior Vice President of Finance, Chris Anastasopoulos will be speaking today. Chris will start by talking about our financial results, and then I'll speak about our performance from an operational and portfolio perspective. Chris? Unknown Executive: Thank you, Rob. Atrium continued to generate another strong quarter for shareholders amid a challenging economic environment. Atrium generated net income of $11.9 million in the third quarter, an increase of 2.5% over the prior year. Our basic and fully diluted earnings per share was $0.25 per share for the quarter, which continues to exceed our fixed dividend of $0.2325 per share. On a year-to-date basis, we generated $0.78 per share, again, ahead of our fixed dividend rate of $0.6975 per share. As expected, the average interest rate on the mortgage portfolio has decreased to 9.2% as at September 30, 2025, from 9.98% as at December 31, 2024. The decrease was largely driven by repayments of loans with higher yields compared to new loan originations and the impact of 325 basis point rate cuts by the Bank of Canada during the period with 2 in the first quarter and 1 in the third quarter, impacting floating interest rates. As at September 30, 2025, 83.2% of the mortgage portfolio was priced based on floating interest rates, with the majority having rate floors in place. The mortgage portfolio ended the third quarter at $917.3 million, which is an increase from $886.7 million at December 31, 2024. As at September 30, 2025, 96% of our mortgages were first mortgages, and we maintained a conservative average loan-to-value ratio of 60.8% for the portfolio, which decreased from 61.9% at December 31, 2024. Our allowance for mortgage losses was $29.5 million at the end of the third quarter, which is as a percentage of the mortgage portfolio represents a healthy 321 basis points. Stage 2 loans increased to $96.8 million at the end of the third quarter, up from $89.9 million at June 30, 2025, primarily due to the addition of 3 commercial loans totaling $40.7 million and $6.1 million of single-family loans. This was offset by 2 commercial loans totaling $13.5 million that migrated to Stage 3, and 3 commercial loans totaling $26.8 million that migrated to Stage 1. Stage 3 loans increased to $56.3 million at the end of the third quarter, up from $45.7 million at the end of the second quarter, primarily due to the addition of 2 commercial loans totaling $13.9 million and offset by $3.7 million of single-family loans that were either repaid or brought current. We continue to maintain a strong, liquid and well-capitalized balance sheet. As at September 30, 2025, balance sheet debt remained low at 41%, with $253 million drawn on our $340 million credit facility, leaving a healthy available capacity. The weighted average cost of borrowing on the credit facility was 5.14% for the third quarter, down from 6.96% in the prior year. Subsequent to quarter end, on October 22, we exercised our right to increase our credit facility by $40 million to $380 million, which underscores the confidence of our lenders. We are pleased to announce that PricewaterhouseCoopers has been appointed as our new auditors effective for the year ending December 31, 2025. In addition, we would like to provide an update on our press release issued on June 30, 2025, where our predecessor auditor was asked to complete remediation procedures identified by the Canadian Public Accountability Board. Atrium has been informed by the predecessor auditor that the remediation procedures have been completed and the audit opinions for Atrium's annual financial statements as at and for the years ended December 31, 2023 and 2024 are fully supported and no restatements are required. The third quarter continues our trend of strong financial performance for our shareholders this year. We continue to apply our disciplined risk management approach to new opportunities, manage our operating expenses and maintain a strong balance sheet to navigate the current economic cycle with confidence. I'll now pass you back to Rob for the business and portfolio updates. Robert G. Goodall: Thank you. As Chris said, Atrium MIC had a good quarter with basic earnings per share in Q3 of $0.25 compared to $0.28 last quarter. The reduced earnings were mostly due to a $1.63 million loan loss provision this quarter versus nil last quarter. Our 9-month results are $0.78 a share, virtually identical to last year and well ahead of our dividend. Overall, the portfolio was steady at $917 million versus $921 million last quarter. Loan advances were $63 million in the quarter and $287 million for the first 3 quarters of 2025, which is more than 23% ahead of last year's loan production. We're proud of this accomplishment given the lack of overall activity in the real estate markets across Canada. Loan repayments in Q3 were $65 million, which is very similar to the repayment level in Q2. For the first 9 months of 2025, we had annualized portfolio turnover of 36%, which is only slightly below our long-term turnover rate and is a sign of a healthy portfolio. We expect both new loan advances and repayments to be considerably higher in Q4. We continue to make good progress implementing CMCC strategy to increase our exposure to commercial loans and single-family mortgages. The commercial category has seen a net increase of $101 million over the last 12 months and has risen to 27.2% share of the portfolio, representing an 11% increase year-over-year. And the single-family and apartment category has risen to 19.1% of the total portfolio. These lower risk sectors now represent 46.3% of our total portfolio. In Q3, Atrium's average mortgage rate dropped to 9.2% from 9.3% last quarter, which reflects the 25 basis point drop in the prime rate of interest in September. The total of high ratio loans, that is loans over 75% loan-to-value was $52 million, equal to 5.7 of the total -- 5.7% of the total portfolio, and a little change from last quarter. This total is still well below a year ago when the balance was $79 million and roughly 9% of the portfolio. In addition, one $6.2 million high ratio loan was paid off shortly after quarter end, and another $5.7 million loan is scheduled to be repaid by the end of this month. In Q3, the average loan-to-value of the portfolio declined slightly from 61.2% last quarter to 60.8% in Q3, and continues to be well within our desired range of 65%. Atrium's percentage of first mortgages remained high at 96%, construction loans represented only 3.5% of the portfolio. Construction costs have become more stable in our target markets and are actually declining in the GTA, so we are now more willing to consider underwriting construction loans with experienced developers. We anticipate funding of $12.5 million loan with a well-known Toronto developer on a purpose-built rental project in Q4. Turning to portfolio quality. In Q3, the level of Stage 2 and Stage 3 loans increased slightly. Stage 2 loans increased from 9.8% last quarter to 10.6%, and Stage 3 loans increased from 5% to 6.1%. In the Stage 3 category, there are 6 commercial and multi-residential loans totaling $39.4 million. A $6.2 million loan was repaid shortly after the end of the quarter and another $5.7 million loan is expected to be repaid tomorrow. 100% of the principal and interest will be collected on both of those loans. And we expect that another 2 of the remaining loans in Stage 3 will be repaid before the end of Q4. There was many as 4 of the 6 commercial and multi-residential loans in Stage 3 are anticipated to be repaid in Q4 or very shortly thereafter. Turning to the loan loss reserve. We expensed a loan loss provision of $1.63 million in Q3 after having no loan loss expense in Q2. On a net basis, Atrium's total loan loss reserve increased marginally from $28.9 million last quarter to $29.5 million this quarter, equal to 321 basis points on the overall mortgage portfolio. With regard to our line of credit, we met with ATB Bank early in Q3 after they expressed an interest in joining our lender syndicate. At the meeting, they expressed a strong interest in participating for $40 million. They very quickly obtained approval. And on October 22, we closed the transaction. As a result, the committed amount of our line of credit has now increased from $340 million to $380 million, with only $20 million of the accordion remaining uncommitted. My economic commentary is as follows: economic data in Canada has improved recently with the unemployment rate dropping to 6.9% after 2 consecutive months of outsized employment gains in September and October. The Canadian economy had contracted 1.6% in the second quarter, led by a sharp pullback in exports and the preliminary estimate for Q3 is a 0.5% gain. The growth forecast for calendar 2025 is still tepid at 1.2%. Business investment is expected to remain weak as companies remain apprehensive until they have a better sense of the Canada-U.S. trade relationship. CPI in Canada rose to 2.4% in September from 1.9% last quarter. Headline inflation in the United States also accelerated to 3% in September. But both the Bank of Canada and the Fed dropped interest rates on October 29 by 25 basis points, suggesting they're more worried about economic growth in jobs than they are about inflation. But based on the recent employment guidance at Canada, it's unclear whether there will be more interest rate cuts in Canada this year. Turning to commercial real estate. After a period of weakness, the commercial real estate sectors across Canada has stabilized. According to CBRE, the national average all properties cap rate held flat in Q3 after dropping by just 1 basis point in Q2. Most commercial real estate sectors are actually performing quite well, including multiresidential, industrial, retail and seniors housing. The office sector continues to be weak, but there are signs of improvement, especially in downtown Toronto, as many large companies are requiring their employees to return to the office 4 to 5 days a week. Looking at the residential and multiresidential real estate markets, the sentiment of real estate developers and realtors in the GTA and the Greater Vancouver area is quite negative. First, looking at resales. In the GTA, resales in October were down 9.5% compared to October 24, but they were up from last month. The MLS composite benchmark was down 5% year-over-year in October and was flat on a month-over-month basis. In Metro Vancouver, it was much the same situation. Resales in October were down 14% on a year-over-year basis, and the home price index in Metro Vancouver was down 3.4% from a year earlier. Turning to new home sales. The new home market remains extremely slow. In the GTA, there were only 438 new home sales in September, which was down 29% on a year-over-year basis. Condominium sales were down 44% on a year-over-year basis, while single-family new homes were down 16% from the previous year. In the condo sector, the only good news is that the number of condominium units under construction and GTA has dropped sharply from a high of 108,000 units in 2023, to 61,000 units at the end of this last quarter, and to approximately 50,000 units by the end of 2025. Completions will decline from over 30,000 units this year to a more normal level of 18,000 units in 2026, and then dropped very sharply in 2027 when we expect the market to recover. In Vancouver, new sales were a little better. They totaled 1,200 units in Q3, but it was still down 46% from the previous quarter and 38% when compared to the same quarter last year. Sales decreased 55% in the pricier North of Fraser area, and by 35% in the more affordable South Fraser area compared to the previous quarter. Like the GTA, Vancouver has a lot of completions in 2025 and 2026 before falling to less than 10,000 units in 2027. The housing market clearly needs a resolution of the trade war and lower interest rates to improve consumer confidence. We believe that a sustained recovery in the housing market should occur in early 2027, when the number of project completion starts to drop sharply. To conclude, Atrium continued to perform well in a difficult real estate market. Our year-to-date earnings per share of $0.78 is almost identical to last year's results and well above our dividend. We made considerable progress on a number of fronts in Q3, including engaging PwC as our new auditors, increasing the committed amount of our line of credit by $40 million to $380 million to ensure ample liquidity, and fully recovering $12 million of principal and interest on 2 Stage 3 loans. One of the lessons I've learned over my 35-year banking career is that it's important to continue lending in a downturn, albeit as conservatively as possible. Our underwriting teams have done a great job of originating loans this year, and we're well above the volume funded over the same period in 2024. We intend to actively source new loan business in our target markets, while some of our private nonbank competitors are facing loan portfolio issues and/or redemption requests leaving them with limited financial capacity to generate new loan business. While conditions are difficult, Atrium's results to date have been strong as they consistently have been in past downturns. Our track record confirms that we know how to construct and manage a resilient loan portfolio in all stages of the market cycle. That's all for the presentation, but we'd be pleased to take any questions from the listeners. Operator: [Operator Instructions] First question is from Michael McHugh of TD Securities. Michael McHugh: Just first on sort of the portfolio growth front, obviously a bit of cautious sentiment. But you did mention that you expect both the originations and repayments to be a fair bit higher in Q4. Any commentary on sort of the outlook for portfolio size? And then within those originations, if that's going to be more focused on some of the lower risk sectors that you had mentioned? Robert G. Goodall: I think they will be in the lower risk sectors, although with repayments -- some of those repayments will also be in those same sectors. So it's difficult to know, but we're continuing to push hard to increase our -- as closer to that commercial and single-family area. We're expecting the portfolio size to increase. But we literally have about a month before the market sort of shut down for new fundings. So some of them are on the edge as to whether they'll be funded in December or at the beginning of January. So it's difficult to forecast, but we're thinking the portfolio will be up slightly. Michael McHugh: Okay. Great. That's very helpful. And then sort of to that end, obviously, you saw you upsize the credit facility. Any appetite at the moment to reenter the convertible market now that the audit is behind you? Robert G. Goodall: Yes. We're going to look at it very closely at the beginning of 2026, probably shortly after our Q4 financials or full year financials are completed and released in late February 2026. Michael McHugh: Great. And then I might just sneak 1 more in before requeuing. The average mortgage rate held up pretty well quarter-over-quarter in a more broadly declining rate environment. Any sort of commentary on dynamics there and what we can expect going forward, maybe rates on originations versus repayments as we move into a lower policy rate environment? Robert G. Goodall: I was saying to the Board yesterday, the irony is when you get rid of and dispose of the difficult loans, they've usually been on the books for 2 or 3 years, and they often have very high coupon rates. So a lot of the -- or some of the reduction that we've had over the last 9 months is because we've dealt with our problem loans. We haven't just kept them on our books and hope that time would solve the problem. We've actually dealt with them. And that caused a reduction in rate. No question every quarter. Also with rates probably staying and prime probably staying where it is for the rest of the year, and a couple of loans, quite frankly, in our Q right now of new loans to be funded that have pretty healthy coupons on them. We're thinking that the average rate will be steady. Operator: The next question is from Sid Rajeev of Fundamental Research Corp. Siddharth Rajeev: With 4 out of 6 loans in Stage 3 to be repaid in Q4 and Q1 mostly. Could you please provide some guidance on forecasting provisions and allowances in Q4? Robert G. Goodall: In Q4? Siddharth Rajeev: Yes. Robert G. Goodall: We tend not to do that. We're pleased with the way the portfolio looks. But -- it's a fairly weak market. So we're dealing with the Stage 2 and Stage 3 actively. But you never know if another loan is going to deteriorate and come into that. Right now, we feel good, as I say, about the portfolio, but we still got another 1.5 months in the quarter. And the real estate markets, as I say, particularly the housing market is pretty weak in Ontario and BC. Siddharth Rajeev: Okay. And then just 1 more question. You talked about interest rate being steady in the next quarter, likely. How are you pricing your current originations just to get your internal thoughts? Are you anticipating 1 more rate cut? Robert G. Goodall: Sorry, how are we pricing new business? Siddharth Rajeev: Yes. Robert G. Goodall: So we generally are still pricing new business at prime plus. And we obviously are not a prime plus 1 or prime plus 1.5 like a bank or a higher spread. And we try to institute floors. So, for instance, if we were a prime plus 3.5, that would be roughly, what, 8% today. Am I getting it right? 8% today. [ 45 plus 3.5 -- 3 -- 7.95 ]. So we would try and put in a floor of [ 7.95% ], depends how competitively bid the businesses, whether you can actually negotiate that and keep it. Siddharth Rajeev: Got it. I appreciate it. Robert G. Goodall: Because one of the reasons borrowers want floating is because they don't see rates moving up, and they see them possibly continuing to move down. Operator: [Operator Instructions]. It appears that there are no other questions at this time. I will now give the call back to Robert Goodall for closing statements. Robert G. Goodall: Okay. Thank you for attending our conference call. We're pleased with the results. I hope you are as well. And for existing shareholders, thank you for your continued support. Have a great day. Operator: Thank you for participating. This conference call has now concluded. Please hang up.
Operator: Good afternoon, ladies and gentlemen, and welcome to the CytoSorbents Corp. Third Quarter 2025 Earnings Conference Call. [Operator Instructions] This call is being recorded on Thursday, November 13 of 2025. I would now like to turn the conference over to Adanna Alexander, Investor Relations Consultant. Please go ahead. Adanna Alexander: Thank you, Chloe, and good afternoon, everyone. Welcome to CytoSorbents' Third Quarter 2025 Financial Results and recent Business Highlights Conference Call. Joining me today from the company for the prepared remarks are: Dr. Phillip Chan, Chief Executive Officer; and Pete Mariani, Chief Financial Officer. Before I turn the call over to Dr. Chan, I'd like to remind listeners that during the call, management's prepared remarks may contain forward-looking statements, which are subject to risks and uncertainties. Management may make additional forward-looking statements in response to your questions today. Therefore, the company claims protection under the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from results discussed today. The forward-looking statements we make may reflect our views and estimates as of today, November 13, 2025, and we assume no obligation to update these projections in the future as market conditions change. During today's call, we will have an overview presentation covering the operating and financial highlights for the third quarter 2025. Following the presentation, we will open the line to analysts for questions. And now it is my pleasure to turn the call over to Dr. Phillip Chan. Phil? Phillip Chan: Thank you very much, Adanna, and good afternoon, everyone. CytoSorbents continues to make solid progress as we execute on our long-term growth strategy. Our company is built around a platform blood purification technology designed to remove harmful substances and toxins from the bloodstream. We have 2 main products that leverage our proprietary polymer bead technology. CytoSorb is used to treat life-threatening conditions in the ICU and during cardiac surgery and DrugSorb-ATR, our investigational device designed to reduce the severity of perioperative bleeding in patients on antiplatelet therapy and other blood thinning therapy. CytoSorb is now approved in the European Union and available in more than 70 countries with nearly 300,000 treatments performed to date. Trailing 12-month core product sales reached a record $37 million as of September 30, 2025, supported by strong execution across our global network. Our strategy remains centered on 5 key initiatives. The first is to return to higher growth in our core CytoSorb business. The second is to obtain marketing approval and open the U.S. market for DrugSorb-ATR. The third is to achieve near-term cash flow breakeven and future profitability. The fourth is to continue to strengthen the balance sheet. And fifth is to increase and maximize shareholder value. Let's start with an update on our core CytoSorb business. By the way, someone on the line is not on mute. Please go on mute. In the third quarter of 2025, revenue was $9.5 million, up 10% from $8.6 million a year ago or 4% on a constant currency basis. This performance was led by record sales in our distributor territories and strong results in our other direct markets. Gross margin remained strong at approximately 70% compared to 61% in the third quarter of 2024. While we've made meaningful structural progress in Germany, we recognize that consistency remains an area of focus. We believe our ongoing work will lead to stronger performance in 2026. On a trailing 12-month basis, core product revenue grew to $37 million, up from $33.8 million a year ago. Breaking that down further, distributor and partner sales grew 14% to $15.6 million. Direct sales outside Germany rose approximately 24% to $8.8 million, and Germany declined modestly by 3% to $12.6 million. Overall sales growth, including Germany, in the past trailing 12 months was 9%. And excluding Germany, growth was a stronger 17%. This is the reason why we are in the process of restructuring our sales team and sales approach in Germany. In Germany, we have built a strong foundation with established clinical centers, device reimbursement and experienced sales talent. Our focus now is to strengthen leadership, improve sales processes and accountability, enhance training and sharpen account targeting, particularly among key accounts. We're simplifying our message to emphasize right patient, right timing and right dosage, which we believe will improve adoption and consistency going forward. We continue to see real-world evidence and clinical validation from leading institutions around the world that support the value of CytoSorb therapy in critical care and cardiac surgery. We would encourage investors to explore our corporate website where there is a wealth of clinical data and information supporting the broad use of CytoSorb in a wide range of applications in critical care and cardiac surgery. You can see here just some of the recent webinars that we've had, particularly turning the tide in sepsis and septic shock, which you can find on the Investor web page as well as a white paper talking about the broad application of CytoSorb in the treatment of septic shock. Our next major initiative is to obtain marketing approval and open the U.S. market for DrugSorb-ATR. Our FDA breakthrough designated device DrugSorb-ATR is designed to remove blood thinners such as Brilinta from the bloodstream. These blood thinning drugs improve outcomes in cardiac -- in heart attack patients that can cause severe bleeding during urgent coronary artery bypass graft surgery. Unfortunately, patients often cannot wait the required 3 to 5 days for drug washout, leaving surgeons with a difficult risk-benefit trade-off. DrugSorb-ATR is designed to solve this unmet medical need, representing an initial $300 million market opportunity that could exceed $1 billion as Brilinta becomes generic and as we expand to additional indications. Now to give you an update on our FDA regulatory timeline. Following our FDA appeal decision on August 20, the agency upheld the denial of our original de novo submission. But importantly, they confirmed that there were no safety issues with the device. And two, they indicated that the review of a new submission would focus only on the remaining open items from the first application. Because of this, on November 7, 2025, we filed a formal pre-submission meeting request with supporting documentation and anticipate a pre-submission meeting will be held in either late 2025 or early Q1 of '26 to confirm FDA requirements for the new de novo application. We expect to file a new de novo filing in the first quarter of 2026, which will include robust analysis of real-world data demonstrating DrugSorb-ATR's effectiveness in clinical practice that was not available with the first submission and was not eligible for inclusion in the prior review and appeal. We anticipate mid-2026 regulatory decision following a typical 150-day review process, and this review may be expedited as DrugSorb-ATR is still an FDA breakthrough device eligible for priority and interactive review. So with that, let me turn it over to Pete Mariani to go over financial highlights and some additional key initiatives. Pete? Peter Mariani: Thank you, Phil, and good afternoon, everyone. Today, I'll be reviewing our third quarter financial performance and important updates that strengthen our balance sheet and our outlook through 2026. First of all, revenue was $9.5 million, an increase of 10% and 4% on a constant currency basis compared to $8.6 million in the third quarter of 2024. As Phil noted, our growth was led by record sales in our distributor territories and strong sales in our other direct markets. Now this sales growth was partially offset by a decline in our direct German market, where we continue to make progress with the reorganization of our team and are confident that this work will lead to stronger execution and improved performance in 2026. Gross margin for the quarter was 70%, which is consistent with our recent history and an improvement over the 61% in the prior year and the prior year's gross margin were negatively impacted by a planned reduction in unit production to rebalance inventory, coupled with a short-term manufacturing issue, which was resolved in the third quarter of 2024. Q3 operating expenses were $9.5 million for the quarter, an improvement of 6% compared to prior year. The decrease was led by a $900,000 reduction in R&D expenses following the completion of certain projects and other cost reductions implemented last year and partially offset by a $400,000 increase in SG&A expenses. The increase in SG&A was led by regulatory spending related to DrugSorb-ATR filings and initial commercialization expenses in anticipation of DrugSorb approval and launch, offset by lower compensation and royalty expenses in the quarter. Given that we now expect DrugSorb approval in mid-2026, the company has taken steps to reduce these commercialization expenses as part of our strategic workforce and cost reduction program. Our Q2 operating loss improved to approximately $9.2 million from $4.8 million in the prior year. And net loss was $3.2 million for the quarter or $0.05 per share compared to net loss of $2.8 million or $0.05 per share in the prior year. However, after eliminating the impact of foreign currency changes and noncash stock compensation in both periods, adjusted net loss for the quarter improved to $2.6 million or $0.04 per share compared to an adjusted net loss of $4.5 million or $0.08 per share in the prior year. Adjusted EBITDA loss for the quarter, which also excludes the impact of noncash stock compensation and changes in foreign currency, improved to $2 million compared to an adjusted EBITDA loss of $3.6 million in the prior year. Our total cash, cash equivalents and restricted cash was $9.1 million on September 30 compared to $11.7 million at the end of the second quarter of this year, reflecting net operating cash burn of $2.6 million in the quarter. One of our key strategic priorities has been to ensure that our core business is running at cash flow breakeven as we enter 2026. We are pleased with the improvements in operating margins and cash burn over the past year. However, we have determined that the pace of our operating improvements needs to accelerate in order to achieve this important goal. As a result, we have implemented a strategic workforce and cost reduction program. This initiative follows a comprehensive review of company's cost structure and operating model. The actions taken include a workforce reduction of approximately 10% as well as reductions across production and operating expenses, which we believe will allow us to achieve cash flow breakeven beginning in Q1, and do so while continuing to fund key growth initiatives, including regulatory approval and launch of DrugSorb-ATR in the U.S. We expect to record a charge of up to $900,000 that will include severance and other charges related to the restructuring. Additionally, we are pleased to announce that we have amended our loan and security agreement with Avenue Partners effective today, November 13. The amended terms provide for immediate funding of $2.5 million of new capital as well as an extension of the interest-only period to December 31, 2026. The amendment also provides for an additional $2.5 million of capital, along with an additional 6-month extension of the interest-only period to June 30, 2027, both upon FDA approval of DrugSorb-ATR in 2026. The company issued warrants to Avenue Capital to purchase 1.4 million shares of the company's common stock for cash at an exercise price of $0.70, which expire on November 13, 2030, and the number of warrants and exercise price is fixed. The amendment requires the company to maintain certain operating cash burn targets until U.S. FDA marketing approval of DrugSorb-ATR is achieved. So we're pleased to be able to complete this timely amendment to our credit agreement. We appreciate the partnership with Avenue Capital Partners, and we look forward to continuing to execute our strategy. And finally, we are pleased with the structural improvements we are making across the company to drive improved execution at the top line and provide a more rigorous ROI focus on our spend, leading to improved margins and cash burn. We believe that these improvements will continue to drive efficiencies and allow us to achieve cash flow breakeven beginning Q1 of 2026. We believe these improvements, along with our amended credit agreement, further strengthen our balance sheet with the liquidity and flexibility to continue driving growth across our core business and pursue what we believe is a derisked plan to U.S. marketing approval of DrugSorb-ATR in mid-2026. And now, I'll turn the call back over to Phil. Phillip Chan: Thanks, Pete. And now I'll cover briefly the last key initiative, which is to increase and maximize shareholder value. To summarize, CytoSorbents has a clear and compelling value proposition. We have a proven international business generating $37 million in annualized high-margin product sales. We have a scalable recurring revenue model, a razor blade and other people's razor business model that's very attractive, a promising U.S. regulatory path for DrugSorb-ATR and a strengthened balance sheet following our credit amendment and cost reductions. We're pleased with our recent execution against our key initiatives and are confident that these actions will enable us to drive towards profitability and long-term shareholder value creation. We very much appreciate your patience and continued support. And finally, before we move to Q&A, I'd like to take a moment to recognize and honor Dr. Robert Bartlett, our former Chief Medical Officer for 10 years and the Father of Extracorporeal Membrane Oxygenation that has saved more than 100,000 lives around the world since its inception. Dr. Bartlett's vision and contributions to this field and to CytoSorbents have left a lasting legacy. Please see our recent press release highlighting his many contributions to the world. That concludes our prepared remarks. Operator, please open the line for questions. Thank you. Operator: [Operator Instructions] There are no questions at this time, please continue. We have a question from Tom Kerr from Zacks Small-Capital Research. Brian Lantier: This is actually Brian Lantier. Tom is triple booked this afternoon, but he wanted me to jump on the call quickly and ask if you could clarify a little bit about where you see the gross margin in Q4 and 2026. Do you feel like it's sort of normalized now around the 70% level? Phillip Chan: Thank you, Brian. Well, Pete, do you want to go at that? Peter Mariani: Well, we -- go ahead. Yes, sure. Yes, Brian, look, we are pleased with the 70% level that we've been able to execute. I do think that we've got opportunities to continue to see improvement. Some efficiencies have begun to come into the [ plant. ] We're seeing consistency there. And certainly, as we move towards higher volumes and eventually with DrugSorb approval, we do see possibilities for extension of -- or expansion of gross margin in the future. Brian Lantier: Okay. Great. And have you shared any either internal or external milestones or guideposts that we can sort of look to, to see progress on the German sales force restructuring to see that it's having the effect that you're looking for? Phillip Chan: Yes. I think that it's a little too soon to say, as I mentioned in my remarks, that it's still a work in progress. But I do think that we are seeing by following certain metrics that we follow improvements in rep performance and efficiency, et cetera. I think that ultimately, we believe that will translate into improvements in sales and returning Germany back to growth. But hopefully, you'll be able to see that in future quarters. Brian Lantier: Okay. Great. And maybe just to satisfy my own curiosity, can you differentiate a little bit between a pre-submission package that you're going to submit to the FDA and the actual full application that you'll be submitting in 2026? Phillip Chan: Sure. The pre-submission package or the pre-submission meeting is designed to get on the same wavelength as FDA. And so that we understand what FDA's concerns are. We understand what guidance -- to be able to incorporate FDA guidance into our de novo submission when we finally submit so that there are no surprises. And in the pre-submission document, we lay out basically our strategy of what we are planning on doing. We'll be asking for FDA feedback during the meeting on those; and then, again, taking all of that and putting that into the final de novo submission. And again, I think that we're excited by the opportunity to be able to present data that has been out there and also new analyses that no one has even seen, of course, based upon FDA feedback as well to be able to demonstrate to FDA this probable -- that the probable benefit outweighs the probable risk or that the benefit-to-risk ratio is a positive one, which is the basis of the de novo marketing authorization. So we're very excited that we've now put in for this pre-submission and hope to stay on schedule to be able to submit that de novo in the first quarter of next year. Brian Lantier: Great. And I guess one last one, and then I'll open it back up for anyone else. Any feedback from the World Sepsis Day webcast that you had? Phillip Chan: Yes. We've actually had excellent response from that webcast internationally. The statistics are very promising. And I think the important part is that we're getting the message out there that CytoSorb is not just a blood filter to treat cytokine storm. What we've been able to demonstrate and what our collaborators and researchers around the world have been able to demonstrate is that by controlling that cytokine storm, it has broad-ranging effects on the pathophysiology of sepsis and septic shock, helping to ameliorate organ dysfunction and organ failure and importantly, allowing clinicians the next step of getting the fluid, which is essentially drowning the patient from the inside out, out of the patient, which they typically cannot do because of that severe inflammation that is happening. So the feedback that we've gotten so far has been outstanding. And this is actually going to be -- it is one of the focuses of our sales teams around the world to continue highlighting really the significant amount of data that has been generated in the area of sepsis and septic shock and help clinicians solve this critical problem for their patients. Operator: There are no questions at this time. Please continue. Phillip Chan: Well, thank you, everyone, for joining the call today. If you do not have any other questions, please feel -- if you do have any other questions, please feel free to reach out to us at ir@cytosorbents.com. We look forward to updating you in the next call. Have a great evening, everyone, and thank you very much. Have a good night. Operator: This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a wonderful day.
Operator: Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Co-Diagnostics, Inc. Third Quarter 2025 Earnings Webcast. [Operator Instructions] I would now like to turn the call over to Andrew Benson, Head of Investor Relations. Andrew, please go ahead. Andrew Benson: Good afternoon, everyone. Thank you all for participating in today's conference call. On the line today from Co-Diagnostics, we have Dwight Egan, Chief Executive Officer; and Brian Brown, Chief Financial Officer. Earlier today, Co-Diagnostics released financial results from the third quarter ended September 30, 2025. A copy of the press release is available on the company's website. We will begin with management's prepared remarks and then open the call to analyst Q&A. Before we begin, we would like to inform listeners that certain statements made by Co-Diagnostics during this call, which are not historical facts are forward-looking statements. In addition to diagnostic test developments and timing for commencement of clinical evaluations, this includes statements concerning the company's Co-Dx PCR testing platform, which requires regulatory approval and marketing authorization for diagnostic use and is not currently for sale. Actual outcomes and results may differ materially from what is expressed or implied in any statement. Important factors, which could cause actual results to differ materially from those in these forward-looking statements are detailed in Co-Diagnostics filings with the SEC. Co-Diagnostics assumes no obligation and expressly disclaims any duty to update any forward-looking statements to reflect events or circumstances occurring after this call or to reflect the occurrence of unanticipated events. In addition, the company may discuss certain non-GAAP financial measures during today's call. These non-GAAP financial measures should not be considered a replacement for and should be read together with GAAP results. We refer you to the company's earnings release issued shortly before this call, which contains reconciliations to the non-GAAP financial measures presented to their most comparable GAAP results. At this time, I would like to turn the call over to Co-Diagnostics Chief Executive Officer, Dwight Egan. Dwight? Dwight Egan: Thank you, everyone, for joining us today and for your continued support of Co-Diagnostics. As we head into the final stretch of the year, it is shaping up to be one of the most active and important times for our business. Over the past 45 days alone, we've shared several important updates, which are all part of our plan to position Co-Diagnostics for its next phase of growth. Each of these steps brings us closer to our goal, building a stronger, more resilient Co-Diagnostics operationally, financially and strategically. Importantly, these developments are the effect of cumulative growth and every initiative that we are currently working on connects to a broader strategy designed to create lasting value for shareholders. Over the coming months, our team is focused on executing across four main growth pillars. First, we recently announced the engagement of Maxim Group to assist in identifying potential strategic alternatives for the company's Indian joint venture, CoSara Diagnostics, which may include a merger with a Special Purpose Acquisition Company, or SPAC, or similar entity listed on a U.S. National Securities Exchange. We believe such a transaction may unlock value from our joint venture project in India and support our long-term funding strategy. Second, the CoMira joint venture with Arabian Eagle, which marks the next step in our international expansion and commercial footprint as we expand our presence in Saudi Arabia and 18 additional MENA nations. Third, our AI business unit, which is driving innovation, operational efficiency and new data-driven opportunities. And finally, the initiation of our upcoming upper respiratory multiplex test clinical evaluations, which highlights our scientific leadership and reinforces our domestic credibility. Together, these initiatives form a complete and aligned strategy focused on financial strength, global reach, technological innovation and disciplined execution. This is how we are approaching the remainder of 2025 and preparing the foundation for 2026 and beyond. This period represents a key inflection point for Co-Diagnostics and reflects years of execution to reach this stage of momentum and readiness. With that context in mind, let's begin with the first and most time-sensitive development, the SPAC. One of the most exciting updates is our planned CoSara SPAC transaction with Maxim Group. This is a major step that we believe can unlock real value for both our operations in India and for Co-Diagnostics as a whole. The funds raised in this transaction are expected to represent a significant infusion of growth capital for CoSara operations in India and to increase Co-Diagnostics' value as well. Preparation for the transaction is progressing according to plan, and we expect to share updates on this project over the next several weeks and months. Combined with recent fundraising activities, this transaction has the potential to provide both flexibility and financial stability as we move into 2026 and begin commercialization of the new platform. This is a proactive step that has the potential to strengthen our balance sheet and create a clear path toward long-term sustainable value creation for our shareholders. I look forward to providing more updates on this transaction as they occur. Shifting focus, the next major component of our growth strategy is the CoMira joint venture. Our recently announced joint venture with Arabian Eagle Manufacturing has led to the formation of a new company named, CoMira Diagnostics, which, along with CoSara will stand as one of the cornerstones of our international expansion strategy. The principles of Arabian Eagle ran the primary distributor in the Middle East and were instrumental in Kingdom of Saudi Arabia, or KSA, being one of the largest international markets for the company's Logix Smart Test. Under the terms of the definitive agreement signed in the KSA, we have established CoMira to localize our Co-Dx PCR platform and other PCR-related intellectual property across the Middle East and North Africa. The partnership covers 19 countries, creating a significant commercial footprint in a high-growth region. CoMira will be headquartered in Riyadh with a dedicated manufacturing and assembly facility designed to produce PCR tests for infectious diseases and other applications relevant to the region's healthcare needs. The venture will initially focus on local manufacturing and distribution of the Co-Dx PCR platform with plans to expand into custom assay development and AI-enhanced diagnostics. The initiative aligns with the KSA's Saudi Vision 2030, supporting technology localization, industrial diversification and regional healthcare innovation. The regulatory pathway is anchored in obtaining Saudi Food and Drug Authority, SFDA clearance to facilitate regional distribution and regulatory acceptance across other MENA markets. CoMira will combine Co-Diagnostics molecular testing technology with Arabian Eagle's expertise in regional operations, infrastructure and local market access. The agreement marks a major step in localizing advanced molecular diagnostics within the Middle East and positions Co-Diagnostics as a strategic partner in regional public health resilience. This milestone demonstrates that our international growth strategy has advanced from concept to execution and reflects the strong high-value partnerships we continue to build globally. While this global initiative expands our reach outside the United States, we remain equally focused on commercialization and on advancing innovation through our AI business unit and other technology-driven initiatives. Another key part of our strategy is our new AI business unit, led by our Chief Technology and AI Officer, Christopher Thurston. This team is bringing all our current and future AI projects under one umbrella, the Co-Dx Primer AI platform. Additionally, our AI business unit is designed to accelerate the development of proprietary AI-powered diagnostics, enhance data analytics and improve operational efficiency across the organization. Integrating AI into our workflows will enable faster, smarter and more scalable testing processes while minimizing human error and improving efficiency at the point of care. These tools will support real-time PCR diagnostics, advance Co-Primers design and optimization and automate interpretation to improve outcomes in both lab and field environments. Our AI models are also being designed to deliver predictive epidemiological insights, giving healthcare providers and public health authorities earlier warning signals and improve situational awareness during potential outbreaks. Over time, the system is expected to leverage analytics from widespread deployment of the Co-Dx PCR Pro to anticipate disease patterns and possibly predict outbreaks before they occur. As necessary, some of these models will be built on a secure HIPAA-compliant cloud platform with a new business unit formed to integrate internal data, workflow orchestration and AI-driven analysis into a single cohesive framework. This initiative underscores our commitment to staying at the forefront of innovation by combining advanced AI technology with our proven PCR expertise. Importantly, this program will position Co-Diagnostics to participate in one of the most dynamic growth areas in healthcare technology while building valuable new intellectual property and data assets. This is not simply an upgrade to existing systems. It is a transformational step that redefines what diagnostics can achieve in speed, accuracy and real-time intelligence. As we continue to innovate technologically, we are also executing scientifically through our flu A, B, COVID-19 and RSV multiplex test clinical evaluation program, which further validates our progress and credibility in core diagnostics. We are preparing to initiate clinical evaluations for the upper respiratory multiplex test in the immediate future, a key milestone for Co-Diagnostics. This test is designed to simultaneously detect flu A, flu B, COVID-19 and RSV, making it the most comprehensive respiratory panel in our portfolio. Test has been supported by a RADx Tech grant from the National Institutes of Health, or NIH, underscoring both the credibility and importance of this work. RADx Tech program was created to accelerate innovation in diagnostic testing and our participation validates the strength of our technology and its public health relevance. This trial represents the culmination of extensive planning and development and marks the first Co-Dx multi-pathogen test to enter human clinical evaluation. The upper respiratory panel addresses a critical need in the domestic market by combining accuracy, speed and multiplex capability within a single point-of-care platform. And we are pleased to be delivering on our commitment to initiate clinical evaluations in this flu season. The data from this trial will be used to support future regulatory submissions and commercial readiness for the U.S. market and potentially for regulatory submissions in other markets as well, such as the SFDA in parallel with the U.S. FDA submission. Initiating this study is a major step forward for our domestic business and a meaningful validation of our scientific and technical leadership. This test has generated consistent interest from both investors and potential partners, particularly those focused on high-volume U.S. respiratory testing demand. The global market size for infectious disease diagnostics is expected to grow to $73.56 billion by 2030, and the demand for rapid accurate point-of-care diagnostics is driving an expanded opportunity for multiplex tests in the infectious disease testing market. The largest single geographical market for these tests is in North America, although the market for respiratory infectious disease testing in the Middle East is also expanding. This is largely influenced by substantial investments in the Kingdom of Saudi Arabia and the KSA's commitment to improving public health in alignment with the Saudi Vision 2030 program. This program represents a rigorous NIH-supported multiplex evaluation with strong commercial potential and is a key component in reinforcing our reputation for execution and reliability within the diagnostics industry. In short, this milestone demonstrates Co-Diagnostics is executing, not just planning and delivering tangible scientific progress that supports both near-term and long-term growth. Looking at our other programs like Co-Dx PCR MTB or tuberculosis test and Co-Dx PCR HPV8-type multiplex test, both remain on track to initiate clinical evaluations before year-end, as stated in previous communications. Both tests have been supported by grants from the Bill & Melinda Gates Foundation and are anticipated to significantly contribute to our international expansion ambitions and represent key components in our goals to provide gold standard solutions for unmet needs in various markets that are only anticipated to expand over the coming years. We believe that the introduction of competitively priced diagnostics into markets anxious to gain the upper hand against the spread of deadly and often devastating infections will position Co-Dx as a leader in innovation and point-of-care PCR diagnostics. Taken together, the initiatives we have discussed today, including the CoSara SPAC transaction, the CoMira joint venture, the launch of our AI business unit, the imminent domestic clinical evaluations and the upcoming clinical evaluations of the other tests in our pipeline all reflect the significant progress Co-Diagnostics has made over the past several months. Each of these milestones strengthens a different part of our business from capital structure and international growth to innovation and scientific validation. Collectively, they demonstrate that our strategy is working, our execution is on track and our team remains focused on creating lasting value for shareholders. Over the last 2 months, we also closed two strategic direct offerings totaling gross proceeds of $10.8 million. We are entering the next phase of growth from a position of strength, supported by a robust balance sheet, a growing pipeline and a clear path toward both near-term and long-term milestones. With that, I'll now turn the call over to Brian Brown, our Chief Financial Officer, to provide an update on our financial performance and outlook. Brian Brown: Thanks, Dwight, and thank you to everyone who joined today's call. For the quarter, total revenue was $0.1 million compared to $0.6 million in the same period last year. In the prior year period, revenue from grants represented approximately $0.4 million, while in Q3 2025, all revenue recognized came from product sales. Total operating expenses for Q3 2025 decreased to $7.1 million compared to $10.6 million in Q3 2024. This reduction reflects our continued focus on becoming more operationally efficient. Research and development expenses were $4.5 million compared to $4.9 million in the prior year comparable period. Net loss for Q3 2025 was $5.9 million or a loss of $0.16 per fully diluted share compared to a $9.7 million loss or $0.32 per fully diluted share in the same period last year. Adjusted EBITDA was a loss of $6.3 million in Q3 2025 compared to a loss of $8.8 million in Q3 2024. We ended the quarter with $11.4 million in cash, cash equivalents and marketable investment securities. As always, we are carefully managing our spending to maintain a healthy balance sheet while positioning the company for commercialization. Throughout the year, we will continue to optimize our operating footprint to drive efficiency gains and cost savings. In addition to the strategies outlined by Dwight earlier, we plan to meet other capital requirements through a combination of equity and debt financing, additional grant funding and continued operational efficiencies. We are also evaluating other financing structures to strengthen our financial position and maintain flexibility. In parallel, we continue to pursue grant funding opportunities to support the advancement of our Co-Dx PCR platform. In the near term, our focus remains on progressing our development pipeline, completing clinical evaluations and preparing for regulatory submissions. We are allocating our resources and time strategically to support these priorities. Looking ahead, we are optimistic about multiple commercial launches expected in 2026 and the ongoing development within our test pipeline. I look forward to sharing additional updates and milestones on our next call. With that, I will now turn the time back over to Dwight. Dwight Egan: Thank you, Brian. To close, we want to extend our gratitude to Co-Diagnostics' shareholders and to our employees whose consistent dedication and hard work is one of our most valuable assets to achieving the Co-Dx vision. Let's now open the line up for questions. Operator? Operator: [Operator Instructions] Your first question comes from the line of [ Katherine Degen ] with H.C. Wainwright. Unknown Analyst: This is [ Katherine ] on for Yi. My question centers around performance of CoSara and CoMira. For CoSara, are they meeting your performance expectations? And if not, what's causing that discrepancy? And how do you kind of expect CoMira to perform financially in comparison? Dwight Egan: [ Katherine, ] thank you for the question. With respect to the performance of both CoSara and CoMira, we're very pleased with the performance of both of those entities. Keep in mind that the CoMira entity is newly formed, and it was formed with leadership from previous interactions that we have had from a business standpoint with the distributors of our product in Saudi Arabia. Saudi Arabia has been consistently the largest international customer for Co-Diagnostics. And so it made a lot of sense for us to establish a joint venture where we could participate more actively in the forward-going opportunity in Saudi Arabia, especially as it revolves around the introduction of our new and revolutionary point-of-care device, the Co-Dx PCR Pro. So they played a huge role in what we're doing and what we have been doing for the last several years at Co-Diagnostics, and we expect that they will be a wonderful partner to this joint venture in moving our agenda forward in what, again, has been our largest international customer. With respect to CoSara, we have been involved in this joint venture with CoSara for about 8 years, we have established a real solid footprint in that country. We have sales personnel that cover largely the entire country. We have significant manufacturing operations there, mostly on the Sarabhai family properties where we established our first laboratory for manufacturing in 2019 when we cut the ribbon on that facility. And then last December, if you'll recall, we established on that same acreage, another more sophisticated property for the development of our oligonucleotides, which we can now produce there in country, and we'll continue to progress the manufacturing opportunity there so that they are manufacturing in connection with the Make it in India initiative of Prime Minister, Modi. They will be making the cups or the cartridges along with the instrumentation. And so we're very pleased with the kind of market development that has occurred over there. Co-Diagnostics is a real fan of the leadership of the Sarabhai family and the other scientists and workers have brought to our company in India. We are well respected in India at the government level, in the academic area and in being able to supply our products to lots of different labs throughout the country. So we have developed a mature business there that is now capable to kind of go off and bring additional value, both to the people at CoSara and also the people at Co-Diagnostics. We think this will be a mutual benefit to both entities, and we're very enthusiastic about our prospects there. Operator: Your next question comes from the line of Mike Okunewitch with Maxim Group. Michael Okunewitch: Congrats on all the great progress. I guess to kick things off, I'd just like to see if you could talk a little bit about how a potential spinout of CoSara might interact with the MTB and HPV point-of-care programs. Is this something where they might be licensed over or you get some sort of distribution agreement signed? I'm just curious since it seems like there's quite a significant market in India for these programs. Dwight Egan: Well, thanks for the question, Mike. Tuberculosis is a disease that is the #1 killer in terms of infectious diseases in the world. And about 25% roughly of those deaths are coming from India. And a similar number is coming from Africa. And so between those two areas of the world, you have about half of all the deaths from -- coming from tuberculosis and tuberculosis is something that is curable. So it's really a shame not to be able to diagnose it effectively and get people treatment because it can be cured if it's caught in time and properly dealt with the therapeutics. So we have a very concrete plan in India with respect to CoSara capitalizing on being able to fill the gap between where they currently have access to PCR tests and where they need to have access. I don't think there's any credible key opinion leader in the world that believes that the main -- that doesn't believe that the main solution to that problem of tuberculosis comes from replacing smear microscopy, which is about 125-year-old diagnostic tool, replacing that with molecular diagnostics is really what has to happen. And in order to make that happen, you have to have a product that has accessibility, that has the kind of accuracy that molecular has, and it also is something that you have to be able to get it down to the end of the row. You can't make it too unaffordable. So we are the -- we -- in our mind, the perfect solution to being able to fill that gap between where they currently have -- and it's not a lot of places, but where they currently have molecular diagnostics and where it will be able to be taken by virtue of the new accessible, affordable and accurate solution that we have. So that applies both to tuberculosis and the human papillomavirus, which has a large presence in India. And I don't want you to think of India or Africa as being just TB and MTB markets. They have a lot of other issues that need to be addressed, and we intend to make those part of what we're addressing in these joint ventures and in the forthcoming transaction that we anticipate and hope for, for CoSara. Brian Brown: Mike, if I can add something, this is Brian. We are talking about different structures internally and what this might look like, but we don't have anything concrete to share to the market, and we will as we move forward in the process. Michael Okunewitch: I appreciate the additional color here. I did want to follow up just on the angle of affordability and in particular, for the PCR Pro, I want to see if you could give a little bit more color on how you're actually able to reach a price point that is so much more affordable than your competitors. Does this have something to do with Co-Primers allowing you to use a more -- less complex device? Any additional clarity you could provide on that would be helpful. Dwight Egan: Again, an excellent question, Mike. And I think one of the reasons that we're able to produce a product at the price point that we've done is that's what we set out to do initially. Shortly after the COVID pandemic kicked in, we looked forward saying, where is this going to go? And we brought in a very, very good team of engineers that -- and scientists with the express idea that they would create a product that could have a price point potentially as low as about $300 to $500 at scale. And that's been our goal from the beginning. And one of the remarkable things about the research and development of this product is that in the large measure, we've been able to keep a lid on what we think we will be able to produce this for at scale. And so as to whether other companies, why they haven't been able to do this, I think some of that has to do with the fact that they were making boxes before we even existed. And so they didn't really come at it with a fresh open, clean slate like we did. And so we had certain important discrete goals that we wanted to accomplish as we set out to engineer both scientifically and mechanically this wonderful device. Of course, Co-Primers play a role in the effectiveness of the assays, but that -- the Co-Primer advantages revolve mainly around its ability to multiplex. So for instance, when you look at the human papillomavirus, this is an 8-plex test for certain specific cancer markers associated with human papillomavirus, plus a ninth marker that is a human DNA control. So that's where Co-Primers kick in. They allow us to do this sort of multiplexing in a class by ourselves because of the way Co-Primers get rid of the formulation of primer-dimers. So I think that's the kind of guidance I could give you and the information about why we've been able to hold the price line. And if you can't make the product at a price point that's relevant to the people that you're trying to serve, it doesn't matter. So we've really held the lid on that. We're excited to take it into the market. There's a huge gap. Michael Okunewitch: Absolutely. And then one more for me, if you don't mind, and I'll hop back into the queue. When looking at the CoMira JV in Saudi Arabia and the Middle East, are there any particular products, particularly from the PCR Pro that you believe are most relevant for that market? Dwight Egan: I believe that all of our current pipeline are very relevant to the CoMira market. It's not just tuberculosis and HPV. It also includes the #1 problem in infectious disease. It's not the most deadly, but it's the most cases, and that's the upper respiratory. So our flu A, B plus COVID plus RSV is a very, very important test for that market as well. And then that's just the beginning. We'll continue to develop more and more. Operator: That concludes our question-and-answer session. Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Luminar Third Quarter 2025 earnings call [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Yarden Amsalem, Head of Investor Relations. Yarden Amsalem: Thank you, Josh, and welcome, everyone. With me today are Paul Ricci, Luminar's Chief Executive Officer; and Tom Fennimore, our Chief Financial Officer. As a quick reminder, you can find the press release and presentation that accompany this call at investor.luminartech.com. In a moment, you will hear remarks from Paul and Tom, followed by a Q&A session. Before we begin the prepared remarks and Q&A, let me remind everyone that during the call, you may refer to GAAP and non-GAAP financial measures. Today's discussion also contains forward-looking statements based on the environment as we see it today. And as such, it does not include risks and uncertainties. Please refer to our press release and presentation for more information on the specific risk factors that could cause actual results to differ materially. With that, I'd like to introduce Luminar's CEO, Paul Ricci. Paul Ricci: Good afternoon, everyone, and thank you for joining us. This has been a pivotal and challenging quarter for Luminar including the developments we disclosed in our 8-K a few weeks ago. We're now taking deliberate action to reposition the company, and I want to begin by addressing a few items directly. First, on our capital structure, we've entered into forbearance agreements with the majority of our secured noteholders, which run through November 24. We anticipate further extensions as we continue to negotiate with our secured noteholders towards a longer-term solution to our capital structure and liquidity needs. During this period, our 2025 financial guidance remains suspended. We've also paused usage of our equity finance, credit and preferred stock programs while we work toward a comprehensive solution. We may decide to resume use of these programs in the future depending on developments. As previously disclosed, we've also received and are evaluating multiple preliminary proposals and indications of interest to purchase the entire company as well as certain of its assets and business lines. We have added Patricia Ferrari and Elizabeth Abrams as independent directors to support our efforts. Together, Ms. Ferrari and Ms. Abrams bring extensive experience in banking, finance and restructuring advisory work. In addition, this will be Tom Fennimore's final quarter with Luminar as CFO. Tom has worked tirelessly with me over the past 6 months and I'm appreciative of all the contributions he's made during his time here and wish him the best in his next chapter. I also want to take a moment to welcome our new CFO, Tom Beaudoin. Tom brings more than 4 decades of financial and operational leadership across both public and private technology companies. Tom and I work side-by-side for many years in building Nuance, and I'm delighted to be working again with him here at Luminar. On the business front, we are managing continued challenges in our automotive LiDAR business. As disclosed, the future course of our relationship with Volvo will depend on the outcome of ongoing processes. We've made a claim for damages and paused further production commitments of Iris units pending resolution. We remain in dialogue with Volvo and are hopeful we can reach an agreement on a path forward. At the same time, we have advanced the strategic shift we outlined last quarter. We're pursuing nonautomotive markets more deliberately in elevating the role of our LSI Photonics business where we see continued progress. Over the past several months, momentum has continued to build across both Luminar and LSI, especially in aerospace and defense, where our technology addresses mission-critical sensing and National Photonics needs. These developments reinforce our belief that this strategic direction better positions Luminar for the years ahead. I'll speak more to that progress in a moment. But first, let me turn to customer updates. Starting with Volvo, the uncertain status of that relationship will reduce or perhaps eliminate the expected volume and revenues from the EX90 and ES90 programs. But given the unfavorable economics of Iris sales to Volvo at these depressed volume levels, this change also will help our cash flow and gross losses. We're continuing the dialogue with Volvo and we'll provide updates when there is more to share. Regarding Mercedes, we do not anticipate further development activity under the current Halo development contract although our technology remains under evaluation for future programs. Finally, our relationship with Nissan continues to advance as we remain focused on meeting their hardware and software program milestones and delivering the quality and performance they require. Taken together, the developments of Volvo and Mercedes reflects broader industry conditions including extended time lines for L3 ADAS program readiness and award decisions. These dynamics reinforce the direction we outlined last quarter to move more deliberately to pursue commercial markets outside of automotive, where engagement and near-term opportunities continue to grow and particularly so in aerospace and defense applications. Luminar now works with nearly all major developments in terrestrial off-road autonomy, including Caterpillar, where we recently shipped the first design validation units as we progress towards start of production. We are also expanding into defense and industrial use cases. For example, Forterra, a leading autonomous mission systems company is currently using Iris on its off-road autonomy platforms. Our 1550-nanometer approach supports operations and conditions where stealth, detail and reliability are important. It captures a highly accurate 3D view of unstructured terrain and allow safe navigation without GPS, which is increasingly important as GPS jamming becomes more common. Beyond ground systems, we are seeing similar interest in aerial and marine applications. Our work with LAKE FUSION Technologies is an early example where Iris sensors are being used to help helicopter pilots identify power lines and other hazards. We're also supporting partners in marine autonomy for obstacle avoidance and precision positioning. Ultimately, these commercial, defense and industrial markets represent growing high-margin opportunities that validate the scalability of our technology. This connects directly to the progress we're seeing at LSI. As a reminder, LSI supplies photonics components subsystems and systems across aerospace, defense, industrial and medical markets, combining defense-grade reliability with chip scale innovation from concept to deployment. As a trusted U.S. supplier in export control domains, such as missile defense, quantum sensing, directed energy and optical communications, LSI is well positioned to benefit from strong tailwinds, driven by rising defense budgets, reshoring mandates and national security priorities. Given the LSI currently represents about 1/3 of Luminar's annual revenue, we believe is an underrecognized element of our business. Year-to-date, LSI has generated roughly $18 million in revenue, and we see a path for strong growth from here. And unlike the automotive business, which has proven to be a more unpredictable business, LSI benefits from stronger revenue visibility with a significant portion of its backlog tied to multiyear customer orders. With strong secular tailwinds, we believe LSI stands to build on this momentum over the next several years. Before turning it over to Tom to discuss Q3 results, I'd like to discuss our organization briefly. Where we are taking steps to align our cost base with our long-term goals. As previously discussed, as part of our ongoing realignment, we will reduce roughly 25% of our workforce by year-end. This was a difficult but necessary step to get the company the stability of requires. We expect a meaningful reduction in operating expense as a result of these actions beginning in 2026. Regarding the supply chain, we are currently reviewing our arrangements with our contract manufacturing partners. This is consistent with our broader effort to rightsize our cost structure and align our supply chain strategy with a lower volume environment in the near term. And with that, I'll hand it off to Tom to discuss Q3 results. Thomas J. Fennimore: Thank you, Paul. Revenue for the quarter came in at $18.7 million, up about 20% sequentially and 21% year-over-year. The increase in revenue during the quarter was primarily driven by 3 factors: First, we shipped roughly 5,400 Iris sensors in Q3 compared to 4,800 in Q2, with the vast majority of these shipments going to Volvo. Second, higher NRE revenue related to development work we are currently performing for our customers; and finally, a sequential increase in LSI revenue, as we've seen continued growth in defense and aerospace related spending. Further quarter, we reported a gross loss of negative $8.1 million on a GAAP basis and negative $7.3 million on a non-GAAP basis. Q3 gross loss improved sequentially, driven by a higher mix of NRE revenue lower inventory purchases following the previously discussed Volvo program pause as well as a lower warranty expense. This was partially offset by higher shipment of series production sensors and unfavorable economics. OpEx came in at $66.6 million on a GAAP basis and $43 million on a non-GAAP basis. Non-GAAP OpEx declined roughly 9% and $4 million relative to the prior quarter and 29% or $18 million relative to Q3 of last year. This decrease was driven primarily by lower R&D spend and continued progress on our cost actions. We ended the quarter with $74 million in cash and marketable securities, in line with the preliminary results shared a few weeks ago. As Paul noted, we have paused usage of our equity financing in preferred stock programs while we work towards a longer-term solution for our capital structure and liquidity needs. We may decide to resume use of these programs in the future depending upon developments. We are also actively evaluating multiple nonbinding preliminary proposals and indications of interest to purchase parts up or the entirety of the company. We will share updates on this when appropriate. Our change in Q3 was negative $34 million above the $31 million level from Q1. This was driven by lower proceeds from our equity financing program. Free cash flow for the quarter was roughly negative $48.5 million lower than the $53.8 million in Q2 and significantly below the $58.4 million from a year ago. I'll now turn it back to Paul for closing remarks. Paul Ricci: While this is undoubtedly a challenging period, we're approaching it with disciplined transparency and focus. We're deeply grateful to our employees, customers and partners for their continued commitment and trust as we navigate this transition. And we'll now take your questions. Operator: [Operator Instructions] Our first question comes from Winnie Dong with Deutsche Bank. Yan Dong: I was wondering if you can provide maybe a preliminary update on the direction of the strategic actions going forward. In the prepared remarks, it was said that you're evaluating potential to sale or partial sale of the company. Just wondering if there is any preliminary indication of interest and what you guys might be leaning forward? Paul Ricci: Yes. As we -- as I did comment in my moments ago, we have had interest in assets, business lines and in fact, the entire company and we're in the process of evaluating those as well as other financing interest in the company. Yan Dong: Okay. That's helpful. And then maybe in the meantime, in terms of your next-gen product development, is that put on hold? Or is that still behind you scenes like still progressing? Paul Ricci: No, it has not been put on hold. We've maintain critical engineering and related resources necessary to pursue the Halo architecture, which we've talked about in some detail in previous quarters. And that work continues unabated. Operator: [Operator Instructions] Our next question comes from Jash Patwa with JPMorgan Chase. Jash Patwa: I wanted to start with LSI. Could you maybe give us a sense of the size of the business, the intellectual property portfolio and the current momentum you're seeing with customers? I understand that LSI is the result of a series of acquisitions over the years. So I appreciate your perspective on how you think about the intrinsic value of that segment? And I have a follow-up. Paul Ricci: Well, I -- earlier in my comments, gave a little bit of indication of revenues year-to-date in LSI. Other than that, I can't comment terribly on the size, too much on the size. It is a growing business. It has deep technologies in various areas of Photonics that I mentioned in my comments. Those range from medical applications to industrial applications to military and defense applications. As I've indicated previously and again today, we think it's an under-recognized asset and kind of business line in our company. And we're doing the things necessary to accelerate growth in that business. And there has been, as I've mentioned, strategic interest in that business as well. Jash Patwa: Appreciate it. As a follow-up, while we appreciate all the detail on your automaker partnerships, I was hoping you could also share any updates on your relationships with platform partners like NVIDIA, is there a continued engagement on that front, especially in light of several major automakers recently announcing their L4 platforms in collaboration with these platform players? Paul Ricci: The company does continue to work with platform players. I don't have any updates on partnerships in that area today now. Operator: This concludes the conference. Thank you for your participation. You may now disconnect.
Operator: Thank you for standing by, and welcome to the Mattr Third Quarter 2025 Results Webcast and Conference Call. [Operator Instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Meghan MacEachern, Vice President, Investor Relations, External Communications. Please go ahead. Meghan MacEachern: Good morning. Before we begin this morning's conference call, I would like to take a moment to remind all listeners that today's call includes forward-looking statements that involve estimates, judgments, risks, and uncertainties that may cause actual results to differ materially from those projected. The complete text of Mattr's statement on forward-looking information is included in Section 4.0 of the third quarter 2025 earnings press release in the MD&A that is available on SEDAR+ and on the company's website at mattr.com. For those joining via webcast, you may follow the visual presentation that accompanies this call. I'll now turn it over to Mattr's President and CEO, Mike Reeves. Michael Reeves: Good morning, and thank you for attending our third-quarter conference call. Today, Meghan and I are joined by our Senior Vice President of Finance and CFO, Tom Holloway. Q3 was the first full quarter following the conclusion of Mattr's 4-year fundamental transformation, which included the divestiture of 9 businesses, the reshaping of our North American production footprint, and the onboarding of our recently acquired AmerCable business. With these complex strategic activities now complete, the organization is focused on leveraging its high-value portfolio of critical infrastructure products to enable progressively greater free cash generation and profit expansion. During the quarter, Mattr delivered year-over-year revenue growth of 39% and adjusted EBITDA growth of 16%, primarily driven by the addition of AmerCable to our Connection Technologies segment. The company also continued to benefit from strong demand in Composite Technologies, with the segment delivering further progress on key technology development and operational efficiency initiatives during the quarter. Our teams remain nimble, resilient, and cost-conscious in the face of a challenging near-term business environment, and we continue to focus on those variables we can control. Across Mattr, we are consistently prioritizing those actions and investments necessary to enable sustained technical differentiation, production flexibility, and progressively greater operational efficiency. Near-term business performance is likely to be impacted by continued economic weakness in certain key geographies, which we anticipate will incrementally moderate customer buying behavior during the seasonally slow year-end period, particularly in the Canadian, European automotive, and energy extraction markets. As a consequence, we anticipate a typical fourth-quarter lowering of revenue, and adjusted EBITDA will be more pronounced than normal, representing a low point for the year. Consistent with our historical approach to balance sheet management, the company expects to primarily allocate capital to debt repayment in the near term. Tom will have some further comments on capital allocation later. Turning to review the performance of each segment during the recently completed quarter. Connection Technologies delivered year-over-year revenue and adjusted EBITDA growth of 105% and 62%, respectively. Wire and cable revenue moved modestly higher sequentially, with relatively stable AmerCable revenue enhanced by increased Shawflex sales, which set a new quarterly revenue record, accelerating delivery of backlog from its recently relocated manufacturing site and offering an early demonstration of the new location's productive output and efficiency potential. Wire and cable margins moved sequentially lower on a less favorable revenue mix, primarily the result of reduced sales into Canadian mining and global oilfield applications, partially offset by higher sales into data center and utility applications. In early Q3, U.S. tariffs were introduced, which directly impacted the primary copper supply chain at both Shawflex and AmerCable. Moving quickly and creatively, Mattr's wire and cable team rapidly converted this supply chain from tariff to non-tariff sources. Although this conversion led to less favorable payment terms and an associated increase in working capital during the quarter, it avoided tens of millions of dollars in annualized tariff expense. Revenue from the segment's DSG-Canusa business was relatively flat sequentially. The business experienced sequential margin compression, driven primarily by higher freight and tariff expenses as the finished goods inventory proactively built prior to the relocation of the business's North American manufacturing footprint near exhaustion, and output from the new Ohio site required supplementation with internationally produced products. While tariff and economic impacts remain a near-term concern for the segment, our talented teams have demonstrated their ability to mitigate external effects with speed and agility. Our commercial teams continue to offset slowing Canadian mining and industrial and global oilfield activity by successfully capturing additional sales in utility, data center, and international mining markets. In parallel, we continue to closely watch for incremental copper-related tariff announcements, which could impact our business. The company expects fourth quarter revenue and adjusted EBITDA within the segment will move sequentially lower as stronger DSG-Canusa performance, driven by rising production from the Ohio site, is more than offset by significantly lower demand for wire and cable in the Canadian industrial stock and project sectors. These sectors have been hit particularly hard by the contraction of Canada's economy, with broadly lower industrial activity compounded by an aggressive inventory reduction drive from distributors serving the sectors. We anticipate Canadian industrial demand will remain similar to fourth quarter levels for several quarters. Looking past the near-term disruption of tariff-induced headwinds, we maintain our constructive long-term outlook for electrification-driven demand across the segment and are pleased with the progress of our strategic actions intended to improve operational efficiency and enhance exposure to utility, nuclear, global mining, data center, and broader U.S. industrial end markets. Turning to Composite Technologies. The segment's third-quarter revenue and adjusted EBITDA decreased by 4% and 2%, respectively, year-over-year. Flexpipe revenue and adjusted EBITDA moved lower sequentially as underlying oilfield activity levels continued to decline in the face of a depressed oil price. Mostly offsetting this weakness, Flexpipe continued to drive customer adoption of new technology with larger diameter products nearing 50% of North American revenue generation during Q3. This continued share gain enabled Flexpipe to limit year-over-year North American revenue contraction to 3% despite a reduction in well completion activity of 16% during the same period. Productivity expansion from Flexpipe's new Texas site remains on schedule, and the business continues to anticipate the release of additional larger diameter products around the year-end, expanding Flexpipe's addressable market by 50% or more over time. Xerxes's revenue in the third quarter was modestly lower sequentially as lower-than-planned production from new and newly refurbished manufacturing sites during Q2 impacted the volume of tanks available for Q3 shipment. These production constraints continue to improve as workforce proficiency across the Xerxes network rises, with Q3 total tank production rising by over 10% compared to the prior quarter. Customer demand for Xerxe's market-leading solutions remains high, with orders for products serving retail fuel, data center, fire suppression, and broader infrastructure markets exceeding revenue generation throughout the first 3 quarters of the year. At the end of Q3, the Xerxes order backlog stood at a new record high. During the third quarter, Mattr acquired an intermediary, which had historically facilitated the supply of metallic components to the segment. This acquisition secures a multi-decade exclusive supply agreement with the ultimate manufacturer, significantly reducing costs, lowering tariff exposure, enhancing supply chain control, and lowering business risk. The transaction involved minimal integration or onboarding activity and is expected to deliver an after-tax internal rate of return significantly above the company's 20% target. We anticipate segment revenue and adjusted EBITDA will move sequentially lower in the fourth quarter as unfavorable oil prices prevail and the normal holiday season slowing of U.S. onshore activity reduces the shipment of FlexPipe products, while the onset of winter season ground conditions will lower the number of Xerxes tank shipments approaching year-end. Looking beyond the fourth quarter, we believe the Composite Technologies segment is positioned to outperform its markets in the coming years as efficiency and increasing output from its newly established and upgraded Xerxess' facilities, combined with the introduction of new Flexpipe technology, are expected to create significant growth opportunities for the segment in the mid and long term. Tom will now walk us through some additional financial details. Thomas Holloway: Thanks, Mike. Third quarter's revenue from continuing operations was $314.9 million, 39% higher than the third quarter of 2024, while adjusted EBITDA from continuing operations was $34 million, a 16% increase from the comparative period in the prior year, primarily attributed to the inclusion of AmerCable results in 2025. The Connection Technologies segment delivered a new third-quarter revenue record of $184.2 million, which was 105% higher than the third quarter of 2024, with segment adjusted EBITDA being $7.5 million higher than the prior year. Both outcomes are primarily driven by Amer Cable's results being included within the segment's reported numbers. Despite the higher segment revenue, the sales mix in Amer Cable was less favorable sequentially, and elevated freight and tariff-related costs in the DSG-Canusa business impacted profitability. Composite Technologies segment revenue was $130.7 million, a 4% decrease compared to the third quarter of 2024, while adjusted EBITDA only decreased by 2% over the same time period. This decrease in revenue was primarily attributable to year-over-year declines in North American oilfield well completions, which were partially offset by FlexPipe's larger-diameter technology sales gains. Segment adjusted EBITDA in Q3 2024 included $1.5 million of MEO-related costs that were not present in the current year. Turning to cash flow. Cash provided by operating activities from continuing operations in the third quarter was $6 million. This was heavily impacted by an increased investment in working capital due to a significant shift in the copper supply chain within our wire and cable businesses to mitigate tariff impacts, which resulted in shorter supplier payment terms. This unfavorable change in the working capital cycle was more than offset by the tariff savings achieved. Cash used in investing activities in the third quarter was $33.1 million, which included capital spending on property, plant, and equipment of $14.6 million and the $22.5 million business acquisition discussed previously, partially offset by a receipt of a modest working capital settlement related to the AmerCable acquisition. During the quarter, cash provided from financing activities was $13.2 million, primarily driven by $21.7 million of net borrowings on the company's credit facility, largely related to funding the acquisition. Cash outflows also included the repurchase of 445,000 shares under the company's normal course issuer bid and lease liability payments. At quarter end, the company's net debt to adjusted EBITDA ratio was 3.9x or 2.8x if lease liabilities are excluded. This reflects the impact of higher working capital tied to tariff mitigation, modest borrowings to fund the small Q3 acquisition, and a sequentially lower trailing 12-month adjusted EBITDA. We remain committed to returning to a normal course ratio of 2x or below, and we'll be prioritizing debt reduction in the near term to ensure maximum future balance sheet flexibility. While we anticipate pausing activity under our share repurchase program in the short term, this does not represent a change in long-term strategy. Capital expenditures recognized in the quarter were $14.3 million, with $14.6 million of cash deployed, including $7.8 million of cash outflow tied to capital expenditures previously accrued. Q3 capital expenditures included $10.8 million related to growth projects, primarily associated with new product readiness and production equipment intended to increase manufacturing capability and efficiency within both segments. Full year 2025 capital spending expectations have been revised down to $50 million to $60 million from our previously communicated range of $60 million to $70 million. This is driven by spending reductions and efficiencies and does not represent costs that will move into 2026. We anticipate that 2026 capital spending will be within the company's previously communicated normal run rate range of $40 million to $50 million. I will now turn it back over to Mike. Michael Reeves: Thank you, Tom. Over the last 3.5 years, we have fundamentally enhanced our ability to efficiently develop and deliver highly differentiated critical infrastructure products from an optimized footprint. Across the matter organization, we are tightly focused on accelerating workforce proficiency and operational efficiency to enable margin and cash flow enhancement. In parallel, we continue to exercise tight spending control, adjusting our cost base as needed to appropriately reflect activity levels. As previously noted, given our current view of likely market conditions and customer demand, we expect our reported business performance in the fourth quarter will be below the third quarter of 2025. Our outlook for 2026 remains cautious, given the impact of ongoing macroeconomic and geopolitical uncertainties experienced during the second half of 2025 and the potential future impact such factors may have on certain markets the company serves. The company remains optimistic regarding the benefits of recent investments to develop new technology, enhance manufacturing capability, improve operating efficiency, and acquire AmerCable. We also remain optimistic that robust near-term demand for the company's products in U.S. infrastructure applications, including fueling network renewal, water management, data center construction, utility expansion, and mining, will persist for an extended period of time. In parallel, the company is experiencing significant declines in demand for wire and cable in the Canadian industrial and mining sectors. Expects depressed commodity prices to weigh on oilfield sector activity for the foreseeable future, and cannot yet determine the potential for direct tariffs on Canadian-made wire and cable products sold into the U.S. utility market. Consequently, the company will not be providing an outlook for the full year 2026 at this time, but anticipates providing such an outlook when it reports Q4 2025 results. Despite the near-term turbulence associated with macroeconomic and geopolitical uncertainty, we retain high conviction that our differentiated technologies, which support increased generation, movement, and use of electrical power and the ongoing transition to composite materials and fuel and water management applications, provide Mattr with substantial long-term growth and profit expansion opportunities. I'll now turn the call over to the operator and open it up for any questions you may have for me, Tom, or Meghan. Operator: Certainly. And our first question comes from the line of Tim Monachello from ATB Capital Markets. Tim Monachello: I just want to try to calibrate the level of change in the outlook across business lines. It sounds like you're taking a more conservative stance around capital allocation, and the outlook has probably become weaken relative to where you thought it was in the last cycle. So, maybe can you talk a little bit about under-absorption trends across the 4 facilities when you expect to hit normalized capacity in each one? And then I guess, the range of growth trajectories that you think you might achieve in each business line in 2026? Michael Reeves: Yes. I'll certainly address some of that. Obviously, we've been clear that we'll speak more about '26 when we report Q4 results. I think we need a little more time to see how certain things will unfold, but I'll speak more about what those items are. More specifically, in the new facilities, very happy with the progress of the Flexpipe facility in the Dallas area; the Xerxes facility in South Carolina is continuing to ramp up. And the Shawflex facility that relocated within Toronto allowed that business to deliver a new record revenue quarter in Q3. So those 3 sites either are already at or will absolutely be at a normalized level of production as we roll into the first half of 2026. Where we've had more challenges here recently has been the DSG facility in Ohio, which is a relocation of production activity from Canada into the U.S. We faced a number of challenges there, which I spoke about on the last earnings call. And those challenges persisted in the first part of Q3, which led to that facility falling below our expected production output levels and required us to import products made in our German and Chinese facilities to meet North American demand at levels that were above our expectations for the quarter. So we did incur some incremental freight logistics and tariff expenses associated with plugging that gap. The production in that facility has ramped substantially as we go through the tail end of Q3 and into early Q4. It has already surpassed the productive output of the Canadian facility that it replaced. So we are well on the way to being back on track for that facility, and I would expect that we will be at a normalized level of production there in the first half of '26 as originally anticipated. So some short-term pain, but not something that I expect will linger for an extended period of time. I think when we talk about our outlook, really the one thing that has meaningfully changed from our last earnings call to today is the effect of the Canadian economic slowdown on industrial demand for wire and cable in Canada. We have seen that the demand level has dropped quite substantially from the middle of Q3 to today. And I think it's likely to stay at a relatively low level throughout Q4 and probably well into 2026. The underlying industrial demand has absolutely lowered. And our distribution partners are, as you would expect, working hard to reduce their inventories, which further compounds the challenge. So what you'll see from us in the wire and cable space is cost reduction actions that have effectively already been taken and an aggressive reallocation of resources to drive incremental growth of sales of wire and cable products into U.S. utility, data center, and other applications as we attempt to overcome the shortfall in Canadian industrial demand. So I know that doesn't give you everything you've asked for, but hopefully, it gives you enough. Tim Monachello: And understanding that it's probably difficult from your perspective to have a view on '26, but Q1 is not too far away. There are some seasonal factors that are impacting Q4 on a sequential basis and probably overshadowing some of the absorption improvement that you might see in Q4. So, when you think about margins in Q1 and seasonal trends and filling up those facilities, is it a reasonable expectation to think that margins should improve sequentially in Q4? Michael Reeves: I think there is a wildcard in there that I cannot tell you the answer to right now, and that is the potential levying of tariffs on Shawflex Canadian-made wire and cable shipped into the U.S. As you may recall, there was an expectation that the U.S. government would make further announcements on its copper-related tariffs on the 28th of October. That date has signed on. There have been no announcements, although that could well be due to the government shutdown. So we are waiting to see if there's something announced there and if that something impacts us. So with that one caveat, we normally see similar degrees of seasonal impact in Q4 and Q1. The businesses that are seasonally affected are largely in the composites business, where ground conditions tend to be a factor in both quarters. So I would say I don't see macro conditions or seasonality being materially different from Q4 to Q1. There are some upside opportunities. There is this tariff thing that we're waiting to see how that settles. And at this point, I think that's about all I can tell you. Tim Monachello: I guess the one segment where you might see some upside for seasonality would be Flexpipe, just given the exhaust in Q4? Michael Reeves: Certainly, the potential. I think we also need to see where oil prices move to. They sit in the high 50s today, with some potential that they could move lower. So that obviously is an effect that we need to be thoughtful around. Right now, I would expect activity levels would follow a normal seasonal track, which means we're slower as we go into the holiday season, and then we start to see activity move up as we roll into, let's say, the second half of January. So we'll have to see how the customers respond to oil prices. I doubt there will be a material movement provided oil price stays where it is now. Tim Monachello: And just on Canadian industrial demand for wire and cable, is that isolated to like lower-margin stock products? Or are you seeing that across some of the higher-margin product lines as well? Michael Reeves: We've seen it across the industrial sector. So projects and stock products have been impacted very similarly. Obviously, we don't have perfect insight into other suppliers in that space, but we can tell by quoted lead times that I think everybody working in that space is seeing exactly the same effect. Operator: And our next question comes from the line of Ian Gillies from Stifel. Ian Gillies: Can you talk a little bit about the margin dynamics in Connection Technologies and Composite Technologies sequentially? Just revenue is reasonably flat, and margins are down. Is it solely due to product mix? Or is there product price inflation? I'm just trying to reconcile that. Thomas Holloway: Yes. So I mean, I think I'll take the first stab at that. Are you asking Q2 to Q3, Ian? Or are you asking Q3? Ian Gillies: Yes. Yes, specifically Q2 to Q3. Thomas Holloway: Yes. I mean I think if we look at Connection Technologies, we had let the market know that we thought AmerCable's margins would be down quarter-over-quarter given the mix, and that played out about how we expected. We saw some good data center orders, which are great. They fill the pipeline, and it's good business, but it's slightly lower margin than some of the oil field or mining activity that we see in that business from time to time. So that played out about how we expected. I think the big wildcard here and the big impact was the DSG business, the Ohio facility. And in Mike's prepared comments and mine, we talked about the fact that because of production struggles in that facility, we have to augment it with German and China production from our other facilities, get that across to North America to meet customer demand, which is great. But the cost of doing that is that we had expedited freight costs and tariffs on those products to get them over here at a much higher level than we anticipated. That we do not anticipate persisting, which is why you will likely see DHT margins move up in Q4. But that's the biggest dynamic that was playing out in that particular Connection Technology space. Ian Gillies: And then stepping back, looking at the balance sheet, do you feel the need to pursue asset sales or any other discrete financing to plug the balance sheet? Or do you think you can work your way through this? Thomas Holloway: No. I mean, we feel very confident with our ability to plug our way through this. I mean, our secured net debt covenant ratios are well within range. Obviously, you see the interest coverage ratio getting a little tighter as you get EBITDA shrinking a little, but we feel very confident in our ability to manage through this. The capital allocation pause on the NCIB is really more of let's really focus on that ratio and get it down so that we can be more aggressive in the future with allocating capital in other areas. As I said in my remarks, that is not a long-term change. That is something we're just doing in the short term to make sure that this market dynamic that is causing the macros and therefore, our results to be impacted, doesn't create further issues. So just trying to get in front of that. But we don't see any significant issues or concerns. No asset sales would be required there. Operator: And our next question comes from the line of Arthur Negorny from RBC. Arthur Nagorny: I just want to touch on the large-diameter pipes within Flexpipe. I guess that's now at 50% in North America, as you mentioned. I know you've previously outlined that as being the target. But now that we're here, is there any indication that you can get that number maybe above 50%? Michael Reeves: Yes, absolutely. I think the market continues to evolve. Customers generally are migrating to larger and larger products. And I think what started out three years ago as that business representing about half of our revenue as a potential is now, I think, considerably greater than that. So as we roll forward, I think we would expect that we can continue to grow share with the current large diameter products, and they will likely move to north of 50% of our revenue generation in North America. And then, of course, we will be supplementing that with additional large-diameter variants that we introduced early in the new year, which will open up a substantial new market opportunity that we would expect to grow into over a period of years. So while the underlying market for Flexpipe in North America has obviously been challenging conditions, 16% year-over-year decline in well completion activity, the business has performed extremely well. Our revenue is just barely down year-over-year, entirely due to the success of the sales team capturing incremental share, deploying new technology, which will be enhanced as we roll into 2026. So I think in almost any market environment, Flexpipe is going to be an outperforming business as we roll forward. And if we can see some stabilization of underlying activity levels, then obviously, the business can start to deliver some meaningful growth. Arthur Nagorny: On Xerxes, I guess, last quarter, you disclosed that you, I guess, had a backlog going into mid-2026. Just curious where that stands now? And separately, could you maybe touch on how demand is trending with data center customers specifically? Thomas Holloway: Yes. So over the last 12 months, Xerxes has added approximately $100 million to its backlog. The backlog at the end of Q3 stood at an all-time record and represented somewhere north of six months, somewhere a little south of nine months of forward revenue. So the business is facing sustained and growing demand, which we believe will persist for many years to come. Hence, our very strong focus is on enhancing productive output. As I mentioned in the prepared remarks, productive output rose by more than 10% from Q2 to Q3. Obviously, Q4 will be a little slower because of the ground conditions. It limits some of the shipments that we'll see. But the business will exit this year with a productive capacity that is materially above the level that it entered this year, which sets us up for that business to have some strength in 2026 and beyond. Data center demand continues to be very robust. We're able to take incrementally more orders as our very large molding for the tanks that data centers require continues to expand, and that's mostly in the Blythewood facility in South Carolina. So I think Berks is all in all positioned to have good performance as we roll forward. We're still working on operational efficiency. While we've got a new site and a fully refurbished site, we still have 4 sites that have existed for nearly 40 years, with limited investment until recent years. So the opportunities to extract incremental efficiency and production output from those sites are still there, and the teams will be incrementally extracting that as we roll through the next several quarters. Arthur Nagorny: And then on AmerCable, I know you shared a little bit of color there. It sounds like things are progressing more or less as expected. Would you say that acquisition is still on track with the guidance that you previously laid out, I guess, specifically on the adjusted EBITDA front? Michael Reeves: Yes, great question. I would say, Arthur, that AmerCable has performed extremely well despite the market challenges in some of the end markets; they've replaced those orders with other orders as we talk about the data center piece. And for the full year, we expect them to perform at or above their initial expectations that we had communicated to the market. So very, very pleased with the execution and the integration process and onboarding process, which is effectively complete at this point. Arthur Nagorny: And then the last one for me. Is there any way that you can help us with the direct tariff impact, what that looked like across the business this quarter? And maybe what the outlook for that is going forward, given some of the mitigating actions that you've undertaken? Thomas Holloway: Yes. I think last quarter, we had signaled that we expect it to be roughly $1 million to $2 million per quarter per segment. That's generally in line with our expectations going forward. As I talked about the DSG dynamic going on, there were a little more tariffs in the third quarter than we anticipated. And so there might be a little uptick in that. So if you were to say $1 million to $2 million in the Composites business per quarter, I think that's in the right range. If you were to say maybe on the upper end, closer to that 2 number for the fourth quarter in the Connections segment, and then getting back to normalized, probably 1% to 2% going forward after that. But that's how we see it. And obviously, we're trying to bring that down as much as we can, but that's effectively what we expect. Michael Reeves: Yes. The other element that's worth noting here is that with the announcement of tariffs on certain copper products that were issued in early August, had we not rewired our supply chain following that announcement, I think we would have been facing an annualized tariff cost on our copper supply chain that could easily have been $50 million a year. So very, very proud of the teams within Shawflex and AmerCable that worked within a matter of weeks to rewire that supply chain. Obviously, we're carrying a little extra net working capital as a consequence of some less favorable payment terms, but that's a small price to pay to avoid up to $50 million of annual tariff costs. So I'd say, broadly speaking, we're doing a very good job of mitigating the direct effects of tariff announcements on the company. Where we are struggling is customer effects from tariffs and knock-on economic impacts, particularly in the Canadian industrial market right now. Operator: And our next question comes from the line of Michael Tupholme from TD Cowen. Michael Tupholme: Tom, can you talk about how we should be thinking about changes in noncash working capital in the fourth quarter, as well as any initial thoughts around the 2026 full year for that? Thomas Holloway: Yes. So, as Mike was just referring to the copper supply chain piece, we did see the third quarter move negatively, almost entirely because of that. And that negative working capital piece was really just that. So our previously discussed trajectory for Q4 should be intact, where Q4 is an unwind quarter. We should see working capital move favorably. Our DSOs are in a good place. We're working to get inventories down, and our DPOs are in a pretty good place. So I would expect the fourth quarter to be a release of working capital as we had signaled before. As we go into next year, our general trend over the course of the quarters is that the first quarter is our worst working capital quarter as we invest working capital for future quarters' orders. The second quarter is trending a little bit better than that. And then the third and fourth quarters generally are more of an unwind quarter this year, being the exception because of that copper supply chain. And just to say, that supply chain has now been adjusted, so we don't anticipate significant moves unfavorably because of that. What we're hopeful about is not committing to this yet, but what we're hopeful to be able to do is actually improve those payment terms and make that a little better over time. Michael Tupholme: And then some of the commentary around the balance sheet and leverage and pausing buybacks, focusing on debt repayment. How should we be thinking about the evolution of the leverage ratio here, and when you would expect to be getting back within your target range, and then sort of freeing up capital to be deployed to other alternative uses? Thomas Holloway: Yes. I think if you look at what's happened in '25, I mean, we've had a couple of down quarters as you're noting here, that's what's really impacted our ratios. So the business is still generating good, healthy working capital and cash flows, other than that. As we go into '26, again, as Mike touched on in his commentary, we see the impact of '25 moving into '26. And so we're, therefore, being cautious with the way we're managing the balance sheet. I would tell you that the seasonality in the first quarter will mean the first quarter is a lower quarter over the course of 2026, which is normal. That's what happens in our business every year. So, as you look at our use of cash during that period, we want to put as much as possible into reducing that debt. That's the reason for that change. I think from a trajectory, depending on where the fourth and the first quarter end, you could see that ratio tick up just slightly because of the EBITDA numbers and then start to decline as we move through the course of 2026. Given what we know from the macros now, it's going to take us most, if not all, of '26 to get back to a 2x ratio, and it could take us slightly longer depending how these tariffs impact our customer behaviors and those sorts of things. But as I said previously, we don't see any need to do anything drastic here. We're just taking precautionary measures to make sure we're being proactive, getting that interest down, getting that debt down to ratios that we're comfortable with. Michael Tupholme: And then just the last one. I don't know if I missed this earlier, but the small acquisition you did, which sounds like it was really to help on the tariff side of things and supply perspective. But can you maybe quickly speak about that, unless you've already covered that, and I can go back and review that. But secondly, like there is mention about the possibility of sort of future acquisitions and being opportunistic? And how do we think about that and when you would have appetite and be potentially looking at something further on the M&A side? Michael Reeves: Yes. Maybe I'll address the acquisition, and I'll pass to Tom to talk about the future. We have historically purchased metallic components to support the composites business. We don't use a huge volume of them in the big scheme of things, but they are an important component of the supply chain for both Flexpipe and Subsea. We made a number of changes in our supply chain over the course of the last 18 months to lower our reliance on Chinese origin products and migrate that reliance to other lower tariff, lower cost environments. In that process, we were working with an intermediary, which was very helpful. But now as we start to see particularly Flexpipe larger diameter products come to market and the expected consumption of these metallic components rise, we felt it was a good moment to take advantage of an opportunity to acquire the intermediary, simplify the supply chain, enhance our margins, lower the tariff costs that we will have to pay going forward and take some risk out of that. So that's the decision we made midyear, relatively modest acquisition, but one that was strategically important for the Composites segment and will pay back very healthily over the course of the next two, three, four years. So feeling good about that decision. Tom, do you want to speak about M&A? Thomas Holloway: Yes. On the M&A front, obviously, with pausing the buybacks and putting money into debt, you shouldn't expect us to be active in the M&A space other than filling our pipeline, which we will continue to do because obviously, it takes years to do that sometimes we get good deals on the table. But I would not expect to see anything in '26. Again, we're always opportunistic and looking for things. But from a balance sheet perspective, we really want to get that ratio down and get back into a comfortable level before we are really active again. So likely a pause in '26, again, filling the pipeline, but not doing a deal and closing anything unless something changes materially in the market. I do think you should expect us to try to be active again as we get into '27. Again, things have to go right, but our ratio should be getting into a range at that point where we'd be comfortable looking at something and again, expanding this business. Operator: And our next question comes from the line of Zachary Evershed from National Bank Capital Markets. Zachary Evershed: So just continuing on the question about the small acquisition there. Internalizing a supplier obviously comes with a little bit of margin accretion. Do you think that will be noticeable on the P&L? Michael Reeves: I do. But I think it will take until we are working our way through 2026 before we start to see the full benefits of that. Obviously, there's certain inventory already in our system that predates the acquisition. But as we draw that down and start to see full advantage of the acquisition, we should see it in both Xerxes and Flexpipe margins. And obviously, as Flexpipe becomes an increasingly bigger consumer of these metallic components with larger and larger diameter products and as that revenue stream starts to ramp up, we will see incremental benefit from the acquisition. So maybe low single-digit EBITDA millions of incremental margin in 2026, perhaps a little better than that, but probably in that range. And I think we can get into double digits as we roll into '27. Zachary Evershed: And then, since we're talking about the larger diameter Flexpipe products, can you speak to your most recent expectations for the sequencing of sales for the addition of those additional large diameter products and the higher [indiscernible] Flexpipe products? Thomas Holloway: Yes. So I think the likely growth path for the new products that we will introduce right around the end of the year is probably going to follow a similar curve to that, that we experienced with the 5-inch and 6-inch products, which were released somewhere in that '21, '22 time frame. So I think we would expect that revenue is, let's say, $10 million or perhaps a little less in 2026, but ramping quite aggressively from there as we roll forward. Obviously, there's substantial demand in the market. We believe that we are well positioned to take that. Obviously, you have to ramp up production. And in many cases, customers will want to try it once and evaluate performance before they try it for a second time. So there will be a gradual roll into the revenue contribution from this one. But nonetheless, the products, I think, are going to prove themselves to be very robust. I think customer pool will be significant. And in 12 months or 18 months from now, we will find that these new products make up a material percentage of the revenue of the business. Zachary Evershed: And then on Xerxes with a two- to three-quarter backlog, why do ground conditions for installation limit your output? Couldn't you be working with customers on terms around taking ownership so you can just be cranking out tanks during the off-season as well? Michael Reeves: We did. So the physical installation of tanks, obviously, is impacted by the ground conditions. We produce at full capacity all year long because we, quite frankly, are still not in a position to meet 100% of our customers' demand. So there is no incentive to back away from production at any point in the year. Tanks that we produce during periods where customers can't physically install them will, in most cases, get invoiced upon completion and then will be stored on our own land until the customers can take them. There is a number of accessories that are billed to customers when tanks are shipped to their final installation location. We don't get to charge for those items until we physically ship them. So if you go back and look historically at the revenue of Xerxes and how it was really very seasonal, it is far less seasonal today because we've managed to migrate most of our customers to a bill upon completion agreement. But there's some seasonality because not every customer has agreed to allow a bill upon completion. And if we don't ship a tank, we don't get the bill for the accessories. So that's why you see some modest but still noticeable seasonality in that business. Zachary Evershed: And then, I guess if we set the potential for incremental tariffs aside, do you think you're being overly negative in your outlook here? Michael Reeves: Try not to be overly negative. I think we are trying to be realistic, given what we have seen unfold over the last 2 quarters. It takes time for tariffs to work their way through supply chains and all the way to customers, and ultimately have an effect on customer behavior. And we are seeing now the effect of tariffs that were implemented in the first half of the year on the Canadian industrial market. We've seen Canadian economic activity slow, actually turn negative in Q2. And we are seeing the effects on the industrial infrastructure in Canada. So that is the biggest area where I am cautious looking into 2025. There's some element of the slowing in industrial demand in Q4 that is related to distributors lowering their inventories. How long it will take them to get to a point where their inventories are in balance is not yet clear. Whether we will see any positive impact from the recently announced Canadian federal budget and the investments into capital projects is also not yet clear. If we see federal dollars start to stimulate industrial activity at some point in 2026, then obviously, that would pose an upside opportunity. If we see something approaching a return to balance in the oilfield markets and we see oilfield pricing move up, that would present an upside opportunity. I'd say while there are these macro elements that obviously we are keeping a close eye on and are not necessarily favorable for the business, there are also bright spots. We've spoken about Xerxes and the overwhelming demand that business has. I think Xerxes will enter 2026 with lots of opportunities. We talked about Flexpipe's large diameter. We talked about the success that Abberable has had in penetrating the U.S. data center market. We continue to see strong demand from U.S. utilities. We continue to see strong demand for mining outside of Canada, nuclear, and water. There are a lot of areas where we see strong demand and think that will prevail throughout '26. The areas where we are facing some challenges are substantial enough that they are worthy of conversation. So I am trying not to be overly negative or overly positive. Hopefully, we're presenting a balance. Operator: And our next question is a follow-up from the line of Tim Monachello from ATB Capital Markets. Tim Monachello: Quick follow-ups. On the freight costs from Europe on DSG, how much that contribute to the margin weakness in Q3 projections? Thomas Holloway: Yes. I mean, I would say it was an order of magnitude, a couple of million dollars. So you can probably do the math on that. But that's the order of magnitude. And as I said, we don't anticipate that continuing at that level going forward. But yes, that's the impact for the quarter. Tim Monachello: And then on the intermediary position, I'm just curious, strategically, what prevented you from just going straight to the... Michael Reeves: So obviously, you have to, I think, be mindful of what experience and skill sets you have in an organization and what you don't have. In this particular case, we were not perfectly positioned to organically execute the establishment of a production footprint and the output of these products in the case of Vietnam. So we chose to work through a party that had that experience, and I'm very pleased that we did. The pace at which we were able to set up that footprint, have access to those products and those costs and those quality levels has been very beneficial over the course of the last 12 to 18 months. So we chose a pathway that we thought would yield the highest value for the business. And at this point, I think that's going to prove to be the case. Tim Monachello: And does that intermediary have any other customers, or are you the sole customer? Just curious if there's any other revenue that comes out of this acquisition. Michael Reeves: We did not acquire anything that involved us supplying to a third party. So this is entirely supplied to our own business. Tim Monachello: And do you get exclusivity? Michael Reeves: Yes. So we have a multi-decade exclusivity arrangement, which obviously we believe will have that. Tim Monachello: Is that one of the strategic rationales? Like, are you cornering the market on this component from Vietnam, I guess? Michael Reeves: So I would describe these components as being proprietary components to us. But in the way we've structured the deal, we can ensure that our competitors don't get similar products from the same source. So I think we have protected ourselves in terms of intellectual property, having a pricing advantage, and, of course, now gaining some tariff advantage as well. Tim Monachello: And in the event that these tariffs go away, does the accretion of this deal also go away? And does it make sense if there are no tariffs? Michael Reeves: The accretion does not go away. Obviously, if there are no tariffs anywhere in the world, then the calculation would change a little bit, but the value associated with securing this incremental margin by removing the intermediary and having direct access to the end producer is something that would have made sense regardless of the tariff environment. Operator: This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Mike Reeves for any further remarks. Michael Reeves: We appreciate everybody's time and attention here this morning. We look forward to speaking to everybody when we release our Q4 earnings results next year. Have a great rest of the day. Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
Lluc Sas: Good morning, and welcome to Sabadell's results presentation for the third quarter and first 9 months of 2025. Today, we are joined by our CEO, Cesar Gonzalez-Bueno; and our CFO, Sergio Palavecino. The presentation will follow a similar structure to previous quarters. Our CEO will start by sharing strategic priorities and then discuss the key developments of the quarter. Next, our CFO will provide a detailed review of financial performance and the balance sheet before our CEO concludes with closing remarks. Finally, we will open the floor for a live Q&A session to address your questions. So Cesar, over to you. Cesar Gonzalez-Bueno Wittgenstein: Thank you, Lluc. Good morning, everyone. Before sharing the results of the third quarter, I will start my presentation today with a reflection on Sabadell's evolution since '21 as well as the prospects for the upcoming years. In Slide 4, in early '21, we launched a strategic plan focused on transforming each one of our businesses through specific levers for each one. This transformation would support the financial turnaround of the group. Since then, we have executed the strategy in a decisive and accelerated manner. We have talked about this many times. I won't elaborate into the details now. As a result of our transformation, a solid financial turnaround has been delivered. Return on tangible equity has jumped from 0% in 2020 to the current double-digit figures, which are above our cost of capital. By the way, our transformation process and financial turnaround has not been affected by the hostile takeover bid, and we have been dealing, which we have been dealing with over the last 1.5 years. In July 25, we presented our new strategic plan. An important milestone is the sale of TSB at very attractive multiples, which crystallizes the value created since we acquired TSB in 2015. The sale was signed with Santander and approved by our shareholders last August, and we expect the closing early next year. The new strategic plan is focused on growth and shareholder remuneration as Sabadell has not reached its potential. In terms of profitability, we expect return on tangible equity to keep growing and reach 16% by 2027. We reaffirm all the objectives of the strategic plans in terms of return on tangible equity, growth and shareholder remuneration. On Slide 5, we have a quick reminder of the key elements that underpin our equity story. First, Spain. Following the sale of TSB, the vast majority of our businesses is now in Spain, one of the fastest-growing economies in Europe. Second, growth. Our approach is clear: prudent market share gains while preserving asset quality and pricing. Third, execution. We have a solid track record of delivering results since 2021. We are confident we will deliver on our current targets. And fourth, shareholder remuneration. We have a proved and strong ability to generate capital while growing our lending book. We will leverage on this to offer an attractive shareholder remuneration in the upcoming years. In Slide 6, we are reminding the financial guidance for 2027, which we announced in July and we confirm today. To summarize, our return on tangible equity for '27 is 16%. We also announced cumulative shareholder remuneration between '25 and '27 and we expect it to amount to EUR 6.3 billion. And in September, we actually improved our expectations on shareholder remuneration from this EUR 6.3 billion to EUR 6.45 billion. In Slide 7, we provide more color on shareholder remuneration. The expected EUR 6.45 billion includes recurring distribution based on a 60% payout ratio. This is executed through two interim cash dividends per year plus one final cash dividend. On top of the 60% payout, we are planning to distribute excess capital above the 13% core Tier 1 threshold. Finally, we will distribute the extraordinary dividend from the sale of TSB once the deal is closed. As you can read in the bottom right-hand slide -- of the slide, we reaffirm that yearly cash dividends per share in '25, '26 and '27 will be higher than cash dividends per share paid in 2024, which was EUR 0.2044. And now let's move to the third quarter results highlights. In Slide 9, the key messages of the quarter. Third quarter results are on track to meet 2025 guidance. Our recurrent return on tangible equity, that is excluding one-offs, and extraordinary items stood at 14.1%. Core Tier 1 reached 13.7%. We kept generating capital in the quarter and in line with our strategy. I will later elaborate on this. Commercial activity continued to accelerate, both performing loans and customer funds grew by around 8%, excluding TSB. Core revenues remained in line with expectations. NII is on track to meet the EUR 3.6 billion target for 2025. Fees grew by 3.7% year-on-year. Asset quality continues to improve. Total cost of risk stands at 37 basis points, decreasing by 18 basis points year-on-year. Finally, we are pleased to confirm a second interim cash dividend of EUR 0.07 per share payable on December 29. Let me remind you that 2025 shareholder distribution amounts to a total of EUR 1.45 billion. On Slide 10, we turn to volumes. One more quarter, we delivered strong growth, both in loans and customer funds. Performing loans ex-TSB grew by 1.2% quarter-on-quarter, even with expected third quarter seasonality. On a year-on-year basis, loans ex-TSB grew by above 8%. On the right-hand side of the slide, total customer funds ex-TSB grew by 1.5% in the quarter and by 7.8% year-on-year. This is mainly driven by off-balance sheet funds, which grew by more than 15% year-on-year. Regarding TSB, volumes in euros were impacted by sterling depreciation, but remained fairly stable at constant FX, both quarter-on-quarter and year-on-year. All in all, at constant FX, group performing loans grew by 5.9% and customer funds increased by 6.4%. If we move to slide origination, and we talk now about loan origination in Spain, let me start with new mortgages. Origination in the first 9 months of the year increased by 26% compared to 24. Mortgage origination in Q3 decreased by 12% quarter-on-quarter, driven by seasonality. Our volumes of new mortgage origination remain reasonable. Our new lending market share is in line with our stock market share. Furthermore, we keep managing risk-adjusted return on capital rigorously for new mortgages to make sure growth is delivered in a profitable manner. Moving to new customer consumer loans. We continue to perform well, growing origination by 19% in the first 9 months of the year versus previous year. In new loans and credit facilities to SMEs and corporates, there was the expected quarterly seasonality. Year-on-year, evolution has been broadly stable. Finally, Third quarter origination of working capital finance declined slightly compared to Q2. However, it increased 3% year-on-year. Yearly cumulative origination in SMEs and corporates remains broadly stable compared to '24. All in all, current levels of new lending in all products allow for growth of the loan book. On Slide 12, performance of Payment systems remains strong. On the first 9 months, cards turnover increased by 6% and point-of-sale turnover rose by 2%. We can see a slower growth in point-of-sale turnover. Taking into account our already strong market share in this business, we are now focused on pricing and profitability. This approach has resulted in a reduction of certain exposures with very low margins, but we have increased total fees coming from this business. In the bottom half of the slide, you can see the evolution of savings and investment products. They grew by EUR 4.8 billion in the year, driven by an increase of EUR 6.8 billion in off-balance sheet products. On Slide 13, we show the breakdown of performing loan book ex-TSB across segments and geographies. In Spain, our performing loans were up by 0.9% quarter-on-quarter and by 7.6% year-on-year. All segments and products keep growing. The stock of mortgages grew by 5.6% year-on-year, consumer loans by 19% and SMEs and corporates grew by 6.2%. International operations were equally strong with performing loans by -- up by 11% year-on-year. In sum, performing loans ex-TSB grew by 8.1%. In Slide 14, I will elaborate on our strategy to enhance capital generation while growing loan book. I think this is a crucial element of our strategy, which we have shared before. We keep growing our book significantly, yes. But on the left-hand side of the slide, you can see that the probabilities of default of new lending originated in '25 are much lower than those of new lending originated in previous years. These are the result of our approach to credit growth, as we explained in the presentation of our strategic plan in July. In the last few years, we have been working very significantly on improving our risk models and processes. We have done this on a portfolio-by-portfolio basis. Once the risk origination capabilities of a given portfolio were improved, we fostered lending growth in that particular portfolio. Furthermore, the quality of the risk we are granting after improving our models and processes is much better as we are able to skew new lending towards lower-risk segments in each portfolio. On the right-hand side of the slide, you can see a simplification of the implications of our strategy. In each portfolio, we might be obtaining lower loan yields, but at a lower cost of risk as the resilience of our franchise improves and we generate more capital. As a matter of fact, we have already generated a very handsome figure of 176 basis points of capital year-to-date. This is fully in line with guidance that we shared in our Capital Markets Day of 175 basis points per year. And this is for the first 9 months of the year, the 176 basis points. Let's turn now on Slide 15 for the U.K. business. As expected, volumes remained broadly stable in the quarter. Net profit of TSB reached GBP 59 million in the quarter, which translates into almost GBP 200 million in the year. That brings its contribution to Sabadell to EUR 242 million year-to-date, up by 44% year-on-year. Stand-alone return on tangible equity was 13.8% despite having a high solvency that remained strong with a core Tier 1 of 16.3%. Finally, the TNAV increased by GBP 104 million between April and September. This will be included in the final proceeds coming from the sale of TSB to Santander, ensuring TSB continues to contribute to Sabadell until the transaction closes. On Slide 16, we can see a summary of our Q3 results. Net profit ex TSB amounted to more than EUR 1.1 billion in the first 9 months of the year. Net profit of the group reached almost EUR 1.4 billion. This implies a recurring return on tangible equity of 14.1%. This level of profitability allows us to grow our loan book while accruing a 60% dividend payout and still generate capital. We have already, as I said before, generated 176 basis points of capital year-to-date. And indeed, this is a high capacity to generate capital and it is a key factor supporting our high shareholder remuneration. And with this, I will now pass the floor to Sergio, who will provide a more detailed overview of the bank's financial performance. Sergio Palavecino: Thank you, Cesar, and good morning, everyone. Let me start by showing the detailed P&L for the quarter and for the first 9 months of the year. As always, we have prepared the full group P&L as well as the P&L ex TSB, which will be the relevant perimeter going forward once we close the TSB sale. The performance of the different lines of the P&L is aligned with our year-end guidance, and we will review them in a minute. Whilst we are on this slide and before going into the detail of each of the lines, I'd like to point out that on the trading income line, this quarter, we recorded an extraordinary gross expense of EUR 23 million. This reflects mainly two items, minus EUR 8 million one-off related to liability management and minus EUR 15 million related to FX hedging on the entire proceeds from the sale of TSB, which will be quarterly incurred until the transaction is closed. We will now go through the different P&L items in more detail, focusing on Sabadell's performance, excluding TSB. Starting with NII on Slide 19, I'd like to highlight that the net interest income is broadly stable this quarter and future growth will be primarily driven by volumes. Excluding TSB, NII closed at EUR 899 million in Q3, reflecting a marginal quarter-on-quarter decline of 0.8%. Now let's look at the top right-hand side of the slide to understand the drivers behind this quarterly evolution. Moving from left to right. Customer NII had a negative impact of minus EUR 5 million. Within this, the customer margin decreased by EUR 24 million, mainly due to lower loan yield. However, quarterly average volumes of both loans and deposits had a very positive impact in the quarter, contributing EUR 8 million and EUR 12 million positively, respectively. The FX effect was marginally negative, subtracting EUR 1 million due to the depreciation of the U.S. dollar. The excess liquidity and other items had a combined impact of EUR 19 million adverse. This reflects the combination of reduced excess liquidity used to finance volume growth invested at a lower ECB deposit facility rate. Wholesale funding costs contributed positively with EUR 14 million, supported by lower funding needs, the maturity of early amortization of expensive instruments and the benefits of the floating rate hedges. And finally, one additional business day in the quarter had a marginally positive impact of EUR 3 million. Overall, we can see that the positive contributions from larger volumes and lower wholesale funding costs helped to offset the drag from lower customer margins and reduced liquidity contribution. TSB added EUR 303 million, in line with Q2 as the higher contribution from the structural hedge was fully offset by the depreciation of the sterling. All in all, we are on track to meet our 2025 NII ex TSB guidance of EUR 3.6 billion. Let's now move on to the fees on the next slide. For Sabadell, excluding TSB, the quarter saw a decrease of 4%. This was mainly due to the usual seasonality in the quarter, particularly in credit risk as well as service banking fees, which were lower during the summer season. However, year-on-year performance remains positive with fees growing by 3.7%. This growth reflects strong contributions from asset management and insurance products, which continue to support fee income. Based on this going forward, we confirm that we remain on track to meet our guidance of mid-single-digit fee growth in 2025, excluding TSB. Now moving on to costs on Slide 21. Total group costs remained contained, reflecting disciplined cost control and supported by depreciation of the British pound. On a year-on-year basis, costs remained broadly stable, increasing by just 0.5% year-on-year. In this context, we confirm again our guidance of low single-digit growth in cost, excluding TSB. On the next slide, we cover cost of risk and provisions. The cost of risk continues to evolve in line with our year-end targets or even better, reflecting prudent credit risk management. Looking at the bridge on the top right-hand side of the slide from left to right, we booked EUR 88 million of loan loss provisions, excluding TSB, during the quarter, which leads to a credit cost of risk of 21 basis points in the year. Next, a positive of EUR 5 million in provisions driven by foreclosed asset provision releases, along with capital gains on real estate assets. NPA management costs and other provisions, mainly related to litigation and other asset impairments in line with the usual run rate. Finally, TSB provisions contributed EUR 16 million this quarter. All in all, total provisions equate to a cost of risk of 37 basis points when excluding TSB. And looking ahead, we expect the total cost of risk, again, excluding TSB, to remain in line with our full year guidance or a touch better. Slide 24 provides a closer look at nonperforming loans, which continued to improve both quarter-on-quarter and year-on-year. The NPL ratio for the ex TSB perimeter declined further to 2.75%, representing a quarter-on-quarter reduction of 6 basis points and a year-on-year reduction of 96 basis points. Meanwhile, the coverage ratio remained broadly stable during the quarter and increased by 5% points over the year, reaching almost 70%. This once again confirms that our cost of risk is improving, but not at the expense of our coverage ratio. Looking at the exposures and coverage level by stage on the right-hand side, we can see that Stage 2 and Stage 3 exposures at ex-TSB level decreased by circa EUR 1.8 billion and EUR 1 billion, respectively, over the last 12 months, which I believe are remarkable figures. Moving on to the next slide. We can see that the stock of foreclosed assets continued to decline quarter-on-quarter, quarter after quarter. This is virtually a runoff portfolio with very limited entries and sales over the last 12 months of 20% of the stock at an average premium of 11%. Total NPAs, which include both NPLs and foreclosed assets, decreased by 19% year-on-year. To sum up, over the past 12 months, we have seen a strong improvement across all the 3 pillars of asset quality. Firstly, NPAs are down by around 20%. Secondly, the coverage ratio has improved by 4 percentage points. And all this has been done provisioning less. Turning now to liquidity and credit ratings. All indicators show that we ended the quarter with a very solid liquidity position, as you can see from this slide, with the loan-to-deposit ratio ex TSB showing a slight increase to 94%. Moving on to the credit ratings. Moody's upgraded Banco Sabadell's long-term rating to Baa1. This upgrade reflects the bank's improved solvency supported by the continued enhancement of both asset quality and profitability compared to past performance. Also, Fitch affirmed our long-term rating at BBB+, giving it a stable outlook once the hostile takeover bid is over. On the next slide, we present our current MREL position. We are comfortably meeting our MREL requirements in terms of both risk-weighted assets and leverage ratio exposure. In addition, we have built a solid management buffer across all requirements, which is our funding plan needs and will help to reduce wholesale funding costs in the coming quarters. For the last quarter -- sorry, in the last quarter, we issued one senior nonpreferred and one SRT transaction. And for this fourth quarter, the last one of the year, we expect one more SRT transaction to take place. Turning now to capital. At the end of September, our CET1 ratio reached 13.74%, reflecting an increase of 18 basis points during this quarter. Looking more closely at the quarterly evolution, we recorded 49 basis points of capital generation per dividend accrual. This includes 60 basis points from organic CET1 generation after deducting AT1 coupons. Zero impact from fair value reserve adjustments, minus 11 basis points from risk-weighted assets growth. Then the accrual of a 60% dividend payout represents an impact of minus 31 basis points. Now looking at the right-hand side of the slide, in terms of available capital to meet the announced shareholder remuneration, we already have EUR 3.7 billion of accrued and unpaid dividends plus excess capital above the 13% CET1 ratio on a pro forma basis. This means after the sale of TSB. This capital has already been generated. Now let's talk about the expected distributions on the next slide. We expect to distribute EUR 3.6 billion in the next 6 months, which is equivalent to more than 20% of our current market cap. This amount is the result of a second interim dividend of EUR 350 million already agreed by the Board, and that is EUR 0.07 per share in cash, which will be paid on December 29. This will be followed by the final dividend plus the excess capital of 13% CET1 to be paid after the Annual General Meeting. The estimated amount is around EUR 750 million and its composition, which may combine a cash dividend and a share buyback still needs to be defined by the Board of Directors. Finally, the extraordinary cash dividend of EUR 2.5 billion that will be paid on the last day of the month following the closing of the TSB sale. As we have seen in the previous slide, the capital required for this remuneration has already been generated. I will now conclude my part of the presentation by highlighting our shareholder value creation and the impact of TSB sale on Sabadell's multiple -- current valuation multiples. Sabadell continues to deliver strong value creation for its shareholders. This is reflected in a 17% year-on-year growth in tangible book value per share plus the dividends distributed over the last 12 months. And finally, given the importance of the extraordinary dividend related to the sale of TSV, let me share one aspect about the valuation. When we look at the 2027 consensus estimates, the Sabadell perimeter obviously already excludes TSB. Therefore, in order to accurately compare that figure with the current market cap, this extraordinary dividend for the sale of TSB must be adjusted for. So when adjusting for the EUR 2.5 billion extraordinary dividend, the market cap is EUR 14.5 billion. This adjustment obviously does affect the valuation metrics, particularly price to earnings ratio. When using the adjusted market cap as of November 11, Sabadell's P/E is below 9x and compares to an average of more than 10x for Spanish peers. And with this, I'll hand over to Cesar, who will conclude today's presentation. Cesar Gonzalez-Bueno Wittgenstein: Thank you, Sergio. To conclude, I would like to review our financial targets ex TSB for '25. We are on track to delivering these yearly targets. Starting with NII, we have delivered EUR 2.7 billion in the first 9 months of '25. So we are well positioned to achieve the full year target of EUR 3.6 billion. Fees and commissions have grown by 3.7% year-on-year consistent with our mid-single-digit expectations. On the cost side, total expenses remained under tight control. We are well within the low single-digit range. Risk metrics remain robust with total cost of risk at 37 basis points, in line with our guidance and close to -- that is close to 40 basis points. In summary, all P&L lines, ex TSB, are on track to meet the year-end guidance and we remain confident in delivering a group return on tangible equity of 14.5% by year-end. Finally, let me highlight that shareholder remuneration is projected at EUR 145 billion for 2025. reflecting an improved outlook. And with this, I will hand over to Lluc for Q&A. Lluc Sas: Perfect. Thank you, Cesar. We will now begin the Q&A session. As we have a limited amount of time, I would kindly ask you to limit the number of questions to no more than 2. Operator, could you open the line for the first question, please? Operator: First question is coming from Maks Mishyn from JB Capital. Please go ahead. Maksym Mishyn: Thank you very much for the presentation and taking our questions. Two questions for me. The first one is on cost. Could you confirm if all the costs related to the tender offer have been booked already? Or is there anything else left for the first quarter? And if so, in what line? And then on medium-term growth, do you expect the strong trend to continue in 2026 if the loan book grows faster than the mid-single digits you have put in the plant, can this have any implications for the capital distribution? Cesar Gonzalez-Bueno Wittgenstein: Okay. The cost related to the tender offer have all been booked provisioned and paid or paid, except the new that will come on Q4, which is related to the shares to be granted to employees. And as you know, it's 300 shares per employee. And this will come as extraordinary in Q4. All the rest are already taken care of. In terms of the medium-term growth, I think we remain exactly on the guidance that we give -- that we gave and therefore, for sure, no implication, and we see no risk in terms of our capital distribution versus the guidance. Anything to add? Operator: Next question is coming from Francisco Riquel from Alantra. Francisco Riquel: My first one is on NII. I would like to refer to Slide 19 of your presentation. So here, the quarterly bridge of NII, I see that new volumes are contributing with EUR 20 million NII in the quarter, loans and deposits. But then there is the column liquidity, which are negative of EUR 19 billion, so most largely offsetting the new volume growth. So it seems to me that redeploying liquidity positions out of the ECB or elsewhere is not accretive to the group with the new volumes. So I wonder how can you reassure us that you are not chasing volumes at the expense of pricing? So that's my first question. And my second question is regarding NII also. So you are targeting NII of EUR 3.6 billion in '25 and EUR 3.9 billion in '27. So that was based on mid-single-digit growth in volumes, but you are growing high single digit in Tier 1. However, the guidance for '25 probably anticipate flattish NII again in Q4. So what shall we expect going forward? If you can share with us some color for NII in '26 that you can share with us at this point? Do you think that there is upside risk to your '27 guidance, assuming you keep on growing mid-single digit for the remaining of the plan? Or do you see margin headwinds. Cesar Gonzalez-Bueno Wittgenstein: Okay. Let me start. I will give you some color, but certainly, Sergio will complete the explanation. I think you're spot on. I think Slide 19, which reflects that there is a EUR 19 million negative in liquidity and others. This is mainly driven by the fact that although we have grown significantly in customer liabilities, the deposits part and is lower than the growth of the asset part. And this is very clearly explained by a very simple reason. We are -- we have been below and we will continue probably being slightly below our expectations for new customer acquisition on all fronts, because of the result of the hostile takeover. We have delivered approximately 75% of our target in terms of growth of new customers and volumes on the -- on-balance sheet deposits and liabilities, which is below our target. If I look at it at face value, what is quite extraordinary is that we did the 75%, given the uncertainty and the difficulty for new customers to join the bank in such a period. But this going forward should improve, and we should again rebalance the growth of our on-balance sheet growth of deposits with the growth of assets. And therefore, that would affect positively that EUR 19 million that you're seeing there. I think I'll leave it at that and pass it on to Sergio. Sergio Palavecino: Yes. Thank you, Cesar. Paco, I think you need also to take into account that the liquidity part is affected by rates as still looking at the third quarter, rates at the ECB were invested at a lower rate than in the second quarter. So that does affect. Then on that part of the breakdown is also the others, which includes some hedges related to the fixed income -- sorry, to the fixed rate mortgages that have been brought to floating because the amount of fixed rate mortgages that we have is a lot and part of them are hedged. So the rates part is also affecting that component. So going forward, we -- as rates stabilize, we will expect not an adverse -- not so big adverse contribution from that portion. And then the volume component to be present during 2026. So we expect NII to start growing during 2026. With this, we will basically reconfirming our expectation that this year, we will end that NII at EUR 3.6 billion. NII will start growing during 2026. And for 2027, our estimate is that this EUR 3.9 billion that comes with -- after mid-single-digit growth of both loans and customer funds. Related to your mention of high [ yield ] on the loan book, that's at the end of the -- that's at the very end of the period, which typically has a peak in terms of loan demand. When you look at the average volumes for the loan book, we are rather on the mid-single digit that we expected. So far on volumes, I think things are progressing in line with our expectations. And if anything, we're lagging a bit in customer acquisition, as Cesar described, which, for sure, I'm sure that the hostile tender offer affected a little bit in that part of the business. Now luckily, the hostile tender offer is over, so we don't have that going forward. Cesar Gonzalez-Bueno Wittgenstein: Although we will have it for the beginning of the next quarter because, of course, the tender offer ended mid-October. If I may make a general comment on the NII. And I think although we've said this many, many times, I think it's important to repeat it, because it's at the core of our strategy. First, the NII is in line with our guidance. And the improvement of the credit quality of new lending, of course, partially dilutes also loan yields. We are growing with lower yields but with better credit quality. And this is a strategy. Because it means lower cost of risk and higher capital generation and it furthermore makes the franchise significantly more resilient. So when you look at line per line, sometimes it's difficult not to realize this underlying shift in strategy, which I think is very positive and at the core of our endeavors. Sergio Palavecino: Yes. So I think that answers also, Paco your comment that if we make sure that growth is not done at the expense of margins. And that's not the case, Cesar explained that we focus on returns, and we have a very strong discipline of allocating all cost, cost of risk and capital to all the lending. So we will only grow as long as it makes sense to do it. Operator: Next question is coming from Alvaro Serrano from Morgan Stanley. Alvaro de Tejada: The kind of follow-ups from the previous questions on loan spreads. So we've seen in the press and it looks like some of your competitors repricing mortgages up and repricing loans up last few weeks. Are you -- can you comment on what you're doing on new production? Do you recognize those comments? And I know you're also repricing up. And related to that, Seth, you mentioned that contrary to some of your competitors, you do hedge and you do swap those mortgages. Can you give us a feel of what the spread is post once the mortgage are swapped, what the spread is at the moment? . And I guess sort of related to that, in your 2027 NII target 3.9, what spread on loans, does that have factored in, what should we think about on the loan spread when we put everything in, where should it stabilize? I realize in the short term. Obviously, there's some repricing to lower Euribor still going on. But once during 2026, where do you think the loan spread can stabilize? Cesar Gonzalez-Bueno Wittgenstein: I'll take just the first part of the mortgage question. I think we are following very closely all the comments also from our competitors and following the market. And it's very clear that we are growing in mortgages at our market share. And that means that, of course, the market is competitive, has always been. But what has transformed dramatically the way we look at mortgages is that we are now fully rail rock-based. The average rate rock of new mortgages is around 20%. And that means that we price correctly, but we also include -- it's based on the segmentation approach, and we are aiming and attracting high-value clients. And the pricing includes and the RaRoC, the impact of cross-selling. That is, if a mortgage offer discounts when customers are also purchasing other products that increase their overall contribution. What has changed also is that before that was only set at the time of the issuance of the mortgage. Now that is a condition. So for example, if there's an insurance attached to a mortgage, it has an improved pricing. But if that insurance is canceled, then the price is automatically adjusted as per agreement with the client. So I think it is very clear we are all focusing very carefully. The market is growing. There's a lot of demand for mortgages, but we are all focusing on and certainly, we are on not increasing our market share on this segment growing with -- and that is our strategy, and that's what we have executed and measuring very carefully what is the value generation. Sergio Palavecino: Yes. And Alvaro to your question related mortgages and its ALM related mortgage, the origination of mortgages is fixed rate in the vast majority, more than 80% of our origination is coming in fixed. And it's been the case now for, I think, the last maybe 7 or 8 years. So the book is definitely turning very much on to the fixed rate. That is also combined with the fact that in the last quarters, the origination volumes are higher. So it's a pretty good amount of fixed rate loans. So yes, we do swap of that part connected with our ALM policy. We're swapping between 30% to 50% of the new entrants. And after swap, it depends on the different portfolios, but the final spread after swapping stays at 30 to 50 basis points. But please take into account that all the business we do, we do with customers. So the mortgage profitability is assigned in connection with other products that the customers take. So we make sure that the RaRoC all in all, makes full sense. Alvaro de Tejada: And as for the total loan book, where do you think the spread could stabilize consistent with that EUR 3.9 billion? Sergio Palavecino: Yes. The spread for the asset -- the loan yield currently in the ex TSB perimeter is at 3.68%. So when compared to ECB or Euribor, it means that in average spread is at above 150 basis points. We think that, that kind of spring is sustainable over time. So when I see maybe a little bit of additional reduction, maybe but then the mix and the rates we think that spread is sustainable over time. Operator: Next question is coming from Borja Ramirez from Citi. Borja Ramirez Segura: Can you hear me? . Cesar Gonzalez-Bueno Wittgenstein: Yes. Borja Ramirez Segura: I have to two. Firstly, on the capital distribution. I would like to ask if you could provide more details on the cash dividend growth. if that applies every year, the EPS will be higher year-over-year. And also, I think your capital distribution target does not include the potential capital from the payments JV. So that could be upside to your target? And then my second question would be on the NII, I would like to ask if the customer NII has bottomed in Q3. And also, I think you have a competitive advantage compared to domestic peers because I think you still have tailwinds from lower cost of hostile funding to come. I think you quoted EUR 200 million of upside after 2027. I'm not sure that, that's in consensus. Cesar Gonzalez-Bueno Wittgenstein: Okay. In terms of the capital distribution, I think that what we are guiding and we are guiding with confidence is that the cash dividend per share and that includes also numerator and denominator. So the number of shares will be higher in '25, '26 and '27 or equal than the one of '24. and that is what that's how we are guiding. And of course, it does not include Nexi. Sergio Palavecino: Precisely, exactly. And regarding your question on NII, I think the third quarter might be the bottom or sort of a valley as we expect the last quarter of this year to have similar levels of NII. And then as mentioned before, we expect NII to start growing in 2026. When you discussed the -- when you mentioned Borja, the wholesale funding savings that we expect, and we touched on them in our Capital Markets Day, we were comparing, I think, 2027 to 2024, there were meaningful expenses. But that was a combination of 2 things. The lower -- maybe 3 lower rates, lower spreads in the market for us in connection with our ratings. That's clear. That's structural. That's a strength going forward for sure. But there's another component, which is that the sale of TSB is going to reduce our wholesale funding needs. But that is connected to some income that we get in the ex-TSB ALCO book because in the ex-TSB ALCO book in the asset side, we also have the MREL from TSB. So I think it's not fully that sort of benefit that goes into NII, because it will be somewhat offset by the MREL bonds in the ex-TSB ALCO book. Cesar Gonzalez-Bueno Wittgenstein: That will be sold to Santander. Operator: Next question is coming from Carlos Peixoto from CaixaBank. Carlos Peixoto: A couple of questions from my side as well. There was a small decline in the... Cesar Gonzalez-Bueno Wittgenstein: Carlos, sorry to interrupt you, but could you -- Yes, much better. Thank you. Carlos Peixoto: So as I was saying, there was a 3% to 4% decline in deposits and overall balance sheet customer funds in the first Q stand-alone in -- excluding TSP. I just wondering whether you see that mainly related with the impact that you mentioned before or whether there's something else that explains this decline? And then on trading gains, well, you have the Tier 2 impact in the quarter and the hedge cost, still underlying trading would actually be slightly negative. I was just wondering whether you see this as being the trend for upcoming quarters in trading as well. And then sorry, just to overstep, but if I may, just on other provisions, if you could also give us a on how sustainable these levels are? Should we look at this adjusted by the EUR 5 million that I believe it was EUR 5 million from a recovery write-back in terms of provisions. If you adjust for that, should we see there more or less a recurrent level of provisions or just your outlook on this? Cesar Gonzalez-Bueno Wittgenstein: I'm going to try to answer the first question, but I'm not 100% sure. I understood that fully. So if I missed the answer, please come back. I think you were referring to customer funds growing less than our asset side and if that was perturable over time. And I think that what we already tried to explain is that, that difference in growth between assets and liabilities on balance sheet from clients, it's mainly due to a weaker acquisition of new customers versus our expectations due mainly to the tender offer. Therefore, we expect that to be reverted over time and to come back to our original plans with the new ones that would not happen fully during Q4, because the transaction ended at mid-October. I don't know if that was your first question, and if I answered it to your satisfaction. Carlos Peixoto: Well, actually was between June and September, you had a decline in overall stock of deposits, but I guess... Cesar Gonzalez-Bueno Wittgenstein: Deposits, you mean. Carlos, or just are you... Carlos Peixoto: Overall stock of deposits. Cesar Gonzalez-Bueno Wittgenstein: Term deposit. Carlos Peixoto: Excluding TSB. Sergio Palavecino: Term deposits. Cesar Gonzalez-Bueno Wittgenstein: Yes, yes, the EUR 2.5 billion, yes, that is a mix, and that's a shift. If you see the growth in the slide, I think it's more than EUR 5 billion growth, excluding capital appreciation on mutual funds. I think we have always pursued a greater growth in our mutual fund strategy in our off balance sheet. And part of that is cannibalization so that minus 2.5 of term deposits is also a significant shift towards mutual funds. And that's overall, what yields the growth of close to circa of 8% year-on-year on our overall funds from customers, both on balance sheet and off balance sheet. And it is the mix of the on balance sheet that I was explaining previously that has had some impact on our NII together with all the other elements that we already commented. Sergio Palavecino: Yes. Despite that -- let me also highlight the very -- the remarkable growth in the off-balance sheet products growing at a very nice double digits. So very successful, I think, part of the business. And then Carlos, your other questions, the second one was related to trading. In the trading line, the way we see things are, of course, it's probably the most volatile line. However, if we were to say a recurrent path, could maybe be between EUR 5 million to EUR 10 million per quarter. And as we have explained, we are hedging the entire proceeds coming from the sale of TSB, and that is going to have a cost of EUR 15 million every quarter during this process. And this is up to, as in our expectation, the first quarter of next year included. So those are the numbers, and we will be, I think, in that range. And regarding provisions, yes, we think that this is sustainable. This is in line with our longer-term expectations that we shared with you in the Capital Markets Day. We guided to also 40 basis points cost of risk in 2027. When we look at all the portfolios are doing a little bit better than expected, that's why we are actually below 40 basis points of cost of risk this year. And I think it's important to take that in connection with the important transformation that Cesar has described it, where we focus all the organization in originating better quality portfolios that might have not such a big spread, but it comes with lower cost of risk. And at the end of the day, we are seeing that the capital generation is actually higher. So quite happy with the transformation and the story. Cesar Gonzalez-Bueno Wittgenstein: And at risk of becoming too repetitive. I think the probability of default reduction is very, very significant. It's around 50% the first 9 months of the year versus '23 new lending. That flows through the balance sheet over time because it's the new production that improves. But after that comes the book improvement overall, depending on the maturity, term maturity of every product, and then the models in which you calculate risk also are adjusted. It all takes time, but it is in the right path. But immediately, it is producing exactly as Sergio was saying the improvement in capital generation. Loan growth is not at the expense of credit quality. On the contrary, it is based on 3 pillars. The first is risk, the preapproved loans by limiting the probabilities of default, both on average and taking away the queues. The second one is pricing. And sometimes, it yields to lower NII, but it is with higher RaRoC considering everything. So the quality of the metrics has improved dramatically. And third, it also comes at the expense of processes. I think one thing that is undervalued usually in banking is that the way you conduct your processes in the sales have a significant impact in your growth or the rest being constant. It is what we call the funnel. The focus on funnels. There's now an obsession around funnels here. And that means that chatter is parable all the rest being constant, you can have with the same pricing or equivalent pricing, the same risk, you can have higher growth. These are the 3 pillars of growth, and we are focusing very much on the execution of the 3 of them. Operator: Next question is coming from Ignacio Cerezo from UBS. Ignacio Cerezo Olmos: So I've got one actually on the mortgage yield discussion. So if you can tell us on your standard mortgages, if you on how much yield you're adding on cross-selling? And how is that broken down between different products. And then the second one, if you can remind us the breakdown of your Miami book, and if you're seeing any deterioration based on, I mean, the developments on private credit, U.S. credit quality in general. Cesar Gonzalez-Bueno Wittgenstein: Unfortunately, I don't think we are able to respond to the first question. I don't think we have that breakdown or that we are sharing that breakdown. And it's changing game continuously, and we would show you averages, but that would also not mean a lot, because it's based on every mortgage one by one and the pricing is based on a RaRoC product. It basically only includes the RaRoC the elements that are contractual. On top of that, you have an additional tailwind, which comes with higher liabilities, higher payrolls and a number of things. But that's as much as we can share. And on the breakdown on Miami. . Sergio Palavecino: No deterioration at all in our Miami book, is not in the activities that might be more affected, but we are seeing no deterioration at all. It's a very high-credit quality book. Operator: Next question is coming from [indiscernible] from Autonomous. Unknown Analyst: The first one is on the Nexi deal. If you could provide any update on the negotiations with Nexi, if this is still a priority by management? And when shall we expect any news on this? And then my second question is on the customer spread. So on the loan side, you commented that 150 basis points is sort of sustainable. Now I wanted to ask you about the deposit spread ex-TSB, -- where do you see this landing once repricing stabilizes? And just one final clarification on the CET1. You mentioned that there should be another SRT in Q4. If you could provide any expected basis points impact from that? And if you also expect any operational risk inflation in the last quarter? Cesar Gonzalez-Bueno Wittgenstein: Okay. On the Nexi deal, I think both sides have been very, very clear that has been a very long time lapse and the market has changed significantly since the prior agreement. So what we have engaged is that on first that there is more ongoing obligation. And second, we are both engaged in continuing exploring if there's a way to come to a new agreement or not. We haven't given us each other a fixed date or we haven't given each other fixed commitment. We just have mutually agreed approach to continue to exploring opportunities. Certainly, if that happens, it will be in probably very different terms and scopes than the original one. And we'll see how this evolves in the following months. Sergio Palavecino: Yes. And regarding customer spread, we are now not expecting major movements as mentioned before, maybe some basis points less in customer yield, but also some basis points less in customer funds, in the cost of customer funds. And overall, customer spread that should get stable or very close to these levels and very soon. And then relating to your last question on... Cesar Gonzalez-Bueno Wittgenstein: On a general view on the capital solution for Q4 and certainly, you can be much more explicit on the SRT. But I think for capital evolution in Q4, you should expect, as you know, we have shown already that we have covered already more than covered our commitments for the year in the first 3 quarters. But nevertheless, we expect a positive contribution to capital in Q4, although it will be more moderate than the one that we have seen in the previous quarters. And the headwinds are seasonality of the quarter because we should expect volume growth and also an impact on operational risk, maybe around 7 basis points or something of the sort. But the tailwinds will be the retained earnings and certainly the SRT now 230. Sergio Palavecino: No, I think you answered perfectly. I think the -- it's going to be in all the moving parts of the last quarter, which typically is not the strongest in capital generation, but still we expect some capital generation, because you're spot on Luis with the risk-weighted asset inflation coming from operational risk in the quarter, but the SRT will offset this. SRT benefit in the quarter will probably around 8 basis points, 8% to 7%, so offsetting that risk-weighted asset inflation and the conclusion is what Cesar said, that we expect another quarter of capital generation, probably not as strong as this one, but some of that. Operator: Next question is coming from Hugo Da Cruz from KBW. Hugo Moniz Marques Da Cruz: I just wanted to ask, so the TSB dividend, the one-off dividend I think you have a slide where you say that so far already generating $2.65 billion, and the target for the dividend is EUR 2.5 billion. So if you end up generating more capital than the dividend that's been promised so far. Will we get that with a one-off dividend? Or would it be later in the year with as you kind of excess capital. Cesar Gonzalez-Bueno Wittgenstein: That's one of those -- sorry, that's one of those mysterious questions because it is for the Board to decide. At this point in time, what we are just saying is that we have already replenished in terms of capital generation to fulfill 100% and even a little bit more of our commitments to the market. What the decisions of the Board will be in the future remains to be seen, and it's for their capabilities to address that in due course. Lluc Sas: Yes. I think we've -- a couple of analysts have just raised their hands. So operator, if we could include them in the list. So let's jump to the next question. Operator: Next question is coming from [ Tetra Romero ] from [indiscernible]. Cesar Gonzalez-Bueno Wittgenstein: Can you hear us? Please check that you are not on mute. If not, we can jump to the next analyst. Unknown Analyst: Can you hear me now? Cesar Gonzalez-Bueno Wittgenstein: Yes, yes. Yes, we can. Unknown Analyst: So my question is related to the last 1 on the dividend related to TSB. I was just wondering, you were mentioning that TNAV has already improved by EUR 100 million. You were targeting around EUR 200 million for the period up to April. So if this progressing according to better than planned and could this represent upside risk to your distribution? And also wanted to know if the timing of the closing of the transaction is on track for April? And then my second question is regarding the SRT that you were mentioning that it's going to be 8 to 7 basis points, where is the cost of that SRT showing up? Is that NII, is that included in your guidance? Sergio Palavecino: The TNAF, as you have seen, has increased by EUR 104 million. And as we guided for roughly EUR 200 million increase of TNAF in 1 year. So it is progressing absolutely in line with our expectation. That TNAF is basically the increase in the book value coming from the net income in the period, and that is flowing into the group results, where the extraordinary dividend is connected with the capital gain and the risk-weighted assets release, which is basically the sort of picture that we had when we cut off as of March 31. So the TNAF is not affecting the capital release, the -- and therefore, the extraordinary dividend is well connected with that. And then for your second question regarding the SRT cost. SRT are done in 2 different ways, synthetic on cash. In the third quarter, we closed a cash transaction. There was a securitization of consumer loans, auto, in particular, auto. So those -- that transaction is SRT and that is a cash bond, so that is going through NII. The synthetic SRT transactions, the cost is going into the fee line, because it's a fee that we pay for the guarantee. So it's going into the fee. And all of that is taken -- is considered in the guidance. Lluc Sas: Okay. So we can now jump to the final question. So operator, please? Operator: Last question is coming from Fernando Gil from Intesa Sanpaolo. Fernando Gil de Santivañes d´Ornellas: So my question is regarding the asset management business and the Amundi deal. Can you just remind us of the main terms of a deal, I think it was 2020 to 2013 -- sorry, '30, so has there been any voluntary breakup clause from Sabadell? And if so, what are the cost to notice periods and some details that you can share, please? . Cesar Gonzalez-Bueno Wittgenstein: Fernando, yes, it was a 10-year agreement for distribution in 2020 where we sold our asset management company to Amundi. That period, therefore, ends in 2030. And we're very pleased with the agreement. We're very happy. The business is done. It's working very well. So there is nothing that we can add at this moment on this. It's going well. Lluc Sas: Perfect. So that concludes our presentation today. Thank you, Cesar and Sergio. As always, the Investor Relations team remains available for any additional questions or follow-ups. Thank you, everyone, for participating and for joining us this morning. Have a nice day. Cesar Gonzalez-Bueno Wittgenstein: Have a nice day. Sergio Palavecino: Thank you.
Operator: Good morning. Thank you for waiting. Welcome to the earnings release call of Ultrapar to present the results referring to the Third Quarter '25. Our presentation will be conducted by Mr. Rodrigo Pizzinatto, CEO of Ultrapar; and by Alexandre Palhares, CFO of Ultrapar. The Q&A session that will follow will also have Mr. Leonardo Linden, CEO of Ipiranga; Mr. Tabajara Bertelli, CEO of Ultragaz; and Mr. Fulvius Tomelin, CEO of Ultracargo. This call is being recorded and will be accessed later through the website, ri.ultra.com.br. After the initial presentation, we are going to start the Q&A session where further instructions will be provided. I would also like to tell you that the conference is being conducted in Portuguese and there is an option for simultaneous translation by clicking interpretation. For those listening to the earnings release call in English, there is the option of muting original volume. The presentation will be shown in Portuguese and there is a version in English to be downloaded through the company's website and through the chat. Before proceeding, we would like to mention that forward-looking statements made during this call refer to business perspective of Ultrapar. Forecast and operating and financial goals are based on beliefs and assumptions of the company management and on information currently available. Forward-looking statements are no guarantee of performance. They involve risks and uncertainties because they refer to future events and therefore, depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions and other operating factors can also cause results to differ materially from those expressed in such forward-looking statements. I would like now to hand the conference over to Mr. Rodrigo Pizzinatto, who will start with the presentation. Mr. Pizzinatto, you have the floor. Rodrigo de Almeida Pizzinatto: During this quarter, we recognized BRL 238 million in extraordinary tax credits at Ipiranga, resulting from the remaining portion of historical ICMS tax credits included in the PIS/COFINS calculation basis. Furthermore, we made significant progress in the fight against illegal practices in the fuel sector. We have been following with optimism that work carried out by the authorities in recent months, especially the Carbono Oculto Operation at the end of August. It represents a historic milestone in this fight, reinforcing the need for stricter legislation to fight crime and the legalities in the sector. We continue to support authorities and regulatory bodies in fighting crime, strengthening market integrity and ensuring fair competition. Another highlight of the quarter was the rapid reduction in leverage. After assuming control of Hidrovias and starting to consolidate its results in the second quarter, leverage stood at 1.9x. With the strong cash generation in this quarter and Ultrapar's EBITDA growth, we reduced leverage to 1.7x even after paying BRL 326 million in dividends in August. We also continue to advance our growth and strategic positioning agenda. In October, we completed the expansion of the Ultracargo terminal in Santos, adding 34,000 cubic meters of storage capacity. On November 1, we completed the sale of Hidrovias Cabotage operation for BRL 750 million (sic) [ BRL 715 million ] which will enable Hidrovias to focus on more synergistic and complementary businesses while strengthening its financial position. We announced the signing of an agreement to acquire a 37.5% stake in Virtu which operates in the LNG logistics for BRL 102 million. This transaction is aligned with our strategy to invest in sectors where Ultrapar can contribute to value creation with high growth and profitability potential. We also received CADE's approval for the LPG terminal in Pecém for Ultragaz in partnership with Supergasbrás. This project reinforces our commitment to safety and efficiency in LPG supply in the Northeast and North regions of Brazil. Finally, for those who were unable to attend Ultra Day 2025 held in September for the first time at Ultrapar's headquarters, please note that the presentation is available on our Investor Relations website. I will now turn the call over to our CFO, who will walk you through the quarterly results. Thank you. Alexandre Palhares: Thank you, Rodrigo. Good morning, everyone. Before starting, I would like to remind you of the reporting criteria and standards used in this presentation. Now let's move on to the results. Ultrapar's adjusted EBITDA was BRL 1.9 billion, including the recognition of BRL 185 million in extraordinary tax credits at Ipiranga representing a 27% increase year-over-year. Recurring adjusted EBITDA totaled BRL 1.8 billion, an 18% increase compared to the third quarter of last year driven by Hidrovia's record performance. Ultragaz also reported higher EBITDA, which together with Hidrovias, partially offset the lower results from Ipiranga and Ultracargo. Net income for the quarter reached BRL 772 million, an 11% increase year-over-year, mainly driven by the higher operating results and the recognition of tax credits already mentioned which were offset by higher financial expenses and higher depreciation and amortization, mainly due to the consolidation of Hidrovias. CapEx totaled BRL 756 million, 46% higher compared to the same period last year, highlighting the consolidation of investments in Hidrovias and increased investments in Ipiranga, especially for the expansion and maintenance of the service station and franchise network, in addition to investments in the evolution of the technological platform with the replacement of the ERP system. Operating cash generation was BRL 2.1 billion, almost 3x the cash generated in the same period last year, even with BRL 258 million for the settlement of the draft discount. This reflects a better operating result, the consolidation of Hidrovias and lower working capital investment at Ipiranga and Ultragaz. And now moving to the next slide. We ended the quarter with BRL 12 billion in net debt and a leverage of 1.7x compared to 1.9x last quarter. This improvement reflects the strong cash generation during the period, which more than offset the payment of BRL 326 million in dividends in August in addition to the impact of BRL 258 million from the settlement of the draft discount, as I mentioned earlier. Now moving to Ipiranga's results. The volumes sold in the third quarter was 1% higher compared to last year due to the increase in the Otto cycle, mainly in gasoline. It is worth noting that we observed the market recovery following the Carbono Oculto Operation, which has been tackling regular companies in this sector with an acceleration in sales volume in September. We ended the period with 5,812 substations. We added 70 new substations and closed 84 to our network throughout the quarter. Ipiranga's EBITDA totaled BRL 1.85 billion, 12% higher than the same period last year, reflecting the recognition of extraordinary tax credits of BRL 185 million. Recurring EBITDA totaled BRL 892 million in the quarter, a 5% lower compared to the third quarter of 2024. This result reflects a more challenging scenario given the irregularities in the sector, mainly due to the high level of naphtha imports for irregular sale as gasoline and inventory gains in the third quarter of 2024. These effects were partially offset by higher sales volume and lower expenses during the period with lower allowance for expected credit losses, marketing and personnel expenses due to a smaller head count. As a highlight, we also had cash generation zreaching BRL 1.453 billion, more than twice the BRL 723 million in the third quarter of 2024. This performance reflects working capital management, strengthening value creation for Ipiranga. For the fourth quarter, we expect a continued market recovery with volume growth and profitability similar to that observed in the third quarter. Now moving to Ultragaz. The volume of LPG sold in the third quarter was 6% lower than the same period in 2024, with a 3% decrease in the bottled segment and an 11% decrease in the bulk segment, reflecting the competitive dynamics of the market, which continued to be impacted by the pass-through of increased cost of Petrobras auctions. Furthermore, we are seeing signs of an economic slowdown with lower demand in the volumes sold to industries. Recurring adjusted EBITDA totaled BRL 463 million, a 3% increase compared to the same period in 2024, mainly due to pass-through of inflation and the positive contribution from new energies despite lower LPG sales volumes. The fourth quarter is seasonally weaker. We see a gradual recovery in volume and bulk segment is below last year's levels. We also expect EBITDA to be higher than that observed in the third quarter. Now moving to Ultracargo. The average installed capacity reached 1,097,000 cubic meters in the quarter, a 3% year-over-year increase, resulting from the addition of 23,000 cubic meters of capacity in Palmeirante and 7,000 cubic meters in Rondonópolis. The cubic meters sold was 12% lower year-over-year, totaling 3,845,000 cubic meters. This decrease reflects the lower demand from our customers for tanking services related to fuel imports, which resulted in lower handling in Santos, Itaqui and Suape. This impact is partially offset by the higher volume of handling in Opla. As a result, net revenue totaled BRL 243 million in the quarter, a 9% decrease compared to the same period last year, reflecting the lower volume even with better tariffs. Ultracargo's adjusted EBITDA totaled BRL 134 million, 20% below the third quarter of 2024, impacted by lower volumes and higher preoperational and initial costs at Palmeirante, which is still in its ramp-up phase, partially offset by better tariffs. For the fourth quarter, we see a recovery in demand from our customers and the effects of the expansion. As a result, we expect a recovery in EBITDA compared to the third quarter. Finally, going Hidrovias. The volume handled in the quarter grew by 30% when compared to the same period last year, driven by the normalization of navigation in the South corridor, which allowed higher handling of iron ore. Adjusted EBITDA reached BRL 332 million compared to BRL 169 million in the same period last year. Recurring EBITDA reached BRL 361 million, more than twice the BRL 169 million recorded in the third quarter of 2024. This record performance mainly reflects better navigation conditions in the South corridor, as I mentioned earlier, and a better sales mix. On November 4, the Cabotage sale was completed, which will affect the results of the fourth quarter and reduce the company's debt. It is important to note that there is also the seasonality of the fourth quarter, which significantly affects navigability in the corridors. We expect an EBITDA similar to the fourth quarter of 2022. With that, I conclude my presentation. Thank you all for the participation. Let's move to the Q&A session. To contribute to the dynamics of this moment, I reinforce that questions related to Hidrovias will be answered from the perspective of the controlling shareholders. Other operational details should be directed to the Hidrovia's IR team. Operator: [Operator Instructions] The first question comes from Gabriel Barra with Citi. Gabriel Coelho Barra: I have 2 questions. First, let me focus on Ipiranga and all the changes you've mentioned during the data presentation. We've seen a sequence improvement and when we talk with the industry at large, there is an expectation of sequential improvement for the upcoming quarters in terms of volume margin and fighting illegality. I'd like to hear about the end of the quarter and the trend for the fourth quarter, the new events that were observed probably they can be translated into better volumes, better margins. And I'd like to hear about the company's strategy. Would it be to recover the lost market share to the informal market? Or would you thinking about optimizing your margins? What is your strategy? Maybe Linden can help us out. Now looking from a broader perspective at Ultra, you've been making some investments in terms of capital allocation, which is a very important point considering Ultra as a vehicle of investments. So what are the next steps? You still have got a lot to deliver in Hidrovias, of course. But the company has already made all the incorporation of investments and all that. So what is the strategy for the future? Where would you consider future investments, exactly when, what would be the timing? Would you think about greenfield, brownfield, something that would bring results in the short term? So these are my 2 questions. Leonardo Linden: Good morning, Gabriel, Linden speaking. The first question is -- would be probably asked by others, so I'm going to answer it broadly. First, hidden carbon operation, Carbono Oculto has been a very positive movement to our industry. It has contributed to Brazil, to consumers, for those that make investments in the area. But we have to be aware of the fact that it's not over. Investigations have to move on. And we have 2 important projects, one of them of bad debt provision and the other one of the one single phase investment. And these are projects that really have to move on and become law. Similarly to hidden carbon there are 2 points, volume and margin. The volume is coming stronger, and you can see that there is an increasing trend. The end of the quarter was better. The first initiative of hidden occult operational was on the second half of August. And since then, we've been recovering volume. Not only volume really, but we can see selling our gasoline with additives being sold more with an increased share of it in the mix, meaning that consumers are aware of quality, positive news from volume. It's important to regain scale because of lost scale throughout months and months due to the irregularities of the industry. Margin is important, but it's not the only indicator. And the margin in terms of volume has been showing slower recovery, especially in B2B and highways, which is expected because these are markets exposed to problems that still persist, such as non mixing biodiesel. And they tend to be more resistant to changes in prices, at gas station levels, large consumer contracts have parameters. So it takes longer to have adjustments. That's all predictable, and we are okay with that. We have to keep on fighting illegality. We cannot simply assume that everything is solved. No, we have to keep on hitting the regular market because there is still a lot to be done, even though we have already observed significant improvement. For Ipiranga, it's important to recover scale. It's been a number of years with loss of volume due to irregular market, and we want the volume to be back, of course. Thirdly, margin is a consequence of the reaction of the market and how we work internally. We should stick to what we've always done, focusing on internal efficiencies, better processes and those who have been following our results know how much we emphasize that, especially in logistics and smaller operational expenses. Something that we've been working on, reducing and also emphasized by Palhares presentation. So very positive landscape, I have to say. We had been waiting for this action for a long time. But of course, it's not over, the problem is not over. Volumes are picking up, especially in Rio and Sao Paulo, where there was most of the irregular activities and margins are going to naturally be recovered, but of course, depending on market reactions as well. But of course, we are also endeavoring all our internal efforts. Rodrigo de Almeida Pizzinatto: Barra, Rodrigo speaking. Thank you very much for the questions. Capital allocation, our next steps, right? In general lines, we are going to try to look up for companies and projects that have similar characteristics to what we found in Hidrovias. In other words, a good potential to create value that depends on us. So what we can do with a company with an asset, unlocking growth, optimizing operations and assets. But if we don't come across good projects, that's okay, we just increased dividend sharing. We have these 2 options, either we come across good projects or we increase dividend sharing. That's it. Operator: Our next question comes from Gustavo Sadka with Bradesco BBI. Gustavo Sadka: My first question concerns cash generation, which was strong in the quarter, and we've seen deleveraging. Now considering the new taxation of dividends, and the profit reserve you have in your balance sheet, should we expect more dividends to be distributed this year? Second question about capital allocation. As the company has been showing interest and have had exposure to the Agro business, do you think about by a stake at Rumo because the partial investments of that can be offered in the market. Rodrigo de Almeida Pizzinatto: Good morning Gustavo. About cash generation, you're right, it was a very strong quarter. The second half of the year tends to be stronger and probably that's going to be repeated in the fourth quarter. It is following the constant discussion of legislation changes and the taxes on dividends. And yes, this is a possibility, anticipating dividends in the fourth quarter. Concerning capital allocation, I'll just repeat what I've just said. We are always looking for good projects where we can create value, unlocking growth and optimizing operations. If we find these assets, we are going to do that. If not, we increase dividend distribution. That's it. Operator: The next question comes from Bruno Montanari with Morgan Stanley. Bruno Montanari: Quick follow-up with Ipiranga. Could you please quantify in a ballpark figure of inventory variation so that we get an ideal about normalized margins. And could you please tell us more about CapEx, especially in the third quarter, CapEx tends to be high in the fourth quarter. You've anticipated somewhat in the third quarter. So I'd like to know what we can expect for the fourth quarter at Ipiranga? Second question about cash flow. It's been a year of a number of adjustments in working capital because of the draft discount. But in working capital, the level we've seen in the third quarter. Is it sustainable? Or is there still more to be done to unlock somewhat more capital to the company. Rodrigo de Almeida Pizzinatto: Good morning Bruno. Thank you for the question. About inventory levels, we don't talk about the levels of losses or gains because it's a result of our supplies policies. But I also remind you that there was a price oscillation in the third quarter of '24 and not '25. So the variation is more due to the fact that there was a change in '24. Concerning CapEx, in the year, the CapEx would be below what we had announced, probably 10% less than what was announced in our plan for 2025. Alexandre Palhares: Palhares speaking. Concerning working capital, this is a very relevant topic to all our businesses. There are some efficiencies which are captured and they are onetime possibilities included in the ordinary working capital of the company and some of them which result from market dynamics. These are the ones that we can repeat and maintain throughout upcoming periods. Operator: The next question comes from Rodrigo Almeida with Santander. Rodrigo Reis de Almeida: Good morning, Ultra's team. I'd like to talk about Ultragaz. Recently, there were new reference prices published. I would like to understand the net effect of this discussion, a lower reference price, some potential of gaining additional volume. Maybe you can tell us more and help us understand what is the net changes you expect in terms of volume and price? Can you also please tell us more about the compliance of -- with resellers because in the end of the day, prices change at the level of the resellers, right? Tabajara Bertelli: Hello, Rodrigo, Tabajara speaking on behalf of Ultragaz. Thank you for the question. The focus of Gás do Povo, Gas to People, it's a program of the government. I think it's the right program to direct the benefit to the population that really needs it, really fighting against the so-called energy poverty, things which are going into effect in a few weeks, starting in some cities and then being scaled up, but something very positive. We've been supporting the program. The model is direct payment to resellers. We are exactly at the level you talked about communicating the project and trying to get more and more compliance. If the resellers have some questions, we answer them. The government has been presenting data. The last one, there were over 3,000 resellers already on board, showing more and more companies join and it will be maintained until the first to second quarter next year. It takes time. It takes some learnings, but it's following the initial design that was imagined. And we see it very positively as a social benefit of addressing a very important issue to our country. And we believe prices and volumes are going to gradually increase. If the reseller is compliant with the program, they are committed with all the elements of the program and it's a product that is going to be picked up. It's pick and collect, not delivery not delivered at homes. Each reseller is considering how to operate, how the program works and how well it fits their operations. It's been doing and believe it's going to be maintained. In a nutshell, we still see the program with the same perspective. This is just step one of implementation. There are more things to come, certainly. Operator: The next question comes from Gustavo Cunha with BTG Pactual. Gustavo Cunha: My question is about Ultragaz as well. Trying to understand about the change in LPG. Ministry of Mining and Energy called an extraordinary meeting to talk about this issue. And I'd like to see your perspective on this topic and what do you expect in terms of time line? Tabajara Bertelli: Thank you for the question, Gustavo. There is still an ongoing process. You are calling it the reform or the regulatory review of LPG. In the beginning of the year, there were some initial inputs shared with the government. The national agency will probably launch a new review in upcoming months. And in the current schedule, it is expected to be completed in the first half of 2026. So there is still a lot to happen. Different players are getting on board, they're discussing. I think it's following the expected path. We are highly convinced of what is the best for society. It's a model of a high level of safety, well balanced, and that's what has been in place. But that's still an open-ended process inputs are being made, and there are still a number of steps until the final decision regardless of what it is to really change the regulations. Operator: Next question comes from Regis Cardoso with XP. Regis Cardoso: Good morning. Thanks all of you for your availability. In Ipiranga, I understood that you expect a similar level of profitability in the fourth quarter. Can you tell us about one-off effects, especially inventory levels, also the draft discounts of the margin, competitive improvement that we've observed in October. So reconciling really the development of the fourth and the -- third and fourth quarter. And finally, in Ipiranga, could you please tell us about the offenders that you still see to margins. Maybe you can make comments about direct sales to refining entities? And what about CBOIS? How do you see it? And how has it contributed to the operation? Leonardo Linden: Concerning the fourth quarter, the guidance is clear. And once again, it's market dynamics. This is what we've been observing happening in the market. As I pointed out, there is volume impacting the fourth quarter and margin picking up slowly. I don't think I have much to add. In terms of offenders, part of the offenders are still irregular activities that we observed throughout the market and have been covered by the hidden occult operation, Biodiesel, CBOIS, certainly still a problem. But once again, the perspective is better now. We know there's still a lot to be done. And I emphasize once again about bad debt provision and single-phase taxation, which are both essential to address the root of the problem. But we are doing our work as best as we can, fighting irregularities together with the market. But that's it. No big news there. Regis Cardoso: Let me see if I got that straight. There hasn't been any relevant losses of inventory levels, right? Leonardo Linden: Yes. Right. None. Operator: Our Q&A session is completed. Now I would like now to hand it over to Alexandre Palhares for his closing remarks. Alexandre Palhares: I would like to thank you once again for your interest and participation. Our Investor Relations team is here to answer any questions that we might not have answered. Thank you very much. See you next time. Operator: Well, the earnings release call of Ultra is finished now. Thank you very much for your participation. Have a great day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]