加载中...
共找到 25,097 条相关资讯
Operator: Good morning and good evening to all and welcome to the Sea Limited Third Quarter 2025 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Please press 0. And finally, I would like to advise all participants that this call is being recorded. Thank you. I would now like to welcome Ms. Rebecca Lee to begin the conference. Please go ahead. Rebecca Lee: Thank you. Hello, everyone, and welcome to Sea Limited 2025 Third Quarter Earnings Conference Call. I am Rebecca from Sea's Investor Relations team. On this call, we may make forward-looking statements, which are inherently subject to risks and uncertainties and may not be realized in the future for various reasons as stated in our press release. Also, this call includes the discussion of certain non-GAAP financial measures such as adjusted EBITDA. We believe these measures can enhance our investors' understanding of the actual cash flows of our major businesses when used as a complement to our GAAP disclosures. For a discussion of the use of non-GAAP financial measures and with the closest GAAP measures, please refer to the section on non-GAAP financial measures in our press release. I have with me Sea's Chairman and Chief Executive Officer, Forrest Li, President, Chris Fung, and Chief Financial Officer, Tony Hou. Our management will share strategy and business updates, operating highlights, and financial performance for 2025. This will be followed by a Q&A session in which we welcome any questions you have. With that, let me turn the call over to Forrest. Forrest Li: Hello, everyone, and thank you for joining today's call. After a very strong first half of the year, our momentum has continued into the third quarter. We achieved a total revenue of $6 billion and adjusted EBITDA of $874 million, representing 38% and a 58% year-on-year growth respectively. Shopee's GMV grew by over 28% year on year. Money's loan book expanded 70% year on year while maintaining a stable risk profile. And Garena delivered its best quarter since 2021, with quarterly bookings up over 50% year on year. Our focus remains the same: continuing to deliver high and profitable growth across all three of our businesses. With ecommerce and digital finance penetration in our market still low but increasing, strong growth lays the best foundation to maximize our long-term profitability. I am very pleased with the profitable growth we have consistently delivered, and we will keep on this path. With that, let me take you through each business's performance. Starting with ecommerce, Shopee delivered another record-setting quarter, achieving new highs in quarterly GMV, cross-border volume, and revenue. We have now achieved five consecutive quarters of sequential GMV growth driven by more active buyers and a higher purchase frequency. And we have improved our year-on-year profitability across Asia and Brazil. Our monetization continued its upward trend into the third quarter. Take rate increased both year on year and quarter on quarter. As for a big contributor, our efforts to make ad services both simpler and smarter drove broader adoption and higher ad spend by our sellers. Ad revenue increased over 70% and ad take rate rose by more than 80 basis points year on year. The number of sellers using our ad product increased by more than 25% and their average ad spend increased by over 40% year on year. Our monetization gains, strong growth momentum, and a healthy balance sheet have positioned us well to capture even more growth opportunities. Our three operational priorities—enhancing price competitiveness, improving service quality, and strengthening our content ecosystem—have proven to be a winning formula, and they remain consistent. We think these priorities let me highlight some of the areas we have been investing into that we believe are critical for our long-term competitiveness and profitability. First, continue to improve our logistics capability, a highly strategic competitive mode that has differentiated us from our peers. We launched XPS Express in 2018 when we recognized that reliable and cost-effective delivery was the most urgent logistics demand in our market due to wide differences in geography and infrastructure. Over the years, we have learned how to deliver packages by truck, plane, boat, motorbike, and more. We deliver well in-depth, congested, and high-rise cities. We also deliver well in rural areas where we need to cross rivers, navigate rice fields, and locate homes without formal addresses or postal codes. This experience has given us a very deep understanding of every region in our market. Our delivery capability has now developed to the point where we can identify and deploy service quality improvements addressing specific user needs in different markets. This helps us to serve more users best while improving our operational efficiency even further. For example, in Indonesia, we saw growing demand from urban buyers for very fast delivery and the willingness to pay a premium for it. So we rolled out same-day and instant delivery with delivery times as fast as under two hours. The response was excellent. Orders using this faster option in the greater Jakarta area increased by more than 35% year on year in the third quarter. But for rural regions, we noticed a preference for economical delivery, so we came up with a delivery solution that reduced the cost per order by 20% compared to our standard delivery, allowing rural buyers to enjoy free shipping with much lower minimum spend. This boosted Shopee's popularity among rural buyers. Orders delivered outside Java increased by more than 45% year on year in the third quarter. In Taiwan, we noticed a very different customer demand. Many buyers preferred self-pickup options, so we expanded our automated long-term store network to over 2,500 locations in less than three years, making us the only ecommerce player in Taiwan with a locker network at such scale. Today, it is a key logistic channel accounting for more than 70% of all our deliveries in Taiwan. This move has paid off in more than one way. The lockers run at over 30% lower cost per order than traditional pickup locations. On top of that, the locker locations double up as last-mile hubs for home delivery at a lower cost compared to traditional last-mile models. In other words, we are making our buyers happier while reducing our costs. In the third quarter, our GMV in Taiwan showed double-digit growth year on year, and we still see a lot of room to deepen our penetration further in this highly attractive market. Today, we have built PX Express into a clear leader in scale, coverage, and cost in our Asian market. Our deep local insights have enabled us to customize ground strategies to create the most efficient and effective solution. With our delivery capability well scaled, our next goal to further deepen our logistics competitive mode is to enhance our fulfillment capability. This addresses a more upstream need for our sellers, ensuring fast, accurate order handling in addition to speedy and reliable delivery. We aim to make fulfillment a second core pillar of our overall logistic capability, another way for us to strengthen our reputation among buyers and sellers and ensure high levels of customer satisfaction just as we did with delivery. These efforts are already underway. In previous calls, I have shared updates on initiatives such as intelligent demand forecasting, where we pre-ship commonly ordered products closer to where we anticipate better demand will be. This helps us reduce buyer waiting time and fulfill orders more cost-efficiently. For instance, in Indonesia, if we wait until an order comes in from a remote island before shipping the item out from Java, we must rely on more expensive forms of transport such as airplanes to get it there quickly. But if we have already anticipated this demand, we can use cheaper forms of transport to pre-ship it to the area, letting us deliver it quickly and cost-effectively once the order is placed. We have made further headway in fulfillment by starting to offer warehouse solutions in some of our markets. Offering fulfillment services benefits everyone. It takes the burden of packaging and shipment off sellers, gives the buyers more consistent service, and allows Shopee to better optimize end-to-end logistics while serving more buyers and sellers. We are investing in this capability in a capital-efficient way, for instance, by mostly leasing rather than buying land and warehouses. The most intense investment comes not in the form of money, but in time and effort. It would be very difficult to build a fulfillment capability without a deep understanding of logistics needs in our market and a tightly integrated delivery network to pair it with. After seven years of experience with XPS Express, we have both. Second, continue to find new and exciting ways to deepen user engagement. Our subscription-based Shopee VIP membership program is a great example, and it continued to gain strong traction. By September, we had team members across Indonesia, Thailand, and Vietnam surpassing 3.5 million, up more than 75% from the previous quarter. Given the price sensitivity of many in our market, the success of our VIP program shows the high value we are delivering to our customers. VIP members are demonstrating higher engagement. In Indonesia, these members spend around 40% more after subscribing to the program. Shopee VIP members also bought three times more frequently and spent five times more than non-subscribers in the third quarter, accounting for about 10% of total GMV in Indonesia. We have also deepened user engagement by enhancing Shopee's content ecosystem. Our partnership with YouTube continues to gain strong traction. In the third quarter, shopping orders driven by YouTube content across our Southeast Asian market grew by more than 30% quarter on quarter. With these strong results, we are now extending this partnership to Brazil. Late last month, we also announced a collaboration with Meta to launch new tools allowing seamless product promotion and checkout between Facebook and the Shopee account. We are excited to see how this partnership will enrich our buyer community further. Third, we are committed to embracing AI, a powerful way to improve the whole consumer retail experience. Our AI efforts have already begun to bear fruit, contributing meaningfully to our monetization gains in the third quarter. Smarter search, better recommendations, and more personalized content have made Shopee easier and more enjoyable to shop on. We have also used AI to enhance product discovery beyond search, helping buyers find relevant and interesting items even when they arrive without a specific purchase in mind. We empowered sellers with AI tools, enabling them to generate images, video, text descriptions, and virtual showrooms to make their product listings more appealing. These initiatives have increased buyer engagement, improving our purchase conversion rates by 10% year on year in the third quarter. Taken together, all these efforts have resonated with our customers. Buyer purchase frequency across our markets continues to improve, going up a further 12% year on year in the third quarter. Average monthly active buyers also increased 15% year on year in the third quarter. And Shopee remains consistently regarded as the ecommerce platform offering the most price-competitive products in both our Asian market and Brazil. Based on Qualtrics survey, I would also like to highlight our progress in Brazil, where Shopee continued to deliver exceptional growth while maintaining positive adjusted EBITDA. Our GMV growth there has been outpacing the market, driven by sustained increases in monthly active buyer purchase frequency and average basket sizes over the past several quarters. Our wide product assortment, highly competitive pricing, and structural cost leadership have enabled us to scale rapidly and profitably. Our continuous improvement in delivery speed and reliability has enabled us to expand into more upmarket product categories. Delivery speed improved sequentially in the third quarter, with average delivery time improving by about two days compared to a year ago. In the Greater Sao Paulo area, one-third of parcels were delivered the next day, and nearly half within two days. With these improvements, we are seeing more merchants listing higher-value products and new buyer cohorts showing higher spending patterns. In the third quarter, GMV for Shopee Mall, our premium shopping section, more than doubled year on year in Brazil. In conclusion, Shopee has delivered another quarter of strong and profitable growth. With our strong performance year to date, we now expect Shopee's full-year 2025 GMV growth to be more than 25%. Next, moving to digital financial services. Money has delivered another very strong quarter, with revenue growing by 51% and adjusted EBITDA growing more than 35% year on year, while our ninety-day NPL ratio remains stable at 1.1%. The strong growth was broad-based, driven by both user growth and product expansion across multiple markets. Our loan book expanded by around a billion dollars during the quarter to reach $7.9 billion at the end of September, solidifying our position as one of the largest consumer lenders in Southeast Asia. Thailand has reached another major milestone, surpassing $2 billion in loans outstanding at the end of September. In Brazil, our loan book more than tripled year on year in the third quarter, with improving portfolio quality and stronger user performance. Our significant credit history with a very large base of users across many markets allows us to roll out products more widely while maintaining the health of our portfolio. We used to take a wide lead approach to onboarding new users. Now any Shopee user in most of our markets can apply for a pay later credit, and we can make credit approval decisions very quickly, in many cases, almost instantly. Moving to this all-can-apply approach enabled us to add more than five million first-time borrowers in the third quarter. New user cohorts scaled well with generally positive unit economics, a testament to our increasingly advanced risk underwriting capability. At the end of the quarter, active users across our consumer and SME loan products reached 34 million, up nearly 45% year on year. Meanwhile, loan disbursements to new users still accounted for less than 10% of total disbursements in the third quarter. As we continue to assess credit quality before cross-selling more products, we are also making our credit products on Shopee, at pay later, off Shopee, at pay later, and the personal cash loan easier to use in a wider set of use cases. In many of our markets where credit card penetration remains low, we are steadily establishing pay later as a trusted and convenient payment method of choice for all kinds of purchases, both online and offline. On Shopee, at pay later has grown steadily as penetration continues to deepen across all our markets. GMV penetration now ranges from single digits in early markets to over 30% in more mature ones, reflecting our discipline in scaling only when incremental disbursements are profitable. We see meaningful room to continue increasing at pay later on Shopee penetration across our markets. Off Shopee, at pay later showed strong traction this quarter, growing over 300% year on year and over 40% quarter on quarter. It still only accounts for less than 10% of our total loan book as of the end of September, so large upside remains for future growth. This product segment represents a significant opportunity to unlock access to offline spend, a very large part of consumer expenditure in many of our markets. The standalone Shopee Pay app, supporting both online and offline payments across a wide range of merchants, is a key pillar of our strategy to grow our money business off Shopee. In payments, it offers users a faster and more seamless experience, giving them direct access without having to go through the Shopee app. Beyond payment, it helps us unlock more use cases, positioning Shopee Pay as a one-stop platform for users' broader financial needs, off Shopee credit, insurance, wealth management, and more. The app has launched in Indonesia, Thailand, Vietnam, and Malaysia, and it's showing strong traction. More than 20% of our Shopee Pay monthly transacting users are using the standalone app. Personal cash loans also grew strongly this quarter. In Indonesia, we have been offering higher limits and longer tenures to attract more prime users who demonstrate strong repayment behavior. Loan sizes can typically range from a few hundred dollars to over a thousand dollars, allowing us to serve users with larger financial needs. Building on this step size, we have similarly expanded access to prime users in Thailand and Malaysia, where user adoption is going up quickly. In Brazil, personal cash loans grew close to 50% quarter on quarter, driven by the continued popularity of the combined credit limit we offer to as pay later users. In conclusion, Money has delivered another excellent quarter, building well while diversifying our credit portfolio across markets, users, and products. Our portfolio quality and our unit economics have remained healthy, and we are extending at pay later's reach beyond ecommerce and embedding it into users' everyday financial use cases. This will build a pathway for strong off Shopee growth for many years to come. Finally, moving to digital entertainment. Garena has delivered another stellar quarter. Bookings were up 51% and adjusted EBITDA grew 48% year on year, making it our best quarter since 2021. Free Fire encouraged a strong performance with the two high-impact campaigns, WeGain and the Naruto Shippuden chapter two. The campaigns received a huge positive response, accelerating our growth momentum from the previous quarter. Our speed game collaboration incorporated iconic challenges from the blockbuster Netflix TV series, such as the red light green light, and the glass bridge. The event drove strong participation, with the RhymeLife, GreenLife challenge being played more than 300 million times in the quarter. Our Naruto Shippuden chapter two event expanded on the resulting success of chapter one in the first quarter of this year. Based on gamer feedback and performance insights, we added five new fan-favorite ninja characters, new attack mechanics, highly sought-after collectible items, and a new one-on-one mode letting players use signature abilities from the series. Chapter two went down to surpass chapter one in both engagement and revenue. With an extremely high social media share rate for chapter two, doubled the already high bar set by our eighth anniversary event. Both Naruto chapters have achieved the highest satisfaction scores of any campaign launched over the past two years. Our Naruto content was very successful because it focused on what players value most: authenticity through attention to detail. This strong focus underpins how we take IP collaboration to the next level, and it is driven by Garena's core creative culture. First, we require every major IT partnership to be led by a team of genuine superfans of that IT within Garena to ensure authenticity and respect for the original work. Naruto fans love how closely the gameplay mirrors small but important details from the anime. For instance, one key storyline from the original anime was about rogue ninjas returning to eat the Choy, the ninja village they had been exiled from. In chapter one, we had to build this Ninja village into our map and introduce iconic attack deals from the main anime characters. In chapter two, we introduced attack skills that were specifically from the rogue ninja character, like fireballs, black fire, and exploding birds, and redesigned the map to feature a Detroit version of the Ninja Village. Continuing the narrative between the chapters in a way that was true to the original anime created a highly immersive experience and brought fan excitement to the next level. These are details only superfans would care about and understand how to incorporate into gameplay. Second, take a global yet local approach, bringing global IPs to our market in highly localized ways. For instance, we took advantage of the huge traction of our Naruto campaign to hold ninja-themed offline events in eight markets across Asia and The Americas, attracting tens of thousands of fans. The largest of these events was a two-day international all-star ninja clash esports tournament in Bangkok, with teams of Free Fire players flying in from across Asia and Latin America to compete. The Bangkok tournament was a huge success, becoming a top-trending event on YouTube gaming and on social media across key markets. In addition to such events, our teams stay closely connected to players through creator programs and fan groups, tapping into a constant stream of feedback and ideas that shape game design conditions. This effort builds very strong community connection and loyalty across our markets. Beyond Free Fire, we continue to expand our publishing portfolio with the launch of EA SPORTS SD mobile in Vina last month, strengthening our long-standing partnership with Electronic Arts. The game quickly became the country's most downloaded mobile game in October based on Sensor Tower. By combining EA's world-class football franchise with Garena's local know-how, we are deepening our expertise in sports games and reinforcing our position as a trusted publishing partner for global titles. With this very strong quarter, Garena remains on track to achieve more than 30% year-on-year growth in bookings for 2025. Our creative depth, disciplined execution, and close connection with players will continue to drive Garena's growth. In conclusion, all three businesses have built on the strong momentum from the first half of the year and delivered another quarter of exceptional growth. We will continue to make our digital ecosystem even more vibrant, trusting our leadership position, and delivering sustainable and profitable growth to our shareholders. With that, I invite Tony to discuss our financials. Tony Hou: Thank you, Forrest, and thanks to everyone for joining the call. For Sea overall, total GAAP revenue increased 38% year on year to $6 billion in 2025. This was primarily driven by GMV growth of our ecommerce business and the growth of our digital financial services business. Our total adjusted EBITDA was $874 million in 2025, compared to an adjusted EBITDA of $521 million in 2024. On ecommerce, Shopee's gross orders increased 28% year on year to 3.6 billion in 2025, and GMV increased by 28% year on year to $32.2 billion in 2025. Our third quarter GAAP revenue of $4.3 billion included GAAP Marketplace revenue of $3.8 billion, up 37% year on year, and GAAP product revenue of $500 million. Within GAAP marketplace revenue, core Marketplace revenue, mainly consisting of transaction-based fees and advertising revenues, was $3.1 billion, up 53% year on year. Value-added services revenue, mainly consisting of revenues related to logistic services, was $700 million, down 6% year on year due to increased shipping subsidies. Ecommerce adjusted EBITDA was $186 million in 2025, compared to an adjusted EBITDA of $34 million in 2024. Digital Financial Services GAAP revenue was up by 61% year on year to $990 million. Adjusted EBITDA was up by 37% year on year to $258 million. As of the end of September, our consumer and SME loans principal outstanding reached $7.9 billion, up 70% year on year. This consists of $6.9 billion on book and $900 million off book loan principal outstanding. Non-performing loans past due by more than ninety days as a percentage of total consumer and SME loans was 1.1% at the end of the quarter. Digital entertainment bookings grew 51% year on year to $841 million. GAAP revenue was up 31% year on year to $653 million. The growth was primarily due to the increase in our active user base as well as the deepened paying user penetration. Digital entertainment adjusted EBITDA was $466 million, up 48% year on year. Returning to our consolidated numbers, we recognized a net non-operating income of $61 million in 2025, compared to a net non-operating income of $50 million in 2024. We had a net income tax expense of $161 million in 2025, compared to a net income tax expense of $93 million in the third quarter of 2024. As a result, net income was $375 million in 2025, as compared to a net income of $153 million in 2024. Rebecca Lee: Thank you, Forrest and Tony. We are now ready to open the call to questions. Operator? Operator: We will now begin the question and answer session. We'll take a maximum of two questions at a time from each caller. If you wish to ask more questions, please request to join the question queue again. Your first question comes from Pang Vitt with Goldman Sachs. Pang Vitt: Hi, management. Thank you very much for the opportunity. Congrats on the great set of results. Two questions from me, both on the ecommerce side. Number one, on your growth guidance of more than 25% year on year for 2025, what do you bake in, in terms of the driver and competitive landscape? What will it mean for your margin trend? And how should we think about these trends carrying into 2026? That's question one. Question two, just to have a good understanding of the margins. So margin trend for ecommerce came down to 0.6% in the quarter despite higher take rate. Can you help us understand where is the investment area, whether this is in the fulfillment as you mentioned, or is there also something else that we should be aware of? Are these more fixed or variable? And how long and how much should we expect this investment cycle to be? Tony Hou: Yeah. But in terms of the gross assumption of more than 25%, I think we are kind of halfway into the quarter already. It's basically based on what we see so far in the market on the momentums and competitive landscapes. It's pretty much reflective of what we see so far as we come into the quarter. And regarding the margin questions, if you look at the previous year versus this year, we do see consistent improvement of margin if you look at a year-to-year basis. As we shared before, we obviously see quarter-to-quarter fluctuations sometimes for seasonality reasons or where some of the investment cycle of the initiatives and could also be a particular market status in terms of where we are pushing some of these initiatives. So I think if you look at a bit of a year-to-year trend, even going forward, I think we believe that we are able to deliver the 2% to 3% EBITDA margin as we shared before and also have improvement year to year if you look at the yearly basis. In terms of where we are investing, one thing is we mentioned in the opening, further investment into the logistic capabilities and fulfillment capabilities. And beyond that, we are also deepening our buyer engagement wallet shares through, for example, our Shopee VIP program that we shared in the opening as well. And all those efforts have been showing pretty good results. Our buyer frequency improved 12% year on year, and average monthly active buyers increased 15% year to year as well, which contribute to our great growth. This quarter, which is way above the guidance we gave earlier in the year, which is 20%. Most of this investment is less fixed per se. We take a relatively asset-light approach even coming to our logistics and fulfillment businesses. We don't own land. Most of our CapEx is just improvement of building the warehouses or sorting facilities, etcetera. It is also less fixed. For our buyer engagement and wallet share program as of VIP, obviously, you will see a little bit of investment in the early days to get everybody to understand the program and join the program. But as time goes, it should be a quite profitable program as you probably have seen in other ecommerce platforms across the globe. Operator: Your next question comes from Divya Kothiyal with Morgan Stanley. Divya Kothiyal: Thank you very much. My first question is on your new market entry strategy and framework. Could you explain the rationale behind closing some of the cross-border operations in LatAm and the reentry into Argentina? What milestones would you monitor for Argentina before making it a localized business? And is this one of your 2026 priorities? My second question is on market shares. If you can comment on the market shares in ASEAN, how have they moved in the third quarter? And also, if you could comment on Taiwan, do you foresee increasing marketing spend and investments in Taiwan next year? We're also seeing a bigger contribution from cross-border with Taobao getting more popular there. If you can comment on the market shares in ASEAN and Taiwan, that would be helpful. Thank you. Tony Hou: Yeah. I think regarding the new market, we take a very highly selective approach on any new geographic expansions. Many of the initiatives will be very early-stage testing the market in nature. The reason we look at Argentina is it's actually leveraging our capability that built in Brazil, leveraging on our existing cross-border infrastructure and the operational experiences we had already built in Brazil. The objective is more to capture the operational synergies across the adjacent regions and open additional channels for our sellers with minimal incremental investment. I think the year we will take some time to learn about the market without sort of having a heavy investment into the market at this point in time. For Chile and Colombia, we decided to wind down our cross-border operation in Chile and Colombia as part of our ongoing review of our global business priorities to ensure our resources are focused on the key business priorities in line with our long-term strategy in the region. Latin America is still an important market for us, and we will continue to explore the opportunities to serve the consumers and businesses well there. If you look at the absolute size in Latin America, obviously, Brazil is the largest one where we have a very large presence there. Argentina, as we mentioned, and Colombia are actually relatively smaller markets and also relatively more distant from Brazil. I guess that's the thinking around the first question. Regarding the market share in South Asia in quarter three, as we shared, our growth has been above kind of the expectations we shared before. And across the region, we actually do believe that we are gaining market shares in South Asia, growing faster than the market in South Asia. For Taiwan, in particular, the cross-border to Taiwan has been, in general, a smaller part of the businesses. And given the complexity for the buyer experience on the cross-border side, we are less concerned about the cross-border players selling from overseas to Taiwan as a potential impact on our businesses. Actually, if you look at the recent quarters, we grow very well in Taiwan. We grow double digits, which is faster than the overall market in Taiwan. So we are pretty confident that, meaning we are the largest ecommerce platform with the largest assortment, with the best pricing, and also we have the best delivery infrastructure, which is much lower shipping and fulfillment cost compared to anyone in the market. We are able to defend our market share well. We are able to grow even faster in Taiwan with our infrastructure much better built than previous years. Operator: Your next question comes from Alicia Yap with Citigroup. Alicia Yap: Hi. Good evening, management. Thanks for taking my questions. And congrats on the solid results. Two questions. One is, if you can, elaborate a little bit more on the overall landscape in Southeast Asia. So are there any countries that we are seeing more intense competition lately? And also, you know, any countries where you see peers are growing faster than Shopee? And do you anticipate the live streaming peers to start shifting more of the traffic and also the purchase frequency to the shelf space, the marketplace model? In addition to the live streaming, if that is happening, you know, what could be the potential threat to Shopee? And then the second question is should we assume the investment cycle this time around similar to, like, a couple of years ago where there could be some step-up investment that is more front-end loaded with GMV growth and market share growth to follow through later, especially for, for example, like, you need to ramp up your fulfillment, you know, capability in some of the markets, which will yield better results later on. So could you clarify if this time the investment cycle could be similar to what we saw last two, I mean, two years ago? Thank you. Tony Hou: On the competitive landscapes, what we see is relatively stable competitive landscapes. I think as you can probably observe as well from your own sources, we didn't see any particular market different from another. I think it has been a general trend across the South Asia market in terms of the intensity or the behavior of the competitors. Regarding whether the livestream peers focus more on the shelf space model, I think it's not something new. I think it's something we try to do for quite a long time. As you probably see from China as well, etcetera. But we do see that the nature of the platform is different. I think the percentage of share of commerce is relatively consistent, let's say, from what we observed. Also, if they are much more traffic pushing towards that, that is a potential of impacting how the overall app behavior and the user retention as well. But anyway, I think that's kind of similar behavior you will see in China and South Asia. But we wouldn't see that's a new thing impacting the competitive landscape in a meaningful way. On the investment cycles, I think the short answer is probably not. It's probably quite different from what you see two years ago in terms of the investment into their content ecosystem, if you remember that. I think what we are doing now is more as a continuous investment in our business to strengthen our competitive mode, pretty aligned with what we shared continuously every quarter. We would like to invest in our infrastructure to better logistics. And now we are extending logistics to the fulfillment network as well. It's actually, in a way, it's not completely new. It's a capability we have been trying to build for a period of time. And now we felt it's a good time to scale it even more. But as I shared just now, it's less CapEx intensive businesses as you probably imagine. And also as we grow the businesses, it will help our growth as well because this will help us to lower down the overall cost to serve as an ecosystem. And also reduce the delivery times to the user, so help us to penetrate the user more. And many of these contribute to our growth faster than we expected early in the year as well. If you take a look at the VIP programs, yes, it's a little bit of investment in the early days, but we also see that with the investment, the users are willing to spend more with the platform as well. I think Forrest shared that the users purchase 40% more than before they joined the VIP program. So in a way, it's less a big front-load investment than the return comes later. I think this time you will see it's more ongoing investment program to strengthen our competitive mode as I shared earlier. And this will impact on the general growth as we invest. Operator: Your next question comes from Piyush Choudhary with HSBC. Piyush Choudhary: Yeah. Hi. Thanks for the opportunity. Congratulations on a great set of numbers. Two questions. Firstly, for Shopee Logistics, what percentage of orders are now fulfilled by XPX within Asia and Brazil? How has it changed over the last one year or so? How much of an increase in your cost of services is driven by this logistics investment and the outlook for this cost item? That is first. Secondly, on Garena, can you share the outlook for Free Fire for 2026 after a successful 2025? Any planned IP collaborations? Any new game launches? Tony Hou: On the SPX, I do believe we shared before more than half of our orders are delivered through our SPX, and the percentage has been increasing, let's say, overall over the last year as we scale our network. On our cost per order, it has been continuously improving year to year. I think that's part of what contributes to our growth as well because this lowers down the cost buyers have to pay to receive the orders. But on top of that, I also want to highlight not only do we try to reduce the cost of our SPX delivery cost, but we also increase the speed for our SPX cost. Forrest mentioned that in Brazil, we reduced the buyer waiting time by two days if you look at the year to year. In Asia, we also reduced the delivery time quite meaningfully year to year and quarter to quarter as well by both introducing the fast shipping channel. If you look at many countries, we have instant delivery now. Also have same-day deliveries, but also reducing the normal delivery channels speed. I think this all helps to contribute to our growth as you see. For the Garena outlook, well, we are very, very excited to observe the momentum. I think this is extremely valuable, like, I think the turnaround, like, two years after the post-COVID headwind. And in 2024, we have a very, very high growth. That is the strong momentum continuing to 2025. Actually, the growth is even accelerated this year compared to last year. So the momentum is still very strong. So we remain very optimistic and positive, like, for 2026. We believe the user base will continue to grow. The content, the offerings will be more, like, the experience user experience is more immersive. And I think, like, especially this year, we were very successful with IP collaborations. And I think Garena as an organization, we unlocked a very important capability. So how to continually work with the global IPs and deliver the best content, very unique experience to our large user base. Right? Whatever we put on the platform, put into the game, like on a single day, more than 100 million gamers from all over the world will be able to experience that. Like, it's a very, very powerful distribution platform, distribution channels. We'll continue to work with more IPs, but of course, we'll be also very selective as well. And we are also quite excited to kind of see what AI can do. So in terms of boosting both the creative side, production side, and also the user experience side. We think that is a potential boost for future growth as well. At this moment, we are in the process of detailed planning for next year. I think probably we'll have a better sense. We're ready to share with the market what will be the specific outlook we receive for Garena in 2026 next quarter. We always have some new games in our pipeline. We have a very, very strong and dedicated experienced developers especially focused on the new games. And we have several games already in the pipeline or, like, in some markets already live in the trial period where learning experiences. And at this moment, I think it's a bit premature to project what is the impact. I think considering the size of the scale of Free Fire in terms of the user base and the revenue and profit, I don't think, like, at this moment, like, even if we have any new games, at an early stage, we'll make a significant impact in terms of the user numbers and the revenue and the financial side. But we're going to continue to put a lot of effort, and I think this through the new games development, we also learn about the different genres. We're also learning the differences about some new markets we haven't been to. I think it remains a very, very good opportunity for future growth. So when we have, like, the way to deal with it, it's the right time to share, so we'll also keep all our shareholders and investors informed. Operator: Your next question comes from Jiong Shao with Barclays. Jiong Shao: My first question is on the VIP membership. I'm trying to get a better understanding of that program. That's clearly a great thing to do longer term. I suspect in the near term, I was wondering what's the unit economics look like for the members and what do you think the eventual VIP member penetration should be in a region? So the reason I obviously asked that is because gross margins for ecommerce came down a bit quarter over quarter. I suspect it's kind of negative initially. And is that a time frame to kind of reach breakeven for the members? Second question is about AI. I think Forrest recently did some media interviews talking about AI may power the company to be one of the first trillion-dollar companies in the region. I was hoping you can talk about what are some of the things potentially you may do or you want to because some investors are worried about the massive AI CapEx that may be affiliated or associated with any kind of a new venture. Thank you. Tony Hou: On the VIP program, we are still in a very early stage of rolling out the program. As you probably can see, it's only a few months. But we see very good growth in the users signing up. If you look at sort of quarter to quarter, we see a 75% growth in the members. In terms of the GMV penetration, we're showing the early stage still in the teens, and we believe this can be a lot higher, probably similar to the percentage you observe in other parts of the world in terms of the penetrations. I think the important thing for us to look at the unit economics is that we would like to make sure that we have members not only receive better benefits from the platform because they are paid members and they are the important core users. We also want to make sure that we work with our partners to bring the benefit to them as well. If you look at Indonesia, it was videos. In Vietnam, we work with FTP plays. We also work with JGPT as well. Offer a free program to the VIP members. I think all those will help us to have good economics for this program. But you are right. In the early days, it does require some sort of investment to bring the user over. One thing that we monitor very closely is the retention rate. We would like to make sure that the user we bring to the program has good retentions. And in our early market, we see the retention improve almost doubled from the last quarter to this quarter period of time, which is a big breakthrough for us given that in our market, credit card is not a common payment method in many other markets. People use credit cards to make sure that it's a continuous payment. We are working on multiple ways to ensure that the retention goes well with the program well, especially together with our digital finance side through as well. Sure. Jiong, on the AI question, yeah, I mean, as I shared during the interview you mentioned, we're deeply excited about the new technology. I think it represents a fundamental technological revolution, which will create massive new opportunities and supercharge technology's ability to unlock values for people everywhere. I think it's extremely exciting for the market where, you know, which still, like, millions of hundreds of millions of people are underserved. Right? And we have been that uplift in the past ten years through the mobile Internet revolution. And we have observed how much the smartphone, the mobile Internet transformed people's lives, how much joy and convenience it brought to people's lives. And of course, we are part of this transformation, and that is what we are really as a company, what this is about our mission. We try to focus on the applications and how to connect those fantastic technologies to people's daily lives in every corner of the world. And we believe we'll see a similar pattern of AI revolution. Probably, we believe this impact and the value creation will be much, much bigger. At this moment, we're like, things you mentioned, okay, we're probably not going to do what the big tech is going to do. We're not going to, like, develop the trying to make some fundamental language model breakthrough. We're not going to build data centers. I think for that part, we are very much open to work with all the big tech that could, like, we're kind of, we have a lot of admiration and respect for how much effort and how much they can do to continually have the breakthrough of the technology and making technology more powerful and more useful. And what we are going to more focus on applications and how that technology built in Silicon Valley or anywhere in the world transformed to a consumer's daily life, small businesses like in Indonesia, in Vietnam, in Brazil. So that work is a factory what we are good at. And we have a lot of best practices that we learned in the past decade. And I think that is also kind of like make us really, really excited. We're going to have a very, very practical and bottom-up approach. So as I and we are very much focused on seeing the immediate return of results. As I shared in my opening, right, and we're very excited to actually see some of their critical use cases in Shopee. Right? And how much this can help on the advertising conversion, how to make product discovery easier, and it's, like, more discovery and beyond traditional search. Right, how to help sellers improve the product listing quality, and how to improve the best retention and conversion rate. And I think I probably shared in the previous order, like, a quarter. And also this is a see the improvement in terms of the customer service capability. And now the majority of our customer service is handled by AI, like a chatbot, and the satisfaction rate is very, very high. So that is all the things we have seen the result under the progress of bottom-up. And we believe with the continuing improvement capability built enabled by the more advanced and large language model and other parts of the AI development. And that there will be more and more things we can apply into the day-to-day business, which make a positive impact on people's daily lives. Rebecca Lee: This concludes our question and answer session. I would like to turn the conference back over to Ms. Rebecca Lee for any closing remarks. Thank you all for joining today's call. We look forward to speaking to all of you again next quarter. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, and welcome to the Endava's First Quarter Fiscal Year 2026 Conference Call. Should you need assistance, please signal a conference specialist by pressing the star. To ask a question, please note this event is being recorded. I would now like to turn the conference over to Ms. Laurence Madsen, Head of Investor Relations and ESG at Endava. Please go ahead. Laurence Madsen: Thank you. Good afternoon, everyone, and welcome to Endava's first quarter of our fiscal year 2026 conference call. As a reminder, this conference call is being recorded. Joining me today are John Cotterell, Endava's Chief Executive Officer, and Mark Thurston, Endava's Chief Financial Officer. Before we begin, a quick reminder to our listeners. Our presentation and our accompanying remarks today include forward-looking statements, including, but not limited to, statements regarding our guidance for Q2 fiscal year 2026 and for the full fiscal year 2026, the impacts of headwinds facing our industry and business trends in our industry, including with respect to developments with AI enhancements to our technology and offerings, our pipeline of client opportunity and our ability to convert such opportunities into contracted orders. The benefits of our partnerships, our pricing models, demand from clients for our technology services, our ability to create long-term value for our clients, our people, and our shareholders, and our business strategies, plans, operations, and growth opportunities. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. Actual results and the timing of events may differ materially from the results or timing predicted or implied by such forward-looking statements, and reported results should not be considered as an indication of future performance. Please note that these forward-looking statements made during this conference call speak only as of today's date, and we undertake no obligation to update them to reflect subsequent events or circumstances other than to the extent required by law. For more information, please refer to the Risk Factors section of our annual report filed with the Securities and Exchange Commission on 09/04/2025, and in other filings that Endava makes from time to time with the SEC. Laurence Madsen: Also during the call, we'll present both IFRS and non-IFRS financial measures. While we believe the non-IFRS financial measures provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with IFRS. Reconciliation of such non-IFRS measures to the most directly comparable IFRS measures are included in today's earnings press release, as well as the investor presentation, both of which you can find on our Investor Relations site or on the SEC website. A link to the replay of this call will also be available on our website. With that, I'll turn the call over to John. John Cotterell: Thank you, Laurence, and welcome everyone. We appreciate you joining us for our first quarter fiscal year 2026 earnings call. Endava continues to be deeply engaged by and with major companies across the world as they look for support in navigating the journey towards AI, whilst ensuring operational resilience in existing platforms and devices. We believe the partnerships with major technology giants and the decisions we took three years ago led to the development of our AI native change delivery life cycle, now branded Dava Flow, see us well placed for the coming years. However, we continue to navigate the challenges associated with this transition in business models, delivery approach, and acceleration of the new AI-driven digital wave. The first quarter results were lower than guided, primarily due to an unexpected credit made to a client that arose subsequent to our last earnings call, as well as certain non-large strategic pipeline opportunities that did not convert into revenue during the quarter as anticipated. While these factors weighed on our performance, our ability to secure a multiyear strategic relationship with a leading payments company of up to $100 million demonstrates the strength of our client relationships. This partnership will utilize the best of Endava's global delivery case capability as well as our AI and advanced engineering capabilities to streamline our clients' technology platforms and enhance existing capabilities. This represents a prime example of the type of deal and partnership we are targeting. Utilizing our capability as an AI native technology agnostic transformation partner, our broader partner ecosystem is already generating incremental potential pipeline opportunities, and client interest in Dava Flow is accelerating. I will return to each of these topics later in the call. Following the sales leadership realignment announced last quarter, we recently hired a Chief Growth Officer for Commercial Services, for Europe and North America. These changes are already sharpening our customer engagement model, which is evident in the composition of our potential opportunity pipeline, which we are tracking closely. We remain committed to disciplined cost management to protect margins while continuing to focus on growth. Starting with an update on our AI-related engagements. AI now anchors many clients' technology roadmaps, and we are partnering across a spectrum of projects, from early proof of concept to enterprise-wide rollouts and subsequent optimization efforts. Following the engagement for a leading U.S. healthcare services provider, where we deployed AI to automate the intake and summarization of medical bills and supporting documentation, we have now advanced integration into the clients' adjuster portal and enable both new real-time and scheduled processing support peak volumes. The architecture is built for compliance and auditability, U.S. data residency, and targets high accuracy to meet over 95% precision while holding unit costs below 0.5% per page. Early performance indicates faster, more consistent decisions and a clear path to materially lower per claim handling costs. Building on the enterprise ChatGPT program, our collaboration with a leading financial compliance technology provider has progressed. We partnered with OpenAI to drive a company-wide deployment of ChatGPT Enterprise anchored in governance and enablement. Within three months, more than 500 licenses were rolled out with a single sign-on, role-based access, and audit logging. Key team members across finance, legal, IT client services, and support received train-the-trainer enablement to develop high-value use cases and custom GPTs reinforced by structured communication, weekly show-and-tell sessions, and continuous measurements. Adoption has scaled, with growing catalogs of validated use cases, and measurable productivity gains are emerging in document workflows and client service operations. These first two client cases are examples we have previously discussed on earnings calls, and I'm covering them to show how these engagements are progressing, to show how engagements are building and deepening once production solutions are in place. For a leading U.S. retail pharmacy chain, we are modernizing a core handheld application by upgrading its code base using AI-assisted analysis, leveraging GitHub Copilot. We completed a comprehensive assessment and prepared a two-phase execution plan that targets the highest impact fixes and de-risks the upgrade. The resulting playbook is designed to be repeatable across other applications, strengthen security, reduce technical debt, and support a faster release cadence. Initial results indicate AI-enabled reviews and automated testing are lowering manual effort by between 25-30% and shortening migration time by between 20-25%, implying a projected productivity uplift between 30-35% once both phases are completed. For a global energy and utilities provider that runs large-scale power grid simulations, we migrated a 400,000-line Fortran system. We built AI-assisted passes and automation tools with agent coding tools to preserve program flow while refactoring syntax and improving memory management. We also identified code sections tied to domain concepts to speed future feature delivery. This approach reduced manual edit risk and enabled automated conversion at scale. Initial benchmarks indicate up to close to 30 times faster code changes with improved reliability. For an e-learning serving over 12,000 healthcare and human services organizations, we developed an AI-enabled content studio that streamlines the entire content life cycle: drafting, review, quality assurance, export, and accreditation for a catalog of 7,000 plus courses. Built on Windsurf and integrated with the client's enterprise AI infrastructure, the platform generates course outlines and transcripts, runs policy-based QA agents, automates SCORM imports, and compares accreditations standards. Automation rules and validation tests further enhance compliance and operational consistency. Results show end-to-end authoring efforts have fallen by approximately 30% and modeling shows projected time savings of 30% to 50% when scaling updates across the full course library. Turning to partnerships, our investment in our partnership with OpenAI is expanding. As we've enrolled a group of Endava engineers in OpenAI's newly launched partner-exclusive certification program. Our team is pursuing multiple opportunities across the OpenAI product suite through training created by OpenAI that is only available to service partners. This is another step to deepen our knowledge and advance our AI native to delivery capability. On the commercial side, the joint go-to-market framework we created in partnership with OpenAI is producing measurable results, with wins in the insurance sector. We continue to grow our dedicated Google Cloud business unit. In collaboration with Google Cloud, we continue to increase the number of Gemini enterprise projects that we are actively engaged in. Each engagement follows a production-grade reference architecture with explicit safety and audit controls, ensuring that pilot outcomes can be migrated into compliant enterprise environments. One of these projects involves a leading UK bank, where we are rolling out AI-enabled digital assistance that give employees fast, secure access to internal and market data. Early pilot results indicate shorter query resolution times and improved policy compliance, laying a foundation for institution-wide adoption of agentic workflows. We also continue to strengthen our partnership with Salesforce by investing in AgenTik AI and innovation, with a focus on applying agent force across Salesforce's core clouds to assist customer-facing teams, streamline operations, and unlock new levels of engagement and productivity. This reflects Endava's commitment to staying at the forefront of Salesforce innovation and helping clients turn emerging AI capabilities into real measurable impact. And now with an update on our large strategic deals, defined as multiyear large-scale engagements. In addition to the multiyear payments deal I mentioned earlier, we deepened our engagement with Convex, an international specialty reinsurer, by signing a new agreement. This builds on the success we have achieved together in recent years as Convex continues to invest in innovative technology deliver consistently high-quality service. This partnership enables us to deliver a range of capabilities enabling Convex to continue creating a business that has data at its heart and a strong emphasis on analytics to make better underwriting decisions. In mobility, we have extended and expanded our long-standing partnership with Toyota Racing Development, as their official IT consulting partner in 2026 and beyond. As part of the partnership, Endava will leverage its AI-enabled accelerators and frameworks to modernize core Toyota racing development production systems and enable digital transformation for the business. Next, let me outline how our delivery model is evolving and what that means to execution and client outcomes. The pace of AI innovation remains exceptionally fast, and the nature of our client discussions has evolved just as quickly. Where a few courses ago we were explaining foundational concepts such as intelligent agents, we are now examining how those agents can be deployed to deliver measurable efficiency across customer-facing and core operations. Clients are starting to move beyond the search for a single killer app application and are instead seeking opportunities to embed AI throughout their technology stacks and operating models. This marks the beginning of the transition from chasing incremental changes brought about by embracing AI to notable productivity changes. We're now spending time shaping larger-scale projects, can only be delivered through the strategic adoption of AI. Purpose-built for an environment in which autonomous software agents participate in delivery, Dava Flow treats flow as the next progression beyond agile. By embedding AI into every activity, the delivery life cycle is organized into four yet feedback-linked phases: Signal, Explore, Govern, and Evolve. Throughout all phases, human oversight, human in the loop guides AI contributions, and the system learns and improves with each cycle. In Signal, we deploy market and estate scanning agents to surface and qualify opportunities. The agent reacts to signals in the market or client environment and feeds qualified opportunities into the life cycle with confidence scores. In Explore, we use human-AI collaboration to convert these signals into evidence solution designs, producing prototypes, requirements, and models at pace. The aim is to reduce uncertainty and finalize what needs to be built supported by evidence. In Govern, we assemble and automate the build. Engineer oversight combines with agent-generated code to enforce best-in-class controls. Evolve is the post-deployment phase where the solution is in production with continuous improvement. Human in the loop checkpoints span every phase so that each iteration strengthens the next. AI agents watch the system's telemetry, user behavior, and performance data to detect anomalies or opportunities. Across the four phases, we take our lifetime experience of distributed agile at scale and optimize our approach to best organize agents at work, agentic checkpoints, and humans in the loop at the core of the new approach. We have equipped our teams with playbooks and training materials, and all delivery teams are expected to complete Endava flow training and immersion before the close of the current financial year. We ended the quarter with 11,636 Endavans, representing a 2% decrease from the same period last year. We are deepening our AI talent pool and embedding new capabilities across the business, positioning Endava to help clients turn emerging technology into near-term operational gains. We're expanding and upskilling our AI talent while trimming roles where market demand has declined. Our inaugural DARVAx Academy, created to train the next generation of AI-skilled professionals, drew 2,900 applicants and resulted in 470 hires across nine delivery locations. And our recent Tech Fest engineering event brought together those new hires working in 48 cross-functional teams to address 24 client-inspired challenges. Every team produced a working minimal viable product under mentor guidance. Before we conclude, I want to recognize every Endarvon for the perseverance and focus you continue to show as we steer through this period of rapid digital evolution and translate change into opportunity. Our priorities remain clear: sustain growth that endures, safeguard the distinctive culture that defines us, and deliver technology solutions that equip our clients to set the pace confidently in an ever-shifting market. I'll now hand over to Mark for a closer look at our quarterly financial results and guidance for the upcoming quarter and the remainder of the fiscal year. Mark Thurston: Thanks, John. Endava's revenue totaled £178.2 million for the three months ended 09/30/2025, compared to £195.1 million in the same period in the prior year, representing an 8.6% decrease. In constant currency, our revenue decreased 7.3% from the same period in the prior year. As John already mentioned, the first quarter results were lower than anticipated, primarily due to a matter in the United States, relating to an unexpected credit made to a client that arose subsequent to our last earnings call, as well as failure to convert certain non-large strategic pipeline opportunities into revenue as previously anticipated. Loss before tax for the three months ended 09/30/2025, was £8.5 million, compared to a profit of £4.2 million in the same period in the prior year. Our adjusted PBT for the three months ended 09/30/2025 was £9.9 million, compared to £19.2 million in the same period in the prior year. Our adjusted PBT margin was 5.5% for the three months ended 09/30/2025, compared to 9.9% for the same period in the prior year. Our adjusted diluted earnings per share was £0.05 for the three months ended 09/30/2025, calculated on 53.2 million diluted shares as compared to £0.25 in the same period in the prior year calculated on 59.4 million diluted shares. Revenue from our 10 largest clients accounted for 36% of revenue for the three months ended 09/30/2025, in line with the same period last fiscal year. The average spend per client from our 10 largest clients decreased from £7.1 million to £6.4 million for the three months ended 09/30/2025, as compared to the three months ended 09/30/2024, representing a 9.9% year-over-year decrease. Of this, FX movement contributed to a 2% year-over-year decrease, and the rest of the decline is in line with the rest of the business. In the three months ended 09/30/2025, North America accounted for 42% of revenue, Europe for 24%, UK for 28%, while the rest of the world accounted for 6%. Revenue from North America decreased by 1% for the three months ended 09/30/2025, over the same period last fiscal year. The decrease was driven by FX, with underlying constant currency growth. The unexpected client credit mentioned in my opening comments is more than offset by the reclassification of a large payments client from the UK to North America. The relationship with the client is now based there. Comparing the same periods, revenue from Europe declined 12.8% due mainly to weakness in the TMT and mobility verticals. The UK decreased 17.9% due mainly to the reclassification of the client referred to above to North America. And the rest of the world increased 9%. Our adjusted free cash flow was £9.2 million for the three months ended September 30, 2025, up from £3.5 million during the same period last fiscal year. Our cash and cash equivalents at the end of the period totaled £47.2 million at 09/30/2025, compared to £59.3 million at 06/30/2025, and £52.8 million at 09/30/2024. Our borrowings totaled £193.2 million at 09/30/2025, compared to £180.9 million at 06/30/2025, and £132.6 million at 09/30/2024. Capital expenditure for the three months ended 09/30/2025, as a percentage of revenue, was 1.7%, compared to 0.6% in the same period last fiscal year. We remain committed to our share repurchase program. As of 10/31/2025, Endava repurchased 7.1 million ADSs for $115.9 million under the program, and we had $34.1 million remaining for repurchase under its share repurchase authorization. Before moving on to the guide, I'd like to provide some context. As a reminder, since May 2025, we are utilizing a guidance methodology under which revenue for any unsigned large strategic opportunity in the pipeline is excluded until the related statement of work is executed and delivery has begun. By contrast, for our non-large strategic deal pipeline, we make an assessment of likelihood and timing of conversion and likely timing of revenue. Turning to the guide for the remainder of the fiscal year, we have reassessed our non-large deal pipeline and lowered our conversion into revenue assumptions. Additionally, the client-specific issue in the United States weighed on first-quarter results and will continue to affect the remainder of the fiscal year. While the three large signed engagements John highlighted are reflected in our guidance and partially underpin the expected revenue uplift in the second half. Mark Thurston: Now moving on to our outlook. Our guidance for Q2 fiscal 2026 is as follows: Endava expects revenue to be in a range of £179 million to £182 million, representing a constant currency revenue decrease of between 8-7% on a year-over-year basis. Endava expects adjusted diluted EPS to be in the range of £0.15 to £0.17 per share. Our guidance for the full fiscal year 2026 is as follows. Endava expects revenue to be in the range of £735 million to £752 million, representing a constant currency revenue decrease of between 4.5-2.5% on a year-over-year basis. Endava expects adjusted diluted EPS to be in the range of £0.80 to £0.88 per share. This above guidance for Q2 fiscal year 2026 and the full fiscal year 2026 assumes the exchange rates on 10/31/2025. The exchange rate was GBP 1 to USD 1.32 and EUR 1.14. This concludes our prepared comments. Operator, we are now ready to open the line for Q&A. Operator: We will now begin the question and answer session. Your tone phone. First question today comes from Bryan Bergin with TD Cowen. Please go ahead. Bryan Bergin: Hey, guys. Thanks for taking the question. I guess I'll start on the client credit. Can you share some more detail on this credit that was not foreseen and weighed on performance? Just any sizing of that in context, curious if it was due to company execution or maybe a choice by the client made to pull back on something. Is it isolated or could this reoccur elsewhere? Mark Thurston: So it was unexpected, Bryan. It arrived after we guided last quarter. It isn't related to remediating work. I'll qualify it as being a more procedural matter. In terms of the impact, if it hadn't happened, we would have been at around the bottom of the revenue guide. And certainly, in terms of EPS, we would have been right in the middle of the range that we set last quarter. I can't really go into any more detail than that at this stage. Bryan Bergin: Okay. Okay. And I guess on demand and the pipeline conversion then, is that a demand issue or would you say some friction in the changes in the commercial responsibilities? Just curious how whether you would say that demand has or client sentiment has changed much at all here in the last quarter. Maybe if you could just talk about how demand trends progress through the first quarter and to the early part of 2Q now? John Cotterell: Yes. Mark Thurston: I mean, in terms of the comment around pipeline conversion in the quarter, the significant impact on revenue was the credit note we just mentioned. Pipeline conversion, we did convert pipeline. So against the high end, it was about 50% of and against the low end, we were about 80%. So not as high as we would have anticipated. But in the light of that sort of performance and the ongoing sort of review of pipeline quality, we've looked at our assumptions for the rest of the year. And that's resulted in it's actually downgrading from top of the guide at £765 million to £752 million. It is actually offset though by some of the big wins that John highlighted on his script. So they add step change revenue basically in the second half. So they do underpin part of the ramp as we see going through into mainly Q3, Q4, but we've taken a more prudent line on the pipeline conversion in the non-strategic deal space. Bryan Bergin: Okay, understood. Thank you. Mark Thurston: Thanks, Bryan. Operator: The next question comes from Maggie Nolan with William Blair. Please go ahead. Maggie Nolan: Hi, thank you. I understand the commentary on how you're considering pace of conversions from here for the non-large accounts. But can you comment on whether there's been any client churn at unusual levels in this quarter versus recent past? John Cotterell: Hi, Maggie. There hasn't been a growth in client churn. And just to be clear, the client that Mark was referring to where we had the credit is an ongoing and not in decline. It's just a more conservative view based on the conversations that we've been having around that inflow of the non-large deal pipeline, which is what we guide against. Maggie Nolan: Okay. Thank you. And then can you talk a little bit about how you're quantifying any Brexit productivity gains from Endava flow? And just the ability to kind of drive this at scale across your model? John Cotterell: Yeah. So, we're seeing the AI shift essentially going through two steps. There's the sort of Gen AI with a bit of AgenTik coming in, where organizations are largely applying a bit of an accelerator from AI to an agile methodology. And getting in that sort of 20% to 30% range productivity improvement that people are talking about. What we're seeing with Dava Flow is taking that next step into using agents to do a far bigger element of the design and coding. All under human guidance and government. And through that getting significant step-ups in productivity. In the five to 10 times type range as I covered on the call last time. Now, for us, that gives us an opportunity alongside some of these bigger deals that we're working on to significantly accelerate transformation and change in client environment. And through doing that, to actually deliver a lot of benefit to the client, but also look at pulling through wider margins through that huge added value that we're delivering. Now, the big deal that I covered with the large payments client is very much based on those principles. Taking that Dava Flow capability to accelerate transformation for them, help with new product development, and some joint go-to-market together. So it's and it's very illustrative of the type of deal larger deal that we're working on. And, but we're not putting into our guidance as Mark is highlighted over the last couple of quarters. Maggie Nolan: Thank you. John Cotterell: Thanks, Maggie. Operator: The next question comes from Nate Svensson with Deutsche Bank. Please go ahead. Nate Svensson: Hey, thanks for the questions. John, wanted to go back to something you said at the beginning of the prepared remarks. I think you mentioned that you're navigating challenges associated with the transition in business model delivery approach and the acceleration of the AI wave. I guess just from my perspective, given the growth in the business, the lower guide, it seems like there's been some struggles with everything that's going on. So I'm just hoping you can take a step back and maybe talk at a higher on what your strategy is to successfully navigate these changes. I know there's macro considerations, but I guess beyond that, what do you think isn't going right? And what's the plan internally to try to turn things around and ultimately capitalize on some of the opportunities that are ahead of you? John Cotterell: Yes. Thanks, Nate. So, for us, we're pushing very, very hard on this shift to being AI native. Our vision is that over the next two to three years, AI becomes a much, much more significant player in our industry in the way in which people deliver to clients, deliver code, deliver requirements, and so on. And in pushing hard on that shift, we are moving much faster away from the old models than I believe many of our peers are. The result of which is that we are accelerating deliveries to clients in the current environment under the old T and M model largely. This quarter, we were 24% outcome-based, which is still rising. But it does mean that 76% of our revenue is coming in a T and M basis. As we're delivering a much higher productivity, that is having an erosion on the revenue that's coming through the business. That is being offset by the growth in demand for our new AI native approaches. Where every Endavan is using AI every day in the delivery of to our clients. And that shift is very, very fast. Last quarter, I reported that half of just over half of our services were AI related. Covering using AI to change and accelerate the SDLC, software development life cycle. Or identifying client workflows or indeed in deploying AI in the physical world. This quarter, that greater than half has moved to over 70% of our services. Are AI related on the same measure. So it is a strong shift and strong acceleration productivity. And that is having headline let's say, it's headwinds for us on revenue. On the old model. The strategy and the focus is all around driving the fastest shift we possibly can to the new model. Where we are writing more outcome-based deals with clients which locks in the opportunity to deliver greater benefit to the client using AI, but also to improve our margins. And we are seeing that come through in the rising proportion of outcome-based deals, and in the margins attached. To those deals. And so that's the strategic shift that we are going through. We are pushing through it very fast and we're probably carrying more pain in the short term. Because of that accelerated shift to the future state. That we're pushing through. Nate Svensson: Makes sense, and I appreciate the detailed response there. Did want to follow-up on this $100 million deal with a leading payments company. My guess is that would be a renewal with maybe one of your two large payments partners, but maybe you can correct me if that is indication, it was a new logo. But beyond that, maybe you could use that deal as kind of a launch point to expand more into general commentary on pricing and productivity commitments you're having to make in the current difficult macro sort of in order to get these larger deals across the finish line? John Cotterell: So the $100 million deal is not a renewal of one of our larger payments clients. It is an existing payment client, but really quite small. And well over 85-90% of that deal is net new revenue to us. And it is around helping that client transform their business. They are equally excited about us helping them do that as we are about helping them drive the transformation and bringing our engineering skills to bear on their estate. Mark, do you want to pick up on the pricing? Mark Thurston: Yes. I mean, pricing, I mean, as John said in terms of the revenues, we are still mainly time and materials. So we'd still look at the average rate per workday and it is very much stable quarter to quarter. Our issue is volume more than anything else certainly in the T and M space. Nate Svensson: Guys. Nice to hear about the payments win. John Cotterell: Thanks, Operator: The next question comes from James Faucette with Morgan Stanley. Please go ahead. Antonio Jaramillo: Hey, guys. Thanks for the question. It's Antonio on for James. Wanted to ask about your fiscal year 2026 guide. It looks like in the back half there's still a strong acceleration. And I know that you mentioned those three large deals are contemplated in that, but what gives you confidence that those large three deals will sort of come through in the back half? Any color there would be appreciated. Thanks. John Cotterell: So the three deals are signed. So they are committed spend that involves ramp up in the second half. I'll let Mark give you a little more color. They are. And it's not just those three deals, they're additive. Mark Thurston: So we've signed deals going back to Q1, sorry when we were guiding Q1 at the end of the year. So there was a further sort of layering on of, I'll call it step change revenue because that's typically the nature of it. And that layering on of these larger deals onto the run rate, which we'll refer to the non-strategic deal revenue stream, gives confidence in that back half. I mean, there is still a pipeline, you know, to convert. As we sort of highlighted when we were discussing the Q1 performance. So there is always sort of risk in the figure, but we have given a range of £752 million to £735 million which we think accommodates that risk in terms of the pipeline conversion on the non-strategic big deals. Antonio Jaramillo: Got it. That's helpful. Antonio Jaramillo: And then as a follow-up, I wanted to ask on your capital allocation priorities. Like how are you balancing investment within AI and also share buybacks? Just to get a sense of that as well. Mark Thurston: The share buyback continues. We still have $150 million approval from the board. We continue to invest. I mean, part of this year, we highlighted there was going to be margin impact through the investment in this shift mainly in terms of technology and onboarding people. And that still remains the case. As John said, we are pushing very fast on this. And sacrificing near-term profitability for the upswing in profitability that we think will come through in at the outer years. Antonio Jaramillo: Great. Thank you guys so much. Operator: The next question comes from Jonathan Lee with Guggenheim Partners. Please go ahead. Jonathan Lee: Great. Thanks for taking my questions. Can you help decompose what's contemplated in your outlook across the high and low end of the range as it relates to pipeline conversion required and the levels go get required and whether you've given any sort of allowance for macro uncertainty? Mark Thurston: Well, in terms of the range for the full year, if this is excluding obviously any strategic deal pipeline, which is growing strongly, 79% to 81%. In the current quarter, it is very high, it's about 95% to 93%. So we think the quarter for Q2 adequately is ranged. It does take into account that the quarter ending December, we have a lower number of working days, which is a headwind. Against the sort of revenue when you look at it sort of sequentially. But we have strong confidence in Q2. So Q3 and Q4 where we have the higher levels of pipeline, we have done a sanitization of the pipelines being proposed in the business, and we believe that those are achievable. And as I said, we have reduced the overall guide to take account of that. Jonathan Lee: Thanks for that color. And as you think about some of the margin challenges you're facing, how are you thinking about the potential for expansion levers and investments into the end of the calendar year and into the start of 2026? Mark Thurston: Well, I think as you've probably seen, Endava has high operational leverage, which is a sort of a negative and positive. So we're very much driven by top-line performance and reacting accordingly. You know, and visibility has to be good for us to react in sort of time. So if we have slow revenue progress, we have to take out costs, you know, as we respond to that. But similarly, with increasing revenue, we get a strong profitability, you know, recovery, which is what is implied in the full-year guide. That we get on that growth trajectory. And yes, there are some strong sequential growth quarter on quarter. Implied by those larger deals starting to deliver revenue. But it does give us high operational leverage, which moves up our gross margin quite significantly and delivers strong EBITA performance. John Cotterell: Anything that I'd add to that is if you look at that strategic pivot that we're talking about going through at the moment, that does have a margin impact. There's a friction element of that change, the change of skills making sure that you know, our people are moving to being AI native and having to take action where people are unable to make that shift. Or carrying skills that become less important. In an AI native world going forward. So that friction element is also hitting the short-term margin picture. Jonathan Lee: Thanks for that clarity. John Cotterell: Thanks, Jonathan. Operator: The next question comes from Phani Kanumuri with HSBC. Please go ahead. Phani Kanumuri: Thanks, John and Mark for taking my question. My question is on your headcount. There seems to be a bit of increase quarter on quarter. Is this an anticipation for demand in the second half of the year? And then how do you see the headcount strategy in terms of the AI productivity that you're seeing? And the macro headwinds that you're seeing for, let's say, the rest of the fiscal year? Thank you. John Cotterell: Yes. So a lot of the increase in the headcount seen is the DARVAX Academy that I talked about on the call. Where we're specifically targeting bringing in strong AI native leaders across the organization. As well as bringing in graduates who know, from their university background more AI native, but perhaps less experienced from a coding and governance point of view so that you can create that mix of teams who've got that natural affinity with AI, with prompt engineering and so on. Alongside the experience headcount. And so enabling that shift is part of the friction element. I was talking about for Jonathan. Where we're investing in the people who move into that space and then getting them placed into client environments. So that's part of that shift up in headcount. We still continue to see us training and bringing in AI native people and losing people who are not going to make that shift into the future. And so you're still seeing an attrition level that's running higher than it has been historically. Because of that churn that's going through the business. And we anticipate that that will carry on for another couple of quarters before we settle down into being much more completely in the new world. Phani Kanumuri: Thank you. John Cotterell: Thanks, Phani. Operator: The next question comes from Puneet Jain with JPMorgan. Please go ahead. Puneet Jain: Hi. Thanks for taking my question. I wanted to follow-up on like the $100 million deal, the one that has 85%, 90% of new work. Can you share like more details like the duration of that revenue or type of work you will do specifically around new development versus managed services? And then why that client and that deal led to like a very different outcome than others like are these type of deals replicable? John Cotterell: Yeah. So it's a very exciting deal for us. It's a headline of a number of other deals that we're working on that would fall into the same category. The duration is over five years and it's a commitment on the part of the client to spend that level of money with us in return for us driving accelerated transformation for them. It is almost all in the new development space rather than in the managed services space. And there are a number of pillars of transformation, of new product development, and of joint go-to-market exploration of capability. That is built into how we will deliver value back to the client for that spend that they have committed. It's a very close partnership mindset. Where together we're going to help transform that part of the market. And obviously, it's in the payment space. So we bring a lot of payments experience as well as the AI capabilities and so on that I've been talking about. Puneet Jain: Got it. And can you also talk about the timing given like the second half guidance for revenue implies give or take £10 million in incremental revenue of quarters in Q3 and Q4. So can ramp in this deal and the large two other large deals alone drive that incremental revenue? In the second half of this year? Mark Thurston: So incrementally, you know, your math is right around the ten a quarter. It's not quite phased that way, but your maths is roughly right. The deals that we've landed, I've contributing roughly about sort of 50% of that ramp. And the balance is coming from the pipeline conversion on the existing sort of run rate. That is after us look, and that is the non-strategic deals revenue sort of stream, if I can put it that way. So it's coming half and half from the big deals that we have landed but also some of the pipeline conversion in the existing run rate business, if I can call it that. Puneet Jain: Got it. Thank you. Mark Thurston: Thanks, Puneet. Operator: This concludes our question and answer session. I would like to turn the conference back over to John Cotterell for any closing remarks. John Cotterell: Thank you all for joining us today. In closing, we anticipate a gradual recovery over the balance of the year with being assisted by those large strategic deals that we recently signed or indeed signed back in the summer. Which kick in, in our H2. Our broader partner ecosystem is already generating incremental potential pipeline opportunities. And client interest in Dava Flow is accelerating. So I look forward to speaking with you all on our next earnings call in February. Thank you very much. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Katariina Hietaranta: Good morning, and welcome to Kamux's Q3 results presentation. My name is Katariina Hietaranta, and I'm Head of Investor Relations at Kamux. We have our CFO, Enel Sintonen; and CEO, Juha Kalliokoski, presenting the results, after which we will have a Q&A session. Go ahead, Juha. Juha Kalliokoski: Thank you. Good morning. My name is Juha Kalliokoski, and I'm back as the CEO of Kamux since October 16. As Katariina said, Enel and I shall now guide you through Kamux's Q3 results. Here is agenda for the presentation. As usual, we shall first take a look at the quarter in brief, Kamux's market positions and what our showrooms network look like at the moment. I shall then lead you through our review by country, after which Enel will present in more details the financial development of the company. Towards the end of the presentation, we will take a look at where we are in terms of our long-term targets, a few words about our strategy. And at the end of, we will have a Q&A session. During Q3, we continued our focus on profitability and improving the financial health of the company. We have successfully reduced the average price of the cars we sell as planned. This contributed to revenue decrease, although the main component was the decrease in the number of cars sold. Our revenue decreased by 17%. Our focus on profitability has paid off and the gross margin has increased from 9.8% to 10.9%. The improvement gross margin was, however, not sufficient to compensate for the decrease in revenue. And subsequently, our gross profit decreased. Our adjusted operating profit decreased from EUR 5.5 million to EUR 4.3 million. Our cash flow has been extremely strong, EUR 31.5 million in January to September. And our inventory is at a healthy level as we enter the quieter period towards the end of the year. Revenue from the integrated services decreased from EUR 14.6 million to EUR 13.7 million as a result of decrease in revenue and number of cars sold. However, the share of integrated services in revenue increased by 5.2% to 5.9%. Consumer preference towards affordable cars continued in all our markets. Customer satisfaction was a good level and a targeted level and NPS was as high as 63% in Finland. Used car markets grew in Finland and Germany, while in Sweden the market was flat. In Finland, finally, it was the sales by dealers that grew during the quarter, while earlier in the year, market growth came mainly from consumer-to-consumer sales. Kamux continues to be the #1 player in the Finnish market measured in number of cars sold. In Sweden, we are #8. And in Germany, our market sale is still very small. A few words about the new car sales. On a year-to-date basis, the growth in new car registration in Europe has been very modest, less than 1%. In Kamux operating countries, registrations have grown only in Sweden, while in Finland and Germany, the new car market is either flat or negative. In the big picture, Kamux is Europe's fourth largest seller used car cars in Europe, and those figures are from last year. Here is an update on our showrooms network during 2025. As of today, we have 68 showrooms. In Finland, we have closed 2 showrooms, Klaukkala and Mantsala during the year. By the end of November, our showroom in Jyvaskyla, Central Finland will move to new premises that are owned by us and built to suit our needs. The total number of showrooms in Finland is now 42. We have made -- we have not made any changes in Sweden, where we continue to have 17 showrooms. I shall come back to our plans in Sweden later in presentation. The Schwerin showroom in Germany was opened in early July, and we currently have 9 showrooms in Germany. Moving to the comments per country. In Finland, we succeed in consumer purchase during Q3 very well. This is particularly important now as importing from abroad is not easy due to the low level of prices for used cars in Finland. Our strong focus has been on more profitable sales, which has led to decreased volumes. We are continuously working to find the right balance between volumes and margin. Gross margin per car sold increased both in Euros and in percentage, which we are very satisfied with. For the quarter, Finland gross margin grew from last year 10.3% to 11.6%. The adjusted operating profit margin increased slightly, although in Euros, we fell behind the comparison period. Adjusted EBIT margin is also above the 4% level. As of September 1, Joni Tuominen was appointed Managing Director of Kamux Finland, having acted as an interim MD since mid-April. Sweden. It has been a pleasure to see our Swedish team making a strong turnaround. Compared to Q3 in 2024, our operating results improved by EUR 1 million, which is really a great achievement. In Sweden too, the focus on profitability has had a downward impact on sales volume. But we have succeeded in increasing the margin per car as well as significantly strengthening the penetration rates for both financing from 48% to 53% and Kamux Plus from 16% to 25%. Customer satisfaction has also risen close to the group's target level and NPS was 58 in Q3. We have completed the assessment of our network in Sweden and decided not to make any major changes at the moment. The current network is sufficient for a profitable business in Sweden, and it also allows growth. We believe it's possible to have a profitable business in Sweden, and it's very much in our plans. Our team in Sweden has already made a clear positive turn by progressing according to plan for 2 quarters in a row. And the results are already visible both in the financial KPIs as well as operational efficiency and customer feedback. And then Germany, challenges on car selection and volumes continued during Q3. Sales volumes were weak, primarily due to the car selection that did not match the demand well enough. The revenue was impacted by the weak volumes, and the margins by the inventory management measures we took, selling out or getting right off low demand stock. Subsequently, the operating results was negative. Marcus Mezodi started as the Managing Director for Germany on the 1st of July. And together with him, we have started to turn the business around. As in Sweden, in Germany, we work in close cooperation with Marcus to build daily operating routines in line with the Kamux concept. Going forward, this will help us to achieve first reason car margins and thereby building the profitability of the business and supporting our ability to grow. As one of the first steps, we modified our purchasing process and ensure that our selection meets the demand better. And then here you are, Enel, you are going to the finance, more details about the financials. Enel Sintonen: Thank you, Juha. As noted by Juha already, our focus has been on financial health and what it means. First, our focus continued to be at car pricing and margins, and we continue to be selective on deals. And second, we continue to work with inventories with focus on capital efficiency, fit with volumes, car selection fit to consumer demand. And key achievements of the quarter were we achieved clear improvement in margin and profit per car. Both Finland and Sweden progressed as planned. In Germany, as noted by Juha already, we faced challenges, and we work intensively and with discipline to turn the profitability into the right direction there. We reached our targets on inventory levels and progressed well with inventory structure and selection fit. Decline inventory levels contributed well to liquidity. We have now EUR 20 million cash at the end of the period, and it enables growth as well as investments in the future. Focus on profitability had also some adverse impacts at the expense of being selective on deals and targeting higher margins, we lost some of the volumes. Volumes dropped exceeded our assumptions, and we needed to issue profit warning in October. Part of the volume drop, not significant, though, was due to smaller net showroom network. And here are the numbers and summarizing key financial ratios. Revenue declined 17%. Key drivers were underlined earlier. Gross margin to revenue improved 1.1 percentage points, which agrees with our targeted levels and was based on our plans. Operating result to revenue improved from 1.5% to 1.8%. Key contributors were improved gross margin and almost absence of items affecting comparability. Adjusted operating result declined slightly from 2% to 1.8%. Operating costs did scale, however, not at full scale. Inventory days improved slightly. However, this is the area we have clearly room for improvement and work intensifies on this measure. Return on equity calculated from rolling 12 months result is at clearly unsatisfactory level, especially due to 2 notably weak quarters of Q4 '24 and Q1 '25. In equity ratio, we have reached 50% level. As a summary, the financial performance of the quarter demonstrates that we are directing our focus and efforts in the right areas. A key area to improve is finding a right balance between profitability and volumes. And after 2 quarters of improving our daily routines on car profitability and inventory fit, as well as strengthened cash position, I think we are better equipped to go for volumes. We do it step-by-step with focus and also needed patience. Here, we can see revenue and adjusted operating result trends. And looking this year, you can see that Q1, we had a negative result. And this is the only quarter in this slide from '22 to '25 that is a negative. Going to Q2, we can see here going up, and also Q3 going further up. So, it's quite nice trend. However, as I said, we are not satisfied with the levels that we have right now. Going to Q4 last year was very weak on profitability-wise, and this is something now we are working to make a clearly better result there. Here, we can see the trend in volumes. So, volumes declined in the quarter, but less than in Q2. mostly due to profitability focus, and with slight impact from lower showroom network. In Q2, so previous quarter, we sold about 3,800 cars less compared to the previous year same quarter. And in Q2, we sold about 2,800 cars less than in previous year same quarter. So, we have seen some positive trend in here, but clearly, we work on the volumes going forward. At the end of the third quarter, our cash position was EUR 20 million. And as noted earlier, this gives us a good position going forward. We are satisfied with a combination of strong operating cash flows and positive car profitability development. Our integrated services revenue development was hit by lower volumes. We are not satisfied with this trend, even though the share of integrated services has slightly increased in total revenue. Here is a visual representation of how our net working capital developed. We can see EUR 24 million reduction in net working capital, driven by a decline in inventory. I can say that our inventory is in a better fit from both structural and also price point perspective. So, in October, as you know, we had to lower our profit guidance for the year. We have been successful in improving our profitability, but this work has had an impact on our volumes. And with the number of cars sold lower than our forecast, the adjusted operating profit in euros is also estimated now to be lower than expected earlier. We have also announced that our dividend distribution in October, we did it, and dividend EUR 0.07 was paid at the last day of October. And this morning, we have announced a share buyback program. Based on the Annual General Meeting mandate, Board of the Directors have decided to acquire at maximum 1 million shares corresponding to approximately 2.5% of the company's total number of shares. The maximum amount to be used for the repurchase of shares is EUR 2.5 million, and the program will commence earliest on November 17 this year. And Juha, back to you. Juha Kalliokoski: Thank you. So, a few words about our long-term targets and strategy. With regard to our long-term targets, we are currently behind in the financials but still believe that these targets are doable in the long-term. And as we have just heard, we have already made progress in improving our profitability, particularly in Finland. Sweden is also progressing in the right direction. In customer satisfaction, we have progressed it very well, and the group NPS for Q3 was 60. We hit our target. In October, the group NPS was as high as 66. Here is our current management team. I had the opportunity to work with the team in an operative role for 8 months before starting as CEO. And it gave me an opportunity to get to know them slightly differently than had I been the CEO. I was also involved in a number of the recent recruitments. Kamux has been an entrepreneur-led company. As the company grew, we needed a unified way of working, and this is what we began with Tapio in charge. We will continue to define and implement common ways of working, so this will not change. We will continue to work with optimizing volume and profitability, data-driven pricing and S&OP, processes as well as inventory management. We will focus on the net working capital, I mean -- and we mean no lazy capital. And at the center are naturally our passionate and capable employees. We have invested in training our employees and will continue to do so. One of the areas where we are proud is our customer satisfaction and demonstrated in our Q3 NPS, which was 60. Going forward, we also want to ensure that our personnel has the opportunity to succeed in the work. Our strategy remains unchanged. We have already made good progress on the customer side as is seen in our NPS figures. We have also made some progress in improving our operating efficiency, but here, we have still clearly more to do. The direction is right, and we still have a lot of to achieve. Our vision also remains unchanged to become the #1 used car retailer in Europe. Katariina Hietaranta: Thank you, Juha. Now it's time for questions, and we shall begin with taking questions from the telephone conference line, if there are any. [Operator Instructions] The next question comes from Maria Wikstrom from SEB. Maria Wikstrom: Yes. This is Maria from SEB. And for Juha, welcome back to a CEO role. I wanted to start with asking a question on the volume trends. Obviously, I mean, this is what has been the recent problems. I think everything starts with volume. So, if you could walk me through a bit of the actions what you are taking in order to resume volume growth in the future. Juha Kalliokoski: Thank you, Maria. If I start, you must choose your games where you want to win. And we choose in last spring the profitable business and we started there. And now we are a situation as we saw from our figures that in 2 quarters, we improved our gross margin in Sweden and in Finland. And now we are a situation we can push cars on the volumes. And of course, inside the company, we have many things what we are doing. And we believe that we can change our growth side also. Enel Sintonen: If I may continue a bit there, given that the NPS has been, I mean, very low in, I mean, the last 12 months. I'm wondering if this is a correlation with lower number of cars sold, which, I mean, then, of course, reduces the compensation for your salespeople and how you are able to turn this around in a very competitive used car market that we are seeing today? Maria Wikstrom: So low EPS. Juha Kalliokoski: Yes, it's one focus areas, what we showed to the people what we have. It's balanced between the demand for the employees and also the happiness of the people. But even we sell less cars and improved our margin, it means that the salary side, it not impacted so much when we compare the gross margin, what was the changes in the countries. And I don't see that this is the area why we -- the employee turnover was quite high. But this is totally the key area that we want to keep the people in the company and give more time for this and make a better job together all. Maria Wikstrom: And then my last question is towards your international operations, and I might even know the answer by now, but I mean, still asking if -- as it seems that your patient with turning around the Swedish and German operation is endless. So have I interpreted this right that even if you haven't returned positive numbers, I mean, from neither of the geographical areas until, I mean, today, you are still ready to -- patient enough to wait to get the turnaround in both of the regions. Juha Kalliokoski: Yes. We are focusing the turnaround case in the countries. And as we saw, the Sweden happened a huge change. And in Germany, we are doing daily routines at the better level and see also the possibilities, and we are continuing in both countries the business. Katariina Hietaranta: The next question comes from Calle Loikkanen from Danske Bank. Calle Loikkanen: This is Calle Loikkanen from Danske Bank. I have a few questions. If we start with Sweden, could you perhaps talk a bit more about your kind of upcoming plans in Sweden? I mean you have done now the network assessment. So, what are kind of the next steps to drive growth? And then also, where do you see that the EBIT margin could kind of realistically go with this setup, with this network that you now have within, let's say, a couple of years? Juha Kalliokoski: If I separate 2 parts to the question. The first part, we see -- of course, we know how many cars we can put in our stores, what we have or premises what we have, and it gives the possibilities for us to grow. with the stores what we have now. And the focus is make a bigger and better businesses in this setup what we have just now. And of course, we are looking into further what is the new way of working and make a business -- used car business. And the other part, we are not announced about or published the country by country EBIT levels, and we have the one target in long-term target, which is 4% in the group level. Calle Loikkanen: And then I was wondering about Germany. You mentioned inventory management during the quarter. So, I was wondering that is there more inventory actions that you need to do during Q4? Or was everything done now in Q3? Juha Kalliokoski: Of course, it's not a one-off when you are -- it's the daily basis work with the inventory, and you can't make it once. It takes a little bit more time, some months that you can turn the inventory right direction, and you are purchasing the right cars to the inventory. But the major change is we changed in Q3. Calle Loikkanen: And then on Finland, you said that the market growth was driven mostly by dealer volumes now in Q3. So, I was just wondering that what has changed in the market because it's been very consumer-driven market now for many, many quarters. So, has something changed in the market? And do you expect this dealer-driven market to continue in Q4 and onwards? Juha Kalliokoski: Of course, we wish and hope that the car dealers share of the deals are increasing. And it's maybe something about the customer -- what is the word of --- Enel Sintonen: Consumer confidence. Juha Kalliokoski: Consumer confidence is increasing. It means that consumers are purchasing or buy a little bit more expensive cars, and it means a bigger share from the dealers to the car dealers because typically, the consumer-to-consumer business, it's very low price point for the cars. It's only some EUR 1,000 the average price. But I don't actually know what was the reason in Q3, this changed, what happened. But of course, it's a good situation that it changed for the more car dealers driven growth. Calle Loikkanen: And then finally, on my side, you've been doing very well now in terms of profitability and kind of margin improvement. And of course, that's the cost side here has been then the volumes. But I was wondering that now you've made a good improvement on the margin, is it now time to push more for volumes going into Q4 and into 2026? Or do you -- how do you think about the profitability versus volumes now versus what you've done over the past, let's say, a couple of years -- sorry, a couple of quarters? Juha Kalliokoski: Yes. It's totally a good question, Calle. As I mentioned earlier, we have focused the profitability and turned the right direction. And now we are a situation that we can balance between the profitability and the volumes and push costs more about the volume side. And we believe that we can grow and of course, calculate together to integrate with the integrated services, what is the right balance between those. Enel Sintonen: Yes. And just to add, when looking back to Q4 last year, looking at the volumes and then profitability, you can see there that we were, how to say, focusing more on volumes compared to profitability. So, this gives us that our comparative numbers in Q4 volumes is, how to say, a challenge in that sense. And also -- but however, the profitability is, how to say, in a more moderate level. So, the last year Q4 volume focus is giving us some maybe challenge. Juha Kalliokoski: Yes. And maybe one point more. If you compare a year back, we have now EUR 30 million less inventory and a lower average price point. It means very much lower risk compared to a year ago because it was quite a big grasp what we had a year ago. Calle Loikkanen: That's a very good point. That's a good explanation. Is there any kind of -- you said lower price point in the inventory. Is there any number that you could give us that how many percent lower is the price point now or something that you would like to share? Enel Sintonen: Not at this moment to share. Katariina Hietaranta: There are no more questions at this time. So, I hand the conference back to the speakers. Enel Sintonen: Very good. Thank you. I think that we shall next take a couple of questions here from the audience, and then we'll go with the questions received in the chat. Okay. Rauli, please? Rauli Juva: Yes. Rauli from Inderes. A few maybe more detailed questions continuing on the inventory you mentioned. Typically, the seasonality on the inventories is that it goes down in Q4, so -- in Q3 to end Q4. So, are you expecting that also in this year, even if you are kind of starting point is quite a bit lower than typically? Juha Kalliokoski: Yes, it's -- we are quite a good level at the end of Q3. And we don't have a pressure to give a lower number at the end of -- value of the end of the year. Of course, it's the condition of the inventory, how fresh it is. And this is more about the things what we are just now doing. Rauli Juva: Then in Finland, you mentioned that you had discontinued the cooperation with Beely, whatever it's pronounced. So, can you open a bit about that? Why was that ended? And are you considering your own leasing offering? Juha Kalliokoski: Yes. We looked through about the contract and the business, how it went. And we didn't see it's so good business for the Kamux but we made decision that we ended that. And of course, it's a very small part of our business, and we will see is there coming some other products for this segment. Rauli Juva: And then finally, the Kamux Plus penetration in Finland, if I didn't look right, it was the lowest in a few years, even if not that much, but still below 30%. So, is there any particular explanation why that's down? Juha Kalliokoski: Maybe one part is the average price, what we sold, it was lower. And it typically goes so that the penetration is higher when you sell the more expensive -- little bit expensive car. And this is maybe one part. And the second part is, of course, where we are focusing, and it's also on the table to sell better penetration of the Kamux. Katariina Hietaranta: Further questions from the audience? Unknown Analyst: In history, Kamux had competitive advantages like selling services and management with data. How is it nowadays? If we are targeting towards 4% EBIT margin, do we have some new advantages in competition? Or is it about executing old advantages better? Juha Kalliokoski: As we see in Finland, we are over 4% level. And still, we are not satisfied that level where we are. We can improve that, and then when it comes to Sweden and Germany, in our side, it's possible to achieve those targets in this business, how we work just now. Of course, we are thinking all the time where the used car business are going and what we are taking from there. Unknown Analyst: Then, about profitability and volumes. Just wondering, are they really against each other? I mean, if you are selling more volumes, you have more turnover against those fixed costs. So, focusing instead of volumes to profitability? Are they really opposed to each other? Juha Kalliokoski: Yes, this asks because when we speak only about the cars, and if you give the very big discounts, you can make a deal. But you don't have any metal margin or very low-level metal margin. You have only the integrated services. And as we see what is the part of the integrated services from our gross margin, we can't make 4% in group level EBIT if you do that. Of course, it's balanced between, and maybe we went, in some cases, quite straightforward and very, very small discounts, what we gave, especially in Finland. And it came against us when we speak about the volume. Enel Sintonen: I just wanted to add here that when thinking about profitability, it's also purchase and sales. So, we are more careful what we purchase to ensure that what we sell is also profitable. So being at the lower level right now, 2 quarters, it has also given us opportunity to strengthen our daily routines on this and how we think about car business overall. And I think that your question, yes and no. So Juha answered already that. But the question also is how we consider what is the business we are at and what we want to achieve longer-term. Unknown Analyst: Then it's basically achieving more customer inflow to your shop so that you can pick most attractive ones. Final question about cost. There are 2 kind of costs, purchasing price of cars, but then operational costs. Do we have any opportunities with operational costs, how to operate car business more efficiently? Enel Sintonen: Thank you for the question. So yes, so when we look at the first showroom costs, the question is what is our showroom network, how much is -- what is the capacity? And we can see that we have still, how to say, capacity in place for higher volumes. So, we can do some changes there in the future when and if needed. Another thing is, of course, when we're looking at the customer journey and how we get more traffic, this is something that is changing quite intensively, the cost structure and there. So, this is something we are working also significantly. And also, salaries and pay for the stuff. We have fixed, but also a very big part of variable. So, fixing also salary models is something. So, a significant part is we can scale. So, room for improvement, I would say. Juha Kalliokoski: And just a year ago, we invested in new provinces, Helsinki Tunemi, Espoo Fila, and Vantaa Petikko, 3 big stores, quite high costs. And as we saw, our sales declined. And at the same time, you took in higher costs and lower sales. It's not a good combination, and now we are tackling that. Unknown Analyst: Did I remember right that in [USkula], we have built our own premises. What is the strategy with that in a way, instead of renting premises, having own one? Juha Kalliokoski: Yes, we looked at their premises quite a long time, and we didn't find that they're good for us. And that's why we made the decision that we can have some on-premises and in a good place and just made for us. And for example, Tampere Lakalaiva, which is not our own, but made clearly for us, and all of those works very well. Katariina Hietaranta: Thank you. We have a couple of questions online via chat. First, it's about the volumes. So, Mika from DNB Carnegie is asking that you've experienced sequential quarterly volume declines, while the overall used car markets in your operating countries were growing slightly. This suggests a significant market share loss. What specific leading indicators are you tracking to signal when volume declines will stabilize? And what is your realistic expectation for when unit sales will return to growth? Also, do you think the long-term target of 100,000 cars sold per annum need to be reassessed given the smaller store footprint and continued market share losses? Juha Kalliokoski: Quite a long question. Katariina Hietaranta: Yes. So maybe focusing in terms of what specific leading indicators are you tracking to signal when volume declines will stabilize? Juha Kalliokoski: As we see in all our markets, it's not the reason that the market declined. It's our own hands, how we think about the market and market share. And as we mentioned earlier, that we focused on the profitable side and financial health. And now we are looking more about the volume side. Katariina Hietaranta: And I believe that we have stated that the long-term target, 100,000 cars, is still valid, and there's been no change in that. Mika is also asking about Germany in terms of Germany has been described as undergoing a strategic restart, but shows deepening losses, management changes, and ongoing inventory and assortment issues. At what point do you consider a full exit from Germany to preserve capital? Juha Kalliokoski: As we mentioned earlier that we are focusing in both countries. We are not losing those. And I would say that our concept works in Germany it's more about how we handle it by daily routines and make the business in a daily basis. We are continuing in Germany. Katariina Hietaranta: We also have a question, a bit broader, on the European market. There are some strong players like Aramis or Ares, and yourself. Do you think there is some room for cross-border consolidation among these independent used car retailers? There are some interesting largely untapped markets such as Poland, Baltics, et cetera. Juha Kalliokoski: I remember earlier told about our strategy. And one part is possibilities to make acquisitions. Of course, it is. Katariina Hietaranta: Very good. I have no further questions via the chat. What about the audience? Everyone happy? Very good. Then I thank everyone and wish you all a good day. Thank you. Juha Kalliokoski: Thank you very much. Enel Sintonen: Thank you. Juha Kalliokoski: Bye-bye.
Operator: Greetings, and welcome to the Seaport Entertainment Group Third Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Jason Wilk, Senior Vice President of Finance. Thank you. You may begin. Jason Wilk: Thank you, operator, and good morning, everyone. With me today is our President and Chief Executive Officer, Matthew Morris Partridge, and our interim Chief Financial Officer, Lina Eliwat. Before we begin, I'd like to remind everyone that many of our comments today are considered forward-looking statements under federal securities law. The company's actual future results may differ significantly from the matters discussed in these forward-looking statements, and we undertake no duty to update these statements. Factors and risks that could cause actual results to differ materially from expectations are disclosed from time to time in greater detail in the company's Form 10-Ks, Form 10-Qs, and other SEC filings. You can find our SEC reports, earnings release, and quarterly supplemental information on our website at seaportentertainment.com. With that, I will now turn the call over to Matthew Morris Partridge. Matthew Morris Partridge: Thanks, Jason, and good morning, everyone. First, I'd like to begin by thanking our team, Board of Directors, shareholders, and partners for their support through the company's recent leadership transition. I also want to thank Anton Nikodemus for his contributions during the initial phase of the company's development. I'm honored to be given the opportunity to step into the CEO role, and I'm excited about what the future holds for our company. I'm also thrilled for Lina and the opportunity she has in front of her with her new role. Lina and I have worked together closely since the beginning of Seaport Entertainment Group, including on SEG's separation from Howard Hughes, and in developing the company's accounting and financial infrastructure. She's done an exceptional job stepping into the interim CFO role over the past few months, and I expect that to continue as we finalize 2026 budgets and work our way into the new year. As we move forward, it's important that we continue to refine the company's focus and priorities as we seek to stabilize and then optimize our operating models. This includes continuous reassessment of our existing businesses and organizational structure to ensure we're working towards improved efficiency and ultimately positive operating income. We also want to prioritize financial discipline and thoughtful capital deployment. With our existing cash on balance sheet and expected additional cash from the sale of 250 Water Street, we plan to allocate capital in a way that positions the company to deliver long-term value. This strategy will include further reinvestment into our existing assets to fill vacancies, improve space utilization, and drive customer visitation and engagement. Beyond our existing portfolio, we plan to be opportunistic as we look for opportunities to create long-term value and grow that leverages our existing partnerships and real estate-driven hospitality and entertainment platforms. With respect to our current portfolio, let's start with New York. I want to address the recent questions about New York City tourism, and real estate trends and their broader impacts on our business. The New York City market continues to present a mixed picture. On the tourism front, international visitation remains below pre-pandemic levels, currently at about 90% of 2019 volume, and will likely remain soft in the near term. This has impacted higher spending patterns typically associated with international guests. That said, domestic travel remains resilient and total New York City visitation is projected to reach 65 million visitors in 2025, surpassing 2024 levels and approaching pre-pandemic visitation levels. Meanwhile, the Manhattan office market has shown strength. It is one of the few major US cities to exceed pre-COVID office leasing activity, driven by increasing return-to-office momentum, particularly within the financial service technology, and media industries. While office leasing in Lower Manhattan hasn't rebounded at the same levels as Midtown, Midtown South, and some of the higher-end corridors, Lower Manhattan office leasing will benefit from taking supply out of the submarket through office residential conversions. An estimated 10,000 new residential units have recently come to market or are expected to come to market over the next few years, which will further enhance the area's vibrancy and residential density. Since 2010, Lower Manhattan has seen its population grow by nearly 29%, which is the fastest-growing district in all of Manhattan and the second fastest-growing district in all of New York City behind Brooklyn's CD 2, which includes Downtown Brooklyn, Dumbo, Brooklyn Heights, and other submarkets that are right across the East River with easy access to the Seaport via the subway, ferry, and Brooklyn Bridge transportation networks. As part of Lower Manhattan's growth, two of the most proximate submarkets to the Seaport, the Financial District and the Seaport neighborhood itself, experienced residential population growth of 45% and 34%, respectively. Well above New York City's 7.7% growth rate over the same time frame. Furthermore, the 18 population in Lower Manhattan grew more than 60%, the fastest in all of New York City, and FiDi residents between the ages of 20 and 34 years old have increased by 12.5%, a 60% higher growth rate than Manhattan's 20 to 34-year-old population growth rate. As a result of the office leasing strength in other submarkets, moderating supply from these conversions, and a continued shift to becoming more of a younger residential neighborhood, incremental demand for commercial space in Lower Manhattan should grow faster than most, if not all, submarkets in New York City. This should ultimately help push rents higher over the long term for all commercial uses. In the near term, our opportunity lies in our ability to curate and deliver compelling, high-quality experiences within the Seaport. Experiences that drive visitation, time spent in the neighborhood, and customer spending regardless of broader market cycles or submarket dynamics. Sticking with New York, I'd like to provide a quick update on the sale of 250 Water Street. In August, we announced we entered into an agreement to sell the 250 Water Street development project for $150.5 million to Tavros, an experienced and active mixed-use New York City-based developer. In September, Tavros exercised its first extension option, and more recently, they exercised their second and final extension option. As a result, the outside closing date for the sale is now December 15. The deposit has increased to $7.5 million, and the sale price has increased to $152 million. Once completed, we estimate the sale will positively improve historical cash burn by more than $7 million as a result of eliminating interest expense through the repayment of the associated land loan, and other related carrying costs such as taxes, insurance, and site maintenance expenses. We remain confident in Tavros' ability to execute on the project and continue to believe this will be a terrific addition to Lower Manhattan and the Seaport neighborhood. Hospitality operations during the third quarter and year to date have seen top-line demand level off in certain legacy venues, while newer concepts such as Dutano, which opened in May, and Long Club, which is in its second full year of operation, have both continued to outperform on a relative basis due to strong social and corporate demand. During the quarter, same-store Seaport Food and Beverage revenues were up 8%, while overall hospitality revenues increased 3% year over year. Both of which are sequential improvements from the first and second quarters. We expect a moderation in food and beverage revenue growth during the fourth quarter as we prioritize flow-through and profitability potentially at the expense of revenue growth. But we believe the recently announced additions of Flanker Kitchen and Sports Bar and Hidden Boots Saloon will help drive momentum at Pier 17 in 2026. We believe that top-line softness we are experiencing in certain legacy venues is due to structural challenges, such as the type of offering or price point, and we intend to address those issues as part of our ongoing repositioning efforts. Those repositioning efforts will also include a full assessment and go-forward plan for the TIN Building, which we intend to provide along with our broader hospitality strategy during our next earnings call. And finally, before moving on from our hospitality segment, I'm pleased to share that we have now completed a number of technology initiatives, including fully centralizing our point of sale and procurement systems across all of our hospitality businesses. This integration enhances our purchasing power, financial visibility, and reporting accuracy, enabling us to better optimize performance and margins across the portfolio. This represents a significant milestone for our company, and I want to take a moment to thank our team for the tremendous work over the past year to bring these projects to completion. As we previously disclosed, we made the decision not to move forward with the rooftop winter structure. Despite its strong appeal as a way to transform the rooftop into a year-round venue, as capital costs and operational complexities rose, the project became less feasible. Despite this change, we remain excited and committed to the rooftop of Pier 17 as one of the preeminent outdoor entertainment and event venues in New York City. Polestar's third quarter worldwide top 200 club rankings placed The Rooftop Of Pier 17 seventh by gross ticket sales among venues of its size. A five-spot improvement from last year's position. This achievement underscores the venue's continued growth, global recognition, and strength of our live entertainment programming. In the third quarter, we hosted 35 concerts, including 22 performances that were at or near sellout capacity. The sell-through rate, or the number of tickets sold relative to overall show capacity, was 86%, driving nearly 100,000 people to the Seaport. We're encouraged by the performance of two newly introduced add-on experiences for this year's concert season, The Patron Patio, a two-level offering with a dedicated bar that provides elevated views of the performances, and Liberty Club, an enclosed lounge area with seating, a dedicated bar, and all-inclusive food offerings. Both initiatives create meaningful upsell opportunities, deliver unique experiences that drive incremental spending, and improve the guest experience. In addition to the concert series, we hosted several unique events on the rooftop of Pier 17. Among them was the NBC-broadcasted 49th annual Macy's Fourth of July fireworks celebration, Nike's The One Global Finals held under the Jordan brand banner, which showcased some of the top youth basketball players worldwide, and the North American premiere of the M&M's documentary "Stans," featuring a special appearance by Marshall Mathers. The benefit of hosting these events and experiences is best represented by the Macy's Fourth of July fireworks celebration, which helped drive the single highest grossing revenue day in SCG's history. We achieved this through multiple buyouts across our dining venues and through our partnership with Macy's, while also working with New York City to provide thousands of free tickets and viewing opportunities for city residents. In addition to the fireworks, in October, we hosted the New York City Wine and Food Festival, with chef Jean-Georges acting as culinary host. The five-day festival, which included an opening party at the Tin Building, drew more than 35,000 visitors across a variety of events, driving significant awareness to the Seaport. The experience showcased some of the world's most celebrated chefs, creating a truly one-of-a-kind culinary event. These events, among others hosted at the Seaport this year, have further validated our conviction in our ability to deliver marquee events that drive substantial visitation to the neighborhood and position us as a premier destination for cultural experiences in New York City. As mentioned previously and highlighted in our press release last week, we are pleased to announce Flanker Kitchen and Sports Bar and Hidden Boots Saloon, two concepts from Carver Road Hospitality. The award-winning Flanker brand currently includes locations in Salt Lake City, Glendale, Las Vegas, and we're excited to welcome their East Coast flagship location to the Seaport. These concepts will occupy over 14,000 square feet at Pier 17. Flanker Kitchen and Sports Bar will offer an elevated cocktail-focused sports and dining experience, with Hidden Boots Saloon offering live music and a country-style atmosphere, both with private event spaces. This new venue introduces fresh, differentiated concepts that will be a complement to the recently opened dining and nightlife venue, Gittano, as well as to our existing restaurant portfolio in the neighborhood. Our Seaport Neighborhood Merchandising Plan, which also includes Meow Wolf and the aforementioned Tatano and Long Club, should appeal to the more social and sometimes younger demographic that is becoming increasingly prevalent in Lower Manhattan. Overall, with more than 110,000 square feet of space leased or programmed over the past twelve months, our plan for the Seaport should build momentum in the coming years as our concepts further support Lower Manhattan's increasing residential density and evolving population. Finally, I want to congratulate the Las Vegas Aviators on a historic season as Pacific Coast League champions, celebrating the franchise's first PCL title since 1988. But we didn't take home the championship title. The team narrowly lost the Triple-A National Championship game by way of a walk-off home run in the bottom of the ninth inning. We're extremely proud of their achievements. Our team in Las Vegas is now in the midst of transforming the Las Vegas Ballpark to Enchant, a winter wonderland activation complete with an ice rink and other festive activities, which opens later this month and runs through the holiday season. This year, we made the decision to bring the operations in-house, which required upfront investment and start-up costs, but we believe it will prove to be a worthwhile endeavor as it should strengthen guest engagement, introduce new audiences to the venue, and allow us to cross-market to a broader customer base. We anticipate more than 175,000 guests will visit this season, driving revenue to the ballpark during baseball's off-season. With that, I want to again thank the entire SCG team for their extraordinary effort to date as we continue to drive improvement quarter to quarter. I'm so appreciative of their commitment and enthusiasm, and I know we'll deliver further progress in the coming months as we get into 2026. I'll now turn it over to Lina. Lina Eliwat: Thanks, Matt, and good morning, everyone. Before I get into the company's third-quarter financial performance, I'd like to remind everyone of some changes made at the start of the year, including renaming our sponsorship events and entertainment segment to entertainment. In conjunction with this change, we reallocated sponsorship and events revenues and expenses to the respective segments that most appropriately reflect the source of sponsorship or event. These changes are reflected in both the current and prior year periods presented in our consolidated and combined statements of operations. Beginning in 2025 and in conjunction with internalizing our food and beverage operations, we consolidated the TIN Building into our hospitality segment. In prior years, the TIN Building was accounted for as an unconsolidated joint venture, and our share of net loss was reflected in the equity and earnings or losses from unconsolidated ventures line on our consolidated and combined statement of operations. In an effort to provide more comparable information, we'll refer to the 2024 operating results on a pro forma basis reflecting the inclusion of the TIN Building as a consolidated entity during the prior year period when providing year-over-year comparisons on this call. In the third quarter, total consolidated revenues were $45.1 million, a 1% year-over-year increase when compared to pro forma Q3 2024. Consolidated revenues exclude the financial results of our unconsolidated ventures, such as the Lawn Club and our investment in John George restaurants, since they are reflected in the equity and earnings or loss from unconsolidated ventures line on our consolidated and combined statements of operations. In our Hospitality segment, hospitality revenues declined 4% compared to pro forma year-over-year in the third quarter. As Matt noted earlier, the decline in hospitality revenue mainly reflects lower revenues at the Tin Building and softness among certain legacy stand-alone restaurants. Including results of our unconsolidated venture Lawn Club, total hospitality revenues increased 5% year-over-year while same-store hospitality revenue rose 11%. These gains were driven by the continued success of The Lawn Club, the strong launch of Jatano, and the benefit our venues received from hosting events on the July 4. Hospitality segment adjusted EBITDA, including earnings from unconsolidated ventures, declined by $2.9 million year-over-year as a result of reflecting a favorable one-time benefit from reimbursements received in 2024 related to prior period operating expenses. Excluding this one-time item, the Hospitality segment adjusted EBITDA improved by 40% year-over-year, supported by the growth of the Lawn Club, improvements from Jatano, event-driven restaurant buyouts during Macy's Fourth of July celebration, and overall lower operating expenses achieved through cost-cutting measures. Moving to the Entertainment segment, revenues declined 5% year-over-year primarily due to hosting seven fewer concerts at the rooftop at Pier 17 compared to the prior year. As we noted on the last call, the show count was favorable in the second quarter compared to the prior year, but unfavorable to the third quarter reflecting a timing shift in shows rather than a change in demand. Partially offsetting the lower number of concerts was revenue from the Macy's Fourth of July broadcast as well as the Las Vegas Aviator's postseason run, which included three additional playoff games, resulting in a Pacific Coast League championship game appearance all held at our Las Vegas Ballpark. Entertainment segment adjusted EBITDA decreased 51% year-over-year in the third quarter, primarily reflecting decreases resulting from the reduced concert count, variances in allocations of overhead compared to the prior year, along with increased sponsorship fulfillment costs, which mainly occurred during peak concert season. Within the Landlord segment, rental revenue drove most of the consolidated revenue increase in the third quarter, rising 56% year-over-year on a pro forma basis. We benefited from approximately $1 million in termination-related income in the quarter associated with Nike and ESPN, both tenants of Pier 17. Rental revenue growth also included private events activity, most notably Nike's The ONE Global Finals event, which took place on the rooftop at Pier 17. Looking ahead, we'll no longer receive or recognize any rental revenue from ESPN, while continuing to recognize Nike's termination income through 2026 and into 2027. In addition, Nike will continue with its ongoing monthly rent payments under the lease agreement. Landlord segment adjusted EBITDA decreased 45% year-over-year in the third quarter, primarily due to one-time non-cash charges totaling around $6 million, which include a $4 million loss recorded on 250 Water Street in conjunction with classifying the property as held for sale, and a $2 million write-off related to capital spend on the rooftop winter structure. Excluding these nonrecurring items, Landlord segment adjusted EBITDA improved 76% year-over-year, reflecting both the revenue gains discussed earlier and lower operating expenses compared to the prior year period. Overall, total segment adjusted EBITDA for the company in 2025, which reflects the financial performance of each of our segments before the effect of G&A, interest income and expense, and depreciation and amortization, and includes the results of unconsolidated ventures, declined by $7 million compared to Q3 2024 on a pro forma basis. When you exclude the impact of the nonrecurring items discussed earlier from both periods, notably the 250 Water Street loss on held-for-sale classification, the rooftop winter structure write-off, and the favorable hospitality operating expense reimbursement recognized in the prior year, consolidated segment adjusted EBITDA improved by 76% or over $4 million year-over-year. General and administrative expenses during the quarter were $18 million, resulting in a quarterly year-over-year reduction of 2%. While prior year G&A continues to be impacted by our predecessor cost structure, in the quarter, we recognized approximately $11 million in accruals related to the leadership transition. Excluding this one-time accrual, our corporate cost structure continues to reflect sequential improvement as we work towards a sustainable operating model. Interest expense decreased by $3 million compared to 2024 as a result of a $1 million decrease in interest expense related to 250 Water Street when compared to 2024 because of a loan paydown that occurred around the time of our separation from Howard Hughes, an approximately $800,000 decrease in interest expense related to the capitalization of interest on the 250 Water Street loan, and $1 million of offsetting interest income earned on invested cash deposits. During the quarter, we suspended capitalization of interest for 250 Water Street midway through the period as it was classified as held for sale, which resulted in higher interest expense compared to the second quarter. When compared to pro forma Q3 2024 results, equity and earnings or losses from unconsolidated ventures improved 180% year-over-year, mainly driven by continued growth at Lawn Club, which in its second year of operations continues to meet a strong demand for private events. Third-quarter net loss attributable to common stockholders was $33.2 million, representing a year-over-year decline of around $700,000 or 2%, with a net loss attributable to common stockholders per share of $2.61, an improvement of $3.28 per share or 56% compared to 2024. The non-GAAP adjusted net loss attributable to common stockholders for the third quarter was $7.2 million, representing an improvement of around $18 million or 71% versus the comparable period in 2024. Q3 2025 non-GAAP adjusted net loss attributable to common stockholders per share was $0.57, an improvement of $3.97 per share or 87% compared to 2024. Capital expenditures in Q3 2025 totaled $4.8 million. Excluding capitalized costs associated with the 250 Water Street development, the majority of the capital expenditures were related to the rooftop winter structure, completing the river deck bar build-out, and landlord work and maintenance capital for our existing operations. Long-term debt outstanding as of September 30 remained at $101.4 million, unchanged from year-end 2024, except for regular way amortization of the Las Vegas Ballpark loan. Net debt to gross assets at quarter-end was negative 2%. Our negative net debt position continues to reflect the strength of our balance sheet and cash, restricted cash, and cash equivalents balances, which totaled $117 million as of September 30. Before we open it up for questions, I want to take a moment to thank Matt for his leadership and guidance in our time working together, but especially over the past few weeks during this transition. I'd also like to thank the entire SEG team, our partners, and our board of directors for their continued support and collaboration. I'm excited about the opportunities ahead as we move into planning for 2026, and I look forward to building on the progress we've made as a team. With that, we'll now open the line for questions. Operator: Thank you. If you'd like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you'd like to remove your question from the queue. Our first question comes from the line of Matthew Erdner with Jones Trading. Please proceed with your question. Matthew Erdner: Hey, guys. Good morning. Thanks for taking the question and congrats on the continued improvement. You know, as we look to profitability, what do you think are the biggest levers that you guys can pull, you know, to drive that path forward? Matthew Morris Partridge: Hey, Matt. Good to hear from you. It's a good question, and, obviously, it's a pertinent one. Because we have made a lot of progress. But most of the leasing that we've done, if not all of the leasing that we've done other than Jatano, hasn't rent commenced or started operating. So I think getting some of these tenants open and operating and paying rent, the remaining vacancy, which continuing the momentum on the leasing front to fill up if we include the Nike space that we'll get back in 2027, it's about 100,000 square feet left to program or lease. And then I think focusing on the operational model and the G&A to try to create some efficiencies with what we've already done, but there's more room to go, is really going to be the path to get us to breakeven and then profitability. Matthew Erdner: Got it. That's helpful. And then, you know, following up on the leasing, could you talk a little bit about the demand that you guys are experiencing down there and I guess the mix of tenants that are looking at your prospective spaces? Matthew Morris Partridge: Yeah. I think demand's been really strong. There's plenty of articles out there speaking to demand for restaurant space over the last few months in New York City. We've obviously had a lot of success with food and beverage operators, in getting them in the space, whether that's Jatano or Flanker or Cork or Willett. So I think the food and beverage has been strong. We're now starting to focus a little bit more on the more traditional retail tenants while filling out some of our legacy F&B spaces. So we're not short on demand. We're more focused on finding the right partners, the right experiences, and the right tenants for the diverse community and customer base that we're trying to serve. Matthew Erdner: Got it. And then is there anything that we should expect kind of timing-wise? You know, are you guys wanting to kind of get all of these guys in and opened up prior to Meow Wolf? So say maybe middle second half of next year, we should look for velocity to really pick up. Matthew Morris Partridge: Yeah. I think the velocity is definitely going to be in the back half of the year. I think Cork will probably get open before the midpoint. Willett will be around that July 4 time frame, hopefully. And then, in Flanker and some of the other stuff we're working on will hopefully be on the back end of 2026. And then depending on who we fill the other vacancies with, will either be a late 2026 or call it first half 2027. So the goal is to get everybody open and operating before Meow Wolf, but, obviously, it'll depend on how things get phased in here from a leasing standpoint. Matthew Erdner: Got it. And then, last one for me. You know, how do you guys position yourself to continue bringing the special events such as Macy's Wine and Food Festival? And then could you also talk about just the importance that these events really bring in helping drive exposure and awareness to the district? Matthew Morris Partridge: Yeah. On the latter point, you know, I'm relatively new to New York. I've been here about two years now. And a lot of the conversations I have with people who live in New York say, oh, I went to the Seaport pre-COVID or I haven't been there in a handful of years. And so I think these events help pull people down who may otherwise wouldn't have the Seaport top of mind. So it's a great marketing opportunity for us and for the community and for the neighborhood. And then I think more broadly, positioning the Seaport as a cultural and experiential destination just more broadly for New York. I think is an important part of pulling people down here and ultimately making all the tenants and partners that we're bringing here successful. So it's as much about foot traffic and time and destination as it is anything else. And I think these events definitely help with that. In terms of how to keep building on that momentum, obviously, the team has done a great job of pulling a number of events down here this year, and we're hoping to bring all of those events back and more next year. Some of that will be through programming the rooftop. Some of that will be doing special events out on the pier or in the cobblestone. So it's an array of different opportunities that we have in front of us, and we just have to keep working and keep networking and creating the partnerships that bring these things down here over a multiyear period. Matthew Erdner: That's great. Appreciate the comments as always. Thank you, guys. Matthew Morris Partridge: Thanks, Matt. Operator: Thank you. As a reminder, if you'd like to join the question queue, please press 1 on your telephone keypad. Our next question comes from the line of Ross Haberman with RLH Investments. Please proceed with your question. Ross Haberman: Good morning. Thanks again for having the call. Could you focus specifically, you talked a little bit in your queue about the restructuring with Jean-Georges. Do you think you'll hit a breakeven with that cash-wise in '26? Let me start off with that. Thanks. Matthew Morris Partridge: Morning, Ross. When you say hit a breakeven in '26, are you talking about specifically in the hospitality segment or something else? Ross Haberman: Jean-Georges, the Tin Building. That's what I'm referring to. Matthew Morris Partridge: Oh, for the Tin Building? Yeah. You know, I'm not in a position today to give forward guidance on what the Tin Building will do in '26. We've spent a lot of time on it. And as we mentioned in the prepared remarks, it's a big focus for us, and we plan to be able to outline that plan on the next earnings call. So I'd say give us a couple of months to finalize the budget process, and we'll make sure to appropriately lay out our plans for that building. Call it early March. Ross Haberman: With the restructuring, let me ask you. With the restructuring, are basically are you cutting costs there? Matthew Morris Partridge: The restructuring was really to bring the employee base in-house. It was previously third-party managed by Jean-Georges. So that's what the restructuring allowed us to do. And by bringing it in-house, we were able to restructure those agreements. So we have license agreements now instead of management agreements. And so we were able to reduce some of the management fees that we're paying for that external management. Ross Haberman: Is a new concept or adjusted concept part of the thinking? Matthew Morris Partridge: I think everything's on the table. Now we're obviously working very closely with our counterparts at Jean-Georges. It's a great relationship for us. It's one that we obviously value quite a bit, especially with our 25% ownership in their broader organization. So we're working hand in hand with them to try to figure out the best path forward, and like I said, I think we'll have a pretty well-laid-out plan by March on the next earnings call. Ross Haberman: You talked about 100,000 square feet of space to rent. How is that coming? And I don't know. Do you think you'll be able to make a dent of half of that in '26, or what's your thought in terms of the people you're currently negotiating or speaking with now? Do you have a couple of larger prospects that could use, I don't know, half or more of that within '26? Matthew Morris Partridge: So the biggest chunk of that 100,000 is the Nike space. We won't get that back until 2027, but, obviously, we're not going to wait to try to work through that. A lot of the remaining space is small shop space. So we should be able to drive higher rents on those spaces just given the size and the use. We are working on a whole host of different opportunities, some of which I'm sure will get over the finish line and some of which maybe won't make it there. But, you know, I'm pretty excited about some of the stuff we have in the queue that we haven't been able to talk about yet. That hopefully will get over the finish line before the end of the year, and we can have some more announcements. Ross Haberman: And just one final question, if I may. What do you expect for the capital expenditures for the fourth quarter? Matthew Morris Partridge: So for the fourth quarter, it'll probably be somewhat light. We're deep into the Meow Wolf landlord work right now, and we're doing some work on Willetts and Cork. You know, it'll probably ramp up in 2026. You know, we've got about $50 million or so committed between all the projects that we've announced. I think the majority of that's going to go out sort of in 2026. Ross Haberman: Okay. Thanks again for having the call. I appreciate it. Matthew Morris Partridge: Of course. Thanks, Ross. Operator: Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Matthew Morris Partridge for any final comments. Matthew Morris Partridge: Appreciate it, operator. Thank you, everybody, for joining us today. We'll look forward to sharing more progress on the fourth quarter and year-end conference call in the early part of the new year. Have a great holiday. Thank you. Operator: Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good morning, everyone, and welcome to the Xtant Medical Holdings, Inc. Third Quarter 2025 financial results. At this time, all participants are in a listen-only mode. The floor will be open for questions following the presentation. If anyone should require operator assistance during this conference, please press. Please note this conference is being recorded. I will now turn the conference over to your host, Kevin Gardner of LifeSci Advisors. Kevin? The floor is yours. Kevin Gardner: Thank you, Operator, and welcome to Xtant Medical Holdings, Inc.'s Third Quarter 2025 financial results call. Joining me today are Sean E. Browne, President and Chief Executive Officer, and Scott C. Neils, Chief Financial Officer. Today's call is being webcast and will be posted on the company's website for playback. During the course of this call, management may make certain forward-looking statements regarding future events and the company's expected future performance. These forward-looking statements reflect Xtant Medical Holdings, Inc.'s current perspective on existing trends and information and can be identified by such words as expect, plan, will, may, anticipate, believe, should, intend, and other words with similar meaning. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those noted in the risk factors section of the company's annual report on the Form 10-Ks filed with the SEC and in subsequent SEC reports and press releases. Actual results may differ materially. The company's financial results press release and today's discussion include certain non-GAAP financial measures. Please refer to the non-GAAP to GAAP reconciliations which appear in our press release and are otherwise available on our website. Note that the Form 8-Ks that we file with our financial results press releases provide detailed narratives that describe our use of such measures. For the benefit of those who may be listening to a replay, this call was held and recorded on November 11 at approximately 08:30 AM Eastern Time. The company declines any obligation to update its forward-looking statements except as required by applicable law. Now I'd like to turn the call over to Sean E. Browne, CEO. Sean? Sean E. Browne: Thank you, Kevin, and good morning, and happy Veterans Day to all those who have served or are serving. One quick note, since today is Veterans Day, the PC is closed. Although, as you know, the market is open. And so we released our 10-Q last night. So with that behind us, thank you for joining our third quarter update call. As has been our practice, I will begin with a few prepared remarks about our operations, and then Scott will provide a deeper dive into the financials. We'll then open the call to your questions. We again turned in solid financial performance during the third quarter highlighted by 19% revenue growth over 2024. We again generated positive cash flow, adjusted EBITDA, and net income, and a continuation of the favorable trends that we've seen over the past few quarters. Before covering the quarter in detail, however, I would like to begin the morning with an update on the pending sale of our non-core Coflex and Cofix interlaminate stabilization implant assets and all international entities of Paradigm Spine to Companion Spine. The proceeds of the transaction, when completed, are anticipated to be $19.2 million in total. We intend to use the proceeds to reduce our long-term debt and to provide additional cash liquidity. Importantly, as a result of this transaction, and the cash flow we are generating from operations, we do not expect to require additional external capital to fund our operations from this point forward. This transaction will be truly transformational for our company, as it will further enhance our focus on our core Biologics business, while strengthening our financial position. In terms of timing, we anticipate we'll close by the end of the year. It's worth mentioning that the Scoliosis Brothers have already paid us approximately $7.5 million, including a $2.5 million payment just last week, toward the total consideration of this deal. So they are as committed as we are to ensuring its completion. As a reminder, the business included in the sale generates annual revenue to Xtant Medical Holdings, Inc. of approximately $23.5 million. As previously mentioned, these products were modestly unprofitable on a standalone basis. So the effect of the sale on our margins and bottom line metrics is anticipated to be neutral to slightly positive in 2026 and beyond. In the meantime, until this transaction closes, we continue to support those products in the field, and we will benefit from the associated hardware revenue for an additional few months. So now turning now to our third quarter. I'm pleased to report that we delivered strong financial and operating results. Scott will cover the financials in detail in a moment. I'd like to begin by touching on a few highlights. First, our total revenue for the quarter was $33.3 million, which represents a growth of more than 90% versus 2024. Notably, our third quarter 2025 revenue includes $5.5 million of licensing revenue pursuant to the license agreement for Q Codes, and the SIMPLIMAX dual-layer amniotic membrane that we announced in the third quarter of last year. As we indicated in Q1, CMS has extended the local coverage determination for skin substitutes to 12/31/2025. Our biologics product family, which is our core business, grew 4% over the third quarter of last year. This was below our long-term expectation for growth in the Biologics product family. However, it's important to take a step back and recall that our focus over the past several quarters has been on prioritizing self-sustainability, particularly positive cash flows, as part of our long-term growth strategy. The strategic initiatives that we have implemented are sharpened focus on higher-margin biologics, our emphasis on in-house manufacturing to improve quality and control costs, and our more disciplined approach to operating expenses were all implemented with self-sustainability in mind. With those goals now achieved, we are turning our focus back to driving top-line growth in our orthobiologics business. We continue to invest in R&D to bring innovation to surgeons and their patients. At the same time, we have started making investments in our commercial team to maximize the reach of our broad portfolio of orthobiologic solutions. From a new product launch perspective, since our last quarterly update, we also continue to innovate to bring new orthobiologic solutions to surgeons and their patients. Earlier this month, we announced the commercial launch of Collagen X, our bovine collagen particulate product for surgical wound closure, that is designed to promote healing, prevent adhesions, and help mitigate concerns related to surgical site infections. Collagen X complements our existing orthobiologics product line, as it represents a potential addition to every case type that our portfolio currently addresses as well as procedures performed in other surgical disciplines. This is the latest example of our commitment to innovation as we work to meet the diverse needs of our surgeons and patients. As a reminder, we now offer and internally produce solutions across all five major orthobiologic categories: demineralized biometrics, cellular allografts, synthetics, structural allografts, and now growth factors. Additionally, with our amino and collagen product lines, we are well-positioned to grow in the surgical repair and wound care markets. This positions us as the partner of choice in the field of regenerative medicine, a position that has been further solidified by the very positive feedback that we have received from surgeons on these recent innovations. Now turning to 2025 revenue guidance. Recall that last quarter, reflecting the heightened levels of license revenue from the previously noted QCO and embryonic membrane agreement, we are experiencing, we increased our full-year 2025 revenue guidance to a range of $131 million to $135 million, which represents growth of approximately 11% to 15% over 2024 revenue. With the sale of our non-core Coflex and Cofix spinal implant assets and OUS business to Companion Spine now anticipated to close closer to the end of the year, we are reiterating our 2025 revenue guidance at this time. We anticipate providing initial 2026 revenue guidance concurrent with our Q4 results in March. With that, I will turn the call over to Scott for a more detailed review of our financial results. Scott C. Neils: Thank you, Sean, and good morning, everyone. Total revenue for 2025 was $33.3 million compared to $27.9 million for the same period in 2024. The 19% increase is attributed primarily to $5.5 million of licensing revenue during 2025 that Sean alluded to earlier, as well as $570,000 of additional biologics revenue, partially offset by a 6% or $736,000 year-over-year decline in hardware product revenue. Gross margin for 2025 was 66.1% compared to 58.4% for the same period in 2024. The increase is primarily attributable to favorable sales mix and greater scale. Third quarter 2025 operating expenses were $19.5 million compared to $20.1 million in the same period a year ago. The reduction in operating expenses is primarily attributable to reduced compensation and commission expenses, which were partially offset by an increase in professional fees related to sales and marketing. General and administrative expenses were $7.1 million for the three months ended 09/30/2025, compared to $7.5 million for the same period in 2024. The decrease is primarily attributable to half a million dollars reduced stock-based compensation expense and half a million dollars of reduced retention and severance expense, partially offset by a half-million-dollar increase in bonus expense. Sales and marketing expenses were $11.7 million for the three months ended 09/30/2025, compared to $11.9 million for the same quarter last year. The decrease is primarily due to reduced commission expense of $700,000 resulting from revenue mix, partially offset by $1 million of additional consulting fees during the current year period. Research and development expenses were $634,000 for the three months ended 09/30/2025, a decrease from $701,000 in 2024. Net income in 2025 was $1.3 million, or 1¢ per share on a fully diluted basis, compared to a net loss of $5 million or $4 per share in the comparable 2024 period. Adjusted EBITDA for 2025 was $4.5 million compared to an adjusted EBITDA loss of approximately $1 million for the same period of '24. As a reminder, beginning in 2024, we no longer include the exclusion of the phasing of the bargain purchase gain on our sell-through of inventory acquired as part of our purchase of Surgi Line Holdings Hardware and Biologics business in our calculation of adjusted EBITDA. Prior periods have been recast to conform to the current calculation. The related effect on adjusted EBITDA was a reduction of $773,000 in 2024 to arrive at the recast amount. As of 09/30/2025, we had $10.6 million of cash, cash equivalents, and restricted cash. Net accounts receivable is $25.6 million. Inventory was $40.7 million. And we had $5.7 million available under revolving credit facilities as of the end of the quarter. As a reminder, our cash balance as of the end of the third quarter does not take into account the anticipated remaining proceeds from the pending sale of certain assets to Companion Spine that we anticipate closing by year-end that Sean discussed earlier. Operator, you may now open the line for questions. Operator: Thank you very much. We are now opening the floor for questions. If you would like to ask a question, please press 1 on your phone keypad now. A confirmation tone will indicate that your line is in the queue. You may press 2 if you would like to remove your question from the queue. For anyone using speaker equipment, it might be necessary to pick up your handset before you press the keys. Thank you. Thank you very much. Our first question is coming from Ryan Zimmerman of BTIG. Ryan, your line is live. Ryan Zimmerman: Thank you, and good morning, everyone. So appreciate the commentary and everything. Maybe I want to start, Sean, you talked about making some investments in the commercial organization. It would be good just to know you want to get more feet on the street. I mean, is this refilling the pipeline? Maybe talk to us a little about kind of, you know, a little more color on kind of what that means. And then my second question, I'll just ask upfront. There's, you know, there's a lot of moving parts as we go into next year. I know you're not guiding for 2026, but maybe any early thoughts, you know, broad strokes around kind of, you know, where you think the orthobiologics business can grow, you know, when we strip out some of the other pieces that, you know, may be in flux. Thanks for taking the question. Sean E. Browne: Sure. Okay. Let's I'll start off with the profitability question. Well, that's profitability question. Sales question. Scott's in profitability. So last year, really in the second half of the year, we started making decisions on how do we conserve cash because we knew that we were going to have a lot of revenue coming in from the Q Codes. We knew that we were gonna have actually a very good year just operationally. So in the fourth quarter of last year, we dramatically cut back the business overall. You can see it in our OpEx expense. With the idea of being profitable. As part of that, we reduced, you know, a fair number of our commercial not necessarily overly highly performing assets. And so over the course of the last, really, quarter, we've now been replacing a lot of those spots in areas that make more sense. And so just to give you the scale to which we're doing, so we had roughly four reps that were selling the Xtant branded products today. We've upped that, and we'll by the end of the year, we'll be at eight. So we'll double that. And then, again, in 2026, we expect to add probably four more. So this is a fixable problem or not a problem, but a fixable opportunity for us. So I feel really good about where we're going and even, you know, what I'm seeing from just having those new assets out in the field already. So it is something that was somewhat predicted or predictable when we made those decisions last year and in the beginning of this year. To give you some guidance with respect to 2026, as you mentioned, we are not gonna be giving full guidance until really, the year completes because there's a lot going on, a lot of good things. And so if I were to give you some general guidance, we do expect still to be in the low double digits with respect to our overall orthobiologics growth. Then as for the hardware, we're still working through some things right now. But I would still say that that really that's that's what we can expect to see in 2026. Ryan Zimmerman: That's very helpful. And, you know, even just the broad strokes, I think, give us a sense of what you can do. And then, you know, look, NASS is coming up. What, next week or this week, I should say. Sean E. Browne: This Friday. Yeah. Monday through Sunday. Yeah. This Friday. Ryan Zimmerman: So anything you want to highlight for people, you know, for NASS, or anything, you know, that you know, you'd say it's worth checking out at the booth? Sean E. Browne: Yeah. Yeah. Thanks for asking. Thanks for the setup. Yes. Three things. First of all, our growth factor product, brand new, is outstanding. We're replacing another growth factor probably you're selling previously that someone else was making for us. This is our own this is our own product. We feel really good about it. We've done a great job of keeping the business that we once had, and we're now starting to grow. So that's absolutely something people should check out. Second of all, we've now created a new advanced DBM called Trivium, which is really a terrific product that we would encourage our surgeons and distributors to look at. Not only is the growth factor count and just basically the overall characterization of the product outstanding, but the handling is even better. Then the third thing is what we just rolled out this Collagen X product, which literally can be used in almost every procedure. And even procedures outside spine. So those would be three big things that we're feeling really, really good about. And just the fact that the entire portfolio of our product line are now things that we make we have a hand in, we control the supply chain, but also just in general, we just think we make really great products. So please stop by and we'd love to give you a rundown of our really exciting portfolio. Ryan Zimmerman: Thanks, Sean. Scott C. Neils: Thank you, Ryan. Operator: Thank you very much. Our next question is coming from Chase Knickerbocker of Craig Hallum. Chase, your line is live. Chase Knickerbocker: Good morning. Thanks for taking the questions. Sean, maybe just to start, if you could just help me kind of dive a little bit deeper into that 3% year-over-year growth in orthobiologics. Just as far as, you know, what supported growth in the quarter on a year-over-year basis, what detracted from it. On a kind of product-specific kind of basis, if we can riff on that for a second. Sean E. Browne: Sure. Absolutely. So the actual is 4% growth year over year, which we had for our and, again, with the areas that we're still continuing to grow growing actually continue to bear stem cell business. Our again, the growth sector business is basically we're holding serve in that, which is good because, again, we released a brand new product line. The annual product line continues to be a nice product line, product growth area for us. And we realize there's gonna be some changes with respect to the wound care world. But some of and a good chunk of some of the growth that we've also seen is in the surgical side, which shouldn't change. And so those would be a couple of the areas that I would say that really helped. What hurt us this past quarter was maybe some of our old line demineralized bone products, and that's why the addition of things like Fibrex and Trivium these higher-end much, much better much higher not only from a handling perspective, but from a perspective and from, again, a growth factor characterization side of things. It is just outstanding products. So we really hope and we really see that those things will be helping offset maybe some of the slide that's been taking place from those old very still very good product lines, but yeah, you realize that, you know, OsteoSelect, OsteoSponge, and three to men think OsteoSelect started oh, no. OsteoSponge started in, like, 2008. OsteoSelect started in 2010, and I think three to it was 2013, 2013. So these are some of the products that that we're now finding upgrades to that we just believe that we've really, you know, knocked out of the park with with some of the new things. And they're just starting to get traction, those new products. And so matter of fact, for our if you look at the Trivium product, you know, it had one of its best months yet. Just recently. So we're really, really excited about where that's gonna take us. Chase Knickerbocker: Just maybe on the on the kind of legacy DBM side, was it mainly kind of white label or direct channel that Sean E. Browne: Definitely more direct channel. Definitely more direct channel. So as I mentioned, when we pulled those resources out of the field or at least eliminate them and really kind of reshuffling them now, it hurt us. I'm not gonna lie. It's something that that we knew what we were going into. Those were again, probably sub-optimal assets when we did it. That's part of the reason why we pulled it out and said, alright. Profitability is the most important thing we're gonna do right now. We feel we can hold serve for most of what we have for our business and with the growing orthobiologic portfolio, we really feel like okay. We might come across some rocky waters, which we have. And so now over the course of really the summer, we started adding back those resources in more strategically important areas. And then as I mentioned, we're gonna continue to add more in 2026. Chase Knickerbocker: Got it. And then, maybe just on the on the Amnio side, you know, the changes that were announced in the final PFS, maybe just any thoughts as far as how it impacts your business as we take an eye into 2026? And then just last one for me, Sean, as I think about Collagen X, probably a bigger market for similar products than people realize. Just kind of speak to your plans for that even outside of spine. As far as how you plan to distribute that product into what is a fairly large market for those particulates. Sean E. Browne: Yeah. Yeah. So let's start with Amnio. So we manufacture Amnio. Most of the people who sell the amnio care products today are not manufacturers. As a matter of fact, they need a fairly high price in order to be able to make real money. We, on the other side, are on the very low end of the value creation. When you think about what it costs for us to make something, it's quite low. And so when the price went to $127 per square centimeter, it's a very good it's actually a very good price for us. As somebody who can actually serve the wound care or I should say the acute care market. If you recall and if you see what's happened in that in that world, this reimbursement opened the door for real real movement. From the Adehoffer or the acute care or the non-acute world into the acute or at least the outpatient clinics tied to the hospitals. We feel that we can do really well with the hospital contracts we have. There are many distributors out there today who don't have the level of hospital contracting we do, and they need it. So we think that there's an opportunity there. So we'll see what happens. I mean, this is something that we're just getting our arms around right now. I'm speaking to various people. Making sure our contracting is tight, but we, again, have a very, very robust contract portfolio. So it is something we're trying to leverage as we speak. So that's the Amnio side. Secondarily, when you think about the collagen-based products, one of the things that we acquired through the Surgiline acquisition was a product called Nanos. And the basis of Nanos was an even more interesting product called eMatrix. And that eMatrix is a collagen-based product that had extraordinary clinical data behind it. Actually, the product was originally created, was created as a wound care product. As a matter of fact, it was going through its own PMA. And the company essentially was running out of money and said, okay. Let's create something that we can start generating money from, and then they created Nanos. Which was taking eMatrix and then putting in hydroxyapatite with it. So it became a product that was ultimately purchased by one of the predecessor companies of Surgilent. So we acquired eMatrix, which in itself is its own collagen-based product. So we see that as a really terrific platform for us moving forward. Because there's a number of other areas we think that we can touch with them. So there's more to follow on that, but it's a platform technology that we're really, really excited about and we've got some FDA work that we need to do. But we're really pretty pumped about where that's leading. So, hopefully, that answered your question there, Chase. Chase Knickerbocker: Yeah. Thanks, Sean. Appreciate the questions, guys. Operator: Thank you very much. Well, we appear to have reached the end of our question and answer session. And therefore, we have reached the end of the conference. So thank you very much. This does conclude today's conference, and you may disconnect your phone lines at this time. We thank you for your participation.
Operator: Ladies and gentlemen, good morning, and welcome to the Octave Specialty Group's Third Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please signal the operator by pressing 0 on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Karen Beyer, Head of Investor Relations. Please go ahead, Karen. Thank you. Karen Beyer: Hello. I'm Karen Beyer, the new Head of Investor Relations for Octave, and it is my pleasure to welcome you to our third quarter 2025 earnings call. For those of you following along on the webcast, we have posted a new investor presentation on our website, which Claude LeBlanc will be speaking to during his prepared remarks. Our call today includes forward-looking statements. The company cautions investors that any forward-looking statement involves risks and uncertainties and is not a guarantee of future performance. Actual results may differ materially from those expressed or implied by those in the forward-looking statements due to a variety of factors. These factors are described under the forward-looking statements in our press release and our most recent 10-Q and 10-Ks filed with the SEC. We do not undertake any obligation to update forward-looking statements. Also, in our prepared remarks and responses to questions, we may mention some non-GAAP financial measures. Reconciliation to those non-GAAP measures are included in our recent earnings release, investor presentation, and operating supplement and other materials available to investors on our website octavegroup.com. Speaking today will be Claude LeBlanc, President and CEO of Octave, and David Trick, Chief Financial Officer. With that, I will turn over the call to Claude LeBlanc, President and CEO of Octave. Claude LeBlanc: Thank you, Karen. We are very pleased to have you participating on the call today, and I would like to extend a warm welcome to you as the newest member of our team. For those joining our call today, we are excited to welcome you to the inaugural earnings call for Octave Specialty Group, the new name and brand replacing Ambac Financial Group, which we announced last night. We have a number of significant updates to share with you today. I will start by providing you with key highlights for the quarter, followed by David Trick, who will cover our financial update. Following David's remarks, I will provide an overview of key themes included in the new investor presentation posted to our website last evening. Today begins a new era for our company as a pure-play specialty P&C insurance company. This transformation reflects the culmination of years of hard work, underscored by significant milestone achievements. Starting with the successful restructuring and exit from rehabilitation of our financial guarantee business in 2018, ultimately leading to its recent sale. In parallel, we defined a vision and strategy for our new business, which we launched just under five years ago. These accomplishments have progressed our company from a runoff business with no access to future distributable earnings to a thriving high-growth insurance distribution platform. I am very proud of our accomplishments, and I want to thank our employees, board of directors, and others who have supported us throughout this monumental transformation. Turning to our quarterly highlights and progress against our recently announced 120-day plan, I am pleased to report we have made material progress against this plan, including: one, the launch of Octave Specialty Group, our new corporate brand and vision; two, we made material progress in executing our capital management plan, completing repurchases totaling 3,100,000 shares or 6.5% of weighted average shares outstanding; three, we undertook additional material corporate expense reductions this quarter that will result in more than a $10 million decrease in our run rate adjusted corporate expenses; and four, in addition to the successful close of the sale of our legacy financial guarantee business to Oaktree for $420 million, we announced and closed the purchase of ArmadaCare, a leading specialty NHMG platform. With respect to our organic growth initiatives, we announced the launch of a new professional lines MGA, 1889 Specialty Insurance Services, the launch of the Alcor US MGA, and we converted our investment in the recently launched PIVX MGA, led by Mac Miller, to a majority stake, bringing our total class of 2025 MGA startups to three. We expect to continue to make material progress on our strategic initiatives during the fourth quarter, positioning our company for strong performance in 2026 and beyond. As we enter 2026, we expect to maintain robust organic growth, bolstered by continued momentum across our core businesses, including the significant number of startups launched in the 2024 and 2025 period. We also remain focused on reducing corporate expenses to a more cost-efficient and sustainable level, with an initial target of approximately $30 million of adjusted expenses for 2026. Capital management continues to be a top priority, guided by our multipronged strategy that includes investment in startups, organic growth opportunities, share repurchases, selective and disciplined acquisitions, and continued investments in data, AI, and core technologies that will advance growth opportunities and lead to reductions in operating expenses. We look forward to providing you with guidance for 2026 during our fourth quarter earnings call. Before I turn it over to David, I would like to share some further thoughts on our new brand, Octave Specialty Group. Our new brand is much more than a name change. It is tied to a new vision, strategy, and culture that defines our business and our future. We've evolved from a capital business to one that is defined by people and services working in a collaborative and entrepreneurial ecosystem. We believe Octave captures the essence of who we are today: a collection of unique, high-performing businesses working in harmony. I should note that our aligned capacity, including our Lloyd's syndicates and Everspan, will retain their brand identity, as will the individual MGAs within our portfolio. The new Octave brand encompasses the holding company Octave Specialty Group, along with our two insurance distribution divisions, formerly known as Serata and B. I will now turn the call over to David Trick to walk us through our financial results for the quarter. David? David Trick: Thank you, Claude. Good morning, everyone. For the 2025, Ambac reported a net loss from continuing operations to shareholders of $32 million or 67¢ per diluted share, compared to a loss of $18 million or $0.43 per share in 2024. The higher loss was driven by a $15 million combined increase in intangible amortization and interest and G&A expenses, coupled with the impact of Everspan's prior period $7.5 million gain on the sale of Scenic, all of which more than offset stronger results in the insurance distribution. The 2024 also benefited by a $4.8 million gain at corporate on an FX hedge related to the July 2024 acquisition of Veep. The increase in expenses resulted from the acquisition of Viat as well as costs related to the exit from the financial guarantee business and expense reduction initiatives. It is worthy to note that the debt used to finance a portion of the acquisition of BEAT was repaid with the proceeds from the sale of AEC. Adjusted EBITDA from continuing operations to stockholders was a loss of $3 million compared to a sub $2 million gain in 2024. The reduction in adjusted EBITDA resulted from the $4.8 million FX gain in 2024, a $1.5 million reduction in Everspan adjusted EBITDA, and $1.2 million corporate expenses mostly related to M&A and legacy litigation. These variances more than offset a threefold increase to $6 million in adjusted EBITDA in the insurance distribution segment. With regards to the insurance distribution segment, revenue increased by 80% compared to 2024, to $43 million. This growth was driven mostly by strong organic growth, which was 40%, and the inclusion of an additional month of B. On an operating basis, that is before the impact of NCI, insurance distribution reported $10 million of adjusted EBITDA, producing a 23% margin, compared to $3 million and an 11.1% margin in 2024. Adjusted EBITDA to shareholders was $6 million for the quarter, at a 13.9% margin, up 183% compared to $2.1 million at an 8.8% margin in 2024. The increased margin to shareholders in 2025 versus 2024 is mostly related to the strong organic growth and higher profit commissions and fees. Included in this quarter's insurance distribution segment results was just over $1 million of de novo loss, approximately $700,000 of which were attributable to shareholders. As noted previously, our margins can be expected to flex a bit, period to period, depending on the relative performance of each MGA compared to our ownership level, but will converge over time with margins on an operating basis as we buy in certain NCI. Everspan's net written and net earned premium in the quarter were $18 million and $17 million, down from $33 million and $27 million, respectively, from the prior year period, due to the previously disclosed proactive nonrenewal of certain personal and commercial auto programs. While reported losses in LAE declined year over year, the loss ratio increased to 84.5% in 2025 from 74.4% in 2024. Adverse development accounted for just over 23 percentage points of this quarter's loss ratio, due mostly to development in runoff commercial auto programs. These losses were partially offset by a sliding scale commission benefit of approximately seven percentage points recognized as an offset to acquisition cost. In-force programs are running in the mid-sixties, materially better than the book in runoff and in line with our expectations. The third quarter expense ratio of 28.4% was up from 26.1% in the prior year quarter. This increase was driven by a shift in mix of business and a reduction in earned premiums, resulting in approximately three and a half points of increase in the acquisition cost and G&A expense ratios, partially offset by a five-point increase in the sliding scale benefit. As Everspan is experiencing steady growth in earned premium sequentially, we continue to expect the expense ratio to improve. The resulting combined ratio for the third quarter of 112.9% compared to 100.5% in the prior year period. For the quarter, Everspan was breakeven on an adjusted EBITDA, which was down from $1.6 million in 2024. Corporate G&A expenses were $26.6 million in the quarter, compared to $27.2 million in 2024. On an adjusted basis, G&A expenses were $9.3 million compared to $8.5 million in 2024. The difference between reported expenses and adjusted expenses in the current quarter is attributable to equity compensation and costs associated with our exit from the legacy business and expense reduction initiatives. We outlined in our investor materials certain select expense reduction initiatives, which include, for example, the termination of our corporate headquarters lease. These select initiatives are estimated to generate over $17 million of reported expense savings and will have over a $10 million impact on adjusted corporate EBITDA when fully complete. I will now turn the call back to Claude LeBlanc. Claude LeBlanc: Thanks, David. I would now like to review key themes and select information set out in our investor presentation posted last night. Starting with Slide 5, outlining the key actions we have taken to reposition Octave along with our go-forward value creation opportunity. One, platform expansion. Since beginning our journey five years ago, we've expanded from one MGA to 22, including ArmadaCare. On a pro forma basis, our revenue has grown more than sevenfold since 2021. Two, accretive M&A transactions. We have a proven track record of attracting high-performing MGAs to our platform, most recently demonstrated by the acquisition of BEAT in 2024 and ArmadaCare last week. Three, expense reductions. As noted, we have already taken significant steps to reduce our corporate expenses across both compensation and non-comp areas and will continue to pursue additional measures to align our cost structure with the scale of our business. And four, capital allocation. We take a disciplined approach to capital allocation, balancing the return of capital against other strategic uses. We believe the actions we have taken to date position us to deliver sustainable long-term shareholder value. Moving to Slide 11. Consistent with the expansion of our business, we have built a leadership team that I am incredibly proud of. A team with an average of more than thirty years of industry experience, deep expertise across market cycles, and broad subject matter knowledge. Combined with our extensive industry relationships and market visibility, this experience provides significant value to the MGA partners on our platform. Moving to Slide 13. We believe Octave is uniquely positioned and differentiated in the MGA sector as a strategic operator, having a true partnership model to align interests with our MGA leaders as a pure-play MGA platform having a holistic and unified business service platform, and aligned capacity through our Lloyd's Syndicates and Everspan. Moving to Slide 14. Our platform is uniquely positioned to deliver value through two complementary growth engines. Our de novo incubation division, Octave Ventures, led by John Kavanaugh and Paul Rayner, and our M&A division, Octave Partners, led by Naveen Anand. Both are supported by access to broad, aligned, and curated third-party capacity relationships, including our Lloyd's Syndicate and Everspan. This dual strategy has created a diversified, high-performing platform where our MGA partners operate independently but with shared alignment, supported by our comprehensive technology-led business services platform. Now taking a closer look at our ventures division on Slide 16. This division is built on a strong foundation that allows us to consistently attract top-performing underwriting teams. We offer them a broad wholesale and retail distribution network, a strong network of aligned and curated third-party capacity partners, access to a stable capital base, and an experienced leadership team providing strategic oversight and direction, and an integrated technology-enabled business services infrastructure. To date, we have made targeted investments in high-performing underwriting teams with proven track records in their respective markets. We generally expect these MGAs to reach profitability within eighteen to twenty-four months. Our UK MGAs typically achieve scale in approximately three years, while in the US, the timeline is slightly longer but generally offers a much larger addressable market and stronger long-term growth potential. The nine new MGAs launched in 2024 and 2025 will be a key driver of EBITDA margin expansion as they scale and achieve profitability over the next three years. Turning to our partner division on Slide 17. Within our partners division, we take a disciplined and selective approach to acquisitions, targeting high-growth platforms that operate in niche markets with significant barriers to entry. When evaluating M&A opportunities, we focus on businesses that have the following attributes: natural entry barriers and strong market positioning, a proven track record of underwriting excellence, owners willing to retain equity to ensure an aligned partner, a strong cultural fit, a clear and sustainable growth trajectory, and identifiable enterprise synergies. Our partners division has enabled us to achieve substantial product diversification in businesses supported by leading MGA entrepreneurs. Turning to Slide 18. Once launched or acquired, our focus shifts to growth and margin expansion for our MGA platform. We utilize a number of key growth and margin drivers, including expanded carrier relationships, producer network growth, digital platform enhancements, producer and coverage expansion, geographic market expansion, and cross-selling and revenue synergies. This is supported by streamlined shared services supported by tech-enabled infrastructure that enables underwriting discipline and accelerated speed to market. Looking ahead to our aspirational $80 million EBITDA goal for 2028 on Slide 24. This table represents our initial targeted aspirational goal we shared with investors earlier this year. We wanted to provide you with an update on our progress to date, including additional information supportive of our growth. On Slide 25, we provide additional information showcasing Octave's strong organic growth. 2025 year-to-date organic revenue growth for Octave Ventures stands at 47%. As we previously outlined, bottom-line EBITDA expansion has a development curve that follows top-line growth as MGAs reach breakeven and later critical scale. With the nine MGAs launched and completed in 2024 and 2025, Octave Ventures has significant potential built-in EBITDA growth and margin expansion, which we expect will push through into the 2026 to 2028 period. As it relates to another key EBITDA growth driver, on Slide 26, we provide a schedule of BEAT and other MGA call put dates. The most significant EBITDA buying opportunity will be driven by BEAT, where we will have the opportunity to buy in the remaining 40% over the next four years. Finally, on Slide 27, we provide an outline of key corporate expense reductions, as previously addressed by David. In summary, we remain confident in our ability to reach our aspirational 2028 goal of $80 million of EBITDA, understanding that the individual contributing components in reaching that goal may vary as we progress through our growth cycle. The next chapter of our journey is now in full flight, and I am very excited about the enormous progress we've made in a short amount of time. Thank you for your continued support. I am truly optimistic about the road ahead and the Octave chapter. With that, operator, please open the call for questions from analysts. Operator: Thank you. We will now be conducting a question and answer session. If you'd like to ask a question at this time, you may press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to withdraw your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Mark Hughes: Thank you. Our first question is from the line of Mark Hughes with Truist Securities. Please proceed with your question. Mark Hughes: Yeah. Thank you. Good morning. The organic growth of 40% in the distribution business is quite strong. Could you talk about the, I think you said in Q1, Q2, if you had incorporated the growth, it would have been in the teens, I think, low teens, upper teens. Obviously, nice acceleration in the third quarter. I wonder if you could talk about what contributed to that? And were there any, say, contingent or performance-based commissions that might be nonrecurring that contributed to that 40%? David Trick: Hi, Mark. It's David. Thanks for the question. No, I think it was really driven by just momentum in the business. There's no profit commissions or contingent commissions that are included in the revenue numbers for the calculation of organic growth. No impact from FX either. So it is a purely same-store sales type of calculation. And what we've seen is just continued momentum in the business. A number of the MGAs that we have started, particularly the ones that started up in '23 and '24, have started to really build momentum in terms of their business. So just a solid quarter with growth moving in line with our expectations for a number of the businesses as we had set those expectations when we launched them. Mark Hughes: Very good. And then the third-party capacity, I think you've highlighted the $1.5 billion in capacity for 2025. How is that shaping up if you've got 40% organic growth? That presumably suggests you're going to need some more capacity to back the distribution business. How should we think about that going into 2026? David Trick: Yeah. At this time, Mark, we believe we have sufficient capacity for the business. The $1.5 billion does not include the new business of ArmadaCare, which is coming online October 1. Just to point that out, it also does not include Everspan. So we believe we have sufficient capacity with interest from capital providers that well exceeded what our needs are for next year. So in the event that additional capacity were needed, we are very confident we would be able to get that capacity. Mark Hughes: Very good. And then when you think about capital allocation, I think you've made the point that of your expected M&A on the distribution side, you've achieved 80% of your target with ArmadaCare. When we think about the use of capital, the noncontrolling interest would be one. But what would be the priority, the pay down debt, buyback stock, additional M&A, perhaps above and beyond that target? How do we think about uses of capital? Claude LeBlanc: Look, I think, you know, we're obviously very focused on balancing these various interests or capital, but I would put them in the, you know, strategic launches as being a continued focus of ours as we are a very growth-focused business. We will look at the deployment of some capital potentially in M&A, although I don't believe there'll be any large M&As in the near future, given our focus on organic growth. We'll certainly continue to look at share buybacks. It's also a very important component, especially given where our current stock price or recent stock price has been. We're also going to continue investing in select M&A, data, and technology platforms as we continue to build out our infrastructure and support for our various businesses. Mark Hughes: Yeah. I did have one real specific question. The timeline of acquisitions of noncontrolling interest, the BEAT, the 10% per year, understand that. The MGA one is the one of the other, the single MGA that you're looking at a 2026 buy-in of that noncontrolling interest. How much capital roughly at this point is involved in that MGA 120% piece? Sorry. I know that's a little detailed, but just sort of curious about the magnitude of what your capital spending would be on that and then the associated EBITDA if you have some thoughts there. David Trick: Sure, Mark. So that is not a significant amount of capital. Today, it would be less than a double-digit capital commitment, and it is not something that we've determined whether or not we would call, and the management team hasn't decided whether they would put in. We would have a conversation with the management team and talk about what's the best path forward for the business and for them, so it would be done in a collaborative way, but not a significant financial commitment. Mark Hughes: Okay. That's helpful. Thank you. I had a couple more questions. I'll get back in the queue. Thank you. Operator: Thank you. As a reminder, to ask a question at this time, you may press star 1 from your telephone keypad. Mark Hughes: Our next question is a follow-up from the line of Mark Hughes, Truist Securities. Please proceed with your question. Mark Hughes: Yeah. Thank you. In Everspan, what should we think about the premium outlook there? You've had some adjustments that have focused on your more profitable programs. Is there kind of a run rate to think about going into 2026? David Trick: Yeah, Mark. I mean, if you look at the last couple of quarters in 2025, right, we've seen relatively controlled, modest growth on a sequential basis. So that is what I would expect to continue through the end of the year and into 2026. Sometimes, due to some seasonality depending on programs that come online and a number of other factors that are somewhat unique to the program business, you can get little jumps and bops and weeds, if you will. But generally speaking, we're looking to grow that top line at a relatively controlled pace. So I think the prior guidance we've given is around $400 million for this year. I'd say we'd probably be in the $370 million to $380 million or so this year, based on the current pace unless there's a little bit of a year-end burst from some of the underlying MGAs. And then next year, while we haven't put out full-year guidance, we would continue to expect some of that modest growth. So somewhere north of $400 million, you know, not looking to push the top line. Mark Hughes: And then interest expense, post your credit repair, what's the run rate on interest expense? David Trick: Probably about $7 million, but the full-year interest expense next year will probably run around what the average quarterly was for this year. So a significant drop in interest expense. Mark Hughes: Yeah. And then just to make sure I've got it straight, I think you talk about EBITDA margins, kind of the or EBITDA ratios, five to 7% relative to written premium. When you think about revenue to written premium, I wonder if you could, if you have any specific numbers there that you might share when thinking about that outlook? David Trick: Yeah. That's a little more challenging because it does really depend on the underlying business. And what I mean by that is there are a number of businesses that, I would say, average, let's say, 20% of premium production would be your revenue number. But there's also businesses that we, because of the nature of the contract, our commission income is reported on a net basis. So what you wind up having is some kind of adjustments to that ratio based on both seasonality and relative growth. So as the business that reports on a net grows, then that ratio of revenue to premiums placed would come down. But at the end of the day, the bottom line results shift dramatically. That's why we're focused more on the bottom line results relative to that premium as opposed to the nuances of the revenue recognition at the top line. Mark Hughes: Understood. Am I right to think that's largely UK versus the US? David Trick: That's primarily the difference. That's correct. Mark Hughes: Okay. Very good. Thank you. Appreciate it. Operator: Thank you. At this time, this will conclude today's question and answer session. It will also conclude today's conference. We thank you for your participation. You may now disconnect your lines. Have a wonderful day.
Operator: Ladies and gentlemen, thank you for standing by. Our call will begin shortly. Ladies and gentlemen, thank you for standing by, and welcome to Ceragon Networks Ltd.'s Third Quarter 2025 Earnings Call. Our presentation today will be followed by a question and answer session. On your telephone keypad. And wait for your name to be announced. I must advise you that this call is being recorded today. I would now like to hand over the call to our first speaker, Rob Fink, Head of Investor Relations. Rob, please go ahead. Rob Fink: Thank you, operator, and good morning, everyone. Hosting today's call is Doron Arazi, Ceragon Networks Ltd.'s Chief Executive Officer and Ronen Stein, Chief Financial Officer. Before we start, please note that today's discussion includes forward-looking statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and the safe harbor provisions of the Securities Litigation Reform Act of 1995. Ceragon Networks Ltd. intends forward-looking terminology such as may, plans, anticipates, believes, estimates, targets, expects, intends, potential, or the negative of such assurance or other comparable terminology, although not all forward-looking statements contain these identifying words. Forward-looking statements are based on expectations that are subject to certain risks and uncertainties, which could cause actual results to differ materially. These results and uncertainties include, but are not limited to, the company's ability to execute strategic plans, marketing, product strategies on the forecast of evolution, market developments, such as market and territory trends, future use cases, business concepts, technologies, future demand, and necessary inventory levels. The effect of the geopolitical situation in Israel and the related regional conflicts, the effects of global economic trends including rising inflation, rising interest rates, commodity prices, increases and fluctuations, commodity shortages, and the exposure to economic slowdown, risks associated with integration and deployment of acquired businesses, risks associated with delays in the transition of 5G technologies and the 5G rollout, risks relating to the concentration of Ceragon Networks Ltd.'s business on a limited number of large operators and the fact that the significant weight of their ordering is important compared to the overall ordering by other customers coupled with inconsistent order patterns that could negatively affect the company, risk resulting from volatility in revenues, and working capital needs, disagreements with tax authorities, tax positions that have been taken as a result of increased tax liabilities, the high volatility in the supply chain of our customers, which from time to time lead to delivery issues, and may lead to the company being unable to fill order commitments. And other risks, uncertainties, and other factors that could affect operations as further detailed in Ceragon Networks Ltd.'s most recent annual report on Form 20-F as published on 03/25/2025, as well as other documents that may subsequently be filed by Ceragon Networks Ltd. from time to time with the Securities and Exchange Commission. Forward-looking statements relate to the date initially made and they are not predictions of future events or results, there can be no assurance that they will provide accurate and Ceragon Networks Ltd. undertakes no obligations to update them. Ceragon Networks Ltd.'s public filings are available on the Securities and Exchange Commission's website at sec.gov, and may also be obtained from Ceragon Networks Ltd.'s website at ceragon.com. Also, today's call will include certain non-GAAP numbers. For a reconciliation between GAAP and non-GAAP results, please see the table attached to the press release that was issued earlier today, which is posted on the Investor Relations section of the company's website. With that, I'll now turn the call over to Doron. Doron, the floor is yours. Doron Arazi: Good morning, everyone. Ceragon Networks Ltd. delivered a solid third quarter reflecting the resilience of our operations, strengthening demand across key markets, and continued progress against our strategic roadmap. Visibility improved meaningfully during the quarter, with greater clarity around customer spending plans, and project timing. That visibility has continued to strengthen in recent weeks giving us confidence in our outlook for the remainder of this year and more importantly, optimism for growth in 2026. Revenue for the quarter was $85.5 million, above our expectations. Non-GAAP gross margin of 35% remained high and non-GAAP EPS was $0.02 but was negatively impacted by $0.02 foreign exchange fluctuation related to a project in India. Excluding this effect, EPS would have been approximately $0.04. Importantly, we generated free cash flow of $3.3 million further demonstrating the strength and resilience of our business model. From a technology and market perspective, we are increasingly benefiting from the same structural forces reshaping communications networks globally. The investment in AI is growing, from data centers to 5G infrastructure and this is driving the need for high capacity low latency connectivity. This demand is cascading outward from the core to the metro and ultimately to the wireless edge. Our addressable market continues to grow driven by two key challenges: our customers face. Network capacity and network resiliency. These two factors are being amplified by the growth of AI and increasingly data-intensive applications. Ceragon Networks Ltd.'s capabilities, especially our E-band and innovative point-to-multipoint offerings, provide tangible solutions to address these challenges, and in our opinion, creating incremental opportunities for us and giving us durable tailwinds for future growth. Our carrier customers need to add capacity. Especially as data traffic continues to grow and as they attempt to gain market share in the fixed wireless access market. AI is also playing a major role in this increased demand. Predominantly for enterprise connectivity. Ceragon Networks Ltd.'s advanced E-band solutions enable operators to replace or significantly augment legacy microwave deployments to increase capacity in an efficient and cost-effective way. As we noted in a recent press release, we recently completed three proof of concept E-band deployments. With T1 operators and a leading ISP using auto-aligning antennas and E-stabilizers demonstrating our ability to boost network capacity. Extend reach beyond standard E-band solutions, accelerate deployments, and lower total cost of ownership. At the same time, operators are placing greater emphasis on network resilience. Fiber alone cannot ensure continuity. Global operators are dealing with many fiber cuts and are looking for wireless transport to ensure flexibility and redundancy and to maximize network uptime. And finally, operators are also exploring ways to support more subscribers. This includes fixed wireless access in residential areas, and enterprise connectivity solutions requiring higher bandwidth. Some operators are conducting trials involving our 60 GHz technology, which provides fiber-like capacity over short distances with fast and economical deployment. Private networks face similar capacity and resiliency challenges. The use of AI industrial automation, and advanced video security applications all demand higher bandwidth and greater reliability. Ceragon Networks Ltd.'s 60 GHz point-to-multipoint addresses both requirements and is increasingly being used in smart city and enterprise environments. A notable example is the rollout of phase one of a large smart city project in Latin America which has the potential to generate approximately $7 to $8 million of recurring revenue over multiple years. Another example involves an industry-leading global e-commerce company in The US that is reevaluating its video security connectivity architecture. Its existing network is expensive, bandwidth-limited, and dependent on public infrastructure. That cannot meet its reliability and latency requirements. Ceragon Networks Ltd.'s 60 GHz solution offers a cost-efficient rapidly deployable and secure alternative that delivers fiber-like performance without the or expanse of fiber builds. We have already received an order for the initial deployment covering several dozen facilities and successful execution could pave the way for substantial expansion across hundreds of additional sites. Increasingly, our private network achievements are end-to-end solutions. Just recently, we were awarded as a prime contractor two projects in The US that involve deployments of private 5G and WiFi technologies to create comprehensive end-to-end solutions. On the managed services and digital twin front, yesterday, we announced a contract with a major Colombian mobile operator that showcases our ability to provide end-to-end managed services in multi-vendor environments. Using our network digital twin, for predictive maintenance. This win underscores Ceragon Networks Ltd.'s expanding capabilities in network reliability and integration and our pipeline includes additional opportunities that can potentially increase our managed services business meaningfully. In general, our new innovative products and services offerings, which are driven by the convergence of our core and recently acquired open for us many new opportunities beyond traditional backhaul. I am also proud of our ability to generate positive cash flow even under top-line pressure. This underscores the resilience of our model and operational discipline. Importantly, our balance sheet remains solid. Enabling us to the flexibility to pursue additional potential acquisitions. Supported by the continued confidence and long-term relationship with our bank consortium. Turning to a regional overview. North America again led our growth delivering record revenue and booking of orders in the quarter, including E2E. This was primarily driven by accelerating deployments of a major Tier one customer. Additionally, we see growing engagement across carriers ISPs, and private networks. In India, revenue was flat compared with Q2. Importantly, visibility has increased as order flow from a major carrier whose purchasing activity had previously been paused has resumed. We are optimistic that this renewed activity with this carrier will continue and potentially accelerate once their debt issue is resolved. We also see other opportunities that can potentially drive significantly higher revenue than current levels in 2026. For example, we are pursuing a sizable RFP from another major carrier in India and if successful, this could provide meaningful incremental revenue in 2026. Outside North America and India, results were generally stable and increased opportunities in EMEA and Latin America give us higher confidence for 2026 even if revenue and bookings were modestly softer for the quarter in some regions. In summary, the third quarter marked continued progress in executing our strategy with increasing opportunities in both CSPs and private networks segments. As near-term visibility has improved, we feel more confident about our $340 million revenue projection for 2025. With business volumes recovering and a mixed shift toward more active North American market we see continued opportunity for profitability expansion. Our financial discipline combined with ongoing investment in our strategic initiatives, positions us to translate future top-line growth into meaningful EPS improvement as we move into 2026. With that, I'll now turn the call over to our CFO, Ronen Stein, to review the financial results in greater detail. Ronen Stein: Thank you, Doron, and good morning, everyone. As Doron described, we delivered solid revenue in the third quarter. Particularly North America. We continue to translate incremental revenue into higher profitability and sustainable cash generation, demonstrating the earnings power of our business model. To help you understand the results, I will be referring primarily to non-GAAP financials. For more information regarding our use of non-GAAP financial measures, including reconciliations of these measures, we refer investors to today's press release. Let me now review the third quarter results. Revenue for the third quarter was $85.5 million, down 16.7% from $102.7 million in 2024. North America was the strongest region in terms of revenue and contributed $36 million including E2E. India contributed $24.4 million in Q3 2025 and was the second strongest region. We had two customers in the third quarter that contributed at least 10% of our revenue. Gross profit in the third quarter on a non-GAAP basis was $29.9 million which was down 15.1% from $35.2 million in Q3 2024. Our non-GAAP gross margin was 35%. Up slightly from the prior year period. The gross margin strength was mainly attributable to our success in North America. Moving on to operating expenses. I'd again note that we have consolidated E2E into our results since February 2025, impacting also total operating expenses. Research and development expenses in Q3 2025 on a non-GAAP basis were $6.8 million down from $8.6 million in Q3 2024. As a percentage of revenue, R&D expenses on a non-GAAP basis were 7.9% in the third quarter versus 8.4% in the prior year period. Sales and marketing expenses on a non-GAAP basis in the third quarter were $12 million up from $10.4 million in Q3 2024. As a percentage of revenue, sales and marketing expenses on a non-GAAP basis were 14.1% in the third quarter as compared to 10.1% in 2024, mainly due to our increased business in North America and our continuous strategic investments. General and administrative expenses on a non-GAAP basis for the third quarter were $5.8 million as compared to $400,000 in Q3 2024. Keep in mind, that our G&A last year included the impact of a $5.1 million benefit related to an initial collection from a $12 million debt settlement agreement reached with the South American customer for which we accounted a credit loss at the 2022. As a percentage of revenue, G&A expenses on a non-GAAP basis were 6.8% in Q3 2025, versus 0.4% in the year-ago period. Operating income on a non-GAAP basis for the third quarter was $5.3 million versus operating income of $15.8 million in Q3 2024. The decline in operating income year over year was impacted by the absence of the $5.1 million credit loss recovery benefit along with a reduction in gross profit as mentioned before. Financial and other expenses on a non-GAAP basis in the third quarter were $2.8 million compared to $1.2 million in the third quarter last year. As mentioned by Doron, the increase was negatively impacted mainly by a $1.5 million foreign exchange fluctuation related to a project in India. However, the quarterly average foreign exchange fluctuation impact in 2025 is currently lower than the 2024 average. Our tax expenses on a non-GAAP basis for the third quarter were $700,000. Non-GAAP net income for Q3 2025 was $1.7 million or $0.02 per diluted share versus non-GAAP net income of $141 million or $0.16 per diluted share in Q3 2024. Without the negative impact of the foreign exchange rate, Q3 2025 non-GAAP EPS would have been $0.02 higher or $0.04 per diluted share. Moving over to our balance sheet. Our cash position on 09/30/2025, was $43 million up from $35.3 million at the end of 2024. Short-term loans were $31 million at the end of the third quarter, compared to $25.2 million at the end of 2024. Thus, our net cash position was approximately net $12 million as opposed to $10.1 million on 12/31/2024, reflecting strong free cash flow in Q2 and Q3 partially offset by the acquisition of E2E. We believe we have cash and facilities that are sufficient for our operations and working capital needs. I'd note that we generated $3.3 million in free cash flow in the third quarter. This speaks to the progress we have made in our business model. Inventory at the end of the third quarter was $58.4 million down slightly from $59.7 million at the end of 2024. Continue to carefully monitor our inventory levels. Our trade receivables at the end of the third quarter were $111.9 million versus $149.6 million at the December 2024. Our DSO now stands at 112 days. Looking at our statement of cash flow, Net cash flow generated by operations and investing activities in Q3 2025 was $3.3 million. I'd like to now turn the call back over to Doron to provide a summary and review our outlook. Doron? Doron Arazi: Thanks, Ronen. I'm encouraged by the continued progress we are making strategically. The combination of our innovation and the capabilities gained through prior acquisitions has strengthened Ceragon Networks Ltd.'s competitive edge. Our solutions deliver high throughput and low latency that are crucial for today's AI-driven environment demand. Our strong financials enable continued cash generation, investments in R&D and sales and marketing, and funding strategic acquisitions. We are well-positioned for continued success. Turning now to our outlook. With improving visibility, we have greater confidence today in our ability to achieve our target of $340 million in full-year revenue for 2025. Importantly, our momentum is increasing and we are looking to 2026 with even greater optimism. With that, I'll now open the call for questions. Operator: Using your mobile or desktop application or press 9 on your telephone keypad and wait for your name to be announced. Our first question comes from Scott Searle from ROTH Capital. Scott, please go ahead. Scott Searle: Hey, good morning. Thanks for taking the questions. Good afternoon. Doron, maybe to just start initially on the, the for the fourth quarter. You're maintaining the $340 million guidance and implies basically flat to sequentially down, but it sounds like the tone of business is improving on that front. I wonder if you could give us some expanded thoughts in terms of what you're seeing sequentially and what are the drivers. Is it still tier ones in North American private networks? Are you seeing India come back to drive that? And maybe as well, give us a quick preview of your thoughts as we enter 2026. Does 2026 look like a year where we should be getting back to growth given a lot of the drivers and vectors you're talking about? Doron Arazi: Thanks, Scott. I will start with the first question. So we usually don't give a specific guidance for a specific quarter, and this is why we basically gave the guidance the way we gave it. But I would say it very clearly. I'm very optimistic about Q4 on a standalone basis. Main drivers as we mentioned, are the, strengthening so to speak, visibility from India and from North America. This is for the very near term. In terms of 2026, we are very much encouraged by the, funnel of opportunities that we're able to build during the last six to nine months. And we see that all across regions, and that drives our optimism about our ability to grow in 2026. Many of the so to speak, use cases I found in to, mention. My prepared comments are actually indicating of a relatively new businesses that Ceragon Networks Ltd. has not experienced in the past. And, obviously, this drives the optimism. People may question, obviously, okay, is India going to be a major factor in your growth? Yes or no? The answer to that would be we think that we can grow in India relative to the current annual run rate but, we definitely build on growth in all other regions. Scott Searle: Very, very helpful. And if I could just to follow-up a clarification on North America. And the immediate outlook and early read on '26. It was up I believe it's about 30% sequentially in the September. Is that a comfortable and sustainable level? And then in your prepared remarks, you're talking a lot about AI, which is not something I've heard you refer to in the past. So obviously, it's been a derivative driver in terms of capacity utilization, and data traffic in general. But are you seeing direct links then to vendors, data centers, and otherwise that are actually driving your direct business, or these indirect drivers? Thank you. Doron Arazi: Okay. So, so first, in terms of North America, indeed, we mentioned an acceleration in the, deployment, coming from a tier one operator as the major driver for the increased visibility. Would that particular T1 operator continue with the same pace? We're not that sure. But, still, our optimism about the growth in 2026 is not just built on this operator. As we mentioned a few times in the past, we are seeing a stronger engagement with other T1 operators in North America and also with ISPs and private networks, And this funnel of opportunities assuming it will turn into bookings and revenue in the pace we believe it can will contribute to growth in '26 in North America as well. Now regarding the AI, look, we've been doing a lot of thorough analysis of the markets. As part of, obviously, looking on our strategy, and trying to, to align it with the, some trends that we are seeing in the markets. What we do see is that, first of all, at enterprise level, and also in areas of security more imminent. the usage of AI is becoming And more relevant, such as video analysis and automation, This is one example. And eventually, that immediately requires by by far, much more capacity with the ability to keep the level of latency at the minimal requirements. Just to give you an example, this opportunity that we started actually executing on, in Latin America They showed us how they use automation. Based on video analysis to create some, so to speak, command controls to give automatic commands to certain functions in the city. So it's their It's happening. We see that more in private networks slash enterprise business, And eventually, it runs much higher, capacity needs and, obviously, latency. Scott Searle: Thanks so much. I'll get back in the queue. Operator: Our next question is from Ryan Boyer Koontz from Needham. Ryan, please go ahead. Ryan Boyer Koontz: Great. Thanks. Can you hear me now? Operator: Yes. Thank you. Ryan Boyer Koontz: Super. I wanted to ask about your tier one ramp up here in North America. Nice to see that. What do you think are their main drivers here? Is this mostly capacity upgrades from legacy microwave? Is it new coverage footprint for mobile? Is it fixed wireless? Any clues as to what's driving the strong uptick there? From your big customer? Doron Arazi: If I need to answer a very short answer to your question, it's all of the above. What we are seeing is a constant demand for higher capacity that is either driven by the continued increasing capacity needs as part of 5G, this particular operator is also very successful in getting more and more subscription on a fixed wireless access. And eventually, that creates a bigger load in terms of capacity. And they are leveraging their very strong position in the market to cover some additional areas where it makes sense to them economically to build more coverage, either a part of their plans or as part of commitments that they have to the FCC. Ryan Boyer Koontz: Right. Makes sense. Are you hearing any concerns in that regard about coverage of them using, you know, satellite, direct to device type technologies, to meet some of those FCC requirements? Doron Arazi: I think that in terms of satellite or, to be more specific, LEO, our discussions with operators are just giving us I would say, the understanding that this is another technology that helps giving a better service to the customers wherever they are. If they are in the very rural areas, And, obviously, it's another augmenting technology that they use. In most cases, they are partnering. They are partnering. With the satellite companies and they don't see that as a necessary direct competition. And it is the same for our technology. The wireless technology, the more traditional, so to speak, wireless technology, has its place and its advantages. And before, I would say that LEO is just another technology to make the world more connected and, I would say, even evenly digitized. Ryan Boyer Koontz: Makes sense. Great. And maybe just one more if I could about know, what's going on with end to end, maybe an update there. Are you, you know, pleased with, kind of commercial activity on private networks? And what your outlook is as you look ahead into the next into '26? Doron Arazi: Yeah. So first of all, end to end is meeting the plans that we took into account as part of 2025 plans. And I would even they're saying that it if not for the administration strikes in The US, we would probably be ahead of our plan in terms of booking. There's a lot of traction. There's a lot of sizable opportunities on the plate, Some of them are, subject to some government approvals And due to the strike, the strikes, it has been delayed. So all in all, we are very satisfied with the progress of, E2E. And I would even they're saying that we have started seeing the synergies by bringing this knowledge into the company where in a way that we have some opportunities. In other regions that we would probably not seriously participate if not for the knowledge that is being brought, with the acquisition of E2E. Ryan Boyer Koontz: Got it. Great. And maybe just want to wrap up. Any comments on supply chain as it relates to availability of parts and costs and any new concerns that we've heard other hardware vendors about, DRAM costs, ratcheting up pre significantly, but, any impact on your on your business? Doron Arazi: So generally speaking, we have seen in certain areas a slight increase in components costs. The model and the strategy of, Ceragon Networks Ltd. in this respect is, I would say, a constant pressure and cost reduction efforts whether it's tactical talking with the vendors and trying to find a better commercial terms on whether it's more strategic by finding second sources and replacing certain components by other components that are cheaper. Generally speaking, we don't see this as a significant or significantly impacting our bond cost in general. But we monitor that very closely. Esther Esther to re component scarcity, I don't think there's any particular issue at this point that I can describe as a trend or epidemic but a hardware company, there's always every now and then, some shortages in components that I call them tactical, and this is part of the business. So at this point, I don't see any major concern. In this regard. Ryan Boyer Koontz: Alright. Great. That's all I got. Appreciate that. Operator: Our next question is from Christian David Schwab from Craig Hallum. Christian, please go ahead. Christian David Schwab: Hi, Christian. Can you hear us? Yeah. Hey. Good morning. There are sorry about the unmute button I missed. I just have one one quick, you know, question. I know you don't provide specific guidance, but I'm just trying to bracket you know, what growth and optimism for '26 means. Should we broadly think about that as mid single digit growth or do you see an opportunity for top line growth? I'm just trying to gauge the expansion of visibility India coming back, and and and what that could potentially mean to to top line estimates for '26. Any directional clarity as broad as you could give would be great. Doron Arazi: Yeah. So so, look, obviously, we are now in the midst of the annual operational planning for 2026. And we are are not done yet. It's it's difficult for me to give you something that is very concrete. At this point. I must tell you that we see many scenarios And, obviously, we'll eventually have to pick the the one that we believe that is the most probable scenario. At this point, just to be prudent, I would probably plan for mid single digit. I hope that we'll come with something that is better once we have finalized our AOP. Christian David Schwab: Fantastic. Thank you for that color. No other questions. Thank you. Operator: Thank you. Our next question comes from Theodore Rudd O’Neill from Hills Research. Theodore, please go ahead. Theodore Rudd O’Neill: Oh, thanks very much. Doron, in your prepared remarks, you talked about the E-band validation. And I'm wondering what's the expectation following that validation step? Doron Arazi: So I would say that with most of the cases that we have already done proof of concept, And, actually, we had another few of them that I didn't mention on the call. We are now in the process of finalizing the terms the commercial terms and the demand, and I hope to start seeing, orders either in this quarter or next quarter. So I'm quite optimistic about seeing more revenues coming out of these new products in 2026. Theodore Rudd O’Neill: Okay. And in your prepared remarks, you also talked about network resilience where microwave takes out the risk of fiber being cut. Are there specific places or customers that are that are looking for that as a solution? Doron Arazi: Yeah. So that's very interesting because I don't know opportunity to visit, some of our customers, personally. Obviously, Maya Maya salespeople and region heads did the same. And we see that as a basically global phenomena. We see that coming as a as an an issue in North America. We see that coming as an issue in Asia Pac. And also in other regions. So I think that eventually it's not something that is very particular to a specific region. I would say that a solution which is basically building redundancy using wireless is one of the viable solutions that these operators are pursuing. There could be other solutions. The best thing or the the I would say the the reason why wireless transport solution is being looked at a very very intensely is, because it's relatively cheap, and it's relatively reliable, And it gives an immediate solution for fiber cuts. Theodore Rudd O’Neill: Okay. And my last question, One of your competitors cited a possible 5% impact on their business if the US government shutdown continues. Well, it looks like it might pick up it might go away, but it might come back in January, is there a similar number that you're exposed to if the US government is shut down again? Doron Arazi: Look. Up until now, For us. of the US government shutdown was not that significant. As I kind of hinted to in in my in in some of my comments, it it has actually impacted predominantly in areas of private network. This point, I don't see a very significant impact on Ceragon Networks Ltd. if that continues for longer term, but we are obviously following very closely on the the development in this respect. Theodore Rudd O’Neill: Okay. Thank you very much. Doron Arazi: Thank you. Operator: Ask a question, please raise your hand using your mobile or desktop application or press 9 on your telephone keypad and wait for your name to be announced. Gunther Kargan: Our next question is from Gunther Kargan. Gunther, please go ahead, Gunther. Gunther, please unmute. Gunther Kargan: Can I be heard now? Yes. Oh, great. Thank you. Doron, is there any, comment available regarding defense, military, security type type business that's applicable to Ceragon Networks Ltd. worldwide? Doron Arazi: Yeah. Look. Generally speaking, we see quite many opportunities around defense and security. Security is, excellent one of the areas where we put a lot of focus because we have this 60 gigahertz point to multipoint product that is very strong for for security use cases, predominantly video. But we're also working on opportunities that are for defense communication networks. Gunther Kargan: Yep. Is this comment applicable, to regions or globally? Doron Arazi: Look. When I'm trying to kind of scan in my head the the funnel of opportunities, I don't think that there is a particular region where I see much higher concentration. So generally speaking, it's it's all over the place. In terms of security, I would dare say that in some of the countries in Latin America, now that, they want to improve their level of, security maybe the list of opportunities is slightly longer. opportunities across the globe. But generally speaking, we see this kind of Gunther Kargan: Thank you. Doron Arazi: Sure. Thank you. Operator: There are no further questions. Doron Arazi: Okay. Thank you, everyone, and have a good day.
Fredrik Ruden: Welcome, everyone, to EG7's Third Quarter Earnings Release. My name is Fredrik Rüdén. I'm Deputy CEO and CFO. With me in this call, I have my colleague and the company's CEO, Ji Ham. We will start with the presentation and then end with a Q&A session. I hand it over to you, Ji. Ji Ham: Thanks, Fredrik. Thank you for all joining us. Let's go to the first slide. For Q3, net revenue came at SEK 355 million with adjusted EBITDA coming in at SEK 63 million, representing 18% margin. Year-over-year net revenue declined by 24%. Without the adverse FX effect, year-over-year decline was lower at 16%. Currency movement has been exaggerating the decline throughout this year, unfortunately, because of the significant volatility with the exchange rate over the last 12 months. Next slide, please. Some notable business unit updates here, starting with Big Blue Bubble. Our results came in below expectations, a tough quarter for them. Net revenue declined by 27% in local currency and 34% in SEK. Reasons for the decline was primarily driven by anniversary content for this year performing worse than last year. Active player base declined with lower user engagement and acquisition for the quarter with the anniversary content underperforming. Core in-game KPIs continue to remain steady and healthy. However, the underperformance appears to be limited to the user acquisition funnel. The team is actively working to improve user acquisition to return to prior higher levels. As for Daybreak, net revenue declined by 7% in local currency and 15% in SEK. For accounting and reporting, net revenue shows a decline, but sales actually demonstrated growth. We track another KPI called gross revenue in local currency, which actually increased year-over-year. Gross revenue is before platform fees and excluding revenue deferral accounting. So it is more of a cash basis number for sales, but that number at the top line demonstrated growth for the quarter. And the main growth drivers for the period for Daybreak included Palia, Lord of the Rings Online, Dungeons & Dragons Online and DC Universe Online, all of which are performing nicely with revenue increases and strong profitability. Titles that are performing softer than expected, include EverQuest and EverQuest II. Down from the big anniversary year in 2024, our EverQuest turned 25 and EverQuest II turned 20 years old. Also, EverQuest was negatively impacted by The Hero's Journey and unauthorized title that was out for a number of months, which for now has been successfully closed down. So that's no longer an issue, but nonetheless, it did impact EverQuest negatively throughout the year until it's closing down. Magic: The Gathering Online cardsets this year have been generally underperforming contributing to low results there. Overall, on a consolidated basis, Daybreak is demonstrating growth in the top line gross revenue level, which we are happy with. Piranha also delivered a solid quarter. Net revenue grew by 112% in local currency and 93% in SEK. MechWarrior 5: Mercenaries' DLC 7 performed better than we expected. It's on trend to be the best-performing DLC out of the 7, a nice outcome for a DLC for a 6-year-old title. Next up now is DLC 2 for Clans in December. Overall, Piranha is performing at a steady and profitable level, and we expect them to continue at that level for the foreseeable future. Next slide, please. Now on the product front, a couple of updates starting with Palia. Palia was one of the main highlights for Q3. Fall seasonal content release went out with a nice success. Animal Husbandry feature, which is a major system and feature for the title shipped with the update and reach peak engagement levels along with that update seen back in May along the console release, which was nice. Game is trending well with improvements across all the core KPIs. MAU increased by 77% when comparing September number to April, right before console release. Monthly average revenue per user also increased 141% and payer conversion rate increasing 99%. We're quite happy with the performance to date, excited for its long-term future. We believe it has a real shot at becoming one of the leading cozy life-sim games in the industry with the key differentiation being it's the only large multiplayer online game that's serviced as a live service title in the cozy life-sim games genre. We expect it to continue to be performing nicely going forward. Now for Cold Iron, we have decided to delay this title. New target release window now is Q3 2026. Our team has made good progress, but requires more time to finalize content as well as to achieve higher quality. Ultimately, decision here is to prioritize quality and invest the additional time and resources accordingly. Additional investment is expected to be approximately $7.7 million in total. Daybreak plans to invest $6.5 million of this, and Cold Iron shareholders co-investing $1.2 million. We continue to remain bullish in the project potential and expect returns in excess of our minimum target returns. Next slide, please. Fredrik, over to you. Fredrik Ruden: Thank you, Ji. Next slide, please. Third quarter was compared with last year relatively quiet and with a few smaller content releases, generating a net revenue of SEK 355 million, representing 16% FX-neutral decline. The lower net revenue is mainly explained by 35% negative FX movements. One successful title release in Q3 last year from Fireshine generating SEK 54 million. Big Blue Bubble turning down, as Ji mentioned. Strong anniversary campaign in EverQuest in Q3 last year, including a fairly strong revenue recognition rollover effect from Q2 2024. Adjusted EBITDA was SEK 63 million, which gave an 18% adjusted EBITDA margin. LTM net revenue was SEK 1.702 billion with the LTM adjusted EBITDA margin at 18%, which is in line with the historic average. Next slide, please. As earlier pointed out, we have a foundation of more predictable revenues and cash flows. More predictable revenue comes from the live service and back catalog titles. Net revenue from this portfolio was SEK 311 million in the quarter, corresponding to 88% of net revenue for the group in the quarter. Of the last 12 months, net revenue amounted to SEK 1.702 billion, of which SEK 1.258 billion derived from the more predictable revenue base. LTM more predictable net revenue has varied less than plus/minus 2% in the past 5 quarters. Following that stability, the portion of revenue -- that portion of revenue has been stable at 70% to 74%. Next slide, please. Daybreak is the largest contributor to the net revenue generating SEK 180 million. This corresponds to a decline from Q3 last year. The decline is attributable to challenging comparable figures following the successful anniversary campaign in EverQuest last year and SEK 18 million in unfavorable currency movements. And as Ji already pointed out, the underlying gross revenue or total bookings, what the customer actually bought from us has increased Q3 to Q3. But we do recognize net revenue over the period when the customer is using what is acquired from us, which means that we now and then have this rollover effects between quarters. The adjusted EBITDA came in at SEK 35 million corresponding to a 19% EBITDA margin. Big Blue Bubble delivered net revenue of SEK 55 million corresponding to a 34% decline. Currency fluctuations negatively impacted net revenue by SEK 6 million, and adjusted EBITDA amounted to SEK 25 million, representing a 45.6% margin. And Big Blue Bubble had lower-than-expected new customer intake. We are evaluating various mitigating actions to increase that KPI going forward. Next slide, please. Fireshine had, as expected, a fairly quiet third quarter, specifically compared to the third quarter last year when the company successfully published 1 digital title generating SEK 53 million. And net revenue in Fireshine was SEK 59 million in the quarter, and adjusted EBITDA was SEK 1 million. Petrol has been stable following the reach out to new business areas and cost optimization from the beginning of the year. Petrol generated SEK 30 million with a 5% adjusted EBITDA margin. Next slide, please. Piranha delivered a net revenue of SEK 30 million with an adjusted EBITDA of SEK 10 million, corresponds to 33% margin. The cost savings measures executed in the beginning of the year together with the successful launch of the seventh DLC for MechWarrior Mercenaries are the 2 major contributors to the strong performance. The seventh DLC, is, as Ji mentioned, one of the -- is becoming one of the best-selling DLCs for Mercenaries. Next slide, please. Our financial situation remained solid. We invested SEK 91 million, of which SEK 51 million in Palia and Cold Iron, and that is what we could define as new growth initiatives going forward. The level of investments in the more predictable revenue base remained low. Operational cash flow increased to SEK 51 million. This figure was negatively impacted by a nonrecurring payment of SEK 8 million. So if we would adjust for that operational cash would have been similar to SEK 60 million. And by end of the quarter, we had a net cash position and SEK 396 million in cash. We also successfully signed a new revolving credit facility of SEK 100 million, which is unutilized by end of the quarter. I hand it back to you, Ji. Ji Ham: Thanks, Fredrik. All right. Let's go to the summary slide. Next one, please. Okay. So in summary, Q3 was a down quarter with some hits and misses for us. Palia is performing well, and we're looking forward to its continued growth. Cold Iron game delay is a disappointment. It was not -- it's not going to be contributing to our 2025 performance, but we expect that it's going to provide a nice boost for 2026. We believe providing with additional time is the right decision to maximize returns for the project. On the industry front, the market still remains challenging for small to medium-sized publishers, and we intend to continue to operate cautiously because of that. We will be patient and highly selective in deploying capital to maintain solid balance sheet during this time. So that concludes our earnings presentation, and now we will transition to Q&A. Fredrik Ruden: Thank you, Ji. So the first question I have here is from [ Elia Ivano ]. What are the key reasons to delay the game to Q3 2026 and to increase the investment with another USD 6.5 million? To what extent is this driven by expanded scope, licensor requirements or earlier planning assumptions? Ji Ham: Yes. I think that's a great question. I would say it's a combination of several things. Ultimately, the content development for a video game, whether it's this game or many other games that are out there takes time. And in order to achieve quality initial estimate versus actual execution could differ, right? So in this case, some of that has happened where there's good progress being made throughout the development across the board. But at the same time, in order to finalize, get those features and content to finalization at the quality level that we see for commercial success is what's going to be requiring additional time for. So we estimate that, that requires us to be able to push this game out to third quarter 2026. And the investment that we're making is [Technical Difficulty] Fredrik Ruden: I think we lost Ji there. So I will go to next question. It's a question from [ Kara Dake and ] Hjalmar from Redeye. What is the total investment so far in Cold Iron? And how can the investment goes down in Q3? I'll try to answer this. So the first decision that we had was to invest USD 23.1 million. In first quarter this year, we decided to increase that with another USD 6.5 million. So in total, $29.6 million before the press release yesterday. And that was all settled in October. So from there and on, we will start to invest on this new decision. So adding another $6.5 million to that, the total investment is planned to be $36.1 million. And it's booked in U.S. dollar and it's revalued to SEK in the balance sheet in the group because our presentation currency is Swedish krona. And that's why it looks like it has gone down, but the U.S. dollar amount remains. So the question is, is Ji back in the call now? Ji Ham: Yes, I'm here. Fredrik Ruden: Yes. All right. I think we lost you there for a second. So here is another question also from Elia Ivano. Is Cold Iron USD 1.2 million co-investment new equity from its shareholders or reinvested profits from EG7? Ji Ham: Yes. That's investment from the shareholders. It's not from EG7. Fredrik Ruden: The commercial terms for which have been adopted in accordance, how have the commercial terms and recoup structure changed as a result of the increased budget? And how does this affect the allocation of risk and return between the parties? Ji Ham: Yes. I think from the beginning, the deal structure was meant to provide risk or lower risk and capital preservation priority for the publisher. So investment that Daybreak is making has priority over investment that Cold Iron shareholders have made. So this additional investment that's going in would be also recoupable at the top of the waterfall after the license fees. And then thereafter is when any profit split would happen. So from a risk allocation perspective, we're going to maintain the same structure that we've utilized to date, where Daybreak has protection over capital that's junior to it from the shareholders of Cold Iron. Fredrik Ruden: Here's a question from Hjalmar on Redeye. Big Blue Bubble, how should the soft player intake in My Singing Monsters be seen? Is there a risk of faster revenue decline going forward? Ji Ham: Yes. I would say it's too early to say. The lower user acquisition number was a surprise given that the game has been performing quite steadily over the last 18 months. So over the last quarter, there was a bigger drop than we expected. That doesn't seem normal in terms of what the trends look like. So we are investigating that as to what caused that lower vision at the top of the funnel with platforms like YouTube, TikTok and Instagram. So along with that investigation and evaluation, we are devising coming up with ideas and strategies of trying to show that back up to the prior levels. Subject to how those perform, we would be able to know more as to whether this means a new trend line versus a temporary blip where we could recover back to prior levels that we've seen over a prolonged period last year. Fredrik Ruden: Another question from Hjalmar. What was behind the strong profitability in Daybreak? Is it sustainable going forward? And I assume that this question came also from the lower profitability that we had in Q2 from Daybreak in conjunction to the release of Palia. Ji Ham: Yes. So there's a number of titles that are performing well. So Palia is at the top of the list, given that acquisition happened last summer and along with the console release and continuing addition of new compelling content. We expect that, that will continue to build in terms of population and revenues and, et cetera. So the third quarter was a good one, and we expect Q4 to be a nice quarter for the title. And 2026, we're very excited for Palia with additional content and big features that we're planning for. Additionally, some of our titles, including Lord of the Rings Online, Dungeons & Dragons Online and DC Universe Online are all performing quite well. Revenue engagement from players and the overall conversion for monetization, for those 3 titles, the teams have done an excellent job with great additional content this year with new server also improving customer experience with new server updates that help with the overall experience. That also was a nice contributor to their better performance. And DC Universe Online, metrics are up across the board in terms of all the core KPIs, and we expect that momentum to continue for the near term. So those 3 titles are doing really well. There are softer spots, as we mentioned. EverQuest, EverQuest II comparison not great compared to 2024 when it was big anniversary for both titles. And The Hero's Journey for EverQuest, was a distraction for the title, which resulted in a lower performance for EverQuest in particular this year, but we expect those titles to stabilize and turn the corner as we go into 2026. Magic: The Gathering Online, highly dependent on how magic, the gathering, the IP and their cardset content cadence, et cetera. This year, a little softer than what we expected. But nonetheless, a highly dedicated player base that continue to come and enjoy the title, highly profitable. So we're happy with that. And lastly, PlanetSide 2. We didn't mention it, but that title has continued to decline after we sold the IP a few years back. And we're continuing to support that. But the numbers have become less significant for the overall portfolio. But when you look at the overall Daybreak portfolio, we remain quite optimistic for 2026 with a number of titles that are doing well and that we expect that momentum to carry into 2026 and stability as well as potential growth there as well. Fredrik Ruden: A question on Palia. What will drive Palia's growth going forward, content and/or monetization? Ji Ham: I think it's both. So we have a pretty compelling content road map that we have communicated where we are doing monthly updates, smaller updates, but we have 3 larger quarterly seasonal updates and 1 big annual update. So those updates will bring new systems and features to continue to take the game towards 1.0. And along with that, we expect to improve core metrics that are really important for us to be able to grow a lot of the engagement and retention metrics and the monetization on top of that. So user acquisition, being able to bring in more players, this game has a great organic word of mouth user acquisition that's been very successful. On top of that, there's plans to be able to invest in user acquisition spend as well as we shore up the retention metrics even further from their level now, which has improved quite significantly from last year. But as we continue to make progress there, increasing user acquisition and being able to grow the player base, we have about 9 million registered users live to date. When you look at what we consider to be competitive titles or our aspirational titles, games like Stardew Valley and Animal Crossing and [ The Sims ] from [ EA. ] You're looking at population for each game in excess of like Stardew Valley over 30 million, Animal Crossing, which has sold over 47 million, and you have The Sims, which had over 70 million registered users as of a couple of years back. So we do think that genre and the market is quite deep and with only 9 million players so far that have come to play and enjoy Palia, we expect that there's significant more depth for us to continue to grow this game over the next number of years. Fredrik Ruden: I have a combination of a few different questions here. How confident are you in the Q3 release window? What is the risk of additional capital requirements for the Cold Iron game from here? And then is Q3 next year really an attractive release window, given that GTA will come out in November, and there is some discussions about Call of Duty to be moved to Q3 next year? Ji Ham: Yes. Based on everything that we know, with a lot of the detailed planning that went into arriving at the new schedule, we have a high confidence today. So that's the reason why we were able to provide a narrower window for the target rather than saying second half or 2026, we're able to guide towards that Q3. As for potential impact from GTA VI, the title has now been delayed a couple of times. Now, I guess, the spec or they've announced that November is when they would -- I expect to release the title. It's really hard to say and hard to plan or release around a GTA VI release date. Although I would say Q3, depending on what part of Q3, GTA VI is coming out in November, it does give us enough buffer to be able to get the game out initially successfully. And this is a premium title that meant to be a live service title. And as a premium title, we expect a significant portion of our revenues to come in the first 2, 3 months upon release. We do think Q3 still makes sense there. Now as to whether other big AAA titles would move out of the way with GTA VI being pushed into November, that may or may not happen. It's speculation at this point. But if it does happen and if there is a Call of Duty that's moving into Q3, then we would need to adjust accordingly at that time as we find out more. But for now, based on information that we know, we do believe that Q3 would be a great time for this game to come out. Fredrik Ruden: Then I think we'll take the last question from Hjalmar at Redeye. What is holding back M&A? Is it price of potential targets, a risk profile of the targets? Can you give some more details? Ji Ham: Yes. We are quite actively looking at opportunities. And I think at this point, we passed on a lot of opportunities. And as I think everyone knows, the market has seen quite a lot of distress over the last couple of years. And this year is less. But nonetheless, there's still a lot of headlines about studios shutting down, the last of which is NetEase just shut down 3 or 4 of their studios over the last 2 months. So there's more special situation opportunities that are out in the marketplace. We are looking at a lot of them. But at the end of the day, we're being very cautious. We are trying to find situations similar to Singularity 6, where there isn't a significant capital outlay upfront and that based on what we're able to contribute based on our expertise that we're able to create and underwrite and upside scenario that we have real confidence in. So along with the criteria that we're putting on, and then we're being quite strict about it, we passed on most of them. But at the same time, there's still some pipeline of transactions that we're evaluating now. And we're hoping over the next 12 months that we would be able to close on some additional transactions similar to Singularity 6. But at the same time, it is opportunistic. And based on whether we're able to ultimately find the right fit is what will dictate whether we're able to close on some of these transactions. We're not -- I would say pricing is probably not one of the things that are driving us away from transactions. I think pricing for transactions are quite reasonable in this marketplace. So we're active and we hope to be able to transact. But once again, we're being cautious and highly selective. Fredrik Ruden: And with that answer, we would like to conclude the Q&A session. And if you have any further questions, sorry if it's something that we haven't answered, just reach out to us, and we will reply to that in accordance. And with that, we would like to thank you for listening in today, and have a good day. Ji Ham: Great. Thank you, everyone.
Operator: Hello, and welcome to the RealReal Q3 Earnings Call. [Operator Instructions] Also as a reminder, this conference is being recorded. If you have any objections, please disconnect at this time. With that, I would like to turn the call over to Caitlin Howe, Senior Vice President of Finance. Caitlin Howe: Thank you, operator. Joining me today to discuss our results for the period ended September 30, 2025, are Chief Executive Officer and President, Rati Levesque; and Chief Financial Officer, Ajay Gopal. Before we begin, I would like to remind you that during today's call, we will make forward-looking statements, which involve known and unknown risks and uncertainties. Our actual results may differ materially from those suggested in such statements. You can find more information about these risks, uncertainties and other factors that could affect our operating results in the company's most recent Form 10-K and subsequent quarterly reports on Form 10-Q. Today's presentation will also include certain non-GAAP financial measures, both historical and forward-looking. We have provided reconciliations for historical non-GAAP financial measures to the most comparable GAAP measures in our earnings press release, which is available on our Investor Relations website. I would now like to turn the call over to Rati Levesque, Chief Executive Officer of the RealReal. Rati Levesque: Thank you, Caitlin. Good afternoon, everyone, and welcome to the RealReal's Third Quarter Earnings Conference Call. Our strong third quarter results and our full year outlook for GMV of over $2 billion are a testament to our long-term strategy, which has solidified our position as the market leader in luxury resale. We are changing the way people shop, making resale a primary option. 58% of shoppers prefer the secondary market outright and 47% of shoppers now consider resale value before buying something new. Resale is no longer reacting to the fashion industry but driving it. In fact, Vogue use search on the RealReal as a key metric for brand heat in their coverage of the new Creative Director debuts during the fall fashion shows. Our proprietary data allows us to identify and respond to what buyers want ahead of cycles. Insights from our recent resale report, which analyzes shopping and consignment behaviors across our community of over 40 million members include the following: Fine jewelry has been our fastest-growing category. First-time watch buyers increased 46% with heritage brands leading the way. Customers are turning to us for major life milestones, evidenced by search volume up 247% for wedding dresses. In handbags, shoppers are embracing the lived-in look with searches for fair condition handbags up 32%. And finally, rising acceptance of luxury resale is fueling the adoption of secondhand and holiday gifting. Turning to Q3 results. We delivered accelerating growth and expanded margins. We set a new record on quarterly GMV with third quarter GMV of $520 million, up 20% versus Q3 of last year. And we delivered adjusted EBITDA of $9.3 million or 5.4% of total revenue, up 380 basis points year-over-year. Let's discuss how our 3 strategic pillars, growth playbook, operational efficiency and obsess over service are fueling these strong results. Diving into the growth playbook, our sales team is unlocking high-quality supply through data and deep consignor relationships. Q3 2025 was the first full quarter with our new compensation plan rolled out to the entire sales team. The plan's design focuses on value over unit volume. In addition, tools like smart sales are enabling our sales team to unlock supply using AI and data. Productivity increased with supply value per existing luxury manager up 12% year-over-year. Sales team tenure reached an all-time high in Q3 with more than half of the sales team in place for over 2 years. And we added top talent to the ranks of our sales team, laying the foundation for deeper relationships with our sellers. With a total addressable market of over $200 billion of untapped supply in U.S. closets, we see a long runway ahead to drive top line growth. Through sales, real partners, our affiliate program, Real Friends, which is our referral program and the continued expansion of drop ship, we will continue to unlock supply in the coming years. Turning to marketing. Our efforts are focused on scaling our active consignor base and reinforcing our brand authority. In Q3, we grew new and repeat consignors double digits year-over-year. Trailing 12-month active buyers increased to reach an all-time high of over 1 million. And new buyer LTV is trending higher with average order value and 12-month lifetime value expanding. From a strategic perspective, we're focused on attracting flywheelers or customers who participate in both sides of our marketplace. These flywheelers are 2 to 3x more valuable and transact with us more frequently, accelerating the network effects of our platform. Looking forward to 2026, we are seeing green shoots in our marketing efforts. Our focus is on pursuing an AI-fueled smart engine to increase our LTV. Our smart prospecting engine aims to enhance targeting of new consignors. Building on our success in social, we are developing a 360-degree presence that combines organic and paid social media to propel brand relevance and digital performance. Early test results are positive. Our retail stores and high-value events work in concert with our marketing and sales team, generating desirable supply and new consignors. In fact, 25% of new consignors come from our stores. Consignors can interact with our in-store experts, gemologists, virologists and handbag experts who provide specialized valuations that build trust with prospective sellers. We are seeing success with introducing high-value experiential events in our retail stores. Q3 set new records. Newport Beach and Tysons Corner unlocked $2.6 million of supply over just a couple of days. We currently have 18 brick-and-mortar locations, and we plan to add 1 to 3 stores per year, giving us a 10-year runway of growth from new stores. Moving to our next strategic pillar, driving operational efficiencies. Athena, our proprietary AI-enabled product intake process is delivering efficiency and reducing costs while improving speed and accuracy. As of the end of Q3, the Athena intake process touched 27% of all items, and we are on track for 30% to 40% by year-end. Our future vision is to achieve full listing automation and reduce our processing time from 14 days to our goal of 7 days. In the next phase of Athena, we plan to expand into mid- and high-value items with the opportunity to save millions of dollars while delivering superior service and speed for our sellers. Turning to our third strategic pillar. Obsessing over service is the secret sauce that reinforces our deep customer loyalty. In Q3, our customer trust metric increased 8 points year-over-year. The customer is evolving rapidly, and we are listening. When I think about our strategic vision, I think of this as an adviser to our customers, a real partnership built on trust, transparency and personalized communication. By helping our customer manage the luxury assets in their closet, this partnership is not just transactional, but is defined by a deep understanding of our customers' financial motivations, fashion sense and individual style. We look to accompany them on their journey through the primary and secondary market. Last quarter, we introduced the concept of My Closet through Reconsign, which allows our consignors to resell items they've purchased on the RealReal in one click. Looking to the future, My Closet is creating additional customer tools to help catalog closet inventory, enhance access to product insights and provide personalized advising. We see flywheel behavior becoming the norm as our service moves past simply buying and selling, offering ways to optimize and manage the content of the fashion portfolio. In closing, Q3 was a strong quarter. Our performance across all key metrics and the trends we are seeing in the business gives us confidence to raise our full year guidance. As I reflect in the last year, 4 quarters of progress since I stepped into the CEO role, I am incredibly proud of the RealReal team and the significant transformation we've achieved. We believe we have proven that our growth playbook works. Our model is scalable and the superior service drives our powerful flywheel. I want to thank the entire RealReal team for their unwavering commitment to our customers and for executing with excellence this quarter. I couldn't be more excited about where the RealReal is headed. We've built a strong foundation. We're seeing great momentum, and I believe the best is yet to come. I will now turn the call over to Ajay for a more detailed review of our financial performance. Ajay Gopal: Thank you, Rati. Good afternoon, everyone. I am pleased to review our financial results for the third quarter, which highlight a period of decisive acceleration and strong execution against our strategic priorities. We delivered robust top line growth with GMV increasing 20% and revenue up 17% year-over-year. Our approach to unlocking supply and driving efficiency is paying off with adjusted EBITDA of $9.3 million or 5.4% of total revenue, expanding 380 basis points and free cash flow of $14 million for the quarter. Now turning to our detailed third quarter results, beginning with the top line. Q3 GMV of $520 million increased 20% compared to last year. Growth was driven roughly evenly by unit volume and higher average selling prices. Q3 revenue of $174 million increased 17% with consignment revenue up 15% year-over-year. Direct revenue increased 47% compared to Q3 of 2024 and represented 13% of total revenue in the quarter. Average order value of $584 increased 12% versus last year. Q3 take rate of 37.9% declined 70 basis points year-over-year due to a mix into higher-value items and categories. Our active buyer base accelerated sequentially. On a trailing 12-month basis, it increased 7% year-over-year to more than 1 million active buyers, marking a new all-time high. Continuing with our third quarter results. Third quarter gross profit of $129 million increased 16% year-over-year. Gross margin was 74.3% in Q3, which was consistent with Q2 of this year and down 60 basis points compared to the prior year period due to a higher mix of direct revenue this year. In the third quarter, consignment gross margin was 89.3%, an improvement of 70 basis points year-over-year and direct gross margin was 20.9%, an increase of 370 basis points versus prior year. Third quarter operating expenses of $136 million leveraged 620 basis points year-over-year as a percent of revenue. Excluding stock-based compensation, operating expenses leveraged by 470 basis points, driven by our focus on operating efficiencies, continued gains from AI and automation and leverage on fixed costs. Third quarter adjusted EBITDA of $9.3 million or 5.4% of total revenue increased $7 million versus prior year. Adjusted EBITDA margins increased 380 basis points year-over-year. We ended the quarter with $123 million in cash, cash equivalents and restricted cash. Our operating cash flow in the third quarter was $19 million, a $10 million improvement year-over-year. Free cash flow was $14 million in the third quarter, a $12 million improvement year-over-year, demonstrating our business model's favorable cash dynamics as we grow. As a reminder, we reduced our debt by $6 million through the strategic debt exchange transaction we announced in August. Since the beginning of 2024, we have reduced our total indebtedness by over $86 million while extending our debt maturity profile, reinforcing our commitment to delevering and strengthening our balance sheet. Capital expenditures on property, plant and equipment for the third quarter were $6 million, and we continue to anticipate full year CapEx, PP&E, to remain within 2% to 3% of total revenue. Turning to our P&L outlook for the fourth quarter and full year. We sustained healthy supply trends throughout the third quarter and into the fourth and are raising our outlook for 2025. Fourth quarter GMV is expected in the range of $585 million to $595 million, which represents 17% growth compared to the prior year period at the midpoint of our guidance range. Fourth quarter revenue is expected in the range of $188 million to $191 million. This reflects 16% growth compared to last year at the midpoint of our guidance range. Fourth quarter adjusted EBITDA is expected to be between $17.5 million and $18.5 million, approximately 9.5% of total revenue and over 275 basis points of margin expansion year-over-year at the midpoint of our range. Moving to our outlook for the full year. We now expect full year GMV in the range of $2.10 billion to $2.11 billion, up 15% at the midpoint of our guidance range. We expect revenue in the range of $687 million to $690 million, up 15% at the midpoint of our guidance. And we now expect adjusted EBITDA in the range of $37.7 million to $38.7 million with an adjusted EBITDA margin of 5.5%, reflecting 400 basis points of improvement versus 2024. In closing, we believe our third quarter performance provides compelling evidence that our growth playbook is working to unlock high-quality supply. And our progress on AI initiatives and automation is driving strong unit economics. The momentum we are building is clear. As the premier authority in luxury resale, we believe we are poised for sustained profitable growth and consistent cash flow generation. Thank you to the entire RealReal team for your dedication and for driving strong third quarter results. With that, I will now turn the call back over to the operator for Q&A. Operator? Operator: [Operator Instructions] Our first question will come from Ike Boruchow with Wells Fargo. Irwin Boruchow: Can you hear me? Rati Levesque: Yes, we can hear you, Ike. Irwin Boruchow: Great. I have one question and one follow-up. I guess, a solid quarter. I guess I'm more impressed by the 4Q GMV growth guide, pretty impressive growth rates you're guiding to. Maybe just could you speak to the confidence you have in that plan? And maybe what are you seeing quarter-to-date that helps inform your targets? Rati Levesque: Yes. Thank you for the question. As far as our Q4 guide and the confidence in the business, a couple of different things. We're seeing 17%. I think we guided to about 17% in the midrange on growth rates. As you know, we're a supply-focused business. And we're seeing our growth playbook work. We're seeing sales, marketing, retail really coming together. The compensation structure that we launched in Q3 is now accelerated to our entire sales organization. Smart sales is driving conversion. Our team is really focused on relationships that art and science coming together. And then we're seeing some early signs of the referral and affiliate programs. Early results are good as we test our way into that. The AI smart scoring and prospecting to drive new sellers, we're seeing double-digit new seller growth there. I talked a little bit about my -- the high-value pop-up events in my prepared remarks, that's strengthening our relationship with sellers. So as the market leader is definitely seeing great momentum. The market is shifting. It's great to see more attention to resale as we change the way people shop. Irwin Boruchow: Great. And then just one more question about the growth rates you guys have put up this year are pretty phenomenal. You have to lap that, which is a good problem to have. Are there any guardrails you can maybe put around next year? I mean, not looking for anything specific, but how should we think about your algo, maybe flow-through rates Ajay, as you typically will give us? Just some guardrails on how to think about next year and how you plan to lap these robust results. Ajay Gopal: Yes. Thanks for the question. We're really pleased with the results we're seeing right now. Q3 was up 20%. We're guiding to 17% for Q4 at the midpoint. You've heard us talk about how we see a growth rate in between high single digits to low double digits as being the right balance, the optimal balance between growing our top line and expanding our EBITDA margins. We continue to think that is the right range for us in the medium term. That said, I would say, given the momentum we are experiencing today, we think that in the short term, so let's say, first half of 2026, we're probably indexing closer to the high end of that range, so closer to low double-digit growth rates. Operator: Your next question will come from Robert Brooks with Northland Securities. Robert Brooks: Looking back at my notes, I believe you guys began to expand the drop shipping initiatives last quarter in fine jewelry. So I was curious to hear how that went and maybe looking forward, what are sort of the next milestones to be watching for as drop shipping is further tested and validated before a more full-scale rollout? Rati Levesque: Bobby, thanks for the question. On drop ship, this year was really about testing and learning. I've mentioned that in the past and building the capabilities, starting with watches, handbags and more recently, jewelry. At the end of the day, it's really one tactic to bring on incremental supply. I also see it as a way to onboard international partners in the future. So we do think after testing, learning, kind of tweaking the models, we think it can be a meaningful contribution, but I'd say in the medium term. Robert Brooks: Got it. That's helpful. And then maybe just stepping back to the revenue growth. It was great this quarter. And as I said earlier, it's been great this year. And I just wanted to get a sense of like, obviously, you guys are a supply-constrained business, but -- and how much of this supply -- how much of the revenue growth maybe is product, is your ability to process the supply you have coming in quicker and therefore, getting those items on the site quicker versus how much of it is just overall more supply coming through the door? Rati Levesque: Yes. So thanks, Bobby. I mean it's really around how much supply is coming through the door. That's really where we're focused. So that's why we talk about the growth playbook. And again, that's sales, marketing, retail coming together. We're also seeing some success in social and seeing some green shoots there and kind of strengthening that relationship with the seller. So really focused on the supply side of things. And at the end of the day, the cool thing is, like I mentioned, 58% of shoppers prefer or now prefer the secondary market. And then we're seeing it in the consignor growth numbers, now double-digit consignor growth numbers. So seeing that strong willingness to spend because of the trust we built and because of the strategic moats that we've built along the way. Robert Brooks: Got it. And then just last question for me is just a year in the seat, you mentioned it in the prepared remarks, Rati. I was just curious if you could speak to the lessons maybe learned so far or stuff that maybe has exceeded expectations. Just curious to get kind of a high-level thought there. Rati Levesque: Yes, sure. Definitely been an exciting year, and we're definitely seeing the market shift. Like I said, it's great to see more attention to resale. But I think 1 year ago, we laid out our foundation for our 3 strategic pillars: profitable growth, operational efficiencies and obsessing over service. And so we're really seeing that work. I'm proud of the progress that we're making, right? The 20% growth, the EBITDA margin at 5% now and expanding. I'd say trust is up 8 points year-over-year and are active, both sellers and buyers are accelerating. We also, less than a year ago, now talked about Athena and launched Athena. And now by the end of the year, it's going to be about 30% to 40% of our inventory. So really, at the end of the day, continuing to become the trusted advisers to our sellers, enriching that data for the seller experience and closing $2 billion in GMV in our history. So building that strong foundation, seeing the momentum. And we really do believe the best is yet to come. Operator: Our next question will come from Ashley Owens with KeyBanc. Ashley Owens: Congrats as well. So maybe broadly, just to start, I want to ask about the competitive dynamics. I know you've provided some good metrics around your flywheel and acquisition. Just curious with secondary and retail becoming a bigger choice among consumers, how are you seeing the competitive environment evolve, particularly around new entrants, supply acquisition and then pricing? And then additionally, have you observed any change in competitive or discounting intensity from peers? Rati Levesque: Yes. Thanks, Ashley, for the question. A couple of different things. First, again, the market shift has been great to see. All attention to resale is helpful. The $200 billion TAM is great, and we're able to capitalize on it because we are the market leader. And then really focused on our moat and our strategic moats at the end of the day around expertise, data, our sales team, all the insights that we have, the diverse product offering is really important. And that's how we built trust, right, with our community of now over 40 million members. The sales piece, relationships to unlock supply driven by insights that, again, art and science, the infrastructure and data we built to process one of one items, single SKU items is hard to replicate. And at this point, 14, 15 years ahead of the curve. So resale is no longer reacting to the fashion industry, but driving it. And I think at the end of the day, we're able to capitalize that being the leaders here. Ashley Owens: Okay. Got it. And then just a follow-up. So for the fourth quarter EBITDA, could you just help us unpack what's embedded in the bridge, particularly within G&A and other OpEx buckets and what dynamics do you expect to carry through 4Q? I know ops and techs have been leveraging at a really strong rate for the past several quarters and accelerated with some of the further automation initiatives you've been working on. So just any color there would be helpful. Ajay Gopal: Ashley, thanks for the question. Yes. So on Q4, as it relates to EBITDA, I would say we expect a continuation of our focus on operating efficiencies. You've seen this translate into strong operating expense leverage in Q3. We leveraged -- we saw leverage in our operations and tech line of 370 basis points as well as on SG&A of 150 basis points. Going forward, ops and tech will continue to be where we see most OpEx leverage coming from, and this is where we bring the power of our AI-driven initiatives like Athena to bear on improving margins. We will also continue to see similar levels in SG&A. We're investing in helping our sales team be more efficient. You heard Rati talk about how the value of supply increased by 12% for existing luxury manager. We think trends like that will continue as we build on these investments and will be a source of leverage for us going forward as well. Operator: Our next question will come from Marvin Fong with BTIG. Marvin Fong: Can you hear me? Rati Levesque: Yes. Marvin Fong: Sorry about that. Congratulations on the strong results. Maybe I could start, you mentioned half the benefit in AOV coming from units as well as the other half from ASP. So I think that's 6 and 6 and both improved versus last quarter. So just maybe a finer point on each of those. With ASP, I think there was a mix benefit there. Was there anything beneficial coming from the tariff side that you call out as well? And then on the units, would just kind of love to unpack what you think is kind of driving that other than just the fact that it looks like buyers are enjoying the site, but anything you're doing there to drive that or category-wise that people might be purchasing more of and adding to their baskets? Ajay Gopal: Thanks, Marvin. I'll take this question. We're seeing a healthy balance in how our growth is split into price and unit volume. If you unpack our growth rate in Q3 of 20%, we see a pretty even split. So roughly half of it came from growth in ASP and half of it came from growth in volume. Going deeper into ASP, this is largely driven by the things we've been focused on. And a few that I would highlight. You heard us talk about our new sales compensation plan. That plan rewards our luxury managers for bringing in value over volume, and we're seeing that translate into our mix shifting into higher-value items. The other thing that's helping on the ASP side is our pricing algorithm. So our AI-driven pricing algorithm has been in place for a while, but we've been steadily expanding coverage and expanding it to cover more and more items. And every time we do that, we see how the model, given its precision, is able to capture incremental price on behalf of our sellers. The last thing I would point to on that aspect is just how our investments in authentication and building customer trust have allowed us to capitalize on the growing interest in fine jewelry. We've been able to bring in more supply, and we've been able to move that supply very effectively, which gives us -- which obviously changes the mix of our business into higher-priced items. At the end of the day, trends are going to come and go. The beauty of our marketplace is just how quickly we can respond to them and capitalize on the way consumer preferences are shifting. Marvin Fong: That's great. And my follow-up question, direct revenue, very strong growth, north of 46% growth about. Could you just kind of unpack that a little bit in this environment? Is the get paid now product gaining a lot of traction? Or was it mostly out of policy or vendor contracts? Or was it all kind of across the board? Ajay Gopal: Yes. Thanks for that question. Direct revenues were up 47% year-on-year. But as we've indicated in the past, we expect this to be between 10% to 15% of our total revenues, and it came in at 13%. So right in that range of where we expect it to be. The outsized growth is really explained by what happened last year as we comp a quarter last year where it was a much smaller proportion of our business. So going forward, we would expect this to stay within that range. We feel really good about that revenue stream. To your point on what's behind it. Gross margins have expanded nicely. They were up 370 basis points at 21% in Q3. So we feel good about what's moving through that channel and our ability to drive strong profitable growth through that channel. Operator: Your next question will come from Matt Koranda with ROTH Capital Partners. Matt Koranda: So it sounds like the luxury managers are getting more efficient at procuring supply, and it sounds like maybe the incentive changes were a big part of helping them with that. Maybe just wanted to hear about the next unlocks ahead for helping the sales team procure more supply as we head into '26. And should we think about that as sort of the main channel of supply growth into '26? Or are there other levers to pull on the retailer marketing side? Rati Levesque: Yes, sure. Matt, thanks for the question. I want to be really clear, the growth playbook, we're a supply-focused business, like I said, but the growth playbook and the unlock in supply wasn't just sales, right? It was sales, marketing and retail coming together, deepening and strengthening our relationship with sellers. The compensation structure was one tactic. We've also really been focused on flywheelers in marketing, and they're 2 to 3x more valuable for us, and that's starting to work. We're getting early days, but I talked a little bit about the referral and affiliate programs. And there's much supply to unlock there, that sales and marketing working together. AI smart scoring and prospecting to bring on new sellers, again, really early days there, and we're testing our way into that, but seeing some green shoots, success in social, our influencer campaigns. I talked about these high-value events again, and we're seeing just over -- these events are 2 to 3 days and bringing in sometimes $1 million -- over $1 million over just a couple of days. So it's another way to kind of, like I said, strengthen our relationship with sellers. So that, along with resale becoming more mainstream or the market shifting and the great momentum that we're seeing around, like I mentioned before, 58% of shoppers prefer the secondary market out right now and almost 50% look to resale pricing before they even buy in the primary market. So all of this gives us a lot of confidence go forward. Matt Koranda: Okay. Very helpful, Rati. And then curious on Athena. I just wondering if you're willing to quantify any of the cost savings that flowed through. I would assume most of the cost savings are flowing through O&T in the third quarter. And then maybe just what's built into the fourth quarter outlook in terms of cost savings on the O&T line? Ajay Gopal: Matt, thanks for the question. You're right, Athena is a key driver behind the efficiencies that we're seeing in operations and tech. We got about 370 basis points of leverage on that line. And most of that is coming from efficiencies in our operations center. When we think about Athena, at the end of Q3, it was processing about 27% of the items. And we started with introducing the model to primarily lower-value items. We are going to continue to expand on that number. We expect to end the year with Athena touching 30% to 40% of total items. And as it scales and also as we expand it towards touching mid-value and high-value items, we see it as continuing to be a source of productivity for us going forward. We think that Athena can save us a couple of dollars per item as we continue rolling it out. And it will take time, but it's a source of leverage going forward. Operator: Your next question will come from Anna Glaessgen with B. Riley Securities. Anna Glaessgen: Really nice to see the GMV growth notably ahead of the longer-term range you gave of high single digit to low double digit. Just curious if you could maybe share some perspective on the degree to which this is being driven by wider consumer acceptance of resale and overall market growth versus relative share gains with the concept. Rati Levesque: Yes. So thanks, Anna, for the question. When we look at piece a part our growth rate, we can map it all of it back to our growth playbook. So this is, like I said, sales, marketing and retail and some of the tactics that we're working through there. So that's a nice shift. And of course, we have some of the tailwinds around the market shift, right, around shoppers preferring the secondary market. So we do feel like it's both things there. And then as we obsess over service and our growth playbook and really up-leveling the experience for the consumer, listening to what they need, really thinking about how to create less friction in the experience, making sure that we're being very transparent on pricing and building that trust with the consumer, that's -- we're also seeing that directly tie back to our GMV growth as far as more value coming out of each consignor. Anna Glaessgen: Got it. And one follow-up on the events or the high-value events you talked about. Maybe you could share what inning are we in, in rolling this out to the fleet and maybe how many do you think could be supported per store? Just anything there. Rati Levesque: Yes. So these high-value events, they're a nice way to test the market as well. We're seeing 1/4 of our new sellers coming from our retail strategy. And of course, they build the Halo Trust seeing much more high value come in through there. Really early there as far as how many events that we're having right now, and we kind of are testing our way into that as well this year. But given the progress that we're seeing and the results there, we'll kind of launch that every month to every major market. And this is a low-cost kind of way for us to bring in incremental supply. Operator: Your next question will come from Jay Sole with UBS. Jay Sole: Can you hear me okay? Ajay Gopal: Yes. Jay Sole: Great. I want to follow up on your comments about the operations and technology line. I know you touched on this before, but can you just talk about what the right rate of growth just in terms of total dollars are for that line? Because it's been pretty steady 6% growth now for about a year. Is that the right way to think about growth in this line going forward? Ajay Gopal: Yes. Thanks for the question. It has been a pretty consistent source of leverage for us, right? In Q2, we got about 310 basis points of leverage. In Q3, 370 basis points of leverage. The bulk of that is coming from the efficiencies we're driving in the ops center. I think we've got a long runway of opportunities there. Athena is just touching 27% of our items as we continue to scale it, it will continue to be a source of leverage for us. I would say when you -- when I go back to the comment we made earlier on focusing the business on getting to 15% to 20% adjusted EBITDA in the medium term, our ops and tech line is going to be a pretty major contributor to that margin expansion. Jay Sole: I guess maybe if I ask it a different way, like what drives growth in that line? I mean, because the dollars went up sequentially this quarter. I guess based on the guidance for fourth quarter, the dollars go up sequentially again. What -- where are the -- are you investing there? Like can you just tell us about what drives dollar growth in that line? Ajay Gopal: Yes. Yes. Well, thanks for that clarification. So about 2/3 of that line is tied to our operations. And really, that is driven by unit volume. So while we get more efficient on a per unit basis at processing items as the business grows, you would expect to see an absolute increase in the dollars going through that particular line. Jay Sole: Understood. And I guess just remind us at this point, Athena can touch what percentage of the assortment of things sold once you scale it to where you envision it to be? Ajay Gopal: I don't know if we put an upper limit on it as we think about it. Today, it's touching 27% of the items. We think we will exit the year at 30% to 40%. Theoretically, there's no reason why it couldn't touch all the items as we continue to get better at running it through our models. Rati Levesque: And then at the end of the day, Jay, we're on track for taking outright multiple dollars in cost per unit in the medium term, and that's really where we're focused. Jay Sole: Understood. And then I guess, can you just update us based on the guidance again for 4Q, it looks like the cash flow for 4Q will be pretty solid. What are your plans for cash uses in the balance sheet going forward? Ajay Gopal: Yes. Thanks for the question. We are a very cash-efficient business. Unlike a traditional retailer, we don't trap any of our cash purchasing inventory in ahead of the season. The primary use of our cash really goes into investments that we make in our fulfillment centers. So it's automation tech or it's implementing technology like Athena, where we can get efficiencies out of it. Q3 was a strong cash performance quarter for us. We generated $19 million in operating cash flows and $14 million in free cash flow. We expect Q4 to be stronger just like you saw last year, and it really showcases how our business model has positive working capital benefits when we grow. Operator: Your next question will come from Mark Altschwager with Baird. Mark Altschwager: I wanted to follow up on marketing. It looks like it was a bigger investment this quarter. I was hoping you could just give us more color on what you're seeing there in terms of efficiencies and then just how we should think about marketing as a percentage of sales, both in Q4 and the medium term. Rati Levesque: Yes. Mark, I'll start with that question there. Yes, definitely made a little bit more of an investment in marketing to drive some of the growth numbers. It's a key lever for us in our growth playbook, drives new sellers, obviously, brand affinity. You are seeing a couple of onetime costs in that number for Q3. But at the end of the day, if we see investment opportunities, we take them. We do have a high confidence in the ROI of our spend, and we're seeing validation of that, obviously, in Q3 and in our Q4 guide, but we make sure to always balance growth and profitability. Mark Altschwager: Excellent. And just separately, any color you can share on customer behavior by age cohort? Rati Levesque: We have not shared customer cohort by age. We are seeing strong willingness to spend, like I said, built by the trust that we've built over the last 15 years, seeing more fine jewelry watches, handbags, more higher value come through. We are seeing this newer cohort has a higher LTV. We do see -- we tend to skew younger, more millennials and Gen Z over half of our customer demographic. And the other way that we cut the data, and I think I've shared this in the past, is looking at our higher-value consignors because we're supply constrained. We're always looking at the supply and the seller side of things, seeing more value come in from our higher value and mid-value consignors. So those tiers on the higher end of our loyalty program. And then obviously, like I mentioned, focused on the flywheeler, which is 2 to 3x more valuable for us. Ajay Gopal: And maybe one thing I would add there. As a platform, I think one of the compelling things about the RealReal is how we have cross-generational appeal. We have customers, younger customers that are entering sort of the earning years of their life, and they look at us as an excellent platform for acquiring items. And then that relationship continues to grow and evolve as they age. Operator: That concludes the Q&A session and the call. Thank you for joining. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. I am Jota, your Chorus Call operator. Welcome, and thank you for joining the Bank of Cyprus conference call to present and discuss the 9 months 2025 financial results. [Operator Instructions] The conference is being recorded. At this time, I would like to turn the conference over to Mr. Panicos Nicolaou, Chief Executive Officer. Mr. Nicolaou, you may now proceed. Panicos Nicolaou: Good morning, everyone. Thank you for joining our financial results conference call for the 9 months ended 30 September 2025. I am joined by Eliza Livadiotou, Executive Director of Finance; and Annita Pavlou, Manager, Strategy, IR and ESG. After my introductory remarks, Eliza will go into more detail on our financial performance, and then we will be very happy to take your questions both during this conference call and afterwards. I would like to start by briefly reminding you of our powerful equity story and our core strengths on Slide #3. We are a leading player in a highly liquid and concentrated banking sector in Cyprus, and we operate in a supportive macroeconomic environment that is resilient and growing. We have a diversified business model with services extending beyond banking, allowing us to navigate successfully the current interest rate cycle while investing in new growth initiatives and leveraging key strengths that are under our control. Our strong capital position and organic generation allow us to deliver attractive dividend distributions and overall shareholder returns. We confirm our intention to distribute 70% of 2025 earnings. And in October, we paid out first interim dividend in the past 15 years of EUR 0.20 per share. All in all, we remain confident that we can achieve a high teens ROTE on 15% CET1 ratio in a circa 2% normalized interest rate environment. Slides 4 and 5 show an overview of the macroeconomic environment. We operate in a strong, diversified, mainly service-based economy that is growing faster than Europe. The economy expanded by 3.6% in Q2 of 2025. According to the latest projections from the Ministry of Finance, Cyprus GDP is expected to grow by 3.2% in real terms in 2025, exceeding the average growth rate of the Eurozone. Inflation is contained, the economy is operating at almost full capacity in terms of employment, and we continue to see strong results of tourists, which is set to exceed the 2024 record levels, both in terms of arrivals and revenue. Cyprus stands on solid fiscal ground underpinned by significantly improved public debt to GDP which at 62% is well below the euro area average and is expected to drop further to below 60% by the end of this year. Slide #6 shows the snapshot of the performance in Q3. Turning to our financial performance this quarter. Our net interest income of EUR 180 million remained resilient, thanks to hedging and strong volume growth, which cushioned the impact from lower interest rates. Our cost-to-income ratio at 35% demonstrates good cost efficiency, while our cost of risk at 33 basis points reflects strong asset quality. All in all, our profitability remained flat with the prior quarter at EUR 118 million. Moving now to Slide 7 and the key drivers of shareholder value creation. We maintain a strong ROTE of over 18% on a high capital base with a CET1 ratio exceeding 20% and a low balance sheet risk, delivering another 111 basis points of organic capital generation in the quarter on a pre-distribution level. Our tangible book value per share of EUR 5.86 grew by 6% year-on-year after paying EUR 0.68 cash terms dividend per share during 2025. Looking at Slide 8, you can see that our 9 months performance is tracking ahead of the targets we have set in February. We are upgrading today our 2025 ROTE target to high teens from mid-teens, driven mainly by higher net interest income. Our ROTE target based on 15% CET1 ratio is expected to exceed 30%. Looking beyond this year, we look forward to updating you on our new financial targets and strategy during the first quarter of next year. Let's now turn to Slide 9 and our distribution track record. In October, we paid an interim dividend of EUR 0.20 per ordinary share, which corresponded to circa 40% payout ratio out of first half 2025 earnings. For 2025, we are reaffirming our distribution target for 70% payout ratio, which is at the top end of our policy, implying a high single-digit yield based on current share prices. I will now hand over to Eliza, who will run you through our first half results in more detail. Eliza Livadiotou: Thank you, Panicos, and good morning from me, too. Let's turn to Slide 10 and a summary of our key highlights in the first 9 months of the year. This includes healthy volume growth with new lending of EUR 2.2 billion and performing loan book growing at 6% since December 2024, a strong return on tangible equity of 18.4%, supported by resilient revenue and low cost-to-income ratio of 35% further improvement in asset quality with the NPE ratio reaching 1.2% and cost of risk at 35 basis points. In September 2025, we successfully refinanced our EUR 300 million subordinated Tier 2 notes at a significantly lower coupon rate and strong capital ratios of over 20%, driven by strong capital generation, including a distribution accrual at 70% payout ratio. Moving on to Slide 12. We have a simple balance sheet characterized by high liquidity with our deposit base twice the size of our loan portfolio. Our balance sheet has grown by 5% since the beginning of the year, mainly as a result of higher customer deposits, while our strong liquidity is gradually being deployed to our loan and fixed income portfolios. Slide 13 shows the net interest income headwinds moderating. Our NII for the third quarter displayed a modest decline of 1% Q-on-Q being supported by hedging and volume growth, mitigating the impact of lower rates and the related repricing of loans. Our cost of wholesale funding is expected to decrease in the coming quarters following the refinance of our Tier 2 notes at 4.25% coupon versus the previous coupon of 6.625%. With rates expected to remain unchanged into year-end, we expect to close the year with net interest income of around EUR 720 million, underpinned by hedging activity, strong volume growth and positive deposit trends. We'll come back to you with more precise guidance for 2026 in the first quarter of next year, but I want to observe that should rates stay at the 2% level, we should expect most of the negative headwinds to now be behind us. Moving on now to our hedging activity on Slide 14. I want to remind you of our significant hedging efforts undertaken over the last couple of years that have reduced our NII sensitivity to 100 basis points parallel shift in interest rates by EUR 58 million since December 2022. We have added around EUR 600 million of hedging in the third quarter, adding to a total of EUR 10.9 billion or 43% of our interest-earning assets. These hedging actions include the received fixed interest rate swaps and further investment in fixed rate bonds. The hedging was carried out on an average yield of 2.7%, meaning that hedging is already a net revenue contributor. We will continue to manage our balance sheet dynamically and carry out hedging appropriate to the interest rate outlook evolution. On Slide 15, you can see that our deposit base of EUR 21.5 billion continues to grow, up 3% on the prior quarter and up 7% on the prior year. And the breakdown of our deposit base on the bottom left chart shows that more than 80% of our deposits are from Cypriot residents. We have seen deposit costs declining from the peak in 2024 and now stand at 27 basis points for the third quarter, whilst the share of term deposits remains broadly unchanged on the prior quarter at 31%. The well-managed deposit cost reflects mainly the very liquid Cypriot banking sector as well as our strong franchise and market position. Let's now turn to Slide 16 and new lending. We are encouraged by the growth of our performing loan book. During the first 9 months of the year, we granted new loans of EUR 2.2 billion, up 31% on an annual basis. We're pleased to see our loan book growing by 6% since December '24, reflecting 4% broad-based domestic loan growth and the careful buildup of our international book to EUR 1.2 billion, on track to achieve the EUR 1.5 billion medium term target. Growth in Cyprus was broad-based being at 5% for the corporate and MSME book and 3% in retail. For this year, we expect to exceed our original 4% loan growth target, supported by the buildup in international lending. Of course, maintaining high credit quality is a key priority. We will continue to ensure prudent underwriting standards, and we will not sacrifice the quality of our loan book for growth. As a reminder, 99% of new exposures written since 2016 remain performing. Slide 17 shows our progress on the fixed income portfolio. As at 30th September, our fixed income book stood at EUR 4.9 billion, representing 18% of the group's total assets, achieving our 2025 target. The majority of the portfolio is measured at amortized cost and is held to maturity. Hence, no mark-to-market impact is recognized in the income payment or equity. The portfolio comprises of high-quality assets with average maturity of 3 to 4 years and is highly diversified. We aim to grow the fixed income portfolio further in the years to come so that it comes to represent around 20% of our total assets in the medium term, subject to market conditions. Slide 18 provides a summary of noninterest income. Our noninterest income in the third quarter benefited by an ad hoc insurance reimbursement of EUR 8 million. Excluding this, our noninterest income decreased by 4% on the prior year, reflecting mainly the net cost of around EUR 3.5 million for the repurchase of Tier 2 notes in September, partially offset by higher valuation gains on financial instruments. Overall, noninterest income remains an important contributor to group profitability and covers 77% of Q3 operating expenses. Our insurance businesses are a valuable and recurring revenue stream for the group as presented on Slide 19. In summary, our net insurance results amounts to EUR 36 million for the first 9 months, increasing 4% on an annual basis despite the negative impact from the July 25 wildfire in Limassol of around EUR 3 million in the nonlife insurance business. The yearly increase is supported by the acquisition of Ethniki Insurance Cyprus Limited and increased premiums in the Life business, which helped to offset the impact from these higher claims. Overall, net insurance results contributed 17% of total non-NII and the insurance business remained highly profitable, contributing 11% of the group's total profitability. To update you on our recent acquisition of Ethniki, note that the legal merger with our existing insurance companies is expected to be completed around year-end. Slide 22 provides an overview of operating expenses. Our cost-to-income ratio of 35% in the first 9 months was higher than last year, reflecting the impact of falling net interest income. Staff costs were up 5% on a yearly basis due to the step-up adjustment, which typically take place in the first quarter of the year, including salary increments and cost of living adjustments. On the other hand, other operating expenses remained broadly flat year-on-year. In July, the contribution to the deposit guarantee fund increased from 0.8% to 1.25% of covered deposits. This is paid semiannually and hence led to a charge of EUR 5.5 million in Q3. For 2025, we expect our cost-to-income ratio, excluding special levies and other contributions to remain below 40%, benefiting mainly from the stronger net interest income. Turning now to Slide 23 and cost of risk. Our underlying credit quality is strong. Cost of risk was at 35 basis points for the 9 months of '25. Our expectation for the full year is for cost of risk to remain below 40 basis points, demonstrating the continued strong underlying performance of the loan portfolio. Additionally, we incurred impairments of EUR 3 million in the third quarter relating mainly to revenue stock of properties, largely due to the aging of the stock. We also recognized provisions of EUR 3 million for pending litigation, reflecting the progress of these cases. Let's now move to Slide 25 and capital. The bank's capital position remains strong. We continue to build organic capital generating over 100 basis points this quarter, totaling 326 basis points year-to-date, well ahead of our full year '25 target of around 300 basis points. As at 30th September, our CET1 ratio and total capital ratio were at 20.5% and 25.4%, respectively. Let me remind you that the capital ratios are after a distribution accrual at 70% payout at the top end of our distribution policy and hence, the interim dividend at 40% does not affect our capital ratios. Finally, the acquisition of Ethniki Insurance Cyprus had a small negative impact of 15 basis points. Moving now to Slide 26 and asset quality. As at 30th September, the group's asset quality remains healthy with an NPE ratio at 1.2% and a coverage ratio above 100%. NPE inflows remain limited. Slide 27. REMU is our engine to manage the stock of properties acquired from defaulted borrowers. The revenue stock decreased to EUR 419 million as at 30th September, achieving early our 2025 target of around EUR 0.5 billion, following the sale of the largest property in June '25. Overall, we continue to manage our revenue property prudently as it is carried on the balance sheet at 71% of the current open market value. It is important to note that we continue to sell on average close to independently assess open market value and above book value. I would now like to hand back to Panicos for his closing remarks. Panicos Nicolaou: Thank you, Eliza. Turning to Slide 28. Our priorities remain unchanged, being centered on prudent capital management, driving new growth initiatives focused on loan book growth, noninterest income diversification, maintaining cost discipline while reinvesting in the business and protecting the fundamentals of our asset quality. We remain positive on the outlook that can deliver sustainable profitability and attractive shareholder remuneration, and we look forward to updating you on our strategy and financial targets in the first quarter next year. This concludes our presentation, and we will now open the floor for your questions. Operator: [Operator Instructions] The first question comes from the line of Boulougouris Alexandros with Euroxx Securities. Alexandros Boulougouris: A question on loan growth on my end regarding the 6% we've seen year-on-year and the target of 4%, it looks quite conservative. And it would imply a reduction in balances in the fourth quarter, if my numbers are correct. Should we assume something similar for the full year around 6% because I didn't see that target being revised? That's my first question. My second question is regarding NII. Should we expect NII to flatten in the last quarter given the rate environment and the loan growth you're witnessing? Because based on the EUR 720 million target, it implies another reduction in the fourth quarter, if you could clarify this. Panicos Nicolaou: Yes, let me clarify that on the loan growth, we expect to materially exceed the 4% of initial target for 2025. So yes, you are right, we expect the growth to be materially higher than 4% and probably higher than 6% as well because we have a good pipeline. Whether this will be materialized or not until the end of the year to the extent that it will be materialized and depends on, let's say, on our ability to actually disburse the funds before the year-end or early next year. So all in all, the loan growth for this year will be materially higher than 4%. Eliza Livadiotou: On NII, Alex, the -- we do expect Q4 to be the lowest quarter, as I said in my script earlier. That's because of the tail of the repricing coming through the rate cut in June. That said, the impact is expected to be modest or marginal offset partly at least by volume, a better volume growth. So we expect to see the tail end of the repricing. And if rates remain at the 2% level, which is the level at the moment, we expect Q4 to be the lowest point and then to move onwards from there. Onwards and upward. Operator: The next question comes from the line of Cruz Hugo with KBW. Hugo Cruz: So I have 3 questions. One is -- so the strategy and financial update, if you could just clarify, is there going to be just the usual target slide that will be refreshed with targets for '26? Or is it going to be something more substantial? Is it going to be a separate event from the usual results calls or not? Then on the fees were a little bit weaker than expected. So if you could give a bit of color there, but also what trends are you seeing for Q4 for the fee income? And then finally, on NII, the interest rate swap book, how big can it be as a percentage of your deposit book? And the bond portfolio, you have a medium-term target of 20% of total assets. If you could give a bit of color how you came up with that target? Is there any regulatory constraints? Or what's the rationale there? Panicos Nicolaou: Okay. Thank you, Hugo. On the first question on financial tax, I will say that we'll provide more details in due course. But yes, it would be substantially more detailed than the usual one slight guidance that we do during the quarters. So you should expect something more detail. On the fees, I think this was your third question, right? On the fees, I mean, you see that we continue to cover almost 80% of our OpEx expenses. So we remain a diversified financial group. If you exclude some of the nonrecurring items, you will see year-on-year that there is a 4% growth. Okay. We -- our -- we view noninterest income as a key source of growth for us. Organically, we have some initiatives. We have Affluent banking, Jinius, FX platform, we will start seeing the integration of Ethniki insurance in our results, especially starting next year. And if we have any opportunities organically to accelerate the top up growth -- the organic growth, we will certainly pursue that. On securities, I will say that the medium-term target is to be 20% of total assets. These are internal limits, no regulatory limits. And these are numbers that we'll certainly review together with the financial update next year. Eliza Livadiotou: On hedging and the fixed income portfolio, first of all, on hedging, our interest rate swaps portfolio hedges around half of our non-rate sensitive deposits. So from a hedging capacity, let's say, perspective, we do have the ability to increase that. That said, we are approaching our internal target in terms of the volumes of hedging. We're not there yet, but we are very close. So we do expect modest increases in our hedging volumes going forward, either through -- or through the natural evolution of the balance sheet, but they wouldn't be huge, let's say, in quantum. Now on the side of the bond portfolio, the 20% medium-term target that we have out there is based on the benchmark of peer banks, especially in the Eurozone area. So there is no regulatory cap. There is no -- it's all a function of capital and risk appetite for us. Operator: The next question is from Alonso Alfredo with Deutsche Bank. Alfredo Alonso Estudillo: Just one follow-up on NII. As we've seen quite stable in the quarter and with the positive trends increasing the securities book that probably have not been fully booked on the NII in the quarter. How could we expect seeing still NII going down if you still see some further repricing of the deposits ahead? And how much this could come from repricing, changing mix, although it's not changing much right now. So it seems that there are positive trends there that could still be putting a more positive view into the next quarters than just being slightly down. That's one. The second one I have is actually on the deposits. We've seen the increase in the contribution to the Deposit Guarantee Fund. Is this something that could be seen for long? Is something just temporary? And moreover, since the loan-to-deposit ratio is so low, do you find any way of managing this excess liquidity channeling into faster loan growth or into conversion into fee-generating product just to reduce the average size of the deposit book? Eliza Livadiotou: Sorry, Alfredo. I will start with NII, our guidance on NII for the full year. So effectively for Q4 is -- that assumes the repricing of the loan book, which we will have a full quarter impact of the rate cut in June, but it also assumes flat deposit cost. So you can form your own view on the cost of deposits and the mix. Our own working hypothesis is that they -- or at least planning -- for planning purposes, that they stay flat both on volumes and on costs and in the mix actually as well. On the DGF, the DGF, we commented last quarter about this because we expected it. It's a fee that will be paid twice a year at roughly the EUR 5.5 million amount per 6 months, and it's due to be paid all the way until June 2030. So in a way, it's here to stay for another few years, but the target of the Central Bank is to take the DGF stock up to 1.25% for the country. Now on the liquidity... Panicos Nicolaou: Generally, deposits are very profitable at the cost of 27 basis points versus rate of 2%. Having said that, okay, you should expect some gradual deployment of liquidity towards gross loans and of course, fix income security. The key for us is to manage the size of our average interest earning assets, which have grown 2% year-on-year -- quarter-on-quarter, sorry, and the mix of this and the mix towards an optimal solution for higher NII and an optimal use of our capital. But we will always be very liquid. Operator: The next question comes from the line of Kantarovich Alexander with Roemer Capital. Alexander Kantarovich: Thank you and good results, it seems. My question is on capital utilization. Clearly, you have a very fat cushion. And on the other hand, you have lots of cash. And I appreciate that your payout policy is top of the range for comparable banks. But perhaps would you consider a one-off dividend payout to reduce your capital and that would have a material impact on your return on tangible equity? Panicos Nicolaou: Okay. As I said before, we are planning to update our strategy and financial targets during the first quarter of next year, which this update will include also how we think of capital. So some of our capital allocation options include, of course, as usual, higher payout ratios than the 70% that we have today, incremental organic growth. You have seen some consumption of capital for international lending growth and of course, strategic optionalities like the additional capital returns or some bolt-on acquisitions. But yes, we are running the bank for long-term shareholder value creation. We want to be generous with our shareholders. We are not talking about huge one-off, but we will remain generous on a sustainable basis. Alexander Kantarovich: Okay. I appreciate that. And can you please elaborate on your plans for the international book? I saw the news that you opened or reopened an office in Athens in Greece. But how would you perhaps pursue deployment of this mountain of cash that you have within the broader Eurozone? Is there any doable angle there? Panicos Nicolaou: Okay. First of all, we have not opened any office in Greece. I'm not sure what the news are you referring to. But the generally, the international expansion for the time being is executed through the international corporate in Cyprus. So international books have 3 projects. The first project is the international corporate, which is, let's say, 5% of that of the 10% of the international book, which is mainly in Greece, but not only in Greece. There is also the shipping, which is another 3% to 4%, which is very selective shipping groups, 13 shipping groups, which means around EUR 25 million per group, again, a diversified exposure there. And also international syndication is -- I think now it's EUR 260 million, close to 3% of our loan book, which is 23 groups, around EUR 11 million per group. So I'm saying that to highlight that the international expansion is diversified. It's not anywhere and has -- and we have set up in Cyprus to execute and reach our internal target, which for the time being is EUR 1.5 billion. So in general, the strategy about lending growth is go along with the growth of the GDP in Cyprus plus top up with the international loan book. So we will save more on loan growth in our plans in the first quarter of next year, together with a general update about capital and other targets that we'll share with you. Alexander Kantarovich: Yes. I probably misunderstood the news about the office in Greece. Operator: [Operator Instructions] We have a question from the line of Memisoglu Osman with Ambrosia Capital. Osman Memisoglu: Just following on loan growth and the outperformance this year. Could you -- is it fair to say it's coming mostly from the international side or versus your expectations, our segments, where are you seeing the outperformances? And also any color for '26? Are we seeing any pull forward? Or do you still feel quite comfortable for '26 loan growth? Panicos Nicolaou: Okay. For 2025, there are a combination of good growth from the Cypriot book, 4% average and the remained top up 2% came from international as it was our initial plan. And going forward, we have the same strategy in Cyprus and international. So the rate of growth of international will probably be reduced as the book become more mature and we start seeing some repayments. But general strategy is to have a combination of growth from Cyprus and international. Now international is mature. You have seen that we are reaching faster our internal target of EUR 1.5 billion and it give us a comfort to decide on the next steps and our next targets, which we'll share with you early next year. Operator: Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Mr. Nicolaou for any closing comments. Thank you. Panicos Nicolaou: Thank you for your participation in the call and for your questions, of course. As always, our team and myself will be available to take any of your questions and provide any clarifications that I'm sure that you have. 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 good day.
Rommel Rodrigo: Ladies and gentlemen, good afternoon and welcome to Robinsons Land Corporation's First 9 Months 2025 Analyst Briefing. Joining us today are our President and CEO; Ms. Mybelle Socorro V. Aragon-GoBio; Mr. Faraday D. Go, Executive Vice President and General Manager of the Malls Division; Mr. Kerwin Tan, our Chief Finance Officer; and the rest of the Investor Relations team. I'll be your host, Mr. Ron Rodrigo. We will walk you through the company's financial and operational performance for the period. Presenting with us are Mr. Kerwin Tan and Mr. Ramon Rivero, Chief Strategies and Sustainability Officer. After the presentation, we will open the floor for the Q&A session. Thank you. Before we proceed, I'd like to draw your attention to this disclaimer. The information in this presentation is for informational purposes only. Certain statements may be forward-looking and actual results could differ materially due to various risks and uncertainties. We encourage you to review our disclosure and refer to our official filings for more detailed information. Now let's begin the presentation. Mr. Kerwin, you may start. Kerwin S. Tan: Good afternoon. Thank you for joining Robinsons Land Corporation's earnings call. Kindly allow us to take you through our unaudited financial results for the first 9 months of the calendar year 2025. As previously highlighted, we remain committed to our Vision 5:25:50, our road map to sustain growth. This vision is anchored on 5 strategic levers designed to deliver PHP 25 billion in net income attributable to parent by RLC's 50th year. These 5 levers, as shown on the slide, form the foundation of our Vision 5:25:50 driving RLC towards sustained profitability and long-term value creation. For the first 9 months, RLC's asset portfolio continues to grow in scale and diversity that now includes 56 operational lifestyle centers serving as hubs of commerce and community, 134 residential developments are currently active covering both vertical and horizontal projects. 32 office developments anchored by our strong presence in Metro Manila and key provincial cities, 33 destination estates and mixed-use developments driving land value creation, 27 hotels and resorts across 9 brands, 13 work.able centers and 13 industrial facilities supporting the rise of e-commerce and supply chain growth. For the 9-month period ending September 30, 2025, RLC sustained its growth momentum posting solid results. Consolidated revenues reached PHP 35.61 billion, up 13% year-on-year propelled by the robust performance of both investment and development portfolios. EBITDA rose 7% to PHP 19.03 billion while net income attributable to parent climbed 10% to PHP 10.17 billion excluding a onetime gain recognized in the prior year. On the balance sheet side, total assets expanded 4% versus end 2024 to PHP 273.2 billion. Total liabilities contracted by 8% to PHP 1.96 billion largely reflecting the full settlement of maturing obligations, which in turn lowered total debt by 21% to PHP 41.91 billion. Total equity strengthened 12% to PHP 411.24 billion with parent equity likewise up 12% to PHP 173.86 billion. From a cash flow perspective, RLC generated PHP 19.94 billion in operating cash flow, raised PHP 13.96 billion from 2 successful block placements and invested PHP 15.19 billion in capital expenditures to support ongoing developments and future growth. Earnings per share for the 9-month period stood at PHP 2.11 per share. RLC delivered another strong quarter in the third quarter 2025 building on its year-to-date momentum. Revenues reached PHP 12.58 billion, a 5% increase quarter-on-quarter and 25% higher year-on-year driven by sustained growth across both investment and development portfolios. EBITDA came in at PHP 6.5 billion, up 4% from the previous quarter and 17% from the same quarter last year. Consequently, net income attributable to parent rose by a remarkable 19% year-on-year growth to PHP 3.3 billion demonstrating enhanced profitability from core operations. From a financing and investment standpoint, operating cash flow for the third quarter was PHP 6.65 billion. RLC generated PHP 7.75 billion in proceeds from another successful block placement during the quarter, second for the year, and deployed PHP 6.01 billion in capital expenditures, consistent with its long-term growth plans. Earnings per share for the quarter registered at PHP 0.69 per share. For the first 9 months of 2025, RLC reported consolidated revenues of PHP 35.61 billion, reflecting a 13% increase year-on-year and a notable 25% growth compared to the same quarter last year. This robust top line performance was driven by the continued momentum across our investment portfolio, particularly malls and offices alongside the continued recovery of the residential segment. EBIT grew 7% year-on-year to PHP 14.53 billion and was 21% higher versus the same quarter last year. The EBIT growth lagged revenue expansion due to higher utility expenses and additional depreciation from newly opened properties. Despite the slower EBIT growth relative to revenues, net income attributable to parent rose 10% to PHP 10.17 billion for the first 9 months period excluding the PHP 730 million gain for the investment reclassification in 2024. Net income for the current quarter ended at PHP 3.3 billion, up 19% versus the same quarter last year. The improvement was supported by lower effective tax rate following the infusion of additional assets into the REIT company during the quarter. Overall, these results underscore RLC's resilience and ability to sustain profitable growth backed by its diversified portfolio and effective execution of strategic initiatives. RLC's portfolio remains strategically weighted towards its investment portfolio, which continues to serve as the company's core revenue and earnings driver. For the first 9 months of 2025, the investment portfolio contributed 74% of total consolidated revenues and accounted for 83% and 78% of consolidated EBITDA and EBIT, respectively. This strong performance reflects the steady and recurring income generated by our mall and hotel properties, which comprise the bulk of the investment portfolio. Additionally, the offices and logistics segments provide meaningful contributions further reinforcing the stability and resilience of this portfolio. Meanwhile, the residential segment sustained its recovery trajectory. Realized revenues for the first 9 months were largely driven by the recognition of sales from prior years as more contracts reached the equity threshold. This carried forward the positive momentum for the development portfolio. Focusing on the third quarter. Consolidated revenues reached PHP 12.6 billion marking a significant 25% year-on-year increase and net income attributable to the parent stood at PHP 3.3 billion, a 19% increase from the same quarter last year. The residential segment emerged as the quarter's key growth driver with revenue surging by 247% year-on-year. This sharp increase was fueled by the recognition of previously booked sales as more contracts reached the equity threshold thus leading to larger conversion of standby revenues. Meanwhile, our malls and hotels maintained their upward trajectory delivering sustained year-on-year growth and office revenues recorded consistently. Overall, the investment portfolio remained the dominant contributor accounting for 72% of consolidated revenues in the third quarter. This reaffirms the portfolio's role as a resilient and recurring income source complemented by the strengthening recovery of the residential business. In September 2025, Robinsons Land successfully completed its fourth block placement of sales in its REIT company, RCR, marking it the largest fundraising transaction for a sponsor of a REIT company in the Philippines Stock Exchange. As of the third quarter this year, we sold a total of 1 billion common shares at a transaction price of PHP 7.75 per share raising proceeds of about PHP 7.75 billion exclusive of taxes and fees. This transaction lowered RLC's ownership in RCR from 65.6% to 60.5%, creating additional headroom for additional asset injections in the interim. The placement received strong investor demand being 3.7x oversubscribed against the base deal size of PHP 4 billion or roughly $70 million, a clear indication of continued market confidence in the RCR's portfolio quality and long-term prospects. The offer attracted a diversified mix of qualified buyers composed of 80% domestic and 20% foreign investors. Overall, this successful placement not only reinforces investor confidence in RCR as a REIT platform, but also strengthens RLC's balance sheet providing additional financial flexibility to fund ongoing and future developments. RCR continues to strengthen its contribution to the group's consolidated financial performance and in view of its growing relevance, we would like to share key highlights covering its financial results, portfolio composition and total gross leasable area. In September 2025, RCR issued 3.83 billion shares to RLC at PHP 8 per share in exchange for 9 malls with a total transaction value of PHP 30.67 billion. This infusion expanded RCR's portfolio to 38 premium assets comprising of 17 offices and 21 malls with combined gross leasable area of 1.15 million square meters. For the first 9 months of 2025, RCR contributed PHP 7.62 billion in revenues representing 21% of RLC's consolidated top line. EBITDA rose by 28% year-on-year reflecting the platform's strong operating efficiency and sustained rental performance. Net income likewise grew 28% to PHP 5.84 billion accounting for 39% of RLC's consolidated net income attributable to parent. Dividends per share also improved by 6% compared to the same period last year demonstrating enhanced shareholder returns. These gains were largely driven by the successful infusion of the 9 malls this year along with the full period contributions from properties infused in the third quarter of 2024, further boosting RCR's income-generating capacity. As of September 30, 2025, RCR's portfolio comprises of 38 premium assets with 17 office properties and 21 malls strategically located across 18 unique key locations nationwide. Occupancy across the portfolio remains very high at 96%. Moreover, RCR maintains a healthy weighted average lease expiry of 4.07 years. This provides strong income visibility and long-term stability. In terms of tenant mix; 46% of lease space is occupied by BPO companies, another 46% by retail banners and 4% each for traditional office users and office CPC underscoring a well-diversified and demand resilient portfolio. RCR continues to be a vital contributor to RLC's recurring income and serves as a strategic platform for future asset monetization and capital recycling. I'll now turn you over to Mr. Ramon Rivero for the operational highlights per business unit. Ramon Rivero: Thank you, Mr. Kerwin Tan. In the first 9 months of 2025, I am pleased to share that we continued to build on our growth trajectory posting total revenues of PHP 14.55 billion, an 11% increase from the previous year. This momentum was anchored by strong rental performance with rental revenues reaching PHP 10.27 billion, up 10% driven by a steady 7% same mall rental growth and sustained recovery in foot traffic across our portfolio. Our profitability also strengthened with EBITDA rising to PHP 8.78 billion and EBIT reaching PHP 6.10 billion reflecting year-on-year increases of 11% and 14%, respectively. Operational performance remains solid as we maintained 94% occupancy, higher than the industry average of 92.3%. Today, Robinsons Malls spans 1.7 million square meters of leasable space, underscoring the continued confidence of our tenants and the resilience of our consumer activity. For RLC Offices, we sustained a stable performance in the first 9 months of 2025 generating PHP 6.24 billion in revenues, up 5% year-on-year. This growth was supported by consistent rental escalations across our expanding portfolio of premium office developments. Our EBITDA climbed to PHP 4.93 billion while EBIT reached PHP 4.06 billion, both up 3% underscoring our strong operational efficiency. This reinforces our view that our offices have already bottomed out and are on a positive trajectory towards further growth. Occupancy improved by 100 basis points to 88% driven by the entry of new tenants. BPO firms remain our key anchors accounting for 81% of total occupancy while our WALE stands at 4.11 years reinforcing the long-term stability of our recurring income. In the third quarter, we proudly opened new work.able centers in Robinsons Summit Center 3, Robinsons Summit Center 4 and GBF Tower 1, adding 770 new seats and bringing our total to over 3,200 seats. This expansion reflects our commitment to flexible workspace solutions and supporting the evolving needs of businesses. For Robinsons Hotels and Resorts, we delivered a 10% increase in revenues reaching PHP 4.74 billion driven by strong performance across all brands, particularly our international hotel partnerships and flagship 5-star properties, Fili and NUSTAR. Our system-wide occupancy stood at 66% reflecting sustained travel demand and strong guest volumes. EBITDA grew 12% to PHP 1.43 billion while EBIT rose 11% to PHP 764 million supported by enhanced operating leverage. Notably, around 70% of total revenues came from our international brands and luxury hotels highlighting our strategic shift towards higher yield assets. With the opening of NUSTAR last May, RHR's portfolio now includes 27 hotels with over 4,000 room keys, further solidifying our presence in the hospitality sector. In the first 9 months of 2025, our logistics and industrial facilities generated PHP 661 million in revenues, up 2% year-on-year. Our EBITDA reached PHP 600 million while EBIT stood at PHP 438 million reflecting the continued strength of our operations. We now operate 13 industrial facilities across strategic logistics hubs in Luzon, maintaining a stable occupancy of 88% and healthy tenant demand across the portfolio. Now for our residential division, we delivered strong results in the first 9 months of 2025 posting PHP 4.06 billion in net sales from organic projects, up 30% year-on-year and an additional PHP 2.29 billion from joint ventures. Our realized residential revenue surged in the third quarter rising 247% year-on-year to PHP 3.11 billion driven by the recognition of prior year sales that reached the equity threshold. This momentum brought our realized sales to PHP 7.84 billion representing a 76% increase year-on-year. Profitability also accelerated significantly with EBITDA up 185% to PHP 1.98 billion and EBIT soaring 207% to PHP 1.87 billion. In addition, equity earnings from joint ventures contributed PHP 912 million during the first 9 months. In the first 9 months of 2025 for our Destination Estates segment, we generated PHP 674 million in property development revenues from deferred land sales to our joint ventures. Our EBITDA reached PHP 399 million while EBIT stood at PHP 395 million reflecting steady performance from our estate development activities. Last July 17, we at Robinsons Sports Entertainment and Recreation together with Cosma Athletic Ventures Corporation hold a groundbreaking ceremony for the Helios Pickleball Center in Bridgetowne. The 8-storey facility will span over 17,500 square meters of gross floor area and will feature 25 professional grade courts, including a stadium court designed for major events and tournaments. It will also house 6 floors of sports and recreation facilities such as gyms, sports clinics and food and beverage outlets while 2 basement levels will be dedicated to parking. With estimated 1,000 daily foot traffic, we are positioning the Helios Pickleball Center as a potential venue for the Professional Pickleball Association tour paving the way for the Philippines to host international tournaments in the future. In the first 3 quarters of 2025, we spent PHP 15.20 billion in capital expenditures, in line with our strategic pipeline of developments across malls, hotels, offices, logistics facilities, land banking and residential projects. This disciplined investment approach reflects our commitment to long-term growth and continued portfolio diversification. For the first 9 months of 2025, we successfully paid PHP 13.80 billion in matured debt, a key step in strengthening our balance sheet and ensuring financial flexibility. Through efficient cash management, we deem it proper to pay our maturing debt to save on interest expense and improve our cash flow. We will borrow only when the need arises. As of September 30, 2025 our total debt stood at PHP 42.10 billion composed of PHP 24 billion in bonds and PHP 18.10 billion in bank loans, of which PHP 2.40 billion is short term and PHP 15.70 billion is long term. Our weighted average loan maturity remains comfortable at 2.1 years and our effective interest rate stands at 5.8% reflecting prudent debt management. With 73% of our borrowings under fixed interest rates, we continue to mitigate exposure to interest rate volatility while maintaining a manageable debt maturity profile in the coming years. For Robinsons Malls, we are on track to expand our total gross leasable area from 1.67 million square meters in 2024 to 2.49 million square meters by 2030 representing a 50% cumulative increase over the period. This year we opened Robinsons Pagadian and will complete Bagong Silang. By 2027, our GLA is expected to grow to 1.97 million square meters driven by the openings of Tanay and Antipolo Expansion 2. 2029 will mark a major growth milestone with a 15% growth in GLA through 5 new malls and 2 expansions with locations in Paranaque, Sierra Valley Estate, Visayas and Mindanao and North and South Luzon. And by 2030, we aim to reach 2.49 million square meters with the addition of 3 new malls and 3 expansions. Again, these developments underscore our long-term commitment to sustainable growth and a stronger regional presence across the country. For Robinsons Offices, we are set to significantly expand our net leasable area from 793,000 square meters in 2024 to 1.28 million square meters by 2030, a 61% increase over 6 years. In 2025, the completion of GBF Center 2 and Cybergate Iloilo 3 will boost our footprint by 13%. We will sustain this momentum through 2026 with Cybergate Dumaguete and by 2027, the addition of Asscher Tower and Davao 1 will bring our NLA to 969,000 square meters. Further growth in 2028 and 2029 will be driven by Trilliant, Bridgetowne 1, Marquis and Davao 2, taking us past the 1.1 million square meter mark. And by 2030, we aim to reach 1.28 million square meters with the completion of Peruzzi Tower and Davao 3. This expansion underscores our strategy to strengthen our presence in key business districts and emerging regional centers across the country. On the logistics front, RLX is on track to more than double our gross leasable area from 295,000 square meters in 2024 to 619,000 square meters by 2030 representing a 110% increase over 6 years. In 2025, we will grow our footprint by 11% with new facilities in Taytay and Calamba 2E. By 2026, we expect a 15% expansion through new developments in Montclair 1, Calamba 3A and Sierra 3. Our capacity will further expand to 436,000 square meters in 2027 with new sites in Misamis Oriental, Cebu 1, Santa Rosa 1 and [ Panglao 1 ]. Over the next 3 years, we will continue building across Visayas and Mindanao culminating in 619,000 square meters of total GLA by 2030 through projects in Southern and Central Luzon. This aggressive pipeline underscores our strong commitment to supporting logistics and industrial growth in strategic locations nationwide. And lastly, for our Robinsons Hotels and Resorts, we are pursuing an equally strong growth trajectory expanding our portfolio from 4,243 rooms in 2024 to 5,681 rooms by 2030, a 34% increase over the period. In 2025, we will open NUSTAR Hotel followed by Summit Villas Siargao in 2026. These openings will be complemented in 2027 and 2028 by key additions such as Grand Summit Cebu, Fili Hotel Bridgetowne and Grand Summit Pangasinan, which will bring our room inventory past 5,200. By 2029, the opening of Grand Summit Bohol will mark a major milestone for Grand Summit brand, an additional 220 room jump in room capacity. And finally, the completion of Grand Summit Davao in 2030 will take us to 5,681 rooms, expanding our total footprint in both established and emerging travel destinations. Through all these developments, we are reinforcing our position as a leading Filipino hospitality brand creating properties that elevate guest experiences, support local tourism and deliver long-term value to our stakeholders. This ends our presentation and we are now open for your questions. Rommel Rodrigo: Some housekeeping rules for the Q&A. To ask a question, please use the raise hand or the Q&A box. When your name is called upon to ask the question, please state your name before proceeding to the queries. The first question goes to Jelline. Jelline Gaza: This is Jelline Gaza again from JPMorgan. My first question relates to the JV earnings. We noticed that it's a little bit soft for the last few quarters. Can you give or shed more light about the trends that are going on here? How much is unbooked profit so far, unsold inventory? And what are you seeing in terms of cancellation trend as well as sentiment given the recent corruption scandal? That's my first question. Maria Socorro Isabelle Aragon-Gobio: Jelline, this is Mybelle. The sales of our JV projects have been soft in the past quarter. Cancellations have not been alarming. They're still the usual rate. So given the corruption scandals, we do see some form of softening in that particular segment. However, we actually are going to be starting to turn over the first tower of our joint venture with Hongkong Land by the first half of next year. We believe that sales should pick up again. Jelline Gaza: Would you be able to share the unbooked profits to date and the value of unsold inventory from the JV earnings? Kerwin S. Tan: The standby revenue is PHP 49.4 billion revenues. Standby revenues for RLC's share is PHP 9.9 billion. Jelline Gaza: And in terms of profit? Kerwin S. Tan: In terms of profit, it's about PHP 1.7 billion. Jelline Gaza: Okay. Understood. My second question relates to the mall revenue growth. We noticed that it's pretty strong at almost midteens. What do you think you are doing differently than peers and are there any updates on the renovation, extent of expected works and any disruptions expected from these initiatives? Faraday Go: Well, our revenue growth for the existing malls, it's coming from 3 main sources. One is the increase in the fixed rent, the second one is the increase in occupancy and the third is the increase in tenant sales. Okay? So those 3 are all contributing to the increases in our revenues for the same malls. And then aside from that, we also have our new malls, which are also contributing to all those 3 factors for our new malls. Your second question was on the expansion, the renovations. So we have ongoing renovations for several malls like Dumagete, Abaco, Manila; and these are all strategically done so that to minimize the effect on our existing operations and rental for those malls. Jelline Gaza: And lastly, would you be able to share the lease-out rate or preleasing commitments for GBF Center 1, Center 2 and Ilolo 3, please? Ramon Rivero: So for GBF 1 actually year-to-date, we're almost near 80% leased. For GBF 2, we're looking around 60% preleased while Ilolo 3 is around 25% preleased. Rommel Rodrigo: The next question goes to Renz from CLSA. John Renz Alvarado: So this is Renz from CLSA Philippines. So I just want to ask about the capital recycling program. So I think the company made roughly PHP 14 billion worth of block placements in 2025. Would you be able to share some broad guidance on the amount of private placement proceeds for 2026 onwards? That is to say is the PHP 14 billion of proceeds something that is sustainable moving forward? And considering that guidance, how will this shape up your capital allocation decisions considering the excess cash flows? So will the company prioritize expanding CapEx, increasing payout or buybacks? So that's my first question. Kerwin S. Tan: Renz, this is Kerwin. Just to answer your question, guidance on how much can we raise this year. Unfortunately, we usually do not provide guidance because it will depend on the timing and [ quotes ] that will subscribe to if ever we do a block placement. So in terms of usage of capital, the capital that we get from the placements, of course we will be flexible on it. It will depend on the need. If there is no need, we will pay down debt. If there's need for CapEx, we will allocate CapEx according to the revenue or plus EBITDA contribution of that particular business unit. And also of course that will provide ample room for us to provide more buybacks and dividends. John Renz Alvarado: Okay. Understood. On the uninfused leasing assets, this is still related on capital recycling. May I ask what the yield on cost is for the malls, offices, hotels and industrial warehouses? Kerwin S. Tan: Renz, we usually do not provide that figure for public consumption. Rommel Rodrigo: Next on the raise hand is Mr. Carl Sy from Regis. Carl Stanley Sy: Let me just check if you can hear me. Rommel Rodrigo: Yes, we can hear you loud and clear. Carl Stanley Sy: So I have some questions, some of which are related to the items asked by Jelline. So I'll start off with the mall business. So it was mentioned that some of the reasons for an increase in the mall revenue was, let's say, increase in occupancy and expansion of the portfolio. Now for the third quarter in particular, it looks like mall revenue was up 7% quarter-on-quarter and the portfolio size is the same as was occupancy. So is it fair to say that actually tenant sales improved substantially quarter-on-quarter in the third quarter? And if so, I'd be interested in what you would -- if you can give color on which types of tenants happen to be strong or were there particular areas of malls that were particularly strong? Faraday Go: Carl, if I can add to that to the answer earlier. So aside from what we mentioned earlier, another thing we're doing also is we're trying to maximize the revenue of our current assets. So we do see if we have a tenant that's not performing that well, we try to replace it with a more high performing tenant. One other thing that we're doing also is we're increasing the F&B mix, which delivers a higher rent per square meter as against, say, another mix that would be of lower rent. Another one is we are converting some of our cinemas into retail spaces that allow us to generate also a higher return for the space. Carl Stanley Sy: This is very helpful. And let's say I guess over the past year or let's say 9 months this year versus 9 months last year and even 3Q this year, it looks like mall margins have expanded quite substantially. It was mentioned in some previous briefings, you attribute at least part of that, maybe most of that to reining in utility costs. Is that still the case? Is it mostly because of utility costs? Faraday Go: Yes. You're saying the margins increase. Yes. Basically the utility cost is one of our major expenses that affect the margins, yes. It's still a major cost of when we sign up to a new contract with a higher or lower deficit. Carl Stanley Sy: Understand. And is there anything else notable that would help drive up the margins? Maria Socorro Isabelle Aragon-Gobio: It would be efficiencies that we adopt across the different malls helping in improving our margins. As to the point of Faraday about the utility cost, power in particular; whenever the power cost increases, we also try to defer or to mitigate the impact by also correspondingly increasing our CUSA that we charge to our tenants so that we're able to maintain our margin spread. Carl Stanley Sy: Sorry, it was a little choppy. Could you repeat that something about CUSA? Maria Socorro Isabelle Aragon-Gobio: Yes. So when the power rate increases, we experienced that in some months in the past 2 quarters. We had to increase our CUSA that we charge to our tenants so that we're able to maintain our margin spread. Carl Stanley Sy: Got it. Okay. That's very helpful. That's it for the mall business. I'll ask about the residential segment this time. So Jelline asked a couple of things and I might have missed it. Did you provide the unsold inventory of JV projects? Kerwin S. Tan: Sold inventory of the JVs is PHP 16 billion. Carl Stanley Sy: PHP 16 billion. Great. And so for the JV projects, one of the things mentioned in previous briefings was that it was easier to sell large units and you have a lot of small units left. Is there anything you can do about that or what have you been trying to sell those more quickly? Maria Socorro Isabelle Aragon-Gobio: We are trying to sell the remaining smaller units via payment schemes. So we offer more attractive discounting for those particular units and then typically, those unsold units tend to go faster as we approach the turnover of the building. So like I was also mentioning when Jelline asked about it. One of our joint venture projects, one with Hongkong Land, Velaris; the first tower is scheduled for turnover by the first half of next year. So we believe that that should help in moving the remaining inventory. Carl Stanley Sy: Got it. And then on your stand-alone projects this time. So the reservation sales for stand-alone projects fell on a quarter-on-quarter basis. Just checking, you still have the same promo, right, a buyer can purchase and pay evenly over 10 years for RFOs. So what would you attribute the decline then quarter-on-quarter for sales of stand-alone projects? Maria Socorro Isabelle Aragon-Gobio: It's a combination of our having to rebuild our sales force. We've had to both rightsize and also to make it a more efficient organization. We are now on a massive hiring mode trying to rebuild the [indiscernible] on the property specialists, the real sellers. So that's one. And then we're also doing targeted international marketing deployments. We've also strengthened our international marketing team so they're now deployed to UAE, Singapore, North America where we have always been able to generate strong sales. And then domestic sales teams have also been reorganized so that they are focusing on specific projects. Carl Stanley Sy: And let me clarify. So that's something, let's say, there's a reorganization that happened in 3Q and that's why sales fell and then you expect 4Q and onwards to be better? Do I understand correctly? Maria Socorro Isabelle Aragon-Gobio: Well, that and also what was driving much of the growth for residential sales in the previous quarter was really the RFO. The one that you mentioned was the lease-to-own. We have substantially sold off some of the inventory for RFO and we've also refocused on reselling, which is a more challenging effort. But as we do all of these combined efforts, we believe that the next quarter we should be able to post higher sales. Carl Stanley Sy: Understand. And I believe there are a lot of buildings due for completion I guess within the next year? So really, you'll have a lot more RFO coming up essentially? Maria Socorro Isabelle Aragon-Gobio: Yes. Carl Stanley Sy: Okay. And then I'll ask about residential revenue this time so for the third quarter picked up quite substantially and it was mentioned that there are more contracts that reached the equity threshold. And so particularly for the third quarter, it was a very large jump and I'm just curious should I think of that as a new normal or it was actually a blip, it should actually come down. I think it was mentioned earlier this year that we are supposed to see better growth of residential revenue starting next year because of timing. And I wanted to check if in fact it was earlier like it already started as early as the third quarter or we should still see a good amount of growth for 2026 residential revenue? Maria Socorro Isabelle Aragon-Gobio: I think the trend will continue for the fourth quarter and the ensuing quarters. The third quarter recognitions are mainly from the 2021 presales reaching the equity threshold. And that coupled with the projects that we will be turning over in the succeeding quarters should contribute to the sustained growth of our realized revenues from the residential projects. Rommel Rodrigo: Our next question on the raise hand is Rafi Mendoza from Raymond. Rafael Mendoza: Again, going back to the residential segment. May I know which locations are most of your 5,333 inventory currently at? Is it mostly in Metro Manila? Maria Socorro Isabelle Aragon-Gobio: It's mostly in Metro Manila, yes. Rafael Mendoza: Okay. And I noticed also that EBIT margin for residential was quite -- there's been some compression. Is it more a function of the discounting of the RFO units sold, which led to some margin compression as of 9 months '25? Maria Socorro Isabelle Aragon-Gobio: The EBIT margins are still consistent first quarter to third quarter, they are at 23% to 25% for the organic projects. Rafael Mendoza: Okay. So I would think it's from the JVs. Maria Socorro Isabelle Aragon-Gobio: Yes. So to answer your question, It's not from the discounting that we had launched for the focused marketing of our RFOs. Rafael Mendoza: Okay. So what may be the reason for some compression? And I would think it's from the JV projects being sold. Kerwin S. Tan: It's the contribution from the JVs. Yes. If you can see the JV contribution for revenues. Rafael Mendoza: Okay. So the JV contribution. Okay. I understand. And for offices as well, I mean it's not so substantial the dip in EBIT margin, just 1.9 percentage points on a 9-month basis. May I know the reason also for the compression? Kerwin S. Tan: It's a function of higher input costs such as contracted services and power and also added the depreciation of the new buildings. Maria Socorro Isabelle Aragon-Gobio: Commissions because our wonderful team was able to close a lot of it. [indiscernible] pay our commissions. Rafael Mendoza: Got it. So from commissions as well. So I would assume this level is pretty much going to be the level for next year? Kerwin S. Tan: It should improve. While we're improving efficiencies, I think it should improve slightly back to what it was before this quarter. Rommel Rodrigo: The next on the raise hand is Jon Ogden from Eastern Value. Jonathan Ogden: I've got 2 or 3. The first couple are sort of related. You've got plans to increase your gross floor area in all sectors quite substantially and as 50 years as a company kind of target and so forth. But rival companies also have aggressive plans to raise their gross floor area. So there's a danger there to sort of have this plan which is all laid out and you can look at rivals, they have their plans. So the danger is overbuilding and so that's something you have to be aware of. I just wonder what your thoughts on that. Is there really going to be enough business for everybody in offices, malls and other areas like your hotels and so on? And related to that is do you really think the strategy is correct, which is to emphasize investment properties and just have development properties as a kind of smaller sideline given you can react to the market much faster and recycle your capital faster and go slower or faster depending on what's happening in the market whereas your malls you kind of lock in for these long periods and it's a long payback. As I say, they are these rivals, the [ SMA ] and so on who also have their aggressive plans. So that's one question. The other one is if you look at your REIT, it's now exactly double the market cap of the parent company, which is a kind of odd situation. The yield is just a bit higher on the REIT, but the REIT is trading at book value and Robinson Land is trading at 0.4 book value. So why is that? I mean it seems like the market is prepared to pay up. For the REIT's assets, they're prepared to pay book, but they're not prepared to pay book for Robinson Land. So that suggests that the assets not in Robinson, the REIT are inferior. So maybe you can shed some light on that. And then just the other one is if you could give us a bit of color on what's happening in the office segment in general with we've got AI coming in, if that's affecting anything in either a negative or positive way? And any general thoughts on where we are now with post POGOs and how BPO demand is going and overall in the market with supply and demand. Maria Socorro Isabelle Aragon-Gobio: There were 4 questions. The first 2 I will tackle, the third I'll pass on to Kerwin and the fourth to James. Okay. So for the first, the growth that we are playing out in our pipeline, whether there is enough of a market to absorb this, I believe so. For Robinsons Malls, maybe we can start off with that. As you know, the Philippines is a consumption-driven economy. We are geographically fragmented. There's still a lot of Tier 1, Tier 2 cities in the Philippines that are still unserved or underserved. And so Robinsons Land is typically the first mover in these areas. So we believe that this playbook will still hold and can be a sustainable growth path for Robinsons Malls. For Robinsons offices, we likewise believe that we have reached an inflection point. It has bottomed out and in fact we have been getting a lot of preleasing requirements, expansion requirements as well. We are of course very careful in our expansion plans, striking a balance between doing speculative builds and build-to-suit builds. This for us is a realistic expansion for the Robinsons Offices. For logistics, it has been sustainably strong so that's why we had projected 2x growth for the business. For hotels and resorts, we are confident that the 25% increase in our keys is on the conservative side of the realistic scenario. And so we are also banking on the improvement of our tourist arrivals as government efforts towards simplifying the visa requirements and also rolling out the VAT coupon system will take place. So we're confident that this will be a sustainable pipeline. Now for the second question? Jonathan Ogden: Was that the one about your 0.4x book versus REIT trading at 1x book? Maria Socorro Isabelle Aragon-Gobio: Maybe Kerwin can take that one. Kerwin S. Tan: Okay. So RCR now trades at about PHP 140 billion of market cap. So RLC owns about 60% of PHP 140 billion. So the way I look at it's actually on the REIT alone, it's PHP 84 billion already. So I think the discount to both is a function of 2 things, right? Number one, what we can do at our end is that that's why there's a focus by the group to develop more land to monetize whatever land bank that we have so that we can essentially churn it, convert this into our income statement and provide more dividends to our shareholders. And then I think the second is the discount, I think can be answered by both the buy and sell side in this group how to narrow the discount there. It's an odd situation. But I guess that can be solved by both the buy and the sell side. Maria Socorro Isabelle Aragon-Gobio: Jon, I remember your second question. It was about if our strategy is correct focusing on the investment side of our business. I believe so because it allows us to have a stable cash flow and it also positions us uniquely to be able to infuse our mature investment assets into the REIT in order to monetize those. The residential market or the developmental business remains to be an opportunistic play for the company. And then for the offices, James, can you answer? James Arco: Jon, so just quickly on offices. As per third quarter market reports from several brokers, vacancy is at 20%. So we're doing slightly better than market at 12% vacancy. Now in regards to AI, I think AI has always been around, but it's just louder now and we've been hearing from our tenants and our orgs that we talk with that they're really using it as a tool to better their efficiencies such as training and hiring. So what we hear from them is they're improving productivity with it using as a tool. And in regards to the key call centers in the U.S., they've remained quite quiet about it because they're hoping it dies down. The incentives given in the U.S. is much lower than the savings they get here in the Philippines. It's maybe around 20% versus 80% here in the Philippines in regards to labor costs. So we're also giving a lot of confidence because of our leasing team. We've had around almost close to 200,000 of expiries this year in which we've renewed and replaced around 94% of that. Also, we're very proud to say that I think this year is the highest amount of new sign-ups that we had even in the height of POGO where we've reached 100,000 square meters in new sign-ups in which 65% were actually ITDPM industry. So we're quite confident on the office sector. Jonathan Ogden: Also, I've got 1 more, if I can throw that in there. Just going back to our expansions and what have you. Now in the latest report, we were able to pay down some debt. Now we've got the REIT we can put assets into every now and again. We've got our expansions of our investment properties coming up. And then we've got dividends or buybacks and then the leverage in the balance sheet. So how is that going to play out in this plan to 2030? Is the balance sheet going to get more leveraged up or is it going to go the other way because of sales of the REIT or how do you see the balance sheet evolving over that plan to 2030? Kerwin S. Tan: It's a function really of how much money do we raise from the REIT on an annual basis. But given that all things are the same or would be the same and the balance sheet will more or less be on the same level as currently shown in terms of gearing. Of course substantially as part of our 5:25:30 plan, if we reach by PHP 25 billion by year 2030 so that would enable -- from now to 2030, that would enable us to provide more -- our earnings per share will increase and subsequently, our dividend payout will also increase. Rommel Rodrigo: Now we'll go on the Q&A. The first one is from [ Emmanuel Limpo ]. That's answered already. Okay. So the second one is from [indiscernible]. Answered already also. From Marco Mario. May I know if you can provide revenue contribution, GLA and occupancy rate for Robinsons Manila and Galleria? When do you plan the [Audio Gap] RCR? Ramon Rivero: Okay. GLA for both of them combined about 200,000 square meters. And then rental income, about 21% rental income and occupancy is more than 90%. Kerwin S. Tan: So it will depend on the market conditions in the future. Rommel Rodrigo: And then a question from Jelline. How much was RCR's DPS in second quarter 2025 and 3Q 2025? Kerwin S. Tan: So for the second quarter, DPS was PHP 1.049 per share. Third quarter PHP 1.060 per share. For the first 3 quarters, total dividends per share is PHP 3.156 per share. Rommel Rodrigo: From [ Christina Uhla ] of First Metro. Can you give more context on the high impact strategic partnerships you've cultivated in your 5-year plan? Maria Socorro Isabelle Aragon-Gobio: Yes. So we're actively pursuing a number of joint ventures, alliances and also co-investments across our different businesses and it's in various formats. Let's say for the malls, it's really working with high potential tenants. For our logistics business, it's acquiring or codeveloping facilities that will allow us to expand our portfolio. Also for our land acquisition, it's joint ventures with other developers as well as government agencies. So together, this should allow the company to scale our executions, expand our pipelines and also to accelerate our market entry into market segments where we're not currently playing. Rommel Rodrigo: Okay. Question from [ Juan ]. May we know the potential impact of Trump's hip call centers in America on RLC's office development given that the app focuses on voice-related services. Do you have an estimate on the percentage of BPO tenants that mainly offers this kind of service in America clients in Q4? James Arco: Juan, so we'll have to get back to an exact numbers here. We have to call all our tenants to get a clear number. But just to give you an example, one of our bigger tenants, maybe around 1/4 of its actual space is dedicated to voice while the others are more on the tech and corporate function. And a lot of our tenants service not only the U.S., but several different countries. So it will be quite a task to break down and give you an exact answer. Rommel Rodrigo: Okay. Last question on Q&A is from Francis Paul from BPI. I would like to ask if you have guidance on resi launches and takeup for both this year and next year? Maria Socorro Isabelle Aragon-Gobio: Yes. So for resi launches for the remainder of the year, we don't have anything lined up. We want to be able to sell substantially our current inventory. In the first half of 2026, we're planning to launch horizontal projects in the provinces where we believe market demand is strong and also for horizontal projects, revenue recognition is faster, execution is likewise faster. As to takeup for this year, we are estimating -- we're now at PHP 4 billion. We're estimating that we'll finish the year at PHP 5 billion to PHP 5.5 billion. For next year given that we have already cleaned up our cancellation substantially for this year, we're looking at a much higher sales takeup. We'll provide more color in the succeeding quarter. Rommel Rodrigo: Okay. If there are no further questions. I will now hand you over to Mybelle to give her closing remarks. Maria Socorro Isabelle Aragon-Gobio: Good afternoon again, everybody. As we approach the end of 2025, Robinsons Land continues to post steady progress and solid results across its diversified portfolio. Net income for the quarter grew by an impressive 19% compared to the same period last year supported by resilient recurring income streams, a strong recovery in our residential business and strategic capital recycling through our REIT platform, a key driver of 5:25:50 objective. The infusion of additional mall assets into RCR and the 3.7x oversubscription of its second block placement this quarter stand as clear testaments to the strong investor confidence in both RCR and RLC's long-term growth prospects. It is also worth noting that RLC now owns 61% of RCR's PHP 140 billion market cap even as RCR holds only about half of RLC's total investment assets. Our investment portfolio remains the key performance driver led by the sustained growth of our malls, which is our biggest revenue contributor, benefiting from resilient consumer spending despite the recent typhoon disruptions. The offices segment also continued its positive upward trajectory posting higher occupancy compared to the previous quarter with our premiumization strategy now clearly paying off and stronger takeup in rents. Our hotels and our logistics and industrial facilities businesses continue to show positive results. Collectively, these businesses form the backbone of our recurring income base, providing stability amid dynamic market conditions. On the development portfolio, our organic residential business remained a standout maintaining its recovery momentum through the third quarter. We should provide detailed updates on the development of our existing destination estates in the coming quarters. Meanwhile, our newly launched Robinson Sports Entertainment and Recreation division introduced just last quarter is already off to a strong start with the groundbreaking of its flagship project in Bridgetowne marking a promising new growth platform for the group. With these positive results, we are confident that our full year performance will highlight RLC's agile execution and strategic expansion, all aimed at achieving our 5-year goal and delivering greater value to our shareholders. And as this is our last earnings call for the year, I would like to sincerely thank each and every one of you for your unwavering support. Merry Christmas and Happy Holidays to everyone. Rommel Rodrigo: Thank you, everyone, for your participation. You may all disconnect.
Richard Tyson: All right then. Good morning, everyone, and welcome to the Oxford Instruments Half Year Results presentation. Thanks for joining us today. We provided an initial overview of the shape of the first half of the year in our first -- in our trading update a few weeks ago. Today, I'm going to begin with the key highlights of the period, and then, I'll hand over to Paul for the financial review before returning to the detail on our strategic progress with some pointers into the second half and beyond. There will also be an opportunity for questions at the end, both in the room and online. Since we last met in June, we have made another 6 months of good progress on our strategy to simplify the group, improve commercial execution and realign our regional presence, laying the foundations for future growth and margin expansion. At the same time, the team have had to contend with more significant disruption than anticipated in the trading environment as a result of the global tariff and trade volatility, coupled with funding challenges in academia. As the results show, the first few months of the year were challenging in our higher-margin Imaging & Analysis division, while we are working with our customers to align on a new trading landscape. By contrast, in Advanced Technologies, we've made great progress with 25% order growth coming from our compound semiconductor business, attracting increasing numbers of commercial customers focused on R&D and production. Across the group, our market-leading technology and expertise continues to position us for good growth in structural growth markets. So despite the disruption in Q1, we ended the half with positive orders and book-to-bill and the Q2 order momentum back to that of prior year. We're into the second half with a full order book to support another year of good growth in Advanced Technologies. And with demand improving in Imaging & Analysis, we expect to deliver a strong H2, broadly in line with last year. We're seeing a good return on our investments in technology with a number of new recent product launches, and I'll share more about those later. Cash conversion was moderate, in line with prior H1 periods for Oxford and reflects the trading conditions. We expect it to normalize to our target levels in H2 with strong free cash flow ahead. The balance sheet is strong with net cash at GBP 45 million and around GBP 57 million from the sale of NanoScience to come. Our share buyback program is well advanced with just over GBP 30 million has been returned to shareholders since June, and we'll be extending it by a further GBP 50 million to a total of GBP 100 million. Now, I'd like -- just like to zero in on the Q1, Q2 dynamics. And there were 2 main factors to keep in your mind. Firstly, tariffs and their impact on trading; and secondly, U.S. academic funding. Let me take you through the slide starting on the left-hand side. We had anticipated some softening of demand from the U.S. administration actions, but the impact turned out to be more extreme in Q1. As a major exporter, we've been managing multiple changes in the global tariff landscape since April 2. Customers have had to reevaluate their budgets and spending plans, while others have had to request additional funding over and above that allocated to support new purchases. Initially, we focused on working with customers to reprice the open order book to cover tariff and then moved on to active quotations and the opportunity pipeline. And as we indicated in June, we were able to protect margin and achieve recovery of new tariff costs, meaning our strong contribution margins have been successfully maintained. Q1 saw -- also saw the significant cuts proposed to academic funding by the White House. Shown here in billions of U.S. dollars, we show this in the chart in the middle, the gray bar, meaning a sizable reduction in funding was being digested by our customers in the U.S., leading to delays in purchases. As we move into Q2, the chart shows you the evolution of the proposals as they went through Congress. We're seeing a potential normalization of U.S. funding shown in the orange bar back to prior levels, both the National Institute of Health and the National Science Laboratory, starting to give customers more confidence their future funding will be intact and to start buying again. Our U.S. team has also been proactive in helping customers seek new funding sources and build up our commercial customer base. Moving back to tariffs. For some product lines, we have also worked quickly to relocate some assembly locations to help our opportunity and mitigate the tariffs. And then, with the retaliatory imposition of restrictions on rare earth supply impacting supply chains, our engineers have created new engineering solutions and helped to resource supply where possible. So despite many distractions and impacted demand patterns, the whole Oxford team have done an excellent job to overcome the headwinds and deal with the fluctuating demand challenges, culminating in the environment stabilizing through Q2. So with that, let me hand over to Paul for a deep dive into the numbers. Paul Fry: Thanks, Richard, and good morning. So moving to the first slide, I wanted to first highlight that all the information presented today is for continuing operations and excludes all revenues and expenses directly associated with our NanoScience business, which is now reported under discontinued operations. As Richard has already explained, despite the disruption to order intake in the first quarter, overall, orders have grown in the first half on a constant currency basis and flat on a reported basis. However, the profile of order intake over the first quarter has had a significant impact on revenue recognized in the period. Our Imaging & Analysis business runs on relatively short lead times, meaning the gap in orders has directly dropped through to revenue in the period. In our Advanced Technologies division, we've seen very strong order growth throughout the first half with a step change in Q4 of last year. Revenue is yet to pull through into -- revenue is yet to pull through as a result of short-term shipment delays and lead times in this division, but we are expecting strong revenue growth in H2. Both gross margin and overheads are in line with last year. And with a relatively fixed cost base in the business, changes in revenue quickly fall through to adjusted operating profit and OP margin, and we've seen this drop through in H1. Moving to revenue in more detail. The Imaging & Analysis division was most impacted by the order profile we saw in the first half. Whilst opportunities in the form of confirmed customer interest continued to rise in the first half, customers have taken longer to convert these to firm orders. In Advanced Technologies, order growth has been consistently strong since Q4 last year. But given some timing delays and lead times in the division, we are yet to see this growth pull through into revenue. However, the order book is full for the year, and we expect to see early teen revenue growth in the second half as we execute on this. Currency has continued to be a headwind in H1 versus the prior year with Sterling strengthening versus the U.S. dollar, but we've seen that trend reverse recently, and I'll touch on the impact of this later. Imaging & Analysis, so this slide gives you a snapshot of the profile of Imaging & Analysis in the first half. Here, you can see the uptick in both orders and revenue in Q2 versus a low Q1 with orders moving back in line with the prior year, but revenue still lagging this recovery. On the right, you can see order intake by end customer type, which shows a broad-based impact across both commercial and academic customers. U.S. academia has been quite resilient in terms of order intake, but revenue in the first half was heavily impacted, down nearly 25% on the prior period. The book-to-bill ratio for this division is above 1, and we expect I&A to trade in line with H2 last year. So far, Q3 is tracking in line with our expectations, but order intake for this quarter will be key, and we plan to update the market on progress in mid-January. On the next slide, you can see the same data cut for Advanced Technologies, where you can see the strong and more consistent order growth in both Q1 and Q2, building on a very strong Q4 from last year. Whilst revenue in Q2 was significantly higher than Q1, we are yet to see this growth pull through into revenue due to the timing delays and lead times I mentioned just now. On the right, you can see the significant growth in commercial customer orders, up 34%, and which made up more than half of the order intake in H1. This shift has been accompanied by increasing numbers of orders for larger multichambered systems, mainly from the U.S. and Europe-based customers. This has contributed to higher average selling prices, but also to longer lead times. Academia outside the U.S. has grown strongly in H1, mainly large systems for Quantum-related semiconductor applications in Europe. Again, as we execute on our full order book, we expect to see this translate into early teen revenue growth for the division in H2. So moving to adjusted operating profit. You can see the drop-through to operating profit from the H1 revenue gap. Gross margin was steady at 55% and overheads fell slightly. Given the relatively fixed nature of the cost base, incremental revenue converts to incremental operating profit at a very high margin, and we expect to see the strong operational leverage effect in H2. As I mentioned earlier, currency has continued to be a headwind in H1, impacting overall margin by around 100 basis points. For the full year, we're expecting I&A to move back into its target margin range and to see continued margin progression in Advanced Technologies. On the next slide, you can see the bridge to our statutory results. We've made no changes to the definition of adjusting items. And most of the nonrecurring or exceptional costs here relate to Belfast restructuring and the move of the semiconductor business to Severn Beach, including the sale of the Yatton site, all of which were ongoing at the beginning of the year. We expect all of these projects to have concluded by the end of this financial year. Discontinued operations is reported here on an after-tax basis and includes all transaction-related costs. Pre-tax discontinued operations made an adjusted loss of GBP 2.2 million in half 1. And then moving to cash flow. Clearly, the foreign operating profit in the first half was fed through directly into free cash flow generation, albeit an improvement of around GBP 7 million on the prior year. The working capital movement largely reflects the normal shape of H1 and is down on the same time last year. Inventories are higher than the year-end, mainly in preparation to execute on the second half order book. We expect working capital to be less of a drag in H2, and we expect cash conversion to return to over 80% for the year. As I mentioned back in June, I think it's worth underlying again the positive cash inflection we see coming next year. Capital expenditure this year is benefiting from proceeds from the Yatton sale in August with underlying CapEx at around GBP 5.5 million in H1. But following completion of Severn Beach, capital expenditure will be lower than recent years, normalizing at levels much closer to depreciation. Our restructuring programs will complete this year, meaning exceptional costs are not expected to be material next year. And following engagement with insurers ahead of policy buying, we now expect to make no further payments to the group's defined benefit pension fund in the remainder of this year or beyond. This means a GBP 4 million upside to guidance we gave for the FY '26 and a further GBP 4 million benefit in both FY '27 and FY '28. So a GBP 12 million improvement versus our previous expectations for the 3 years. These, combined with operational cash flow, will have a material effect on free cash flow next year. Our balance -- our cash balance is strong, ending the year -- ending the half, sorry, at GBP 45 million after investing GBP 25 million in the share buyback program and before the receipt of gross proceeds from the NanoScience sale expected to be around GBP 57 million. Which then leads me to reconfirm our capital allocation priorities, which have not changed since I presented them in June. Our first priority remains profitable growth, and this is where we will always seek to deploy capital first. We will continue to invest in opportunities to improve productivity to drive order growth and to develop new products. We're also committed to our dividend program, and given our cash balance, the confidence we have in future cash flows and our strong dividend cover, we've grown the interim dividend again up 6%. Beyond these 2 priorities, we will look to deploy capital either inorganically, where we see a compelling case to drive growth and returns or return to shareholders via share buybacks, again, where there is a compelling case to do so, which makes sense for our individual shareholders. We are continuing to look actively inorganic options, but with a disciplined approach to ensure any acquisition increases the value of the company. As I outlined on the last slide, we see cash flow generation to markedly improve as we move into FY '27. And so taking into consideration all these factors, we've announced this morning that the current share buyback program is to be extended by a further GBP 50 million to GBP 100 million, and further details of that will be announced in due course. And then finally, I wanted to summarize some guidance for the rest of this financial year. This has not changed since our October trading update. On a constant currency basis, we expect our Imaging & Analysis division to trade in line with H2 last year with margin improving in H2 as a result of approximately GBP 4 million of cost benefit, mainly from our Belfast-based business. And as I mentioned earlier, we expect Advanced Technologies to transition to early teens revenue growth in H2 with a significant drop-through benefit to operating profit. These Belfast savings and the operational leverage benefit from a growing semiconductor business give us confidence that we can grow operating profit in the second half on the prior year and finish the year broadly in line with last year, ignoring the impact of currency. Currency is a continued headwind in H2. And in the guidance here, we've assumed a U.S. dollar rate of 134 for the rest of the year, giving us a headwind for the full year of around GBP 5.5 million. The impact of changes in this rate will not -- in rates this year will not be very significant given we are largely hedged for the remainder of the year. But if sterling continues to weaken to the levels we've seen recently, certainly to $1.30 or below, we would not expect to see further FX headwind in next year's results. And with that, I'll hand back to Richard. Richard Tyson: Great. Thank you, Paul. So now, I'm going to walk you through some of our progress that we've made on our key strategic actions. This progress is giving us clear line of sight to margin improvement and future revenue growth. I'm going to start with Imaging & Analysis, the larger of our 2 divisions. The Imaging & Analysis division brings together all of our small-scale imaging, microscopy and camera product lines with similar customer bases and go-to-market strategies. It currently generates around 3/4 of the group revenue and the vast majority of the group's profit given its very good contribution margins with recent year -- recent full-year operating margin, operating in the range of 22% to 24%. I've already covered the first-half disruptions and our actions in response, and we're expecting a much stronger performance in the second half, supported by the self-help actions on cost and efficiency in Belfast and our usual improved H2 seasonality. So let's take a closer look at the 3 main markets in which we operate. In Materials Analysis, our products are ideal for analyzing the widest range of materials across multiple sectors. And although we started out in academia, we're attracting more commercial customers as companies seek to test properties of new materials and products and to carry out the quality test and failure analysis on those in production. With the constant demand for better and more sustainable materials, we anticipate a mid-single-digit growth over the medium term. We also support a strong and growing presence in the semiconductor market, where demand has been exceptionally strong in recent periods. We operate right across the life cycle, supporting customers at every stage from academic research to corporate R&D through to packaging, test and failure analysis. Significant long-term investments in security of supply and productivity are driving market opportunity for many years ahead. And our third key market in this division is Healthcare & Life Science. As you know, the global market has been subdued over the last couple of years following COVID with some customers overstocked. And although demand patterns have remained weak, they have been stable for a few periods now. And we're starting to see some early signs of improvement with book-to-bill now above 1. Order growth in the U.S. and China has returned, and we're making positive progress on rebuilding OEM relationships with another key order secured already in H2. As well as being well positioned in our main markets, we're also in a strong position geographically, globally diversified with good opportunity in all regions. In recent years, we shifted the weights of our markets with the U.S. increasing and China reducing, as we followed the best areas of opportunity for the business. At a group level, clearly, the short-term demand dynamic has been similar across all markets, but the medium-term opportunities in these 3 markets are exciting. And with the great products and technology we have in our portfolio, our competitive position, combined with our globally diverse business, we feel we are well placed to take advantage of the opportunities in the future. We've also been agile in responding to the immediate challenges. Given the changing trade and tariff circumstances in Q1, we took a number of specific actions to support customers and improve the resilience of the business. These included making adjustments to a few assembly lines. We accelerated a China for China project that was already underway to meet growing demand for locally produced products. Here, the plan was to produce Oxford Instruments detectors in China aligned with a number of our electron microscope partners who do the same. Our local team and supply partners successfully shipped our first products made in China for Chinese customers in the summer. And given the uncertain trading relationship between the U.S. and China and the proposed tariff levels, there was a risk to demand on our atomic force microscopes, which are made in California. This was likely to have a sizable impact on this product line. So we swiftly established assembly of AFM products at our WITec facility in Germany for European and Asian customers, a real achievement because we only started in April and the first products were shipped from Germany last week. Both of these initiatives should add to our competitive advantage as well as protecting and increasing market share. We're also now working on a further project to relocate some of our Nano indentation production from Zurich to High Wycombe during H2 to capitalize on our capabilities in this excellent facility. And as I touched on earlier, I'm also really proud of the U.S. team's response in such a volatile environment, bouncing back from the disruption in Q1, 11% order growth at the half year. That growth has been underpinned by commercial customers, notably in semiconductor, which we'll talk more about shortly. And they've also delivered 9% growth in service revenue, as we increase our focus on contract sales and improved utilization of our field service engineers. Given the historical performance of Andor in Belfast and the demand environment in Life Sciences, we spoke about this in June, the need to turn around the business performance. Over the summer, we took the unwelcome, but necessary decision to reduce the size of the workforce by 20%. And we will see the financial benefit of that flow into H2. In combination with other reductions, we expect to see around GBP 4 million worth of benefit in the second half. We've also continued with our operational program, which is delivering a 60% productivity uplift on our cameras work stream, reducing lead times and achieving GBP 4 million reduction in inventory, surpassing our GBP 2.5 million target. We've also reduced the backlog of customer repairs by 30% since January. All of that is helping us to rebuild our partnerships with OEMs. I'm pleased to say we've secured 2 new OEM positions and won back 1/3 since the start of the year by working closely to really understand the needs and deliver the product development that fits their requirement. Initial, but important steps forward. And we're working hard to reinforce the benefits of our leading technology with customers outlining the much stronger operational foundations we now have in place. And finally, the product line restructure we announced in June is complete, enabling us to focus on regaining market share and improving our margins. That is being helped by the launch of a new range of cameras, developed by the team in First Light Imaging that we acquired in 2024. This is just one of the important developments in the Imaging & Analysis new product lineup. Let's take a closer look at the examples of outputs of our technology investment, which is a key component of our organic growth strategy. New launches so far this year, including an extension to our atomic force microscope range, which is entering a new market segment, delivering our typical excellent standard of imaging at a more attractive price point for customers as well as being much simpler for the non-expert users to operate. We delivered this project in record time for OI, 9 months from start to finish. And the second one on the chart is a significantly updated benchtop Nuclear Magnetic Resonance instrument, which has enabled us to regain technology leadership in this space. This new model had an early success and was snapped up by GSK for one of its pharma production sites in the U.S. The third is that suite of new scientific cameras I just mentioned. And finally, a refresh of our Raman Microscope line, paired with a groundbreaking new spectrometer. Recognizing that our market-leading technology is and always will be key to our ongoing success, we are committed to a continued investment at our target level of 8% to 9% of revenue. Let's now turn to our Advanced Technologies division, where we've seen such strong order growth this year. Following the divestment of our NanoScience business, which in accounting terms in the results is held for sale, this division now mainly comprises our compound semiconductor business and Severn Beach here in the U.K., making large capital equipment for semiconductor development and fabrication. Though it does also include our much smaller components business, X-ray Technology in California. In this division, we focused on building the scale of Severn Beach, as we move from supporting academia to commercial customers, as they develop new chips and establish volume production activity. There is a big opportunity to improve margin as we improve efficiency and grow revenue to more than twice its current scale in the current facility. There is a second half weighting to revenue, fully covered by a strong order book, which will deliver improved margins. As you've already heard, Severn Beach has delivered excellent growth in orders over the half year, trading with strong momentum. So we'll take a look at what's driving that. The business is founded on 40 years plus of expertise in fabrication on compound semiconductor process development, positioning us really well to access the exciting growth potential in the compound semi market of between 10% to 20%. With the combination of our deep expertise and the significant investment we have made in our new facility at Severn Beach, we've positioned ourselves to target commercial customers developing next-generation technologies, including hyperscale data centers for AI and augmented reality devices. We're gaining traction, delivering 25% order growth in H1 and with a sixfold increase in orders from commercial production customers versus the first half of last year. That's supported by our world-class clean room, which is now fully operational, supporting growing number of customer samples and demonstrations. And this sampling forms an increasingly important part of the sales process, enabling us to work in partnership with commercial customers to develop and refine processes in our new clean room. We're also starting to see repeat orders from some of these larger customers, including Coherent, as they expand their data center presence in Europe and the U.S. As we grow our reach into commercial customers, we're also seeing more large systems and average order sizes increasing as well, as Paul mentioned. And as we grow the business, we're focused on doing so efficiently. The new facility is a great help with that, and we've seen a 12% uplift in labor efficiency so far this year. Our Operational Excellence program, which began in Belfast, is also now working at the facility to drive this forward further. And as I've already touched on, our growth is coming from key developments in technology, including AI and related developments in data center, power efficiency, quantum and augmented reality. We have focused our R&D investments in these areas of compound semiconductor technology, as we expect them to offer the strongest growth potential. Semiconductors are made up of many layers of materials. Our plasma equipment is used to etch that is to remove and deposit to add nanoscale layers of material to give the semiconductors their specific properties such as greater power efficiency or better optoelectronic properties. These so-called critical layer applications are where we have the most specialized technology, and we can, therefore, win orders from our target customers and command an improve value. The rapid progress in the AI ecosystem provides us with an exciting opportunity given our expertise in so many areas that are vital to its success. If I take you from left to right, we all know how important data centers are. Our equipment is used to fabricate the material required for the latest generation of optical laser transceivers and also gallium nitride devices, key to energy efficiency. Then there's also quantum technology development, too. Here, we're supporting a range of customers from leading academic institutions to start-ups and also some of the world's largest technology companies, as they take this technology from concept to reality. Finally, augmented reality is a further part of the future pathway for the AI ecosystem. And in a particularly nice example of our role, the team are playing in development of the technologies for tomorrow. In the diagram, you can see numerous different processes we are supporting the development of augmented reality glasses, which we have seen widely reported increase in investment in recent years, notably from the big U.S. technology players. We're excited about the potential for these areas and expect growth -- continued growth, as these rapidly advancing areas of technology continue. So despite the short-term disruption in H1, we have made good progress across both divisions, all meaning we remain confident, we are on track to our medium-term targets set out last year, which you can see on the right. Through swift and decisive action, we've protected our margin structure. As growth returns, we are well positioned for another step towards our 20% plus goal. In Imaging & Analysis, self-help cost and efficiency will support improvement in H2 and next year. And in Advanced Technologies, the success of the strategy is evidenced by more commercial customers and a strong order book, an opportunity pipeline supporting continued growth in revenue and margins. We're also continuing to invest significantly in the -- at the top end of our target range to maintain our technology leadership with new product launches directly from our R&D investment. Cash conversion is expected to return to target levels by the end of the year and net -- with the net proceeds of the sale from NanoScience will boost progress to our return on capital targets. And our balance sheet is strong. The capital allocation priorities mean we have already returned more than GBP 30 million to shareholders. With our forecast for strong future free cash flow, we have announced today a further GBP 50 million of share buybacks when the current program completes, taking the total program to GBP 100 million. So putting the short-term disruption earlier in this year behind us, I'm really pleased with the response from the team and actions on the building blocks to continued progress towards our targets. So to conclude, we go into the second half of the year with an improved position and good execution on strategic actions. I'm really proud of the way the teams have stepped up and found positive resolutions to unforeseen external headwinds, while we continue to make progress on our priorities. It is a challenging macro environment, but we've been navigating it with agility. That performance and the foundations we're building reinforce our confidence in the ability to deliver an improved performance in the second half. And with great people and fantastic technology, this is a good business, and it's improving well, as we put ourselves in the best position possible to deliver growth and the benefits of margin and improve value for our shareholders. Thanks very much for your attention. We'll now hand over to the room for Q&A and also online. If you're online, do post your question, and we can moderate that after we've dealt with the ones in the room. Thank you. Thomas Rands: Thomas Rands from Berenberg. Just 3 questions, if I may, please. First one is around Advanced Technologies and that very strong order momentum during Q1 and Q2. And you mentioned kind of momentum in Q3, any kind of extra color you can give on? Should we expect a similar sort of level of growth in Q3? Or is that maybe too much? And linked to that, you mentioned shipment delays. Can you just give us a bit more reasoning for what was internal or external kind of causes of that, please? I'll come on to the 2, if that makes it easy. Richard Tyson: Sure. Yes, no problem. So I mean, obviously, the order -- we're delighted with the order momentum in the first half. It's broad-based. There's no sort of one specific thing or customer or something like that that's driven it. It's across a range of customers, and it's been great. As I said, the pipeline continues to look really good and is building. So we're feeling good about the next sort of couple of years ahead as well for continued momentum in the business. And yes, there's reason to believe that Q3 could continue or certainly Q3, H2 could continue at least double-digit momentum. Do you want to pick up on the delayed piece? Paul Fry: Mainly customer readiness. There was one, which was just a logistical issue on our side, which is resolved, but it's mainly customer readiness just to receive the equipment and install it and so forth. So those are getting resolved during this half -- I think, it is quarter I should say. Thomas Rands: Small internal, but mainly external in place. Second one was just around capital allocation, and I guess, the increased share buyback. What is the M&A kind of pipeline looking like? And can you just remind us of kind of which key areas you're hoping to kind of find acquisitions? And then linked to that with the increase in the share buyback, which is kind of doubling great kind of number, was there any discussion at the Board to kind of have an even bigger than GBP 50 million? Or is that in time to come to that kind of balance between keeping your powder dry? Richard Tyson: Okay. Sure. So from the M&A perspective, the pipeline we're looking at remains interesting. The areas we've been focused on is really for I&A generally and expanding there, either their sort of reach principally into the U.S. and Europe and extending the sort of product and technology range we're able to offer to the similar customers. And in terms of the pipeline, part of the capital allocation discussion is we've kicked it pretty hard in the last few months, and we don't see any of the sort of key targets coming into sort of ability to transact in the near term, basically, Tom. So that plays into -- it's not a change in our view on M&A as a strategy and wanting to use it to support the group's development going forward, but in the near term, you look at the strong free cash flow, the strength in the balance sheet, and the Board's conclusion on that was it made sense to extend the program by the GBP 50 million. That broadly puts us -- if you think 12 to 18 months out, it's putting us back in a similar position in terms of M&A potential. So it's a sort of keeping optionality, I guess, over that time frame for the strategy. I think the other point is it's an active continual conversation effectively about the capital allocation balance. Thomas Rands: Good. And then just the third one, interesting to see where the kind of R&D and innovation is kind of going on Slide 19. Difficult to kind of for us as analysts to kind of gauge which one is exciting. Which of those kind of 4 kind of key products do you think has got the most potential from a revenue and profitability kind of point of view? Richard Tyson: Actually, I think that the sort of 4 that we put up there happen to be the ones that have come to market in the first half. They're all important moves in those product lines, I guess, to -- I wouldn't put any one of those as sort of head and shoulders above the rest. I think we've got some others coming in, in H2 that I think we're hoping might be sort of more comprehensive or significant. The imaging camera stuff is -- that's good. The First Light technology was a proper extension to our opportunity in camera imaging, and potentially, as we said on the chart, takes us into some newer spaces, and that did offer us the opportunity to secure a position with a new OEM. So that's in a development program. So we'll have to see how that moves forward, but that was certainly good. David Richard Farrell: David Farrell from Jefferies. Two questions from me. Firstly, if we think about Advanced Technologies, you referenced potentially doubling revenue with the existing facility you have. I think you've also talked about kind of better pricing in the order book. Can you just kind of talk about what needs to happen to get to the 10% to 12% operating margin target? Is that purely operational leverage? Or is there an assumption that the pricing is part of that progress? Richard Tyson: Sure. So there's a basic assumption that the mix sort of improves a bit over time, but nothing sort of major step up, David, and it's been doing that. So it's a continuation of what we've been achieving over the last few periods. And then, it's really all about ensuring we get the revenue growth and continuing the top line, which as we've shown is in really good shape. That will be another year of double-digit growth on top of the last 3. So I think the strategy has positioned us with a balance of opportunity across the different compounds. I mean, if one is down, others are still offering some great potential for us. So yes, I think it's really all mostly about the revenue growth and the leverage that comes from that. David Richard Farrell: And I think I'm right in saying [ Brooke ] had talked about signs of life in China last week. Maybe just get your views on what you're seeing in that market. Richard Tyson: So probably talk I&A for China, I think -- we mentioned, I think, in the release this morning the -- in general, a good data point was in the sort of life science and/or arena that we've seen the cameras return to some growth. So that was good in China. Overall, I think we need to do continuous certain actions like the product line that I mentioned, the sort of the entry-level detector. China for China is key to match it with our electron microscope partners. And that definitely gets the team excited out there, and there's an opportunity for selling that. So I think I'd sort of point to a few of those things, and overall dynamic for China is, as we said, we obviously made that deliberate reduction, but then, it's sort of stabilizing at the level that we've seen, and we're hoping for growth in there with I&A. Richard Paige: It's Richard Paige from Deutsche Numis. Three from me, please. Aligned to the former 2 questions on the AT business, the 25% order growth in the first half, can you give us just a bit of flavor? Because you've spoken about larger systems of price versus volume within that? And then on the pro forma numbers you've given, obviously, a couple of changes since October, I understand, on stranded costs, but can you just align us as to where we are and whether there's any opportunity post the NanoScience disposal of any more... Richard Tyson: Stranded costs... Richard Paige: To do that on stranded costs, yes, please. And then, obviously, it's only a month on since your trading update in October, but the second half bridge all important, could you just talk about visibility in the order book and timing of that, particularly given, obviously, the last month and a bit, we've been in a U.S. shutdown. Richard Tyson: Sure. Paul, how do you fancy doing the first 2, and I'll come back on the trade demand? Paul Fry: Yes. So... Richard Tyson: I mean, you talked a bit about the price-volume increasing. Paul Fry: Yes. I mean, certainly, order growth has been very strong. And, as I said, it's been both academia, as in Europe, in particular, as well as commercial systems. Both of those have led to -- have been around larger systems, more complex, multi-chamber, which has given us a higher ASP, but it does mean some longer lead times. But that's -- we don't think that's going to handicap us in terms of delivering a double-digit growth still in the second half in terms of revenue. On the pro forma, so yes, we've been stabilizing just in terms of what costs sit within the discontinued line versus sit within continuing operations. And so you probably saw some slight tweaks versus our -- what we set out in October. Hopefully, that will not move again now. Obviously, we've got the order to go through, but our auditors have had a look at those numbers so far. Stranded costs are where we expect them to be in terms of quantum, as we set out -- in fact, slightly less actually than we set out in June, so probably around 3.5% full year. And as we set out in June, we've got a line of sight on how to reduce those by at least half. Richard Tyson: So -- on trading, Rich? Yes. So I mean, basically, obviously, I&A is the key one where we said we need a Q3 order intake in line with Q2 momentum. So essentially, Q3 is running to expectations at the moment. So outlook forecasts are in line. P7 kind of moves as we'd anticipated going through the quarter. So yes, there's not a lot -- there's still another 2 sizable months to do, and P8 and P9 are sizeable months like they were in Q2, but the outlook is in line with that. So, hence, we're sort of moving along the way we need to, I guess, so far. The shutdown clearly has not been super helpful, as you can imagine, in the U.S. in period 7. And so there are a few specific orders where -- which we were expecting to land, and they've moved alongside not having somebody to place it basically. But I think we're -- that's obviously looking like it's normalizing, and we were expecting those in Q3. So we're -- we think that risk is obviously going away. Any more in the room? No? No more in the room. Any more online? Operator: Yes. We've got 1 question from Daniel Thornton from Shore Capital. Can you talk about the new product launches in I&A and whether these are going into industrial commercial labs as opposed to academia? Richard Tyson: Okay. Right. So well, the 4 that we talked about, what would we say about those? I guess -- so yes, it's a mix, actually. There is a few specific -- so Raman tends to be specifically academia, but not exclusively, but the majority of it, but actually, the other areas are targeted at more commercial customers in general that we mentioned this morning. The higher-end cameras are pretty high end and quite individual projects, but they're moving towards the commercial arena. Operator: No further questions from the webcast. So I'll just hand back to you, Richard, for closing remarks. Richard Tyson: Great. Well, thanks for coming along this morning. I appreciate the attention. And hopefully, we've managed to convey that we've been navigating a disrupted Q1 and a better Q2, so a difficult H1, but well positioned for a much improved H2, as well as making great progress on the strategic actions, which underpin our confidence in the medium-term targets. So thanks for listening this morning, and see you around. Okay.
Operator: Good morning. This is the Chorus Call conference operator. Welcome, and thank you for joining the Third Quarter 2025 INWIT Financial Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Fabio Ruffini, Strategy, M&A and Investor Relations Director of INWIT. Please go ahead, sir. Fabio Ruffini: Good morning, everyone, and thanks for joining us. With me today are Diego, INWIT General Manager; and Emilia, CFO. Before we begin, allow me to draw your attention to the safe harbor statement on Page 2. As usual, following a brief presentation, we will be happy to take your questions. Over to you, Diego. Diego Galli: Thank you, Fabio, and good morning, everyone. It's a difficult day for INWIT shares following the updated growth expectation in the '26-2030 period. It's important for us to answer the key questions you may have and lay out the priorities going forward. We expected to grow at the low end of the target range with revenues at about 4% compounded growth rate, more than 50% of which is contractually committed via inflation and Anchor MSAs alone. The update impacts noncommitted sources of revenues, densification outdoor and indoor, which are postponed. We are also factoring in slightly lower 2021 inflation, up 1.5%. We acknowledge the difficult market environment with protracted financial challenges of Italian telco sector, focused on maximizing efficiency, limiting investments to the bare minimum. In the previous outlook, we implicitly assumed that over the course of 2025, there would have been initial signs of an improved market structure following transformative transactions in 2024. This improvement has yet to materialize. Having said that, Q3 results confirm the resilience of the business, expanding all industrial and financial metrics while investing in critical infrastructure from NextGenerationEU in rural areas to Roma Smart City. Today, it's also important to affirm the structural outlook for digital infrastructure investments in Italy with a need to catch up since infrastructure investments cannot be postponed indefinitely. INWIT plays in a concentrated market with high barriers to entry, holding 2 competitive advantages, the best assets and locations in the market and a true industrial approach to deploying assets from the ground up. In this market context, we are conscious of our role as an enabler of investments and a driver of efficiency for operators, facilitating densification through sharing economics. This will be even more important in case of additional coverage obligations currently being discussed, linked to the extension of mobile frequency post '29. Moving to main trends of the quarter on Page 4. The key figures for the quarter, revenue growth by 4.1%, EBITDA after lease up by 4.4% with margin up 73%. Recurring cash flow up EUR 170 million with 69% cash conversion. In October, we completed the first tranche of EUR 300 million share buyback and successfully issued the company's first sustainability-linked bond. In summary, INWIT continues to be resilient in a challenging industry environment, acting in a proactive way on the levers under our control already to facilitate further network densification. Now I will turn it over to Emilia for a more detailed review of the results. Emilia Trudu: Thank you, Diego, and good morning, everyone. On Page 5, the focus is on new towers. Q3 displays a continued high volume of new sites, 180 across 2 programs, MSA commitment for TIM and Fastweb-Vodafone and the 5G NextGenerationEU program, where we are on track with the milestones. New towers are expected to continue to be the main network requirement of our clients due to data traffic growth, increasing capacity needs, the transition to 5G in suburban areas and the need to cover approximately 9,000 kilometers of roads and railways currently lacking adequate quality connectivity. Moving to total costs on Page 6. 670 new PoPs were added during the quarter, bringing the total 9 months figure to more than 2,000. This is consistent with full year target of approximately 2,500 new PoPs. Of the new additions, 260 PoPs were delivered to TIM and Fastweb-Vodafone and 410 to other clients, further diversifying INWIT's client base. Within other clients, we recorded steady pace with other MNOs, Iliad in particular, stable adds from FWA and solid demand from utility companies for IoT gateways for smart grid applications. Next, on Page 7, we review smart infrastructure. Revenues in the first quarter were up double-digit year-on-year to more than EUR 22 million. Growth was driven by the addition of 30 new DAS locations across multiple verticals and higher tenancy ratio across the more than 700 locations we serve. INWIT covers a growing portfolio of critical infrastructure assets. Latest additions include the Roma Smart City project, one of the largest in Europe, DAS and tunnels for the upcoming Winter Olympic Games between Milan and Cortina and international corridors connecting Italy to France and Austria and Germany. Looking ahead, demand for dedicated indoor connectivity is expected to remain structurally solid across verticals, including transportation, hospitality, healthcare and leisure. As you know, revenues come from 2 client categories: MNOs based on their ability to fund additional coverage projects via recurring fees and location owners where demand is solid, though primarily based on project-based revenues. Next, we review the P&L. Revenue growth stood at 4.1%, in line with the 2025 guidance midpoint. The drivers, as mentioned, were new PoP additions for Anchors and OLOs as well as double-digit growth in smart infrastructure and inflation at plus 0.8%. EBITDA margin remained stable at 91.3%, while the main efficiency lever continues to be lease costs. 360 real estate transactions in the quarter supported EBITDA after lease's growth of 4.4% and margin expansion from 72.8% to 73%. This partially offset the impact on cost of inflation and the higher asset base for which we pay lease costs. Lastly, net income increased by 5.9% to EUR 92 million, reflecting the expected trends in D&A, stable interest expenses and taxes. Moving to the cash flow on Page 9. Recurring free cash flow amounted to EUR 170 million in the quarter or 69% cash conversion. In the quarter, we recorded limited recurring CapEx, no cash taxes, which are due in Q2 and Q4, positive net working capital in line with full year '25 guidance. Lease payments were higher year-on-year, mainly due to the end of the VAT split payment mechanism. This is in line with full year expectations of about EUR 215 million lease cash out, including the effect of VAT split payment. Reported leverage stood at 5x net debt to EBITDA, reflecting the completion of the first tranche of EUR 300 million of share buyback plan with approximately EUR 180 million in the quarter. Additionally, we're pleased to report that in October, we completed 2 debt capital market transactions with the first sustainability-linked bond issuance and the partial buyback of the 2026 outstanding notes. This further strengthened INWIT's debt structure, extending its maturity profile and confirming solid market interest. With this, I hand it back to Diego. Thank you. Diego Galli: Thank you, Emilia. On Page 10, the updated expectations for 2026-2030. Growth sits at the low end of the range with an impact of about EUR 15 million to EUR 25 million progressively versus the midpoint revenues. This is driven by the lower expectations for non-committed revenues, mostly densification projects indoor and outdoor, which we expect to be postponed or reduced by our main clients. As you know, we invest on the basis of committed revenue streams, so a project postponement also means a delay or reduction in CapEx. This impact is partially factored in, in our updated leverage guidance. Together with a mix and phasing of industrial KPIs, there will be a more granular update with full year '25 results. Through 2030, we expect to deliver 4% revenue growth per annum, of which more than 50% is contractually committed, and progressive margin expansion and leverage reduction. Committed revenues come from inflation, more than 9% combined over the next 5 years, MSA contracts, particularly new PoPs on new sites and the solar energy projects and all this provides a contractually secured path to growth. Non-committed growth is less than 50% of total growth and comes from OLOs and additional densification revenues, both outdoor and indoor. Today, we are also confirming the dividend policy and capital allocation announced this past March. A few concluding remarks in the next slides. Today's presentation reflects an updated macro and industry view, stemming from current industry challenges. In this context, INWIT is expected to grow at 4% for revenues and 5% for margin. In any case, we continue to believe on the structural outlook for digital infrastructure in Italy, which is confirmed there is a need to catch up, which is an opportunity. INWIT continues to focus on all levers under our control, both on revenues and costs, affirming our role of an efficiency driver for operators, facilitating densification through sharing economics. With this, I thank you, and we are now ready for the Q&A session. Operator: [Operator Instructions] First question is from Roshan Ranjit, Deutsche Bank. Roshan Ranjit: I guess my question is around the evolving Italian landscape, which is something I think you've talked about now for the last few quarters. And if we think across Europe, what we've seen is where markets have evolved, there has been these behavioral remedies and the want for further densification of networks. So I guess my question is, how easy is that to apply to the Italian market given the already high tenancy ratios and also the kind of more restrictive EM limits, which whilst we have seen the rules change, we haven't actually seen any practical changes in the emission limits leading into kind of more PoPs in smaller areas. So anything you could say around how the evolving MNO landscape can benefit you even though that visibility is maybe a bit more limited than before? Diego Galli: Thank you, Roshan. Yes, I think that the key point is that in Italy, the digitalization and 5G rollout is behind all peers and European and international standards. There is a need to catch up. And this is recognized by all operators in the market. So there is a significant need for additional densification, both outdoor and indoor. This need currently goes -- can I say, is not materialized because there are financial constraints in terms of budget limitation and return on investments. We think that the market has evolved already in 2024 in the right direction. That's not been enough to continue to evolve towards a more sustainable market. And also, let me say, initiatives and the consensus around the new license renewals in 2029, which there is a scenario where the renewal is at no limited cost against commitment to invest, these kind of things do recognize the need to invest, do recognize the need for a more sustainable industry and go absolutely in the right direction. In case of densification, our role is clearly to do it in an efficient manner through the sharing economics and through the industrial capabilities. So in short, the market is behind the industry. There is a need of densification and INWIT is a key player to benefit from it building in an efficient manner, shared infrastructure, outdoor and indoor. Roshan Ranjit: Great. If I could just follow up, you -- I think you -- in terms of the densification, you've kind of given this target, I think it's 2.6x by 2030. So is that -- does that require an easing or further easing of any regulation? Or is that under the current regime? Diego Galli: Yes. No, there is no impact from regulation. This is consistent with current regulation. Operator: Next question is from Fabio Pavan, Mediobanca. Fabio Pavan: I would have first a follow-up on what you were saying, Diego, about the renewal of the license. So do you have any visibility on how long this discussion may take? Do you have already managed to discuss with regulators about this potential new scenario? And then the question is, clearly, you have managed to derisk the target and providing us a very solid equity story. What could be, if I may, upside from here in your view? So higher demand, which at some point, given 5G stand-alone coverage is very low rather than deciding to speed up in capturing opportunities in adjacent businesses. So it's open question, I leave that to you. Diego Galli: On the frequencies on the licenses, discussions are ongoing. I think there have been, let me call, public declaration from the regulator, which have been supporting the scenario. So I think there is a process on forming an overall consensus on this scenario that, again, from our perspective, makes a lot of sense to the benefit of operators and the entire value chain, the entire industry. In terms of upside, yes, I think that the updated guidance reflects timing in the development of the industry towards what we just call more densification. That means higher demand, higher number of new towers to densify -- to cope with the additional capacity needs and the additional data traffic in urban areas, additional towers to densify the suburban areas as soon as 5G stand-alone advances and new towers and dedicated coverage for the transport corridors, rail and roads where the quality of connectivity is clearly requires strong improvement. On top of that, indoor, there are thousands of locations where connectivity is not up to the use of data and digital needs. So that's, I would say, is the industrial key upside in terms of higher demand from the operators to deploy a digital ecosystem to advance on 5G and this again means more towers, more point of presence, more inter coverage. That's our core business that in these days, we do see under pressure because of the budget limitations. But going forward, we do see that investments cannot be postponed forever. Operator: Next question is from Rohit Modi, Citi. Rohit Modi: Some of them have been answered. So just one question, basically clarification on the committed revenues baked into the guidance. If I remember correctly, at start of the year, you mentioned more than 60% of the guidance is based on the committed revenues you have with the operators. Now slide shows that it's more than 50%. Just trying to understand if there's any change in terms of your committed revenue profile there. Diego Galli: Yes. No, thanks for the question. Yes, we -- the committed revenues made up of inflation and the MSA agreements continued as planned, and that's more than 50% of the overall growth. Where the -- we have updated our view is on the noncommitted bit that, again, is related to the to the densification, so the additional point of preference, both outdoor and indoor. In the business plan, in the guidance, we had about 1,000 additional towers, which were not committed. We think that, that is the bit that will take more time to materialize. And by 2030, we think there will be probably around 400 towers less, and this accounts for about EUR 10 million. On top of that, the outdoor -- the indoor densification, we have been developing this market growing very fast. But again, there are budget constraints from the operators at this stage, and we do expect the remaining bit to come from lower indoor location. We would expect that about 20% lower location compared to the March guidance. So these are the 2 main bits, towers and indoor cover solution projects. Operator: Next question is from Andrea Devita, Intesa Sanpaolo. Andrea Devita: So my question is basically on the change in FY '30 guidance because at the end, I clearly understand that on 2026, you have visibility of lower revenues. But I just want to understand whether you just applied, let's say, a mechanical new baseline for 2030, assuming that no catch-up eventually takes place. So 6 months ago, you had visibility on 2030 and now it is lower. Just whether it is structurally or you now do not assume that any catch-up, which should have taken place in 2025 will not take place ever in the next 4 years? Diego Galli: Yes. Yes, I think that as I shared before, what is -- we strongly believe in the need for investments in the sector, in the industry, which has been under-invested for a long time, and that's not only our view. This is the view overall in the market, in the industry as reflected in statistics. The industry has been under pressure and is under pressure in terms of financial return, and that has reduced the investments. In 2024, the industry has started changing with the telecom separation, the Fastweb-Vodafone transaction. We think that overall, the industry has gone into the right direction. And our assumption was that already starting from the end of 2025 with the impact in 2026, there would have been an acceleration of investments. Now talking with customers, in terms of commercial discussions, planning the next year activities, the rollout plan, securing locations that's clear that the emphasis on -- from the customers is on efficiency. So there is still a short-term focus on recovering efficiency on optimizing cost. And clearly, our growth is reflected in rental fees to customers, which means additional OpEx for customers. And this then faces the budget constraints of our customers. So the fundamentals are -- and the fundamental needs for additional investments are confirmed from our point of view. The timing is different. And this impacts for sure by 2026. But then we think that the -- I can say the phase, the timing for the development will take anyway a little bit longer. We don't see at this stage the view of an acceleration, which will compensate the initial shortfall. So in short, term impacted by budget limitation, medium, long-term growth with potential upside to what we have embedded in the current guidance update, growth coming from densification outdoor and indoor. Operator: Next question is from Oba Agboola from UBS. Obaloluwa Agboola: Can you hear me? Fabio Ruffini: Yes. Obaloluwa Agboola: Just on what you're hearing from customers, you mentioned customers are looking to be more efficient, so postponing investment. Are you hearing anything in terms of potential renegotiation of contracts? I know this is something Fastweb-Vodafone mentioned on the efficiency side. So just any update on how you see that? Diego Galli: Yes. We -- Clearly, we continue to talk with customers on recurring on an ongoing basis. We believe the MSA is a strong contract, creates value, has been creating and creates value for all parties involved. So we are very happy to continue to discuss with customers about potential development, additional investments to create value for all. And on the basis of additional investment cycle, we -- our mission is to create efficiency to make most -- the best effort, again, to be efficient and to share the benefits of efficiency with our customers. So that's our focus. The MSA is -- the MSA. Operator: Next question is from Fernando Cordero, Santander. Fernando Cordero: It's basically related on the guidance, and you have been updating to the low end of the previous revenue guidance. And this low end is falling to the rest of the main lines of the P&L. And what I'm a little bit or what I would want to understand is why you have maintained the EBITDA and EBITDAaL margins in your updated guidance despite the fact that, for example, in the third quarter, we have seen the operational leverage in your business slowing a bit, particularly on EBITDAaL side. So in that sense, are you reflecting in the updated guidance any increase -- any effort increase in buying land? Just to understand why the update on revenues is not impacting margins? Diego Galli: Thanks for the question. Overall, on the cost side, we continue our plans. And overall, the real estate programs and activities are on track. There is -- in the quarter, there is a specific topic in terms of comparison against last year same quarter. But overall, the ground lease cost is on track. Therefore, we are confirming our view on that. Operator: Next question is from Giorgio Tavolini, Intermonte SIM. Giorgio Tavolini: Two questions, please. The first one is on M&A. In particular, we recently heard about rumors on a potential tie-up between Iliad and Wind3. But more in general, we know your position regarding consolidation, which is a neutral to positive event. But I was wondering if you can add more color on Cellnex remarks regarding the fact that this kind of consolidation may temporarily weigh on tower growth cash flow due to the higher flexibility granted to the operators during the integration phase. So in the very short term, should be negative event then in -- over the long -- medium to long run should be pretty positive given the more investments and more network upgrades and better financial shape of the merged entity. The second question is on 5G stand-alone. Is it to assume to expect that the near-term investments from the MNOs will mainly prioritize active equipment upgrades on existing sites rather than, let's say, new passive infrastructure, new sites for the network densification? Diego Galli: Thanks, Giorgio. Yes, on potential consolidation, I think that the consolidation is a mean to get to a more sustainable industry structure and to enable and abilitate additional investments. So yes, I believe that the consolidation making the market more sustainable will drive additional investments. And so there is a positive impact on the overall value chain, including the tower companies in terms of additional infrastructure. When talking about consolidation, it's also important to highlight our MSA protections in terms of all or nothing and active sharing protection. With regards to the second point in terms of active versus passive, yes, what you say makes sense. But what is important to highlight is that the active upgrade then drives the need for additional point of presence. So the sequence is quite short between one and the other. And the key point is, again, is investment for network improvement on clearly both radio active and passive. That's what is needed in the market. And we think it will develop even if a little bit later than originally expected. Operator: Next question is from Milo Silvestre, Equita. Milo Silvestre: I have 2 questions. The first one concerning the recent, let's say, agreement between Cellnex and Vodafone on 1k hospitalities. So here, if you can elaborate on that point and if it may have, say, an impact on your expected discretionary investments? And the second one, considering the limited investment momentum on telco infrastructure, if we may expect an acceleration in net new verticals such as data center? Diego Galli: Yes. Maybe come back to the second part of the question, I'm not sure I fully understood. The -- yes, no, the announcement is related to a renewal agreement, and there is no impact on INWIT. Again, let me remind the MSA features, which include the all or nothing clauses and the preferred supplier clause as well. So no impact on us. The second part of the question, sorry, if you can kindly repeat. Milo Silvestre: Yes. And if, let's say, considering the weak momentum on new tower or densification investments, if you are, let's say, considering entering new verticals such as data center? Diego Galli: Okay. Yes, thanks. As part of our strategic plan, we have 2 potential areas of development where we think our companies can make a difference consistently with the current existing model. One of those is the edge data center, the far edge. So clearly different from the hyperscaler data center, which is a different business. But when the computing capacity is needed at the edge of the network, then clearly, we have the infrastructure, which is distributed in the country, which is connected with fiber and energy. So we have both the infrastructure and the business model, which may allow some investments on edge far data center. The second -- let me take the opportunity to mention also the second area, which is the involvement of INWIT tower companies in the active equipment as a player as a neutral host to own and run and manage the active equipment, again, to provide a more efficient operating model and to bring additional efficiency to the operators. These are 2 areas of potential developments, of potential upside for the company based on the strength of our financial position and the ability to invest and based on the industrial capabilities that we do have. So in short, yes, potential opportunities for the medium term. Operator: Next question is from Riccardo Romiati, Aurelia. Unknown Analyst: Just one. Given that the lower growth from noncommitted revenues probably also implies slightly lower CapEx, does this, together with the lower share price, provide an opportunity for further share buyback? And how do you think in general about shareholder remuneration going forward? Diego Galli: Yes. Thanks for the question. We have the EUR 400 million buyback program already approved, EUR 300 million just been finalized. We have EUR 100 million for the next month. And actually for Q1 and in a few days, in a couple of weeks, we will have the special dividends for EUR 200 million. So that's the current shareholder remuneration, and that shows the way we do think about shareholder remuneration, which is a mix of dividend increase and topped up by either buyback or special dividends, and that's the way we will continue to assess the shareholder remuneration. Unknown Analyst: And sorry, is the share price today, do you see that as an opportunity to further boost this? Diego Galli: Yes, absolutely. I think it's -- if I may, clearly, let me say that I strongly believe the current share price does not reflect the fundamental value of the company, the solidity of the business model, the cash generation and the ability to invest and to fuel further growth. So I -- for sure, the share price is below the fair value of the company. Operator: Next question is from Graham Hunt from Jefferies. Graham Hunt: Just on what could see the industrial backdrop improve. Is it just -- is it that we're just waiting for consolidation really? Or could you maybe expand on other situations which maybe could see your customers expand their budgets a little bit or we could see a pickup in growth? Just trying to explore different scenarios there. And on that, we've seen one consolidation, and we are still waiting for any improvement. So just wondering sort of if you could reflect on why that is? Why are we not seeing a pickup from Vodafone-Fastweb? Diego Galli: Yes. I think that the industry may improve across different levers. Starting from the top line, I think the pricing has been a little bit more rational in the last quarters, and that's clearly a key to support the industry a little bit of rationalization on consumer and there is the growth in enterprise, which is a significant opportunity for the telco industry to grow revenue. That's -- I think it's considering the overall digitalization environment, I think it's an opportunity which is at the beginning and operators will be in the condition to materialize in the next years. On cost and investments, let me mention that the energy cost is particularly high on the industry, and there are initiatives to support lower cost on the energy front. And the other element that I did mention before is about the frequency and the renewal of the frequency with no limited cost in exchange of investments together with additional investments and coverage commitments will be a way to support the industry to get better returns and to start the investment cycle and the positive cycles of investments, services and top line growth. Operator: Mr. Ruffini, gentlemen, there are no more questions registered at this time. Fabio Ruffini: In this case, thank you, everyone, for connecting. Have a good rest of the day. Diego Galli: Thank you. Operator: Ladies and gentlemen, thank you for joining. The conference is now over. You may now disconnect.
Operator: Welcome to the K&S Second Quarter 2025 Earnings Call. I will now hand over to Julia from K&S for some technical notes. Julia Bock: Ladies and gentlemen, also from my side, welcome to our call. We hope you've had the chance to review our posted slides as well as our Q3 documents available on our website. After the opening remarks by Christian, we will jump directly into the Q&A session. Some technical notes as always. Please refer to our disclaimer on Page 2 of the presentation. And then a note on data privacy. Please be aware that the Teams session will be recorded, webcasted and available as an audio replay on our home page afterwards. People who ask a question in the Teams session should be clear that they are switching on their camera and microphone, they agree to the recording and replay of video and audio sequences. Now I'd like to hand over to Christian, our CEO, for the opening remarks. Christian Faitz: Thank you, Julia, and welcome from my side as well. Starting with the quarter. Third quarter EBITDA was above the prior year quarter. Firstly, this was due to better prices in both customer segments. Last year's EBITDA was affected by a drawdown in inventories, which did not occur this year. This resulted in a positive EBITDA effect. Thirdly, our hedging brought us to a total positive FX effect, which was better than last year. Q3 free cash flow could also be increased from EUR 24 million to EUR 37 million. Regarding our full year guidance, we confirm the midpoint of our previous guidance range and now expect EBITDA to be between EUR 570 million and EUR 630 million. The expectation of a slightly positive free cash flow is confirmed as well. For the midpoint of the EBITDA guidance, we assume that the average price level currently achieved in all regions and for all product groups remains stable during the rest of the year. This would result in a full year ASP of EUR 330. Although we are highly committed regarding our potash deliveries until the end of the year, we still have some flexibility regarding the exact product mix. Furthermore, we assume normal winter weather, normal production as well as a U.S. dollar-euro exchange rate of $1.18 and a gas price at EUR 36 for 30% open position in Q4. We would reach the upper or lower end if these factors in combination develop in our favor or against us. I'm looking forward to answering your questions together with my colleagues, Jens and Julia. And I will now hand over to the operator to start the Q&A session. Operator: [Operator Instructions] And this brings to our first question from Christian. Christian Faitz: Christian Faitz here at Kepler Cheuvreux. Christian, Jens and Julia and team, congrats on the results in a difficult time, low season period. A couple of questions, please. So my first question would be your D&A in Q3 was significantly lower than in previous quarters. I assume this is in context of the impairment you took for Q2, correct? And which D&A level should we model in going forward? Christian Meyer: Yes. Christian, you're absolutely right. The lower D&A is based on the impairment that we had in Q2. So the base level now is much lower. So the current level that you could calculate for the other quarters. Christian Faitz: Okay. Great. And my second question is, any news regarding the progression in talks about the tailing pile coverings. Jens Keuthen: So we postponed the roundtable discussions and now went further in the smaller group with the local municipality and the citizens initiative. And the aim now is to focus on reliable measures which we can implement and also put in our procedural applications. And yes, now the discussions are ongoing, and we are still confident that we will find a solution. Christian Faitz: This is for Neuhof, I assume. Jens Keuthen: It is for Neuhof, yes. Christian Faitz: Okay. And last question, what is the current run rate of annual production in Bethune? And where do you see Bethune gearing up to by the end of '26 in terms of production? Christian Meyer: So in the current level, we expect a little bit more than 2.2 million. And in the next year, we have a big maintenance, and that's why we have a little bit more than this year, but not much more in the next year. But that's based on the long maintenance period. That's every 3 years. Julia Bock: And you know that we always ramp by 100,000 to 150,000 tonnes and next year will probably rather be a 100,000 tonnes year. Operator: Our next question comes from Sebastian. Sebastian Bray: Sebastian Bray from Berenberg Bank. I have two questions, please. The first is on the volume outlook for the group as a whole for '26. Q3, it looks as if the group quite wisely cut some of the more commoditized volumes and went more for specialty. But I'm thinking about implications for next year. We have, as you had mentioned earlier to Christian, a little bit of maintenance at Bethune. Is 7.4 million tonnes a reasonable baseline? Or are there any one-off effects? And how do you think of that is for agriculture? And how do you think about volume growth, if any, moving into '26? Because if we have some maintenance at Bethune, additional ramp-up of specialties at the MOP market, let's say, remains a bit more challenging, is there any volume growth at the group level in the year? Christian Meyer: Yes, Sebastian, what's very important is the final volume finally depends on the product mix. If we have some more specialties compared to MOP, than the volumes are a little bit lower. But from today's perspective, we expect a little bit more volumes for the next year. So growth of at least around about 100,000 tonnes. Sebastian Bray: That's helpful. And can I ask about the salt business. The pricing has been very helpful over the last few years I think it is safe to say. Are there any signs that the pricing for de-icing salt or salt-like products more broadly is starting to flatten out or in some places, decline or that's not the case? Christian Faitz: From today's perspective, not really. That finally depends on the weather conditions in the winter. If it's a pretty warm winter then it could be that's a little bit lower. But you should keep in mind that we are selling de-icing volumes over the whole year. So more than 1 million tonne is already sold. And so the rest finally depends on the weather conditions. If it's pretty cold, then the prices are better; if it's warm, then a little bit lower. But the general price level should be the same. Operator: Our next question comes from the line of Michael. Michael Schaefer: This is Mike Schaefer speaking from ODDO BHF. Two questions from my side. The first one is more on the general market conditions in the potash market. Initially, into '25, we discussed a lot about production curtailments in Russia and Belorussia. So obviously helping to bring potash prices up. But if we look into rail shipment statistics year-to-date October, we see that basically volumes are up 10%. So my question is, how do you see, let's say, the supply side from Russia? And how we should think about let's say, going into '26 from this source and what this is doing to the potash market environment in general in '26 from your perspective? This is my first question. Christian Meyer: Yes, with Belarus and Russia, they are back on the pre-war levels and increased their volumes a little bit. But the main or the most important answer is that there's the demand. And that regardless of these additional volumes, we saw increasing prices, for example, also for the cross-border deliveries to China. But also if you have a look to Brazil over the last 12 months, we have a much higher level in Brazil. And for the next year, we will see in the spring season when the demand comes from every region globally that we will see how tight the market is. So we expect still a good demand for next year. And if the supply -- we will see if the supply is able to fulfill this demand in the spring season. Michael Schaefer: Okay. Second question is more related to K&S specifically on the major building blocks for your cost items, major cost items in '26. So can you just remind us on how you -- you mentioned the EUR 36 price assumption for natural gas in the fourth quarter. So -- but how in general should we think about those energy costs and personnel, what to expect in '26 compared to '25? Christian Meyer: Yes. In total, we expect that the cost level will be more or less stable. With regard to the personnel cost, you should keep in mind that the bargaining agreement was in place since the second quarter of this year. So the next year, we have, in the first quarter, a higher level compared to this year, but the bargaining agreement will run until the end of the next year. So there will be no additional increases. And with gas, we already hedged around about 70% for our gas consumption, and that's a little bit below EUR 40 of the hedging position. Operator: Our next question comes from the line of Tristan. Tristan Lamotte: Tristan Lamotte, Deutsche Bank. I'm just wondering about Q4 and your ASP assumptions. I think you said EUR 330 for the full year, which implies quite a drop-off in Q4 versus Q3 even if you consider FX. So I was wondering if you could maybe talk through that. Christian Faitz: Yes. So what's very important, I mentioned that we expect stable market prices from the perspective of today. We are at a peak, for example, with the Brazilian prices. That's also a little bit weaker currently. And you should keep in mind that the FX effects compared to H1 will also be -- is included in our calculation. And the third thing that we have some seasonality with regard to the product mix. So mathematically, that results finally in this EUR 330 a tonne. Tristan Lamotte: And maybe second, I was wondering if you could maybe comment on where you think inventory levels are at the moment in potash in the different regions. Christian Meyer: Yes. In the different regions, we see more or less normal levels if you have a look to Europe, U.S. and Brazil. If we have a look to China, there, we see that the prices for cross-border deliveries increased and that the port stocks are below the strategic levels of 3 million. They are around about 2 million. And so at the end, there are normal levels in total, maybe in total, a little bit lower than the normal levels if you see the global market. Operator: [Operator Instructions] This brings us to the next question of Angelina. Angelina Glazova: I will have two. The first one is specifically on Brazil and the current market environment. Could you give us a bit more color as to what you're seeing on that market? Because we know that potash is relatively more affordable compared to other micronutrients right now and demand has generally been good from Brazil, but still the farmers have seen some challenges from the economic side, and their availability to credit has become more difficult. So have you seen any impact on your operations from that? And how are you expecting the situation to develop in terms of demand in Brazil due to this? Christian Meyer: Yes. Yes, you're absolutely right. The general conditions for the farmers are still good. And from our perspective, we optimize our regional mix. So we have some better netbacks in some other regions currently. So we don't bring too much volume to Brazil. But the volumes that we are finally export to Brazil, there, we look pretty close on the payments and that we secure or ensure our receivables. So from our perspective, we don't see a risk for us. And the general farmer conditions are pretty good. So at the end, that's more, yes, depending on different customers that we have a closer look, but in total, we don't see a risk for us. Angelina Glazova: Understood. And my second question is a bit of a follow-up to Sebastian's questions regarding volumes. So one of the things that we've seen, I think, over the course of the past few quarters, but particularly in Q3, is you're shifting to more higher margin product mix. And I just wanted to understand to what extent do you have further potential to ship your product mix that way? Is it mostly down? Or you still think that there is some addition you can make in terms of SOP or maybe more broadly in terms of premium products? Christian Meyer: Currently, we are very happy with the product mix, but there's not much room for more specialties currently. Operator: Our next question comes from the line of Lisa. Lisa Hortense De Neve: This is Lisa De Neve from Morgan Stanley. I have one question. Against your expectation for rising potash demand in 2026, as you just stated, and your comment that Chinese potash inventory is maybe slightly below their normal strategic levels and their domestic production in China being quite restricted. I mean what are your qualitative expectations for the timing of the Chinese potash contract negotiations? And to which extent do you see potential for the price to be settled higher year-on-year? Christian Meyer: What's very important to keep in mind the point I already addressed and you just also addressed, we are not part of the negotiations. That's very important to understand. For this year, everybody expect that it won't take too long that we see a Chinese contract compared to this year. So I can't imagine that we will see that in the summer or in the late spring, it should be earlier, but the rumor is in the market, but we are not at the table. Operator: And if there are no more questions, we will conclude the call. Christian Meyer: Okay. Yes. Thanks for your questions, and hope to see you on the road in the next weeks, and have a good day. Julia Bock: Thank you. Bye-bye. Christian Meyer: Bye. Jens Keuthen: Thank you. Bye-bye. Operator: This concludes today's call. Thank you, and have a great day.
Operator: Good day, ladies and gentlemen. Thank you for standing by, and welcome to the Health In Tech Third Quarter of 2025 Earnings Conference Call. [Operator Instructions] As a reminder, we are recording today's call. If you have any objections, you may disconnect at this time. Now I will turn the call over to Lori Babcock, Chief of Staff of the company. Ms. Babcock, please proceed. Lori Babcock: Thank you, operator, and hello, everyone. Welcome to the Health In Tech's Third Quarter of 2025 Earnings Conference Call. Joining us today are Mr. Tim Johnson, Chief Executive Officer; Mr. Dustin Plantholt, Chief AI and Marketing Officer; and Ms. Julia Qian, Chief Financial Officer. Full details of our results can be found in our earnings press release and in our related Form 10-Q to be filed with the SEC. These documents will be available on our Investor Relations website at healthintech.investorroom.com. As a reminder, today's call is being recorded, and a replay will be available on our IR website as well. Before we continue, please note that today's discussion includes forward-looking statements made pursuant to the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements are based on information available as of today and involve risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed or implied, including those discussed in our quarterly report on Form 10-Q for the period ended September 30, 2025, to be filed with the SEC. Please review the forward-looking and cautionary statements section at the end of our earnings release for various factors that could cause actual results to differ materially from forward-looking statements made during our call today. We undertake no obligation to update and expressly disclaim the obligation to update these forward-looking statements to reflect events or circumstances after the date of this call or to reflect new information of the occurrence of unanticipated events. We may also refer to certain financial measures not in accordance with generally accepted accounting principles, such as adjusted EBITDA for comparison purpose only. Our GAAP results and reconciliations of GAAP to non-GAAP measures can be found in our earnings press release. With that, I now turn the call over to our CEO, Mr. Tim Johnson. Tim? Tim Johnson: Thank you, and good afternoon, everyone. I appreciate you joining us today. I'm pleased to share our third quarter results which were well aligned with our expectations as we continue to invest in strategic channel partners and rapidly expand our distribution network. At a high level, we delivered another quarter of strong revenue growth. Revenue reached $8.5 million, up from 90% year-over-year, bringing the 9-month revenue to $25.8 million compared to $19.5 million for the full year of 2024. This momentum was driven by the continued expansion of our sales distribution network. The number of brokers TPAs and agencies grew to 849 partners, up 57% year-over-year. As more brokers and agencies adopt our eDIYBS platform, we're seeing more quotes bound and sold in real time. By the end of the third quarter, the number of billed enrolled employees reached 25,240, an increase of 7,654 employees year-over-year. The third quarter is typically a development and deployment period for us, a time to introduce new programs and features. Most notably, we completed beta testing and officially launched the large employer underwriting capability with our enhanced eDIYBS platform. This is a major milestone that scales our reached across the full employer spectrum, positioning Health In Tech as a true insurance marketplace for business of all sizes. The new capability enables brokers to generate fully bindable quotes for groups of 150 more employees and as little as 2 weeks compared to the industry norm of about 3 months. This advancement dramatically expands our addressable market and establishes Health In Tech among the few platforms serving both small and large employers seamlessly. Soon after the launch, we showcased this innovation at the SIIA National Conference in October 2025, one of the most influential events in the self-insurance industry. Our participation there helped accelerate national exposure and strengthen broker relationships, key catalysts for future growth. As we look to the fourth quarter and into Q1 2026, we're entering our peak enrollment period when employers review or switch their health care coverage. Recent market uncertainty and rising health care costs have created mixed timing patterns with some employers making early planned selections in late Q3, while others are delaying decisions into January. As a result, we delivered much better year-over-year growth in Q3 and anticipating sales volume shift from Q4 into Q1, but still expect healthy year-over-year overall growth. To help employers navigate cost volatility, we're testing a new program, offering a 3-year rate hold, a solution that provides predictable, stable pricing over a multiyear period. The program allows groups with 150 or more employees to lock in health care costs for 3 years through a fixed remittance model backed by an A-rated stop-loss carrier. It brings real time -- excuse me, real value to clients looking for cost, stability amid rising medical expenses, while also strengthening our relationships with brokers and TPAs. By providing cost certainty amid rising medical expenses, we're giving brokers and TPAs powerful retention tools and helping employers plan long term with greater confidence. We completed initial testing in October and plan to fully launch the program in the first quarter of 2026. We believe it represents an innovative concept for broader health care insurance market and we're optimistic about its reception as we enter 2026. Beyond underwriting innovation, we're setting our sights on one of the largest inefficiencies in U.S. health care claims processing, which consumes more than $300 billion annually in administrative costs and delays. This quarter, we announced a nonbinding letter of intent with AlphaTON Capital Corp. to co-develop HITChain, a blockchain-enabled platform designed to bring real-time visibility, accuracy and accountability to claims workflows across the ecosystem. Under this LOI, both companies plan to contribute distinct strength. Health In Tech brings domain expertise in insurance and health care data standards, established broker and carrier relationships, proven go-to-market channels and leadership in health technology design. AlphaTEC Capital contributes to blockchain development, expertise on the open network smart, contract architecture, cybersecurity, stable coin integration for secured payments and capital resources for enterprise scale deployment. Together with AlphaTON blockchain infrastructure and Brittany Kaiser's leadership in data ethics, we are building HITChain, a decentralized and verifiable claims system aimed at compression time lines, eliminating duplication, reduce cost and creating a transparent system of record for payers and providers alike. By combining insurance domain expertise with blockchain innovation, AlphaTON is positioned at the forefront of decentralized health care insurance technology infrastructure, a market opportunity of meaningful scale and long-term impact. Lastly, we're thrilled to share that Health In Tech will host the InsurTech Summit at Davos during the World Economic Forum week in January 2026. This event will convene global thought leaders to discuss AI technology and transformation of critical business sectors, including health care and insurance. With that, I will now turn it over to Dustin, who will walk through our latest marketing and partnership innovations in greater detail. Dustin? Dustin Plantholt: Thank you, Tim, and good afternoon, everyone. As Tim mentioned, we will take Health In Tech to the center of the global innovation stage by hosting our very first independent InsurTech Summit on January 20, 2026, during the week of the Annual World Economic Forum in Davos, Switzerland. It's interesting because the World Economic Forum, which is held each year in Davos, is really considered one of the world's most prestigious gatherings of global leaders across business, government, academia and civil society, and it serves as a powerful platform for shaping global, regional and industry agendas. And this year, Health In Tech will be among the organizations leading that dialogue. Our Summit will feature a curated lineup of panels on artificial intelligence, digital transformation in health care and blockchain-enabled system reform, all focused on redefining how technology can drive transparency, efficiency and equity across the $4.5 trillion health care economy. The first session we've announced, AI and institutional resistance, CEOs driving change in legacy sectors, brings together Time CEO, Jessica Sibley, alongside our very own CEO, Tim Johnson, for a dynamic discussion on how top executives are embedding AI within large traditional organizations. This dialogue will not be just about innovation. It's going to highlight the leadership mindset and operational courage required to modernize industries that have historically resisted change. Our second session, First Ladies: Backing Women Who Build will feature Lady Cherie Blair, founder of the Cherie Blair Foundation for women. The panel will spotlight global leaders advancing women's entrepreneurship, leadership and access to capital across the industries, exploring how innovation, education and technology can close gender gaps in business creation and economic opportunity. And this aligns perfectly with Health In Tech's broader mission of expanding access and inclusion through technology-driven ecosystems. Additional sessions focusing on other strategic themes will be announced in the next weeks and months ahead. Together, these sessions are going to elevate Health In Tech visibility among insurers, investors and yes, even policymakers, reinforcing our leadership in shaping conversations at the intersection of AI, health care and financial inclusion. For investors, Davos represents a strategic inflection point, amplifying our institutional reach, strengthening our brand presence on the world stage and showcasing how our technology and partnerships are modernizing the health care system here in the United States. As I've often said, legacy sectors like health care, finance and insurance are where AI meets its toughest test and delivers its greatest rewards. By leading these discussions, Health In Tech is demonstrating that responsible data-driven innovation can scale sustainably while earning trust from both partners and regulators. With that, I'll turn the call over to our Chief Financial Officer, Julia Qian, to walk you through the financial results in more detail. Julia? Julia Qian: Thanks, Dustin, and good afternoon, everyone. It's my pleasure to talk you through the financial results that underpin the strong operational achievement Tim just discussed. Our third quarter and the first 9 months of 2025 reflect continued execution across all the business fronts, from expansion of our sales distribution network to launch new platform features, while maintaining disciplined cost management and operational efficiency, revenue performance. For the third quarter, total revenue reached $8.5 million bringing year-to-year revenue growth to $25.8 million, presenting 132% of our full year 2024 total. Lease growth clearly demonstrate our accelerated momentum and the effectiveness of our strategy channel expansion through the broker TPA and agencies, combined with our strong customer acquisition activities. Profitability and operating leverage. Beyond the top line, our profitability matrix show significant operating leverage. Adjusted EBITDA for the quarter was $1 million, up 49% year-over-year. For the first 9 months, adjusted EBITDA reached $3.8 million or 167% of the full year 2024 total. This strong EBITDA performance demonstrate our ability to scale efficiency while maintaining the cost discipline. Pretax income for the quarter was $0.6 million, a 48% increase year-over-year. For the first 9 months, pretax income totaled $2.1 million or 2.4x of full year 2024. Importantly, pretax income present around 8% of the revenue. It's 135 basis points improved year-over-year, reflect our consistent balance between the resource allocation for growth and the bottom line profitability. Expenses management. On the expenses side, we continue to improve operating efficiencies with scale. Total operating expenses for the third quarter was $3.7 million, 55% of revenue, down from 68% in the same period last year. For the first 9 months, operating expenses represent 59% of revenue, an improvement of 12 basis points from 71% of the year ago. we continue to integrate AI-driven internal solution to enhance process automation and reduce administration burden. Break this further down. Sales and marketing expenses were $1 million or 11.3% of the revenue, essentially flat year-over-year. Our channel partner model continued to drive revenue growth without the need of a large in-house sales force. General administrative expense was $3.5 million consists of $1.3 million in operating cost, 14.9% of revenue and $2.2 million in admin cost, 25.8% of revenue. The higher admin costs reflects the expenses associated with being a public company including D&O insurance, Board compensation, Investor Relations and media outreach. So the research and the development expenses declined to 2.8% of revenue from 16% of the year ago. Our tech results have shifted from the preliminary project maintenance phase -- research phase to heavy development phase deployment. So thus the tech costs associated with the software development are capitalized. That's why you see the expenses reduced. Cash flow and the balance sheet. For the first 9 months, we generated $2.7 million of positive cash flow from operations. We invested $2.4 million in technology development and $0.1 million in the capital markets activity, resulting in net positive cash flow of $0.2 million. We ended the quarter with a solid $8 million in cash and cash equivalent. Our collaboration with AlphaTON Capital also provides additional capital leverage for the HITChain initiative. With AlphaTON investment contribution, we expect to build these transformative blockchain enabled first platform with minimum cash requirement from our end, which maximizing our capital efficiency. As we enter the fourth quarter, we are navigating a period of the market uncertainties related to rising health care costs and evolving regulation -- regulatory dynamics. Some employers accelerated their planned selection decision into late Q3, which contributed to a stronger-than-expected performance in the quarter, at the same time, other employers are shifting the purchase decision into January and early Q1 2026. Q4 is typically when we launch our major marketing broker initiatives and PR campaigns to build the momentum for the peak sales season, in line with the strategy, we intentionally reinvest a portion of our gross profit into the market expansion activity to support continued long-term growth. We anticipate Q4 revenue growth of around 50% year-over-year, which reflects a solid performance given lease timing shifts. For the full year 2025, we're expecting to deliver around 70% year-over-year revenue growth, reaching an estimated $32 million to $33 million in revenue. Importantly, full year net income growth is expected to be near 90%, outpacing the revenue growth on a percentage basis. As we're balancing disciplined profitability with purposeful reinvestment, given our market share is less than 0.01% of the market potential, the long-term growth runway remains very substantial. Our strategy is to thoughtfully redeploy a portion of earnings to skill distribution, drive product adoption and deepening our competitive position. As Tim mentioned, we began pilot test our 3-year rate hold program in late October, early November, this offering is very innovative and designed to provide possibilities for the employers and managed -- for them to manage the health care costs more effectively, this is very appealing to the companies with a large number of employees. We will share more details with you upon full launch in Q1 2026. In summary, the third quarter marked a pivotal point of the technology progress and the product innovation. The fourth quarter is focused on the market activities, program testing and our year-end sales campaignship with all -- which position us for accelerated momentum heading into 2026. We are laying the foundation for an AI-enabled multi-program health care insurance marketplace that we can serve our employees with all sizes and segment. I now turn it back to the operator for Q&A. Operator: [Operator Instructions] Our first question today is from Marla Marin with Zacks. Marla Marin: So -- this was obviously a strong quarter growth. I know you talked a little bit about some pull forward and maybe some timing differences versus general patterns in past years, but still, we're seeing very strong growth. You've been operating now for a very brief period in the large employer market. Is the response that you're seeing tracking along the lines that you had anticipated? And are there any things that you're seeing in that market that distinguish it from the small and medium market that you have traditionally looked at or focused on? Tim Johnson: Yes. Marla, thanks for the question. This is Tim. You're right. We really just got started. We haven't been able to see a trend yet because the process usually takes from -- for our brokers to get established and trained on the system to where they're starting to use it and an effective date is usually about, at a minimum at 60, it's usually 90 to 120 days out. So although the process has sped up and helped everybody, help our distribution sources get their proposals and their quotes faster, we haven't seen them start to really bind anything yet because they're quoting groups that are further out from when we started, if that makes sense. But we are seeing a lot more activity. We're seeing -- it started at about 2 quotes a day. Now, we're up to 5 quotes a day that our underwriters are able to get out. So a big improvement from where it was. Marla Marin: Okay. Understood. Okay. So switching gears a little bit. Your enrolled employees that metric, which is one that I look at from quarter-to-quarter, as I'm sure others do, it continues to increase. I think in the past, you've talked about there's a level of stickiness with that number, just because of the difficulties sometimes in switching to other, other coverage providers or other solutions. Can you give us any color on whether or not you think that is true? Julia Qian: Yes, that's -- Marla, it's Julia. I think that is a great question. That's why when we're looking at the 3-year rate hold program we're either further to enhance the retention, because with these uncertainties that when the business can have a product with a flat rate for the 3 years and really significantly change how the dynamic on the market. Yes, the health care product, insurance product itself, is already pretty sticky. And with the speed and the benefits we offer, that's how we see adding we're more products, make that even more sticky. Marla Marin: Okay. Got it. And then last question for me. The blockchain initiative, I think, is very interesting. As you continue to innovate in this space and you continue to use technology, to streamline processes and make things simpler for the customer base? In terms of blockchain right now, is there anyone else in the space that is using blockchain? Or will this be something that you're going to be relatively amongst the lead innovators? Julia Qian: I would let Tim to address that. Tim Johnson: Yes. Dustin, you can address that, if you want. That would be a good one for you. Dustin Plantholt: I would -- yes, I would love to. So it's interesting, the space of health care and now putting these records on chain, but doing it in a way that it still remains de-identified, so we don't have any compliance issues. We will really be the first at the scale that we will be launching the HITChain, bringing in an entire ecosystem, over the next 12, 24, 36 months, into HITChain. So it has not been done at that level ever because of all the moving pieces that are involved, and when we look at the problem -- the friction point, and Tim and I, our CEO, again, I discussed friction. The friction our providers feel, the friction that the hospital systems feel, even the friction at times the patients are feeling to be able to have a real-time ledger that they can track. So I'm excited over the next number of months, Mr. Tim Johnson will be rolling out some of the areas that we see Health In Tech being able to receive revenue opportunities and also strategic growth, not just in North America, our plan would be long term that HITChain would be a little bit of planned that we would become the #1 in the health care blockchain even at some point, tokenization. So I'll refer it back to Mr. Tim Johnson, our CEO, because I can't reveal too much. Tim Johnson: Yes. Marla, we -- this type of product has been tried and failed by other people with considerably larger recognition than we are. We have brought though a much broader base of people that understand the A to Z effect of this. Everybody at Health In Tech and AlphaTON, they have experience in every function that has started from when somebody goes to the doctor, to where that bill gets paid. And believe me, there are multiple entities in the middle of that, that have -- and transactions that have to take place. And by streamlining all that, as Dustin said, the decentralization of that where anybody can join this thing, it -- this blockchain that we're calling HITChain, it has not been done before in such a scale. It has been done by single hospitals, do it to manage their processes internally, but nothing where you decentralize it to the public like we are. Operator: The next question is from James Lieberman with American Trust Investment Services. James Lieberman: I want to congratulate you on the terrific year of execution and the vision that you're putting in place. And I wonder, can you share a little bit more about this 3-year lock program for health care. How do you manage to do that? Or is that your secret sauce and you'd rather not say at this thing? Tim Johnson: Yes. I guess, that -- it's -- because this is public, you're right. We really don't want others to know how we're going about it from an underwriting perspective. I will tell you, though, that there has been a year's worth of work with multiple different financial institutions, bankers, underwriters, insurance carriers, distribution sources in order for everybody to get comfortable with this. It has taken a lot of effort on everybody's part. And over a year now, we've been working on. So I apologize, I can't give you much more than that. But... James Lieberman: No, I think it's kind of extraordinary and I commend you that you've been able to bring all the players together to even present that vision. Congratulations. Julia Qian: Yes, Jim. You just turn to watching for the full launch news, then we will have more detail than the time we do our official full launch. And it's really, we combine the insurance sector expertise with carrier with various investment bank and funds. It's just a lot to put together, I would say, and you will find that there are renowned institution to join force to make this happen, and we're very excited, but we will have more details to share with everybody in Q1 full launch. Operator: The next question is from Allen Klee with Maxim Group. Allen Klee: It's really great to see your degree of innovation. Following up on the 3-year rate hold product, I think it could be really very powerful for employers to want -- there's some -- I'm actually -- it's kind of surprising that an insurance company would take that risk with given the challenges of -- and the changes that could happen with underwriting results. Was that maybe the hardest part to get over how an insurance company could get comfortable to take a 3-year risk? Tim Johnson: Yes, Allen, it was very challenging, but there's 2 sides to look at here. So what insurance carriers like to do is get profitable business and hold it. In this case, that's what we're trying to do is make it profitable by implementing these medical management programs, some very strategically targeted programs, where we're trying to manage every possible instances that can come up. So if somebody has diabetes, we have a program for that. If somebody has another condition, we have very specific programs that manage this because, Allen, what you find is that a carrier will pick somebody up for a year and try to implement these things, but 12 months isn't enough to make an impact. If something happens, they don't have enough time to say it happen 6 months into the program. They don't have enough time to really make an impact and try to manage that condition whatever it is, to get it back to where one where it probably is not -- maybe it's not a profitable program, but it could be over time, if you get enough time to get it under control. And that's what we sold our carriers on is the ability for us to manage those over time, better than what we're able to do today. Allen Klee: That makes a lot of sense. And then for the claims processing, who you're selling this? Who is your customer in this? Tim Johnson: Customers are large employers -- larger employers, 155 lives on their plan and greater. So like municipalities, for example, I use municipalities because they don't have a lot of money from their tax base, whatever that is, but they try to budget. Their budgeting money is very tight. And when we can give them a 3-year rate guarantee, municipalities and government entities love this type of product. Allen Klee: Right. Okay. And then for the -- I'm sorry, I didn't ask my question. I meant for the blockchain opportunity to manage claims processing, who are you selling that to? Tim Johnson: Well, that's going to be sold to everybody. If you've heard me speak in the past, Allen, everybody that touches health care, and which is from the hospitals to the patients, the employers, the brokers, the third-party administrators, the networks, everybody in, not to use the term or beat the term up, in the chain of events, everybody will participate in this. The program -- and again, I can't go into -- I don't know where my line is drawn, I've given too much information, but everybody that touches it, will benefit. There's a win-win in this for everybody. It will drive -- I have asked -- people have asked me the question, how is that going to drive health care costs down? Well, a large part of the health care cost is the administrative costs. And they're huge. As we talked about in this presentation, it was $300 billion. We're trying to cut that down dramatically. And we hope that, that savings reflects back in the term of health care expenses paid out over time. Dustin Plantholt: Yes. And I'd like to also kind of add to that, Tim, and great explanation. I think that for those that have ever experienced issues when it comes to claims, our -- the ideal kind of customer client that we see partnering with us are going to be insurance carriers, health plans, benefit administrators, companies that are processing potentially millions of claims a year or thousands or tens of thousands of claims. They're going to win with the chain because of fewer fraudulent claims, faster processing, fewer disputes, faster collection, less overhead expenses, meaning we're driving operationally their cost down and ultimately, happier providers, which means Health In Tech wins, those that are within the ecosystem wins. And I can't get everything. I don't want to get ahead of myself and -- but we have an enormous opportunity here, and we're hearing from large organizations around the world, including large hospital system that we are on to something. So I'm excited to go on this journey with all of you in the future. Julia Qian: Yes. Allen, once we work with AlphaTON turn to from nonbinding letter intent into the definitive agreement. At that point in time, we will be able to give an update in terms of the more detailed business model and all these above fronts and both Tim and Dustin mentioned about, it's just some of the very initial identified area we can benefit from. There are much more area where we continue to discuss and discover the benefit is not only just the transparency, the speed, remove the redundancy, especially, one clients get a process once, not multiple times, get to review the different people, different the organization, menu work back and forth, but also there is opportunity to think about how the money movement get paid, the payment part side of process. So there's really a lot of things we can do. The most benefit for us, for overall, is both parties contribute to their strengths, and that has really a minimum cash requirement from all, and we contribute our knowledge, and they have the funds, they have the technology and blockchain. Combine these with both parties, we're going to create something very unique and big and the benefit every participant on the chain. Dustin Plantholt: And Julia, I think it's good to note because we have mentioned it in press releases regarding AskTim, our AI-driven benefits counselor that also will be unveiled in 2026 with a little bit of under-the-hood in Davos on January 20, 2026. Allen Klee: You guys had mentioned in the last few months of some stuff that you're doing with pharmacy benefit management side to try to get lower drug costs. Any update on that? Tim Johnson: Julia? Julia Qian: Allen, I think we really do not have much more built out in terms of pharmacy benefit. And our focus on this year is enhance the system, produce the new program, new products. And while the PBM side of the opportunity has been evolving, this is very much to do with the market condition, and who we partner with. And just to present additional opportunity, whether for this year, and we entered into the November, when we look at really the enhanced eDIYBS and the 3-year rate hold and ended to the large size of the employer market is important for us. When we look into 2026, we might go back to check on what else we can build in terms of additional opportunities. Tim Johnson: Yes. The administration -- the current administration in the White House has -- you've recently heard the press release and the conference that they had, they're looking for serious solutions. So putting our time and energy into it, if the government is going to step in as much as they are and good for them. It could have been more of a waste of time. We thought our efforts would be better off focusing on the underwriting and claims piece that we just talked about. Allen Klee: Okay. One of the things that you guys had focused -- have focused on is your broker -- your partners and how that's been helping to drive sales. Basically, you're getting your distribution through your partners. And I think last quarter, one of the things that struck me is you were getting some of the larger insurance brokers also. So maybe if you could talk a little about your broker relationships, and how -- like for the big renewal season, how you go about the process of focusing on that? Dustin Plantholt: Yes, our -- we are growing our distribution sources because once they get -- see the system, it's so convenient, so easy to use that it's making their lives easier, so they can do -- they can make more sales, but the -- what we term as our Alpha house is the bigger brokerage firms around the country, products, just like what we talked about with the 3-year rate guarantee, they have -- some of them have only focused on larger groups, some of them do larger and smaller groups, but their primary focus is the larger group, and with bringing a program like this 3-year rate guarantee, rate stability program that we call it. That's what they're focused on. So they are more excited than ever to get access to some of these products that we're bringing for the larger segment, the group segment. Julia Qian: Yes, Allen, also, we very aggressively start to train the brokers. And with all the large broker agency, they have regional office. They have -- they intend to just have a pilot office so testing out and then, then they roll out to rest of the agencies in the different states. So to us, it's not only just the numbers, but once we start with 1 agency and our sales team really go down to the implementation of the training, we should be able to see these things getting wrap up, not only just the number, actually, 1 agency can have hundreds, thousands. The other agency handful, so not only the agencies, but also how can we deepening the relationship and our sales team has done a great job of being providing a training and looking at how the system, how easy system is. So we will see this continue accelerating our outreach. Additionally, the event we do in Davos, and led by Dustin and all other PR will continue to give us very good visibility in the market, attract more large agencies. Allen Klee: That's a good point. So the audience for the Davos conference, will be kind of bigger players in the insurance tech area. Julia Qian: That's right. Like before, I think when the agency with a certain size, they are looking for more of the peers, and where there is a significant event in the forum, they all can exchange their thoughts, and also it's a perfect venue for us to improve our visibility without burning a lot of marketing dollars. So we have been very disciplined in terms of the marketing and the PR, but we think this is a great opportunity for us. Operator: The next question is a follow-up -- excuse me -- pardon me. Seeing no more questions in the queue. Let me turn the call back to Mr. Johnson for closing remarks. Tim Johnson: Thank you, operator, and thank you all. I appreciate everyone joining the call today. If anyone has any follow-up questions, please do not hesitate to reach out to us. We appreciate your interest and look forward to keeping the dialogue open. Thanks, everyone. Operator: Thank you all again. This concludes the call. You may now disconnect.
Raymond Jones: Greetings everyone and welcome to our third quarter 2025 earnings conference call. This call is being conducted as audio. [Operator Instructions] As a reminder, we will make forward-looking statements regarding future events and potential financial performance during this call, which are subject to material risks and uncertainties that can cause actual results to differ materially from such statements. A summary of these risks may be found in the Risk Factors section in our Form 10-K filing with the SEC dated February 27, 2025, and our Form 10-Qs filed with the SEC dated May 12, 2025, August 11, 2025, and November 10, 2025. These forward-looking statements are based on assumptions that we believe to be reasonable as of today's date, November 10, 2025, and we have no obligation to update these statements as a result of new information or future events, except when required by law. Additionally, we will present both GAAP and non-GAAP financial measures on today's call. These non-GAAP measures are not intended to be considered in isolation from, a substitute for or superior to our GAAP results and should be read in conjunction with the company's consolidated financial statements prepared in accordance with GAAP. A description of these non-GAAP financial measures as well as a reconciliation to the nearest GAAP financial measures are included at the end of the company's earnings media release issued earlier today, which has been posted on the Investor Relations page of the company's website. We have posted an updated investor presentation on the Investor Relations page, which includes additional complementary graphics and data. Please note that it has been provided as an additional reference and that we will not be using the presentation as an exhibit during today's call. We will begin with an overview of results and a business update from our Chief Executive Officer, Lauren Antonoff, with a comment from our Co-Founder and Executive Chairman, Chris Hulls; then our Chief Financial Officer, Russell Burke, will walk through the Q3 2025 financials. Lauren will return with comments on our updated 2025 outlook before we open up the call for Q&A. [Operator Instructions] With that, I'll turn the call over to Lauren. Lauren Antonoff: Good afternoon to everyone joining from the U.S., and good morning to those of you tuning in from Australia. Thank you for joining our third quarter results call. Q3 2025 was another record quarter for Life360. We reached all-time highs in Paying Circles and global net subscription adds while continuing to advance our vision of becoming the go-to platform for everyday family life. These results reflect our outstanding product market fit, the strength of our freemium model and most importantly, the trust we built with millions of families who depend on Life360 every day to keep their families safe and manage the day-to-day chaos of family life. Our growth engine is fueled by the peace of mind that Life360 provides families who use our platform to stay connected to the people, pets and things they love. Our freemium model continues to drive delight and encourage upgrades to premium features such as unlimited place alerts that give families a heads up where mom leaves work or dad stops by their favorite sandwich shop. Our free offering is now even more valuable to families with the introduction of our new Pet Finder Network, which I'll come back to in a moment. Because of our outstanding value, the majority of our growth remains organic, driven by word of mouth and increasing brand awareness. This quarter, we continued to deliver innovative experiences like no-show alerts. We spotted a pattern where nervous parents continually check to see if their kid arrived and we decided to create a feature to reduce anxiety by flipping this experience on its head. Now we can alert parents when a loved one doesn't arrive on time at a designated location. No need to keep checking. It's one more way we're giving families peace of mind and making everyday family life better. We delivered no-show alerts just as kids were heading back to school, and we've seen outstanding engagement with over 1 million alerts configured to make sure that people arrive safely as expected. We also deepened our partnership with AccuWeather, the world's most accurate and widely used source of weather forecasts and warnings. Last quarter, this partnership delivered severe weather alerts to our members. In Q3, we took it a step further by extending these alerts to the entire circle, so every family member is notified when weather threatens someone they care about. This integration, as with our work with Uber, highlights how major brands are recognizing Life360 as a true platform, not just another location sharing app. We're creating monetizable experiences that drive far higher engagement than traditional ads and genuinely add value to our members' daily lives. Unlike banner ads that users simply tolerate, our AccuWeather experience shows why people choose Life360. It makes the platform more useful, relevant and uniquely positioned at the center of family life. We're also engaging members in creative ways like our Life360 Pays For campaign, which was designed to reinforce our mission of making everyday family life better and build brand affinity by helping families manage real-life costs from rent to gas to data plans. Our combination of product innovation and creative marketing with millions of views across the media spectrum continues to strengthen engagement across our platform. As a result, we added 3.7 million monthly active users in the third quarter, growing 19% year-over-year, bringing our total active users to nearly 92 million. Our total Paying Circles grew 23% year-over-year to 2.7 million, achieving a record 170,000 net new additions, boosted by focus in our marketing efforts and optimization in our funnel, resulting in better conversion from free to paid in the U.S. and international markets, especially within that first critical 30 days of use. While MAU growth is lower than the same period last year, it was led by our highest value user segments, reflecting an intentional shift in our marketing to focus paid media on users who are more likely to retain and convert. The strategy is working. Our 35- to 50-year-olds, which drive the majority of our monetization, reached record highs this quarter. The results speak for themselves with record growth in Paying Circles and strong brand awareness. At the same time, we continue to benefit from Life360's cultural relevance, which extends well beyond our core target audience. In recent weeks, we've been trending on TikTok because we created a product experience that hopped on the 67 meme. If you don't have teens, you might not know what that means, but millions of our younger members do. While we don't rely on Gen Z as primary converters, their enthusiasm fuels a powerful halo effect that keeps Life360 part of the broader cultural conversation. Just this week, one of our TikTok posts went viral with an astounding 2.2 million views. This visibility strengthens our brands with parents and families alike, proving that our position at the center of the digital zeitgeist is a real competitive advantage. Internationally, momentum remains strong. Paying Circles outside the U.S. grew 29% year-over-year with an 8% year-over-year ARPPC uplift driven by local pricing strategies and the continued success of premium tiers across the U.K., Canada, Australia and New Zealand. If these markets continue on the same trajectory as the U.S., and current trends suggest they will, there remains significant headroom for accelerated growth ahead. While we continue to experiment with our marketing levers, the results we've seen give us confidence that edgy creative, disciplined marketing investment and most importantly, a product that delights customers will continue to drive durable growth for many years to come. On top of growing our membership base, we're deeply committed to increasing the value we deliver to our members, including extending Life360's impact beyond the phone. Our connected devices play a critical role in expanding our reach and deepening engagement, giving families more ways to stay connected. We took a big step forward on this front as we launched Life360 Pet GPS, which brings to life our vision to connect families with the people, pets and things they love on one map and extends the peace of mind we're known for to furry family members. This is our first product designed specifically for pets, and it's now available in the United States, Canada, the U.K., Australia and New Zealand. We took a measured approach to our initial launch, and while it's too soon to provide forecast, early demand exceeded our initial expectations, selling it out in most regions within days. One in 3 pets becomes lost at some point during their lifetime, and family with pets represent a significant opportunity, covering nearly 70% of U.S. households. Young families tend to get their first pet before they have kids and certainly before the age that kids get their own phone. And pets don't head off to college, meaning that our Pet GPS makes subscriptions more valuable to families through all life stages. Our goal with pets goes far beyond selling devices. We have an opportunity to raise the bar for what it means to be a responsible pet parent. We're committed to driving awareness and education about how to keep pets safe. Pet owners have been led to believe that a microchip or Bluetooth tracker will help if their pet escapes. And I know from personal experiences that these solutions are outdated and woefully unsuited to the job. To make use of a microchip, someone needs to capture your pet and take it to a vet or a shelter. Not only does that count on extraordinary effort, but trying to catch a lost dog and put both the dog and the person in danger. Bluetooth trackers work great when your dog is at home on the couch, but they're ill suited for a dog on the run. The best way to get a dog home safely is to equip them with a GPS tracker that tracks your pet in real time, so you can close the distance quickly and bring them home safely. While Pet GPS is the best way to keep a pet safe, at Life360, we want to keep every pet safe, even those without a tracker. Our community-powered Pet Finder Network draws on our nearly 92 million members to help reunite lost pets with their families by sending a lost pet alert to members nearby. Pet GPS and our Pet Finder Network expand our relevance to even more households and reinforce our position as the go-to platform for everyday family safety. Families already trust Life360 to keep their loved ones connected and safe, and that trust gives us a strong foundation to lead in this growing category. Beyond subscriptions and hardware, we continue to advance our strategy to build high-margin complementary revenue streams. Q3 other revenue grew 82% year-over-year to $16.9 million with strong performance in advertising. We're still early in our advertising road map, but we're making progress building the full operating stack that will power long-term growth. Our place ads and uplift products are live and gaining traction, enabling brands to reach families in relevant real-world moments and measure the impact of their ad campaigns. At the same time, we're enhancing our programmatic partnerships and data integrations to improve targeting, delivery and performance. This phase is about building the right foundation, bringing together the people, technology and relationships that will allow us to efficiently and effectively scale. The momentum we're seeing fuels our confidence that advertising is on track to become a durable high-margin growth engine for Life360. To accelerate our vision, we've entered into an agreement to acquire Nativo, a best-in-class advertising technology company. Nativo brings full stack ad technology, a seasoned team and hundreds of advertiser and publisher relationships that will allow us to scale our ads business faster and more efficiently while maintaining the high editorial and privacy standards that define the Life360 promise. We expect this combination to accelerate our advertising road map, expand our offsite reach and position Life360 to deliver a unified ad platform that seamlessly connects our audience with broader publisher networks. It's a major step forward in creating a differentiated full-funnel solution for brands and agencies. And importantly, it advances our mission to grow advertising in a way that's consistent with our commitment to families. We look forward to welcoming the Nativo team to Life360 once the transaction closes. Before I conclude, I've asked Chris to share a few thoughts from his new role. So Chris, over to you. Chris Hulls: Thanks, Lauren. I'll keep it brief. The transition has gone incredibly smoothly, and it's great to see how well the company has executed while continuing to advance our long-term vision. If I had to sum up this quarter on one theme, it's that we're proving Life360 is not just an app, it's a platform that's always been at the heart of the 360 in our name. With the launch of our new device, people, pets and things are now fully integrated into the Life360 map. And we're the only player in the space with a complete family-focused hardware and software ecosystem, and it shows how far ahead we are of any direct competitor. The Nativo acquisition is another major milestone. We've long said that indirect revenue could one day rival subscriptions, and this deal accelerates that vision. Nativo isn't just about adding more ads. It's about enabling third parties to use our location intelligence in privacy-safe ways that improve their performance while preserving the experience of our free users who remain the foundation of our platform. And finally, it's great to see Life360 jumping on the 67 trend and going viral on TikTok again, this time organically from the team, which means in a very genuine way, I'm very happy I do not have to reprise my role as an influencer. I'm excited to continue supporting the team as Executive Chairman, and back to you, Lauren. Lauren Antonoff: Thanks, Chris. I'm incredibly proud of the team for delivering another outstanding quarter of balanced growth and disciplined execution. We continue to scale our core subscription business, expand our high-margin revenue streams and invest in new innovations that make everyday family life better. With momentum in our core business, the successful launch of Pet GPS and continued expansion in advertising with the addition of Nativo, we're confident in our trajectory as we enter the holiday season and head into 2026. So with that, I'll hand it over to Russell to walk through the financials and our continued progress on profitability. Russell Burke: Thanks, Lauren, and thank you all for joining the call today. As a reminder, the Q3 financials I'll be referencing are unaudited and denominated in U.S. dollars. We are very pleased to report another record quarter, reflecting continued strength in our core subscription business, accelerating momentum in advertising and data revenue and disciplined expense management. Q3 total revenue grew 34% year-on-year to $124.5 million with continued strong momentum. Subscription revenue increased 34% to $96.3 million, while core Life360 subscription revenue, which excludes stand-alone hardware subscriptions, rose 37%. The increase was driven by sustained global Paying Circle growth and ongoing improvements in conversion across both U.S. and international markets. Other revenue grew 82% year-on-year to $16.9 million, fueled by strong performance from our expanding advertising platform and partnerships. We continue to see advertiser demand scaling as expected, supported by new formats and higher engagement. Stand-alone hardware decreased 4% year-on-year to $11.3 million. Unit sales increased 15% year-on-year, driven by strength in online channels. Stand-alone hardware gross profit and margin were impacted by tariff-related costs. Absent those tariffs, both would have been positive. We view the tariff impact as manageable long term, and we took steps earlier in the year to largely mitigate it. Our focus remains on driving adoption, not short-term stand-alone hardware margin as devices continue to be an important funnel into our subscription ecosystem. Looking ahead, our Q4 outlook includes the impact of promotional launch pricing for Life360 Pets GPS across all markets. This pricing was strategic and time limited, focused on driving adoption and engagement within Paying Circles. Pet GPS operates exclusively with a paid Gold or Platinum membership, which delivers the near real-time GPS visibility and integrated safety experience families expect from Life360. We've structured device pricing to minimize friction and expand the pool of paying members, which aligns with our long-term strategy. This approach is fully reflected in our Q4 guidance and supports our goal of growing high-value subscribers rather than focusing on near-term device margins. We are still in the early stage of the Pet GPS launch, and we'll share more detail at year-end. Turning back to Q3 results. Annualized monthly revenue reached $446.7 million, up 33% year-on-year, underscoring the durability of our high-quality recurring revenue model. Gross profit increased 39% year-on-year to $97.1 million. Gross margin was 78% compared with 75% a year ago, reflecting mix shifts in the quarter. Operating expenses, excluding commissions, grew 20%, well below our revenue growth rate, demonstrating continued operating leverage. Year-over-year, you'll see a visible shift in marketing spend as we ramp campaigns ahead of our Pet GPS launch and key holiday promotions. These were planned investments that support long-term subscriber growth and product adoption. Breaking it down by expense line, R&D rose 12%, reflecting ongoing product innovation and scaling of our data and ad tech capabilities. Sales and marketing increased 27%, primarily driven by seasonal campaigns and commissions in line with subscription growth. G&A grew 31%, consistent with the overall pace of company expansion. We also continue to test purchase path variations to enhance conversion efficiency across platforms. Profitability continues to strengthen. Net income for the quarter was $9.8 million compared to $7 million in Q2 and $7.7 million in Q3 last year. Adjusted EBITDA rose 174% year-on-year to $24.5 million, representing a 20% margin, our 12th consecutive quarter of positive adjusted EBITDA and further progress towards our target of 35% plus. Turning to the balance sheet. We ended the quarter with $457.2 million in cash, cash equivalents and restricted cash. We remain in a strong position with strategic flexibility to pursue investment opportunities. Operating cash flow was positive for the 10th consecutive quarter at $26.4 million, up 319% year-over-year. In summary, Q3 demonstrated that Life360's growth engine remains strong and efficient with record revenue, expanding high-margin businesses, disciplined cost control and clear line of sight to increasing profitability. Before we move to guidance, I'd like to share some additional context on the exciting step forward for our advertising business. As Lauren mentioned, we entered into an agreement to acquire Nativo, a leading native advertising technology company for approximately $120 million in the combination of cash and stock and subject to customary closing conditions. This acquisition positions Life360 to compete at scale with a unified end-to-end advertising platform that expands our reach and will unlock meaningful revenue potential. The acquisition will be accretive to adjusted EBITDA from day 1 and reinforces our commitment to growing adjusted EBITDA margins through high-quality complementary revenue streams that deliver long-term shareholder value. Because the transaction is expected to close in early 2026, we do not anticipate any financial impact in 2025. Nativo currently generates roughly twice the level of advertising revenue that we expect to deliver this year with a different margin profile that reflects its position across the full ad tech value chain, spanning the demand side, customer data, measurement and supply side platforms, all of which carry -- typically carry lower gross margins than pure digital advertising. The company has approximately 125 employees or about 1/4 of Life360's current headcount and brings full stack technology, sales and operations capabilities that will accelerate our advertising road map significantly. We expect both revenue and cost synergies to begin ramping in 2026 with full realization by year-end. Importantly, the acquisition further supports our longer-term goal of achieving 35% adjusted EBITDA margins. With that, I'll hand it back to Lauren to review our updated outlook for the remainder of 2025. Lauren Antonoff: Thanks, Russell. As we look ahead, we remain confident in our ability to deliver consistent results through disciplined execution and our continued commitment to making everyday family life better for millions of families worldwide. With the launch of our new Pet GPS across key markets and continued momentum in our advertising business, we're extending our reach and deepening our engagement across the platform. With that foundation and the strength of our subscription model, we're focusing on finishing the year strong, and we're raising full year 2025 guidance as follows: We're increasing our consolidated revenue guidance from the previous range of $462 million to $482 million to a new range of $474 million to $485 million. We're raising subscription revenue guidance from the previous range of $363 million to $367 million to the new range of $366 million to $368 million. We're also raising the range of hardware revenue guidance from $42 million to $50 million to the new range of $46 million to $50 million. We expect full year gross margin on hardware to be negative single digits due to the impact of tariffs and the launch of Pet GPS. We're also raising the range of our other revenue guidance, which includes advertising and partnerships from the previous range of $57 million to $65 million to a new range of $62 million to $67 million. And finally, we're raising our guidance for adjusted EBITDA from the previous range of $72 million to $82 million to a new range of $82 million to $88 million. This concludes our prepared remarks, and now I'll turn the call over to RJ, who will manage the question-and-answer portion of our call. Raymond Jones: [Operator Instructions] With that, we'd like to open it up to Maria Ripps from Canaccord. Maria Ripps: I appreciate all the color on the Nativo acquisition. I guess do you expect the platform to maintain its existing advertiser base? And sort of how do you see the operating model evolving here sort of over time once you integrate the acquisition? Lauren Antonoff: So we definitely see the Nativo acquisition as additive. We continue to work on the base of both features and momentum that we have in Life360, and we expect that to accelerate with this technology that Nativo is bringing in, in addition to bringing the momentum in their business. Raymond Jones: Thanks, Maria. Next, we'd like to open it up to Lafitani Sotiriou with MST. Lafitani Sotiriou: Two quick questions or clarifications for me. I know it's only one question, but can I just clarify with the Nativo acquisition, Russell, you're sort of talking code a little bit around the revenue run rate. Can you just tell us roughly what the revenue run rate is of Nativo and roughly the cost base broadly for FY '25, so we've got a base to sort of include it going forward? And with the Pet GPS, can you talk to -- I know it's only early days, but can you talk to the conversion of the -- or the engagement of free users adopting the Pet GPS versus existing subscribers? Russell Burke: So taking those one at a time, Laf. We're not going to give a huge amount more detail. But I think we clearly said you've got a good sense of our advertising revenue for '25. Nativo is on a roughly twice that run rate. At the same time, they would have expected a -- without this acquisition to be in a small adjusted EBITDA positive situation next year, which once we add in the combination with Life360, we absolutely expect that to be, as I said, positive adjusted EBITDA accretive from day 1. So that would give you enough to come back to both the revenue run rate and the cost base. In terms of Pet GPS, the early phase was really focused on our existing members. So from the initial launch, it largely went to existing members and then has moved really targeted towards free members. So it's very early stages in terms of adoption at this point. And I think we'll be able to give you a lot more color at year-end. Lafitani Sotiriou: Can I clarify, are you talking about advertising, including all buckets in other revenue? Or are you calling out advertising as a component, excluding data income? Russell Burke: For the comparison piece, it's the advertising, excluding data. And I think as you know, that's approaching sort of 50% of other revenue at this point. Raymond Jones: Thanks, Laf. Next, we'd like to open up the line to Mark Mahaney from Evercore. Mark, are you on by chance? Mark Stephen Mahaney: Okay. Now, I am. Russell, you talked about margins long term getting -- moving from that 20% level to the 35% plus. What would be the biggest factors that would cause that margin to grow more quickly or more slowly? Is it -- should the rate -- or let me ask it this way, the rate of margin expansion that we've seen over the last year or 2, is that the way loosely to think about margin expansion going forwards? And then, Lauren, could I ask you, when you think about the product development road map from here, like what are your top priorities just in terms of new products that you want to offer to existing customers? Russell Burke: So Mark, on the first part, I think there's 2 major factors in terms of margin expansion. One is purely scale as we've demonstrated over the last couple of years, in particular. As we increase scale, we're really able to leverage operating costs quite effectively. So even just with that, we see a sort of a clear path to those adjusted EBITDA margins. On top of that, we are increasing the mix of higher-margin revenue within our total revenue base. So that contributes to that as well. Mark Stephen Mahaney: That advertising is the higher-margin businesses? Russell Burke: That's the biggest factor, yes. Lauren Antonoff: So speaking a little bit about our road map. The thing that we want to make sure that we do is not to dilute our focus too much. So we've introduced a lot of new experiences with things like our advertising business and now Pet GPS, and we want to make sure that we're taking the time to really nurture those ad capabilities, incorporate customer feedback. And we think there's a lot of opportunity on a lot of the new things we've started already. In addition, the thing that powers this business is our core app experience. And as we pointed out with our new map experience, we're continually investing in enriching and uplifting that core experience. And so while we have a lot of extensions to the business that we plan to do over time, our focus isn't primarily adding new products right now. It's making the things we have better. I'll say the one thing that we are starting to work on is specifically making our app a much better place to attract aging parents. And so we are starting to work on that. That's something we planned for a long time, and in 2026, we'll get a lot of our focus. Mark Stephen Mahaney: Lauren, would you expect the pet customers to be -- what percentage of those do you think would be your existing customers over the next couple of years and -- versus those that are just completely new to the platform that just have different needs, like people who have pets and don't have kids? Lauren Antonoff: Yes. Our focus certainly is on our members. I think that's where we have the most differentiated offering. And so that's where our focus is initially. My hope is that as we convince the world that every pet needs this kind of protection that, that starts to balance out. And over, I think, a much longer time horizon, we'll start to get more people from the outside, but it's not our focus right now. Raymond Jones: Thanks, Mark. I'd like to open up the line next to Eric Choi from Barrenjoey. Eric Choi: Just one quick follow-up on pets. You guys mentioned it's outperforming, and I just wanted to drill into that a little bit. Noticed you've taken off the discounts for some trackers. So I was just wondering, does that mean the average profitability per sub could be better than what you're expecting? We've also been kind of signing up various members of the team to pet trackers at different times and just comparing order numbers. And we've noticed that the rate of sales hasn't really slowed as well. So I just wonder, has the continued momentum being better than what you expected and it's not just a short-term issue here? And then just as part of the outperformance question, you've answered to everyone else. It seems like the majority of new pet tracker sales has been existing customers. Is that right? Or has that new -- I appreciate that new component might be small, but how has that performed versus your expectations as well? Russell Burke: Okay. There's a few questions in there, Eric. So we'll try and cover all of those. I think generally, as we've said, the Pet GPS launch performed much better than we expected at launch point. And the embrace by our existing members was very, very strong. And as we move forward, we -- that's sort of balancing between paid and existing members. And then we -- as Lauren said, we look to bring completely new people into the ecosystem as well. So I think the -- as -- we are also experimenting a little bit with pricing in a couple of territories, but we've largely taken the promotional price point away. So that's -- the pricing now in most territories is largely as we had planned it to be. It is still, as we've said in the past, a subsidization effectively on the actual hardware cost because the strategy here is to drive people into subscription. So that we trust will work effectively. We'll have a lot more color on that at year-end. Raymond Jones: Thanks, Eric. Next, we'd like to open the call to Mark Kelley from Stifel. Mark Kelley: I just want to go back to Nativo. I just want to understand, I guess, since it's a full stack offering, that business is already serving publishers on the SSP side, and then it looks like there's a self-serve platform kind of DSP business. So I guess, should we expect that advertising revenue for other publishers and also ads that the current buyer base is buying off of Life360, will that become part of your revenue? I'm just trying to understand -- I know you obviously probably bought for the technology, but just trying to understand better the mechanics of the revenue that it generates today. And then maybe kind of a quick follow-up. Is that revenue booked gross or net of the value of the ads? Russell Burke: Right. So Mark, the -- you're absolutely right. The exciting part of the acquisition for us is the fact that this is a full stack broad spectrum advertising platform that we'll be able to use to really accelerate our advertising road map. So that is the strategy behind the acquisition. You're absolutely correct. They have a solid existing business with a good range of publishers and a good range of advertising context and sales staff, all of which will help us really move our advertising business forward. So yes, we expect to continue that business. We expect to use that to enhance the Life360 business and enlarge it and accelerate it as we move forward. Raymond Jones: Thanks, Mark. Next, we'd like to open up to James Bales with Morgan Stanley. James Bales: I had a question on MAU growth. So in the past, I think Chris has described it as sort of North Star. Third quarter is typically the seasonally strongest part of the year. And this year, you had an ad campaign that you guys were really excited about. I guess I'd like to understand why it sort of slowed so significantly year-on-year and explain maybe those comments earlier about targeting consumers that are more likely to convert. Russell Burke: So I'll start with that, James, and Lauren might want to add a bit more color. I think there's a few pieces to that. In the past, we've also said that MAU growth can vary significantly from period to period, and we see that often. And in that respect, the comps from last year to this year are unusually difficult, if you like, because we had an exceptionally high MAU growth across international, in particular, last year across multiple territories. This year, it's still very strong, but it's -- we wouldn't expect that sort of exceptional growth to occur again. As well as that, you referred to the advertising campaign. We are very -- we were and are very excited about the moves that we're making in marketing. And there's two aspects to that. One is the fact that the creative is exciting, but also directed towards demand generation so that, as you mentioned, we're really targeting users at the top of the funnel that are more likely to convert. So the quality of people coming through the funnel and our conversion rates are very strong, as you can see with the record net Paying Circle adds. The other minor aspect for advertising is that we did launch a major campaign in Q2, which sort of really accelerated things for Q2 and possibly had a little bit of pull-forward impact from Q3. Raymond Jones: Thanks, James. Next question we'd like to hear from is from Chris Kuntarich from UBS. Chris from UBS, hopefully, you're there. Russell Burke: You there, Chris? Raymond Jones: Okay. We'll come back to Chris. Next, I'd like to open it up to Siraj Ahmed from Citi. Siraj Ahmed: Can you hear me okay? Russell Burke: We can. Siraj Ahmed: Just following up on that question from James on the MAUs, right? Lauren, you sort of mentioned you're focusing on higher intent members. But if I look at the stats that you've given on Slide 15, I think with -- Circles with families and teams has actually decreased a bit, and it looks like members per Paying Circles has also come down from 3.3 to 3.2. Just keen to understand what dynamics playing there if you're actually saying you're getting some of the higher intent MAUs in. And maybe just a quick one for Russell. Just in terms of the other revenue strength this quarter, can you just confirm that's actually been driven by ads and not your Placer partnership? And within ads, I think you had a partnership with Aura. Has that kicked in as well in this quarter? Russell Burke: Well, I'll start with the end piece of your question, and then Lauren can come back to the earlier piece. We -- in terms of -- sorry, what was the last part of your question again, Siraj? Siraj Ahmed: Was that -- so 2 things. On the ad -- on the other revenue, was that really driven by advertisements or the partnerships? And within ads, you had the Aura partnership that was meant to kick in from an ad perspective, right? Has that kicked in? Russell Burke: Yes, it has, although the major part of the Aura advertising revenue will flow through in Q4. And to the other part of your question, yes, the major growth in Q3 relates to advertising. There's a small element related to data and other revenue and partnerships, but it's primarily driven by advertising. Lauren Antonoff: And stepping back to this question of how we're focusing our advertisement. A lot of the focus this quarter was on that optimization, targeting those people who convert. And that's where we've seen this really great uplift in those people who convert in the first 30 days. That's what's helping to drive our outstanding conversions. But we're always playing around with those optimizations. Siraj Ahmed: And Lauren, just clarifying, so that members going down to 3.2, just is that just a function of you're getting younger couples -- younger families or something like that? Russell Burke: I mean it's a relatively small variance from 3.3 to 3.2. I think there's a number of factors that drive that, but it's more of the -- just the growth in the base that can drive those sort of minor variations. Lauren Antonoff: Yes. A lot of our circles start smaller and grow over time. And so when we have more new circles, those are smaller circles than bigger circles. So don't read too much into that, I would say. Raymond Jones: Thanks, Siraj. Next, we'd like to open it up to Rob Sanderson. Robert Sanderson: Yes. A couple -- I guess a couple of questions. First, just subscription guidance. You had a very strong Q3, a notable upside to consensus, but your midpoint for Q4 a little bit below. So just anything unusual about seasonality, Pet GPS, other factors like maybe Street is just sort of mismodeling, I'm not sure, but anything you could say about the subscription guidance? And I had a follow-up on Nativo as well. Just talk about the importance of the differentiation of just in-feed native content compared to other display networks. And I understand it's more of a technology buy, but also want to understand how you can leverage the existing business and the reach. You said the hundreds of publishing partners. Lauren also mentioned connecting to publisher networks. So are these direct deals or publisher networks? And is it relatively easy to scale up the supply side here, if you can generate... Lauren Antonoff: We're not going to remember all these questions. Russell Burke: Rob, let me take the first part of your question and then Lauren can provide a bit more color on the Nativo platform. There's nothing unusual in subscription. I think Q3 is typically our -- sort of metric-wise, our strongest seasonal period. So coming into Q4, we're seeing the same levels of strength. There's nothing particularly unusual in terms of subscription in Q4. I suspect it's probably just a modeling aspect of the mix of revenue. Robert Sanderson: Okay. And I'll repeat that, Lauren, on Nativo, differentiation of in-feed versus display, like why that's important to understand in terms of its positioning? And how can you leverage the existing business? You said hundreds of publisher partners, but also mentioned networks. So I'm curious whether it's direct deals or publishing networks. And then finally, like is it relatively easy to scale the supply side of this if you can bring the demand? Lauren Antonoff: So one of the things that was really exciting to us about Nativo is they focus on making ads that are relevant to consumers, and that helps brands and that also is good for the people who are seeing the ads and in particular, we're interested in families and what the impact is on Life360 families. So that was a real differentiator for us. Their business is pretty multifaceted. They have both direct and programmatic deals. We're interested in both sides of those and plan to continue to invest in those. And the scale of their publisher relationships is quite extensive and allows us to take a lot of the good information and information about our members and use that to deliver experiences across a wide range of publishers. Raymond Jones: Thanks, Rob. [Operator Instructions] Next, we'd like to open it up to Bob Chen from JPMorgan. Bob Chen: A quick one for me. And I think you touched on it earlier, Lauren. You mentioned one of the key product areas of focus for next year is making the app more user-friendly for elderly. Any comments on sort of time line on when we might see an elderly product come to market as well? Lauren Antonoff: Yes. So it depends what you mean by product. I think the first thing that we think about is today, many aging parents are using Life360, but not nearly as many as it could be if all the families in Life360 brought in their parents. And what we're looking at is what are those inhibitors, why do people not come as often as they might? How do people come to think of Life360 as a way to keep their parents safe just like it's a way to keep their kids safe. And what do we need to do differently to make this a great solution for those people. And so the work in that will continue, I think, in an ongoing basis throughout the year, and I would expect that you would be seeing some of that stuff by midyear and continuing to see that potentially even sooner and continuing to see that throughout the year. In terms of bringing sort of a stand-alone product offering with something like a hardware, we don't yet have a time line on that. But we are continuing to use all the resources that we have to solve family problems in a multifaceted way. Raymond Jones: Thanks, Bob. Next, we'd like to open up the line to Chris Kuntarich from UBS. One more time for Chris at UBS. Okay. We'll come back to Chris again. Next, we'd like to open up to Andrew Boone from Citizens. Andrew Boone: I wanted to go back and just hit on the Nativo again, just like everyone else. We talked about the opportunity of the subscription business being as big as kind of other at large. Lauren, can you just paint the 5-year picture for us of what does that kind of look like? What are you guys building on the advertising side? Like what's the opportunity in a multiyear context of what you guys can put together here and what that looks like? Lauren Antonoff: Yes. So what we envision for our advertising business is one where we can take all of the value and insights that we have about our members and use that to connect brands with a wide range of publishers on many platforms, so not just within the Life360 app, but in a multitude of apps in ways that are really relevant and with that, be able to deliver better performance on those ads that we also can measure through our measurement products like Uplift. And so that we have sort of this end-to-end solution where we have those insights, we help people target the right audiences. We deliver app experiences, both inside our app and outside our app that are more compelling and more relevant. And then we can measure the results of those for brands. So I hope that's helpful. Raymond Jones: Thanks, Andrew. Next, we'd like to open up the line to Wei-Weng Chen from RBC. Wei-Weng Chen: Yes, more Nativo questions from me as well. I guess, can you help quantify how much faster this acquisition allows you to move? Like how many years of development and how much cost has 360 avoided by making this acquisition? And then I guess you mentioned Nativo is about 2x your revenue. 360 has kind of built this revenue base over 12 months that Nativo has been around since 2010. So can you maybe speak to the growth rate of Nativo and how we should think about a forward blended growth rate for the advertising business? Russell Burke: So taking the last part of your question first, Wei. The 2x revenue is just to give you a sort of a concept of scale so that as we look at the combined businesses going forward. You're right, Nativo has been around since 2010. They built this business from scratch basically. So they were very much a pure start-up. So they've created the business that they're doing and created that quite successfully over a period of time. Again, the attraction for us here is the platform that they've built, the ad tech, the publisher relationships, the sales staff, the infrastructure that they've put together on creating this sort of full stack ad tech platform. So that's the piece that's exciting for us. We could debate in terms of how long it would have taken us to build and what that would have cost. But clearly, from our point of view, this accelerates our road map probably in the range of sort of 12 to 18 months. Raymond Jones: Next, Wei-Wei. I'd like to open up the line to Lindsay Bettiol from Goldman Sachs. Lindsay Bettiol: Yes. Okay. So I'm going to have a crack at the question that's been asked a couple of ways, just on the other revenue front. It looks like advertising accelerated like pretty meaningfully Q-on-Q. So I've got something like 60% growth. You've called out existing arrangements and an increased number of partners. Could you maybe like just delineate those 2 and talk to us a bit about whether it's an existing partner paying a lot more or it's like you've seen kind of meaningful growth in the new number of partners using advertising? Russell Burke: So I mean in terms of advertising, it's largely a ramp-up of the various things that we are doing. We've talked about the various products that we've launched in the last couple of quarters. There's probably no one significant piece that would accelerate that. And that's going to be sort of somewhat uneven. We also talked about the Aura partnership. And as I said earlier, the larger part of that advertising piece at least will flow through in Q4. So there's those pieces. And again, just to give you a sense of where that's at, as I said before, as we look at the full year, we expect advertising revenue to be coming up towards half of other revenue in total. Raymond Jones: Thanks, Lindsay. Next, we'd like to open up the line to Jennifer Xu from Jefferies. Jennifer Xu: I just have one question related to pet. So for pet, when you comment that it is currently focusing on existing members, can I understand that pet product is now expected to bring more conversion from free users to paid users rather than increasing MAU? And how long the conversion usually take and will be that period change shorter due to the launch of the pet? Lauren Antonoff: Yes. So our focus is certainly giving our existing free member base a reason to convert. One of the blessings and challenges of Life360 is that customers love us a lot and don't always feel like they need to pay for it. And so this is a great reason for people who love the product to have a real concrete visible reason to pay. It's really too early for us to extrapolate the timing and when in someone's life cycle are they going to discover that. But we certainly think it will apply to more members more often and earlier in their journey than in the past. Raymond Jones: Thanks, Jennifer. Next, we'd like to open up the line to Chris Smith from Ausbil. Chris Smith: Look, really pleasing to see the 20% growth in Paying Circles and even more so to see the pet trackers obviously sell out across your key regions. Obviously, not trying to get a timing question here. But can you please talk to how you're using -- you're going to use it as a conversion tool. Obviously, you've got 26 million nonpaying circles on the platform. So you could 10x the business just from the current levels if you actually just turn them to Paying Circles. But within that, could you maybe help us just understand, obviously, from a discount perspective, if you give away the hardware, you're losing the App store commission, it's gross margin dilutive, but it's EBITDA accretive at the bottom line. And how you're thinking about from that conversion perspective, the gating of that product release to then target those 26 million circles that aren't currently Paying Circles, of which, what, 13 million must have pets? Lauren Antonoff: Yes. So this is exactly the point is providing value to members that is inherently linked to subscriptions. The Pet GPS requires that LTE connection in order to be able to give your pets real-time location. People understand that reason and understand that as a reason to pay. As we learn more about the price sensitivity and as we have more volume of units in stock, we're certainly willing to lean in and deliver units at a lower cost if we find that, that helps us convert people faster. I think we're doing a lot of experiments to understand the price sensitivity and what allows us to scale the business and convince members to buy. Russell Burke: And Chris, as I think we've said before, that's -- there's a timing aspect to that. While it might be dilutive to stand-alone hardware margins, obviously, the intent here is to get people into high-margin subscription. And our intent and our expectation is that we'll be able to do that. It's just a matter of the timing of when that occurs and what that payback period becomes. Chris Smith: Great. And look personal anecdote, the pet tracker life cycle is probably 3 to 4 weeks and I couldn't be more pleased with mine. Lauren Antonoff: We're happy to hear that. Raymond Jones: Thanks, Chris. We'll open up the line to one more time for our final question. Unknown Analyst: It's been answered. All good. Lauren Antonoff: Okay. Great. Russell Burke: All right. Raymond Jones: Thank you. That concludes our call. Lauren Antonoff: Okay. Thank you, everybody, for joining us today. We appreciate it.
Marseille Nograles: Good afternoon, everyone, and thank you for joining us today. I'm Jinggay Nograles, Head of Investor Relations here at PLDT. And it's my pleasure to welcome you all to our 9-month financial and operating results briefing. Joining us today to share insights into PLDT's performance and strategic direction are PLDT's Chief Financial Officer, Mr. Danny Yu; PLDT's Chief Operating Officer, Mr. Butch Jimenez; PLDT Corporate Secretary, Marilyn Victorio-Aquino; PLDT Chief Legal Counsel, Attorney, Joan De Venecia-Fabul; Head of Consumer Business, Mr. John Palanca; Head of Enterprise Business, Mr. Blums Pineda; ePLDT President and CEO, Viboy Genuino as well as our OICs for Smart, Lloyd Manaloto and Ms. Marjorie Garrovillo. All right. So before we begin, I'd like to remind everyone that we will have a Q&A session after the presentation [Operator Instructions]. To start, I'd like to invite our Chief Financial Officer, Mr. Danny Yu, to walk us through PLDT's financial performance. Danny Yu: Good afternoon, everyone, and thank you for joining us today. Allow me to present PLDT's financial and operating highlights for the first 9 months of the year. Our service revenues net of interconnection cost reached PHP 145.9 billion, up 1% year-on-year, driven by steady demand across fiber, data and ICT. Cash OpEx, subsidies and provisions were down 2%, showing our focus on spending control and even as we support growth areas. EBITDA rose 3% to PHP 82.8 billion with margin steady at 52%, amidst higher revenues and lower OpEx. Telco core income came in at PHP 25.3 billion, down 5%, mainly due to higher depreciation and financing costs from network and IT investments. On the other hand, core income was stable at PHP 25.8 billion, supported by Maya's sustained profitability. Our share in Maya's core net income reached PHP 603 million for the period, a PHP 1.5 billion turnaround from last year's loss. Maya remained profitable for the third consecutive quarter, showing consistency that it solidifies its position as the country's leading fintech ecosystem. In summary, our 9-month results show a stable top line, resilient EBITDA and improving contribution from digital businesses. Consolidated service revenues reached PHP 145.9 billion, up 1% year-on-year. If we exclude legacy services, total revenues rose 3%, showing the continued expansion of our growth areas. Within these growth segments, fiber revenues grew 7%, reflecting solid demand for reliable connectivity. Mobile data and fixed wireless revenues were up 1%, with usage and 5G adoption continuing to rise. Please note that beginning this quarter, we will now include fixed wireless access, FWA, within our growth segments for our wireless business. The base numbers have been adjusted accordingly to provide like-for-like comparison and reflect organic growth. Fixed wireless growth is driven by the expanding 5G base and stronger network coverage. For enterprise, corporate data and ICT revenues grew 2%, returning to growth in the third quarter as government and public sector projects started to ramp up after election-related delays in the first half. ICT on its own grew 27%. Overall, the shift towards these growth areas, namely fiber, data, fixed wireless and ICT continues to offset the decline in legacy revenues. Focusing on the third quarter, I'd like to point out that all major business units delivered positive growth even with legacy drags showing recovery, especially for our mobile and enterprise groups. Consolidated service revenues rose 2% year-on-year to PHP 48.8 billion. Excluding legacy services, total revenues rose 4%. Wireless consumer revenues were up 1% with mobile data and fixed wireless delivering 3% growth year-on-year. Home revenues climbed 3%, while fiber revenues were up 6%. Enterprise, as mentioned earlier, is now back on its growth path, still a 2% increase year-on-year with corporate data and ICT up 5%, while ICT services on its own grew 51% year-on-year, as government projects begin pushing through. Overall, third quarter marked a broad-based recovery with improvements in both mobile and enterprise, reflecting steady execution and disciplined growth across the group. Now let's take a closer look at each of the business units. Home revenues grew 4% year-on-year to PHP 45.7 billion, driven mainly by continued fiber demand. Fiber revenues were up 7% to PHP 44.5 billion, now accounting for 97% of total home revenues. We added 265,000 net fiber subs year-to-date, up 67% versus last year. Total fiber base is now 8% higher year-on-year. On prepaid, we have selectively introduced prepaid fiber in appropriate growth markets, specifically targeting quality subs, who have a high probability of topping up regularly. In this way, we not only secure revenue growth but also sustainable profits in the long run. Prepaid sub count has grown 15x since end of 2024. ARPU held steady at PHP 1,470, the highest in the industry, driven by our value-based bundles such as video and gaming. Churn remained low at 1.9%, reflecting strong customer loyalty and consistent network quality. To further extend our reach, we have launched Air Fiber and Laser Internet providing fiber-like speeds in hard-to-reach areas at lower cost. This technology expands our coverage and improve service availability in underserved locations. Overall, Home continues to deliver solid growth, underpinned by fiber leadership, high ARPU and expanding access through new technologies. Let's now move on to Enterprise. Year-to-date revenues reached PHP 35.6 billion for the first 9 months, broadly steady year-on-year, while corporate data and ICT revenues rose 2% year-on-year to PHP 26.7 billion. Within this, ICT revenues grew 27% year-on-year, driven by strong demand for managed IT services up 115%, data center colocation up 25%, cybersecurity services up 12%. Importantly, the business unit returned to growth during the third quarter, reversing early year softness as delayed government projects pushed through. Enterprise revenue rose 5% versus the second quarter with corporate data and ICT up 7%, led by a 40% increase in ICT services. Corporate data and ICT now account for 75% of total enterprise revenues, reflecting our continued shift toward high-value services. PLDT also continues to strengthen its leadership in AI and data infra, positioning the group at the forefront of the country's digital transformation. We recently launched Pilipinas AI, the country's first sovereign AI platform hosted at VITRO Santa Rosa. This platform enables the enterprise to build and deploy AI models locally, giving businesses access to GPU-powered computing on demand. For our wireless business, revenues reached PHP 63.2 billion for the first 9 months, down slightly by PHP 0.3 billion versus last year due to legacy brands. Data revenues, which now include mobile data and fixed wireless rose 1% year-on-year to PHP 57.3 billion, accounting for 91% of total wireless revenues. For the third quarter alone, data revenues were up 3% year-on-year, reflecting steady demand and continued monetization discipline. Fixed wireless sustained strong momentum with revenues up 18% year-on-year as Smart leads the market by revenue share. If we remove fixed wireless, mobile data revenues rose 1% to PHP 56 billion. Performance was supported by stable data traffic growth, disciplined monetization, customer value management initiatives that help optimize spend and reduce marketing costs. 5G adoption continues to expand with the number of 5G devices up 39% year-on-year to 10.5 million, while data traffic rose 6% year-on-year to 4,393 petabytes. The share of 5G devices in the total base improved to 18%, driving higher data usage and improved customer experience. As we continue to innovate on the product side, we also stay focused on cost discipline across the group. Total cash OpEx, subsidies and provisions for the first 9 months of the year came in at PHP 63.1 billion, down PHP 1.1 billion or 2% versus last year. The biggest savings came from compensation and benefits down 7%, reflecting continued workforce optimization. Selling and promotions were also lower by 18%, driven by better campaign targeting and spend efficiency. Subsidies were also down by 25%, reflecting Smart's deliberate shift towards higher quality acquisition and tighter credit screening for postpaid device plans. On the other hand, repairs and maintenance rose 4% to PHP 23.6 billion, reflecting ongoing network expansion and site rollouts. Contract-specific services were up 25%, tied to the ramp-up of key enterprise and ICT projects. For the first 9 months of 2025, EBITDA reached PHP 82.8 billion, up 3% year-on-year with margin steady at 52%. This performance reflects the combined impact of a PHP 1 billion rise in revenues along a PHP 1.1 billion discipline for decline in operating costs. The 52% EBITDA margin has held firm, demonstrating our ability to defend profitability even in a very competitive environment. Telco core income reached PHP 25.3 billion, down 5% year-on-year, mainly due to higher depreciation and financing costs from network and infra investments. Core income was steady at PHP 25.8 billion, supported by continued earnings from Maya, whose consolidated core income hit PHP 1.6 billion year-to-date. Maya remained profitable for the third straight quarter, continuing to gain scale through higher transaction volumes, growing deposits and steady expansion in its lending and merchandise businesses. This quarter also includes PHP 2.6 billion in accelerated depreciation and noncash charge related to modernization of our core and IT systems and the retirement of legacy assets. Reported income stood at PHP 25.1 billion, lower year-on-year, mainly reflecting the absence of last year's higher ForEx and derivative gains as well as the accelerated depreciation booked this quarter. CapEx for the first 9 months stood at PHP 43 billion, down from PHP 52.3 billion for the same period last year. CapEx intensity improved to 27% from 33% a year ago, driven by lower spend on network and IT as major projects near completion. For the full year, 2025 CapEx guidance is lowered further to PHP 60 billion, lower than the original guidance of PHP 68 billion to PHP 73 billion. This is mainly due to more favorable pricing and terms. We continue to invest in new cell sites, LTE and 5G upgrades, home fiber ports, data center development and submarine cables. These projects will strengthen network quality and support the growth of enterprise and digital services. As at end of September, net debt stood at PHP 289 billion, translating to a net debt-to-EBITDA ratio of 2.61x, slightly higher than the prior quarter, but still within our target range. Our gross debt was at PHP 299 billion with 60% of maturities falling beyond 2030, providing a long runway and minimal near-term refinancing pressure. About 13% of total debt is U.S. dollar-denominated. With only 5% unhedged, keeping ForEx exposure very manageable. The average interest cost was 5.49%, up slightly from last year's 5.08% as lower rate maturities are refinanced. Our interest coverage ratio remains healthy at 3.37x, while our average debt maturity is 6.5 years. PLDT remains investment grade with ratings from S&P and Moody's. In terms of cash flow, we recorded PHP 1.1 billion in proceeds from tower sales and completed a PHP 20.5 billion final dividend payment for 2024 during the period. Incidentally, PLDT hit positive free cash flow as of September 2025, ahead of its forecasted 2026 target. Looking ahead, we are working towards reducing leverage to around 2.0x net-debt-to-EBITDA, which will be supported by our asset monetization program as well as lower CapEx. Now let me now discuss Maya, the Philippines all-in-one fintech platform powered by Maya Bank and Maya Philippines. It's a fully integrated platform that unites digital payments, savings and lending for both consumer and enterprises. Maya has created a powerful 2-sided network where more customers drive more transactions, generating richer insights, which enables higher cross-sell of products and ultimately, delivering scale and profitability. Maya continues to lead with strong performance across deposits, loans and payments. Maya remains the #1 merchant acquirer and card payment processor. It delivered PHP 532 million in net income in the third quarter, sustaining profitability while growing. Banking customers nearly doubled year-on-year to 9 million, while its cumulative borrower base grew 81% to 2.4 million. Deposit reached PHP 57 billion, up 59% year-on-year and total loans disbursed since its inception hit PHP 187 billion. Maya continues to onboard millions into the formal financial system, especially younger users and underserved segments. It continues to be the digital bank of choice for young customers across the country. Of the 9 million customers in just over 3 years, 84% comprise Gen Z and millennials and 76% are based outside of Metro Manila. Of the 2.4 million borrowers that Maya has given credit to, over half are first-time borrowers with no previous lending history. Maya's deposit base has grown to PHP 56.7 billion as of September, more than doubling from end of 2023. It disbursed PHP 36 billion in quarter 3 alone, bringing its total loan disbursement since launch to PHP 187 billion. The loan book now stands at PHP 27 billion with loan-to-deposit ratio at 48%. Net interest margin rose to 18.9% for the first 9 months, while maintaining a healthy portfolio with an NPL ratio of 6.3%. Maya continues to expand its fintech ecosystem through product innovation and strategic partnerships. Maya launched Maya Black, its premium credit card in quarter 3, receiving a very strong response from the customers. Around 40% of Maya Black cardholders are first-time credit users, underscoring Maya's role in democratizing credit access to Filipinos. Maya also launched an innovative personal loans product in the previous quarter that incentivize users to make periodical savings habit by offering higher rates. Maya is also leveraging its relationship with established businesses like Cebuana Lhuillier to expand credit to unbanked customers through over 3,500 branches and 25,000 agents nationwide. In summary, Maya's strong growth across payments, deposit lending reflect the power of a fully digital integrated ecosystem. PLDT continues to mark progress in its sustainability journey as manifested in its latest ESG ratings, which continue to register improvements as you will see on the slide. We continue to align with global best practices, and we have started to take part in global conversations. At the Climate Week in New York, PLDT and Smart represented the Philippines at the United Nations Global Compact Leaders' Summit, which we showcased a homegrown innovation that integrates localized mapping of natural hazards and remote monitoring of network facilities into a single visual dashboard. We were also featured in the Philippines 2025 Voluntary National Review presented by the Department of Development, highlighting the country's progress on sustainable development goals. Other highlights during the quarter includes a workshop with our supply chains where we cascaded our biodiversity policy, particularly in the context of network rollouts. Smart also secured a PHP 2 billion green loan with proceeds to be used to accelerate the rollout of our 5G network nationwide, which is more energy efficient. Now that concludes our prepared remarks for PLDT's 9 months results. We're now open for questions. Marseille Nograles: Thank you so much, Danny, for your insights. Before we open the floor to your questions, allow me to reintroduce our business leaders in the room. I'd like also to recognize our COO, Mr. Butch Jimenez; Aayush Jhunjhunwala of Maya. The CIO of Maya has also joined us as well. And just to remind everyone, those who are in the room with us are our Head of Consumer Business Home, Mr. John Palanca; our Head of our Enterprise business; Mr. Blums Pineda; ePLDT and Vitro President, Viboy Genuino; our OICs for Smart, Lloyd Manaloto and Marjorie Garrovillo. Of course, we have our CFO, Mr. Danny Yu; our Chief Legal Officer, Ms. Joan De Venecia-Fabul and our Corporate Secretary, Ms. Marilyn Victorio-Aquino. [Operator Instructions] The first question here is from Nicky Franco of Abacus Securities. This is for Maya. Given that Maya's lending was still strong in 3Q '25, what were the main drivers for the drop in net income for the period? Were there any one-offs that were attributed to this? Aayush, would you like to take that? Aayush Jhunjhunwala: Sure, Jinggay. Thanks for the question. So there are a couple of factors that resulted in a slight drop. One was the slight impact of the removal of gaming links, the effect of which started to come in the August of 2023 as per BSP's direction. And secondly, as Danny mentioned, we launched Maya Bank Black Credit card. And as I mentioned in the previous call as well that we had launched our personal loans. So as we scale these longer duration loans, they will continue to have some provision -- some excess provision impact in the near to medium term before the -- until the portfolio matures. So these are the 2 sort of main factors for that. Marseille Nograles: Thank you, Aayush. All right. It looks like we also have some questions here from Arthur Pineda of Citi. Arthur Pineda: Several questions, please. Firstly, with regard to the KPA and the IRRs, which have been released by -- and signed by the President, how do you see this impacting your profitability as well as your investment profile going forward? I'm just wondering, do you see the new revenue opportunities as outweighing the revenue risks with regard to upcoming competition? Second question I had is with regard to mobile. I mean we've seen this has been -- it has been trailing that of your competitor for the third straight quarter. What's driving this difference in performance? Is there any issue that the company needs to work out? And the third question is on enterprise. You mentioned an uptake in government projects earlier. I'm just wondering, are you seeing sustained uptake into the fourth quarter, given that we've seen a slowdown in the broader macro momentum and government spending? Marseille Nograles: Thank you, Arthur. Okay. We have 3 questions here. Perhaps we can take your first question -- your second question first, which is on wireless. It's been trailing for a while. Is there any difference in performance that you'd like to highlight? So Marjorie or Lloyd, would you like to take this question? Marjorie C. Garrovillo: All right. So for the wireless business, whilst we have been trailing behind Globe in actual revenue, when you actually review the growth rates, we could actually see that the Smart Wireless group has actually achieved a flattish growth rate for year-to-date 2025 versus Globe. It's actually more of a negative. Number two, the actual Q3 achievement versus last year, Smart is also ahead, right, versus Globe. Now what's interesting is that what we've actually managed to do is using tools like hyper targeting, we actually have been able to secure higher quality subs space so much so that our ARPUs for Smart have actually improved. So we're actually at a positive 2.5% on our ARPU for Smart versus Globe, for example, which is at negative 5.5%. We do believe that with tools like this and actually focusing on how we could generate more positive growth, we should be able to at least stabilize and actually sustain our mobile resilience. Lloyd Dennis R. Manaloto: Also, I'd like to add to the fact that if you look at fixed wireless -- for example, on wireless network rapidly growing, and this is driven by our investment in 5G and investment in 5G devices. So that's one area we're also focusing on as a total portfolio because we see the bigger growth in that. Marseille Nograles: Thank you, Marjorie. Thank you, Lloyd. Let's take your question on Enterprise next in terms of the sustained uptick in the fourth quarter. Blums, would you like to take that? Blums Pineda: Yes, sure. Thanks for the question, Arthur. So with PLDT Enterprise, yes, we are seeing the continued momentum, as we mentioned before, into the fourth quarter and also into early Q1. As you can imagine, some of the nature of the projects will probably result in some slippage of award dates, et cetera, which is quite normal. But we're seeing still that level of investment and activity. There's a lot of -- across both national government agencies and LGUs, continued demand here that we're serving on both the connectivity and the ICT side. Menardo Jimenez: Can I add to that? Marseille Nograles: Yes, of course. Menardo Jimenez: Just, I guess, a couple of insights on where the government is going to land in terms of sustaining their investments in digital connectivity. Of course, I can't speak for the government at this point in time. But generally, what we see is that they are going to continue their trust and their investments in being able to connect the Philippines digitally. I don't see that slowing down. And I think that after realizing that they've spent too much on flood control, they've started to sense that maybe they should start shifting some of that expense or that spend to other areas and digitizing or providing digital connectivity to various aspects of Philippine society is something that they are talking about prioritizing. So first, let's talk about data centers. The government or PBBM has already given the DICT an order for public sector data sovereignty. That becomes a big driver for the enterprise group in terms of possible revenues in the future, principally because we do have the biggest data center in the Philippines, and we are the only ones at this point in time that can provide GPU as a Service leading towards AI. Aside from that, the GIDA site investment or initiative of the government has just finished its bidding. PLDT, Globe has gotten its fair share of rolling out in GIDA sites. So that is going to add revenue for our company, at the same time, continue the investments of the government in connectivity. Now tomorrow, I will be presenting to the PSAC, the Private Sector Advisory Council, a couple of more initiatives to digitize state universities in the Philippines and the other one is health care centers in the Philippines. So it looks like they are realizing that we are far behind our Asian or ASEAN neighbors when it comes to digital connectivity, and it's one of the priorities that I think the President and the government is going to push forward in 2026 and beyond. So looking forward to a sustained investment of the government in connectivity. Marseille Nograles: Thank you, sir, Butch. The last question, which is on Konektadong Pinoy. Marilyn MAVA would you like to take this one? Marilyn Victorio-Aquino: Lot of opportunities. It's difficult to assess the opportunities right now because this is the first country where they are going to roll out the open access for all assets model. So we don't know in what shape or form it will -- it will basically be form in the Philippines. But aside from that, if there are new players that are with the vision and philosophy that allows them and are committed to invest in the Philippines, invest in new infrastructure that will complement and supplement our network, that is an opportunity that we can consider because it will strengthen our network together. And we may be able to improve the connectivity for the entire country and maybe that will help in the vision of the connecting Filipino to have more connectivity even in the GIDAs area and also improve the Internet connectivity in the entire country. But that requires -- but that is something that we can find an opportunity that we can explore and exploit and create new partnerships around that. But if it is pure access, it's hard to assess the opportunity right now because we don't know how it will be rolled out in the Philippines, the open access for all assets. Arthur Pineda: So no indications on the IRRs based on what's been signed by the President so far? Marilyn Victorio-Aquino: I'm sorry? Marseille Nograles: Indications on -- how we feel about the IRR? Marilyn Victorio-Aquino: Well, how we feel about the IRR. Mr. Pangilinan answered that earlier in the media briefing. Maybe Jinggay will read his answer. Marseille Nograles: Sure, sure. So he had a very -- he had a statement earlier that he shared with the media. So I'll just quote what he mentioned, and I'll share it with you, Arthur. So when he was asked about PLDT's overall view on the final IRR, he answered by turning the question around, right? Do we think that the law as written actually achieves what it's set out to do, cheaper Internet for all, wider coverage, more infrastructure because the law and its IRR right now do not impose any obligation on new entrants to build infrastructure. There's no requirement to start in geographically isolated or disadvantaged areas. And there is no service obligations to ensure coverage or quality. And if you recall, in the Ramos administration, there was a sound model under the service area scheme, where telcos were assigned specific regions and targets like reaching the number of households to be connected, right? And that created real infrastructure build-out at that time. And the Konektadong Pinoy law, on the other hand, does not have such provisions. So really, the question remains on whether it will truly deliver on its promises. So that was the statement shared by MVP earlier on the IRR. All right. We have another hand raised from Ranjan Sharma. Ranjan Sharma: My questions are related to the KPA as well. Can you help us understand what -- how the wholesale access pricing mechanism is going to be set? When you're being asked to open up your network, on what basis are wholesale access prices that you would be charging any access seekers? Is this completely on commercial terms? Is there a cost model associated with it? And the second question is on the spectrum. I think there's also spectrum management provisions as well, which includes clawback of underutilized spectrum. Can you help us understand how that might impact the industry as well? Marseille Nograles: Yes. In terms of the pricing, I don't think there has been any specific model that was shared in the IRR, right? The way it was drafted was that the incumbents are to submit our price list in the reference access offer and that will be reviewed by the regulators to determine if it is fair, reasonable and nondiscriminatory. So I think there's really no specifics at this time, Ranjan, on using any specific model. Marilyn Victorio-Aquino: Maybe I add to that. In fact, it is not clear to us because we already have open access, bilateral contractual commitments, right. We do open access on a contractual basis. But it's not clear to us, for example, whether or not the pricing that we have assumed based on voluntary contracts with counterparties will be the same price that will be approved by the regulator. And there is also a provision in the IRR, which says if it's a significant market player, then the regulator may scrutinize your pricing. And what that means is not clear to us, whether or not significant market players will be required to price down their offering compared to contractual commitments that they entered into before Konektadong Pinoy. It's not very clear to us. So on the spectrum underutilization, is that the question? Marseille Nograles: Spectrum management provisions, how we see this impacting our business? Marilyn Victorio-Aquino: Well, it will have an impact on the business, but please appreciate that right now, there is no standard for underutilization. It really depends on how you use the spectrum. If you use the spectrum as a macro site, the utilization might be different. If you use the spectrum to cover that basically blind spots or if you use it to have continuous trouble, the utilization would be different. And so the spectrum management policy is intended to, I think, come up with that. And hopefully, there will be a consultation with the stakeholders like us, who are using the spectrum. And hopefully, there will be a transition period if they set -- if they define, for example, underutilization as such, then the next day, they will start recording the spectrum that might not be fair because it's basically a totally new definition of underutilization, which we are unable to comply, if the next day, they will start recording. So that is what's not clear. But I think they will have a period from the effectivity of the IRR to come up with a spectrum management policy framework, but that's not very clear right now. Marseille Nograles: Okay. Looks like we have some questions here as well from [indiscernible]. So 2 questions on net debt. You mentioned that net-debt-to-EBITDA will be reduced to 2x, which year is this expected to be achieved? So that's the first question. Second question, net debt to EBITDA is increasing a lot faster than net profits. Where is the -- where in the business is that going into? Danny Yu: We continue to spend on IT network rollout and data center development. So that's where the EBITDA -- that's where the debt go to now. With respect to projection, I think it will be about 3 to 4 years from now going to the 2.0. But certainly, I think the positive news is that we finally achieved positive free cash flow as of September, ahead of our forecast in 2026. That's one good news. And we hope to sustain this with lower CapEx moving forward as well as with our monetization program. Marseille Nograles: And we also have a question related to that regarding our positive free cash flows, how confident are we that we can sustain this into 2026? Danny Yu: We're confident because we will have lower CapEx moving forward, again, as mentioned earlier, because of our asset monetization program. Marseille Nograles: And also, this is a common question that was sent to us earlier. Any updates on the current asset monetization programs, namely the data center stake sale as well as the copper sales? Danny Yu: On the data center, we're currently in talks with prospective investor, who intends to take around 49% of the business. At the same time, we're also exploring the possibility of doing a REIT listing for our data center, just in case the other falls true. Marseille Nograles: Thank you, Danny. All right. We have another question here from John Te of UBS. John Te: Two questions. First is on the fixed broadband net adds, quite strong, 95,000 compared to your run rate of 70,000 in the first half. So how much of this was prepaid? How much of this was postpaid? And what drove the acceleration there? Marseille Nograles: [indiscernible], would you mind taking this? Unknown Executive: So thank you for the question. Yes, we've actually been able to build up the install rates over the last quarter. We leased up not just our channels, but our installed team. So we're able to gather more. I can't -- all I can say is that in the third quarter, we've seen more than a threefold increase in the prepaid subscriptions. And we're doing this in a very different way. I think I mentioned in the previous quarter that while we are growing the pie to ensure that the ARPUs remain at the high level and not cannibalize postpaid, our acquisition of prepaid has been very targeted to areas where prepaid applies. So growing the pie from Tier A and Tier B municipalities to what is now probably Tier C and probably opportunities is very selective. So we will not be seeing the same volumes, but what we will be seeing are the quality subscribers who have the high propensity to top up. We -- as mentioned from the beginning of the year, we have grown more than 3x already, 3.3x to be exact. And once we're ready to release the figures, I think we have a sizable market -- rather subscriber base on prepaid, then we will do so. So at the moment, the majority of it is coming from our postpaid acquisitions. John Te: Okay. A quick follow-up on for -- maybe for Danny. On depreciation, there was PHP 2-plus billion charge in 9 months, but safe to assume that most of it came from the third quarter. And the related question on interest expense, given that debt really hasn't changed, but there was a spike on year-on-year interest expense. Would this mainly come from, I guess, leases for towers, et cetera? Danny Yu: I'll take the second question first. The reason for the increase in interest is mainly due to increase in the weighted average rate by around 49 basis points. That's one. The second reason for that is that also increase in the weighted loan average by around PHP 19 billion compared to the previous year. So that's for the second. What was the first question again? Marseille Nograles: Accelerated depreciation of PHP 2.6 billion... Danny Yu: It's mainly retirement of legacy assets as well as modernization of our IT and network core system and the accelerated depreciation is a fast-paced capital-intensive industry, and it's rapidly changing. So we have to continually review the economic life of these assets. John Te: And most of it occurred in the third quarter, right? Danny Yu: Yes, in the third quarter. I think we recorded that in July of this year. Marseille Nograles: Okay. So some questions that were sent in as well. This one is for Enterprise. You recently launched SmartSafe as well as Pilipinas AI. How do you see these contributing to your revenues moving forward? Unknown Executive: I'll tackle SmartSafe and I guess I have Vitro President of ePLDT and Vitro, Viboy Genuino will tackle the Pilipinas AI announcement. So on the SmartSafe, yes, we have actually been bringing this to customers already even in Q3, but we did a commercial launch just last week. Basically, with SmartSafe, this takes advantage of specific technology on the Smart network that makes it as secure for someone to have a transaction on a mobile app that's enabled for this so that they don't need an OTP. So it's a very seamless log on, but also just as secure as an OTP type motion. You bypass the risk of your OTP being intercepted, et cetera, which is very common nowadays. From a revenue standpoint, of course, this is a capability we need to work with other B2B companies that have app, so the banking, government apps, et cetera, for them to build this into -- very simple to do it -- for them to build it into the next release of their app. So that's a motion that's happening now. We're quite excited that we have several institutions with apps that are interested in this and looking to launch it as soon as possible. So we'll keep the team posted in terms of what that is. Turning over to Viboy. Victor Genuino: Yes. Thank you, Jinggay, for the question on Pilipinas AI. So yes, we launched this in the third quarter of this year. And the basic concept is to be able to offer a platform for enterprises to be able to run AI use cases. The main issue of enterprises now is that they want to run AI use cases or proof of concepts, but they don't know how to utilize it and how to build the infrastructure around it. They have to source for the GPUs. They need to talk to a staff provider. They need to talk to a data center. They need to provide the connectivity and the cybersecurity requirement. We're basically taking this pain point away from the customer and letting them run these different applications on a ASU model wherein they can run the POCs on an hourly, daily, weekly or a monthly view. And we've seen a lot of interest coming from enterprise customers, who really want to experiment and run AI use cases. So we're very happy to be able to offer this service to our customers. We're the first company in the Philippines to actually bring in NVIDIA H200 GPUs, the most advanced GPUs of NVIDIA currently, and we're seeing a lot of interest in it. Marseille Nograles: Thank you Viboy. This question is from [indiscernible]. And this question is for Danny. Noting that your debt levels have increased this year despite continuous lower CapEx guidance. Is this mainly for refinancing? Increased net debt despite lower CapEx guidance. So is the increased debt because of mostly refinancing? Or is there -- are there new... Danny Yu: Mostly refinancing. Yes, mostly refinancing. Marseille Nograles: All right. And from Tony Watson, any thoughts -- this is for Aayush. Any thoughts that you can share on a potential Maya IPO or spin-off? Aayush Jhunjhunwala: I think we'll stay clear of that. I think we are focused on driving the business and any IPO decisions, et cetera, will be led by the shareholders. But we, as management, are sort of fully focused on just executing and scaling our products. Marseille Nograles: Thank you, Aayush. Just doing a last scan for questions here. If there's any from the floor. Okay. It looks like there are no further questions. With that said, I'd like to thank everybody for your time today and joining us for our 9-month briefing. If you have any further questions that you'd like to send to us, please feel free to reach out to us via e-mail. And with that said, we look forward to presenting our full year results by February of next year. All right. Thank you, everyone. Have a good afternoon. Danny Yu: Thank you. Unknown Executive: Thank you. Aayush Jhunjhunwala: Thank you.
Operator: Welcome to the K&S Second Quarter 2025 Earnings Call. I will now hand over to Julia from K&S for some technical notes. Julia Bock: Ladies and gentlemen, also from my side, welcome to our call. We hope you've had the chance to review our posted slides as well as our Q3 documents available on our website. After the opening remarks by Christian, we will jump directly into the Q&A session. Some technical notes as always. Please refer to our disclaimer on Page 2 of the presentation. And then a note on data privacy. Please be aware that the Teams session will be recorded, webcasted and available as an audio replay on our home page afterwards. People who ask a question in the Teams session should be clear that they are switching on their camera and microphone, they agree to the recording and replay of video and audio sequences. Now I'd like to hand over to Christian, our CEO, for the opening remarks. Christian Faitz: Thank you, Julia, and welcome from my side as well. Starting with the quarter. Third quarter EBITDA was above the prior year quarter. Firstly, this was due to better prices in both customer segments. Last year's EBITDA was affected by a drawdown in inventories, which did not occur this year. This resulted in a positive EBITDA effect. Thirdly, our hedging brought us to a total positive FX effect, which was better than last year. Q3 free cash flow could also be increased from EUR 24 million to EUR 37 million. Regarding our full year guidance, we confirm the midpoint of our previous guidance range and now expect EBITDA to be between EUR 570 million and EUR 630 million. The expectation of a slightly positive free cash flow is confirmed as well. For the midpoint of the EBITDA guidance, we assume that the average price level currently achieved in all regions and for all product groups remains stable during the rest of the year. This would result in a full year ASP of EUR 330. Although we are highly committed regarding our potash deliveries until the end of the year, we still have some flexibility regarding the exact product mix. Furthermore, we assume normal winter weather, normal production as well as a U.S. dollar-euro exchange rate of $1.18 and a gas price at EUR 36 for 30% open position in Q4. We would reach the upper or lower end if these factors in combination develop in our favor or against us. I'm looking forward to answering your questions together with my colleagues, Jens and Julia. And I will now hand over to the operator to start the Q&A session. Operator: [Operator Instructions] And this brings to our first question from Christian. Christian Faitz: Christian Faitz here at Kepler Cheuvreux. Christian, Jens and Julia and team, congrats on the results in a difficult time, low season period. A couple of questions, please. So my first question would be your D&A in Q3 was significantly lower than in previous quarters. I assume this is in context of the impairment you took for Q2, correct? And which D&A level should we model in going forward? Christian Meyer: Yes. Christian, you're absolutely right. The lower D&A is based on the impairment that we had in Q2. So the base level now is much lower. So the current level that you could calculate for the other quarters. Christian Faitz: Okay. Great. And my second question is, any news regarding the progression in talks about the tailing pile coverings. Jens Keuthen: So we postponed the roundtable discussions and now went further in the smaller group with the local municipality and the citizens initiative. And the aim now is to focus on reliable measures which we can implement and also put in our procedural applications. And yes, now the discussions are ongoing, and we are still confident that we will find a solution. Christian Faitz: This is for Neuhof, I assume. Jens Keuthen: It is for Neuhof, yes. Christian Faitz: Okay. And last question, what is the current run rate of annual production in Bethune? And where do you see Bethune gearing up to by the end of '26 in terms of production? Christian Meyer: So in the current level, we expect a little bit more than 2.2 million. And in the next year, we have a big maintenance, and that's why we have a little bit more than this year, but not much more in the next year. But that's based on the long maintenance period. That's every 3 years. Julia Bock: And you know that we always ramp by 100,000 to 150,000 tonnes and next year will probably rather be a 100,000 tonnes year. Operator: Our next question comes from Sebastian. Sebastian Bray: Sebastian Bray from Berenberg Bank. I have two questions, please. The first is on the volume outlook for the group as a whole for '26. Q3, it looks as if the group quite wisely cut some of the more commoditized volumes and went more for specialty. But I'm thinking about implications for next year. We have, as you had mentioned earlier to Christian, a little bit of maintenance at Bethune. Is 7.4 million tonnes a reasonable baseline? Or are there any one-off effects? And how do you think of that is for agriculture? And how do you think about volume growth, if any, moving into '26? Because if we have some maintenance at Bethune, additional ramp-up of specialties at the MOP market, let's say, remains a bit more challenging, is there any volume growth at the group level in the year? Christian Meyer: Yes, Sebastian, what's very important is the final volume finally depends on the product mix. If we have some more specialties compared to MOP, than the volumes are a little bit lower. But from today's perspective, we expect a little bit more volumes for the next year. So growth of at least around about 100,000 tonnes. Sebastian Bray: That's helpful. And can I ask about the salt business. The pricing has been very helpful over the last few years I think it is safe to say. Are there any signs that the pricing for de-icing salt or salt-like products more broadly is starting to flatten out or in some places, decline or that's not the case? Christian Faitz: From today's perspective, not really. That finally depends on the weather conditions in the winter. If it's a pretty warm winter then it could be that's a little bit lower. But you should keep in mind that we are selling de-icing volumes over the whole year. So more than 1 million tonne is already sold. And so the rest finally depends on the weather conditions. If it's pretty cold, then the prices are better; if it's warm, then a little bit lower. But the general price level should be the same. Operator: Our next question comes from the line of Michael. Michael Schaefer: This is Mike Schaefer speaking from ODDO BHF. Two questions from my side. The first one is more on the general market conditions in the potash market. Initially, into '25, we discussed a lot about production curtailments in Russia and Belorussia. So obviously helping to bring potash prices up. But if we look into rail shipment statistics year-to-date October, we see that basically volumes are up 10%. So my question is, how do you see, let's say, the supply side from Russia? And how we should think about let's say, going into '26 from this source and what this is doing to the potash market environment in general in '26 from your perspective? This is my first question. Christian Meyer: Yes, with Belarus and Russia, they are back on the pre-war levels and increased their volumes a little bit. But the main or the most important answer is that there's the demand. And that regardless of these additional volumes, we saw increasing prices, for example, also for the cross-border deliveries to China. But also if you have a look to Brazil over the last 12 months, we have a much higher level in Brazil. And for the next year, we will see in the spring season when the demand comes from every region globally that we will see how tight the market is. So we expect still a good demand for next year. And if the supply -- we will see if the supply is able to fulfill this demand in the spring season. Michael Schaefer: Okay. Second question is more related to K&S specifically on the major building blocks for your cost items, major cost items in '26. So can you just remind us on how you -- you mentioned the EUR 36 price assumption for natural gas in the fourth quarter. So -- but how in general should we think about those energy costs and personnel, what to expect in '26 compared to '25? Christian Meyer: Yes. In total, we expect that the cost level will be more or less stable. With regard to the personnel cost, you should keep in mind that the bargaining agreement was in place since the second quarter of this year. So the next year, we have, in the first quarter, a higher level compared to this year, but the bargaining agreement will run until the end of the next year. So there will be no additional increases. And with gas, we already hedged around about 70% for our gas consumption, and that's a little bit below EUR 40 of the hedging position. Operator: Our next question comes from the line of Tristan. Tristan Lamotte: Tristan Lamotte, Deutsche Bank. I'm just wondering about Q4 and your ASP assumptions. I think you said EUR 330 for the full year, which implies quite a drop-off in Q4 versus Q3 even if you consider FX. So I was wondering if you could maybe talk through that. Christian Faitz: Yes. So what's very important, I mentioned that we expect stable market prices from the perspective of today. We are at a peak, for example, with the Brazilian prices. That's also a little bit weaker currently. And you should keep in mind that the FX effects compared to H1 will also be -- is included in our calculation. And the third thing that we have some seasonality with regard to the product mix. So mathematically, that results finally in this EUR 330 a tonne. Tristan Lamotte: And maybe second, I was wondering if you could maybe comment on where you think inventory levels are at the moment in potash in the different regions. Christian Meyer: Yes. In the different regions, we see more or less normal levels if you have a look to Europe, U.S. and Brazil. If we have a look to China, there, we see that the prices for cross-border deliveries increased and that the port stocks are below the strategic levels of 3 million. They are around about 2 million. And so at the end, there are normal levels in total, maybe in total, a little bit lower than the normal levels if you see the global market. Operator: [Operator Instructions] This brings us to the next question of Angelina. Angelina Glazova: I will have two. The first one is specifically on Brazil and the current market environment. Could you give us a bit more color as to what you're seeing on that market? Because we know that potash is relatively more affordable compared to other micronutrients right now and demand has generally been good from Brazil, but still the farmers have seen some challenges from the economic side, and their availability to credit has become more difficult. So have you seen any impact on your operations from that? And how are you expecting the situation to develop in terms of demand in Brazil due to this? Christian Meyer: Yes. Yes, you're absolutely right. The general conditions for the farmers are still good. And from our perspective, we optimize our regional mix. So we have some better netbacks in some other regions currently. So we don't bring too much volume to Brazil. But the volumes that we are finally export to Brazil, there, we look pretty close on the payments and that we secure or ensure our receivables. So from our perspective, we don't see a risk for us. And the general farmer conditions are pretty good. So at the end, that's more, yes, depending on different customers that we have a closer look, but in total, we don't see a risk for us. Angelina Glazova: Understood. And my second question is a bit of a follow-up to Sebastian's questions regarding volumes. So one of the things that we've seen, I think, over the course of the past few quarters, but particularly in Q3, is you're shifting to more higher margin product mix. And I just wanted to understand to what extent do you have further potential to ship your product mix that way? Is it mostly down? Or you still think that there is some addition you can make in terms of SOP or maybe more broadly in terms of premium products? Christian Meyer: Currently, we are very happy with the product mix, but there's not much room for more specialties currently. Operator: Our next question comes from the line of Lisa. Lisa Hortense De Neve: This is Lisa De Neve from Morgan Stanley. I have one question. Against your expectation for rising potash demand in 2026, as you just stated, and your comment that Chinese potash inventory is maybe slightly below their normal strategic levels and their domestic production in China being quite restricted. I mean what are your qualitative expectations for the timing of the Chinese potash contract negotiations? And to which extent do you see potential for the price to be settled higher year-on-year? Christian Meyer: What's very important to keep in mind the point I already addressed and you just also addressed, we are not part of the negotiations. That's very important to understand. For this year, everybody expect that it won't take too long that we see a Chinese contract compared to this year. So I can't imagine that we will see that in the summer or in the late spring, it should be earlier, but the rumor is in the market, but we are not at the table. Operator: And if there are no more questions, we will conclude the call. Christian Meyer: Okay. Yes. Thanks for your questions, and hope to see you on the road in the next weeks, and have a good day. Julia Bock: Thank you. Bye-bye. Christian Meyer: Bye. Jens Keuthen: Thank you. Bye-bye. Operator: This concludes today's call. Thank you, and have a great day.
Operator: Good morning, and good evening, ladies and gentlemen. Thank you for standing by for Yalla Group Limited's Third Quarter 2025 Earnings Conference Call. [Operator Instructions]. Today's conference call is being recorded. Now I will turn the call over to your speaker host today, Ms. Kerry Gao, IR Director of the company. Please go ahead, ma'am. Yuwei Gao: Hello, everyone, and welcome to Yalla's Third Quarter 2025 Earnings Conference Call. We issued our earnings press release earlier today, and it is now available on our IR website as well as on Newswire outlets. Before we continue, please note that the discussion today will contain forward-looking statements made under the safe harbor provision of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, our future results may be materially different from the views expressed today. Further information regarding these and other risks and uncertainties is included in our earnings press release and our annual report filed with the SEC. Yalla does not assume any obligation to update any forward-looking statements, except as required by law. Please also note that Yalla's earnings press release and this conference call include a discussion of unaudited GAAP financial information as well as unaudited non-GAAP financial measures. Yalla's press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures. Today, we hear from Mr. Tao Yang, our Chairman and Chief Executive Officer, who will provide an overview of our latest achievements and growth strategies. He will be followed by Mr. Saifi Ismail, the company's President, who will briefly review our recent business developments. Ms. Karen Hu, our Chief Financial Officer, will then provide additional details on the company's financial results and discuss our financial outlook. Following management's prepared remarks, we will open the call to questions. Mr. Jeff Xu, our Chief Operating Officer, will join the Q&A session. With that said, I would now like to turn the call over to our Chairman and Managing Executive Officer, Mr. Tao Yang. Please go ahead, sir. Tao Yang: Thank you, everyone, for joining our third quarter 2025 earnings conference call. We delivered another strong set of results in the third quarter of 2025. Our total revenue grew to USD 89.6 million, once again beating the high end of our guidance. Net margin came in at 45.4%, up 1.4 percentage points year-over-year, thanks to continued operational efficiency improvement and our commitment to high-quality growth. The Middle East digital economy continues to gain momentum in the third quarter. According to [ Newswires' ] latest report, the region's gaming market is expected to reach around USD 7.1 billion in 2025 with 75% year-over-year growth, the highest among all regions globally. The increases we are seeing in a number of our mobile users and their interest, including more diverse game content, reflecting MENA gaming markets vast potential. Our strategic direction positions us to capture the trend and foster a more mature, more robust digital entertainment ecosystem across the region. Meanwhile, we're also looking for opportunities to leverage our value and growing product portfolio to deliver more exceptional experience to MENA users. Our strategy in game pipeline currently serves as our primary market expansion driver. In the third quarter, we soft launched Turbo Match, a match-free title featuring car-modification, simulation, operations on Android. We were pleased to see the initial user acquisition and retention metrics meeting our expectations. With 2 years of cumulative experience in the match-3 genre, we are confident in our team's ability to create games that resonate within our targeted audience. Furthermore, we expect to launch our self-developed roguelike game, Boom Survivor, in late this month. Meanwhile, we continue to advance our game distribution initiatives, we are collaborating with the leading gaming studio on the distribution of [ newly focused ] SLG title. The hard-core title is well on track for year-end launch for the recent testing. We remain dedicated to providing MENA users with an ever growing selection of gaming and content tailored to MENA's local culture. For our future MENA hard-game collaboration, we will continue to leverage our existing gaming user value for precise targeting and efficient conversion to steadily deepen penetration of MENA mid-core and hard-core game markets. Moving on to our AI initiatives. We are proactively developing AI to fuel our growth, led by CMIS, our in-house developed multi-modal AI module. CMIS is now fully deployed across our product line, serving as the intelligent backbone of our content moderation and security, supported by our experienced R&D games and extensive ad language and visual data set. CMIS delivered regional -- leading accuracy in annualized impact and images and detecting inappropriate content. Another self-developed AI tool, our automated creative packing model has significantly improved advertising and user acquisition efficiency. Furthermore, our in-house AI event orchestration engine has doubled the frequency of modular in-app campaigns for our flagship products, including Yalla Ludo, driving the leap in operational efficiency. Together, these technological breakthroughs have elevated user experience and boosted in-app purchases, serving as a powerful driver for revenue growth. Next, an update on our USD 150 million shareholder return program, which we continue to execute sales with this plan. As of November 7, 2025, the company has repurchased a total of more than 7.7 million ADS or Class A ordinary shares totaling USD 51.9 million, achieving our full year 2025 repurchase commitment of USD 30 million, well ahead of schedule. As we mentioned on our last call, we will cancel all shares repurchased in 2025, and we have canceled a total of more than 6.2 million shares that as of August 11, the aggregate valued that remained available for purchase under the current share repurchase program with USD 48.6 million as of November 10. For next year, we expect to maintain a similar level of share repurchases as in 2025. We are on track to complete our current USD 150 million share repurchase program within the next year, at which point, we plan to launch a new program. As always, I want to emphasize that we will continue to play shareholder interest as the core of our capital allocation decisions and optimize our shareholder return strategy to generate long-term value for our shareholders. Last but not least, I'm happy to share that Yalla Group celebrated the fifth anniversary of its public listing at the end of September, capped by a bell-ringing ceremony at NYSE. This past five years have been an incredible journey, one of growth, learning, persistence and achievement. Yalla is now the largest MENA-based online social networking and a gaming company. We are proud of the leading position we've established in this dynamic market. But our journey is [ far from over ]. Looking ahead, we will remain dedicated to maximizing the synergy between our social and gaming ecosystem and enhancing our AI-fueled technological edge, bringing us ever closer to our vision of becoming a lot in the most popular platform, for online social networking and entertainment activities in MENA. Now I will turn this call over to our President, Saifi Ismail, for a closer look at our recent development. Saifi Ismail: Hello, everyone. Thanks for joining us today. Let's take a closer look at our third quarter operations and our product performance. First, I would like to share our operational highlights in the third quarter. We increased average MAUs by 8.1% year-over-year to 43.4 million. Following last quarter's user acquisition channel optimization, our user growth [ delivered ] us again as expected, supported by AI-powered upgrades and innovation across our product portfolio. Our flagship products saw a fresh wave of momentum with the introduction of new gaming modules, users can now play a variety of popular mini games directly within the Yalla platform, significantly boosting engagement and user stickiness. These innovative initiatives also served as a springboard for integrating more interactive entertainment features into our core products going forward. This quarter was also backed with engaging and precisely targeted online activities. A key operational strength for Yalla that demonstrates our keen user insights and content creativity. For example, our original event series, Yalla Ludo Carnival just completed its third consecutive quarterly run with record high revenue. Its thoughtfully crafted gameplay paired with stunning visuals, drove strong growth in in-game purchases and gifting activities. On Saudi National Day, Yalla launched the Yalla Season campaign, creating a [ richly ] immersive atmosphere online to resonate with the Riyadh Season, a major national festival developed under Saudi Arabia's Vision 2030. Meanwhile, thanks to a diverse lineup of in-game and chatroom events. 101 Okey Yalla delivered its highest quarterly revenue ever in the third quarter. Yalla innovation reach continues to extend well beyond our business. In honor of our contribution to the local tech industries development, we recently received our third award in the audio tech, media and entertainment category at Asian Business Review Magazine Middle East Technology Excellence Award 2025. These prestigious awards judged by a panel of esteemed regional industry leaders, recognized companies that drive innovation through transformative products. To sum up, I would reiterate what our CEO said. We are immensely proud of Yalla Group's achievements over the past years. Our deep cultural resonance with users in the MENA region and the resonance products innovation are the cornerstones of our sustained growth moving forward. We will remain committed to those values, honoring the trust our users and stakeholders place in us while fostering a driving mutually beneficial ecosystem. With that, I will now turn the call over to our CFO, Karen, who will discuss our key financial and operational results. Yang Hu: Thank you, Saifi, and hello, everyone. Thank you for joining us today. In the third quarter, we continued to pursue high-quality growth and profitability enhancement. Through our excellent execution of ongoing cost management and efficiency improvement initiatives, including AI development and application, our net income grew by 3.9% year-over-year to USD 40.7 million. And our net margin increased by 1.4 percentage points, supported by the solid performance and the fundamentals. We have strengthened our efforts to return value to stakeholders. As of November 7, we have returned a total of USD 51.9 million in 2025 to our shareholders through our share repurchase program. We will deepen our commitment to shareholder returns going forward, delivering sustainable long-term value to all stakeholders. Let's move on to our detailed financials for the third quarter of 2025. Our revenues were USD 89.6 million in the third quarter of 2025, a 0.8% increase from USD 88.9 million in the same period last year. The increase was primarily driven by our broadening user base and enhanced monetization capability. Turning to our costs and expenses. Our total cost and expenses were USD 55.9 million in the third quarter of 2025, a 1% decrease from USD 56.4 million in the same period last year. Our cost of revenue was USD 28.4 million in the third quarter of 2025, a 10.7% decrease from USD 31.8 million in the same period last year, primarily due to lower commission fees paid to third-party payment platform as a result of diversified payment channels and lower share-based compensation expenses recognized in the third quarter of 2025. Cost of revenues as a percentage of total revenue decreased to 31.7% in the third quarter of 2025 from 35.8% in the same period last year. Our selling and marketing expenses were USD 9.6 million in the third quarter of '25, a 30.3% increase from USD 7.4 million in the same period last year, primarily due to higher advertising and marketing promotion expenses attributable to our continued user acquisition efforts and expanding product portfolio. Selling and marketing expenses as a percentage of total revenue increased to 10.7% in the third quarter of 2025 to 8.3% in the same period last year. Our general and administrative expenses were USD 9.2 million in the third quarter of 2025, a 9% decrease from USD 10.1 million in the same period last year, primarily due to a decrease in incentive compensation and professional service fees. G&A expenses as a percentage of total revenue decreased to 10.3% in the third quarter of 2025 from 11.4% in the same period last year. Our technology and product development expenses were USD 8.6 million in the third quarter of 2025, a 21.4% increase from USD 7.1 million in the same period last year, primarily due to an increase in salaries and benefits for our technology and product development staff, driven by an increase in the headcount to support the development of new businesses and expansion of our portfolio. R&D development expenses as a percentage of total revenues increased to 9.6% in the third quarter of 2025 from 8% in the same period last year. As such, our operating income was USD 33.8 million in the third quarter of 2025, a 3.9% increase from USD 32.5 million in the same period last year. Interest income was USD 6.3 million in the third quarter of 2025 compared with USD 7.8 million in the same period last year. Investment income was USD 2.2 million in the third quarter of 2025 compared with USD 0.1 million in the same period last year, primarily due to increase in investments in wealth management products. Income tax expense was USD 1.6 million in the third quarter of 2025 compared with USD 1.3 million in the same period last year. As a result of foregoing, our net income was USD 40.7 million in the third quarter of 2025, a 3.9% increase from USD 39.2 million in the same period last year. And our non-GAAP net income in the third quarter of 2025 was USD 43.1 million, a 1.2% increase from USD 42.6 million in the same period last year. Moving to our liquidity and capital resources. Our cash position remains solid and healthy. As of September 30, 2025, we had cash and cash equivalents, restricted cash, term deposits and short-term investments of USD 739.5 million compared with USD 656.3 million as of December 31, 2024. We continue to retain value through our share repurchase program as of November 7, 2025. The company had cumulatively completed cash repurchases in the open market of 15,021,621 ADS represents Class A ordinary shares for an aggregate amount of approximately USD 101.4 million, since the inception of the current share repurchase program. The aggregate value that remained available for purchase under the current share repurchase program was USD 48.6 million as of November 7, 2025. In addition, the company decides to cancel all share repurchase in 2025. As of August 11, 2025, the company has canceled 6,230,299 ADS Class A ordinary shares. Moving to our outlook. For the fourth quarter of 2025, we expect our revenue to be between USD 78 million and USD 85 million. The above outlook is based on the current market conditions and reflects the company management's current and preliminary estimates of the market and operating conditions and customer demand, which are all subject to change. In the interest of time, please refer to our earnings press release for the further details on our third quarter 2025 financial results. This concludes our prepared remarks for today. Operator, we are now ready to take questions. Operator: [Operator Instructions] Your first question comes from Xueqing Zhang with CICC. Xueqing Zhang: Congratulations on another strong quarter. My question in regards on your game business. Can management brief us on the advancements in mid-core and hard-core games. Jianfeng Xu: Thank you for your question. During the quarter, we soft launched two match-3 titles as planned, marking a significant step forward in our mid- and hard-core gaming portfolio. Turbo Match stood out in multi-region test worldwide with the unique blend of car modification and simulation operations gameplay, achieving retention rates that met our criteria for product expansion. As a result, we decided to invest more resources to focus on Turbo Match in the next stage. Based on the test data, we're adding levels and diversifying size gameplay options, set stage for the next wave of large-scale using acquisition. Meanwhile, our localized product is expected to launch officially bigger this month or next. We have also recently completed a round of testing for our collaborative project, SLG. Given our high expectation for this title, we are working closely with the content provider to refine its gameplay, visuals and other details. We expect to launch it by the end of this year. It will take some time for this new product to generate meaningful revenue. For those expecting notable revenue impact from these new games, we see the second quarter of 2026 as a key inflection point. Operator: Your next question comes from Chloe Wei with CICC. Chloe Wei: This is Chloe Wei from CICC. So I have a follow-up question about game. So how should we think about the strategic role of our match game? And can we think of it as an indicator for your push into the new regions? That's it. Tao Yang: I'll take -- to answer this question. Match-3 games do have a broad global user base, making an ideal entry point for us to explore diversified regional markets. Our recent testing has shown that Match-3 titles are particularly well received in markets like Europe and North America. Given this positive user feedback, we certainly plan to increase marketing budgets for markets where performance is strong. Looking back at our growth journey, Yalla Parchis has been steadily performing for years in South America, providing us with valuable cross market experience. Additionally, the Yalla Ludo support 8 languages, reaching diverse countries worldwide. We are open to expanding our market boundaries as we explore product net MENA users may be interested. In that side, I want to emphasize that the Middle East remains our key strategic region. We will continue to deepen our engagement in key markets across MENA, while selectively expanding into new ones. Operator: Your next question comes from Lincoln Kong with Goldman Sachs. Lincoln Kong: I also like to follow up on the gaming business. So could management share our company's upcoming gaming strategy, including one of the choices around the content and the market? Jianfeng Xu: Lincoln, thanks for your in-depth question. The company has identified gaming as one important inner for our strategic priorities for future growth and established a clear dual-track strategy featuring self-developed titles and game distribution. For self-developed games, we are focusing on casual and mid-core gaming segments, such as Match-3 and board games. Our team has built substantial experience in the Match-3 category over the past 2 years. If our Match-3 titles show positive results in the coming months, we look forward to consistently deepen our presence in this segment. On the game distribution side, we're building a strategic partnership with leading global developers, leverage our strengths in product localization, user acquisition and local operations to bring more high-quality gaming content for the Middle East. We continue to explore game distribution opportunities to further enrich and accelerate our product pipeline. We believe that the dual track strategy will enable us to quickly build a competitive edge for mid- and hard-core games. Operator: Your next question comes from Sarah Hu with Haitong International. Unknown Analyst: So can you please get management's view on the quarter performance of our flagship products, Yalla and Yalla Ludo, as well as they're also going forward. Saifi Ismail: Thank you, Sarah Hu. During this quarter, both flagship titles achieved significant breakthroughs in product innovation and operational activities. For example, Yalla added an in-app minigame modules to enrich users' entertainment experience. Meanwhile, Yalla Ludo [indiscernible] 1 versus 1 mode, quickly become a hit with users, driving overall community engagement to a new high. Operationally, Yalla Ludo tournaments and Yalla's Riyad Season theme initiatives amplify the connection between our products and off-line entertainment scenarios in the Middle East. Looking ahead, we expect both mature products to remain stable in terms of business scale, and we will continue to pursue incremental growth by introducing new features and strengthening operational activities and initiatives. Operator: Your next question comes from Tianhao Liu with Citic. Tianhao Liu: I have two questions on your future plan. So firstly, I think Yalla has completed a sizable share repurchase this year. So could management outline the plans for future shareholder returns? And I have a quick follow-up question. Yang Hu: Okay. Thanks, Tianhao Liu. This is Karen. I will take this question. As we just discussed, we successfully completed the previously announced minimum full year 2025 repurchase commitment of USD 50 million. As of November 7, 2025, the company had repurchased over 7.7 million ADS for an aggregate amount of USD 51.9 million. Among that, over 6.2 million ordinary shares previous repurchases was canceled. And we will notify everyone once the remaining issues have been fully canceled. With this year's repurchase commitment achieved, the company continues to execute its share repurchase program based on market conditions. For next year, we expected to maintain a similar level of share repurchase as in 2025. We are on track to complete our USD 150 million share repurchase plan within the year of 2026 before we launch the new plan. The company remains committed to prioritizing shareholder interest in all capital allocation decisions, maximizing shareholder value through a consistently optimized return strategy. Tianhao Liu: That's very helpful. And could also -- the management also share your revenue and the profitability outlook for Q4 and 2026. Yang Hu: Okay. Given the revenue from new initiatives is expected to have a limited contribution in the fourth quarter and based on current business trends, we maintain our guidance that full year 2025 revenue will be broadly in line with 2024, or with low single-digit growth. We expect revenue from our new business initiatives to become more visible over the next 1 to 2 quarters. Regarding profitability, we expect our full year 2025 net margin to reach about 40%. Looking ahead to 2026, we expect R&D spending to follow a similar trend as in 2025, assuming broadly similar business conditions. On the market side, we will dynamically adjust our investments based on the performance of our new products. While maintaining a healthy financial position, we will continue to invest in innovative business initiatives to view the company's long-term growth and ensure stable profitability through refined operations. I hope I answer your questions. Operator: As there are no further questions now, I'd like to turn the call back over to management for closing remarks. Yuwei Gao: Thank you once again for joining us today. We look forward to speaking with you in the next quarter. If you have further questions, please feel free to contact Yalla's Investor Relations or Piacente Financial Communications. Both parties contact information is available in today's press release as well as on our company website. Thank you. Operator: This concludes the conference call. You may now disconnect your lines. Thank you.
Richard Tyson: All right then. Good morning, everyone, and welcome to the Oxford Instruments Half Year Results presentation. Thanks for joining us today. We provided an initial overview of the shape of the first half of the year in our first -- in our trading update a few weeks ago. Today, I'm going to begin with the key highlights of the period, and then, I'll hand over to Paul for the financial review before returning to the detail on our strategic progress with some pointers into the second half and beyond. There will also be an opportunity for questions at the end, both in the room and online. Since we last met in June, we have made another 6 months of good progress on our strategy to simplify the group, improve commercial execution and realign our regional presence, laying the foundations for future growth and margin expansion. At the same time, the team have had to contend with more significant disruption than anticipated in the trading environment as a result of the global tariff and trade volatility, coupled with funding challenges in academia. As the results show, the first few months of the year were challenging in our higher-margin Imaging & Analysis division, while we are working with our customers to align on a new trading landscape. By contrast, in Advanced Technologies, we've made great progress with 25% order growth coming from our compound semiconductor business, attracting increasing numbers of commercial customers focused on R&D and production. Across the group, our market-leading technology and expertise continues to position us for good growth in structural growth markets. So despite the disruption in Q1, we ended the half with positive orders and book-to-bill and the Q2 order momentum back to that of prior year. We're into the second half with a full order book to support another year of good growth in Advanced Technologies. And with demand improving in Imaging & Analysis, we expect to deliver a strong H2, broadly in line with last year. We're seeing a good return on our investments in technology with a number of new recent product launches, and I'll share more about those later. Cash conversion was moderate, in line with prior H1 periods for Oxford and reflects the trading conditions. We expect it to normalize to our target levels in H2 with strong free cash flow ahead. The balance sheet is strong with net cash at GBP 45 million and around GBP 57 million from the sale of NanoScience to come. Our share buyback program is well advanced with just over GBP 30 million has been returned to shareholders since June, and we'll be extending it by a further GBP 50 million to a total of GBP 100 million. Now, I'd like -- just like to zero in on the Q1, Q2 dynamics. And there were 2 main factors to keep in your mind. Firstly, tariffs and their impact on trading; and secondly, U.S. academic funding. Let me take you through the slide starting on the left-hand side. We had anticipated some softening of demand from the U.S. administration actions, but the impact turned out to be more extreme in Q1. As a major exporter, we've been managing multiple changes in the global tariff landscape since April 2. Customers have had to reevaluate their budgets and spending plans, while others have had to request additional funding over and above that allocated to support new purchases. Initially, we focused on working with customers to reprice the open order book to cover tariff and then moved on to active quotations and the opportunity pipeline. And as we indicated in June, we were able to protect margin and achieve recovery of new tariff costs, meaning our strong contribution margins have been successfully maintained. Q1 saw -- also saw the significant cuts proposed to academic funding by the White House. Shown here in billions of U.S. dollars, we show this in the chart in the middle, the gray bar, meaning a sizable reduction in funding was being digested by our customers in the U.S., leading to delays in purchases. As we move into Q2, the chart shows you the evolution of the proposals as they went through Congress. We're seeing a potential normalization of U.S. funding shown in the orange bar back to prior levels, both the National Institute of Health and the National Science Laboratory, starting to give customers more confidence their future funding will be intact and to start buying again. Our U.S. team has also been proactive in helping customers seek new funding sources and build up our commercial customer base. Moving back to tariffs. For some product lines, we have also worked quickly to relocate some assembly locations to help our opportunity and mitigate the tariffs. And then, with the retaliatory imposition of restrictions on rare earth supply impacting supply chains, our engineers have created new engineering solutions and helped to resource supply where possible. So despite many distractions and impacted demand patterns, the whole Oxford team have done an excellent job to overcome the headwinds and deal with the fluctuating demand challenges, culminating in the environment stabilizing through Q2. So with that, let me hand over to Paul for a deep dive into the numbers. Paul Fry: Thanks, Richard, and good morning. So moving to the first slide, I wanted to first highlight that all the information presented today is for continuing operations and excludes all revenues and expenses directly associated with our NanoScience business, which is now reported under discontinued operations. As Richard has already explained, despite the disruption to order intake in the first quarter, overall, orders have grown in the first half on a constant currency basis and flat on a reported basis. However, the profile of order intake over the first quarter has had a significant impact on revenue recognized in the period. Our Imaging & Analysis business runs on relatively short lead times, meaning the gap in orders has directly dropped through to revenue in the period. In our Advanced Technologies division, we've seen very strong order growth throughout the first half with a step change in Q4 of last year. Revenue is yet to pull through into -- revenue is yet to pull through as a result of short-term shipment delays and lead times in this division, but we are expecting strong revenue growth in H2. Both gross margin and overheads are in line with last year. And with a relatively fixed cost base in the business, changes in revenue quickly fall through to adjusted operating profit and OP margin, and we've seen this drop through in H1. Moving to revenue in more detail. The Imaging & Analysis division was most impacted by the order profile we saw in the first half. Whilst opportunities in the form of confirmed customer interest continued to rise in the first half, customers have taken longer to convert these to firm orders. In Advanced Technologies, order growth has been consistently strong since Q4 last year. But given some timing delays and lead times in the division, we are yet to see this growth pull through into revenue. However, the order book is full for the year, and we expect to see early teen revenue growth in the second half as we execute on this. Currency has continued to be a headwind in H1 versus the prior year with Sterling strengthening versus the U.S. dollar, but we've seen that trend reverse recently, and I'll touch on the impact of this later. Imaging & Analysis, so this slide gives you a snapshot of the profile of Imaging & Analysis in the first half. Here, you can see the uptick in both orders and revenue in Q2 versus a low Q1 with orders moving back in line with the prior year, but revenue still lagging this recovery. On the right, you can see order intake by end customer type, which shows a broad-based impact across both commercial and academic customers. U.S. academia has been quite resilient in terms of order intake, but revenue in the first half was heavily impacted, down nearly 25% on the prior period. The book-to-bill ratio for this division is above 1, and we expect I&A to trade in line with H2 last year. So far, Q3 is tracking in line with our expectations, but order intake for this quarter will be key, and we plan to update the market on progress in mid-January. On the next slide, you can see the same data cut for Advanced Technologies, where you can see the strong and more consistent order growth in both Q1 and Q2, building on a very strong Q4 from last year. Whilst revenue in Q2 was significantly higher than Q1, we are yet to see this growth pull through into revenue due to the timing delays and lead times I mentioned just now. On the right, you can see the significant growth in commercial customer orders, up 34%, and which made up more than half of the order intake in H1. This shift has been accompanied by increasing numbers of orders for larger multichambered systems, mainly from the U.S. and Europe-based customers. This has contributed to higher average selling prices, but also to longer lead times. Academia outside the U.S. has grown strongly in H1, mainly large systems for Quantum-related semiconductor applications in Europe. Again, as we execute on our full order book, we expect to see this translate into early teen revenue growth for the division in H2. So moving to adjusted operating profit. You can see the drop-through to operating profit from the H1 revenue gap. Gross margin was steady at 55% and overheads fell slightly. Given the relatively fixed nature of the cost base, incremental revenue converts to incremental operating profit at a very high margin, and we expect to see the strong operational leverage effect in H2. As I mentioned earlier, currency has continued to be a headwind in H1, impacting overall margin by around 100 basis points. For the full year, we're expecting I&A to move back into its target margin range and to see continued margin progression in Advanced Technologies. On the next slide, you can see the bridge to our statutory results. We've made no changes to the definition of adjusting items. And most of the nonrecurring or exceptional costs here relate to Belfast restructuring and the move of the semiconductor business to Severn Beach, including the sale of the Yatton site, all of which were ongoing at the beginning of the year. We expect all of these projects to have concluded by the end of this financial year. Discontinued operations is reported here on an after-tax basis and includes all transaction-related costs. Pre-tax discontinued operations made an adjusted loss of GBP 2.2 million in half 1. And then moving to cash flow. Clearly, the foreign operating profit in the first half was fed through directly into free cash flow generation, albeit an improvement of around GBP 7 million on the prior year. The working capital movement largely reflects the normal shape of H1 and is down on the same time last year. Inventories are higher than the year-end, mainly in preparation to execute on the second half order book. We expect working capital to be less of a drag in H2, and we expect cash conversion to return to over 80% for the year. As I mentioned back in June, I think it's worth underlying again the positive cash inflection we see coming next year. Capital expenditure this year is benefiting from proceeds from the Yatton sale in August with underlying CapEx at around GBP 5.5 million in H1. But following completion of Severn Beach, capital expenditure will be lower than recent years, normalizing at levels much closer to depreciation. Our restructuring programs will complete this year, meaning exceptional costs are not expected to be material next year. And following engagement with insurers ahead of policy buying, we now expect to make no further payments to the group's defined benefit pension fund in the remainder of this year or beyond. This means a GBP 4 million upside to guidance we gave for the FY '26 and a further GBP 4 million benefit in both FY '27 and FY '28. So a GBP 12 million improvement versus our previous expectations for the 3 years. These, combined with operational cash flow, will have a material effect on free cash flow next year. Our balance -- our cash balance is strong, ending the year -- ending the half, sorry, at GBP 45 million after investing GBP 25 million in the share buyback program and before the receipt of gross proceeds from the NanoScience sale expected to be around GBP 57 million. Which then leads me to reconfirm our capital allocation priorities, which have not changed since I presented them in June. Our first priority remains profitable growth, and this is where we will always seek to deploy capital first. We will continue to invest in opportunities to improve productivity to drive order growth and to develop new products. We're also committed to our dividend program, and given our cash balance, the confidence we have in future cash flows and our strong dividend cover, we've grown the interim dividend again up 6%. Beyond these 2 priorities, we will look to deploy capital either inorganically, where we see a compelling case to drive growth and returns or return to shareholders via share buybacks, again, where there is a compelling case to do so, which makes sense for our individual shareholders. We are continuing to look actively inorganic options, but with a disciplined approach to ensure any acquisition increases the value of the company. As I outlined on the last slide, we see cash flow generation to markedly improve as we move into FY '27. And so taking into consideration all these factors, we've announced this morning that the current share buyback program is to be extended by a further GBP 50 million to GBP 100 million, and further details of that will be announced in due course. And then finally, I wanted to summarize some guidance for the rest of this financial year. This has not changed since our October trading update. On a constant currency basis, we expect our Imaging & Analysis division to trade in line with H2 last year with margin improving in H2 as a result of approximately GBP 4 million of cost benefit, mainly from our Belfast-based business. And as I mentioned earlier, we expect Advanced Technologies to transition to early teens revenue growth in H2 with a significant drop-through benefit to operating profit. These Belfast savings and the operational leverage benefit from a growing semiconductor business give us confidence that we can grow operating profit in the second half on the prior year and finish the year broadly in line with last year, ignoring the impact of currency. Currency is a continued headwind in H2. And in the guidance here, we've assumed a U.S. dollar rate of 134 for the rest of the year, giving us a headwind for the full year of around GBP 5.5 million. The impact of changes in this rate will not -- in rates this year will not be very significant given we are largely hedged for the remainder of the year. But if sterling continues to weaken to the levels we've seen recently, certainly to $1.30 or below, we would not expect to see further FX headwind in next year's results. And with that, I'll hand back to Richard. Richard Tyson: Great. Thank you, Paul. So now, I'm going to walk you through some of our progress that we've made on our key strategic actions. This progress is giving us clear line of sight to margin improvement and future revenue growth. I'm going to start with Imaging & Analysis, the larger of our 2 divisions. The Imaging & Analysis division brings together all of our small-scale imaging, microscopy and camera product lines with similar customer bases and go-to-market strategies. It currently generates around 3/4 of the group revenue and the vast majority of the group's profit given its very good contribution margins with recent year -- recent full-year operating margin, operating in the range of 22% to 24%. I've already covered the first-half disruptions and our actions in response, and we're expecting a much stronger performance in the second half, supported by the self-help actions on cost and efficiency in Belfast and our usual improved H2 seasonality. So let's take a closer look at the 3 main markets in which we operate. In Materials Analysis, our products are ideal for analyzing the widest range of materials across multiple sectors. And although we started out in academia, we're attracting more commercial customers as companies seek to test properties of new materials and products and to carry out the quality test and failure analysis on those in production. With the constant demand for better and more sustainable materials, we anticipate a mid-single-digit growth over the medium term. We also support a strong and growing presence in the semiconductor market, where demand has been exceptionally strong in recent periods. We operate right across the life cycle, supporting customers at every stage from academic research to corporate R&D through to packaging, test and failure analysis. Significant long-term investments in security of supply and productivity are driving market opportunity for many years ahead. And our third key market in this division is Healthcare & Life Science. As you know, the global market has been subdued over the last couple of years following COVID with some customers overstocked. And although demand patterns have remained weak, they have been stable for a few periods now. And we're starting to see some early signs of improvement with book-to-bill now above 1. Order growth in the U.S. and China has returned, and we're making positive progress on rebuilding OEM relationships with another key order secured already in H2. As well as being well positioned in our main markets, we're also in a strong position geographically, globally diversified with good opportunity in all regions. In recent years, we shifted the weights of our markets with the U.S. increasing and China reducing, as we followed the best areas of opportunity for the business. At a group level, clearly, the short-term demand dynamic has been similar across all markets, but the medium-term opportunities in these 3 markets are exciting. And with the great products and technology we have in our portfolio, our competitive position, combined with our globally diverse business, we feel we are well placed to take advantage of the opportunities in the future. We've also been agile in responding to the immediate challenges. Given the changing trade and tariff circumstances in Q1, we took a number of specific actions to support customers and improve the resilience of the business. These included making adjustments to a few assembly lines. We accelerated a China for China project that was already underway to meet growing demand for locally produced products. Here, the plan was to produce Oxford Instruments detectors in China aligned with a number of our electron microscope partners who do the same. Our local team and supply partners successfully shipped our first products made in China for Chinese customers in the summer. And given the uncertain trading relationship between the U.S. and China and the proposed tariff levels, there was a risk to demand on our atomic force microscopes, which are made in California. This was likely to have a sizable impact on this product line. So we swiftly established assembly of AFM products at our WITec facility in Germany for European and Asian customers, a real achievement because we only started in April and the first products were shipped from Germany last week. Both of these initiatives should add to our competitive advantage as well as protecting and increasing market share. We're also now working on a further project to relocate some of our Nano indentation production from Zurich to High Wycombe during H2 to capitalize on our capabilities in this excellent facility. And as I touched on earlier, I'm also really proud of the U.S. team's response in such a volatile environment, bouncing back from the disruption in Q1, 11% order growth at the half year. That growth has been underpinned by commercial customers, notably in semiconductor, which we'll talk more about shortly. And they've also delivered 9% growth in service revenue, as we increase our focus on contract sales and improved utilization of our field service engineers. Given the historical performance of Andor in Belfast and the demand environment in Life Sciences, we spoke about this in June, the need to turn around the business performance. Over the summer, we took the unwelcome, but necessary decision to reduce the size of the workforce by 20%. And we will see the financial benefit of that flow into H2. In combination with other reductions, we expect to see around GBP 4 million worth of benefit in the second half. We've also continued with our operational program, which is delivering a 60% productivity uplift on our cameras work stream, reducing lead times and achieving GBP 4 million reduction in inventory, surpassing our GBP 2.5 million target. We've also reduced the backlog of customer repairs by 30% since January. All of that is helping us to rebuild our partnerships with OEMs. I'm pleased to say we've secured 2 new OEM positions and won back 1/3 since the start of the year by working closely to really understand the needs and deliver the product development that fits their requirement. Initial, but important steps forward. And we're working hard to reinforce the benefits of our leading technology with customers outlining the much stronger operational foundations we now have in place. And finally, the product line restructure we announced in June is complete, enabling us to focus on regaining market share and improving our margins. That is being helped by the launch of a new range of cameras, developed by the team in First Light Imaging that we acquired in 2024. This is just one of the important developments in the Imaging & Analysis new product lineup. Let's take a closer look at the examples of outputs of our technology investment, which is a key component of our organic growth strategy. New launches so far this year, including an extension to our atomic force microscope range, which is entering a new market segment, delivering our typical excellent standard of imaging at a more attractive price point for customers as well as being much simpler for the non-expert users to operate. We delivered this project in record time for OI, 9 months from start to finish. And the second one on the chart is a significantly updated benchtop Nuclear Magnetic Resonance instrument, which has enabled us to regain technology leadership in this space. This new model had an early success and was snapped up by GSK for one of its pharma production sites in the U.S. The third is that suite of new scientific cameras I just mentioned. And finally, a refresh of our Raman Microscope line, paired with a groundbreaking new spectrometer. Recognizing that our market-leading technology is and always will be key to our ongoing success, we are committed to a continued investment at our target level of 8% to 9% of revenue. Let's now turn to our Advanced Technologies division, where we've seen such strong order growth this year. Following the divestment of our NanoScience business, which in accounting terms in the results is held for sale, this division now mainly comprises our compound semiconductor business and Severn Beach here in the U.K., making large capital equipment for semiconductor development and fabrication. Though it does also include our much smaller components business, X-ray Technology in California. In this division, we focused on building the scale of Severn Beach, as we move from supporting academia to commercial customers, as they develop new chips and establish volume production activity. There is a big opportunity to improve margin as we improve efficiency and grow revenue to more than twice its current scale in the current facility. There is a second half weighting to revenue, fully covered by a strong order book, which will deliver improved margins. As you've already heard, Severn Beach has delivered excellent growth in orders over the half year, trading with strong momentum. So we'll take a look at what's driving that. The business is founded on 40 years plus of expertise in fabrication on compound semiconductor process development, positioning us really well to access the exciting growth potential in the compound semi market of between 10% to 20%. With the combination of our deep expertise and the significant investment we have made in our new facility at Severn Beach, we've positioned ourselves to target commercial customers developing next-generation technologies, including hyperscale data centers for AI and augmented reality devices. We're gaining traction, delivering 25% order growth in H1 and with a sixfold increase in orders from commercial production customers versus the first half of last year. That's supported by our world-class clean room, which is now fully operational, supporting growing number of customer samples and demonstrations. And this sampling forms an increasingly important part of the sales process, enabling us to work in partnership with commercial customers to develop and refine processes in our new clean room. We're also starting to see repeat orders from some of these larger customers, including Coherent, as they expand their data center presence in Europe and the U.S. As we grow our reach into commercial customers, we're also seeing more large systems and average order sizes increasing as well, as Paul mentioned. And as we grow the business, we're focused on doing so efficiently. The new facility is a great help with that, and we've seen a 12% uplift in labor efficiency so far this year. Our Operational Excellence program, which began in Belfast, is also now working at the facility to drive this forward further. And as I've already touched on, our growth is coming from key developments in technology, including AI and related developments in data center, power efficiency, quantum and augmented reality. We have focused our R&D investments in these areas of compound semiconductor technology, as we expect them to offer the strongest growth potential. Semiconductors are made up of many layers of materials. Our plasma equipment is used to etch that is to remove and deposit to add nanoscale layers of material to give the semiconductors their specific properties such as greater power efficiency or better optoelectronic properties. These so-called critical layer applications are where we have the most specialized technology, and we can, therefore, win orders from our target customers and command an improve value. The rapid progress in the AI ecosystem provides us with an exciting opportunity given our expertise in so many areas that are vital to its success. If I take you from left to right, we all know how important data centers are. Our equipment is used to fabricate the material required for the latest generation of optical laser transceivers and also gallium nitride devices, key to energy efficiency. Then there's also quantum technology development, too. Here, we're supporting a range of customers from leading academic institutions to start-ups and also some of the world's largest technology companies, as they take this technology from concept to reality. Finally, augmented reality is a further part of the future pathway for the AI ecosystem. And in a particularly nice example of our role, the team are playing in development of the technologies for tomorrow. In the diagram, you can see numerous different processes we are supporting the development of augmented reality glasses, which we have seen widely reported increase in investment in recent years, notably from the big U.S. technology players. We're excited about the potential for these areas and expect growth -- continued growth, as these rapidly advancing areas of technology continue. So despite the short-term disruption in H1, we have made good progress across both divisions, all meaning we remain confident, we are on track to our medium-term targets set out last year, which you can see on the right. Through swift and decisive action, we've protected our margin structure. As growth returns, we are well positioned for another step towards our 20% plus goal. In Imaging & Analysis, self-help cost and efficiency will support improvement in H2 and next year. And in Advanced Technologies, the success of the strategy is evidenced by more commercial customers and a strong order book, an opportunity pipeline supporting continued growth in revenue and margins. We're also continuing to invest significantly in the -- at the top end of our target range to maintain our technology leadership with new product launches directly from our R&D investment. Cash conversion is expected to return to target levels by the end of the year and net -- with the net proceeds of the sale from NanoScience will boost progress to our return on capital targets. And our balance sheet is strong. The capital allocation priorities mean we have already returned more than GBP 30 million to shareholders. With our forecast for strong future free cash flow, we have announced today a further GBP 50 million of share buybacks when the current program completes, taking the total program to GBP 100 million. So putting the short-term disruption earlier in this year behind us, I'm really pleased with the response from the team and actions on the building blocks to continued progress towards our targets. So to conclude, we go into the second half of the year with an improved position and good execution on strategic actions. I'm really proud of the way the teams have stepped up and found positive resolutions to unforeseen external headwinds, while we continue to make progress on our priorities. It is a challenging macro environment, but we've been navigating it with agility. That performance and the foundations we're building reinforce our confidence in the ability to deliver an improved performance in the second half. And with great people and fantastic technology, this is a good business, and it's improving well, as we put ourselves in the best position possible to deliver growth and the benefits of margin and improve value for our shareholders. Thanks very much for your attention. We'll now hand over to the room for Q&A and also online. If you're online, do post your question, and we can moderate that after we've dealt with the ones in the room. Thank you. Thomas Rands: Thomas Rands from Berenberg. Just 3 questions, if I may, please. First one is around Advanced Technologies and that very strong order momentum during Q1 and Q2. And you mentioned kind of momentum in Q3, any kind of extra color you can give on? Should we expect a similar sort of level of growth in Q3? Or is that maybe too much? And linked to that, you mentioned shipment delays. Can you just give us a bit more reasoning for what was internal or external kind of causes of that, please? I'll come on to the 2, if that makes it easy. Richard Tyson: Sure. Yes, no problem. So I mean, obviously, the order -- we're delighted with the order momentum in the first half. It's broad-based. There's no sort of one specific thing or customer or something like that that's driven it. It's across a range of customers, and it's been great. As I said, the pipeline continues to look really good and is building. So we're feeling good about the next sort of couple of years ahead as well for continued momentum in the business. And yes, there's reason to believe that Q3 could continue or certainly Q3, H2 could continue at least double-digit momentum. Do you want to pick up on the delayed piece? Paul Fry: Mainly customer readiness. There was one, which was just a logistical issue on our side, which is resolved, but it's mainly customer readiness just to receive the equipment and install it and so forth. So those are getting resolved during this half -- I think, it is quarter I should say. Thomas Rands: Small internal, but mainly external in place. Second one was just around capital allocation, and I guess, the increased share buyback. What is the M&A kind of pipeline looking like? And can you just remind us of kind of which key areas you're hoping to kind of find acquisitions? And then linked to that with the increase in the share buyback, which is kind of doubling great kind of number, was there any discussion at the Board to kind of have an even bigger than GBP 50 million? Or is that in time to come to that kind of balance between keeping your powder dry? Richard Tyson: Okay. Sure. So from the M&A perspective, the pipeline we're looking at remains interesting. The areas we've been focused on is really for I&A generally and expanding there, either their sort of reach principally into the U.S. and Europe and extending the sort of product and technology range we're able to offer to the similar customers. And in terms of the pipeline, part of the capital allocation discussion is we've kicked it pretty hard in the last few months, and we don't see any of the sort of key targets coming into sort of ability to transact in the near term, basically, Tom. So that plays into -- it's not a change in our view on M&A as a strategy and wanting to use it to support the group's development going forward, but in the near term, you look at the strong free cash flow, the strength in the balance sheet, and the Board's conclusion on that was it made sense to extend the program by the GBP 50 million. That broadly puts us -- if you think 12 to 18 months out, it's putting us back in a similar position in terms of M&A potential. So it's a sort of keeping optionality, I guess, over that time frame for the strategy. I think the other point is it's an active continual conversation effectively about the capital allocation balance. Thomas Rands: Good. And then just the third one, interesting to see where the kind of R&D and innovation is kind of going on Slide 19. Difficult to kind of for us as analysts to kind of gauge which one is exciting. Which of those kind of 4 kind of key products do you think has got the most potential from a revenue and profitability kind of point of view? Richard Tyson: Actually, I think that the sort of 4 that we put up there happen to be the ones that have come to market in the first half. They're all important moves in those product lines, I guess, to -- I wouldn't put any one of those as sort of head and shoulders above the rest. I think we've got some others coming in, in H2 that I think we're hoping might be sort of more comprehensive or significant. The imaging camera stuff is -- that's good. The First Light technology was a proper extension to our opportunity in camera imaging, and potentially, as we said on the chart, takes us into some newer spaces, and that did offer us the opportunity to secure a position with a new OEM. So that's in a development program. So we'll have to see how that moves forward, but that was certainly good. David Richard Farrell: David Farrell from Jefferies. Two questions from me. Firstly, if we think about Advanced Technologies, you referenced potentially doubling revenue with the existing facility you have. I think you've also talked about kind of better pricing in the order book. Can you just kind of talk about what needs to happen to get to the 10% to 12% operating margin target? Is that purely operational leverage? Or is there an assumption that the pricing is part of that progress? Richard Tyson: Sure. So there's a basic assumption that the mix sort of improves a bit over time, but nothing sort of major step up, David, and it's been doing that. So it's a continuation of what we've been achieving over the last few periods. And then, it's really all about ensuring we get the revenue growth and continuing the top line, which as we've shown is in really good shape. That will be another year of double-digit growth on top of the last 3. So I think the strategy has positioned us with a balance of opportunity across the different compounds. I mean, if one is down, others are still offering some great potential for us. So yes, I think it's really all mostly about the revenue growth and the leverage that comes from that. David Richard Farrell: And I think I'm right in saying [ Brooke ] had talked about signs of life in China last week. Maybe just get your views on what you're seeing in that market. Richard Tyson: So probably talk I&A for China, I think -- we mentioned, I think, in the release this morning the -- in general, a good data point was in the sort of life science and/or arena that we've seen the cameras return to some growth. So that was good in China. Overall, I think we need to do continuous certain actions like the product line that I mentioned, the sort of the entry-level detector. China for China is key to match it with our electron microscope partners. And that definitely gets the team excited out there, and there's an opportunity for selling that. So I think I'd sort of point to a few of those things, and overall dynamic for China is, as we said, we obviously made that deliberate reduction, but then, it's sort of stabilizing at the level that we've seen, and we're hoping for growth in there with I&A. Richard Paige: It's Richard Paige from Deutsche Numis. Three from me, please. Aligned to the former 2 questions on the AT business, the 25% order growth in the first half, can you give us just a bit of flavor? Because you've spoken about larger systems of price versus volume within that? And then on the pro forma numbers you've given, obviously, a couple of changes since October, I understand, on stranded costs, but can you just align us as to where we are and whether there's any opportunity post the NanoScience disposal of any more... Richard Tyson: Stranded costs... Richard Paige: To do that on stranded costs, yes, please. And then, obviously, it's only a month on since your trading update in October, but the second half bridge all important, could you just talk about visibility in the order book and timing of that, particularly given, obviously, the last month and a bit, we've been in a U.S. shutdown. Richard Tyson: Sure. Paul, how do you fancy doing the first 2, and I'll come back on the trade demand? Paul Fry: Yes. So... Richard Tyson: I mean, you talked a bit about the price-volume increasing. Paul Fry: Yes. I mean, certainly, order growth has been very strong. And, as I said, it's been both academia, as in Europe, in particular, as well as commercial systems. Both of those have led to -- have been around larger systems, more complex, multi-chamber, which has given us a higher ASP, but it does mean some longer lead times. But that's -- we don't think that's going to handicap us in terms of delivering a double-digit growth still in the second half in terms of revenue. On the pro forma, so yes, we've been stabilizing just in terms of what costs sit within the discontinued line versus sit within continuing operations. And so you probably saw some slight tweaks versus our -- what we set out in October. Hopefully, that will not move again now. Obviously, we've got the order to go through, but our auditors have had a look at those numbers so far. Stranded costs are where we expect them to be in terms of quantum, as we set out -- in fact, slightly less actually than we set out in June, so probably around 3.5% full year. And as we set out in June, we've got a line of sight on how to reduce those by at least half. Richard Tyson: So -- on trading, Rich? Yes. So I mean, basically, obviously, I&A is the key one where we said we need a Q3 order intake in line with Q2 momentum. So essentially, Q3 is running to expectations at the moment. So outlook forecasts are in line. P7 kind of moves as we'd anticipated going through the quarter. So yes, there's not a lot -- there's still another 2 sizable months to do, and P8 and P9 are sizeable months like they were in Q2, but the outlook is in line with that. So, hence, we're sort of moving along the way we need to, I guess, so far. The shutdown clearly has not been super helpful, as you can imagine, in the U.S. in period 7. And so there are a few specific orders where -- which we were expecting to land, and they've moved alongside not having somebody to place it basically. But I think we're -- that's obviously looking like it's normalizing, and we were expecting those in Q3. So we're -- we think that risk is obviously going away. Any more in the room? No? No more in the room. Any more online? Operator: Yes. We've got 1 question from Daniel Thornton from Shore Capital. Can you talk about the new product launches in I&A and whether these are going into industrial commercial labs as opposed to academia? Richard Tyson: Okay. Right. So well, the 4 that we talked about, what would we say about those? I guess -- so yes, it's a mix, actually. There is a few specific -- so Raman tends to be specifically academia, but not exclusively, but the majority of it, but actually, the other areas are targeted at more commercial customers in general that we mentioned this morning. The higher-end cameras are pretty high end and quite individual projects, but they're moving towards the commercial arena. Operator: No further questions from the webcast. So I'll just hand back to you, Richard, for closing remarks. Richard Tyson: Great. Well, thanks for coming along this morning. I appreciate the attention. And hopefully, we've managed to convey that we've been navigating a disrupted Q1 and a better Q2, so a difficult H1, but well positioned for a much improved H2, as well as making great progress on the strategic actions, which underpin our confidence in the medium-term targets. So thanks for listening this morning, and see you around. Okay.