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Operator: Good afternoon and thank you for standing by. Welcome to the Ascend Wellness Holdings Third Quarter 2025 Earnings Call. Before proceeding, AWH would like to remind you that the following discussion and presentation contains various forward-looking statements or information. These forward-looking statements or information are subject to risks and uncertainties that may cause actual results to differ from historical or anticipated results. For more information on the risks and uncertainties, please refer to today's earnings release and AWH's SEC and SEDAR filings, including the most recent report on Form 10-K. During today's call, the company will be referring to non-GAAP financial measures such as adjusted EBITDA. Reconciliations to the most directly comparable GAAP measures are in an appendix to the presentation and in the company's earnings release. I'm pleased to introduce the Ascend management team joining us on today's call. We will begin with Sam Brill, Chief Executive Officer and Director, who will discuss the company's strategic priorities and provide an overview of key operational developments from the quarter. After that, Roman Nemchenko, Chief Financial Officer, will review the company's financial results for the period. With that, I'd like to turn the call over to our first speaker, Sam Brill. Sam, please go ahead. Samuel Brill: Thank you, operator. Good afternoon, everyone, and thank you for joining our third quarter 2025 earnings call. As we approach year-end, the industry landscape remains consistent with last quarter. Federal regulatory reform continues to attract attention and speculation, though material progress has been limited. Meanwhile, intensified competition and ongoing sector-wide price compression continue to create challenging market conditions for established operators. However, as we continue to navigate the challenges inherent in our nascent industry, a monumental shift in consumer preferences towards cannabis is reshaping the sector's long-term outlook. Recent research from the 2025 National Cannabis Study by MRI Simmons found that 61% of U.S. adults consider cannabis a healthier choice than alcohol with this number rising to 87% among recent users. Similarly, the 2024 national survey on drug use and health revealed a decade-long decline in rates of recent adult alcohol consumption alongside steady growth in cannabis use within the same period, particularly among 21- to 25-year-olds. These trends signal that cannabis is moving into the mainstream and is being embraced as a preferred consumer product. The gap between the pace of regulatory reform and the strength of consumer demand underscores cannabis' position as one of the fastest-growing categories in the CPG sector, steadily catching up to alcohol and established consumer staple. These evolving consumer trends highlight the industry's resilience even amid ongoing regulatory uncertainty. While we are cautiously optimistic about the prospect of federal reform, we remain focused on the factors within our control, such as delivering high-quality products through our leading brands and offering the best possible experiences for our customers. Our strategic priorities continue to guide our decisions and drive meaningful progress in a complex operating environment. As a reminder, our approach is grounded in 3 core pillars: profitability, sustainability and densification. Our ongoing sustainability initiative has strengthened our balance sheet and delivered measurable cost savings with well over $30 million in annual expenses eliminated ahead of schedule. These savings support margin expansion and improved profitability, contributing to our long-term resilience and operational efficiency, which lay the foundation for sustainable growth. Simultaneously, targeted market densification should help reignite our top line as we strategically expand our footprint in high-profile states and deepen our presence in key markets. These priorities provide the structure and discipline needed to maintain stability and thrive amid evolving macroeconomic and industry-specific headwinds. Turning to our performance. Net revenue for the third quarter was $124.7 million, representing a modest 2% decline from the prior quarter. Ongoing pricing pressures in several states, coupled with heightened discounting and promotional activities from new and existing competitors through the end of the summer, weighed on same-store sales. These trends are consistent with broader industry performance as total U.S. cannabis sales remained relatively flat in Q3 despite numerous new store openings, according to Hoodie Analytics. Notably, Ohio continues to outperform, maintaining its position as the strongest retail market in our portfolio. This strength underscores Ohio's importance as a key growth driver for our business, particularly as other markets face headwinds. We continue to add new stores, although recent regulatory delays have slowed the anticipated pace of openings and expected revenue contribution from new locations. That said, we remain confident in the depth and quality of our store pipeline, which will drive our strategy of premium consumer experiences in prime, high-value retail locations. We believe this will position us for future top-line growth while driving higher-margin vertical sales of our leading brand. Although revenue was softer this quarter, we delivered profitability improvements through effective operational enhancements. Our focused approach mitigated the impact of negative operating leverage supported by ongoing optimization in third-party retail buying and stronger retail margins and disciplined wholesale execution. We remain committed to building high-quality, sustainable revenue streams and expanding margin performance driven by a strengthened product mix in step with consumer demand. As part of our strategic focus to strengthen our position as a leading brand house, we are intentionally reallocating resources towards higher-value branded products -- by channeling wholesale biomass into finished goods with greater margin potential, we are enhancing our overall profitability across our product mix. This purposeful shift positions us to deliver products that resonate with consumers through our expanding portfolio of differentiated brands. In turn, this should enable us to broaden retail distribution through our wholesale channel with higher-margin branded products. These strategic initiatives are already driving results with adjusted gross profit for Q3 reaching $57.8 million, reflecting a 4.6% increase quarter-over-quarter and adjusted gross margin improved by 300 basis points to 46.4%. I'm also pleased to report that adjusted EBITDA grew 8.9% to $31.1 million, and adjusted EBITDA margin expanded to 24.9%, reflecting a 250-basis point improvement quarter-over-quarter. These improvements are a direct result of our disciplined cost management and our commitment to operational excellence, both of which remain core to the business. Turning to liquidity. Operating cash flow was slightly negative this quarter due to the transition to biannual interest payments of $19.1 million. As a result, we anticipate operating cash flow to be lumpy with larger outflows in quarters with interest payments on the indenture, followed by notably positive operating cash flow in the interim quarters. We ended the third quarter with cash of $87.3 million and strengthened our financial foundation by securing a $9.3 million mortgage on our Ohio real estate at a very competitive 8.5% interest rate. It is important to note that we have no major debt maturing until 2029, and we feel good about our financial position and flexibility. This strong foundation enables us to confidently advance our strategic priorities, enhance our operating platform and take advantage of potential acquisition opportunities. Year-to-date, we advanced our densification strategy by adding 7 new stores across our footprint, which will help drive vertical sales and increase fixed asset utilization. Through our hub-and-spoke model, each new location strengthens our operational efficiency and margin profile. Most recently, we received approval from the New Jersey Cannabis Regulatory Commission for our partner store in Little Falls, New Jersey. This location is expected to open by the end of November and marks our inaugural partnership under the state's social equity program. We are 1 of only 6 operators that are eligible for this program, and we look forward to building on this momentum in New Jersey, where we have 5 more social equity partnerships under development. Our national footprint now encompasses 46 locations, including partner stores. We remain on track to reach our goal of 60 total Ascend and partner locations, which was announced at the end of 2024. With 13 additional stores currently active in our pipeline, we expect to achieve this target within the next 12 months. While regulatory approvals and timing remain important variables, our disciplined expansion strategy is centered on strengthening our market presence with New Jersey as a core pillar of our growth plans. By aligning our retail network and CPG platforms under a unified customer-first approach, we are delivering a more consistent brand experience, better meeting evolving consumer expectations and creating long-term value. As announced last quarter, we officially launched our fully integrated digital e-commerce platform in Q3, a major milestone in our CPG and retail optimization efforts. Since launching, customers have embraced the redesigned mobile app and Ascend Pay, our secure cashless payment solution that allows one-click checkout after a single setup. Since Ascend Pay's July launch, transactions through the feature have increased from 2.7% to 6.7% of total sales as of the end of October. The platform delivers a seamless shopping experience powered by AI-driven personalization, deepening engagement and driving both retention and overall spending. Our stores are achieving strong transactional throughput relative to labor hours, a key indicator of operating efficiency. These improvements reinforce our store-level productivity and the effectiveness of our digital shopping platform. Central to this rollout, our reimagined Ascenders Club loyalty program now features 4 tiers, that each offer compelling value. As consumers move up tiers, they can earn exclusive perks such as gifts, launch discounts and early access to new products. The invite-only Legends Club recognizes high-value customers with highly personalized experiences and elevated benefits, further strengthening loyalty within our growing customer base. To date, over 64,000 new Ascenders Club accounts have been created by customers. Looking ahead, we are exploring tier-exclusive menus and continuing to align pricing and assortment strategies with evolving customer behavior to deliver a more relevant and differentiated consumer experience. Our customer-focused digital ecosystem remains at the heart of how we scale. It is designed to deliver seamless and repeatable experiences that feel uniquely personal. As we continue to enhance the platform, we are creating premium interactions at every customer touch point, deepening brand loyalty and driving lasting value across the markets we serve. Our CPG initiatives delivered strong momentum in the third quarter. Our flagship brands-maintained category leadership, and we continue to grow our emerging portfolio. We expanded our Effin' brand across multiple categories in the third quarter. The brand entered the vape category with effects-based 1-gram cartridges now available in Illinois, Massachusetts and New Jersey. This line features 5 SKUs with curated blends of THC and minor cannabinoids designed to address distinct consumer needs. Effin's popular gummy line also grew with 5 new effects-based SKUs formulated to support creativity, relaxation social energy, relief and deep sleep. These new edibles are now available in select markets and have been well-received for their innovative formulas. Meanwhile, our High Wired infused flower brand is gaining strong traction across multiple categories. Following a successful Q2 debut in Illinois and Massachusetts, the brand expanded in New Jersey in Q3. In the quarter, High Wired drove an 82% market share increase in infused products and was a key contributor to our roughly 4% market share gain in the pre-roll category across all 3 states, according to BDSA. In Illinois, infused flower remains a fast-growing segment. High Wired is helping lead that growth with market-leading potencies reaching up to 60% THC. As of the end of Q3, High Wired is the #2 infused brand by sales and units across Illinois, Massachusetts and New Jersey combined. It ranked #3 in Illinois and jumped to #2 in New Jersey despite just launching in September. We recently introduced infused pre-roll 5-pack clips in Illinois, Massachusetts and New Jersey and a bigger 10-pack format is now available in Massachusetts and will roll out in Illinois and New Jersey in the coming weeks. Simply Herb continues to hold the position of the #1 flower brand by both by both sales and units in Massachusetts, supported by strong customer loyalty and accessible pricing. Additionally, the brand achieved an 8.4% increase in market share in New Jersey, driven by continued demand for its flower and vape cartridge offerings. Building on the success of its existing offerings, we introduced a new 1-gram all-in-one disposable in early Q4 across Illinois, Massachusetts and New Jersey. The all-in ones feature distinctive flavors such as Mango Sticky Rice and Fruit Lagoon, generating a strong reception and leveraging the brand equity of Simply Herb. Ozone remains the #1 overall brand in units sold across Illinois, Massachusetts and New Jersey combined. In New Jersey specifically, Ozone leads in both flower and pre-roll unit sales. In Q3, we launched new flavor extensions across cartridges, Pixi disposables and edibles. Ozone Reserve is fueling growth in the concentrates category, gaining over 4% market share during the quarter. Reinforcing its high-quality positioning, Ozone Reserve will soon debut an exclusive King of Queens cola SKU. Additionally, as mentioned on our last call, Ozone is undergoing a comprehensive brand evolution to sharpen its identity and enhance shelf presence, aligning with the visual experience to match the superb quality of the product. In total, we've launched over 420 SKUs year-to-date and are on pace to reach nearly 550 by year-end, a record for our portfolio. In Ohio, we reached a major milestone with the long-awaited introduction of pre-rolls. Early results from the launch of Ozone Reserve and Simply Herb pre-rolls indicate strong demand. With a proven track record in this category, we are preparing to bring more brands and differentiated formats to market as regulations permit. These results highlight the strength of our multi-brand portfolio and our agility in responding to shifting consumer preferences and regulatory developments with speed and precision. Lastly, we are looking forward to debuting our newest brand, Honor Roll, a premium pre-roll collection using proprietary flower blends designed for discerning consumers seeking elevated quality and experience. The brand will launch in Illinois in December, followed by Massachusetts and New Jersey early next year. As competitive pressures continue across the industry, we are actively addressing them through refined pricing strategies, product differentiation and category expansion, which are all designed to protect and grow our leadership position. On the operations side, we continue to invest in targeted technologies that support both product innovation and operational performance to maximize yields and quality. Our network-wide automation rollout remains on track for completion by year-end. This includes automation across flower packing, vape filling, edibles and pre-roll production. This initiative is already delivering measurable results, optimizing labor, boosting throughput and improving efficiency across our production facilities. Our ongoing automation and technology investments are foundational to our profitability and sustainability strategies. They enable us to scale production of our leading high-demand branded products and reduce the cost of goods sold. Together, these improvements support brand innovation and long-term value. With that, I'd like to hand the call over to Roman to discuss our financial performance for the quarter. Roman Nemchenko: Thank you, Sam, and good afternoon, everyone. We're pleased to report that the company generated $124.7 million of revenue and $31.1 million of adjusted EBITDA for the third quarter of 2025. Compared to the prior quarter, total revenue decreased by $2.6 million or 2%, while adjusted EBITDA increased by $2.5 million or 8.7%. Retail sales for the quarter were $83.8 million, which is a $2.7 million or 3% net decline from Q2. The sequential decrease is almost equally driven by declines in the average basket size as well as the transaction volume, mainly in our Illinois and New Jersey markets. The impact of these declines was partially offset by the gradual ramp-up of 5 new stores that were added in the first half of the year. During the quarter, we have seen a variety of competitors offer aggressive discounts aimed at taking share. We value those actions and only respond where appropriate, prioritizing profitability over sales growth. We believe that a disciplined approach to pricing and promotions leads to a more sustainable business model as reflected in our improved adjusted gross profit and adjusted gross profit margins. Wholesale sales for the quarter totaled $41 million. Although flat to Q2, our sales mix improved with finished goods making up a larger portion of the B2B sales channel. Despite the sequential decrease in top line, adjusted EBITDA improved by $2.5 million and adjusted EBITDA margin improved by 250 basis points, finishing the quarter at 25%. We realized margin expansion across both sales channels, leading to an overall 300 basis point improvement in adjusted gross profit margin, while SG&A remained flat. In retail, the largest driver was improvement in vertical sales mix with a larger percentage of total retail sales coming from our own brands. Margin on third-party finished goods also improved as a result of purchasing efficiencies executed over the course of the year and a better product mix offered on our retail menus. In wholesale, improvements in operating cost basis and product mix also drove the margin expansion for the quarter. Moving on to our balance sheet. We closed the third quarter with $87.3 million of cash, representing a sequential decrease of $8 million. This net reduction in cash reflects $2 million of negative operating cash flows, $12.5 million of using investing, partially offset by $6.5 million provided by financing inflows. The negative $2 million of operating cash flows was heavily impacted by the $19.1 million semiannual interest payment in July. As noted earlier, transition from quarterly to biannual interest payments under our 2024 indenture will continue to create variability in our quarterly operating and free cash flows moving forward. $12.5 million of investing outflows include $6.4 million of CapEx and $5.5 million of M&A-related payments. CapEx includes approximately $1.4 million of new store build-out costs and the rest was used to improve our cultivation and manufacturing facilities. We're still expecting our full-year CapEx to finish in the $30 million to $35 million range as planned early in the year. $6.5 million of financing inflows reflects proceeds from the $9.3 million mortgage, offset by the $1.6 million related to debt repayments, $0.6 million in share repurchases and $0.5 million of payments associated with finance leases. As Sam mentioned earlier, our capital position was strengthened with a $9.3 million mortgage financing from a traditional banking partner. This loan is secured against some of our retail real estate assets in Ohio and carries a competitive annual interest rate of 8.5% with maturity in September of 2030. Elsewhere in the balance sheet, finished goods and packaging inventory levels are beginning to reach optimal levels. Receivables have been in a steady state as we continue to actively monitor our credit exposure and collection cycles. The business is current on all payables, and we do not have any large debt maturities coming up for a number of years. We're happy with our overall balance sheet position, and we continue to believe that our current market value does not fully reflect the quality of our assets and strength of our operations. Initiatives such as our buyback program are aimed at addressing this misalignment and returning value to our shareholders. During the quarter, we repurchased and canceled approximately 1 million shares. Since the launch of the buyback initiative last year, we have repurchased and retired approximately 5 million shares at an average price of $0.30 per share. This represents a 7% reduction in the trailing 12-month average shares outstanding as of Q3 and a 9% reduction if you exclude approximately 45 million shares held by directors and officers as disclosed in our most recent proxy. As we look towards the fourth quarter, we expect the top-line performance to remain relatively stable with projected revenue slightly down from Q3. This guidance reflects the promotion-heavy holiday period ahead and continued industry headwinds. However, adjusted EBITDA margin is expected to exceed 23%, along with a much stronger cash flow generation given the timing of the next interest payment in Q1 of next year. Although we're disappointed with delays in new store openings as well as declining transactions and basket size trends, we believe that our new e-commerce platform will provide a strong foundation for customer acquisition and retention in the near future. Our strong cash position should also enable us to execute on a densification strategy and highly accretive acquisitions as we continue to pursue greater scale and sustainability in our core markets. Additionally, our refreshed portfolio of flagship and emerging brands and products should help offset the negative pricing trends. Rebalancing our portfolio towards the higher end of the value spectrum is also expected to present additional opportunities for margin expansion moving into next year. I will now turn the call back to Sam for closing remarks. Samuel Brill: Thank you, Roman. While the market environment remains challenging, our performance this quarter reflects encouraging progress as we execute on our strategic priorities. Our leading brands, strong retail locations and excellent customer service paired with our disciplined execution, continue to drive results. Margin optimization efforts are taking hold, supporting improved profitability despite top-line pressure. With a strengthened product and brand portfolio, expanding retail footprint and growing customer loyalty, we believe that we are well-positioned to build on this momentum. As we head into 2026, our focus remains on driving profitability and sustainable growth, all while delivering exceptional products experiences and long-term value for our customers and shareholders. None of this would be possible without the dedication and hard work of our talented AWH team. They are the key to our ongoing success, and I appreciate all that they do. With that, I'll turn it over to the operator for questions. Operator: [Operator Instructions] Your first question is from Frederico Gomes from ATB Capital Markets. Frederico Yokota Gomes: First question on the decline in retail revenue. I think you mentioned that not only due to price compression, but also lower transaction volumes. Can you talk a little bit more about these lower transaction volumes? Samuel Brill: Sure. It's probably a 50-50 mix between the 2. And it's -- you have additional competition in our key markets. When I look at New Jersey, they added 52 stores this year. And New Jersey now has almost as many stores as Illinois, which also added about 20. So as more stores open up around us, you're going to compete more heavily. And we're not going to stoop to the point where some of these competitors, when they come in, they do 50% of their entire menus. We're not going to play in that game and give product away for free. But we do have to weather that storm of when the competition comes in with prices that cheap. But ultimately, long-term, we believe that we have the right experience and product assortment to win. And I think that speaks more to what we're doing on the e-commerce side to make sure that we tie loyalty to every transaction, understand who our customers are and be able to give them the best experience possible because that's what's going to win in the long term. Frederico Yokota Gomes: Appreciate that. And then second question, just on the regulatory delays that you mentioned to open more stores. Is that specific to any market? I know that probably New Jersey is one of them, but any other markets that you're seeing that, that could maybe get in the way of you opening those stores next year? Samuel Brill: Yes. Well, it's -- New Jersey was specific because it was a new program enacted by -- recently by the legislature there. And the CRC, this was new for them. So we worked with them very carefully to construct a the right terms to be able to move forward. They just approved it, and that opens up the opportunity to really push forward the 5 additional stores that we have in that state. And it's extremely important for us because with the size of cultivation facility in New Jersey and only having 3 stores, we don't have as much going through our stores and having 7 additional stores will shift more product through our stores and create better vertical margins and put us with less exposure to wholesale, which is lower margin by nature. But other states would be just, I would say, is more typical. There's always delays. It's usually on the local level and it's natural for across the board. So I wouldn't say that there's -- it was a CRC specifically that took like significantly more time. We expected to get that store open in Q2, and we'll hopefully get that first store open by the end of this month. Operator: Your next question is from Neal Gilmer from Haywood Securities. Neal Gilmer: I just want to start on the gross margins. Congrats on the strong improvement quarter-over-quarter, and I believe highest level it's been in a few years. I'm also aware that it can fluctuate from quarter-to-quarter. So is there anything sort of onetime in nature that helped improve it to those kinds of levels? And sort of how do you want to sort of set expectations with investors going forward as far as what sort of the -- on an annual basis, not looking at it on a quarterly basis, sort of a range that may be sort of a reasonable target to work for? Samuel Brill: No, I think this is the fruit of all of our hard work to try to get to this point. I mean this was a weakness that we've had and the strategy, I think, is working. There's no single call out that I would say was onetime for this quarter. I think it's more about better discipline with third-party purchases having a better product assortment and the product development that we've done internally. Commercializing 420 new SKUs is a very, very hard thing to do in less than a year. We've done that. And it's very important to always have what the consumers want. And the customer, when they come in, they tell us they always want new. They want new and interesting products, and that's what we're bringing to market. We're bringing -- we're trying to be at the forefront of innovation to bring those new -- we see it in other markets, right? And so we want to hit -- meet the customer where they are and always bring that innovation to our stores. And I think that product mix certainly helps, and it certainly helps with vertical penetration. You're not going to get vertical penetration unless you have products that customers want. And I think we brought that to the table, and it's showing this quarter. Neal Gilmer: Okay. Great. In your prepared remarks, you sort of commented about you noticed more sort of promotional activity and discounting in the summer months. Wondering whether that sort of implies that you're seeing a little bit less of that as you moved into October here at the start of Q4. I'm aware at the end of this month, obviously, that kicks back in with Black Friday and holiday. But how have you sort of seen sort of October play out in some of your markets with respect to that promotional activity? Or has that sort of continued on from the summer? Samuel Brill: Yes. It's -- I would say that it's continued. I haven't seen it slowdown in any material way. It's -- I think, unfortunately, many other players in the market, the only way they understand how to win a customer is through price. And so that's the lever that's pulled most often. It's frustrating because in some cases, it's just -- some of it's irrational. But when it comes to price compression, I mean, if there's an opportunity going forward, the recent talk about actually closing the hemp loophole could be quite meaningful for the entire industry. I mean you have an unregulated market that is somewhere in the neighborhood of $20 billion to $30 billion, which I believe is the same size as the adult-use regulated market. And if that loophole actually gets closed, then that's a whole lot of market share for us to be able to pick up as regulated players. So that could be very interesting if that actually happens. And that might alleviate price compression as new customers come into market wanting products. Operator: Your next question is from Luke Hannan from Canaccord Genuity. Luke Hannan: I want to follow up on Ohio. Sam, you touched on that as being a market that continues to outperform and mentioning it as the strongest retail market in the portfolio. I imagine that's because of the nascency of the adult-use program, but is there anything else to call out there? And can you give us a sense of what maybe same-store sales would look like in that market in particular? Samuel Brill: That market is, as you said, relatively new. It's about -- it's a little over -- I think it's the 1-year anniversary or a little past that. So now you're kind of seeing same-store like on AU level. But it continues to gain traction. It's been pretty like linear growth so far. We do expect 10Bs eventually to get approved and more stores to enter the market, but hopefully at a slower pace as more customers come to the store and it becomes a more mainstream industry for that region. I would say we've had the past -- like we're now able to sell pre-rolls, which is new form factors, and that's gone extremely well. We have 3 different pre-rolls in the market. It's been extremely well received. And so I think that, that's going to help drive some additional growth. And then eventually, I hope that we'll be able to advertise and they'll allow more -- there are still some form factors that are not allowed in that market. So I think as you allow advertisements and more form factors to come into Ohio, that will hopefully create an opportunity for additional growth. Luke Hannan: Okay. And then I want to follow up also. You had some commentary on one of the reasons why you are having better gross margin is there's more discipline when it comes to buying third-party brands. I mean what exactly is it that's underpinning that? What are you doing differently there now versus what you were doing before? Samuel Brill: It's just having a process that is focused on what it is that we're buying, how we're populating our menu in a more disciplined way. So I think it's more about buying those top products in each market and understanding the profitability metrics of those items. I mean, honestly, we didn't have something that was like really set in place to have that discipline. And we have put that in place, and we follow it very carefully. So it's just something that wasn't there. And so putting that -- like that was a key factor in making sure that we're actually aware of the margin profile of the things we put on our menu and focus on the ones that have the highest margins, but also make sure that we have the key leaders in every single market in every single category because we always want to have a menu that's going to have something that the customer wants. Roman Nemchenko: Yes. And just to add to that as well, I mean, it's really assortment. There's a big piece of it, focusing on items that complement our menu buying efficiencies, buying at scale, watching kind of how we run our promotion pricing cycle. So I think a mix -- a combination of efforts when you look at sequential and even year-over-year margin profile on that third-party product, it's a pretty massive improvement. Operator: Your next question is from Andrew Semple from Ventum Financial. Andrew Semple: Congrats on the Q3 results here. I'm going to return back to the retail segment, at least relative to our forecast, that's probably where the biggest surprise was on the sales pressure, but also on the margin outperformance. You've seem to indicate that most of the -- maybe the delta there was mostly related to kind of market pressures, including competition from third-party stores. Just want to unpack if there's anything maybe internally that -- or operationally that happened as well. Was there any shift in the outlet retail strategy that happened during the quarter? And were you seeing any -- maybe some impact at the stores from increasing vertical integration and putting more of your own products on the shelves? Any color on that would be helpful. Samuel Brill: No, I think actually, the vertical, I think penetration has really been driven by the refreshed product portfolio. The products speak for themselves. We're seeing people actually pay higher prices for some of these things because they're new and fresh. I would say that the price compression and competition are sort of -- like you look at the state of Ohio that was essentially flat despite adding 20 new stores, I mean, that means that the pie is getting split up across more units essentially. And so that's what we're facing. And at the same time, you do have irrational players that are willing to give away product essentially for free in some cases in order to steal traffic. And if we went down that route, then we wouldn't have the margins that we have. And we need to stay disciplined and rational and not chase basically very low-value sales. So I think it's just the mindset. We're just not going to play in that sandbox. And that discipline, yes, are we losing some sales as a result? We are, but like we don't have any margin on those sales. So you could see a higher sales number. You'll probably get the same result in terms of EBITDA, maybe even lower. And then you end up lowering the value of everything else that you have on the menu. So it's a losing strategy long term. And so we need to stay disciplined and focus on where we see success and lean into that. Andrew Semple: Great. That's helpful. And then maybe my follow-up would be on the margins. Given the EBITDA margin guidance next quarter, it sounds like you're hoping to sustain at least a decent portion of the quarter-on-quarter margin improvement we saw. Maybe just thinking into like 2026, do you think you can continue to hold on to kind of the higher margin level we saw in the third quarter? Or do you think competitive pressures and pricing pressures can continue to weigh? Samuel Brill: Well, we'll see what happens with the price compression. Again, if the same thing happens, that's a $30 billion opportunity for this industry. So we'll see where that goes. We're going to continue to stay disciplined with our strategy. And look, in Q4, you do have the seasonality. You do have the holiday season. We're cognizant of that. We have to be competitive for the holiday menu. And look, we're anticipating a slightly down quarter-over-quarter revenue. So we're not going to get the same operating leverage because SG&A is going to remain like flattish with lower revenue. So I think that has the bigger impact than the gross margin in terms of where you'll see results next quarter. And then as we look into next year, as our densification strategy continues to take hold, we should be able to grow revenue as we add more stores. And that's the key is to add more stores and then grow revenue and then see what this looks like when we actually have operating leverage. That's the key, get to a place where we have operating leverage. And so hopefully, in 2026, as the densification strategy takes hold, we can actually demonstrate that and see where we go. Operator: There are no further questions at this time. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
Operator: Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Quanterix Corporation Q3 2025 Earnings Call. [Operator Instructions] I would now like to turn the call over to Joshua Young, Head of Investor Relations. Joshua, please go ahead. Joshua Young: Thank you, Tiffany. And good afternoon, everybody. With me on today's call are Masoud Toloue, Quanterix's President and CEO; and Vandana Sriram, Quanterix's Chief Financial Officer. Today's call is being recorded, and a replay of the call will be available on the Investors section of our website. During the course of today's presentation, we will make forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act. These forward-looking statements are based on management's beliefs and assumptions as of today, November 10, 2025. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. To supplement our financial statements presented on a GAAP basis, we have provided certain non-GAAP financial measures. These non-GAAP measures are used to evaluate our operating performance in a manner that allows for meaningful period-to-period comparison and analysis of trends in our business and our competitors. We believe that such measures are important in comparing current results with other periods results and assessing our operating performance within our industry. Non-GAAP financial information presented herein should be considered in conjunction with and not as a substitute for the financial information presented in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to the most directly comparable GAAP financial measures set forth in the presentation posted to our website and in the earnings release issued today. Finally, any percentage changes we discuss will be on a year-over-year basis unless otherwise noted. Now I'd like to turn the call over to Masoud Toloue. Masoud? Masoud Toloue: Thank you, Joshua. We're pleased with how we executed in the third quarter, especially given the significant integration work underway and the challenging industry conditions we continue to navigate. This quarter reflects the strong execution, focus and resiliency of the Quanterix team who've continued to deliver results while driving major integration milestones and advancing key strategic initiatives. I'd characterize the third quarter around a few key themes. First, we delivered on our revenue expectations in a demanding environment. Second, we're moving fast and hitting key integration milestones following our acquisition of Akoya. In just over 3 months since the closing of the transaction, we're operating as one company under one common infrastructure and leadership team. We've created meaningful scale, built a stronger foundation for growth and already realized $67 million of the $85 million in synergies we're targeting. Third, we continue to invest for growth. We're making significant investments in Alzheimer's diagnostics and in new assays across our Simoa and Spatial franchises. Year-to-date, we've invested roughly $27 million in R&D, just under 30% of our revenue, which underscores our conviction in the opportunities ahead and the innovation pipeline we're building. And finally, we remain disciplined in managing our cash. We're on track to finish the year with around $120 million in cash and no debt and will be cash flow breakeven in 2026. We generated $40 million in revenue in Q3, a solid start to our first quarter operating the Simoa and Spatial portfolios under one umbrella. While demand across the broader industry remains uneven, we're seeing signs of stabilization, particularly in academic, government and pharma markets. Instrumentation and accelerator revenues were both up sequentially, signaling a gradual recovery that we expect to continue over the next few quarters. Since bringing Simoa and Spatial together, we're already seeing early commercial momentum. Customers are increasingly interested in combining tissue and blood insights, and we're starting to see real cross-selling opportunities between both portfolios. This is expanding our presence across leading pharma and academic customers where multimodal biomarker strategies are becoming an important focus. We're also seeing early activity in oncology where both platform sensitivity and reproducibility are proving valuable in emerging liquid biopsy and tumor profiling applications. These are still early days, but the traction we're seeing reinforces the strategic power of bringing these two technology platforms together and the potential to unlock entirely new growth avenues for Quanterix. The integration itself is progressing very well. We had three clear goals when we started. First, build one Quanterix organization under a unified leadership team; second, continue delivering on our core revenue expectations while positioning to capture tissue to blood-based opportunities; and third, capture meaningful cost synergies from the transaction. We've made substantial progress on all three fronts. We've consolidated four manufacturing and lab service operations into two Quanterix sites. We're fully aligned under one structure. And as I said, we've already implemented $67 million of the $85 million in targeted cost synergies. That's a strong start, and it gives us the flexibility to keep investing in growth while improving profitability. We're also making some of the most significant R&D investments in our history. We're developing our next-gen platform, advancing our Alzheimer's diagnostics programs and expanding our assay portfolio across Simoa and Spatial. We'll soon launch an early access program for Simoa One to give key partners hands-on experience with the technology and gather feedback ahead of a broader launch. We believe this will be an important catalyst for future instrument growth. In Alzheimer's diagnostics, we received a positive pricing recommendation to crosswalk our LucentAD test at $897 with a final approval decision expected later this quarter. We also added 4 diagnostics partners in Asia, extending our reach and making high sensitivity, clinically relevant biomarker testing available to more patients worldwide. Diagnostics-related revenue was $2.4 million in the quarter, another step in the right direction. On the balance sheet, we remain in a strong position. The cost reductions from our integration activities are driving real improvements in cash performance. We expect to exit the year with about $120 million in cash and no debt, supported by improved working capital and a full quarter benefit from the synergies in place. We're building a stronger, more agile and more scalable company. With integration advancing ahead of plan, early commercial synergies taking hold and continued leadership in neurology and diagnostics innovation, we're laying the foundation for sustained growth, profitability and impact. Our progress this quarter is a testament to the dedication and talent of the Quanterix team and the momentum we're building together positions us well for long-term success. Now I'll turn over the call to Vandana. Vandana Sriram: Thank you, Masoud, and good afternoon. As a reminder, we closed Akoya on July 8, so the following results represent a partial quarter of Akoya's operating performance and excludes $600,000 of revenue recognized by Akoya in the first week of July. Total revenue for Q3 was $40.2 million, an increase of 12% year-over-year. From a product perspective, Simoa contributed $23 million, a 36% organic revenue decline and Spatial reported $17.2 million, down 9% year-over-year. Spatial revenues include $1.2 million of noncash revenue from an off-market contract. Instrument revenue was $7.2 million, $2.5 million in Simoa and $4.7 million in Spatial instruments. We placed 16 Simoa and 27 Spatial instruments in the quarter as compared to 13 Simoa instruments in the third quarter of '24. Consumable revenue was $18.8 million, which consisted of $12.3 million in Simoa and $6.5 million in Spatial consumables. Accelerator lab revenue was $8 million, $5 million in Simoa and $3 million in Spatial. Simoa Accelerator lab revenue of $5 million increased sequentially by $1 million in the quarter. Our organic revenue decline was driven by weakness in the U.S. academic and pharmaceutical end markets. For consumables, the number of orders this quarter were consistent year-over-year, and we had a net increase in the number of accelerator projects. But in both cases, the dollars per order or project were lower than last year, driving the decline in revenue. Our customer mix was evenly split between pharma and academia in the quarter. On a pro forma basis, including Spatial revenues, U.S. academic revenue declined approximately 30%, which is tracking to the decline in academic grants. Pharma revenue declined 23% year-over-year. Gross profit and margin were $17.2 million and 42.8%, respectively. Non-GAAP gross profit was $18.5 million and non-GAAP gross margin was 45.9%. The alignment of Akoya's accounting policies to Quanterix resulted in the reallocation of certain Akoya expenses into cost of sales, causing a reduction of approximately 900 basis points to the combined company's gross margins, which was then offset by the favorable impact of synergies. Operating expenses for the quarter were $54.5 million. Included in operating expenses are approximately $15 million of costs related to acquisition, integration, restructuring and purchase accounting and $1.3 million of shipping and handling costs. Non-GAAP operating expenses were $38.2 million, an increase of $7.1 million sequentially. I'd like to comment here on the synergy realization from the Akoya transaction. These synergies are in three areas: firstly, the alignment of the commercial organizations into one; secondly, the integration of the supply chain into one manufacturing operation and one lab; and thirdly, the elimination of duplicate public company costs. Prior to the acquisition, Akoya had a run rate of nearly $20 million of quarterly operating expenses. So the $7.1 million sequential increase in spending for the combined company really highlights the impact of the swift action we've taken to capture cost synergies. Our adjusted EBITDA was a loss of $11.9 million as compares to a loss of $5.5 million in the third quarter of the prior year. We ended the quarter with $138 million of cash, cash equivalents, marketable securities and restricted cash. During the quarter, we paid approximately $126 million in deal-related costs, which includes the debt pay down, shareholder payments, severance and other expenses. We acquired $16.8 million in cash from Akoya. Adjusted cash usage during the quarter was $16.1 million. I will now turn to our updated guidance for the year. We continue to expect to report $130 million to $135 million of revenue for 2025. This assumes approximately $100 million to $105 million of Simoa revenue and implies pro forma revenue of $165 million to $170 million for '25, assuming the 2 companies were combined for the full year. We expect GAAP gross margin to range between 45% and 47% and non-GAAP gross margin to be in the same range. We've tightened the gross margin ranges versus our prior guide as we know more about the effects of integrating Akoya, and these account for the allocation changes I touched upon earlier. None of the allocation changes impact our cash construct. And finally, on to cash. We continue to expect adjusted cash usage of $34 million to $38 million for the full year. We ended the third quarter with $138 million in cash. For the fourth quarter, we expect to pay $10 million for the Emission acquisition, which was completed earlier this year and to use approximately $8 million cash in operations. The sequential cash improvements from $16 million of adjusted cash usage in Q3 is expected to come from incremental synergy realization in the quarter as well as working capital improvements. This keeps us on track to end 2025 with approximately $120 million in cash and with no debt. With that, I will now turn it back over to Masoud. Masoud Toloue: Thank you, Vandana. Operator, let's take some questions. Operator: [Operator Instructions] Your first question comes from the line of Kyle Mikson with Canaccord. Kyle Mikson: So just looking at the core, the Quanterix business, Simoa, consumables were down, I think, 30% or so year-over-year. I know there were a similar number of orders, but there were lower dollars per order. But could you just really kind of dive into that and elaborate on what's happening there competitively and macro-wise and if you're confident that can rebound maybe next year? Masoud Toloue: Kyle, so I'll take that first question. So yes, on the consumable side for Simoa, as you articulated, the order volume was consistent with last year, but the order size was smaller, which explained the entire decline. So what we're seeing on the academic side are project sizes that weren't the same size as they were last year. And so from a customer perspective, we're getting the same number of customers ordering the products, just project sizes is smaller than it was in the prior year. And we're really attributing that to the basic academic grant environment that we're in, which we saw less of in the prior year. And I think we're seeing also the same thing on the Accelerator side. We saw an actual double-digit increase in total number of accelerator projects this quarter how -- but those projects are smaller in scope versus '24. So it's still a sticky business, and we expect those smaller projects to scale in '26. Kyle Mikson: All right. Got it. And then as I look to the 4Q '25 kind of plans to implement more synergies, I think one aspect is building out this one manufacturing team and other is the combining of the lab services. And I feel like that's probably an Accelerator illusion. So [indiscernible] Spatial has already done $3 million in the quarter, which was good to hear. Could you just again kind of walk through what the plan holds for 4Q just because it seems like the last leg of the stretch here, and it seems like it could be more challenging than it seems on the surface. Masoud Toloue: Kyle, I think you're referring to the integration chart that we put together with Simoa and Spatial. And so in Q4, we've already implemented the single manufacturing team and we're now combining lab services. And when we say combining lab services, we're already in under one footprint, and we've combined both labs. We're operating out of a single building. And what we're looking for is some additional synergy opportunities as we get down the final stretch. Those include synergies that we see -- opportunities we see in the lab side. But then also as we enter at the beginning of next year, we'll have the company running on a single ERP with all systems and financials integrated into one organization. So we expect to pick up the remaining part of our synergies as we round out the first quarter. So you mentioned it could be difficult. I think we're ahead of schedule with what we've done so far. I would call the implementation of the operating lines, probably some of the most challenging parts of the integration. And now we're actually see good line of sight towards the end and the full $85 million of synergy. Kyle Mikson: All right. Great. And then finally, just on diagnostics, $2.4 million in revenue in the quarter. As we think about the CLFS later this month or this quarter, how should we think about kind of durable Medicare coverage and the payment rate being close to the $897 and then maybe next year, again, is this like an inflection year for that business for Lucent? Masoud Toloue: Yes, that's a great point. We got the preliminary reimbursement recommendation. We expect to hear back by the end of this quarter on something definitive. And you make a good point. We're now, I think, for the first time, basically sending up providers, taking orders and we didn't have that in the beginning of the year. So we do expect to gain some traction based on this pricing. And this is the beginning part of our diagnostic journey. What we need to do is continue to deliver on our clinical utility studies, which show that a five-marker algorithmic test outperforms single marker tests and gets the value that we've initially been assigned. So we think it's a beginning part of the journey, but a lot more traction in '26 versus '25. Operator: Your next question comes from the line of Dan Brennan with TD Cowen. Daniel Brennan: Congrats on the quarter. Maybe just on the Akoya business, can you just walk through kind of the assumptions kind of in the fourth quarter, I guess, so what you did $17 million this quarter. And it's $30 million for the back half. Is that right? So it's $13 million in the fourth quarter. Is that right? Just kind of -- I know it's simple math, but just walk through what you're assuming in the fourth quarter for Akoya? Vandana Sriram: Yes. So we got off to a really good start on the Akoya transaction and $17 million of revenue in the third quarter. For the fourth quarter, we've modeled a slight step down simply because there's a level of uncertainty in the market still. There's still questions on when funding will really start to flow down. So we've derisked Q4 just given the uncertainty in the market. Now of course, if that were to change, then Spatial would be in a position to take advantage of that. Daniel Brennan: Got it. I mean were there any like one-off issues in the quarter where you had more success maybe getting some orders in, like any pull forwards? Or you just executed really well and kind of got that $17 million in the door? Masoud Toloue: Yes. Again, it was just solid execution from the team. There wasn't anything material or anything pull forward. So it was good traction. And this is the first quarter we had both teams, everything -- all product lines were under the same umbrella. So even in that circumstance, when you combine two organizations, I'd say that our commercial team did a fantastic job. Daniel Brennan: Got it. And then just on the kind of high-level core Quanterix, I mean, I guess the fourth quarter guide assumes kind of flat to down, but -- or at the higher end up, a decent step up. Just kind of you commented in the prepared remarks, you're seeing improvement and improving signs in pharma and academia. Maybe can you just speak to a little bit of like what you're specifically seeing and kind of how you've tried to characterize that in kind of the core Quanterix fourth quarter guide? Masoud Toloue: Yes. So when we look at the full year, you'll notice we haven't changed the full year guide. And I think that's what you see is us being prudent, and we're still under a government shutdown, and there's just some uncertainty. So we want to be realistic and conservative on the fourth quarter. The -- on your commentary along the lines of performance, I think we were very happy with the outcome of Q3 and going into Q4, we saw sequential -- actually, going into Q3, we saw sequential improvement in both Accelerator and Instruments. We saw a greater number of projects coming in through our pharma customers in Accelerator. We hope that, that basically continues going into the fourth quarter and going into 2026. So we can keep that momentum going up. We're excited about '26 even in the pressured environment. Daniel Brennan: Got it. And then maybe one other just in terms of the cross-selling opportunity, which I don't think you guys formally baked in anything, but you made a bunch of comments early in on the prepared remarks about early success there. Just maybe a little bit more on that. And you kind of look ahead, like are you already starting to see some incremental wins? Or how do we think about the cross-selling opportunity? Masoud Toloue: Yes. Early days, it's been positive, Dan. If you take a look at both consumables portfolio, Simoa, it has the #1 liquid biomarker franchise everywhere. And then Spatial, we have the #1 protein tissue biomarker panels versus anything else out there. So -- what we did immediately was that we talked to our neurology customers, and they're interested in understanding where these proteins are moving along the brain and the early signs of Alzheimer's and how this grows from tau tangles to plaque to conditions for a patient. So we're seeing some of our Simoa customers interested in -- and actually making purchases for the Spatial product line. And then on the other side, we're seeing on the oncology or immuno-oncology side, formerly Akoya customers wanting to measure and track these biomarkers in blood. So I'd say we have probably a double-digit list of opportunities that we're tracking and early days have been positive. Daniel Brennan: And sorry, truly final one, like 2026, will we get the first update at JPMorgan? Will it be on the fourth quarter call? Most companies are kind of saying something at this point. Any early read? I don't know if you were -- if you were consensus has landed. Just wondering kind of how we might think about an early look at next year? Masoud Toloue: Yes. We're not going to provide sort of the '26 guidance on this call. We typically do it on our last quarter call for the year. So I think we'd continue to wait there. But I just want to reiterate, we've made -- '25 was a big investment year for the company. We've made a lot of investments in the product and service portfolio. And so we expect to enter '26 with real momentum. Operator: Your next question comes from the line of Puneet Souda with Leerink Partners. Puneet Souda: Just wondering what you're accounting for the government shutdown, if there was any impact that you're thinking about in the fourth quarter? And then just how should we think about -- if the shutdown is over now, how should we think about the recovery or potential for maybe slight upside if the government shutdown was to end and normalcy was to reverse in the academic accounts? Vandana Sriram: Yes. Thanks for the question, Puneet. We did take the government shutdown into account as we set our Q4 guide, and that was the primary reason for the slight deceleration on a quarter-over-quarter basis. Q4 tends to be a tough quarter with all of the holidays, et cetera, and we are about halfway through the quarter already. So we thought it prudent to hold the guide and reflect that impact. We don't think it gets worse than that. If there is any kind of year-end flush or if the government opens up sooner than expected, that would be favorable to us from a revenue perspective. But we do think we've bottomed out the risk here. Puneet Souda: Okay. And then Masoud, a bigger high-level question for you around competition. I mean I hear your comments on academic weakness backdrop is tough. We all know that. But how do you plan to address the significant market competition that is emerging from high sensitivity, high multiplex platform on the discovery side and academic discovery side as well, especially in neurology and pharma and biotech as well, at least on the discovery side, I could say we can -- we're seeing more of that. So just wondering how do you think about that? I appreciate your clinical trial business is not impacted, but how do you compete more aggressively on the discovery side of the business? Masoud Toloue: Yes. Puneet, thanks for the question. So just for clarity, we really compete in the 4 or 5 marker space, which is a lot more of a translational segment. So if a customer is interested in looking at something that's a 20 to 1,000 Plex, we really don't play in that part of the market. Now we acknowledge that, that's a fast-growing segment, and that's great for Quanterix because as discovery accelerates as new markers are identified by customers doing 1,000 or 100 Plex, that really translates, usually 4 or 5 markers come out of those studies, and that translates to more business for Quanterix. So we're very happy with that discovery progress and expect new markers to come into our pipeline. Overall, from a competitive standpoint, I think basically, orders were on the consumable side, flat, which is good -- of good performance given sort of some of this academic shutdown and grant instability. So overall, we're not losing any share. In fact, we're gaining share in some of the diagnostics segments and clinical trial studies as we are able to do 4 markers, 5 markers with our algorithm, we provide unique insights that you just can't get with a single marker. So high plex discovery, good for Quanterix, translational single marker, we've been able to identify a great solution on the clinical side. Puneet Souda: Okay. And then last one for me. Could you remind us what was the volume for you in LucentAD in the quarter? And how should we think about the volume ramp in '26? Wondering if you can provide an update on the commercial end of that? And just related, out of that volume, how should we think about the new pricing applying to what portion of that volume? Masoud Toloue: Yes. So I'll let Vandana answer the question on the revenue. But for diagnostics, we're going to be entering '26 with an established pricing recommendation. It's just something we didn't have this year. And so that positions us really for stronger traction and growth in the segment. And so when you look at current revenue, it's mainly through partner enablement where this is basically customers buying a platform, buying consumables, buying tests and running it through their own LDT laboratories or reference hospitals and reference laboratories. And that really makes up the majority of our diagnostics revenues. We are, as I said on the call, running patient samples and through our own CLIA, LDT lab and that continues to increase, and we expect with established pricing that to, as I said, give us more traction and growth next year. Vandana Sriram: Yes. Maybe just to add to that. We don't disclose our direct testing revenues and volumes just yet. But as they start to get meaningful and material, most likely next year, we'll start to talk about that. The one point I'd make on the enablement side is this is an area where we are starting to see a really steady business now. Over the last several quarters, it's been a little bit lumpy depending on one deal or the other. But we're now reaching a point where our enablement partners are regularly starting to buy consumables, and that is helping to hold the revenue at a fairly steady level each quarter. Year-to-date, we've done about slightly north of $6 million of revenue already versus $6 million for the whole of last year. So we are definitely seeing an uptick in our partners using our single marker test for testing as well. Operator: Your next question comes from the line of Thomas DeBourcy with Nephron Research. Tom DeBourcy: Just first, I was just wondering if you could clarify the difference between, I guess, your cost reductions implemented versus, I guess, cost reductions realized because even if I annualize those, there's a little bit of a gaps. So just can you help me reconcile the two? Vandana Sriram: Yes, sure. I can take that. So the cost reductions annualized is the full year impact of an action that you'll see in the 2026 time frame. What's realized in the quarter is true dollar savings that fell through within the quarter. So for example, if you take some of the leadership changes that happened, 2 months' worth of impact is captured in that $12 million number. But when you look to next year, that would really be a full 12 months' worth of impact. Tom DeBourcy: Understood. And then just, I guess, on the instrument side, obviously, that's been difficult for pretty much everyone in the market. Just in terms of kind of as you look at improvement in the end market, hopefully, in the near future, would you expect to see, I guess, more of a rebound in lab services ahead of potential instrument placements? Or just how are you thinking about how that might materialize? Masoud Toloue: Yes, Tom, we're already seeing increase in numbers of projects through the Accelerator program. Now there's certainly some quarterly ups and downs on services. And as those smaller projects become larger, we expect some smoothing out of that volume. So we're already seeing an uptick on the Accelerator side. It's just a matter of time on -- as these projects become larger or more spending happens, that will improve. And I do expect it to perform that way to see services outperform sort of consumable instrument uptick in the following quarters. Instruments performed well. We obviously want to place those, as you know, across the franchise now both our HD-X, our [ HT ] and the PhenoCycler, they're all high-volume instruments with the capacity to run high volumes of consumables, and we're going to continue our work in making sure we get these placed globally. Operator: Your next question is a follow-up from Kyle Mikson with Canaccord. Kyle Mikson: On the point there about instruments on Simoa One, I just wanted to ask about the time line there because I thought it was supposed to be launched by the end of '25, but it sounds like now there's an early access program for that. So again, how should we think about this product as being like an incremental inorganic source of revenue growth like next year? It sounds like it could be big, but I mean, what's the funnel kind of look like? Like what do you expect for that, Masoud? Masoud Toloue: Yes. We've been working with a handful of customers, and they're certainly excited to get access to higher sensitivity compared to where we are today and the ability to plex even further. And so we're going to be kicking off an early access program before the end of the year, where we're going to give early access, get feedback from our customers before we go and move forward with a full launch. Revenue contribution, we haven't talked about that in '26. We'll provide an update on our next quarter call. Kyle Mikson: All right. Great. And then finally, on the Asia kind of updates for LucentAD, I mean, when does that become material? Like what are the steps of sort of unlocking revenue in overseas internationally for that test, given it's not -- it's obviously unprecedented? Masoud Toloue: Yes. I think what you see in some of the collaborations we've done right now in Southeast Asia, we're basically kind of early stages, but we're already seeing the opportunity in China. We have a couple of partners there. Partners have already received IVD approval for the platform, and they're moving ahead with testing patients and getting the system out to laboratories across the country. So good signs there. The drug is available. Patients want access, and they're using our test. So that's been a decent contributor to our diagnostics revenue. Kyle Mikson: Got it. And finally, you've reduced R&D spending quite a bit. I'm just kind of curious if you aim to sort of increase that next year as you think about, again, the small one, you have other products coming out just to maintain a competitive stance and sort of drive growth as well over time because you have a lot of synergies to be taken out -- or sorry, investments to be taken out the business so you need kind of investment to drive more growth. How do you -- what do you think about that kind of a concept? Vandana Sriram: Yes. So we've been pretty disciplined about the synergies, and we've been careful to make sure that we maintain all of our investment in our growth areas. So R&D is down a hair, but that's mainly because there's some reallocation of some of Akoya's R&D cost into cost of sales. And on the Simoa side, there's been a little bit of pruning and a little bit of housekeeping, but all of our strategic investments are very much intact. So we're still allocating capital to Simoa One as well as diagnostics as well as on assay development, both for Simoa and Spatial. As we go into 2026, some of these programs will come to a natural end. Other programs will start off. But our intention is that we'll continue to balance R&D as a priority item even going into '26. Operator: We have reached the end of our question-and-answer session. Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Greetings, and welcome to the TransAct Technologies Third Quarter 2025 Earnings Call. [Operator Instructions] And as a reminder, this conference is being recorded. It is now my pleasure to introduce Ryan Gardella of Investor Relations. Please go ahead. Ryan Gardella: Thank you. Good afternoon, and welcome to the TransAct Technologies Third Quarter 2025 Earnings Call. Today, we'll be discussing the results announced in our press release issued after market close. Present from the company is CEO, John Dillon and President and CFO, Steve DeMartino. Today's call will include a discussion of the company's key operating strategies, the progress on those initiatives and details on the third quarter financial results. We'll then open the call to participants for questions. As a reminder, this conference call contains statements about future events and expectations, which are forward-looking in nature. Statements on this call may be deemed as forward-looking and actual results may differ materially. For a full list of risks inherent to the business and the company, please refer to the company's SEC filings, including its reports on Form 10-Q and 10-K. TransAct undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances that occur after the call. Today's call and webcast will include non-GAAP financial measures within the meaning of SEC Regulation G. When required, a reconciliation of all non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP can be found in today's press release as well as on the company website. And with that, I'd like to turn the call over to John. John Dillon: Thanks, Ryan, and good afternoon, everyone, and thank you for joining us today. I'm delighted to report that TransAct delivered another solid quarter in Q3 and continuing momentum we've built throughout 2025. For the quarter, we sold 1,591 BOHA! Terminals urging the year-to-date total of 5,883 units, and that's up 58% from the 3,732 units sold through the first 9 months of 2024. I'm pleased with this increase and believe it shows clear progress against the initiatives. As I mentioned in the past, units sold remain the best indicator of successful sales organization. And when I first joined as CEO, I laid out a clear land and expand strategy, and clearly, that expand motion is working well. The improving results for foodservice technology, we call it FST. That business highlights the effectiveness of the go-to-market improvements, and we believe this trajectory sets us up for ongoing progress and continuing improvement as we move into 2026. Our goal is to build the business with repeatable execution while leaning into the competitive advantages that make TransAct unique and allow us to win in the market. And before diving into the results, let me provide an update on our acquisition of the perpetual license to the BOHA! source code, which we announced back in August. As a reminder, we acquired this royalty-free license for $2.55 million, and it gives us full control to use, host market, sublicense, distribute, copy and modify the code. The implementation and stand-up process have gotten off to a good start and we're encouraged by this by what we will mean to transact in our BOHA! business, greater operational freedom, the ability to enhance the software without constraint and long-term value creation for shareholders and employees. We expect the fully operational and supported version to launch in early 2027 and already see tangible progress towards that goal. Now let me dive into our FST highlights for the quarter. Total FST net sales rose to $4.8 million, up 13% year-over-year, driven by hardware sales and growing recurring revenue, including a partially strong quarter for Labels. Recurring FST revenue climbed to $3.3 million, generating a modest uptick in ARPU to $792 per unit from $700 in the prior year quarter. The main takeaway on the FST side of the business is that we're executing against our priorities and moving the needle meaningfully. We see good momentum, and our GTM changes are yielding positive results. The rollout from prior quarters are progressing as planned and our existing base of approximately 40,000 AccuDate 9700 units plus first-generation BOHA! Terminals remains a ripe opportunity for upgrades and expansion. We're focusing on that opportunity alongside new clients and customer growth. We continue driving conversions and expansions with key customers in the third quarter, including further upgrades across multiple Tier 1 accounts. This includes additional rollouts with our major QSR customer and multiple C-store chains where the Terminal 2 is delivering real value to customers in the form of increased efficiency, reduced weight and ultimately higher margins for them. We added 2 new logos in the quarter, which while lower than we expected, was more than offset by expansion with our existing customer base. In line with this, we're excited about 2 recent customer wins that demonstrate the appeal of our BOHA! platform. First, in September, we secured a rollout with one of the nation's largest sushi franchise operators which has over 2,100 locations. They placed initial orders for 596 units with either Terminal 2 LTE, which means they work with cellular phone lines, in other words, the wireless part. And these units are part of a broader initiative to modernize their network with plans to eventually equip all their locations. The LTE version solves connectivity challenges for franchises in supermarkets or off network environments, eliminating the need for MiFi devices while enabling reliable cloud access and remote updates. This enhances food quality, operational consistency and efficiency, leading to better customer experiences and improved financial margins. As I said in the announcement, this deployment reinforces the real-world value of our BOHA! platform, reflecting its strong ROI, reliability and scalability. Additionally, in October, we added another convenience store chain with 81 locations, our growing BOHA! customer base. They've deployed 73 BOHA! Terminal 2 devices for labeling workstations and adopted BOHA! Temp at 47 food service locations to digitize back-of-the-house operations. This integration streamlines workflows reduces manual processes and support passive compliance while driving higher margins and operational efficiency. Before moving on, I wanted to mention that we're looking at 2 unique revenue opportunities in the boat space. One near-term focus and a second -- on a longer-term visionary path. The first looking at near term, our labels are not only an important contributor to recurring revenue, but a fundamental strength of the business. We have some prospective customers who may be interested in labels only as we are recognized as the best-in-class provider and importantly, cost-effective versus our competitors. Second, from a longer-term visionary perspective, we're evaluating the development and launch of an app store for our BOHA! Terminals to allow existing users to opt into new software purchases right over the hardware. This is a future project. It's on our map to consider now that we own the software. I wanted to point that out, but it is a future project, but I think it's a great idea, and I'm looking forward to making progress on it. For developments that are currently hardware only, this could be a key driver of future software revenue, and we'll update you on these initiatives as we develop in coming quarters. Shifting to casino and gaming, we recorded net sales of $7.1 million in the quarter, which was up 58% from the year prior. However, as everyone has seen in the headlines, domestically, we are seeing some challenges in the demand side of the environment with Las Vegas and broader casino performance facing headwinds. Our domestic OEM partners have indicated slowing demand and 1 large buyer from the first 9 months of 2025 is now in an overstock position while awaiting jurisdictional approvals on new machines. We currently believe this is a macroeconomic situation that we expect will flatten out in coming quarters. While we do expect this to impact our fourth quarter sales, we are hopeful that an improving set of dynamics will emerge as we enter and move through 2026. I'd note that these factors are not being seen internationally, where we had a strong quarter, both sequentially and year-over-year. That said, we are also seeing traction with our Epic TR80 thermal roll printer, which is used in sports betting kiosks, video lottery terminals and other applications. Sales for the first 9 months of 2025 have been modest but we anticipate it being -- becoming a larger contributor in 2026. Before handing the call over to Steve, let me update our financial outlook for 2025. based on third quarter and year-to-date performance, we're maintaining our full year revenue guidance of $50 million to $53 million, reflecting continued FST expansion and casino stability amid the anticipated fourth quarter deceleration. Adjusted EBITDA is expected to range from breakeven to positive $1.5 million for the full year, assuming no major disruptions in supplier or demand. I'd also like to call out that our balance sheet remains strong. We have $20 million in cash on the balance sheet at the end of '23, thanks to inventory sell down and disciplined management, this provides us ample working capital and flexibility to navigate any headwinds while positioning us for enhanced profitability and progress in 2026. To close out, I'm pleased with our third quarter results and the process across the business. We drove significant BOHA! Terminal sales growth year-to-date, achieved higher FST sales with strong recurring contributions while maintaining positive adjusted EBITDA for the third straight quarter. The BOHA! platform is expanding successfully across our core subverticals, including convenience stores, health care, and sushi operators with 2 solid wins in the recent months, and we believe that our casino and gaming business remains solid despite some macro-driven economic softness that we're currently experiencing and expect to continue during the fourth quarter. We continue our focus on execution, operational improvements and fiscal discipline to drive shareholder value. And with that, I'll turn the call over to Steve for a detailed review of the financials. Steve? Steve DeMartino: Thank you, John, and thanks, everyone, for joining us this afternoon. Let's turn to our third quarter results in more detail. Total net sales for the third quarter were $13.2 million, which was down 5% sequentially but up 21% compared to $10.9 million in the prior year period. Sales from our foodservice technology market or FST, for the third quarter were $4.8 million. That was up slightly by 2% sequentially and also up 12% compared to $4.3 million in the prior year period. Our recurring FST revenue, which includes software and service subscriptions as well as consumable label sales for the third quarter were $3.3 million. That was up 10% sequentially and up 13% compared to $2.9 million in the prior year period. Our ARPU for the third quarter of '25 was $792, which was consistent sequentially with Q2, but up 13% year-over-year. Our ARPU for Q3 improved versus prior year as a result of strong growth in label sales. Our casino and gaming sales were $7.1 million, which was down 7% sequentially, but up 58% year-over-year, reflecting the market rebound John discussed. Results were further driven by a new OEM win for use in non-casino charitable gaming applications, combined with normalized buying from just about all our major OEMs. As John mentioned, we expect our fourth quarter casino gaming sales to be sequentially lower due to dynamics in the domestic casino market. POS Automation sales for the third quarter declined sequentially by 32% and also declined 65% from the comparable prior year period to $399,000. As we discussed in the past, we believe that Ithaca 9000 printer sales have now reached a new normalized level based on competitive dynamics. As a result, we expect sales for POS automation to remain in about the $400,000 to $500,000 range per quarter for the foreseeable future. Moving to TransAct Services Group, or TSG. For the third quarter, TSG sales were down 8% year-over-year to $792,000. This decrease was due to lower demand for legacy spare parts on a year-over-year basis, somewhat offset by higher shipping revenue. We expect TSG sales to remain at about this quarterly run rate going forward, consistent with normalized demand. Moving down the income statement now. Our third quarter gross margin was 49.8%, which was up from 48.1% in the prior year period and up 160 basis points sequentially. Our margin performance reflects higher sales as well as a higher mix of casino and gaming sales compared to the prior year, somewhat tempered by modest cost headwinds from overhead inflation and tariffs. We expect gross margin to remain in the mid- to high 40% range for the remainder of '25. I also wanted to give a brief update on our tariff situation. During the third quarter, we implemented a second small price increase to the original tariff surcharge we implemented earlier in '25 on applicable imported items. We did this to cover incrementally higher tariff and air freight charges we're incurring. To date, we haven't experienced any significant pushback from customers and don't believe this has had any negative impact on our sales performance for the quarter. While we don't have any further price increases planned at this time, this is a fluid situation that we'll continue to closely monitor and update you all as needed. Our total operating expenses for the third quarter increased by 8% from the prior year third quarter to $6.5 million. Our engineering and R&D expenses for the third quarter were essentially flat at $1.65 million. Our selling and marketing expenses were up 11% to $2.1 million, and our G&A expenses were up 10% to $2.8 million. The increase in G&A was due largely to higher incentive and share-based compensation expense from our improved financial results. For the third quarter, we had positive operating income of $14,000 or 0.1% of net sales compared to an operating loss of $837,000 or negative 7.7% of net sales in the prior year period. On the bottom line, we recorded net income of $15,000 or 0 or breakeven EPS compared to a net loss of $551,000 or negative $0.06 per share in the year ago period. Our adjusted EBITDA for the quarter remained positive at $669,000, which was up from an adjusted EBITDA loss of $204,000 in the prior year period. Lastly, turning to our balance sheet. As John mentioned, we crossed $20 million in cash and cash equivalents on our balance sheet at the end of the third quarter. This was mostly the result of success from a proactive inventory reduction program we put in place at the beginning of '25. Since the start of the year, through a combination of selling off remaining stock of older products, and more tightly controlling stock of other products, we have been able to reduce our inventory levels by over $4 million. However, we expect inventories to tick up some beginning in the fourth quarter and into '26 as we restock new products in anticipation of growing future demand. In terms of our debt, we continue to maintain $3 million of required minimum borrowings under our $10 million credit facility at the end of the third quarter. And before we close -- before I close, as we discussed last quarter, we believe the purchase of a copy of our source code will largely be a balance sheet event until we go live with our hosted version which we anticipate to occur in early '27. To that end, we expect to capitalize the $3.55 million of consideration to be paid plus any additional costs we incur related to in-housing the source code through the go-live date in early '27. These costs will appear as an intangible asset on our balance sheet. At the go live point, we'll begin to amortize the total amount of those capitalized costs to cost of sales on our income statement over a 5- to 7-year period. As of the end of Q3, we have made the first 2 installment payments totaling $1.35 million and capitalize these costs which appear as an intangible asset on our balance sheet at the end of September. From a cash perspective, we expect to fund the remaining $2.2 million of the $3.55 million purchase price plus any other related costs from the current $20 million of cash on our balance sheet. The remaining $2.2 million is expected to be paid in installments with approximately $200,000 to be paid in the fourth quarter of '25 and the remaining approximately $2 million to be paid during 2026. And with that, I'd like to turn the call over to the operator for questions. Operator? Operator: The first question comes from the line of Jeff Martin with ROTH Capital Partners. Jeff Martin: John, could you give us an update? You mentioned on the last quarter earnings call that in casino gaming you're getting more aggressive and you're incentivizing winning competitive deals. Just curious how that initiative is going? And can you give us an update on the competitive landscape in that market. Maybe he's on mute. Steve DeMartino: Are you on mute? John Dillon: I was on mute. Thanks for the question, Jeff. Let me just say that when you build a sales compensation plan for our sales team, you should assume that they're entirely coin operated. In other words, they're going to do exactly what makes them the most money. And so what we did is we gave them the plan so that if you close a net new customer or if you take a customer away and a competitive win, we're going to get paid more. And without being more specific, let's just say it turned up the heat and it turned up the zeal to go after and win business. All of that said, though, we're very mindful that we have a bit of a duopoly in the marketplace in the sense that we have 1 major competitor and we treat that competitor with respect, but we're not having a race to the bottom. They have their share of the market. We have ours. But when a new casino is going to come online, we're right there, and we like to think that our product is sufficiently better and that our services support and our field team is a better team and they can win head-to-head. So we're focused on that, but the sales team knows for sure that if they're winning new deals, they're going to make more money than if they just sell more product to existing customers. Jeff Martin: Great. And then, Steve, I don't know if you can give us a sense of the magnitude of the fourth quarter impact on casino gaming? Steve DeMartino: Not yet, Jeff. I mean, we're not going to publicly disclose that. But it's -- the demand is -- we're already seeing it, right? So we're into mid-November. So we have 1.5 months past. So we've already seen the weakness in the demand, and we expect it to continue for at least the remainder of the fourth quarter. I think it's temporary. But we don't know when -- I think when we get into '26, I think we should see ourselves start to come out of it. But for right now, it looks like the fourth quarter is going to be weaker than the third quarter. Jeff Martin: Right, right. Okay. And then with respect to the non-charitable gaming markets, are you seeing much on the regulatory front that we can see more states open up as we head into 2026 here? Steve DeMartino: John, do you want to take that or you want me to take it? John Dillon: Yes. No, it's very true. I mean it's an opportunity for state governments to make money without having to raise taxes. It's kind of an interesting thing. It's sort of like reinstate lotteries where some of the money goes to, say, education, some of the money goes to the state that they can pool and use for whatever they want. Some of it goes to the player and some of it goes to either the operator or the venue. And what's interesting about that market is that it's sort of a winner take all. If you are in that business, you would go to a state and you just pick a state and you say to the state government, I think I can do this for you. And I will give -- you give me a contract for the entire state and I'll roll these machines out into places like BFW centers and other places where people like to play these games of chance. And it kind of feels good for the player because the player knows that they're somewhat funding a charitable event. It's very much like selling lottery tickets at the state level. And so when a vendor that resells our machines wins, the state, a particular state, we will get 100% of the business. it's looking pretty interesting in a lot of states, as you know, that they tend to follow suit. If 1 state does it and it works well, they tend to do the same thing. And I think this is an area that we think is going to be a very successful area for TransAct. Jeff Martin: Great. And then my last question is on the new logo side in FST. I think you had 2 new logos last quarter to this quarter. You had commented that, that was below your expectations? Maybe just could you help us frame how the pipeline is and how the new logo sales are developing from a pipeline perspective? Steve DeMartino: Sure. The sales cycles are long and kind of lumpy, especially since we're targeting the largest organizations that are in the food service industry. So it's a little bit like selling enterprise software. However, the 2 new accounts that we landed have potential to deliver a considerable amount of volume over time, and that's part of the land and expand strategy. Pipeline remains basically the same. We have enough coverage to make the numbers that we forecast internally. So I'm okay with that. But we are focused -- continuing to focus on the GTM, the go-to-market and lead generation and those other things that basically speed the top of the funnel and then we're paying a lot of attention to the metrics as that opportunities go through the funnel, what's a yield at each step and where -- what can we do in each 1 of those steps to improve it. So I'm comfortable with the performance. Obviously, more new accounts is better. But the accounts that we landed in this quarter will be accounts that sustain us in the future. And I do focus on that pretty extensively, and we're not taking our eye off that ball. Operator: [Operator Instructions] There are no further questions at this time. I'd like to turn the call back to John Dillon for closing remarks. John Dillon: Thank you very much, all of you for your time and attention. We're happy to talk about the quarterly performance with any of you who feel inclined to schedule a meeting with us. You can get to us through Ryan Gardella who's our IR representative. And again, thank you, and good wishes. Operator: This concludes today's conference. You may disconnect your lines at this time. And thank you for your participation.
Operator: Good afternoon, and welcome to DoubleDown Interactive's Earnings Conference Call for the Third Quarter Ended September 30. My name is Daniel, and I will be your operator this afternoon. Prior to this call, DoubleDown issued its financial results for the third quarter of 2025 in a press release, a copy of which is available in the Investor Relations section of the company's website at www.doubledowninteractive.com. You can find the link to the Investor Relations section at the top of the homepage. Joining us on today's call are DoubleDown's CEO, Mr. In Keuk Kim; and its CFO, Mr. Joe Sigrist. Following their remarks, we will open the call for questions. Before we begin, Joe Jaffoni, the company's Investor Relations adviser, will make a brief introductory statement. Joseph Jaffoni: Thank you, Daniel. Before management begins their formal remarks, we need to remind everyone that some of management's comments today will be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Act of 1934 as amended, and we hereby claim the protection of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements about future events and include expectations and projections not present or historical facts and can be identified by the use of words such as may, might, will, expect, assume, believe, intend, estimate, continue, should, anticipate or other similar terms. Forward-looking statements include, and are not limited to, those regarding the company's future plans, merger and acquisition strategy, strategic and financial objectives, expected performance and financial outlook. Forward-looking statements are subject to numerous risks and uncertainties that could cause actual results to differ materially and adversely from what the company expects. Therefore, you should exercise caution in interpreting and relying on them. We refer you to DoubleDown's annual report on Form 20-F filed with the SEC on April 21, 2025, and other SEC filings for a more detailed discussion of the risks that could impact future operating results and financial condition. These forward-looking statements are made only as of the date of today's call. The company does not undertake and expressly disclaims any obligation to update or alter the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. As noted in this afternoon's press release, beginning with the 2024 fourth quarter, DoubleDown is reporting its financial results in accordance with IFRS. As such, the financial results for the 2025 third quarter reflect IFRS as do the comparable period for 2024. Previously, the company reported its financial results in accordance with GAAP accounting standards. The change to IFRS aligns DoubleDown's financial reporting with the financial reporting standards of its controlling shareholder in Korea. During today's call, management will discuss non-IFRS financial measures, which are believed by management to be useful in evaluating the company's operating performance. These measures should not be considered superior to, in isolation or as a substitute for the financial results prepared in accordance with IFRS. A full reconciliation of these measures to the most directly comparable IFRS measure is available in the earnings release issued this afternoon. I'd like to remind everyone that today's call is being recorded and will be made available for replay via a link in the Investor Relations section of DoubleDown's website. It's now my pleasure to turn the call over to DoubleDown's CEO, In Keuk Kim. Please go ahead. In Keuk Kim: Thank you, Joe. Good afternoon, everyone. We are delighted to be with you today to discuss our strong 2025 third quarter results, the continued growth of SuprNation, initial results from our newest acquisition, WOW Games and other recent initiatives intended to enhance shareholder value. Let's start with the quarterly results. This afternoon, we reported third quarter consolidated revenue of $95.8 million and adjusted EBITDA of $37.5 million. Q3 revenue was comprised of $79.6 million generated by Social Casino operations and $16.2 million generated by SuprNation, our iGaming business. In Q3, we again delivered on our key operating priority of driving a high conversion of revenue to profit and cash flow. Cash flow from operations was $33.4 million, bringing our total for the first 9 months of 2025 to $94.1 million, and we are delivering the profit and cash flow results even as we continue to invest in the business and prudently increased marketing spending to acquire new players at SuprNation. Our flagship DoubleDown Casino app continues to be the engine of profit and cash flow generation for the company. Monetization metrics for the third quarter reflected this performance with ARPUDAU at $1.39, up from $1.30 in Q3 of 2024 and from $1.33 in Q2 of 2025. The payer conversion rate also rose during the quarter to 7.8%, up from both Q3 2024 and Q2 2025 levels. We continue to develop innovative enhancements to double-down casino, including with upcoming releases of new slot lobby for our mobile app and a new link Java system. We also remain very focused on the direct-to-consumer Social Casino opportunity, and DTC remains an important part of our growth strategy. In Q3, we increased the percentage of Social Casino revenue generated by DTC purchases as DTC revenue per DoubleDown Casino is now running at over 15%. We are also launching additional product changes within app purchase messaging to drive further growth of DTC revenue as a percentage of our overall Social Casino revenue. This not only helps to improve margins. It also enhances player engagement and retention. Our goal is to execute for with a DTC percentage of Social Casino revenue of over 20%. As I mentioned a moment ago, we are complementing our strong free cash flow profile and financial position through other initiatives intended to build new value per shareholders. Our commitment to building our Social Casino business is highlighted by the July appreciation of WHOW Games a Social Casino operator based in orange in Q3 of we believe the growth potential in international social market is currently greater than in the United States and we are working to leverage this investment for our shareholders. Turning to SuprNation. Q3 revenue of $16.2 million yet again represented the highest quarterly performance of the business since our acquisition in late 2023 and grew $700,000 on a quarterly concert basis. For perspective, SuprNation's quarterly revenue run rate has more than doubled since DoubleDown closed this acquisition as we continue to make steady positive progress on acquiring new players. Our investment in new player acquisition continues to generate strong returns even as the number of new players increased. At this time, we believe that investment in player acquisition could drive further success and growth for SuprNation into 2026. We are also excited to share with you that our team has been working on a new first iGaming casino with a new name to be launched only next year. Our experience in owning and operating SuprNation over the last few quarters and our success with integrating its operations and driving very healthy levels of top line growth reinforce our confidence that we can leverage our core strengths, financial discipline and strong balance sheet to further diversify our company by focusing on new gaming categories and underserved geographies. This priority is reflected in our acquisition of our games and our ongoing search for other acquisition targets that meet our criteria for expanding our operations into new markets while further diversifying our revenue and cash flow sources to create value for shareholders. Now I will turn it over to our CFO, Joe Sigrist, to walk us through our financials before providing my closing remarks. Joe? Joseph A. Sigrist: Thank you, IK, and good afternoon, everyone. As was mentioned earlier, beginning with the fourth quarter of 2024, we are now reporting our financial results in accordance with IFRS. And the comparisons of our 2025 third quarter results to 2024 third quarter results reflect that change for the prior year period under IFRS. The financial statement implications and switching to IFRS from GAAP are generally insignificant with the biggest change being how our leases are treated as some amounts are now included in depreciation and amortization under IFRS. This generally makes our reported adjusted EBITDA slightly higher. To review, revenues for the third quarter of 2025 were $95.8 million, and were comprised of $79.6 million in revenues from our Social Casino business and $16.2 million of revenues from SuprNation. This compares to total company revenues of $83.0 million in the third quarter of 2024. Our Social Casino segment grew nearly 6% from the third quarter of 2024 and nearly 15% sequentially and as we realized initial contributions from the WHOW Games transaction, which further increased our revenue in Europe, specifically in Germany. The initial results from WHOW Games are encouraging, and we are assessing their operations and will include the impact on our Social Casino KPIs when we report our Q4 2025 results. iGaming revenues more than doubled, increasing 108% from the third quarter of 2024. And as IK stated, we're up $700,000 on a quarterly sequential basis. With our focus on leveraging our platform and driving free cash flow, we continue to generate strong monetization in the Social Casino business in Q3. We average revenue per daily active user or ARPDAU at $1.39 in Q3 2025 was up from $1.30 in Q3 2024. Payer conversion rate, which is the percentage of players who pay within the Social Casino apps increased to 7.8% in Q3 2025 compared to 6.8% in Q3 2024. And average monthly revenue per payer continued to be strong at $272 in Q3 2025, which is down just slightly from $281 in the prior year period. Again, this last quarter's results are KPIs that exclude WHOW Games. In the third quarter of 2025, operating expenses were $60.9 million compared to $47.6 million in the third quarter of 2024. The increase is primarily due to increased operating expenses related to SuprNation driven by revenue growth and the inclusion of operating expenses related to the addition of operations from WHOW Games. Sales and marketing expenses for the third quarter of 20 were $15.7 million compared to $9.2 million in the third quarter of 2024. In Q3, we continued to optimize spending to acquire new players for DoubleDown Casino while increasing sales and marketing spending for SuprNation focused on new player acquisition and marketing expenses at WHOW Games were included in our financial results for the first time. Profit, excluding noncontrolling interest for the third quarter of 2025 was $32.8 million or $3.21 per diluted share and $0.66 per ADS compared to profit, excluding noncontrolling interest of $25.0 million or $10.10 per diluted share and $0.51 per ADS in the third quarter of 2024. Adjusted EBITDA for the third quarter of 2025 was $37.5 million compared to $36.5 million for the third quarter of 2024 and $33.3 million for Q2 and 2025. Adjusted EBITDA margin was 39.1% for Q3 2025 as compared to 44.0% in Q3 2024 and 39.5% and in Q2 2025. Net cash flows provided by operating activities in Q3 2025 were $33.4 million compared to $32.1 million in Q3 2024 and $19.7 million in Q2 2025. For the first 9 months of 2025, net cash flows provided by operating activities were $94.1 million. We are on track to yet again generate over $100 million in free cash flow for the full year. And finally, turning to our balance sheet. As of September 30, 2025, and we add $439.2 million in cash, cash equivalents and short-term investments with a net cash position at quarter end of approximately $404 million or approximately $8.14 per ADS. Our current cash position reflects the approximate $65 million payment made in July for the WHOW Games acquisition. Now I will turn the call back to IK for closing remarks. In Keuk Kim: Thank you, Joe. In summary, DoubleDown Interactive is delivering strong cash flow from its 2 meaningful and exciting businesses: Social Casino and iGaming. Our strong balance sheet and cash position allow us to continue to make disciplined investments in each of our businesses while continually evaluating new opportunities to enhance the growth of each. This includes investments through both organic means as we leverage the strength of our talented teams and through our evaluation of potential future acquisitions. We are now happy to take your questions. Daniel? Operator: Our first question comes from Aaron Lee with Macquarie. Aaron Lee: Maybe to start with SuprNation. So you've driven really nice growth out of that asset over the last couple of quarters, another over 100% growth in 3Q. Maybe share your thoughts on how you're thinking about the balance between investing for growth versus profitability from here? Joseph A. Sigrist: Yes. Thanks, Aaron. The reality is that we really believe that -- have believed that there was capacity in SuprNation's business to add users profitably. And as you know, we measure not only in our iGaming business, but in the Social Casino business as well, the ROI of all the cohorts that we acquired when we market to acquire new players. And the good news is adding new players to the SuprNation business continues to meet our targets for return on ad spend. As we go forward, we'll just continue to monitor that. And when -- and I think we've talked before that essentially our payback period for acquiring new users about 6 months. And as long as we're achieving or hopefully even beating that threshold, we'll continue to add players. But if not, we'll dial it back and spend less to acquire new players. Aaron Lee: Got you. Okay. That's helpful. And then on WOW Games, now that you've had some more time with that business and the team there, has anything changed in terms of how you think about the drivers of growth or the ramp time line for that acquisition? Joseph A. Sigrist: Yes. It seems like it's been a long time, but it was just July when we closed the deal, and there's still work for us to do to really dig in. But so far, so good. We are, as I think I can mentioned excited about the growth in the European Social Casino sector, and we want to lean into that as much as we can. Again, just as I mentioned with the SuprNation, it's all about the road, the return on ad spend as we acquire new players, and so that's first and foremost on our mind. And then secondly, it's about product, product development. So slot games, how we could help them relative to potentially even bringing some of the slot games that we have in the other parts of our Social Casino business into their apps and how we could help on the technology side and meta features. And so that's kind of a next level evaluation that we're making as we're always looking to improve the product as well. Operator: Our next question comes from Eric Handler with ROTH Capital. Eric Handler: Just want to follow up that last question with WHOW. I mean, now that you've had up for 2.5 months, I'm sort of wondering if you could maybe lay out the road map over the next 6 months of what you hope to achieve? Joseph A. Sigrist: Yes. I think as I mentioned to Aaron, we're looking really in the short term to determine how acquiring players can support the business. with the product that they have because that's the quickest and perhaps simplest way to affect the business in the short term. And then secondarily, we want to look at the product and some of the features and technology that we are interested in potentially leveraging from our traditional Social Casino business. And then I think, thirdly, one of the things that they've done a really good job on is kind of a build for third-party casino apps. So I think as we've discussed, they have a casino that they operate that is 100% supported with mature box, and they work with mature directly the care being a German slot machine manufacturer in that app. And so being able to lean into that and in fact, perhaps more with that with others is something that we're also looking at leveraging. Eric Handler: That's helpful. And then as a follow-up, fully recognizing that there's a big difference between being shown acquisitions and being some quality acquisitions. I wonder if you could talk a little bit about your M&A pipeline at this point on what you're seeing? Joseph A. Sigrist: Yes. I think the M&A pipeline continues to be busy. I mean it's interesting, obviously, that there are there are gaming assets that are ones that we all know about or that have been around for a while that are potential opportunities for us to integrate into our business. So that's on one end of the spectrum, and we continue to look at some of those. And then there are those that are newcomers, if you will. And that's across the board in all kinds of different genres of games, and we look at those. And so we're open for both ends of the spectrum, and we're looking at opportunities, again, both for games that we all know about and are familiar with that could be for sale as well as those that are, as I said, up in comes. Operator: Our next question comes from Josh Nichols with B. Riley. Josh Nichols: Good to see the progress. Just real quick, it looks like we're seeing potentially some stabilization in the Social Casino business. I didn't hear if you broke it out. What was the revenue contribution from WHOW for the quarter? Joseph A. Sigrist: Yes. We haven't broken it out, and we're not going to separate it since it's all integrated with our segment reporting for Social Casino, but it was consistent with what we had previously said was essentially the run rate of their business. So there was no real surprise there from Laos operations in the summer. Josh Nichols: Understood. And then there's been a lot of action that's being taken again like stat comps. You've seen things in California, there's a ban that's going into effect for overall. I'm curious historically, that had been pushing user acquisition costs higher. You're also seeing some potential action from Google on advertising. Has that started to alleviate some of the player acquisition costs? And is there an opportunity for you guys to deploy some additional capital to start growing that user base? Or are you not seeing much of an effect yet? Joseph A. Sigrist: Yes. No, I appreciate you mentioning what's going on in Sweepstakes category. It's obviously very interesting. I think it's a little early for it to have. And you're right, by the way, we've said it's probably the biggest impact on us that we can have perceived with the sweepstakes business is upward pressure on CPIs on advertising costs. I think it's a little early given that California's ban just kicked in and some of the other states actions are early. But it's a little too soon to determine if that's going to have an impact on lowering cost. But I think all in all, none of this can hurt and we're obviously glad to see it. Operator: Our next question comes from David Bain with Texas Capital. David Bain: I guess I would first ask about direct-to-consumer. I know you're at 5% in 2Q and you're over that in 3Q. And I, you mentioned 20% is the goal. And if that's the case, I was wondering if you could put a time frame on that? And then also, is that sort of like an interim goal? I'm just looking at the industry leader. Was it 31% in 3Q and they want to get to 40% over 2 years? So I'm just kind of wondering what your overall thought process is with D2C. Joseph A. Sigrist: Well, let me answer the target question. And if IK, if you want to talk a little bit about what we're doing to even accelerate our results in D2C, I'll let you do that. But yes, our -- and I think IK mentioned that our goal is to exit Q4, exit this quarter with a run rate of over 20% D2C. So we really think that it's possible to achieve something considerably higher than what we did over the last 6 months. And we've been doing some product work and we've been afforded. I think, based on what's happening in the industry as a whole, the ability to be more aggressive in messaging and in product and that kind of thing. IK, do you want to talk a little bit about what we're doing... In Keuk Kim: Yes, for the broader D2C co-system especially in terms of providing more flexibility in how developers can communicate with transact direct with users, the recent direction of this platform is very helpful. At DDI, we've already been investing in our own D2C capabilities particularly through our own channels and direct CRM strategy. We engage players more freely and cost effectively outside of traditional platform constraints which opens up potential for margin expansion and improved lifetime value. We view this as a long-term tailwind for our business and for the industry at large. David Bain: Okay. No, that's helpful. So it sounds like there's no cap on that 20% either. This is by the end of the year, and you'll reassess from there. was my take anyway. Well, maybe switching gears to SuprNation unless you had something to add on that. I'll go to SuprNation. So I believe on the last call, you cited the potential entry into new regions within Europe and into Canada. Maybe if you could provide us any sort of time frames or ideas or kind of updates with that? And then IT, you also mentioned a new brand, I believe, by the end of the year, if you could expand on that as well would be helpful. In Keuk Kim: Yes. Let me start first about the first front. From a marketing payback perspective, as Joe mentioned, our current operation consistently with ROI targets, making these investments accretive rather than dilutive to profitability for the future. based on our experience, new brands help drive scalability and better ROI and scaling remains the priority in the iGaming business looking at larger market peers, we believe that once we ship a sufficient scale, then portion, we can start to deliver a profit margin of over to it. to drive further revenue growth, we are about to launch our first brand Las Vegas sites in addition to our existing 3 long-rate apps. This initiative are expected to enhance retention and bring additional efficiencies within the SuprNation ecosystem. Hope this helps. David Bain: Definitely helpful. And any update on geographic expansion? Joseph A. Sigrist: Dave, I'd say that we still feel like there's low-hanging fruit relative to the markets we're already serving, given how low our book share is. And so we're continuing to evaluate new markets. It's a more long-term thing. And we have room to run with our existing markets. So I wouldn't put a time frame on expansion, but we're always continue to evaluate that. Operator: Thank you. This concludes our question-and-answer session and today's conference call. Thank you for participating. You may now disconnect.
Operator: Welcome to Comtech Telecommunications Corp.'s Conference Call for the Fourth Quarter and Full Year of Fiscal 2025. As a reminder, this conference call is being recorded. I would now like to turn the call over to Maria Ceriello, Senior Director of FP&I of Comtech. Please go ahead, Maria. Maria Ceriello: Thank you, operator, and thanks, everyone, for joining us today. I'm here with Ken Traub, Comtech's Chairman, President and CEO; and Mike Bondi, our CFO. After Ken and Mike's remarks, they will be available for questions together with Daniel Gizinski, President of our Satellite and Space Communications segment; and Jeff Robertson, President of Allerium, formerly known as the Terrestrial and Wireless segment. Before we get started, please note we have a detailed discussion of the quarter and year in the press release and 10-K we issued this afternoon, which is available on our website as well as the SEC's website. Certain information presented in this call will include, but not be limited to, information relating to the future performance and financial condition of the company, the company's plans, objectives and business outlook and the planned objectives and business outlook of the company's management. The company's assumptions regarding such performance, business outlook and plans are forward-looking in nature and always involve significant risks and uncertainties. Actual results could differ materially from such forward-looking information. Any forward-looking statements are qualified in their entirety by cautionary statements contained in the company's SEC filings. With that, I will turn it over to Ken. Ken? Kenneth Traub: Thank you, Maria, and good afternoon, everyone. I appreciate you joining us today. I am proud to report how much stronger Comtech is today, financially, operationally and strategically. This is the result of the ongoing successful execution of the transformation initiatives that we announced when I started as CEO in January 2025. As a testament to our improving financial health, the company no longer has uncertainties regarding its ability to continue as a going concern, and this disclosure has been removed from our financial statements. We have executed a successful turnaround of our Satellite and Space business, which is now revitalized and our Allerium business, formerly known as terrestrial and wireless has continued to deepen our presence in the public safety market while securing long-term customer partnerships. We expect the company's significantly improved operational and financial health to be reassuring to our current and prospective customers, vendors, employees, investors and partners. The early success of our transformation initiatives and the positive trajectory of the business are evident across numerous key metrics. Let me provide some examples. First, operating cash flow. We reported $11.4 million of positive operating cash flow in the fourth quarter, which follows the $2.3 million of positive operating cash flow in the third quarter. These are the first quarters of positive operating cash flow for Comtech since fiscal 2023. These operating cash flow numbers are after taking into account the payment of cash interest expense and fees on our debt as well as restructuring activities, including payments to resolve legacy issues we inherited from former management. The significant improvement in operating cash flow is the result of a cultural shift, emphasizing optimizing cash flow, improved process disciplines, better working capital management as well as the timing of and progress of completion on contracts that enabled us to bill customers and collect accounts receivable. Second, liquidity. We concluded the fiscal year with $47 million of liquidity. That includes qualified cash as well as undrawn availability under our revolving credit facility. This is the highest level of liquidity that Comtech has had in recent history compares to $27 million disclosed as recently as March 2025. This is the result of the generation of operating cash flow that I just described as well as improved terms with our lenders. The increased liquidity gives us comfort to continue executing on our improvement initiatives as well as the ammunition to prudently invest in building sustainable long-term value. Third, accounts payable to vendors. The cash flow and liquidity improvements that I just discussed were achieved while we also paid accounts payable down to the lowest level Comtech has had in years. We finished the fiscal year with accounts payable of just $26 million, which is down from $43 million as of January 31. We are now building stronger and healthier relationships with key vendors and partners. Fourth, revenue increase and improved mix. Quarterly revenue increased 13% from the first quarter to the fourth quarter of fiscal 2025 despite the anticipated wind down of certain legacy contracts, a deliberate shift away from a number of low-margin contracts and the elimination of other revenue contracts that had unsatisfactory operating margins or excessive demands on working capital. This increase in quarterly net sales reflects improvements in both of our operating segments, including a shift back to higher rate production orders in our satellite ground infrastructure solutions product line, which is expected to produce a more favorable revenue mix going forward. Fifth, improved gross margins. Gross margins improved from 12.5% in the first quarter to 31.2% in the fourth quarter of fiscal 2025. Gross margins are improving as a result of the revenue discipline I just described, resulting in a more favorable revenue mix as well as the implementation of operational efficiencies and cost savings measures. Sixth, we've improved the bottom line. Our adjusted EBITDA, a non-GAAP measure, improved sequentially in each quarter of the year. We went from a negative $30.8 million in the first quarter to positive $2.9 million in the second quarter to $12.6 million in the third quarter and $13.3 million in the fourth quarter. Our adjusted EBITDA gains stem from our improved gross margins as well as further savings in corporate overhead and operating expenses. Adjusted EBITDA is now more closely correlated with operating cash flows than it has been in the past. Seventh, improved credit facility terms. As previously reported, we succeeded in negotiating significantly improved terms with Comtech's creditors. These negotiations were facilitated by both the operational and financial improvements I just discussed as well as a relationship of trust and a spirit of cooperation that we've developed with our lenders. As a result, Comtech now has significantly enhanced financial flexibility. Eighth, progress in repeating -- in remediating our material weaknesses. We have been implementing improved control systems and working with external experts to remediate the previously disclosed material weaknesses in the company's internal controls. While we have more to do in this regard, we have made significant progress. The revised engineering estimates that we made recently on a development project with an international customer are manifestations of this progress. While I was disappointed that the revisions delayed our report on all of the accomplishments that we are discussing today, I am also encouraged that our enhanced bottoms-up analysis have led to an overall improvement in our processes and quality of our reports. The metrics that I just described highlight the significant improvements and achievements in the second half of fiscal 2025. However, we recognize that we still have legacy challenges to address and fluctuations in our quarterly results are inevitable. Now I would like to share with you just some of the initiatives that made these achievements possible. First, improved corporate governance. I have always believed that strong corporate governance and a healthy dynamic both within the Board of Directors and between the Board and executive management is fundamental to corporate success. The corporate Board of Comtech is well informed and is working diligently, collaboratively and constructively in their evaluation and support of corporate priorities. This strong governance and alignment between the Board and management has enabled a focused execution of the transformation initiatives that I will describe in more detail. Secondly, strengthened executive leadership. The Comtech leadership team is now strong and capable, both at the corporate level and the operating segment level. Our executives are rising to the occasion and performing at a high level as they are aligned around key priorities and core values. We have also recruited additional key members of the team that are helping to drive continuous improvement. I will discuss this in more detail when I move into the discussion of developments at the segment level later in this call. The strengthened executive leadership team has fostered an improved dynamic and is energized by the positive momentum resulting from the successful execution of our transformation initiatives. Third is accountability. We've empowered key contributors throughout this organization while implementing new disciplines to foster accountability. For example, we've initiated a revised delegations of authority program that clearly defines lines of responsibility, authority and accountability. We've also improved the systems we use to manage, approve and monitor critical activities, including capital expenditures, research and development initiatives, purchasing, contract execution, employee hiring and incentives. Fourth, cash flow optimization. I've seen companies in my career use various metrics as their primary focus. such as revenue growth, revenue per employee, adjusted EBITDA and others. These metrics can get companies into trouble, particularly if they are misaligned with cash flow or inconsistent with either short- or long-term shareholder equity value maximization. The principle that we're currently focusing on here at Comtech is optimizing for cash flow, not revenue. Our return to positive cash flow enables us to strengthen our short- and long-term financial, operational and strategic positions. Fifth, improving working capital management. A key component of cash optimization is alignment of the organization around understanding and managing the balance sheet and particularly working capital. Our strengthened financial position, coupled with enhanced disciplines will anchor further initiatives to optimize working capital management as a source of cash for further improvements in our capital structure as well as investments in value-accretive opportunities. Sixth, strong customer focus and support. We are dedicated to meeting and exceeding our customers' current and future needs and expectations. We've already seen how our efforts are enhancing customer satisfaction. Our team is focused, not only providing excellent customer service and support today, but we're also developing innovative next-generation solutions to address the growing needs of our customers in each segment of our business. Seventh, enhanced operational efficiency. We have been implementing new processes to improve reliability, quality, on-time delivery and capacity utilization as well as streamlining product lines and operations to reduce complexity and cost. And the eighth initiative is a reduced cost structure. In addition to savings from operational efficiencies, we are identifying opportunities to lower the cost structure with less internal labor and reduce use of external consultants and expensive professional service firms. And finally, is a revitalized corporate culture. The final major initiative I would like to mention is centered around corporate culture. I say this for last because it is the most important. We've been reinvigorating the corporate culture here at Comtech by emphasizing transparency, empowerment and accountability. On a personal note, it is particularly gratifying for me to see how our employees are increasingly taking pride in contributing to our success, which has also enhanced morale, retention and performance. The initiatives I just described not only helped to drive Comtech's significantly improved financial performance, but also enabled us to improve relationships with current and prospective employees, customers, vendors and creditors. This leads to a flywheel effect, in my opinion, in which improved relationships create a healthier dynamic for the business going forward and ultimately, further improvements in operational and financial performance. Now I will provide some commentary on our business units. Under Daniel Gizinski's leadership, our Satellite and Space Communications business has been executing a successful turnaround. In fiscal 2024 and early in fiscal 2025, Comtech's Satellite and Space business performed poorly and was a drain on the company's financial results and liquidity. Daniel was promoted to President of the business in the second quarter of fiscal 2025 has done a very impressive job of identifying the issues that gave rise to the previous underperformance, executing a remediation plan to address those issues and positioning the Satellite and Space segment for margin improvement, cash flow generation and long-term growth. As Daniel took the reins of the Satellite and Space business, he and the team identified several factors that contributed to the prior underperformance of that segment. Let me explain 6 of those factors. First, the company suffered from a failure to respond effectively to industry trends. Secondly, the company had a product portfolio that included some aging and obsolete products. Third, we had poor cost management. Fourth, the company had poor procurement approval disciplines and related excessive inventory buildup. Fifth, the company had poorly negotiated contractual terms. And sixth, we had a lack of skilled program managers, resulting in poor change control management. Over the course of the past year, Daniel and our leadership team addressed these issues with decisive actions, which yielded immediate improvements and have positioned the business for long-term success. Let me explain some of these actions. First, we recruited a strong segment leadership team, specifically Steve Black as Chief Operating Officer; Brent Norman as Chief Financial Officer; Mark Dale as Chief Technology Officer; Bob Pescatore as General Manager as well as other key contributors under Daniel's direction. Second, we developed a new product road map, featuring differentiated technologies aligned with customer needs. Third, we've eliminated over 50% of slow-moving products, which enabled us to have a tighter focus on a differentiated value-driven product line. Fourth, we restored operational discipline. Fifth, we implemented productivity enhancements and cost reduction initiatives. Sixth, we implemented a disciplined approach to procurement and inventory management. Seventh, we improved customer relations and contractual terms. And finally, we established best practices in program management, showing improved reliability and performance. These initiatives are already having a significant impact. For instance, in the fourth quarter of fiscal 2025, Satellite and Space generated over $20 million of operating cash flow. This compares to a negative cash flow of $1 million in the first quarter of fiscal 2025 and approximately $23 million of negative cash flow in fiscal 2024. The significant improvement in Satellite and Space cash flow in the fourth quarter reflects the early impact of the operational improvements I just described. Additionally, in the fourth quarter, Satellite and Space benefited from earlier-than-anticipated orders and related cash collections. Now that these improvements have been implemented, the Satellite and Space business is better positioned to pursue growth opportunities in our markets. We are prepared to meet increasing demand for technology to support 5G nonterrestrial networks and sovereign defense networks with the launch of our next-generation platforms. We are already seeing traction from the launch of our digital common ground platform, including additional early production prototype order agreements. In the fourth quarter, the Satellite and Space business completed initial deliveries of our small form factor troposcatter system, referred to as our Multipath Radio or MPR, to an international Air Force customer. We believe the small form factor troposcatter capabilities align closely with the modern defense demands, and we believe there will be increasing demand for the unique features and capabilities we offer. When you hear me discuss shifting our focus toward opportunities in which we can provide a more differentiated solution at higher margins, MPR is one such type of opportunity. During fiscal 2025, we began delivery of initial production units to our prime contractor support of a next-generation satellite modem contract and we'll be transitioning into full production during fiscal 2026 as the program transitions from a multiyear development period into a production-oriented stage. A second next-generation product with the same prime contractor has also significantly progressed in development and is also expected to begin production deliveries in fiscal 2026. This is an important milestone as it signifies the long-awaited migration from low-margin nonrecurring engineering efforts to higher volume production with improved operating margins and faster cash conversion cycles. We continue to support key space initiatives, including NASA's Artemis project with bookings in support of this project of approximately $10 million during the fourth quarter. Additionally, satellite and space was awarded over $7 million for its work supporting a U.S. government cybersecurity training program. All of the initiatives that we have been executing under Daniel's leadership in our Satellite and Space business have resulted in a comprehensive turnaround with significantly improved operating performance. This has helped to reinvigorate employee morale, partner commitments and customer trust. The durable differentiation in our product portfolio as well as the new products that we have been developing position Satellite and space to capitalize on the growing demand for the innovative, secure communication solutions we provide to our target markets. Now I will provide commentary on our Allerium segment, formerly known as our Terrestrial and Wireless Networks segment. Our Allerium segment led by Jeff Robertson, delivered a strong fourth quarter with adjusted EBITDA growing 37% to $13.7 million from $10 million in the same period last year. This performance was driven by higher net sales and gross profit related to our location-based and next-generation 911 call handling solutions, offset in part by increased research and development activities geared toward further solidifying our role as a trusted provider of innovative emergency communication and location-based technologies. During the fourth quarter, Allerium was awarded multiple orders across each of its 3 product areas, reflecting confidence in Allerium's performance and the strong collaboration with customers that defines these relationships. In total, bookings for the fourth quarter aggregated about $50 million. Taken together, we believe these awards validate Allerium's role as a market leader in emergency communication and location-based solutions. This momentum is underscored by a significant achievement that we reported today. After year-end, we have secured a multiyear contract extension from Allerium's largest customer, a leading telecommunications company in the U.S. known for its network reliability and security. This contract award is valued in excess of $130 million and is for a scalable service. The agreement reinforces Allerium's commitment to helping carriers and public safety organizations modernize critical infrastructure and optimize service reliability with confidence. This also highlights a core strength of this business. Regardless of broader economic conditions, emergency response has a history of consistent funding. As the world becomes more complex and riskier, governments as well as commercial entities are increasing their investment in public safety and precise location-based technologies, which provides Allerium with a durable tailwind and enhances our long-term revenue opportunities. The Allerium rebrand reflects a new unified go-to-market strategy that consolidates this segment's product lines under the single Allerium name. It marks a fresh new chapter, elevating our name in the markets we serve. Internally, it has served as a rallying cry for our teams, renewing focus on innovation and strengthening both employee engagement and recruitment as we drive the next generation of public safety technology. To support and accelerate this strategy, we have opened a new Allerium Innovation Lab in Broomfield, Colorado. This facility will be a center of excellence, focusing on next-generation R&D and attracting the best talent in public safety technology. A cornerstone of this strategy is Allerium Mira, our next-generation public safety-grade cloud-native call handling solution. Mira simplifies complex emergency call handling operations by allowing public safety answering points to manage voice, text, video and alerts through a single interface, unlocking smarter routing and deeper integration. Allerium Mira is also the engine for our broader service expansion. We are moving beyond traditional 911 calls to handle many other forms of information for a wide array of originating service providers. This includes data from wearables, connected cameras, fire panels, vehicles and traffic cameras. By integrating these inputs with next-generation software tools, we provide critical situation awareness to ensure first responders are prepared to deliver the emergency services the public needs. This strategy is proving successful, both domestically and abroad. As I stated last quarter, some of our key growth drivers include cloud-based products like Allerium Mira, next-generation call handling solutions and 5G location-based technologies for international customers. We are already executing on this global strategy and expanding our international footprint as I can confirm that during the fourth quarter, Allerium secured over $6.5 million in new contracts for work in South Australia and Canada. This entire vision is underpinned by Allerium's competitive advantage, the combination of our industry-leading statewide, innovative next-generation 911 networks with decades of experience in dispatch centers around the world. As agency expand beyond voice to multimodal data-rich request for help, this integration of network and dispatch technology gives us a distinct ability to help them manage complex emergencies. As previously disclosed, the company has been reviewing strategic alternatives with the assistance of nationally recognized investment bankers. We will only be providing updates on these processes if and when we have something specific to share. At this point, there is nothing to share. With that, I'll turn the call over to Mike to walk through the financials. Mike? Michael Bondi: Thank you, Ken, and good afternoon, everyone. Before getting into the detailed results, I would like to first summarize this past quarter. Sequentially, our consolidated GAAP operating results were better than our third quarter of fiscal 2025. We continue to grow net sales and improve gross margins, further reduced our operating expenses, generated positive GAAP operating income for the first time in over 5 quarters, further increased our adjusted EBITDA and achieved our second consecutive quarter of positive cash flows from operations. The Allerium segment continues to perform well, securing several large multiyear contract extensions from key customers. Our Satellite and Space Communications segment has been rejuvenated and improvements are evident with sequential growth in net sales, gross profit, operating income, adjusted EBITDA and operating cash flows. We were also successful in reducing corporate unallocated operating expenses during the more recent fiscal year quarter. While there are always opportunities for greater efficiency, the transformation plans that Ken described earlier have not only stabilized our business, but have also strengthened our financial condition and opportunities for further growth. I'm going to review our financial results for fiscal 2025 first, then discuss results for the fourth quarter. In fiscal 2025, Comtech had consolidated net sales of $499.5 million compared to $540.4 million in fiscal '24. The change in sales reflects the anticipated wind down of certain legacy troposcatter contracts, lower sales of EEE space components and antennas, including those related to the CGC divestiture that we initiated in our fourth quarter of fiscal '24 and the divestiture of our high-powered solid-state amplifiers product line in November of 2023. These items were offset in part by higher sales of our Allerium's NG911 emergency communication, call handling and location-based solutions and SATCOM solutions in our Satellite and Space segment, primarily satellite ground infrastructure solutions and VSAT and similar equipment sales to the U.S. Army. Gross margin as a percentage of net sales was 25.6% for fiscal 2025 compared to 29.1% in fiscal 2024. Fiscal 2025 margins reflect an $11.4 million noncash charge in our first quarter from inventory write-downs related to restructuring within our Satellite and Space segment. Our quarterly gross profit, both in dollars and as a percentage of consolidated net sales improved sequentially throughout fiscal 2025. Over the course of the fiscal year, we improved our quarterly consolidated GAAP operating income from a loss of $129.2 million in the first quarter to income of $1.9 million in the fourth quarter. Reductions in quarterly expenditures for SG&A expenses contributed to this improvement. As outlined in the company's annual report on Form 10-K for fiscal 2025, Net loss attributable to common shareholders was $204.3 million compared to $135.4 million in fiscal 2024. In aggregate, fiscal 2025 results were impacted by $187.5 million of net charges, of which $167.1 million were noncash. Our net loss attributable to common shareholders improved sequentially throughout fiscal 2025 due primarily to improved operational and financial performance, as Ken just explained. Adjusted EBITDA loss for Comtech in fiscal 2025 was $2 million compared to adjusted EBITDA income of $45.7 million in fiscal 2024. This change primarily reflects the anticipated lower consolidated net sales and gross profit in fiscal 2025, both in dollars and as a percentage of consolidated net sales and including an $11.4 million noncash charge in our first quarter related to the write-down of inventory and higher selling, general and administrative expenses driven by a $16.1 million noncash charge in our first quarter related to the allowance for doubtful accounts, offset in part by lower company-funded research and development expenses in light of increased levels of customer-funded initiatives. Overall, we experienced sequential quarterly improvements in adjusted EBITDA throughout fiscal 2025 with improvements ranging from negative $30.8 million in our first quarter to positive $13.3 million in our fourth quarter. Net bookings in fiscal 2025 were $372.7 million compared to $700.6 million in fiscal 2024. Bookings in fiscal 2025 were impacted by a $36.4 million debooking in the third quarter following the award of a protested low-margin U.S. Army field services contract to the incumbent provider. Also, bookings in the prior year included a large multiyear contract awarded to us from an NG 911 customer in the Northeastern region of the U.S. Comtech's funded backlog as of July 31, 2025, was $672.1 million compared to $798.9 million as of July 31, 2024, and $708.1 million as of April 30, 2025. For clarity, such backlog does not yet include the $130 million-plus multiyear contract extension just recently awarded to Allerium. Fiscal 2025 GAAP cash flows used in operations were $8.3 million, a significant improvement from the $54.5 million of cash flows used in operations last year. Fiscal 2025 cash flows include $23 million in aggregate payments for restructuring costs, including severance, proxy solicitation costs and CEO transition costs. This compares to $16 million in fiscal 2024. Fiscal 2025 also includes cash payments for interest and taxes of $29.6 million as compared to $23 million in fiscal '24. Throughout fiscal 2025, Comtech had sequential quarterly improvements in operating cash flows, improving from negative $21.8 million of operating cash flow in our first quarter to positive $11.4 million in our fourth quarter. Pivoting now to our results for the fourth quarter of fiscal 2025, consolidated net sales were $130.4 million compared to $126.2 million in the fourth quarter a year ago and $126.8 million in the third quarter of fiscal 2025. The fourth quarter benefited from earlier-than-anticipated orders in both segments, offset in part by a $3.5 million charge in our fourth quarter due to higher-than-expected cost completion on a nonrecurring development project within our Satellite and Space segment. Gross profit in the fourth quarter of fiscal 2025 was $40.7 million or 31.2% of net sales, representing a substantial 50.2% increase from the $27.1 million or 21.5% of net sales in the fourth quarter last year. Gross profit in the more recent quarter also represents a 4.6% sequential increase from the $38.9 million or 30.7% of net sales in our third quarter of fiscal 2025. We continue to make progress in improving our product mix, including our ongoing shift back to higher volume production orders in our satellite ground infrastructure Solutions product line as certain legacy low or no-margin nonrecurring engineering contracts draw near to completion. In our fourth quarter of fiscal 2025, we continued our trend of lowering GAAP operating expense, in particular, SG&A. Such reduction resulted in our ability to report positive operating income in our fourth quarter of $1.9 million, which compares to an operating loss of $1.5 million in the prior quarter and an operating loss of $81.5 million in the fourth quarter of fiscal 2024. These improvements in our financial performance also resulted in consolidated adjusted EBITDA for the fourth quarter to increase to $13.3 million compared to $0.3 million in the fourth quarter of last year and $12.6 million in the third quarter of this year. As mentioned, fourth quarter of fiscal 2025 cash flows provided by operations were $11.4 million, a substantial improvement from the $9.5 million of cash flows used in operations in the fourth quarter of 2024 and the $2.3 million of cash flows provided by operations in the third quarter of this year. The improvement in this metric is due to operational enhancements and our revitalized culture with aligned focus on optimizing cash flow, which in part contributed to earlier-than-anticipated collections in our fourth quarter of fiscal 2025. Now turning to the balance sheet and as discussed in more detail in our SEC filings, we recently amended our credit facilities. These amendments, among other things, provided for the incurrence of a $35 million incremental subordinated priority term loan, the net proceeds of which were used to prepay without premium $28.5 million of outstanding term loans and $5.8 million of the outstanding revolver loan under the credit facility. Importantly, it suspends until the 4-quarter period ending January 31, 2027, testing of the net leverage ratio, the fixed charge coverage ratio and the minimum EBITDA covenants. They altered the interest rates applicable to term loans under the credit facilities. It delayed the scheduled repayment of a portion of the principal on the term loans and fees due pursuant to the second amendment to the credit facility. The amendments reduced the minimum EBITDA requirements, reduced the minimum quarterly average liquidity requirements from $17.5 million to $15 million, permanently reduced commitments under the credit facility revolver loan by $2.1 million and obligated the company to enter into management incentive and retention arrangements for its key personnel. Such amendments also permit us to engage in the sale or disposition of certain properties and assets approved by the administrative agents subject to the conditions to use net cash proceeds from such sale to repay outstanding principal amounts of the obligations under our credit facilities. Collectively, these amendments provide Comtech with enhanced financial flexibility. In terms of our liquidity and outstanding debt obligations, at July 31, 2025, our available sources of liquidity totaled $47 million. Total outstanding borrowings under our credit facility were $133.9 million, of which $17.6 million was drawn on the revolver. Total outstanding borrowings under our subordinated credit facility were $100.1 million, excluding the $25.7 million make-whole amount associated with the $65 million portion of such facility through July 31, 2025 and the liquidation preference of our outstanding convertible preferred stock was $204.2 million, excluding potential increases that could be triggered by, among other things, asset sales and/or changes in control of the company. Before turning it back over to Ken, I will now provide a brief update on our consolidated performance for the first quarter of fiscal 2026. While we currently have a policy of not providing guidance or full year targets, given the unique situation of having our fiscal 2025 earnings call after the end of our first quarter of fiscal 2026, we felt an update in this instance, albeit preliminary, would be appropriate. For the fiscal quarter ended October 31, 2025, we are currently estimating the following consolidated results: net sales to approximate a range of $107 million to $113 million compared to $115.8 million in the first quarter of fiscal '25. Cash flow provided by operating activities to approximate a range of $6 million to $7 million compared to cash flow used in operating activities of $21.8 million in the first quarter of fiscal '25 and liquidity, defined as our qualified cash and cash equivalents and available portion of our revolver loan under our credit facility as of October 31, 2025, was $51 million. Performance in the first quarter of fiscal 2026 is expected to reflect, among other things, the impacts of earlier-than-anticipated orders, net sales and cash collections that we just discussed as well as certain contracts nearing completion in the fourth quarter of fiscal 2025. Additionally, performance in the first quarter of fiscal 2026, particularly in our S&S segment, is expected to reflect the impacts of timing, delays in orders, net sales and cash collections as a result of the U.S. government shutdown as well as the decision to phase out and eliminate certain low-margin revenue. While not providing full year guidance or specific targets, we do expect performance to improve in subsequent quarters of fiscal 2026. Additional details will be provided when we file our Form 10-Q for the first quarter of fiscal 2026, Also, as a reminder, statements about our anticipated results are subject to the cautionary language on forward-looking statements included at the start of this call as well as in our various SEC filings. Now let me turn the call back over to Ken. Ken? Kenneth Traub: Thank you, Mike. To sum up briefly, Comtech has been successfully executing the transformation plan that I announced in January, which has not only helped to drive Comtech's significantly improved operating and financial performance, but also has enabled us to improve relationships with current and prospective employees, customers, vendors and creditors. I believe this leads to a flywheel effect in which improved relationships create a healthier dynamic for the business going forward and ultimately, further improvements in operating and financial performance. As a reminder, Jeff and Daniel will be joining us for the Q&A. With that, operator, please open the call to any questions. Operator: [Operator Instructions] And we'll take our first question from Matthew Maus with B. Riley. Matthew Maus: Matthew on for Mike Crawford. I guess to start off, regarding the $130 million carrier contract, I'm assuming it hits 2Q '26 bookings. Can you help us model some of the economics in terms of the contract duration, how it's -- how the revenue is expected to ramp and whether you think it kind of represents a meaningful step-up in Allerium's growth trajectory? Kenneth Traub: Thanks for the question, Matthew. So it's -- we're not going to give a lot more specifics for commercial and competitive reasons. We'll say that it's at least $130 million contract. It is a long-term commitment with a major customer, and we believe it gives us an opportunity to build significantly around that. Jeff Robertson is on the call. Jeff, do you want to add anything? Jeff Robertson: No, Ken. I think you covered it well. We're just encouraged by this customer, and it's the long-term backlog that it represents gives us some confidence in the future. That's all I would add to that. Kenneth Traub: So I do want to clarify, Matthew, that this is an existing customer that is making a going-forward long-term commitment. And -- but it is -- it's a very significant milestone for us, right? This locks in a long -- one of our most important customers in the Allerium business, and it's an anchor of stability that we will be building around. Matthew Maus: Got it. And you provided some preliminary first quarter '26 guidance. I guess, given the government shutdown impact and the pull forward you mentioned, how should we think about the quarterly cadence through fiscal '26? Kenneth Traub: Okay. So we're a company that doesn't give guidance. We did for Q1 because Q1 is already complete. So what we can tell you is we do believe that business will continue to improve throughout fiscal 2026 and beyond. We've now -- we've achieved a lot of improvements that I've detailed in my remarks, and we do anticipate improvements in the quarters following Q1. Matthew Maus: Got it. All right. And so bookings and the book-to-bill ratio both improved sequentially. I'm just wondering if you can lay that out one more time. What's kind of driving that improvement towards getting that above 1 in fiscal '26? And like where -- which segment specifically do you see the most strength of that? Kenneth Traub: Mike, do you want to handle that question? Michael Bondi: Sure, Ken. In terms of our book-to-bill ratio, just always keep in mind that as you just heard us announce today, we had a very large contract, a multiyear contract award that was booked in November. So that's something that we would not expect to repeat. But overall, I think we're very excited about our progress in Allerium's success in international markets. That's been a focus of ours, and it's nice to see that we're getting some bookings there as well. And I think working through the government shutdown, we don't think it's going to be permanent. And I would think that the cadence will pick up once we get past this shutdown period. Matthew Maus: And last one for me, just quickly on -- I think previously, you mentioned the EDIM certification was expected prior to calendar year-end. I'm just wondering where things stand now. Are you through the certification and what would the ramp look like? Michael Bondi: Matthew, could you clarify your question? What was it that you were asking about a certification? Matthew Maus: Yes, the EDIM certification in terms of it being -- it was previously expected prior to year-end. I'm wondering if there's an update on that. Michael Bondi: Okay. I think you're referencing the EDIM program, we referenced it as EDM. Matthew Maus: Right, EDIM. Michael Bondi: Yes. Maybe that's a question best answered by Dan Gizinski. But yes, I'll start off by saying that, that program has been progressing. We definitely are excited that we're getting towards the tail end of our nonrecurring engineering phase and moving to production, which is in our wheelhouse, but I'll turn it over to Daniel. Daniel Gizinski: Yes. Thanks for the question. So high level on the EDIM program, I think the expectation that we had communicated is that we would be delivering initial prototype equivalent products to begin the certification process prior to calendar year-end. We are still expecting to see that final certification phase that we're going to work through collaboratively with the U.S. government certainly will be dependent on the delivery of those units as well as coordination with various different government entities to conduct that final certification, and that will take place over the earlier parts of calendar '26 with, I think, some flexibility in the schedule. We are continuing to make good progress and are still expecting to have those units delivered in place to begin the certification process prior to our calendar year-end. Operator: [Operator Instructions] We show no further questions at this time. I will now turn the call over to Ken Traub for closing remarks. Kenneth Traub: Well, I'd like to thank you all for joining us today. And as a final message, in anticipation of Veterans Day tomorrow, I would like to express our gratitude to all those who have served our country. Thank you all very much. Operator: Thank you. And this does conclude today's program. Thank you for your participation. You may disconnect at any time. Thank you.
Operator: Good afternoon, and welcome to the Beyond Air financial results call for the fiscal quarter ended September 30, 2025. [Operator Instructions] And now I would like to turn the call over to Garth Russell, Lifesci Advisors. Please go ahead. Garth Russell: Thank you, operator. Good afternoon, everyone, and thank you for joining us. Today, after market close, we issued a press release announcing the operational highlights and financial results for Beyond Air's second quarter of fiscal year 2026 ended September 30, 2025. A copy of this press release can be found on our website, www.beyondair.net under the News and Events section. Before we begin, I would like to remind everyone that we will be making comments and various remarks about future expectations, plans and prospects which constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Beyond Air cautions that these forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those indicated. We encourage everyone to review the company's filings with the Securities and Exchange Commission, including, without limitation, the company's most recent Form 10-K and Form 10-Q, which identify specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements. Additionally, this conference call is being recorded and will be available for audio rebroadcast on our website, www.beyondair.net. Furthermore, the content of this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, November 10, 2025. Beyond Air undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this call. With that, I'll turn the call over to Steve Lisi, Chairman and Chief Executive Officer of Beyond Air. Steve? Steven Lisi: Thanks, Garth, and good afternoon to everyone. With me here today is Doug Larson, our Chief Financial Officer. We continue to receive highly encouraging feedback from hospitals using LungFit PH, reinforcing the clinical value and operations efficiency our technology delivers. Adoption is accelerating meaningfully over the past year, contributing to a 128% year-over-year revenue increase in the fiscal second quarter, reaching $1.8 million, up from $0.8 million for the same period last year. While we are pleased by the strong year-over-year growth, sequential growth was essentially flat compared to the prior quarter, reflecting the timing of hospital purchasing cycles and the natural variability in international shipments. We view this stability as an encouraging baseline from which we expect sequential growth to resume over the coming quarters. We continue to navigate the inherent complexity of hospital sales cycles in the U.S. and internationally. These extended lead times and institutional decision-making processes have led to peaks and valleys in our quarterly sales performance as seen in the September quarter. Importantly, our sales pipeline remains robust, and we see substantial greenfield opportunities across the U.S. as awareness and interest in LungFit PH continue to build. Before getting into further details, let me highlight the changes that have occurred since our last update in August. We have raised $12 million in debt, and we'll file a registration statement for an additional $20 million through an equity line of credit, both with Streeterville Capital, which solidifies our balance sheet. We believe these additional funds will give us the ability to properly address the pace of sales growth with our first-generation system and prepare for the launch of our second generation system. LungFit PH has been placed in the first hospital outside the United States for commercial use. We have named our Board member, Bob Goodman as Interim Chief Commercial Officer, given the departure of David Webster. We are updating our fiscal year '26 guidance to $8 million to $10 million. We introduced our capital purchase sales model in the United States and had our first hospital purchase of LungFit PH. We collected data from Beyond Cancer's Phase Ia trial with 10 subjects with ultra-high concentration nitric oxide or UNO. That shows median survival has not yet been achieved and currently sits at 22 months. These updates have put us in a very strong position and provide us the financial runway we need to optimize the Gen II launch in late calendar 2026 and drive our international business from the strong foundation we have already built. As you all know, we were awarded a national group purchasing agreement for therapeutic gases with Premier. Coupled with our agreement with Vizient, we now have access to nearly 3,000 hospitals. We are confident that our targeted commercial strategy, supported by the right people now in place and strengthened by our Premier and Vizient GPO contracts will begin to have a meaningful impact on revenue over the coming quarters. Our disciplined approach is allowing us to prioritize the highest value hospital opportunities while deepening relationships across our existing accounts. This focused execution is already translating into broader market engagement and increased visibility of LungFit PH within key hospital systems. At the same time, we are preparing for the next major inflection point with our second-generation LungFit system, which is smaller, lighter and designed for both air and ground transportation, while maintaining all the revolutionary features of the first generation LungFit PH. We believe this next-generation platform will enable us to expand into larger hospitals and health systems, further accelerating adoption and cementing LungFit's position as the standard for nitric oxide delivery. We anticipate commercial launch of the second-generation system in the U.S. market in late calendar year 2026, pending FDA approval. As a significant aside, several of our existing customers have extended their annual contracts with multiyear agreements, while increasing anticipated annual volumes. We see this as a confirmation of the ease of use and the value proposition of LungFit PH, and we expect this trend to continue. During the quarter, we finalized and have since launched a new sales model that complements the traditional industry leasing model. Under this new approach, hospitals may now purchase LungFit PH systems outright while continuing to generate recurring revenue for Beyond Air through disposables and service agreements. Initial system sales occurred subsequent to quarter end, and the early reception has been extremely positive. We are very excited by the flexibility this dual model approach offers and the opportunity it creates to accelerate adoption of LungFit PH. Today, we announced the appointment of Bob Goodman as Interim Chief Commercial Officer, following the departure of David Webster. Bob joined the Beyond Air Board earlier this year and brings deep commercial and operational expertise from leadership roles at BioTelemetry, Philips Healthcare, Cardiocore, Thermo Fisher Scientific and Pfizer. His experience spans public companies, private equity-backed businesses and early-stage ventures, where he has consistently driven innovation, operational scale and commercial success. We have greatly valued its contributions to the Board and look forward to the fresh perspective and leadership he brings as we ramp up commercial activities and, as I just mentioned, prepare for the highly anticipated launch of our second-generation LungFit PH. A key driver of our long-term growth strategy over the past year has focused on the expansion of our global distribution network. During the September quarter, we added new distribution partnerships in Japan, South Korea, Mexico, Costa Rica, Guatemala, Panama and El Salvador. These new agreements significantly broaden our geographic reach and demonstrate growing demand from both mature and emerging health care markets seeking modern, cylinder-free nitric oxide delivery solutions. Importantly, we achieved our first international commercial placement of LungFit PH into hospitals outside the United States this quarter. These initial system sales marked a key validation of our technology's global applicability and confirm that our value proposition, improve safety, reduce logistical burden and long-term cost savings is resonating strongly with hospital administrators and clinicians. We continue to see excellent engagement from our distribution partners who are now actively seeking regulatory approvals or demonstrating LungFit PH in hospitals in their local markets. These latest agreements bring our total international coverage to 35 countries, representing a combined population of approximately 2.8 billion people, and we expect to reach our goal of 60 countries under partnership in calendar 2026. As local distributors begin converting opportunities into active installations and sales, we anticipate international revenue contribution to build steadily through fiscal 2026 with momentum accelerating into fiscal 2027. This growing global footprint positions Beyond Air to capitalize on significant untapped demand for LungFit PH and lays the foundation for broader global adoption following additional regional approvals. To wrap up our remarks around LungFit PH, I have two more positive updates to share. We had a patent allowance for a design patent that covers our second-generation LungFit PH through 2040. And we had data shown by a physician at the Extracorporeal Life Support Organization Conference in September, which show positive results when LungFit was used in the ECMO sweet gas circuit on neonates. I would like to provide an update on the data from Beyond Cancer's Phase Ia study. As a reminder, study enrolled 10 subjects at doses of 25,000 and 50,000 parts per million nitric oxide gas delivered over 5 minutes intratumorally. These patients all had metastatic disease and were heavily pretreated. The mean number of total prior surgeries, radiation and medications was 10.3 with a minimum of 4 maximum of 18. The mean number of all prior medications only was 5.5 with a minimum of 2 and a maximum of 14. All subjects had a life expectancy of less than 12 months when we treated with UNO therapy. The only adverse event which occurred in one patient that was possibly attributable to nitric oxide was a Grade 3 vasovagal response. Otherwise, the safety profile is very clean for this patient population. With respect to overall survival, the median and mean are 22 months and 21.2 months, respectively. These survival numbers will continue to increase, but we have not yet reached the final median survival. Given these impressive data, we are assessing the best path forward for the program at this time. We remain dedicated to pursuing the Phase Ib combination study with anti-PD-1 therapy, and we will communicate more details as we progress. With respect to NeuroNOS, we recently announced that the U.S. FDA granted Orphan Drug Designation to its investigational therapy, BA-101 for the treatment of glioblastoma. The NeuroNOS team is working closely with regulators, investigators, patient groups and the foundations to accelerate development of BA-101 towards a first-in-human study. This program is in addition to the development for BA-102, an investigational therapy for the treatment of Phelan-McDermid syndrome, or PMS, syndrome associated with autism. We expect the IND submission for the first-in-human study by the end of calendar 2026. As a reminder, the FDA has also granted orphan drug designation to BA-102 for PMS. I will wrap up by stating how energized we are following the financing, which will support the continued progress of our global commercial activities and help us prepare for the potential launch of the second-generation LungFit PH. Promise of LungFit is apparent, and we are thankful to the team at Streeterville, taking the time to appreciate our vision to provide clinicians and patients around the world with the optimal NO system. Now I will turn it over to our CFO, Doug Larson. Douglas Larson: Thanks, Steve, and good afternoon, everyone. Our financial results for the second quarter of fiscal year 2026, which ended September 30, 2025, are as follows: Revenue for the fiscal quarter ended September 30, 2025, increased 128%, $1.8 million compared with $0.8 million for the fiscal year ended September 30, 2024. We showed 3% growth versus last quarter. Steve mentioned how our revenue is a little chunkier now given an international ramp is never straight up. We are showing a gross loss of $0.3 million for the fiscal second quarter 2026 compared to a loss of $1.1 million for the same period last year. The improvement was primarily attributed to sales growth. Our margin slipped back negative this quarter due to costs required to upgrade our existing fleet of devices and provisions for excess inventory. Turning to operating expenses. We continue to see cost reduction across the board, in SG&A, R&D and in our supply chain due to cost reduction initiatives we took in the last 12 months. For the second quarter of fiscal 2026, we reduced total operating expenses to just above $7.4 million from $11.7 million for the same period last year. This translates to a 37% reduction year-over-year, and greater than 56% reduction from a high of $17 million at its peak. Going forward, we anticipate R&D expenses will decrease slightly next quarter as the cost related to our Gen II device are mostly behind us. SG&A expenses will only move up in line with our commercial performance to maintain our excellence in service and take advantage of coming opportunities. Research and development expenses were $2.5 million for fiscal quarter 2026 compared to $4.6 million for the same period last year. Half of the decrease of $2.1 million was due to a reduction in development costs for our Gen II device while the other half was mostly attributed to a decrease in salaries and stock-based compensation costs. SG&A expenses for the quarters ended September 30, 2025 and September 30, 2024, were $4.9 million and $7.2 million, respectively. Almost all of the decrease of $2.3 million was from a reduction in salaries and stock-based compensation costs. Only part of the business that saw an increase in SG&A was a NeuroNOS as they start to build a little bit of infrastructure to support the groundbreaking work being done there. Other expense was $0.6 million compared to a $1.2 million expense for the same period a year ago. The decrease in expense of $0.6 million was primarily attributed to the prior period loss associated with the partial extinguishment of debt. Net loss attributed to common stockholders of Beyond Air, Inc. was $7.9 million or a loss of $1.25 per share, basic and diluted. Our net loss for the fiscal quarter ended September 30, 2024, was $13.4 million or a loss of $5.67 per share, basic and diluted. Please note that the per share results for both periods were calculated to reflect the company's 1-for-20 reverse stock split, which became effective on July 14, 2025. Net cash burn for the quarter was $4.7 million, which is a 66% reduction versus a year ago. We believe our overall cash burn will continue to reduce as revenue grows and will only get better until we get approval and start building inventory in preparation for the launch of Gen II. As of September 30, 2025, we reported cash, cash equivalents and marketable securities of $10.7 million. As Steve mentioned earlier, subsequent to the end of the second quarter, we announced closing a strategic financial agreement with Streeterville Capital, LLC. Under the terms of the agreement, we issued $12 million promissory note bearing a 15% annual interest rate. This note matures in 24 months from the issue date with no payments due for the first 12 months. In addition, we entered into a $20 million equity line of credit agreement with Streeterville Capital dependent on our filing an S-1 resale registration covering resale of the shares Streeterville Capital may receive under the e-lock. This e-lock provides us with the right but not the obligation to sell up to $20 million of newly issued shares of our common stock over a 24-month period, subject to certain limitations. Following these recent financing agreements, we believe that our cash and existing financial vehicles will be sufficient to allow us to support our current operating plans well into calendar 2027 and potentially to profitability, providing we continue to hit our current revenue estimates continue to control costs at Beyond Air. With that, I'll hand the call back to Steve. Steven Lisi: Thanks, Doug. Operator, we'll take questions. Operator: [Operator Instructions] The first question is from Justin Walsh from Jones Trading. Justin Walsh: Without going into specific fiscal 2027 guidance, can you comment on the expected growth drivers leading into the potential approval of the second-generation LungFit PH? And then how you're thinking about that trajectory after that second gen product is out? Steven Lisi: Thanks, Justin. Appreciate that. So obviously, the trajectory once the second generation is out should be significantly steeper than what we're seeing now. That's our belief. And I think people know the attributes of that system versus the current system and the competition. So we're confident in that. As for the growth drivers prior to that, I assume you're asking for. Justin Walsh: Yes. Steven Lisi: Yes. We're setting up internationally. We're in 35 countries now with partners. We did just place systems in our first commercial hospital outside the United States. So it takes time to build that. We all wish we'd go a little faster, but it is being built, and our international team is doing a great job. So we've got a lot of seeds planted out there, I guess, you could say. And we anticipate that with fiscal '27 coming up, we should be winning a lot of hospitals outside the United States where the competition is a little bit different than it is in the United States. So that's one of the drivers for '27. The other thing inside the United States, we did introduce a capital purchase model. Our system is now -- and to a point where it's extremely reliable, we've had interest, and we've actually had our first hospital purchase from us. So that will be a capital equipment purchase. And then the filter and the other accessories would be the ongoing purchase. And those prices, I guess it depends on how much nitric oxide use in your hospital per year per system, but this is certainly very competitive from a per hour cost basis for nitric oxide. So I think this new offering in terms of how hospitals can pay in the United States, we've gotten some interest there and the ex U.S. will be the driver prior to Gen II being approved. Justin Walsh: Got it. And one more question. You mentioned here that you're hoping to commercialize the second-gen LungFit PH around end of calendar 2026, if I heard correctly. I'm just wondering if you can comment on kind of the thinking around this time and whether or not you've noticed any delays in your dealings with the FDA recently. Steven Lisi: Yes, I think FDA is doing a great job. I don't think the timing that we're providing is FDA being a limiting factor. It's more supply chain on our side. I think the environment is difficult to get the parts that we need, certainly doesn't help with all the disagreements, I would say that are happening around the world with trade, government shutdown doesn't help either. So I think just getting things in place for our ability to get our contract manufacturing in shape for inspection is what we're doing. So it's just a matter of time before that occurs. And I did mention -- I mean you did mention we'd be launching before the end of the year. I think approval has to be a little bit earlier than December, obviously, for us to be able to launch by then. We're not going to launch the next day. It's going to take a little bit of time. So -- that's kind of where we are right now, things can change, things can be better or worse in terms of timing. But as we sit here today, that's the feeling that we have. Operator: The next question is from I-Eh Jen from Laidlaw & Company. Yale Jen: Steve, could you just do some comparison between the new model versus the prior ones? So give us a little bit more deep dive in terms of the benefits to the company or maybe for the market penetration? Then I have a follow-up. Steven Lisi: Yes. Thanks, I-Eh. I mean the biggest difference -- will, there's a few, but the biggest differences are the size. So this second generation machine will be about 60% the size of the original. It will be what we've applied for. And I believe -- we believe that upon approval, with approval from FDA, it would be approved for use in ground and air transportation. That's critical. I think that's probably the biggest difference maker for us. And the user interface has been upgraded based on feedback from our current customers and some future customers, I guess, who weren't using our Gen I system, but did give us advice on Gen II. So we listen to them and we built this device based on their input. So we think that all of the functions of the device will be a little bit easier and a little bit better for the user. One other thing that we have is that the maintenance interval will be longer, so that the disruption of swapping machines out for those high-volume users will be a thing of the past, let's say. So when you have hospitals that are using an exceptional amount of hours per system per year, let's say, way above what the average is, we're bringing them in for maintenance fairly regularly. So -- that's a little bit of a disruption of the hospital, and we're working to get Gen II out there. So that disappears. Yale Jen: So actually, I try to get - I'm sorry, try to get a little bit about the new business -- new business model can achieve that wasn't really fully appreciated -- can be appreciated by the existing one? Steven Lisi: You mean Gen II versus Gen I, I-Eh? Yale Jen: So -- I mean you mentioned that the new business model, which is to purchase -- machine. So I just want to get a sense of what does that -- what the benefits of that versus the business operation you have done before this and what some additional benefits you can generate from that? Steven Lisi: Yes. So look, the market was set up as essentially a leasing market before we enter the market. So we're -- we came in and we worked with hospitals based on what they were used to, and we get requests from hospitals, can we purchase the machine, can we purchase the machine. And we weren't doing a purchase of the machine in the first 2 years because we were still making upgrades and tweaking the machine and it would have been difficult to sell something where you were still upgrading it and improving it. We're at the point now where there really aren't any more improvements to the Gen I machine a little tweak here or there is standard, maybe a software update or something. Those things are not major changes. So for hospitals that have been asking us if we take a purchase again, I don't know on their side, they prefer to purchase and to buy the disposables at a much lower rate than the leasing model would have. Again, that's just their preference. So we are offering different models for using our system to the hospitals based on their needs. That's all it is, yes. We're not abandoning the leasing model in any way. So we have multiple different types of leases. So we're really just trying to offer the hospitals what they're asking for. So the latest one is the capital purchase model. So we introduced it a few months ago, and we've got hospitals that are taking advantage of it. Yale Jen: Okay. Great. Maybe just a follow-up on the question. Next question is that you've got a lot of international deals signed, which is a great thing to happen. And because of the massive market over there, I assume most of these are distributor -- distributors. So how should we think about modeling over the long term in terms of what sort of pricing that may generate versus the one in the United States, which is slightly different? And how was the filter -- renewing filter fit into that model as well? Steven Lisi: Yes. I mean the ex U.S. model for us, where we're selling things to the distributors and then they're using it in whatever model they like in their markets, whether it be a leasing model or a capital equipment purchase model or something else or some combination of that, that's their business. So for us, though, they're purchasing the machines like a capital equipment purchase. And then we're also selling them the disposables, including the filter, which is obviously the most important disposable. So -- that's how you should think about it in terms of modeling. It's more of a -- just a repetitive revenue line, and I think that, that's probably going to happen more in fiscal '27 than now because we're just getting the systems out there. Once they're placed in hospitals, you see that repeat business, but that's not happening in fiscal '26. It will be a fiscal '27 phenomenon and picking up speed more in fiscal '28 because we're still awaiting regulatory approvals in many countries, and it takes time to get into these hospitals. So it is a long process, but that's the way it goes. Yale Jen: Okay. Great. That's very helpful. And congrats on the fortify the balance sheet, which you can do a lot of good things. And congrats. Operator: The next question is from Marie Thibault from BTIG. Sam Eiber: This is Sam on for Marie. Maybe I can start on the updated guide, the $8 million to $10 million. Steve, would just love your thoughts on the visibility. You have given maybe some of the fluctuations in the hospital sales cycle? And then any thoughts on cadence for the back half of the year? Steven Lisi: Thanks, Sam. Appreciate it. Well, look, we've got $3.6 million in the first half. So it's not a large leap to get to the 8% plus range. But we have a transition at Chief Commercial Officer. So I'm sure everyone on the call wouldn't expect Bob Goodman to hit the ground running on in week 1 or 2 and start ripping sales straight up. I think it will take a little bit of time for Bob to implement his processes here and get things moving in the right direction. So I think that when there's a change like this, there's going to be a little bit of disruption. So that's part of the reason why the $8 million to $10 million is the new guidance. Sam Eiber: Okay. Okay. That's helpful. And then maybe I can just follow up here on the pace of contract renewals that are coming up. Are you seeing pretty strong renewal rates? Are customers exiting contracts at all would just love an update there as well? Steven Lisi: Yes, the renewals are going well. We've had a bunch of renewals go from 1 year, they renewed for 3 years. We see that happening not with every contract, but a good number of them. And I think that getting on Premier is very helpful. We had a few hospitals that were premier hospitals that we had contracts with weren't yet on Premier, so now being on Premier solidifies that. That's very helpful. We look forward to hopefully getting on HealthTrust as well at some point, and that would give us the big 3 GPOs. That's very helpful for being able to not only get hospitals, but maintain them. Sometimes they can contract out of their -- outside of their GPO, which is rare. But when we do, when we get on the GPO, it's obviously important. So we haven't really seen hospitals leaving us. It's a very sticky business, I think. And I think it's due to the team in the field, the machine's performance, and my -- the clinical team here at Beyond Air do an excellent job of supporting the hospitals when they need support. Operator: At this time, we are showing no further questions in the queue. And this concludes our question-and-answer session. I would now like to turn the call back over to Steve Lisi for any closing remarks. Steven Lisi: Thanks, operator. Thanks, everyone, for joining. Look forward to speaking to you in the near future. Thank you. Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Greetings. Welcome to Energy Vault's Third Quarter 2025 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Michael Beer, Chief Financial Officer. Thank you, sir, you may begin. Michael Beer: Thank you. Hello, and welcome to Energy Vault's Third Quarter 2025 Financial Results Conference Call. As a reminder, Energy Vault's earnings press release and presentation are available now on our investor website, which we'll be referring to during this call. This call is now being recorded. If you object in any way, please disconnect. A replay of this call will be available later today on the Investor Relations portion of our website. Please note that Energy Vault's earnings release and this call contain forward-looking statements that are subject to risks and uncertainties. These forward-looking statements are only estimates and may differ materially from the actual future events or results due to a variety of factors. Please refer to our most recent 10-K or 10-Q filing for a list of factors that cause our results to differ from those anticipated in any forward-looking statement. We undertake no obligation to publicly update or revise any forward-looking statements, except as required by law. In addition, please note that we will be presenting and discussing certain non-GAAP information. Please refer to the safe harbor disclaimer and non-GAAP financial measures presented in our earnings release for more details, including a reconciliation to comparable GAAP measures. Joining me on this call today is Robert Piconi, our Chairman and Chief Executive Officer. At this time, I'd like to hand the call over to Robert. Robert Piconi: Great. Thank you, Michael, and good morning and evening and afternoon to everybody that's joining this call. Our third quarter of 2025 was one of the most pivotal in Energy Vault's history. The quarter marked the formal launch of our Asset Vault platform, solid execution across our global project base and the establishment of the financial foundation that will fuel our next phase of profitable growth. It was less than 18 months ago, we outlined a bold strategy to execute a plan involving developing, building, owning and operating energy storage assets over time, constructed at financially privileged or attractive points of grid interconnection to achieve top quartile investment returns. In that time, we have also built, commissioned and now are operating for the first time the 2 initial projects in Texas and California, with the revenue included in all the Q3 results also for the first time. And while initially built using our balance sheet cash, we followed with 2 consecutive project financings closed in the last 6 months as we continue to put cash back on our balance sheet with now 3 consecutive quarters of growing cash. And as you will hear from Michael and saw in our investor presentation, a large increase in cash also expected for our fourth and final quarter this year. You'll recall at our last earnings, we announced the framework of the new non-dilutive preferred equity platform to fund and put into operation an initial 1.5 gigawatt of energy storage IPP projects, unleashing over $1.1 billion in capital that we formally announced the close of the $300 million transactions just last month with Orion Infrastructure. In the spirit of moving with speed and velocity, which are becoming table stakes now for success in this industry, we immediately put that capital to work last month with the purchase of a 150-megawatt interconnect site outside of Houston, Texas from Savion, a U.S. division of Shell. Coupled with the 125-megawatt site at Stoney Creek in Australia already closed earlier this year with the long-term energy service 14-year contract with the New South Wales government, that now brings our project total to 4 and 340 megawatts operating or in construction, which will be delivering a little over $40 million in recurring annual EBITDA for these initial projects as all come online in the next 12 to 24 months. When I was in Australia last week, I shared for the first time as well at our Investor and Analyst Day, our deepening collaboration with the team at Crusoe. Crusoe, the AI factory company. Chase, Cully and the team there with their focus on energy first are innovating and redefining what it means to move with the speed and velocity that I referenced earlier in vertically integrating to deliver the largest AI data centers in the world in time frames previously thought impossible, as the initial Stargate project in Abilene shows alone. I think an example for all of us for what is now becoming a requirement to be successful in this industry. In a similar fashion, Energy Vault is vertically integrating and originating now, designing, building and now owning and operating energy storage assets over longer time frames, a synergistic endeavor with the same relentless focus on execution and now with greater speed and efficiency of getting capital deployed with the new Asset Vault platform. While these larger projects will take some time to be built and come online in the next 12 to 24 months and then with the subsequent 10- to 15-year plus revenue streams, a reminder that it is Energy Vault that will be building these projects. So when we talk about the $1.1 billion in CapEx that the $300 million preferred enables, that CapEx will be funding into Energy Vault to build and commission these projects, which results in another $100 million to $150 million in cash flow back to the parent company in the form of project margins, long-term service agreements, among other cost and profit recoveries. I realize it's been a little longer time given how busy it's been the last 60 days since we last spoke at the quarterly earnings. I do want to jump right in here to our quarterly results. But as you get a sense, there's been just a lot going on that we've been executing as a company on a series of fronts, and really proud of the team at Energy Vault and all of our partners, as well as the support of our Board of Directors that all supported in making this happen. Michael has been be covering the results in more detail, I would like to cover some of the top of the waves here on the results as we entered into the second half of our year and began to deliver the expected revenue ramp and what was a strong and expected performance for the quarter. Also a reminder for everyone, there is a publicly available investor presentation that's on the website that you can download, and we would be referring to some of the charts that are in that presentation. As you saw, the contract backlog remains near $1 billion for us to execute upon in the years to come, which has more than doubled this year and about 4x what it was from this time last year in 2024. The ramp started as expected with $33 million, a substantial increase on both a year-over-year and sequential quarter basis and expecting an even larger jump of about $150 million or thereabouts in Q4 with the deliveries in Australia and the U.S. That $33 million also includes some of the first recurring contributions now from our 2 energy storage IPP projects in Texas and California. We also delivered strong unit economics with gross margins of 27% in the quarter, bringing our year-to-date gross margins to almost 33%. This reflects strong management of our project deliveries of our supply chain and just general execution competencies, which is one of the most critical core strengths of the company. We saw the EBITDA loss narrow to only $6 million for the quarter, noteworthy on only $33 million of revenue. We continue to find ways to optimize our OpEx and be as efficient as we can as we push to a full year profitability. And another good story on our cash creation. As we have every quarter this year, we continue to grow our cash balance and return cash to the balance sheet through the project financings completed and with the first phase of the Asset Vault platform just coming online. Noteworthy here that we are still expecting now another $30 million to $40 million in investment tax credits as well to return to our balance sheet this quarter in Q4, hence, the expected jump in our cash to $75 million to $100 million range as we close the year, setting ourselves up well for 2026. And for us at Energy Vault, our results, of course, encompass more than just the financial side, but also the results and the impact we strive to make as a company, reflecting how we do our business and the sustainability of our solutions to enable prosperity for all humankind in a resilient way. I'm very proud to share today that we have continued to advance our leadership in sustainability with S&P Global's latest release of their ESG scores. Energy Vault continued along its improvement path year-over-year, placing again in the top 98th percentile of all companies reviewed by S&P Global, while critically maintaining its leadership as the #1 company in the energy storage segment. This speaks to the culture and the execution philosophy that we have as a company that really comes down to our purpose of what we seek to fulfill and the impact we are making and will continue to make in our global communities. I want to send out a special thanks to Edward Johnson and Michael Van Parys as well for their specific leadership within Energy Vault to make this happen, but also their humility, which reflects our humility as an organization to realize that we have much more work to do here. The insatiable demand for power we see now will make this focus even more critical if we want to have a shot at improving the quality of life on earth for decades to come. With that, I'd like to turn it over to Michael Beer, our CFO. Michael Beer: Thanks, Rob. Turning to Q3 2025 results on Slides 3 and 4 in the attached presentation. We delivered Q3 revenue of $33.3 million compared to $1.2 million a year ago, representing a 27x increase year-over-year, driven by strong execution on Australia projects and the initial contribution from the Asset Vault assets. Q3 ' 25 GAAP gross profit of $9 million improved nearly 18x versus the prior year, driven by increased revenue and favorable business mix, resulting in a Q3 2025 gross margin of 27% and 32.6% year-to-date. Q3 adjusted operating expenses were $16.2 million, flat quarter-over-quarter, but up modestly versus last quarter as ongoing cost reduction initiatives were generally offset by start-up costs and development expense related to Asset Vault and growth in Australia. Q3 adjusted EBITDA, excluding stock-based compensation and other onetime items outlined on Slide 11 of the earnings presentation, improved to a loss of $6 million from a loss of $14.7 million in the prior year ago quarter, driven by higher revenue and gross profit. Regarding cash and project financing, cash as of September 30, 2025, was $61.9 million, up 7% sequentially and in line with our previous guidance. The company completed a securities purchase agreement for up to $75 million, of which $30 million has been drawn to date. Following the quarter, we closed a $300 million preferred equity agreement with OIC for the launch of the own and operate business called Asset Vault, which we'll discuss in a moment. Along with the large sequential increase in revenue and customer receivables anticipated during the fourth quarter, we also expect to receive $40 million of investment tax credit proceeds, which we've committed to those projects now placed in service. As it relates to the latest backlog and developed pipeline, as reflected on Slide 5, the company currently maintains a revenue backlog of $920 million, up 112% year-to-date, offset in part by the $50 million in recognized revenue this year, including the initial contribution from Calistoga and Cross Trails projects now included in Asset Vault. The backlog increase reflects new projects with, Consumers Energy, a long-term service agreement with an existing customer and long-term offtake agreements in the U.S. and Australia. As highlighted in the press release, the company also recently acquired the 150-megawatt 300-megawatt hour SOSA project in Texas as part of the Asset Vault portfolio and entered into an agreement with EU Green for a 400-megawatt hour project in Albania, subject to final Albanian legislative approval, both of which we expect to be included in backlog once finalized and key milestones are completed. Our total development pipeline for advanced projects, third party and those within Asset Vault is around $2.1 billion or roughly 8.7 gigawatt hours. Turning to our business outlook. Reflecting the timing of U.S. battery deliveries associated with Consumers Energy projects and other project time lines in Australia, we are estimating full year 2025 revenue of $200 million to $250 million within the prior guidance range. We are estimating full year 2025 gross margin of between 14% and 16%, in line with our historical averages. From a cash and project financing perspective, we are estimating $75 million to $100 million in total cash at the end of this year, unchanged versus previous guidance. We are now scaling up development activity and support services for Asset Vault with both Calistoga Resiliency Center and Cross Trails now in service, we expect these assets to contribute annualized adjusted EBITDA on a stand-alone basis of $10 million. As Rob had mentioned, on October 29, management held its second Investor and Analyst Day to provide additional detail around the recently launched Asset Vault business, Energy Vault's wholly owned subsidiary focused on global development, construction, ownership and operation of energy storage assets. We also discussed strategic growth plans as the company leverages Asset Vault to build and manage an expanding portfolio of contracted and operational storage projects. That presentation and replay are available on our website. With the backing of the $300 million preferred equity investment from OIC, Asset Vault creates a vertically integrated ecosystem that captures value across the entire energy storage life cycle. That platform combines Energy Vault's proven operational expertise with long-term asset ownership to generate predictable recurring and high-margin cash flows. With the launch of Asset Vault, Energy Vault is positioned to accelerate deployment of 1.5 gigawatts in attractive priority markets and upper-tier IRR projects as part of Fund 1. And that Fund 1 is expected to contribute roughly $40 million in recurring adjusted EBITDA by year-end 2027 from the 4 maiden projects, including the recently announced SOSA project and the Stoney Creek project in Australia, both of which are in the process of commencing their respective project financing processes, and to achieve $100 million to $150 million in recurring adjusted EBITDA by year-end 2029 from attractive projects yet to be disclosed across high-growth markets in the U.S., Australia and Europe. The project portfolio is prioritized with a clear monetization strategy, supported by long-term offtake agreements with bankable partners and/or attractive merchant markets. We're currently expecting our merchant exposure to be around 25% Further, by leveraging Energy Vault's existing EPC integration capabilities as well as a host of other services we provide today to our third-party customers, we can unlock notable synergies across the business, including larger volume commitments with suppliers, et cetera, adding incremental cash flows and liquidity to the parent company. Case in point, as Rob had mentioned, assuming a mid-teens average historical gross margin on $1 billion plus of CapEx for internally developed projects, Energy Vault should generate additional cash flows that more than cover the associated equity investment. With that, I'll hand it back over to Rob. Robert Piconi: Thank you, Michael. I think we were going to open it up for some questions now. Operator: [Operator Instructions] Our first question is from Noel Parks with Tuohy Brothers. Noel Parks: Just one item I noticed in the P&L is it looks like R&D expense actually declined sequentially a bit. And I was just curious if you had any updated thoughts on with some of the structure changes, just what the -- how the expense lines might be affected as if there's more capitalization going on going forward or something. Michael Beer: Sure. Happy to take this one. I would say it's a confluence of a handful of things. As you know, we've been tightening the belt from a cost perspective really over the last year. So this is the reflection of some of those activities. Furthermore, the company was in a different phase following the IPO and around that time where we were investing heavily in R&D. And at this stage, we're looking to harvest the benefits of some of those earlier investments. And so a little less focus around R&D and more around certain activities such as Asset Vault and so forth. Noel Parks: Great. And I guess I'm thinking a little bit bigger picture. As we've had a fair amount of macro uncertainty in the quarter and the months before that. And things like the shutdown certainly haven't improved the clarity of where many things in the marketplace are heading. So I'm just wondering if sort of your pace of discussions on the customer acquisition, bus dev side, I just wondered if you've kind of characterized customers feeling a sense of urgency and sort of pressing on unabated or whether there's been some more hesitation introduced and thinking especially maybe as you're doing with utilities at times. So I just wondered what that pace has been like since the summer. Robert Piconi: Thanks, Noel. It's Rob here. I'll comment, and then I'm sure Michael may want to add a comment or 2 as well. Look, this year, for sure, if anything, has been quite volatile and dynamic between the tariff side of the equation, which obviously impacts a lot of the battery shipments that were coming from China and then up to and including the most recent shutdown and recent changes and ups and downs on tariffs. So we've had to manage through that as have our customers, and it's required a lot more terms with customers in terms of the deal structures and trying to deal with it. So I think that's definitely caused some delays. And interestingly, on the Asset Vault side, meaning on the origination of deals we're looking at attractive assets, it is a buyer's market from what we see. I mean we have opportunities getting thrown our way daily, looking at sites that have interconnects and projects. So I think from an Asset Vault perspective, we're seeing a pretty target-rich environment and just obviously being careful on the ones that do make our list. We have a fairly formal and in-depth way that we evaluate these projects. But generally, I'd say from a U.S. market perspective, we have had a lot of stop and starts across the board. And I think noteworthy, we're holding our guidance. I think we're one of the few companies in our space that are holding their guidance because of deliveries that we have underway and a lot to do next quarter, as you know. But that's what I'd share with you. Michael, do you have anything to add to that? Michael Beer: Yes. We pride ourselves in having a nice diverse footprint and also being very agile. So earlier this year during tariff gate, I think on the earnings call, we had commented that only about 10% of our backlog was really subject to some of the volatility around U.S. tariff rates. So starting to prepare and protect ourselves against some of these shocks. The other thing is just being agile over the last 5 years plus, we've seen a 90% decline in battery prices, right, at the cell level. And so being able to participate in the most attractive parts of the value stack and choosing to own and operate assets rather than simply being a third-party service provider has set us up exceptionally well. Operator: [Operator Instructions] Our next question is from Sid Rajeev with Fundamental Research Corp. Siddharth Rajeev: Just to confirm, the current backlog, it does not include the recently announced projects in Albania, right? And also, any plans to add these projects to asset in the future? Michael Beer: That's right. So the $920 million backlog today does not include either the SOSA project or the project that we had announced with EU Green. The SOSA project is part of Asset Vault and will contribute to a lot of those recurring EBITDA numbers that we had guided previously. I would expect those to be added to backlog, yes. Siddharth Rajeev: No, to Asset Vault? Michael Beer: They'll be added to the backlog for the broader company and it will also be part of Asset Vault. That's correct. Siddharth Rajeev: Okay. Just one more. The development pipeline showed a massive increase from 5.9 to 8.7 gigawatt hour, $300 million added. What -- which projects specifically were added to this? Michael Beer: We've not disclosed the specific projects. These are what we internally classify as Stage 4 or Stage 5 opportunities where we've either been shortlisted or awarded opportunities. And obviously, as we curate the pipeline around Asset Vault, there certainly are -- there's been some ins and outs, and that is likely reflected in that change. Siddharth Rajeev: Okay. And congrats on the Q3 results. Operator: [Operator Instructions] With no further questions, I would like to turn the conference back over to Robert for closing remarks. Robert Piconi: Thank you, operator. Look, I'm happy to be talking about this quarter now as -- and in the last 6 years, in particular, have been quite transformational for us in terms of executing on what we said we were going to do, in particular, with getting the Asset Vault platform in place, I think that was significant. But in addition, and not to lose sight of the execution capabilities of this company and keeping our eye on the ball despite all of the various transactions that are going on around us between the project financings, between what it takes to get all the investment tax credits all organized and administered. Just delivery of product around the world. I think what's going on in Australia right now is one of our larger projects, which Australia represented more than half of our revenue this quarter and will continue to play a large part, I think, into the next quarter, getting there and delivering product toward our first, what's called an R2, which in Australia is your first grid interconnected project. That for us is the ACEN project. They're a large customer, a large partner of ours. We're delivering a few projects for them right now, and Q4 and into next year will play an important role in that for our future and the growth in the Australian market. I just want to thank all of our employees first, our days start and end with all of you. And thank you, everybody, for your focus and dedication through what remains a pretty volatile time, a lot of things going on around us that we do not control. However, we do have to plan and continue to plan for that as a company and ensure we have all the levers available to us to ensure we can respond and react and adapt as needed in the market while just staying focused on our strategy, which really starts with serving our customers. We feel really good about that. We've announced a few new projects, new collaborations, some things focused on the new AI infrastructure that's getting built out and excited about how those developments are going to proceed and impact our company as well. I also want to thank our Board of Directors who, in the last quarter, all participated in buying stock in the company during the non-blackout period as well as some of the management and myself. Hopefully, it's not lost on you all, the investors who are listening in, but also the employees that you've got management buying into the future of the company because of our faith and confidence in the prospects. And again, that really starts with the people of Energy Vault. So thanks to all of you. And operator, thank you for your support today. Operator: Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.
Operator: Ladies and gentlemen, thank you for standing by. My name is Abby, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Assertio Holdings Third Quarter 2025 Results Conference Call. [Operator Instructions]. And I would now like to turn the conference over to Daniel Santos with Longacre Square Partners. You may begin. Daniel Santos: Thank you. Good afternoon, and thank you all for joining us today to discuss Assertio's Third Quarter 2025 Financial Results and Business Update. The news release covering our results for this period is now available on the Investor page of our website at investor.assertiotx.com. I would encourage you to review the release and tables in conjunction with today's discussion. Please note that during this call, management will make projections and other forward-looking statements regarding our future performance. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those noted in this afternoon's press release as well as the Assertio's filings with the SEC. These and other risks are more fully described in the Risk Factors section and other sections of our annual report on Form 10-K and in our Form 10-Q filings. Our actual results may differ materially from those projected in the forward-looking statements. Assertio specifically disclaims any intent or obligation to update these forward-looking statements, except as required by law. With that, I will now turn the call over to Mark Reisenauer, Chief Executive Officer. Mark L. Reisenauer: Thank you, Daniel, and thank you to everyone for taking the time to join today. This is my first earnings call as CEO of Assertio and I'm excited to be here today. I'm joined by Paul Schwichtenberg, our President and Chief Operating Officer; and A.J. Patel, our Chief Financial Officer. I'd like to give you some background on myself and touch on some high-level financial results from the quarter. Then Paul will talk about the Rolvedon pull-forward, and A.J. will go over the financial results in more detail. As you may know, I've served on the Board for the past several months, bringing 30-plus years experience commercializing and launching innovative products. Most recently at Astellas Pharmaceuticals, I led the commercializing of blockbuster therapies, XTANDI and PADCEV. I also built and successfully scaled the Astellas Oncology franchise from scratch. That included enhancing market access and distribution capabilities, attracting and growing talent and implementing successful product launches as well as growth and life cycle management strategies. I'm thrilled to step into the CEO role and apply my experience here because I truly believe Assertio has the potential to generate significant value for patients and shareholders. The team has made a lot of progress and set the company up for a promising future with core growth assets like Rolvedon and Sympazan and a solid balance sheet. Before I turn to our third quarter results, I want to take a moment to acknowledge the promotion of Paul Schwichtenberg to President and COO. Many of you know Paul from the numerous roles he's held during his time at Assertio, most recently as Chief Transformation Officer. Paul is a strategic and practical leader who has guided the company through several transformative initiatives. I look forward to working closely with him as we continue driving Assertio forward. Now onto this quarter's results. In the third quarter, we achieved financial results that position us to narrow our full year 2025 guidance, and we continue to support high quarterly unit demand for Rolvedon and maintained a leading market share position. As outlined in the release, Rolvedon net product sales were $38.6 million for the third quarter of 2025, up from $15 million in the prior year quarter due to the pull-forward of 2 quarters of Rolvedon sales through the wholesale distribution channel. Rolvedon net product sales also drove adjusted EBITDA of $20.9 million for the third quarter of 2025, up from $4.4 million in the prior year quarter. The pull-forward was done to ensure seamless availability to patients as we transition Rolvedon to our consolidated commercial labeler and we realign our corporate subsidiaries under a single operating entity. While this transaction will result in a temporary decrease in operating cash flow in the fourth quarter of this year and the first quarter of next year, we expect to maintain a leading market share and uninterrupted patient supply. Regular sales of the newly labeled Rolvedon will resume in the second quarter of 2026. Sympazan net product sales grew to $2.8 million for the third quarter of 2025, up from $2.6 million in the prior year quarter, driven by higher volume. We continued to strengthen our Sympazan oral film franchise with new data the team presented at the American Neurological Association Meeting, which underscored the value the drug offers patients with difficulty swallowing. This quarter's results allow us to narrow our full year 2025 guidance. Our updated 2025 guidance reflects the impact of the Rolvedon pull-forward and our greater visibility into the expected performance for the remainder of the year. This narrowing also reflects negative impacts from Indocin generic competition and decommercialization of Otrexup. I'll now pass the call over to Paul to introduce himself and provide more detail about the Rolvedon pull forward. Paul? Paul Schwichtenberg: Thanks, Mark. Over the last several years, I've had many roles at Assertio, including Chief Commercial Officer, Chief Financial Officer and most recently Chief Transformation Officer. So I've had a front-row seat to many of our recent initiatives including the consolidation of our operations and driving continued growth for Rolvedon. First off, reflecting on Rolvedon's performance to date in 2025, we have seen 42% third quarter year-to-date demand growth versus the same period in 2024. We have been able to provide continued price stability and predictability for our customers over the last several quarters and achieved a 43% market share in the clinic Medicare Part B segment of the market in the third quarter. Third quarter Rolvedon sales reflect both normal demand and large purchases by several national distributors to help ensure consistent supply of Rolvedon over the next 2 quarters as we complete the integration of Rolvedon into Assertio. This was done to ensure uninterrupted product availability to patients during the integration and allow sufficient time to manufacture the newly labeled product, establish Rolvedon with a new 3PL distributor and execute on many other integration-related activities. Specifically, the volumes sold in the third quarter of 2025 includes expected channel inventory sufficient to supply end-customer demand for the fourth quarter of 2025 and the first quarter of 2026. No further sales of the Spectrum-labeled Rolvedon will occur and the Assertio Specialty does not expect to record material product sales of Rolvedon until the second quarter of 2026. From a customer and patient perspective, this will be a seamless transition. Also related to Rolvedon, we executed a long-term supply agreement with Hanmi, our API manufacturer in the third quarter, which positions us for continued stable supply and pricing going forward. Additionally, our same-day dosing data was presented at 4 oncology conferences since December of 2024, and most recently at the Network for Collaborative Oncology Development and Advancement Conference in October of this year, and we anticipate publication in a major journal in the near future. Looking ahead to 2026 and beyond, our goal is to maintain our strategy of price stability and predictability for our customers as we continue to pursue further demand and market share growth for Rolvedon. With that, I'll now pass the call over to A.J., who will cover the financial results. A.J.? Ajay Patel: Thanks, Paul. Today, I'll walk through our financial results for the third quarter of 2025. As a reminder, starting this year, we have resumed the use of year-over-year comparisons. Total product sales in the third quarter were $49.5 million, compared to $28.7 million in the prior year, primarily driven by the Rolvedon 2-quarter pull-forward, as previously mentioned. As a result of this, we do not anticipate material Rolvedon sales to wholesalers in the fourth quarter of 2025 and first quarter of 2026 and expect sales of the newly labeled Rolvedon to begin in the second quarter of 2026. Sympazan sales were $2.8 million in the third quarter, up from $2.6 million in the prior year, driven by higher volume and partially offset by the impact of payer mix. Indocin sales were $4.8 million in the third quarter, down from $5.7 million in the prior year, reflecting expected impacts from previously announced generic competition. The higher proportion of Rolvedon sales relative to our other products drove a modest decrease in overall gross margin to 72% compared to 74% in the prior year. Turning to operating expenses. Reported SG&A expenses were $16.9 million, up slightly from $16.7 million in the prior year quarter, reflecting nonrecurring costs related to the decommercialization of Otrexup, partially offset by lower legal expense following the completion of related initiatives this year. Adjusted operating expenses which excludes stock compensation, D&A and other specified items were $14.9 million compared to $17.3 million in the prior year reflecting our efforts to streamline the business and drive cost efficiencies. GAAP net income for the third quarter was $11.4 million compared to a loss of $3 million in the prior year, and adjusted EBITDA for the third quarter was $20.9 million, up from $4.4 million in the prior year, both driven primarily by higher Rolvedon sales. Turning to our balance sheet. As of September 30, 2025, cash, cash equivalents and short-term investments totaled $93.4 million compared to $98.2 million at June 30, 2025. The timing of cash collections and payments associated with the Rolvedon sell-in is expected to result in a temporary decline in cash over the next 2 quarters before increasing in the second quarter of 2026. Total debt outstanding as of September 30, 2025, remains unchanged at $40 million comprised of the company's 6.5% convertible notes with no maturities until September 2027. Lastly, as Mark mentioned, we are tightening our 2025 guidance within the range previously provided. We anticipate full year product sales on the current operating portfolio to between $110 million and $112 million and adjusted EBITDA to be between $14 million and $16 million. Both the product sales and adjusted EBITDA guidance reflects the impacts of the pull-forward of the Rolvedon sales into the third quarter. With that, I will turn the call back to Mark. Mark L. Reisenauer: Thank you, A.J. I'm pleased with the strong financial position we are currently in. As I continue in my new role, my focus is on advancing strategic initiatives that will drive growth. I will provide updates on those initiatives as they materialize. Abby, we're ready to take questions now. Operator: [Operator Instructions] And our first question comes from the line of Thomas Flaten with Lake Street. Thomas Flaten: Paul, congrats on the promotion. Nice to have you back on the call. Let me start with you. Could you explain to us what if any linkage there is between labor code and ASP? Like do you inherit the spectrum labeled ASP? Or could you just walk us through the mechanics of that? Paul Schwichtenberg: Alex, we don't really comment on forward-looking reimbursement for Rolvedon. So basically, what I can tell you is that we expect to continue our strategy that I mentioned in my comments, our price stability and predictability. So the labor code change is not tied ASP. It's really about the integration of Rolvedon into Assertio. Thomas Flaten: And then there was a sequential uptick in Indocin sales, which was a bit surprising. Any comments on what's kind of going on out there in the market for industry? Paul Schwichtenberg: Yes. Two things related to Anderson. We've continued to maintain some good market share and volume in Indocin despite the competition, and we've seen a little bit of price favorability as well quarter-over-quarter. So we're continuing to compete as best we can in the generic space. Operator: And our next question comes from the line of Naz Rahman with Maxim Group. Nazibur Rahman: First of all, I just want to say nice to meet you Paul. I don't believe we you spoke before. But my question is geared mostly towards Mark. So Mark, you obviously have a background in oncology and Rolvedon obviously competes in that space. I understand you've only been at the COC for a few weeks now. But sort of based on everything you've seen and everything you know, do you have any thoughts on potentially optimizing Rolvedon's either promotional strategy or commercial strategy and also potentially adjusting the reimbursement strategy? Mark L. Reisenauer: Yes. Thank you for the question. And what I would say, yes, it's a couple of weeks in and currently reviewing with the team, all of the current strategies. And so as we come up with any refinements, we'll certainly let you know. But I think I'm certainly approaching this from the position of looking for any way that we can drive additional growth on our growth assets. Nazibur Rahman: And just one follow-up is just on the gross margins. So it looks like the gross margins somewhat stabilized this quarter. But with the Rolvedon pull-through, what do you sort of expect to happen to gross margins going forward for the next 2 quarters? Or do you think you just kind of stabilize around here? Ajay Patel: This is A.J. I can take that. So obviously, we haven't given full guidance for next year yet, and we'll plan to do that at our March conference call. But I would say the targeted gross margin we had this year, which aligns with the guidance range we just gave is in line with where kind of Q3 landed. Operator: [Operator Instructions] And our next question comes from the line of Ram Selvaraju with H.C. Wainwright. Raghuram Selvaraju: Firstly, a broad spectrum one for Mark. I was wondering if you could comment on the kind of differences in strategic priorities and core business objectives under the new direction as opposed to what historically was being prioritized, particularly with respect to business development. And then secondly, on a product front, I was just wondering if you could provide us with any color on emerging market trends that may be favorable towards Sympazan uptake and what you expect the generalized prospects for Sympazan sales acceleration in the coming quarters? Mark L. Reisenauer: Yes. Thank you for your questions. I'll take the first one, and I'll let Paul talk about the Sympazan question. So regarding future strategy, what I am doing, along with the management team as well as with the Board is currently reviewing and refining our strategies moving forward. When we have updates there, I will certainly provide that more broadly, but it's very early days in terms of that effort. Paul, do you want to handle the Sympazan question? Paul Schwichtenberg: Sure. As it stands right now, Sympazan is competing in a generic market. We're not seeing any significant changes to that market in the near future. But our differentiators are delivery mechanism being it oral film. And what we're doing right now is we're focused on raising awareness of our products and getting the message out there. We've got reps in the field concentrated in the high-prescribing areas. And we're also trying to raise awareness through our digital promotion as well. So that's our focus right now for Sympazan. Operator: And ladies and gentlemen, that concludes our question-and-answer session and today's call. We thank you for your participation, and you may now disconnect.
Operator: Good afternoon, everyone, and welcome to Red Robin Gourmet Burgers, Inc. Third Quarter 2025 Earnings Call. This conference is being recorded. During management's presentation and to your questions, we will be making forward-looking statements about the company's business outlook and expectations. These forward-looking statements and all other statements that are not historical facts reflect management's beliefs and predictions as of today, and therefore, are subject to risks and uncertainties as described in the company's SEC filings. Management will also discuss non-GAAP financial measures as part of today's conference call. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles, but are intended to illustrate alternative measures of the company's operating performance that may be useful. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in the earnings release. The company has posted its third quarter 2025 earnings release on its website at ir.redrobin.com. Now I'd like to turn the call over to Red Robin's President and Chief Executive Officer, Dave Pace. David Pace: Good afternoon, everyone, and thank you for your interest in Red Robin. It was just 4 months ago that we unveiled our "First Choice" plan with a core imperative of establishing Red Robin as the first choice for guests, team members and investors. Today, I'm pleased to report that in the third quarter, we began to see the early fruit from our efforts. During the third quarter, our traffic trends improved sequentially through the quarter, supported by the launch of our Big Yummm promotion and growth in our off-premise business. Equally encouraging are the continued gains in our 4-wall operating efficiency and our team's ability to manage the middle of the P&L, allowing us to beat our expectations for both restaurant level and corporate profitability during the quarter. Going forward, sustaining and extending this improvement requires continued execution across all aspects of our "First Choice" plan. The momentum we're building reinforces my belief that we're on the right track to deliver on our goal to be the first choice for guests, team members and investors. With that, let me share more detail on our progress and how we're building momentum as we move forward with this "First Choice" Plan. First, let's start with hold serve. Our operators have continued to raise the bar on performance. During the quarter, our team once again delivered labor results that beat our internal expectations. It's important to point out that we're achieving this efficiency gain while maintaining guest satisfaction scores at the improved level we established last year. This demonstrates that efficiency and hospitality are not mutually exclusive, and our ops team is proving every day that we can deliver both. The numbers also tell the story. The increased efficiency we achieved in the third quarter drove a 90 basis point improvement year-over-year in restaurant level operating profit, almost entirely driven by improvements in labor. These efficiency gains are being accomplished through a healthy blend of process changes, analytics and technology, combined with the entrepreneurial spirit of our operators who are finding the ways to work smarter and more efficiently while refusing to compromise the guest experience. Our managing partner program also ensures that our partners see the benefits of their efforts in increased compensation as they share in the gains that they are achieving in their restaurants. As we turn to our drive traffic initiative, I want to reemphasize that we're committed to creating sustainable traffic growth that is rooted in improvements across all of the relevant consumer touch points, including compelling value for the guest, delivering on our commitment of food quality and great taste and a welcoming hospitable and fun environment. As I outlined on our last call, our plan is to build traffic-driving layers, and I'm pleased with our progress. In addressing these elements of our plan, our first priority was to address our competitive positioning in price point value offers. The Red Robin Big Yummm burger deal that we launched at the beginning of the third quarter has performed above our expectations, resulting in an approximately 250 basis point sequential traffic improvement from the second quarter to the third quarter. More specifically, we entered Q3 with a traffic run rate of approximately down 7%, and we exited the quarter with that run rate at approximately negative 1.4%, a result that we're extremely pleased with. Our Big Yummm deal resonated strongly with our midweek dining occasions, particularly the lunch daypart and delivers on our commitment to provide our guests the gift of time. On average, we're delivering a complete dining experience in under 45 minutes. This promotion delivers exactly what we were looking for, immediate market relevance and trial generation. To build on this momentum, our team remains hard at work on new menu innovations to accelerate our competitive positioning and price point value offers, and we look forward to sharing updates on our future calls. That brings us to our second traffic-driving layer. During the third quarter, we launched our data-driven marketing initiative, incorporating microtargeting capabilities that will allow us to engage guests more personally, precisely and efficiently than traditional broad-based messaging. This approach to marketing is intended to more efficiently and effectively reach guests, allowing us to level the playing field against larger, more resourced competitors. These unique and internally developed algorithms help us understand guest decision-making behaviors and as a result, allow us to specifically target messaging and promotion in ways that resonate more directly with each guest. During our initial rollout of this approach, we saw outsized improvements in traffic and sales for the initial cohort of prioritized restaurants, and we plan to expand our reach to more of our restaurants each period. In addition to the progress we've seen within the 4 walls of the restaurant, we've also seen a dramatic increase in our off-premise business, driven largely through a significantly expanded approach to catering. The off-premise portion of our business represents approximately 25% of sales in the third quarter and delivered traffic growth of 2.9%, a signal that our guests love our food and want to enjoy it in more places than just the dining room. We expect to continue to aggressively grow this segment of our business as we move forward. Next is our Find Money initiative. I'm pleased to report another quarter where adjusted EBITDA beat our expectations, which continues to reinforce our confidence in the operational improvements we've implemented. In addition, thanks to our corporate efficiency initiatives, we continue to expect between $3 million to $4 million benefit in G&A in 2025 with a $10 million run rate expected to be achieved in 2026. These savings are critical as we balance our investment priorities with delivering profitability. Regarding our capital structure, we're exploring all elements that I discussed when I introduced our "First Choice" Plan. This includes taking a comprehensive and proactive approach through multiple initiatives to give us optionality as we work to strengthen our balance sheet and position the company for long-term success. We've launched 4 primary tactics to accomplish this. First, as part of this process, we announced today a 6-month extension to the term of our current credit agreement, with the loan now maturing in September of 2027 as compared to March of 2027 previously. This extension provides helpful time to optimize the value of the other efforts. Second, we've engaged Jefferies to assist us in refinancing our debt to further optimize our capital structure. Jefferies is an industry leader in this space, and we expect to work quickly and effectively with them to deliver a successful outcome on this effort as soon as practicable. Third, today, we announced the establishment of an at-the-market or ATM program, which allows us to sell up to $40 million in equity open market transactions. While we may or may not execute against this option, we put this in place so that we have the option to generate funds if needed and to be in a position to move quickly where we may see compelling opportunities. Fourth is our refranchising effort. We continue to have great interest and engagement from both existing and potential new franchisees developed through our partnership with Brookwood Associates. We're encouraged by the level of interest in our brand, and we remain committed to a thoughtful process that maximizes value for our shareholders in both the short and long term. Refranchising is yet another important option to have in our tool belt as we optimize our overall financing structure and work to strengthen our balance sheet. We'll continue to share updates as these projects progress. Supported by the gains we've seen in our operating results through the first 3 quarters of the year, we believe these actions will provide us with the options and flexibility to create the best long-term financing structure for Red Robin while also assisting us with resources to reinvest in the business. Next, let me provide you with an update to our fixed restaurants efforts. As I mentioned on our last call, we identified the need to invest in critical deferred maintenance to better align our restaurant atmosphere with competitive standards. I'm pleased to report that we successfully completed refreshes in 20 restaurants across 4 markets during the third quarter. As a reminder, these are relatively light touch refreshes from a capital perspective and not full reimaging projects, averaging approximately $40,000 per refresh in the third quarter. We've prioritized these investments by targeting areas that we believe will directly benefit the guest experience. This includes flooring updates, internal finishings, furniture repairs and lighting, coupled with exterior improvements, including signage, paint, lighting and landscaping, all of which will directly benefit guest perceptions and experience. While results are still early, we're already seeing measurable improvements in both sales and traffic performance at these 20 locations. These results further support our thesis that well-executed improvements that enhance the guests first impression and overall dining atmosphere can deliver measurable results relatively quickly. The success of these actions has helped us fine-tune our investment priorities as we look to expand the number of restaurants that we can touch. Our goal is to offer an environment that matches the quality of food and hospitality that our teams deliver every day, and we'll continue to take a disciplined approach as we expand this initiative further across our system. Lastly, let me briefly touch on our Win Together plan. As I've continued to travel the country, visiting our restaurants and meeting with restaurant teams, I'm hearing increasingly positive feedback from our team members who see that we're delivering on the promises we made earlier this year. They wanted a value offering, and we delivered the Big Yummm deal. They asked for help addressing long-standing maintenance and repair issues, and we successfully refreshed 20 restaurants during the quarter with more to come. They ask for better technology and tools to execute more efficiently, and we're continuing to roll out additional technology with more planned ahead. It's encouraging to see that our team is embracing our guest-centric culture. And when combined with the strength of our operating results, we believe it's prudent to modestly raise our CapEx guidance for the year as we further accelerate some of these key initiatives that directly support our team members and their ability to deliver a great guest experience. Encouragingly, we've continued to see our team member turnover rates come down each period to a point where we're now at levels below industry benchmarks. As we look ahead, we believe this collaborative team approach will further strengthen our culture and position us favorably to attract and retain the best talent in the industry. To the almost 20,000 Red Robin team members across the country, I want to extend a heartfelt thank you for your dedication and hard work. I'm proud of what we've accomplished so far and excited about what's still to come. With that, Todd will now review our third quarter results. Todd Wilson: Thank you, Dave, and good afternoon, everyone. In the third quarter, total revenues were $265.1 million versus $274.6 million in the third quarter of fiscal 2024. Comparable restaurant revenue beat our expectations for the quarter and are in line with last week's announcement at a decline of 1.2%. This result includes a 1.7% increase in net menu price, offset by a 3% decline in guest traffic. Guest traffic trends improved sequentially through the quarter and delivered a 250 basis point trend improvement as compared to the second quarter. We attribute this improvement to the success of our Big Yummm Burger deal that launched in July and continued traffic strength in our off-premise business. Restaurant level operating profit as a percentage of restaurant revenue was 9.9%, an increase of 90 basis points compared to the third quarter of 2024. This was driven by the continued success of our operations team, delivering significant gains in labor efficiency. I would also note, while cost of goods increased due in part to beef inflation that we anticipated, our commitment to deliver value for the guest is also reflected with this increase with the goal that this value ultimately contributes to delivering increasing guest traffic. General and administrative costs were $16.9 million as compared to $20.8 million in the third quarter of 2024. The reduction is primarily due to not holding a partner conference event in 2025 as we did in 2024. In 2024, this cost was mostly offset with vendor contributions credited to other parts of the income statement. Selling expenses were $6.8 million, an increase as compared to $5.5 million in the third quarter of 2024. The increase is primarily due to additional investment in third-party delivery platforms and other channels. Adjusted EBITDA was $7.6 million in the third quarter of 2025, an increase of $3.4 million versus the third quarter of 2024. Adjusted EBITDA increased due to cost efficiency gains, particularly in labor and the benefit of menu price increases. We ended the third quarter with $21.7 million of cash and cash equivalents, $9.2 million of restricted cash and $29 million of available borrowing capacity under our revolving line of credit. Turning to our outlook. We will now provide the following guidance for 2025. First, total revenue of approximately $1.2 billion is unchanged from our prior guidance. This incorporates expectations that comparable restaurant sales will decline approximately 3% in the fourth quarter, and we will end 2025 with 386 company-owned restaurants in operation. Second, restaurant-level operating profit of at least 12.5% as compared to our prior guidance of 12% to 13%. Third, we now expect adjusted EBITDA of at least $65 million as compared to $60 million to $65 million previously. Finally, we now expect capital expenditures of approximately $33 million as compared to approximately $30 million previously as we continue to execute against the "First Choice" Plan and make investments back into our restaurants and technology. As added commentary on our guidance, I would note the following points. In recent weeks, we have seen guest traffic trends slow from where we exited the third quarter. We attribute this to intentional timing shifts in our marketing spend and the consumer impact of the government shutdown. While our guidance is grounded in expectation for both traffic and comparable restaurant sales to decline approximately 3% in the fourth quarter, we are optimistic traffic trends will regain traction as our marketing spend levels increase in the remainder of the quarter. On the margin side, we expect cost of goods in the fourth quarter to be similar to the third quarter. For the other operating cost categories, we expect marginal improvement in the fourth quarter as compared to the third as we leverage fixed costs with higher seasonal sales in the fourth quarter. Overall, we are very pleased with our progress, capturing cost efficiencies while delivering a great guest experience. We have made significant gains, increasing restaurant level profitability, reducing debt and growing EBITDA. Initial results from the launch of the Big Yummm are encouraging, and we look forward to the great value at Red Robin delivering growing guest counts. In closing, I'd like to offer a tremendous thank you to our operators, our restaurant teams and the team at the restaurant support center. This great progress in the business is a result of your hard work, and I'm excited for what's next. Dave, I will now turn the call back to you. David Pace: Thanks, Todd. The progress we've made across all pillars of our "First Choice" Plan gives me confidence that we have the right strategy in place. Our operators are proving every day that efficiency and hospitality can coexist. Our strategic value offering is delivering the expected change in our traffic trends, and we have additional innovations under development for next year. Our data-driven marketing capabilities are being strengthened to position us to compete more effectively, and our restaurant refresh initiatives are being well received by both our team members and our guests. We're not declaring victory, but delivering a sustainable recovery requires a clear strategy, coordinated tactics and engaged team and disciplined execution. I've seen personally that our Red Robin team members are up to the challenge. Let me close with this. We have more work ahead of us, but we're building momentum with each period and each quarter, positioning us to create a Red Robin that our guests will choose first. Our team members are proud to work for and our shareholders can rely on for predictable and reliable returns. Before I hand it over to the operator for questions, I want to call out 2 organizational announcements that we made last week. First, I want to recognize the appointment of Jesse Griffith to Chief Operations Officer. As you heard today, our operations team under Jesse's leadership has been a major contributor to the progress we've seen both financially and with our guests. This is a well-deserved move that is reflective of those contributions. I'd also like to acknowledge Todd's plan to move on to another opportunity in our industry. During his time with Red Robin, Todd has been an integral part and member of our executive team and has provided great leadership to the finance team and well beyond. His many contributions were greatly appreciated by all of us, and I want to thank him for all that he did and wish him well in his next role. With that, we're now happy to take your questions. Operator, please open the lines. Operator: [Operator Instructions] The first question comes from Jeremy Hamblin from Craig-Hallum. Jeremy Hamblin: Congrats on the strong results. I wanted to start with just some of the commentary around the Big Yummm initiative and where it's mixing. Just to get a sense for where that's mixing as a portion of sales. And then as you talked about a little bit of an uptick here in food and beverage costs to get a sense if you expect that to kind of stabilize in this current range or given a little bit of pressure on beef prices as well, we should be expecting that to click up a little bit here going forward? David Pace: Yes. Thanks, Jeremy. Two parts. I'll let Todd answer the second part. The first point about mix, the big Yummm deal is mixing at about 8% of our total sales. So we feel pretty good about that. That's kind of where we expected it to come in from a mix standpoint, but it's definitely having the impact that we had hoped it would. Todd Wilson: Yes. Jeremy, on the second part of your question, just overall cost of goods, beef is certainly the most inflationary part of our basket right now. We do think the 25% that we saw in Q3, we think that's the right guide for Q4 as well. The team -- we've got different measures that we're putting in place to mitigate that beef inflation. So we think we can hold that 25% through the fourth quarter. Jeremy Hamblin: Great. And then just switching gears a bit here. I wanted to understand the cost of getting the amendment to your current debt agreement, getting that extension to September 2027. What was the financial cost of that getting the extra 6 months? And then secondly, related to the refranchising efforts to get a sense for how that initiative is progressing and what valuations are looking like if you have maybe a better sense, I think you called out initially 25 to 75 potential locations. If you have winnowed that down a bit more or what other color you might be able to share with us? David Pace: Yes. So let me take that, and I'll let Todd kind of pile on here in a second. In terms of the extension, it was a 50 basis point cost to us to extend for that period of time. So we thought that was reasonable given what we were looking to do and why we wanted to do it. Regarding the second point about refranchising, I would -- I guess what I'd say to you, Jeremy, is everything is going as we had expected and hoped on refranchising. So the available number of restaurants that there's interest in is in the range that we communicated originally. We have indications of interest, specific proposals put forward that we haven't really negotiated against yet. We're still in the middle of kind of vetting and kind of getting to know who's who. And so it's moving ahead. It's -- as I said in the remarks, it's an option for us. I mean we're going to kind of toggle all of these options to figure out the best combination as we move forward on the refinancing and the whole strengthening of the balance sheet. and refranchising is still one of those options. I'd say we're where we had thought we would be. And -- but nothing firm to announce beyond right now. Todd, do you want to add anything? Todd Wilson: No, I think that I'd just reiterate those points. Refranchising an option. It was, I think, a good thing for the business to get the Fortress amendment or the amendment with our lender across the finish line. It gives us the time to really vet through those other options and make sure we maximize value, as Dave said on the call. So a good progress for us. Jeremy Hamblin: Great. Congratulations, Todd. Best wishes on your -- the next part of your journey. Todd Wilson: Thank you, Jeremy. Really appreciate it. Operator: The next question comes from Todd Brooks from Benchmark Stern. Todd Brooks: I'll echo Jeremy's congratulations, Todd. And also, Jesse, I assume you might be in the room, congrats on the promotion to COO, well deserved. Todd Wilson: Thanks, Todd. Todd Brooks: I wanted to lead off and kind of take -- thanks for dimensionalizing kind of that entry and exit traffic run rate for the business. Dave, I think Big Yummm was launched third week of July, so not even a full quarter's worth of impact. And I know you had spoken about working against things like upsell and kind of coaching up the front-of-house teams, how to sell the product. And the mix looked pretty benign and only down 10 basis points. So I guess kind of coming out of Q3, and I know you talked about a wiggle down here to start the quarter, but unlocking the big Yummm and the traffic benefit from it, my sense is, is there still some fruit in front of us to drive further improvement from it? David Pace: Yes, we think there is. And we think there are ways to even expand the impact of Big Yummm even further, which we're working on. I think you're right. It wasn't a full quarter. It wasn't day 1. It was probably 3 weeks in. That's probably about right, what you said. So we feel good about it. It came -- it did what we had hoped it would do. It got traffic. It gave people a reason to come in. It got trial again. So from a tactical standpoint, it did what we had hoped to do. Beyond that, I would tell you we're taking a much more strategic look at the entire menu and how we package it together. And so that's some of the pretty substantial work that's going on, which includes Big Yummm and beyond. So I think you'll see more. I do think there's more there. There was a little wobble coming into the quarter. But for us, and I'm sure you know this, the way the fourth quarter plays out for us, October is the softest month. November picks up a little bit, starts to pick up momentum and then December is when we really make hay. So for us, we've consciously shifted marketing spend from October to the back end. And so a little bit of it was a pullback in marketing spend purposely to backload fish when the fish are or the fish are. Todd Brooks: Great. And just one follow-up there. What do you feel or what are you hearing from customers about the importance of having an everyday value platform now instead of having a be appointment dining? How important has that been and what you're hearing and feedback? David Pace: I think we're seeing -- look, it resonates with the guest and it resonates in, as we said, in the kind of early week, midweek and lunch dayparts. The value offering, Todd, is, I think, is a slightly different occasion from the weekend offering in that weekends are date night, and that's when people go out early week lunch, they're kind of looking for a value opportunity to utilize us. So we -- it's part of the thing that we're working on is we think there's opportunity, but there's opportunity in the way we use it and when we use it. I don't think it's going to change. I do think it's going to be every day. I don't see us kind of limiting it back to certain days of the week. But the reality is it does have an impact on some parts of the week more than others. Todd Brooks: Great. Dave, you also mentioned the data-driven marketing efforts and the fact that you had kind of a cohort of stores that maybe are a little bit more challenged where you saw really outsized improvement, I think, was your actual words from these efforts. Can you talk about any way to dimensionalize the traffic improvement from the effort? And then you talked about a path to expand this further. Can you maybe walk us through what that looks like going into '26? David Pace: Yes. I mean because of the way this is set up, Todd, this is a very -- I've said this, and I've tried to kind of be as clear as I can on this, but it is a hyper micro targeted approach where we get into the individual restaurant and we get into the individual guests, we understand the trade area. We understand the makeup of it. We understand what pulls people in. Is it a value play? Or is it a premium burger play? What is the reason for people making the shift? And we can get that information down to a highly targeted level. So as we went into the first cohort, as I said, we started with some. We learned as we went into this that, oh, maybe value resonates with this group, but it doesn't resonate with that group. Let's focus on more of a premium burger or maybe a different set of messaging. geez, that seems to resonate more with this group. Let's kind of plus up that messaging in this cohort, plus up the value messaging in another cohort. And so we're kind of generating the knowledge base that we can then cluster and figure out how to deploy messaging and promotions on a highly micro-targeted basis. I mean I'm trying to explain this without kind of showing you, but it's -- that's where we're going with that. So anyway, we started with that. We saw performance, and I'll let Todd kind of pile on top of this above the performance of the rest of the system. And so as we've gone out, we started with, I think, 50 restaurants. We expanded beyond. We're probably -- we got to 130. We're looking at kind of walking that out further as we get the data. And so we're -- the intention is to expand that across the system. How quickly we get there, we're going as quick as we can. Todd Wilson: Todd, I'll just tag on quickly here to expand on the point of the over 100 restaurants that the team has been focused on. Sequentially, there's been a significant improvement in traffic trends in those restaurants to the point that in many weeks, obviously, we're looking daily, weekly, long term. But in many weeks and many periods, we're seeing that those restaurants are delivering positive traffic on a year-over-year basis. And that's ultimately where we want to be. And so now it's just a matter of, hey, we found a playbook that works in those 100 plus, and we'll work to expand that to the other restaurants, obviously. Todd Brooks: Okay. Great. And I'll wrap it up into one final question. If you take the traffic driving benefit of the Big Yummm and you take the early success with the data-driven marketing, Dave, as you're thinking out to '26, I think year-to-date, there's maybe been 17 restaurant closures. Thoughts on stability of the base and maybe improving kind of that bottom decile or bottom quartile of stores with the early success that you're seeing from these 2 initiatives? David Pace: Yes. Good question. No question, we're seeing it. No question, our ops team is focused on these target restaurants to try and see -- we're not in the business of closing restaurants. We're trying to keep them open and run them and make money, which we've moved a number of them kind of off the watch list back performing where we want them to be. There's still some, as there always is, that aren't quite there yet. We'll give it a shot with them. There's probably going to be a subset of additional closures, but the list is far, far shorter than what we had talked about previously. Operator: The next question comes from Mark Smith from Lake Street Capital. Mark Smith: I just want to dig in a little bit more on menu mix and kind of check dynamics and consumer behavior. Big seem to mix well. But can you talk about kind of other parts of the menu, beverages, desserts, people sharing meals. Curious to hear what you're seeing in consumer behavior kind of during the quarter and even post quarter. Todd Wilson: Mark, Todd here. I'll start. To -- you mentioned, I think others have as well. We were pleased with the mix outcome. Going into the quarter, we thought the impact of the Big Yummm deal may have resulted in more of a mix impact than we saw. Part of that is a credit to our operators. We've given the guests trade-up options. And in many cases, they have taken those, right? So many people are getting the value in the $9.99 deal, but others are trading up to ad toppings, ad beverages, those types of things. So that helps support the overall check. In terms of other dynamics, one of the areas we always look at add-on type trends in terms of appetizers, desserts, beverages. We've seen those hold steady. And so we think that's a good thing for us in this environment where we see the headlines that maybe consumers are managing their wallets a little bit more. We've seen those areas hold up. So the mix that we saw, we did report, obviously, a little bit of a negative mix. Some of that was the Big Yum. Some of that is a mathematical phenomenon, I'll say, of the growth in our catering business that Dave referenced. That comes at a lower PPA. And so there's just a natural dilutive effect there as that part of our business grows. But we're seeing stability in appetizers, desserts, beverages with some of the add-ons helping to mitigate the impact of the lower price point on Big Yummm. David Pace: Yes, Mark, I would just add, I think I agree with everything Todd said. I think the other thing I would offer is we learned a lot going through this big Yummm deal, and we learned a lot about mix in consumer behaviors. And what resonates on our menu and what we may want to look at further. And so we're doing a lot of menu work right now that I think you'll see in 2026 that is an output of the learnings that we've got through the Big Yummm deal. Big Yummm is a very narrow, very tactical execution. I think the approach that you'll see us evolve to is a much broader, more strategic approach, including the Big Yummm, but beyond that. Mark Smith: Okay. Then I also wanted to ask about G&A. I know you didn't have this partners conference, but it looks really pretty good. I'm curious just how sustainable G&A is at these levels? Is it further cuts or maybe some ramp back up with more investments. Todd Wilson: Yes, Mark, Todd here. I'll start. I'd frame it this way. When we look at our Q3 spend, we're expecting Q4 to be similar. So we think it is sustainable. It reflects some of the efficiencies that we have put in place and started to capture this year. And so we're certainly pleased with that. But as we look at just Q4 as an example, we expect Q4 to be similar to Q3. David Pace: Yes. Look, I think we expect it to hold, Mark. But I think there's -- we're looking at some other opportunities in the future. I mean I'm not worried about it. I don't have anything to signal yet, but I think there are some opportunities that we can not only hold but maybe expand a little further. Mark Smith: Excellent. And last one for me, Todd, I apologize, but I missed some of your comp guidance here for Q4. If you can walk through that and kind of the thought process behind where you're at for kind of comp expectation. Todd Wilson: Yes, Mark, happy to. So the commentary in the prepared remarks, I talked about both same-store sales and traffic expectation for Q4 down 3%. The traffic, I think, is straightforward. That's frankly, exactly what we ran in Q3 in total at least, and we think is achievable, especially to Dave's point with the backloaded marketing. The sales being equal to traffic is obviously a couple of puts and takes. We do have a little bit of what I'll call gross menu price increase in place, meaning we have some year-over-year benefit from menu price increases. That becomes a lesser level in Q4 than it was in Q3. And so we expect mix will basically negate those menu price changes. So no net check, just the benefit or the impact of traffic flowing through to the comp number, if you follow me through all that. Operator: Ladies and gentlemen, we have reached the end of the question-and-answer session. And I'd like to turn the call back to Mr. Dave Pace for closing remarks. Thank you. David Pace: Okay. Just quickly, thanks, everybody, for joining the call. We appreciate it, and we look forward to giving our next update after the fourth quarter. So thanks, everyone. Talk to you soon. Operator: Thank you. Ladies and gentlemen, that does conclude today's conference for today. Thank you very much for joining us. You may now disconnect your lines.
Operator: Ladies and gentlemen, thank you for joining us, and welcome to the Belite Bio Third Quarter 2025 Earnings Call. [Operator Instructions]. I will now hand the call over to Julie Fallon. Please go ahead. Julie Fallon: Good afternoon, everyone. Thank you for joining us. On the call today are Dr. Tom Lin, Chairman and CEO of Belite Bio; Dr. Hendrik Scholl, Chief Medical Officer; Dr. Nathan Mata, Chief Scientific Officer; and Hao-Yuan Chuang, Chief Financial Officer. Before we begin, let me point out that we will be making forward-looking statements that are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties, and actual results may differ materially. We encourage you to consult the risk factors discussed in our SEC filings for additional detail. And now I'll turn the call over to Dr. Lin. Dr. Lin? Yu-Hsin Lin: Thank you for joining today's call to discuss our third quarter 2025 financial results. I'd like to start immediately by highlighting our recent progress. For GA, we completed the enrollment of the Phase III PHOENIX trial with 530 subjects. For Stargardt's disease, we have completed the Phase III DRAGON trial, and we now look forward to reporting the final top line data by end of this month. The DRAGON II trial have enrolled approximately 35 subjects of our targeted enrollment of approximately 60 subjects, including 10 Japanese subjects. The data from Japanese subjects is intended to expedite a new drug application in Japan. We have been in close communications with Japan's PMDA and Sakigake-designated concierge to ensure that our JNDA is submitted as one of the first countries for market authorization. We also recently received positive feedback from regulatory authorities. Specifically, China's NMPA agreed to accept NDA for priority review based on the interim analysis results from the Phase III DRAGON trial. Additionally, the U.K.'s MHRA agreed to accept conditional marketing authorization application also based on DRAGON's interim analysis results. With the consistent feedback from major regulatory agencies across the world, we are encouraged that the DRAGON trial provides a strong foundation for global submissions and potential approvals. Lastly, we have completed a $50 million registered direct offering and an upsized $125 million private placement with leading health care investors with the potential for an additional $165 million upon full warrant exercise. This investment puts us in a very good position to advance and prepare for Tinlarebant's commercialization. I'll now turn over the presentation to Hao-Yuan. Hao-Yuan? Hao-Yuan Chuang: Thank you, Tom. For Q3 2025, we had R&D expenses of $10.3 million compared to $6.8 million for the same period last year. The increase was mainly due to expenses related to the DRAGON trial and the PHOENIX trial, partially offsetting by the Australian R&D tax incentive program. It was also due to an increase in share-based compensation expenses. Regarding G&A expenses, we had G&A expenses of $12.7 million compared to $2.9 million for the same period last year. The increase was primarily driven by an increase in share-based compensation expenses from the new grant of equity incentive plan this year, which has become higher as our share price and exercise price increased. Overall, we had a net loss of $21.7 million compared to a net loss of $8.7 million for the same period last year. It is important to note that, as I said, the majority of our expense increase came from the share-based compensation, which was about $12.9 million and was not cash related. Our total operating cash outflow for the third quarter was approximately $9.3 million, similar to $8.6 million in the second quarter. Moving to the balance sheet. As Tom shared, we were pleased to complete a registered direct offering and a significant pipe with gross proceeds of total $140 million with potential for up to additional $165 million of our full warrant exercise. With that, at the end of Q3, we had $275.6 million in cash, liquidity from time deposit and U.S. treasury bills. We have made significant progress toward our key milestone year-to-date. We sincerely appreciate the continued trust and support from our shareholders. Our balance sheet remains strong and is expected to provide sufficient funding to support our clinical trials and preparation for commercialization. We are well positioned to achieve our future objectives. With that, I'll turn the call back to the operator for Q&A. Operator? Operator: [Operator Instructions]. Your first question comes from the line of Yi Chen with H.C. Wainwright. Yi Chen: So can you tell us whether you have submitted the application to the regulatory agency in China and U.K.? And if not, when do you plan to do so? Yu-Hsin Lin: No, we have not. We plan to submit our first half next year. As you can see, there's a couple of regulatory agencies that has given us the green light to submit, whether it be based on interim analysis or waiting for the final report for the DRAGON study to come out. We want to maintain the consistent data package across all regulatory agencies. And therefore, the time line for that will be first half of 2026. Yi Chen: Got it. and can you also provide us with the current amount of shares outstanding after the most recent announcement. Yu-Hsin Lin: Hao-Yuan, this probably a question for you. Hao-Yuan Chuang: Yes, I think somewhere like the total outstanding shares, I think list on the recent S3. I think somewhere like $35 million. Operator: Your next question comes from the line of Bruce Jackson with Benchmark. Bruce Jackson: Following up on the last question about the international submissions. When do you think you might be submitting the application in Japan? Yu-Hsin Lin: Actually, we are still in discussion with Japan on how the -- basically the different modules that we need to submit with Japan. We're still going through this with Japan. So the expected time line will be first half. But given that we have several countries that we need to prioritize, we still haven't had a -- we still need to wait until the data comes out and then prioritize which countries will be submitted first. Certainly, Japan is up there. But having 3, 4 countries submitted at once, we definitely wouldn't have the bandwidth to handle all those submissions and getting questions from regulatory agencies across several regions. So we still haven't had the list of where to prioritize first, but certainly FDA is one of the first authorities that we need to submit first. So yes. So I don't know if that answers your question, but at this point, we've got several that we had a green light to submit, including Japan. Bruce Jackson: Yes. Okay. Then turning over to the PHOENIX trial. Are you going to have an interim analysis that is structured in a way that was similar to the DRAGON trial. So we're going to be testing for either futility or for adequacy of the sample size? Yu-Hsin Lin: Yes, we do. So at this point, we have an interim analysis planned for next year, probably around second half next year. But regarding the -- how we're going to go about that, I probably will refer to Nathan. Do you have a better idea on the structure of the interim analysis? Nathan L. Mata: Very likely, it will be a sample size reestimation as we did for DRAGON. Same sort of scenario where we set up a conditional window specifically refer to as a promising zone to look for efficacy trends within that window to determine whether or not we can supplement the sample size with additional subjects. Bruce Jackson: Okay. Super. Then last question for me. The SG&A levels have been moving around a little bit with all the milestone payments. What should we be assuming as kind of like the baseline level for SG&A expenses going forward? Yu-Hsin Lin: Hao? Hao-Yuan Chuang: Well, Bruce, that's a good one, but it's also a little bit hard to estimate at this point of time. As you can see, we are starting to prepare for commercialization. So we're expanding the team now. So we don't have a clear -- and also many of that will involve some ESOP as well. And ESOP has become a big moving factor based on the share price on the actual expenses being recognized on the income statement. So we have a better understanding about the cash flow. But for the income statement itself, the G&A, it's a little bit hard to estimate a correct number given it was so much related to the valuation of the ESOP. Operator: [Operator Instructions]. Your next question comes from the line of Michael Okunewitch with Maxim. Michael Okunewitch: I just wanted to ask a couple of questions on your commercial preparations. In particular, what steps are you taking right now to prepare for a potential approval and launch? And then how are you prioritizing different regions since the DRAGON trial should serve for several different geographies? Yu-Hsin Lin: Sure. Hao, do you want to give more details on this? Hao-Yuan Chuang: Sure, sure. Well, apparently U.S. is the focus given the potential size, but we are applying for NDA in all the regions. Probably U.S. or some smaller single market such as Japan will be relatively easy for us to focus on. And we remain open to seek cooperation and partnership for all the other regions. Yes. But for now, I think we're targeting on those markets that we think will be easier to take the handle by ourselves. Michael Okunewitch: And do you have a sense of how large of a sales force you would need for the U.S.? Yu-Hsin Lin: Sure. We probably will start with 20 people and then maybe up to 40 people. Michael Okunewitch: And then one last for me, and I'll hop back into the queue. Just given that you have raised this additional $125 million and you have a pretty strong cash position, are you anticipating that your current cash should be sufficient for the commercial preparation and launch of Tinlarebant? Yu-Hsin Lin: Well, that's a good question. So we estimate it could be probably about $200 million to commercialize Stargardt in the U.S. That's how we designed the recent transaction with additional cash coming from the warrant. So potentially, yes, we think we should have enough. But of course, that is just estimation. Operator: [Operator Instructions]. Your next question comes from the line of Marc Goodman with Leerink. Marc Goodman: Yes. Can you confirm the U.K. basically ask for the same interim information that you sent to the U.S. FDA that got you the breakthrough designation. I mean is all of this the same exact information and in China as well, did they get anything different? Everybody got the same information? Yu-Hsin Lin: Yes. So everyone will present the same information. I'll let Hendrik answer those questions since he presented to them. Hendrik.? Hendrik Scholl: Yes. Thank you, Tom. Yes, Marc, this was the same set of information. The type of presentation was different. It was an in-person presentation in Beijing to the NMPA, including a large panel of experts from China. While for the U.K., as an example, this was an online meeting with the agency. But the data set that was the basis for the presentation and the discussion was exactly the same. Operator: There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Legacy Housing Corporation Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Curt Hodgson, Co-Founder and Executive Chairman of the Board. Please go ahead. Curtis Hodgson: Good morning. This is Curt Hodgson. I'm here with Kenny Shipley, my legacy Co-Founder and our interim CEO. Thanks for joining our third quarter 2025 conference call. Ron Arrington, our Interim Chief Financial Officer, will read the safe harbor disclosure before we get started. Ronald Arrington: Before we begin, I'm reminding our listeners that management's prepared remarks today will contain forward-looking statements, which are subject to risks and uncertainties and management may make additional forward-looking statements in response to your questions. Therefore, the company claims the protection of the safe harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from management's current expectations. Therefore, we refer you to a more detailed discussion of the risks and uncertainties in the company's annual report filed with the Securities and Exchange Commission. In addition, any projections as to the company's future performance represents management's estimates as of today's call. Legacy Housing assumes no obligation to update these projections in the future unless it is required by applicable law. Curtis Hodgson: Thanks, Ron. As you can tell from the word interim, appearing in 2 of our titles, we've had some senior turnover recently. Our prior CEO, CFO and General Counsel departed last month. Fortunately, Kenny and I have remained active in the business through these years and are excited to reengage in the day-to-day operations of profitability -- of profitably manufacturing and selling mobile homes. Ron Arrington previously served as our CFO and has led our development team recently. So we haven't skipped a beat in that section. I'm going to turn the call over to Ron now for a review of our third quarter performance, after which, I will speak briefly with our thoughts and some additional corporate updates, and then we'll open the call up for questions. Ron? Ronald Arrington: Thanks, Curt. Let's get straight to the numbers. Home sales decreased by $1.4 million or 4.8% during the 3 months ended September 30, 2025, as compared to the same period last year. The decrease was primarily driven by a decline in sales to mobile home park customers utilizing Legacy's commercial loan program as well as a decline in sales to independent dealers participating in Legacy's inventory finance program. These drops were primarily offset by increase in direct sales to customers and revenues from Legacy's company-owned heritage outlets. Net revenue per unit increased approximately 8% to $68,500 and from $63,500 year-over-year. At the end of the second quarter of 2025, Legacy increased prices to mitigate the impact increases in raw material cost and tariffs on Chinese goods. Curt can speak later as to these other steps Legacy is taking to address these challenges. Product sales remained relatively flat in the year-to-date comparison for 2025 versus 2024, declining slightly by $1.2 million or 1.3%. The sales mix changed with declines in direct sales and mobile home park sales offset by increase in company-owned retail store sales and New York inventory finance program sales. The shift in mix along with price increase explains why Legacy's net revenue per unit increased 13% to $68,600. Consumer MHP and dealer loan interest income increased to $10.9 million, up 5.4% during the third quarter as compared to the prior year. This increase was primarily driven by increases in the consumer loan portfolio and higher interest rates from MHP loans converting to variable rates per their loan agreements. Consumer NPH and dealer loan interest increased to $32.4 million, up 5.3% for the 9 months ended September 2025 as compared to 2024. Over the prior 12 months, Legacy's consumer loan portfolio increased by $21.4 million, up to $188.1 million, up 12.8%. During the same period, Legacy's MHP note portfolio remained essentially unchanged at $201.5 million. Dealer inventory finance loans decreased $1.4 million to $30.3 million, down 4.4%. Other revenue consists primarily of contract deposit foreclosures -- forfeitures, dealer consignment sales, commercial lease rents, portfolio service revenue and land sales revenue decreased by $3 million or 79% for the third quarter of 2025 compared to the third quarter of 2024. This decrease was primarily due to a significant land sale, which occurred during the third quarter of 2024 as well as a decrease in portfolio service revenue between comparison periods. For the 9-month comparison period of third quarter '25 versus third quarter 2024, other revenues declined $4.1 million or 63.1% due to the aforementioned sale as well as a significant reduction of 2025 forfeiture income on MHP deposits for canceled contracts. The cost of product sales increased $1.6 million or 7.5% during the 3 months ended September 2025 as compared to the same period in 2024. During this same comparison period, product sales declined $1.4 million or 4.6%. This increase and cost of product sales is primarily related to a sizeable increase in raw material cost and tariffs offset by a decrease in delivery, shipping and setup costs as we ship fewer units. I know tariffs are a particular interest. So to put them in perspective, they had roughly $1,200 to the cost of a standard floor plan. Product gross margin was 20.28% for the third quarter of 2025, down from 29.2% for the third quarter of 2024. The cost of product sales increased $2.7 million or 4.3% for the 9 months ended September 2025 compared to 2024. During the same period, product revenue decreased by $1.2 million or 1.3%. The increase in cost of product sales is primarily related to increases in raw material costs, tariffs and delivery shipping and setup costs, offset by a decrease in labor and factory overhead cost. Product gross margin was 27.7% for the 9 months ended September '25 compared to 31.6% for 2024. Selling, general and administrative expenses increased $1.3 million or 20.6% for the 3 months ended September '25 compared to '24. The increase was a result of a $900,000 increase in legal expenses, a $500,000 increase in loan portfolio loss expenses and a $0.5 million increase in professional and consulting fees, partially offset by a $600,000 decrease in the company's self-insured health benefit fan. SG&A increased $2.7 million or 15.5% for the 9 months ended September 2025 compared to 2024. The increase was primarily a result of a $1.7 million increase in loan portfolio expenses, $800,000 increase in legal costs, a $700,000 increase in service and warranty expenses and a $400,000 increase in professional and consulting fees, offset by a $700,000 decrease in the company's self-insured health benefit expenses and a $400,000 decrease in corporate and general payroll expenses. Other nonoperating income decreased $6.9 million or 72.3% over the 9-month comparison period ending September '25 compared to September 2024. This was primarily due to a significant onetime transaction during the 2024 period. The 2 largest were a $4.9 million fair market value adjustment and loan restructuring gains and a $2 million of liability of accrual reverses related to various completed MHP contracts. So that's the bottom line for a tough quarter, net increase -- net income decreased $7.2 million or 45.3% to $8.6 million compared to $15.8 million in the third quarter of 2024. Net income margin was 21.4%, down from 35.7% for the third quarter of 2024. For the 9 months ended September '25 compared to '24, net income declined $13 million or 28.7% to $33.6 million from $47.1 million. Net income margin was 26.6% for the 9 months ended September 2025 compared to 36.3% in 2024. We ended the third quarter of 2025 with $13.6 million in cash. In July of 2023, we closed a new revolving credit facility with Prosperity Bank. The facility is for $15 million with a $25 million accordion feature. It is secured by our consumer loan portfolio and currently has a 0 balance. As of September '24, we had approximately $570,000 in cash and equivalents and a balance of [ $2.6 million ] on our line of credit. So you can see that despite the lower sales and net margin, we have continued to strengthen our balance sheet. Legacy has delivered a 9.5% return on shareholders' equity over the last 4 quarters ended September '25. And at the end of the third quarter, Legacy's book value per basic share outstanding was $21.85, an increase of $1.90 since the same period of 2024. I'll now turn things back over to Curt. Curtis Hodgson: Thanks, Ron. So let's quickly discuss the market, followed by our financial performance and updates on key issues and strategic initiatives. The latest data shows continued slowing in the industry as a whole with the Texas Manufactured Housing Association reporting a seasoning adjusted drop of 3.8% in August, and down 6.1% on the raw total from September of 2024. Despite the continued housing affordability problem in our markets, macroeconomic headwinds, such as falling consumer confidence, large tariff rises necessitating price increases are somewhat restraining growth. On the bright side, we held our big annual show in September in Fort Worth. The show was one of the most successful that the company has ever had. Orders booked there will ensure higher production rates for the fourth quarter over the third quarter and carrying on well into the first quarter of '26. Dealer and park customers ordered homes at our Fall show. I'd kind of like to dive into some macro topics for a minute. So I think we're not happy with these results, and I think that probably explains why the changing of the guard, sort of speak, happened last month. Our retail and dealer side of our business saw sales falling for the last year or more. Our community park side of the business saw sales falling for the last year or so. Heritage, our retail side actually had increased sales and our finance division continued to be profitable, very much so low, but somewhat increasing charge-offs due to more foreclosures and lower resale prices. As of September 30, I think 99% of our mobile home notes are better were performing as agreed and about 97.5% of our consumer loans were performing as agreed and by that, we mean are they within 30 days of being current. We monitor these numbers are monthly and are confident that our portfolios are very strong. We have begun to feel the effects of ICE enforcement on our labor force and on customer demand and on the performance of our retail portfolio. I don't think it's real significant but we definitely are feeling the effects of fewer Hispanic customers in our market, particularly in Texas, but I think it's also true in the Southeast. We began hiring at key positions. We had kind of a lull in hiring. I think our past management can't really be credited with hiring anybody of consequence. We've already hired a new General Manager for Fort Worth. We're -- as you know, Norman Newton is not with the company. He was released earlier. We are actively looking for a new CEO with industry experience. So our hiring is since in the last few weeks when Kenny and I got back about, we're focusing on filling the seats with some quality people. Our working capital is too high, and I've been noticing this in our financials for some time. We have too much raw material, probably double of what we should have and our finished inventory is also high. At any given time, we have as many as 200 houses in the yard, which is probably double of what it should be. Our finished good inventory was $24 million, including work in progress at the end of the quarter. I think that's probably double of what it should be. So if we can reduce our working capital or, let's say, our unproductive working capital, that will free up $10 million, $20 million to be reinvested into the business. We remain in a strong cash position. We'll be able to complete the AmeriCasa purchase without incurring any debt. On a positive, I don't know who all is on the call and what their knowledge of Texas is, but the data centers in Texas are all underway. There's going to be at least 5,000 housing units probably created in the next 24 months to tend to that -- to those housing needs, almost all of which will come from the 30-plus manufacturing facilities located in the state of Texas, ours being a couple of those. So our business in Texas anyway looks like it's going to be really good for the next year or 2. I'd like to discuss a little bit about the AmeriCasa acquisition. We've known this partnership between Jeff Gainsborough and Norman Newton for at least a decade. They've been a customer of ours. They've had a portfolio with us the whole way. We're basically buying them out of everything they have in the mobile home business and Norman Newton has agreed to come to work as a Director of Revenue for the company. He has particular expertise in passively or should I say, absency managing of dealerships, which has really -- been a real challenge for us. He has a vibrant dealership that we're acquiring in Houston and it doesn't have an owner on the premises and he's proven that his model works pretty good, and we hope to be able to use his model over our 12 other locations that we have at the retail level. We are acquiring some other things in this process. It's kind of a hodgepodge of things. The net result is about $9 million or $10 million will be allocated among the retailership that we're acquiring in Houston, the nearshoring that we're affiliating with in Colombia, which I visited myself and the what we call the home FX model. which is Norm's proprietary system, including software of managing retail locations remotely. So we're looking forward to that, integrating that with our system so that we can do more retailing at our company stores. I think that the likelihood of that is extremely high. We continue to deliver strong operating margins and consistent profitability. In fact, we've never had a quarterly loss in our entire history, not just from the 6 years plus that we've been public, but for the -- actually, the 40-plus years that Kenny and I have maintained our partnership. The loan portfolios are on track to deliver about $40 million straight to the bottom line this year. As far as valuation, Kenny and I started this company in '97 with about $700,000. We took in about $60 million of outside money when we went public and the combination of that has now grown to $522 million over the 20-plus years that we've done this, and we'll continue to grow that book value. That's pretty much after taxes. We make it. We say that we invested, and that's what we've always done, and that's the basic value that we'll be getting back to. I think we got a little distracted over the last couple of years, and we intend to get back to doing what we do, which is selling a good product for a fair price, financing and distributing it in a variety of ways. Our book bag consists mostly of finance notes realize that, that book value wasn't ever in place at any given time. It's what we evolve to. We basically finance notes to enhance our own yields, but we like to finance business from a return on investment point of view, too. The Norm portfolio that we're acquiring, which is a little over $10 million notes, carries interest at over 16%. And we have experience with his portfolios because we have 1 in common with them. It's always performed very well. And we expect that portfolio we're acquiring from Norm will perform well and make everybody money. We published our book value per share each quarter. As Ron mentioned, as of September 30, our book value is $21.85 per share. We've also bought back through time. Ron might be able to quantify this, I don't know, but I want to say it's somewhere in the neighborhood of $20 million or more of stock, which sits on our balance sheet as treasury stock. With our stock trading essentially the same price, we're looking at this changing the guard as an opportunity to maybe reinvigorate our growth and innovation, which should increase profit margins and create a stock premium. On the flip side, if the stock continues to trade somewhere around book value, we will use our own liquidity as usual to repurchase shares. So I think the bottom is fairly well protected subject to our limitations of how much we can buy back in any given day. And as you know, with the new buyback laws, every time we buy back shares, we do pay, I think it's a 1% tax to the federal government. I believe we can continue building shareholders' equity even in this high interest slowing growth economy and then our share price will begin to reflect this. I think when we get the uncertainty behind us, we'll get back to some reasonable PE ratio. Any strategic moves are icing on the cake in my opinion, this is a great time to be an owner of a legacy, particularly if you're in at today's price as you'll part of the company that's never lost money in any year since its founding. As for affordability is now front and center in the U.S. in housing. We are positioned to provide that affordable housing to thousands of family over the coming years. And for those of you that are not from Texas, Texas is a nice place to be right now. The economy is still doing great. And we haven't had any hiccups as far as the economy is concerned. I want to address a couple of questions on e-mail that was sent to me recently. We have a lot of real estate on our books. The Austin project is coming along nicely. It's a little slower than we like. We have 3 or 4 hurdles before we're up and running. The wastewater treatment plant needs to be installed, which will not happen until probably second quarter of 2026. We're also working on getting access from the state highways that adjoin our property. The infrastructure in the middle of the property is coming along really well and will be very far along by the time we solve those other 2 problems. We are trying to negotiate with the school assistant to put [indiscernible] in the middle of it, which will be the primary amenity of the parcel. As for other real estate we own, we are not -- we have no shovels in the dirt anywhere else. It is all entitled to be mobile home properties. It's a little bit challenging when the property is worth 2, 3, 4, 5x more than you paid for it. Just because we bought it for $10,000 an acre to make a mobile home park out of it doesn't mean we would come to the same conclusion now that it's valued at $40,000 or $50,000 per acre, which is the case in several of our properties, we are entertaining divesting ourselves of the properties. I would estimate of the 6 or 7 remaining properties on the books besides faster accounting, we probably have $4 million to $5 million of gains should we choose to liquidate those properties. And if anything, that's on the low side. I was asked about the long-term margin targets for the industry. I think a lot of companies have been absorbing the increase in costs caused by tariffs and other factors. I think when they start looking at their financial statements like we just did ours, we'll probably all be in likestep with each other to slowly increase prices for the products that we're marketing. Right now has been pretty cut throw from 1 manufacturer to the other. And I'm hoping that when people realize that the tariffs are not temporary, the labor increases that we've paid, labor wage increase that we're paying are not temporary. I think we probably need to reevaluate the operating margins in the industry as a whole. That's pretty much it. I can probably turn it over to question and answers or questions. Operator: [Operator Instructions] Our first question comes from the line of Daniel Moore with CJS Securities. Dan Moore: Appreciate the color and thanks for taking questions. Maybe start with the AmeriCasa, the AmeriCasa asset purchase. Just talk to their revenue model, what are the features of the FutureHomeX platform? And how is their software expected to enhance sales growth? Curtis Hodgson: Well, we weren't really looking at their financials on the purchase. We were intrigued by the HomeX product. We've experimented a little bit with it, several of our dealers are using it. They pay a royalty to use it. If we can find a way to manage these locations remotely, whether it be from Dallas or Houston or Bogota, then we will solve a lot of the mystery. Our manufacturing peer group all maintain their own retail locations, and they struggled with how to get volumes up as well. Industry-wide, I would guess that the average retail location that is affiliated with the manufacturer sells 2, 3, 4 mobile homes per month. 2 is maybe breakeven, 3 is profitable, 4 is highly profitable. So basically, we're just trying to get our sales up on a location basis, the primary reason we made a deal with Norm was to have access to that remote management technology. And I think that's it. As far as there's 1 lot in Houston, it shines, he sells roughly 10, 12 hours a month, every month, which is more than double what we sell at our locations and Kenny and I have both visited it, is pretty impressive in that front. I mean, are we paying a little bit of premium, it kind of depends on what the management system is worth. If it is worth say, $5 million, which is what I kind of put on, I would look at it as though we paid a fair market value for all the assets we're acquiring from -- on the AmeriCasa thing. Of course, we won't know until we integrate it with our own model to see what it is, but I'm very optimistic that, that acquisition is going to help us sell more direct to retail consumers. Dan Moore: Really helpful. And just making sure I heard correctly, the size of the chattel mortgage loan portfolio that you're acquiring, I heard the 16%. Was it $30 million? Or was that off, I'm sorry. Curtis Hodgson: The portfolio -- the deal is when we close we'll acquire all loans in that portfolio that are current defined by within 30 days of currency. And we think the face value of that part of the transaction will be $10.8 million, plus or minus a couple of hundred thousand. And the effective interest rate or the interest rate on that is just over 16%, pretty similar to our portfolios. It's almost exact and that piece is right up our rally. We can absorb it rather easily, and I have confidence that it will be accretive to our financials. Dan Moore: Got it. And then you mentioned in the press release you expect normal production out of the Texas manufacturing facilities through year-end. Obviously, great to hear the encouraging show that you had at the end of September in Fort Worth. What does kind of normal mean maybe relative to Q4 last year and just talk about what your expectations are from the Georgia plant as well over the next quarter or 2? Curtis Hodgson: I don't have Q4 in front of me from last year, but I think we'll be through most of the Q4, which now, of course, we're a month into, I think we'll average 6 to 7 in Texas per day and probably 2 to 3 in Georgia. So let's call it company-wide 8 to 10 and I don't really know I'd have to dig out to see how we did in Q4 last year. 8 to 10 is profitable, so 1 shareholder elegantly pointed out, it doesn't look like the production of sales of mobile home has made money in Q3, and that is correct. But in Q4, that part of the business should contribute pretty nicely to our earnings and the first quarter looks even better than that. Dan Moore: Perfect. And then lastly, you mentioned that the industry pricing have you taken or plan to take additional price increases? I know it's a tough environment, but to offset some of the increase in raw material costs and tariffs over the next 1, 2, 3 quarters? And I'll jump back in queue. Curtis Hodgson: Well, we went first. We had announced price increase in June, and I think we were first in the industry to do it. And it may have dissuaded some of our regular buyers from buying. But since then, our competitors have joined into slight price increases we're talking overall, probably 3%, 4% has been the price increases. But again, we're all trying to use up excess capacity, 34 plants operating in the State of Texas, probably only 3 or 4 of them operating at capacity. So we do get out on pricing and financing features and all sorts of things, I mean I heard recently have a manufacturer that was offering 1 year free flooring dealers if they buy a house, we're concerned about profitability. We were able to make hay while the sun shines during COVID, but we don't intend to give it back by building them all a home unless we can make a margin on it. It's tempting to say, okay, let's just keep the factory running or whatnot, but we're not going to be giving back this tangible book value we have. I don't see the market declining, especially in Texas with the data center workforce housing lift that we're going to be having in the next 24 months. I am a little more concerned about Georgia and where its -- where its unit sales are going to come from in the Southeast. Operator: Our next question comes from the line of Alex Rygiel with Texas Capital Securities. Alexander Rygiel: A couple of quick questions here. So are you looking at other acquisitions at this time? And can you talk a bit about expanding your company-owned retail stores? Curtis Hodgson: Well, I mean, I would say that if we do any acquisitions, it will dovetail well with the one we just did. And the one we just did is designed to increase our ability to profitably distribute through company stores. So I think you hit the nail on the head, Alex, that there is an acquisition that would probably be retail centers in our market areas. The independent dealers are getting difficult to make money on. And besides that, a lot of them are aging out. There are [indiscernible] ages, very few retail centers independent retailers are owned by anybody under 50 years old. So that [indiscernible] competitors and then may be more of a push to Internet sales, we may be emphasizing used out sales. But yes, we want to be more in the retail business than we have in the past, very small percentage of revenue has been from our own retail centers, and I would hope to grow that to maybe as much as 50% by the end of next year. Alexander Rygiel: Very helpful. And then secondly, can you talk a little bit more about your kind of consumer loan portfolio and how it's performed kind of more recently how the trends have been playing out over the last few months and if there's been any kind of notable change there? Curtis Hodgson: We don't have much notable change, but there is anecdotal evidence. We had the benefit of everything that was on our books pre-COVID, was at prices substantially below current prices. So every mobile home loan on our books that was pre-Covid, I had the benefit of being right side up, so to speak, from a consumer's perspective. So every time one did repo, we actually made money on it. I mean if the guy owed $30,000 on his mobile home and turned it back to us, we sold it for $40,000. So for years, when we did repo one, it was actually kind of a windfall but since COVID those notes that have been created in the last 4 years don't have a corresponding benefit from price increases. So now when we repo a note that was made, say, in 2022, when we go to sell it, if they owe us $40,000, maybe we can only sell it for $35,000 and we have a little bit of impairment to take on it. So -- so the recovery rate on the repos is not as good as it once was. But let's just say, my opinion is more realistic that if that onetime nearly doubling of prices that we had during COVID kept us from having any losses when we did repossess something. And now as far as the percentage that are in trouble, and this is kind of the good news is we just don't have more than a couple of percent at the retail level that are problematic, which is still historically a low amount. Anecdotally, we're in Texas, I live here. Kenny lives here. And we all know somebody now that's subject to deportation or a relative that is subject to deportation. And a lot of our notes and a lot of our basic demand comes from and for lack of a better word, an immigrant market. So we're kind of expecting some difficulty there, but it hasn't shown up in the numbers yet. Alexander Rygiel: That's good to hear. And then circling back to capital allocation. Through the years, like you mentioned, you have been a buyer of stock. Can you talk about that a little bit more? And also, have there been any insider repurchases? Or has there been an open period for insider purchases at all? Curtis Hodgson: I haven't bought any, and I don't think Kenny has bought any. Unfortunately, from an insider point of view, that's pretty much the only visibility that we do on our Form 4s. In our circle of influence, which is not an insider, I do know of at least 1 party that's bought pretty heavily in the last couple of months. And I don't know of any party in my own circle that has been a seller at these levels ever since, say, December '24. I don't know anybody that's even considered being a selling -- seller that I have much influence over. So I would say at what level will we protect it? Well, I don't make the decision. Kenny doesn't make the decision. We kind of make a decision when we talk to each other, we do have the authority to make the decision. And as you know, the company can't -- for instance, we can't buy today, we're in blackout. . We could buy later in the week. It's always a little bit discretionary when we could buy. But when we're not in a blackout, I think you can assume any time that we think it's a good investment, we'll be there with our cash resources. Not only do we have cash in the bank today, but we have an unused $50 million loan that I think it's still pretty solid with price parity. So between -- and we cash flow money. All the improvements to our land in Bastrop County have all been paid for with free cash flow. And I think we're now pressing about $30 million of money we put into Bastrop counting. And I would guess by the time it's all said and done, we'll put another $20 million to $30 million into Bastrop County and then we'll have room for 1,100 mobile homes, be a thing of beauty. We'll probably keep a couple of days a month or 3 days a month active in 1 of our factories by satisfying that one property's demand. Alexander Rygiel: Sorry. And 1 last question as it relates to Bastrop County. What's your best guess right now as to when you might start to sell homes? Curtis Hodgson: We have 110 lots that were designed to be 3 simple lots that we would begin marketing as soon as we solve just 1 piece of the puzzle, and that's connecting to state highways on 1 side or the other. They would go under market. The beauty part about that is when we did this, we thought we'd be selling those things for $70,000 or $80,000 a piece. And the current value of those lots is retail is probably more like $120,000 or maybe even $130,000. So in a way, not selling them for $80,000 has yielded us an above average rate of return just by not selling them. But anybody has a lot, 0.75-acre lot in this market is getting well over $100,000 for a place to put a mobile home, sometimes $130,000. We're kind of expecting now to get $115,000, $120,000 when we go to market on those. And we'd like to get that going if nothing else to fill it up with Legacy that we build at our 2 plants in Texas. Operator: Our next question comes from the line of Mark Smith with Lake Street. Mark Smith: First question for me. I just wanted to ask, you talked quite a bit about kind of demand and production in Texas. Curious if you can just give us your thoughts around kind of Georgia and the Southeast, how that market is doing and kind of how things are running at the plant? Curtis Hodgson: Like you probably got this Mark from my mood when you -- when I say just a minute ago or my tone of voice. I am not that confident in the Southeast and know that we can carry on at 2 or 3 a day, but that's a very large manufacturing facility and doesn't really make sense at 2 or 3 a day. So we've got to find a way to develop distribution in that market. The mobile home park model is not as good as it was. People now are paying a lot more for the house. They're paying a lot more for the home. They're paying a lot more to set it up. They're paying more hook it up the utilities. And unfortunately, the rents that they typically get when they put 1 of their mobile home parks haven't increased accordingly. So the model is not as solid as it was, say, 5 years ago, which was a big part of what we built in the market when everybody built filling up a bunch of mobile home parks in a model that did make sense. When all those prices were down and the rents were pretty much the same as they are today. So the underlying demand in the Southeast has got to be to the guy who's going to live in rural America or some sort of opportunistic disaster housing, which is oftentimes happen in that market that we participated in. If you assume that park sales is going to be much lower than historically -- than it has been historically, demand has to come from direct consumer sales for privately owned land or from some sort of disaster relief. So if you can tell me how many hurricanes there will be in the Southeast next year, I could probably give you a pretty good feel for how good the markets are going to be. But -- and that's really kind of the demand there. As you know, the Southeast doesn't have the tailwinds that Texas has but it has better tailwinds than many parts of the country. So the demographics in all those states that we serve in the Southeast are still positive. And we know it's not because of birth rate. it's positive because people are still moving to Georgia and there's still moving to North Carolina and they're still moving to Florida. So there's an immigration from 1 part of the United States to another that goes on in that market. So we get some positive demographics there. And we sell to operators that are taking advantage of that. I talk to them all the time. They're struggling to make the economics work. Now if interest rates come down a little bit and there are models instead of being, say, at a 6% cap rate or at a 5% cap rate, then they can make more sense out of it. And we've had a nice reduction in as it relates over the last month or so, they actually punished mobile home stocks because they thought that would make site-built housing more attractive and maybe it does. But it sure helps communities that are trying to make sense out of community-owned rentals and community-owned mobile homes. When their rate -- their borrow rate goes down a point, it really helps their model quite a bit. So I know this didn't address the answer that you want or a specific answer. But I think I made it clear that there's only 2 ways to really do well in the Southeast, the community model and disaster relief housing, as the likelihood that all those plants in the Southeast, which there's roughly 20 operating in that market that we compete against, there's not enough demand at the retail level to keep 20 factories working. So I can see the industry as a whole, making some difficult decisions in the Southeast absent getting some disasters next year that they give us more tailwinds. Mark Smith: Okay. And then I did want to ask about gross profit margin. I know you don't give guidance, but just kind of any insight you can give us on the outlook there, maybe where the pressures are coming? I know you discussed tariffs, but I guess maybe 2 things here. Do you think that you've seen kind of topped out the inflationary pressure, whether it's from tariffs or anything else? And then two, do you think that you've taken ample price to cover the pressure that you've seen or could see? Curtis Hodgson: Well, I think the price increase that we did are going to cover the effects of tariffs, in particular. And the world believes that tariffs are a one-time inflationary event. And if that's the case, then the price increases may be over. But we've also increased our line workers' wages by 10% this year. And we've -- obviously, the Chinese imports have gone from a 25% tariff to as of what time is it 10:00 -- no, 11:00. As of 11:00 a.m. today, the tariff rate currently is 45%, but that could change by 2:00 this afternoon. So I mean, it moves around. So the net result of our cost of goods sold on just what happened last week, decreasing the tariff from 55% to 45%. Our cost of goods sold will go down roughly $1 million with just that 1 happening just like they went up before when they went up that much. I don't really look at an inflation as something that either does happen or doesn't happen, it's 70 years old, I can remember $0.04 stamps, I can remember $0.29 gasoline. I think inflation is inevitable. At what pace, that's the only thing that we might disagree on. But I would guess that our average wholesale price now is about $60,000 per floor. And I think that if I was to give the same earnings call, say, 24 months from now or 2 years from now, I think that would be -- it's going to be closer to closer to $70,000 than $60,000. The margins are real simple. Financial statements sometimes make it seem more complicated. You got a selling price, you got materials, you've got labor, you've got allocable overhead. On the materials side, all factories are pretty similar. I would say 80% of the capacity buys their materials within a few percentage points of each other's. Labor, there's quite a disparate labor deal kind of depending on the complexity of the product you're building. If you're building a very simple product, you might get labor all the way down to $4 or $5 a square foot. And if you're very complex product, you're going to get labor in the $10 to $15 range per square foot. And the only thing that could help that, the more you build that's exactly the same, the more productive the assembly line gets. As far as allocable overhead, that's very specific about what we're allowed to do on a GAAP basis, purchasing agent can be allocated but a CEO can't. So while our gross margin may be suffering a little bit over the next 12 months, our net margin because now we're talking about eliminating SG&A or controlling SG&A. While the founders were gone, SG&A went up. I think Ron was very clear in his outline on that. With SG&A up 15%, 16% at a time when sales were down, I think you will see the immediate reversal of that trend and some relief in probably the fourth quarter followed by a significant release in the first quarter on SG&A as a percentage of sales. I hope that puts a little color on your question. Mark Smith: That's helpful. If I can squeeze in one more. Just I don't know if you're able to talk at all about kind of numbers behind the acquisition and potential impact on the balance sheet just as far as the size of this acquisition? Curtis Hodgson: It's simple. We're on a call that's available to the public. We didn't give much detail on Friday's announcement. But I don't mind telling you what it is. This is roughly a $22 million deal, all in, about half of which is retail paper and the other half are the assets that I've described. We wouldn't be doing this if we didn't think it was going to have a positive aspect on the company. I was just guessing I would guess that our retail selling as a company, which is currently about 250, 300 units a year, I would expect that to be 50% higher, maybe 60% higher in 2026 than it was in 2025. If that doesn't come to pass, then the acquisitions, the purpose of the acquisition, didn't get accomplished. It's really that -- that's the jewel. And then everything else we bought pretty much what we would be willing to pay on a one-off basis at any time. We have a 28% interest in the mobile home park. As part of the deal, we know that market really well, it's worth a little over $1 million or more to us. So a lot of what we acquired was hard asset value with the only uncertainty being how well can we integrate the Columbia presence and the HomeX model into our retail system. If that turns out to be what I think it is, I would think our retail sales will go up by at least 50%. And if we really perform well, it could even be double in 2026 relative to 2025. Let's face it, we make a lot more money whan we can retail one than we can make on selling it wholesale for $60,000. The margin in this industry is about 40%, 50% up. So if we build it for $60,000, we retail it for $90,000 and the more that we can retail the better. I think Ron mentioned that a good part of the reason why our average price per home went up is because we retailed a higher percentage of what we built in 2025 than we did in 2024. But it was just nominal compared to the leap that we're planning on taking with this acquisition. This acquisition is pretty much what can we do at the retail level to improve that part of our distribution filling the gap that is kind of leaving us because of the park problems that I referred to earlier on the call. Mark Smith: And just confirming within that kind of increase within retail stores that's including the site that you're buying in as your retail location as well as kind of improvements in retail stores at the existing heritage sites today? Curtis Hodgson: Correct. Yes. We probably retail -- and I'm just guessing because I know we do monthly, so I'm going to go ahead and multiply by 12, I guess do that in my head. I'm going to guess we're about 300 now. The Houston location itself could add 100 to that going forward and then the integration of the systems into our existing retails should add another 100 to it. And on a good day, maybe even another 200. So what I'm saying is we should be up 60% in '26 versus '25 in the number of units we retail and it could be as much as 100%. There's a little more guidance than what you asked for, but on the other hand, the press release on acquisition was a little bit gray, let's put it that way. So now you have color on it. And we haven't closed it yet, so you never know it could blow up, but it's a binding contract. The contingencies are being put together and we expect to close before Thanksgiving. Operator: This concludes the question-and-answer session. I would now like to hand the call back over to Curt Hodgson for closing remarks. . Curtis Hodgson: Well, it's a much longer call than I expected. I had to have a bunch of it, but I think I did a reasonable good job. I'd like to thank everybody who joined in today's earnings call. We appreciate your interest in our company and look forward to delivering you better results in the future than we did in this last quarter. Operator: This concludes today's conference. Thank you for your participation. You may now disconnect.
Operator: Good morning, everyone, and welcome to BKV's Third Quarter 2025 Earnings Conference Call. As a reminder, today's call is being recorded. [Operator Instructions] I would now like to turn the call over to your host, Mr. Michael Hall, Vice President of Investor Relations. Please go ahead. Michael Hall: Thank you, operator, and good morning, everyone. Thank you for joining BKV Corporation's third quarter 2025 earnings conference call. With me today are Chris Kalnin, Chief Executive Officer; Eric Jacobsen, President of Upstream; and David Tameron, Chief Financial Officer. Before we provide our prepared remarks, I'd like to remind all participants that our comments today will include forward-looking statements, which are subject to certain risks, uncertainties and assumptions. Actual results could differ materially from those in any forward-looking statements. In addition, we may refer to non-GAAP measures. For a more detailed discussion of the risks and uncertainties that could cause actual results to differ materially from any forward-looking statements, including those associated with the closing of our acquisition of a majority control position in the Power JV, which remains subject to customary closing conditions, including approval by at least 75% of the disinterested shareholders of Banpu Power and the integration of the upstream assets we recently acquired in our Bedrock acquisition into our existing portfolio as well as the reconciliations of non-GAAP financial measures, please see the company's public filings, including the Form 8-K filed today. I would also point listeners to the updated investor presentation posted this morning on our Investor Relations website. We encourage everyone listening to review those slides for further information on our business, operations and results from the quarter. I'd now like to turn the call over to our CEO, Chris Kalnin. Christopher Kalnin: Thank you, Michael, and thank you, everyone, for joining us to discuss our third quarter results. BKV delivered another strong quarter, reinforcing our said-did culture and disciplined execution of our strategy. The third quarter was marked by several notable achievements that reinforce the strength of our business model and accelerated momentum of our closed-loop strategy. I want to begin this quarter by highlighting significant progress in our Power business. At the end of October, we announced that we have entered into a definitive agreement to acquire 1/2 of Banpu Power's interest in our Power joint venture for an equivalent value of approximately $1,000 per kilowatt of generation capacity. At the close of the transaction, which is expected to occur in Q1 2026, BKV will increase our overall ownership in the JV to 75%, giving us over 1.1 gigawatts of low heat rate equity power generation in the ERCOT market. We are thrilled to have reached this agreement to acquire the majority and controlling stake in the Power JV as it's a critical step to advancing our closed-loop strategy and enhances our growth flexibility. I would like to thank the Banpu Power team for their strong partnership in our successful joint venture. We are excited about our ability to drive growth in our Power business. And we are confident that our differentiated business model has ideally positioned us to benefit from the macro energy tailwinds that are driving the U.S. markets. Controlling the Power JV transforms it into a strategic growth engine, allowing us to consolidate results, align strategy and accelerate our ability to create long-term value. Looking ahead to 2026 and beyond, ERCOT's long-term fundamentals remain exceptionally strong. Texas continues to experience unprecedented load growth from AI data centers, industrial expansion and steady residential demand. The state of Texas remains open for business and is proactively facilitating and in some cases, fast tracking interconnections to meet this surge in electricity demand. The passage of Senate Bill 6 is aimed at improving interconnection planning and grid reliability to support this growth. For BKV, this combination creates a durable expanding market for our existing Temple assets and a clearer pathway to secure premium PPAs. Our confidence in the Power business is grounded in the tangible progress we've made in discussions with hyperscalers, data centers and other potential customers. We are encouraged by the unique tailored energy solutions that BKV is able to offer these potential counterparties. In particular, our capability to provide a one-stop offering that combines power, natural gas and carbon capture is a true winning formula and is resonating deeply with long-term AI and data center customers as evidenced by recent announcements from major hyperscalers. We also continue to actively negotiate with OEMs to secure additional power generation capacity to serve future load growth from potential customers backed by secure commercial agreements. In our carbon capture business, we are experiencing strong momentum. Importantly, we are seeing a significant uptick in interest from potential PPA customers that are interested in the combination of gas-fired generation and carbon capture. Further, we are making meaningful progress towards our goal of an injection rate of 1 million tons per annum by year-end 2027. Existing projects are advancing on schedule and we expect to have 2 more operational projects within the first half of 2026. Overall, there is optimism following the One Big Beautiful Bill Act by emitters across the sector. BKV's carbon capture business has demonstrated strong leadership. In particular, our strong partnerships with Copenhagen Infrastructure Partners, Comstock Resources, Gunvor, and a large midstream company and others all underscore both the credibility and the momentum of our carbon capture business. Our upstream business remains a core cash engine for the company. Our Barnett and NEPA assets outperformed expectations again, delivering strong overall results, including outperforming on production, cost and capital efficiency. In the third quarter, we successfully closed our Bedrock acquisition, materially expanding our operational footprint in the Fort Worth Basin. This transaction reinforces our position as the leading operator in the play and underscores our role as the natural consolidator of the Barnett. We believe the Barnett sits at the sweet spot of all the shale plays, positioned at the epicenter of U.S. demand growth in and around the premium markets of the Gulf Coast. We continue making strong progress integrating the Bedrock assets into our portfolio and are excited to realize the benefits from the combined operations. The Bedrock acquisition brings high-quality assets for both existing production and new developments, including new wells and refrac candidates. We are excited to demonstrate the accretive nature of this transaction over the quarters to come. BKV's closed-loop strategy, combining gas, power and carbon capture is a winning formula that is in line with the biggest trends in energy. The ability to offer carbon-neutral power solutions in Texas, in particular, positions us uniquely in discussions with many customers who are willing to pay premiums for these energy solutions. We remain confident in our business and our ability to capitalize on the megatrends in the market, which are driving the future of energy. With that, I'd like to hand the call over to BKV's President of Upstream, Eric Jacobsen, to discuss our operational performance for the quarter. Eric Jacobsen: Thanks, Chris. The third quarter was another outstanding one for our operations as we further capitalized on momentum in both our upstream and CCUS business lines. Our upstream business delivered another excellent quarter, beating our production guidance at the midpoint with volumes up 9% year-over-year and 2% sequentially at 7% below our guided CapEx midpoint. As a reminder, we raised full year 2025 production guidance by approximately 4% at the end of last quarter and have continued to maintain the same base business capital range. We remain a leader in managing low base decline through the leveraging of data analytics and artificial intelligence, outdelivering new well performance expectations and setting the standard for sustained capital-efficient production in the Barnett. Moving to the close of the Bedrock acquisition. BKV has already captured value from these newly acquired Bedrock assets. Integration has been seamless. And our teams are already applying our proven operating playbook to enhance value through improved performance, reduced costs and accelerated efficiency gains, all of which we call torque or delivering value even better than underwriting assumptions. The Bedrock acquisition also adds meaningful development runway, including at least 50 equivalent new drilling locations and 80 refrac opportunities, creating substantial near-term value potential. You'll see us continue to drive these development and torque initiatives in the quarters ahead, further proving BKV's leadership strength in the Barnett. During the third quarter, we drilled 8 new wells, completed 8 wells and performed 11 refracs, bringing our total to date refrac count to over 400, distinguishing ourselves as the refrac leader in North America. Our year-to-date Barnett D&C cost average is $545 per lateral foot, representing a further 3% reduction from our second quarter performance and a 14% reduction from our 2023 to 2024 program average. This cost improvement was achieved while drilling longer laterals and implementing enhanced completion designs that have resulted in excellent well performance and accelerated turn-in lines. Further, during 2025, we turned in 3 of the 25 best 1-month peak wells in the entire recorded history of the Barnett, including 2 of the top 3 this decade, a clear proof point of our subsurface completions and operational excellence, reflecting the technical acumen of our teams. Our teams have delivered all of this with an expected capital investment as we continuously find new ways to increase efficiencies and outperform expectations. In fact, our total full year corporate capital guidance remains unchanged at $290 million to $350 million. Within that corporate CapEx range, we continue to see legacy development capital at the high end of our previously guided range, and we have added approximately $10 million of development capital to kickstart our Bedrock torque initiatives. We've delivered substantially more activity and strong results while exercising highly disciplined and capital-efficient investments. For the fourth quarter, we expect production to average 910 million cubic feet equivalent per day with a range of 885 million to 935 million cubic feet equivalent per day, representing the full integration of our bedrock assets and continued strong performance from our base business. The production guidance component of our base business, excluding Bedrock assets, is 810 million cubic feet equivalent per day, which would bring full year base production slightly above even our previous raised guidance midpoint. Our continued effective and efficient upstream performance, coupled with the Barnett positioning to supply gas to high-margin Gulf Coast demand centers, enables continued strong financial performance for the long term. We're not only driving the success of our core upstream operations, we're fueling the growth of our other business lines. Turning to our CCUS business. We are well positioned in this rapidly expanding segment. Since the passage of the One Big Beautiful Bill Act, we have received a significant increase in inquiries from potential emitter partners. These discussions are ongoing and we're encouraged by the quality of opportunities entering our pipeline. Combined with the projects already advancing through various stages of development, we believe the growth potential for this business remains strong while adhering to our capital framework. The Barnett Zero facility has now been operational for nearly 2 full years and once again achieved strong quarterly performance, maintaining over 99% uptime and injecting approximately 44,000 metric tons of CO2. Since project inception, approximately 286,000 tons of CO2 have been injected. Barnett Zero continues to serve as a vital proof point of concept for our broader CCUS strategy, showcasing BKV's technical expertise and providing tangible validation to current and prospective partners. The project we announced on our last earnings call, the East Texas project with a leading midstream company, is moving forward, and we expect FID for that project in 2026. As a reminder, we anticipate that approximately 70,000 metric tons per year of CO2 could be captured on that project. This is the second project we are developing with that same midstream company. The previously FID-ed Eagle Ford and Cotton Cove projects both remain on schedule. These projects are expected to achieve average sequestration rates of approximately 90,000 and 32,000 metric tons per year of CO2 equivalent, respectively. The Cotton Cove injection well was successfully drilled in September, and both projects have received EPA approval of their measurement reporting and verification or MRV plans. I also want to address recent developments in Louisiana, a strategic focal point for our CCUS business, where the governor signed a temporary moratorium on the consideration of new CCUS project permits. We view this as a constructive step that brings focus and clarity to the permitting process and advantages those like BKV that have already submitted quality permit applications. The state's decision to prioritize existing applications is helping to distinguish credible developers with technically sound near-term projects that can deliver real benefits to Louisiana. All 6 of BKV's permit applications, 5 from our large-scale High West Project adjacent to New Orleans and 1 from Donaldsonville near Baton Rouge have been classified as administratively complete and are among those advancing towards approval under Louisiana's primacy. We're encouraged by the state's active engagement and recent movement on permit issuances, which signal growing regulatory momentum and confidence in responsible carbon capture development. We remain on track to reach 1 million metric tons per year of CO2 injection by the end of 2027 and see the related capital requirements as very manageable within cash flow under our existing capital plan. Together with our CIP partnership and a robust project pipeline, this positions us for meaningful free cash flow generation from CCUS later this decade. I'll now turn the call over to our CFO, David Tameron, for a review of our Power business and financial results. David Tameron: Thank you, Eric. Turning to our Power business. As Chris mentioned, we are thrilled to announce our pending acquisition of a majority control position in our Power JV. Increasing our ownership to a 75% equity stake means we will have over 1.1 gigawatts of power generation capacity in the growing ERCOT market. As previously disclosed, the total purchase price will be $376 million, which includes the assumption of $145 million of debt. The remaining $231 million will be funded 50% in cash and 50% in BKV stock, which equates to 5.3 million shares based on a predetermined VWAP price. This transaction sets a clear marker on the value of this business line within BKV's portfolio and positions Power as a core growth engine for our company. The increased ownership will also come with an updated and aligned governance structure and will unlock additional potential for commercial opportunities. Following the close, which is expected to occur in the first quarter of 2026, we expect to include the Power JV results within BKV's consolidated financials, providing greater transparency into the business' strong cash flow generation and enabling investors to better recognize the value it brings to our overall portfolio. While third quarter Power JV adjusted EBITDA was below our guidance, operational performance remains very strong. We are incredibly proud of our Temple team, which has set a high bar for performance and has established a solid foundation for our growing Power business. Pricing did disappoint during the quarter, largely reflecting milder weather in Texas as third quarter cooling degree days were 15% lower than the 5-year average. While this resulted in lower-than-expected prices, market strength remains evident and robust load growth continues to support long-term ERCOT fundamentals. Power prices averaged $46.29 per megawatt hour during the quarter, with natural gas costs averaging $2.87 per MMBtu, resulting in an average spark spread of $25.82 as compared to $20.82 a year ago. For the quarter, BKV's share of power JV adjusted EBITDA was $20.4 million with gross power JV EBITDA coming in at $40.9 million. For the fourth quarter, we expect gross power JV EBITDA of $10 million to $30 million, reflecting typical seasonal patterns and continued operational execution. Shifting to BKV's corporate financial performance. We delivered another outstanding quarter, highlighted by our upstream outperformance, disciplined capital spending and a strengthened balance sheet. Net income for the third quarter was $76.9 million or $0.90 per diluted share with adjusted earnings of $0.50 per diluted share. Combined adjusted EBITDAX attributable to BKV, including our proportionate share of the Power JV adjusted EBITDA was $91.8 million, representing a 50% increase from third quarter of 2024. These results were driven by higher production volumes, improved realized pricing and continued cost reductions across our upstream operations. Accrued capital expenditures totaled $79.6 million for the quarter, 6% below the midpoint of guidance. The spending included $56 million for upstream development and another $24 million for CCUS and other. Our teams continued to deliver strong results and higher activity levels while maintaining capital discipline. During the quarter, we achieved 9% year-on-year production growth, advanced investments in our CCUS partnership and project pipeline and reduced debt levels in our power JV. With regard to the balance sheet, we closed the third quarter in a strong financial position. Several positive developments further strengthened our capital structure, leaving us well positioned to fund and advance our growth initiatives. A key highlight was the successful execution of our inaugural bond offering. We issued $500 million of 7.5% senior notes, marking an important milestone in our capital market strategy. Proceeds from the bond were used to fund the cash portion of the purchase price for our Bedrock Shale acquisition, as well as pay off the outstanding RBL balance. During the quarter, we also strengthened our liquidity position by expanding our elected commitments under the RBL, increasing it from $665 million to $800 million. The increase primarily reflects the additional borrowing base capacity associated with the Bedrock acquisition and underscores the continued support and confidence of our lending partners. Our balance sheet remains straightforward and conservatively positioned with $500 million of senior notes outstanding and no borrowings under our $800 million RBL. Our net leverage ratio as of September 30th stood at 1.3x within our stated leverage target of 1x to 1.5x. Cash and cash equivalents totaled $83 million at quarter end. And combined with remaining RBL availability, total liquidity stood at $868 million. In addition to this strong liquidity position, we continue to manage commodity price risk through our prudent hedging program. For our updated hedge positions as well as fourth quarter 2025 guidance ranges, you can refer to our press release and our updated investor presentation, which are both posted on our website this morning. We will release 2026 guidance in February. But in early looks at our budget, prior to considering any successful PPA negotiations, we see our newly combined business generating meaningful free cash flow. This is driven by both our upstream and power businesses, which more than fund the capital needs of our CCUS business. With that, I'd like to turn it back over to Chris for his concluding remarks. Christopher Kalnin: Thanks, David. The third quarter of 2025 exemplifies BKV's said-did culture and positions the company for sustained long-term profitable growth. Our achievements this quarter span all aspects of our business. In Power, we announced the purchase of a controlling interest in the Power JV, increasing our ownership to 75%, which we expect to close in the first quarter of 2026. In upstream, we successfully closed the Bedrock acquisition while continuing to drive highly competitive capital efficiency and production growth. In CCUS, we have additional momentum with high-quality projects, supported by our CIP partnership. Financially, we successfully priced our first corporate bond and maintained a strong balance sheet. The ongoing integration of our gas, power and carbon capture capabilities creates unique energy solutions that are increasingly valued in today's market. Looking ahead, we remain excited about the multiple growth vectors of our business. I want to thank our exceptional team for their continued dedication and excellence in execution and our shareholders and partners for their ongoing support of BKV's vision and long-term strategy. We look forward to updating you on our continued progress in the quarters ahead. Operator, we are now ready to take questions from the audience. Operator: [Operator Instructions] Our first question comes from Betty Jiang with Barclays Bank. Wei Jiang: Congratulations with the acquisition of a controlling stake in the Power business. So can we just start from there and talk to how gaining control of the power unit going forward would change your conversation or how you have that conversation with hyperscalers and growing the Power business over time? Christopher Kalnin: Yes, Betty, thank you. So first of all, we're really pleased with the acquisition. It's clear to us that the power markets in Texas are poised for very strong growth and our move into buying 50% of Banpu Power's position is a signal of our optimism in the market. I think the ability to kind of control the JV and consolidate does a number of things for our discussions. Number one, it allows us to bring together in a very seamless way the energy solutions that we uniquely provide between power, gas and carbon capture so that we can structure commercial agreements in a singular holistic energy solution package that a lot of these hyperscalers and data center companies are very interested in. So that's the first thing. The second thing is it positions us to really provide the transparency around our financials that investors are looking for. And I think also that allows us to be able to disclose a lot more information financially around what we're doing with the JV. And then the third angle is the way we've set it up from a growth or strategic flexibility engine for investments or additional opportunities, acquisitions, et cetera, in this 75:25 structure really is the right mix in our minds for long-term growth, and that allows us to deploy capital. When you think about expansions under the back of additional commercial agreements or additional acquisitions, it really does position us ideally. And that's a key part of these discussions with hyperscalers as well and potential data center companies. Wei Jiang: My follow-up, staying with power, and I want to ask about SB6. I understand that law might have some changes in how the power discussion and a potential PPA could be struck. Can you just speak to how that might be impacting your conversation with the hyperscalers and then the optionality and other solutions that you can bring to the market despite that policy change? Christopher Kalnin: Yes. So first of all, I think SB6 is really something that's constructive by the state of Texas. It's an effort to high-grade the types of projects that are in the queue. A lot of folks have been applying for interconnections but not all interconnection requests are created equal. And so SB6 has a framework that's being evolved to really streamline and high-grade the types of interconnections that are being requested in the state of Texas to get to the real demand that's coming in and allow that demand to materialize because in general, the posture of Texas is open for business. And we see this desire to streamline and enhance grid reliability while encouraging AI and data center investment, in particular, in the state of Texas. So we think SB6 goes a good step of the way to get there. Clearly, the rules are being laid down as we speak, and BKV is very actively involved in evaluating and participating in that process. With regards to the hyperscalers and the data center companies, I think the -- what we're seeing is the bet is that Texas figures this out pretty quickly relative to other grid regulators across the nation. And we feel like it's something that everyone wants to understand and understand how to deal with the rules. But I think what we're seeing is that there's a general feeling that this actually helps to streamline the process. And when it comes to companies like BKV with existing power-generating assets at 1.1 gigawatt of equity power today, I think it puts us in a great position to high-grade potential projects that we're looking at relative to kind of the broad universe of the interconnection request. So I think in general, I would say it's positive. Again, the rules are still being finalized. But we see this as a positive move by Texas to encourage investment in the power sector, encourage investment from the data centers and the hyperscalers. And in general, the belief is that Texas is open for business and we'll figure this out quicker than potentially other regulators across the country. Operator: Our next question comes from Michael Furrow with Pickering Energy Partners. Michael Furrow: Look, BKV has been able to put together quite the position in the Barnett relatively quickly as well as work down well costs and improve margins on the assets. So bringing back to the consolidation of the Power JV, the company is now trading at an expanded multiple and looking at it simplistically, this should ease further consolidation of the basin. So would you agree with that comment? Or are there certain dynamics of the Barnett M&A market that just may not be as clear to those of us on the outside looking in? Christopher Kalnin: Yes, Michael, it's a good question. So if you look at what's happening in the Barnett, I think, one is when you ever look at a deal, for me and for the team here, it's about fundamental economics, right? Multiples are helpful but it's about what is the hold to maturity return as the last owner. And so we're looking at deals that will be accretive from both the purchase price perspective, the strip, but also what can you do with those assets from a optimization, a synergy, a dropping costs, enhancing the development. You saw what we were able to do in the Bedrock transaction that we closed recently. And I think there's nearly a Bcf plus of opportunities in and around the Barnett. We believe that at our current multiple and with our position in the Barnett that we can continue to acquire accretive transactions in the market and we're very optimistic about continuing to be able to do that. Michael Furrow: Just a follow-up on the power JV. I mean, look, the Temple assets really appear to be running on all cylinders. The availability factors look great. I think you disclosed only 3.5 days of downtime. So beyond adding incremental sort of around-the-clock baseload capacity, what else can the company do operationally to improve margins at the power plants outside of changing spark spread? Christopher Kalnin: Yes. I mean, Michael, clearly, the number one thing is to get additional long-term contracted demand, right, and that in the form of commercial arrangements or PPAs. That's going to be front and center for the company. That's what we see the most near-term capital-efficient accretive transactions that we could pursue. So that's definitely the priority. Beyond that, if you look at Temple originally, Temple was designed for 3 power plants. Today, there's 2 power plants there. We've got ample land space, water, gas. It's flat and we're on the fiber optic super highway between San Antonio, Austin and Dallas-Fort Worth. So we think it's ideally positioned. You can imagine there's room for another power plant on the back of commercial arrangements that could be added, similar size and scale. So there's just a lot of areas of growth and reflected in our optimism about the Power business and the fact that BKV is going big in power. Operator: Our next question comes from Neal Dingmann with William Blair. Neal Dingmann: Nice quarter. Chris, my first question -- just really interested on capital allocation, specifically. Could you maybe, David, speak to how you all are thinking about managing all your opportunities throughout the closed-loop strategy? What I'm getting at is you all seem to have more opportunities when you look at the upstream opportunities. I mean, how do you think about managing this or the power opportunities along with potential shareholder return and maintaining a solid balance sheet? David Tameron: Yes. First off, let's talk about near term, right? 2026 is going to be a strong year as far as free cash flow generation. Obviously, Eric and his team right on the upstream side, we have that cash flow engine that's been there. I think once we consolidate the power results and people start to see those show up in the numbers, that's another source of funding that more than covers CCUS and any spend needed there. So we do have significant free cash flow that we have options with, right? To your point, do you delever, do you use that for strategic investments on the power side. But we do have options with that cash. And if you think about additional flexibility in '26. One, we do have the power debt that's going to be available to refinance midyear. We have additional flexibility now with the -- as Chris mentioned in his prepared remarks and I did as well, the bond and the upside to the RBL. So a number of avenues, triggers, and levers to pull as we think about financing. then finally, as it relates to power, obviously, if you start thinking about some type of commercial opportunities, that gives you financial flexibility depending on the level of counterparty you engage with, and we expect that to be a very solid counterparty if and when we get to that point. So a lot of flexibility, significant free cash flow generation and still levers to pull if you think about '26, '27. And we look at our current structure of how we have our debt and capital structure of each entity, if you will, lined up. And they're all taken with the life cycle and the maturity of each of the respective business units. So we feel very good actually about where we're at today as we head into '26. Does that answer your question, Neal? Neal Dingmann: It does. A lot of opportunities. Perfect answer. then just secondly on looking at Slide 32, just on the forecasted sequestration. I'm just wondering, besides those projects, I think there's 4 or 5 announced. Are there others that are currently in the works? Or when I'm looking at that slide and you're talking about the forecasted sequestration volumes, is that just what's known? Or maybe just anything you could comment on that about potential upside? Eric Jacobsen: Yes, sure. Eric Jacobsen here. Thanks for your question. On Page 32, I think you're referencing the target of 1 million tons of CO2 injection run rate by the end of 2027. And yes, we listed 5 or so projects that have even been -- that have either been FID-ed or announced and on track towards FID. So all of those would contribute nicely to that 1 million ton per year run rate. There are a large number of other projects in our portfolio, some of which have been brought through the CIP partnership, which has been exciting for us, some of which we've been working for quite a while. And they continue to follow our trajectory of natural gas processing, large industrial and then sort of ethanol and renewables. And all told, you can see where we have high confidence in that portfolio of projects of growing above and beyond the 1 million tons towards an ultimate kind of 16 million tons a year or so of annual run rate by the early 2030s as we've announced. You can see on Page 34, where one of the projects we're very excited about as we look to really ramp our injection volumes is our High West project in Louisiana, where we're excited about the focus the state has brought to permitting there, as well as being located in what we believe is a world-class reservoir in what I call one of the best emitter neighborhoods in the world, 30 million tons of CO2 within a 30-mile radius. So you can see where that can really step change those sorts of projects, namely High West and some other Class Vis that we've submitted already can really step change in a nice combination with the other portfolio of projects we have around natural gas processing, other industrials and ethanol. So all told, Neal, we have a very high confidence in that 1 million tons and then growing from there with a great portfolio of projects and a great investment partner in CIP to kind of split the 49% share of that check and keep our capital allocation right in line with where we want to be on CCUS. Operator: Our next question comes from Jacob Roberts with TPH & Company. Jacob Roberts: Chris, I was wondering if you could spend some time talking about the incremental autonomy that the increase in the stake in the Power JV will give you, maybe less so about pursuing the closed-loop strategy with customers, but really specifically on capital allocation to the power segment as a whole. Christopher Kalnin: Yes, Jake, it's a good question. So as you know and we shared in our press release, the governance has changed, right, on the JV. And so pro forma for close, that would give us a majority control. That allows us to there -- very efficiently decide how much capital goes into the Power business how quickly we want to grow that business while also diversifying 25% of that capital to our partner, Banpu Power. So I think what it does for us is it gives us very strong control of the ability to flex. Clearly, we're going to work with our partner in the joint venture in terms of how much capital we deploy or how much debt we pay down. Right now, the power plant is delevering debt. It's generating cash. And so we're excited about that. And then as we look to grow into commercial agreements, increase the capacity factor and potentially add additional generation capacity through -- on the back of commercial arrangements, we're going to have a lot of ability to kind of time, optimize and size that capital in a way that fits with our overall portfolio capital allocation strategy. Jacob Roberts: Great. I'm wondering if there's a possibility of future power investments or spin-ups or inorganic opportunities that might come to the business outside of this JV? Christopher Kalnin: Yes. So we're really happy with the JV structure today. I think the way we've restructured it in that 75:25 setup really does give us the vehicle for growth. Jake, if you look at how we've set up our business, we've got the upstream and midstream business, 100% owned by BKV Corporation. We're 51% of the carbon capture business in our joint venture there with CIP. And then in the Power business, we're 75% owners pro forma for the close and 25% Banpu Power. That gives us an ability to grow both the power and the carbon capture alongside of the upstream, which is our cash engine but to do it accretively. And so as we think about additional acquisitions, which we believe are there on the market and we'll be evaluating very closely and about some potential additional organic new generation assets on the back of commercial arrangements, we believe that the joint venture is the right structure for us to utilize because it does give us that capital allocation optimization and it gives us a platform that's already working and winning in the marketplace. So we see that as the right vehicle for growth, and then we'll obviously evaluate that from time to time going forward. Operator: We have reached the end of the question-and-answer session. I'd now like to turn the call back over to Chris Kalnin, BKV's CEO, for closing comments. Christopher Kalnin: Thank you, and thank you, everyone, for joining our call. We really appreciate the fact that you've spent time to evaluate BKV. We're excited about the future. BKV stands at the precipice of some of the most exciting megatrends in energy. We are at the epicenter of the macro trends that are driving energy demand, particularly in the state of Texas. We see our combination of natural gas, power and carbon capture as a winning formula that is going to transform and reshape the energy industry going forward. We're excited. We're pleased about our results this quarter. And we look forward to future results as we continue to deliver on our closed-loop strategy. Before I close, I would like to take a moment to recognize our veterans, all those who have served. We thank you for your service. At BKV, we hold dear the sacrifice that many families and individuals have made in protection of our country and freedoms. And we want to thank you as we go into Veterans Day tomorrow, and we want to recognize you. So thank you, everyone, for joining the call. Thank you, veterans, and thank you, and we'll look forward to future announcements. Operator: This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.
Ching Ching Koh: Good morning, everyone. Thank you for joining us to our third quarter results briefing. This results briefing will be Helen's last results briefing. And so of course, we all wish her all the best, and from the fourth quarter and full year results, we'll see Teck Long [indiscernible] next year. Okay. So without further ado, I'll pass the time to Chin Yee to take us through our results. Chin Yee Goh: Good morning, everyone. Thank you for joining us in OCBC's third Q 2025 results briefing. Our third Q '25 group net profit was SGD 1.98 billion, up 9% from last quarter and largely unchanged from a year ago. This was our second highest quarterly net profit. ROE was an annualized 13.4%. Total income grew 7% from previous quarter. The growth was driven by record noninterest income, which more than compensated for the decline in net interest income. NII fell 2% to SGD 2.23 billion quarter-on-quarter amid declining benchmark rates. We continue to prioritize asset growth to support NII. Noninterest income rose 24% to SGD 1.57 billion, driven by fee, trading and insurance income. The strong results were supported by our wealth management franchise, which continued to scale and deliver record wealth management income. Our insurance business also contributed strongly, reinforcing the benefits of our diversified income streams. Loans and deposits continued to register healthy growth, up 7% and 11%, respectively, year-on-year. Asset quality remained resilient. NPL ratio stable at 0.9% for the past 6 quarters. Total credit costs in third Q of '25 were 16 basis points on annualized basis. Total NPA coverage was 160%. Our capital position remains sound. Common equity Tier 1 ratio was 16.9% on a transitional basis and 15% on a fully phased-in basis. With our solid third quarter earnings, our 9 months of '25 group net profit reached SGD 5.7 billion, 4% below 9 months of '24. The strength of our One Group franchise is reflected in the performance across our banking, wealth management and insurance pillars. Our banking net profit grew 3% from last quarter, demonstrating resilience despite a declining interest rate environment. Double-digit growth in noninterest income more than compensated for the moderation in NII. Wealth management income and AUM were at record highs. Our wealth management income grew 25% to SGD 1.62 billion, contributing 43% to group total income. Banking AUM rose 18% year-on-year and 8% Q-on-Q to SGD 336 billion, driven by net new money inflows and positive market valuation. Net new money inflows were SGD 12 billion in third quarter, above the run rate for the past 2 quarters of about SGD 4 billion to SGD 5 billion. Year-to-date 9 months, net new money inflows were SGD 21 billion. On insurance, profit contribution from GEH grew 50% Q-on-Q to SGD 347 million. This was driven by improved investment performance from insurance and shareholders' funds. GEH new business embedded value or NBEV rose 9% and NBEV margin improved to 48.8%, reflecting GE's strategic shift towards higher-margin products. Moving on to details of our group performance trends, starting with NII on Slide 8. NII for the quarter came in at SGD 2.23 billion, 2% lower from last quarter. Average assets grew 1%, but this was offset by an 8 basis point decline in NIM to 1.84%. Referring to the waterfall chart on NIM. NIM narrowed primarily from lower loan yields, which reduced margin by 21 basis points. This was driven by the fall in benchmark rates, particularly the average rates for SRA and HIBOR. The progressive reduction in our funding costs as well as cash flow hedges partly mitigated the compression in loan yields. About half of our loan book is denominated in Sing dollar and Hong Kong dollar. For these currencies, around 80% of our Sing dollar loans and almost all Hong Kong dollar loans are either on floating rates or due for repricing within a year. The exit NIM for September was 1.84%. At end September, our NIM sensitivity based on 100 basis point drop in rates across our four major currencies of Singapore dollars, Hong Kong dollars, Malaysian ringgit and U.S. dollars was about 11 basis points on an annualized basis. On NII -- sorry, on noninterest income now. For the quarter, noninterest income was up 24% Q-on-Q, supported by broad-based growth across fee, trading and insurance income. For the 9-month period, noninterest income grew 10% year-on-year to a new high of SGD 4.14 billion, listed by the same growth drivers. Fee income was a key contributor, increasing 24% to SGD 1.8 billion. Our fee income reached SGD 683 million in third Q of '25, up 18% Q-on-Q and 34% year-on-year, driven by higher corporate as well as wealth customer activities. As can be seen from the chart, our fee income has maintained an upward trajectory over the past 5 quarters, contributed mainly by the strong momentum in wealth management. The record third quarter wealth management performance lifted our 9-month fee income to a new high of SGD 1.8 billion, up 24%. Wealth management fees surged 35% to SGD 923 million, contributing more than half of fee income. Compared to last year's, customers deploy more funds into investments across all wealth segments with around 60% of banking AUM invested. Trading income for the quarter was SGD 518 million, up 38% Q-on-Q. The strong growth was driven by customer flow treasury income, which was at a quarterly high. Noncustomer flow trading income also improved, reflecting better investment performance across our global markets portfolio as well as GE's shareholders' funds. For the 9-month period, trading income was up 4% to SGD 1.29 billion, underpinned by record customer flow treasury income. The growth was contributed by both wealth and corporate segments. Moving on to expenses. Our operating expenses continued to be well managed even as we invest strategically for growth. For the 9-month period, operating expenses rose by 3% year-on-year. Cost-to-income ratio was held below 40% at 39.3%. Our loan book remains well diversified across geographies and sectors. Loans grew 7% year-on-year and 1% quarter-on-quarter to SGD 327 billion. Growth over the past year was broad-based across consumer and corporate segments. In particular, the transport, storage and communication sector grew the most as we focus on capturing opportunities in the new economy sectors and high-growth industries. Singapore housing loans also grew as we build market share. Sustainable financing continues to gain traction. Loans grew 17% year-on-year to SGD 55 billion and now accounts for 17% of our total group loans. Our overall loan portfolio quality remains sound. NPL ratio stable at 0.9%. NPAs declined by 1% Q-on-Q, largely due to higher recoveries, upgrades and write-offs, which more than compensated for new NPAs. We remain vigilant and continue to conduct ongoing reviews of our loan portfolio, including assessments on the potential impact of trade tariffs. Total allowances for 9 months of '25 were SGD 466 million, down 4% due to lower allowances for impaired assets. Allowances for non-impaired assets were higher. This included preemptive allowances set aside for trade tariffs and macro uncertainties and adjustments, MEV updates mainly to reflect the weaker economic outlook. Credit costs for 9 months '25 were at an annualized 17 basis points. Our third Q '25 allowances were higher quarter-on-quarter as we set aside allowances for impaired assets. Our NPA coverage ratio was around 160% over the past 5 quarters. Allowances for non-impaired loans maintained at 0.9% of total performing loans. Moving on to deposits. Customer deposits rose 11% year-on-year and 1% Q-on-Q to SGD 411 billion. CASA deposits grew by SGD 27 billion or 15% year-on-year across both corporate and consumer segments. CASA ratio improved to 50.3%. Our strong deposit franchise contributed to 80% of our funding structure. All funding and liquidity ratios are well above regulatory requirements. Moving on to capital. Our capital position remains strong. Transitionary CET1 ratio was 16.9%, broadly stable quarter-on-quarter. On a fully phased-in basis, our CET1 ratio was 15%. Our robust balance sheet and capital position enable us to pursue growth opportunities, navigate uncertainties and enhance shareholders' returns. With this, I end my presentation. Thank you. And I will now hand the floor over to Helen. Helen? Pik Kuen Wong: Thank you, Chin Yee. Good morning, everyone. As usual, very happy to see faces. I always say that because when I started, we can't see faces. It was COVID. So it's always good to have you at office. Just want to start with some comments on the third quarter results. Of course, it is our strongest quarter this year, and it's the second highest on record. I think we lost out -- this quarter lost out to first quarter '24 by like SGD 4 million. So -- and it's all in all, a very good quarter. Of course, net profit is up Q-on-Q by 9% and SGD 1.98 billion, of course, and is closest, as we said, closest to first quarter '24. I think we achieved this despite a declining shipment environment through a few things. I think the first thing has to mention is the ability of our diversified business pillars, right, and producing or generating balanced earnings through economic cycles. And covered by -- as covered by Chin Yee, NII and NIM moderated, but our noninterest income rose 24% quarter-on-quarter to a new high with double-digit growth across quite a variety on fees, on trading and insurance income as well. So to sustain our NII, we are focused on asset growth. I did mention before in some of the other briefing on interest rate cycles, there are always interest rate cycles, they are always up and down. You cannot rely on high interest rate to generate a wider margin. So the cost of the matter is always to focus on growth and asset growth is important to defend the NII. So -- but equally important is to manage the funding cost. So growing deposits in the right manner, especially lower cost deposits is key as well. So I think we have been able to and we continue to focus on driving regional account openings for corporates and also for commercial banking customers and capturing a lot more cash management mandates. Cash management mandates are important as they bring in the money and the operating account normally are not fixed deposits because they work on that. And indeed, as you gather the cash management mandate, that means the remittances, the FX, everything comes in as well. So this is what is important. So our robust noninterest income also reflected results of our strategic actions to strengthen our franchise. Be it in wealth and be it in our cross-border capital flow, sustainability, as Chin Yee has mentioned, our sustainable finance is growing well and also some of the newer economy customers that we are able to start to bank with more and more. Wealth management strategy, of course, continue to play out positively. We are well positioned for long-term growth. As shared by Chin Yee, net new money for the third quarter is SGD 12 billion, and this is quite good, well spread across and contributed by all segments. By that, we mean the private banking side, our premier private and our premier customer wealth segments. Quarterly wealth management fees and income grew to record levels with sustained momentum across all segments as well and product channels. We do talk about our investing in more relationship managers, but our wealth platform has been very effective for our customers. And indeed, whenever we come up with new products, we will be able to apply across our wealth platform for different segments. Of course, we check the suitability, right? So -- but that means whenever we invest in anything, we can consider to launch on the same platform, which makes our channels very effective. We continue to deepen our regional private banking and premier banking franchise. RM bank strength, we talk about private banking and also our PPC segment having more RMs. But I think importantly is the products that we develop and the advisory capabilities across the wealth spectrum, including insurance. I think productivity also is another key. Recently, we did announce private bank using AI to have our RMs to do KYC and which has significantly shortened the time spent, meaning they have more time facing the clients, but will be -- continue to be effective and protected. Trading income, we're happy with it as well, rose 38% Q-on-Q. It's now above SGD 500 million in the third quarter as customer flow treasury income hit an all-time high. This is again both for wealth and also for corporate customers as we built on cross-selling as One Group. And this is not just in Singapore, but across geographies as well. And for insurance, the profit contribution from GE was up 50% Q-on-Q. GE indeed is working on increasing collaboration with the whole group. And I would say insurance plays an essential role in our Wealth Management business. We have also seen more insurance policy working together with the trust side to -- as a way to protect the wealth of our customer. So we always talk about wealth continuum. This is what we have been working on, and it is important that we continue to have that. So cost-to-income ratio is around 40%. Of course, we exercise quite a good cost discipline as well. And important to continue to invest in our business, in our people and also in technology. This is indeed for future growth. Asset quality is sound. NPL ratio held steadily at 0.9% since June 2024. And we are closely watching risk arising from trade tariffs, but we've talked about it for the last 3 quarters already. So I think there is, of course, potential impact, but I think we have been tracking well. Our customers have been managing quite well as well. One sector we remain particularly cautious, of course, Hong Kong CRE is a question that some of you will raise, but indeed, we have been quite cautious. We're comfortable with current level of allowance coverage. I think 160% as an NPL coverage is quite satisfactory. And then coverage on performing loans is at 0.9%. Loans will also grow, I think, 7% and 4% on a constant currency basis. We have gained market share in Singapore mortgages. And through -- for one example, we have a partner care program, which we work very closely with property agents and to encourage them to bank with us more and also through the referral customers and mortgages to us as well. For corporates, we continue to expand, deepen relationships with new-to-bank customers as well as supporting customers across our international network. So that is not limited to ASEAN and Greater China, but through our major international branches as well. I'll pass to Teck Long later to talk a bit about that. Flipping the page, of course, we always say there is uncertainty and uncertainty become more complex as well. But happy to say that global trade and most major economies have shown signs of resilience. And of course, this year, in particular, supported by some front loading for trade and also technology up cycling, particularly for Asia. For this year, we are keeping to our previous guidance on our financial numbers, except for NIM, we want to -- and we are changing it to around 1.9% from the previous 1.9% to 1.95%. Looking ahead, I think as we said, operating conditions continue to be complex and 2026 may see slower economic growth across various countries and geographies. And of course, trade policies can continue to shift. Geopolitical tensions are still there that could have an implication on the demand and supply chains for our key markets, but we do feel that the fundamentals remain resilient, and we are positive on the mid- to longer-term growth prospects as well. Also want to report on our strategy. I think we refreshed our corporate strategy in 2022. We talked about a 3-year plan of incremental revenues of SGD 3 billion. Glad to report by end of September, we have already surpassed that growth of SGD 3 billion. So hopefully, we'll end the 3-year plan quite ahead. First thing is ahead of schedule, but also above plan. That means the initiatives we all put together and how we work as One Group has bear fruit. And I think this will shape up well as a firm foundation to capture growth opportunities going ahead as well. We talk about growth pillars, but also fundamentally what is important is a One Group approach, and this is an important enabler. Today, we work much more closer as One Group. That means not just collaboration, but synergy and synergy is both in business volumes and more customer and also synergy in terms of cost savings as well. So this is important because it is -- as we have more customers and they bank with us on more products and more and more countries and more effectively because we also make digital a very important offering. So I think we are managed to work as One Group together. We are well placed for the future and -- because we still have a very strong balance sheet position and the business franchise. For 2025, we stick to our commitment to deliver the 60% of dividend payout ratio, and we will complete the share buyback plans by end of 2026. That is still there. So we stay committed. So we now hand over to Teck Long to talk a bit more about the business and the business environment. Teck Long Tan: Thank you, Helen. I will share two key factors which we are monitoring. One factor is obviously the tariffs. And I would say it's not just the tariffs, but also the broader trade restrictions other than tariffs. We feel that the ripple effect of the tariffs and trade restriction has not been fully filtered throughout the economy. So we are watching this very closely. Having said that, some sectors are still growing, for example, digital infrastructure, domestic construction boom. So we see these sectors continue to grow. Indeed, from a different angle, because of trade tariff where materials come from, for example, a large market, a large manufacturer market like China, the input cost could be lower for some of these corporates in these industries. The second big factor is interest rate. Interest rate helps in the sense that the wealth customers start to relook at onboarding risk in their investment. And also for corporates, it has an effect on them evaluating the hurdle rates for investment. Having said that, the overall tone of the environment is still cautious in investing. So I will pass that back to the colleague, Ching Ching. Ching Ching Koh: Right. We'll open the floor now for questions. Maybe [indiscernible]. Unknown Analyst: Yes, so to start off, what does this mean for OCBC moving forward? And what's the outlook for the next quarter and... Pik Kuen Wong: Which one? Sorry, can you repeat that once more? Unknown Analyst: What does this mean for -- [indiscernible] for us. Pik Kuen Wong: Okay. It's an exciting set of numbers. We are happy, reflects on some of the investments and the commitment we have made in the past. We did talk about the corporate strategy, where we are focusing on and indeed improving for the wealth segment, in particular, we said we are hiring more RMs. I remember last quarter, we did talk about we achieved the number, in particular for the private bank, we achieved the number earlier than we expected, meaning we hire faster than we hope. The use of AI has generated a lot more -- some cost savings, meaning we become more productive in a sense. So we hope that this is a good foundation going forward. Fourth quarter since we're going to only announce by next year, and we're only 1 month into the fourth quarter. Of course, we hope momentum is still there. But generally, the last quarter is a more quiet time for wealth. Normally, it is the case. And we have changed our -- [indiscernible] some of our guidance, meaning we think loan growth can still be mid-single digit. We continue to try to defend our NII. But again, I think the noninterest income sees most results from what we have invested in the past. So we hope this is laying a good foundation for 2026. Unknown Analyst: Okay. So with AI assisting [indiscernible] helping RMs do KYC, so [indiscernible]. Pik Kuen Wong: If we have RMs, that's great, right, because they have more time to talk to customers. So they're able to generate business volume. I think I also mentioned in the past with the use of technology, you have not actually seen there is any need for us to say that we have to release people. First thing is because we continue to train our people so that they will be able to take on more complicated jobs. But the second thing is you invest in technology, it brings on more volume. So you also need the people to do the job. And there's always natural attrition. So I wouldn't say that because of AI, suddenly there will be a loss of job. We haven't seen that, and I do not expect it in the foreseeable future. Ching Ching Koh: Anyone else? [indiscernible]. Unknown Analyst: So one question I had was how critical is wealth management to Singapore's growth strategy right now, especially as lending margins compress? And then my second question is, how do you balance the growth opportunity from ultra-wealthy clients with heightened regulatory scrutiny around money laundering and sanctions compliance. Pik Kuen Wong: The first one you're also referring to wealth. And you asked about loan margins? Unknown Analyst: No. Mostly just how critical is wealth management to Singapore banks right now as a strategy? Pik Kuen Wong: I think wealth management has been a very important -- also in our own corporate strategy, it's a very important growth pillar. And the reason being that Asia is getting more affluent over the years. And so Singapore definitely is the center in particular for ASEAN. And wealth management -- and Singapore is a highly rated country. And even you have seen over COVID or some uncertainty in the world, actually, there will be net new money coming into the country. So that's why this is a very important growth pillar for Singapore banks. And in particular, most research would say that the Wealth business will continue to grow like high-single digit or even double digit, right? Over the next 5 years or so. So that is why it is important. When we say it is important, that means we should be able to handle business in a fair manner. Fair manner meaning that you serve your customer well, but, of course, you stick to your laws and regulations. And also we uphold to the higher standards, right, because we are responsible to -- not just to our regulators or rules and regulation, it's to our stakeholders as well, right? We defend our reputation, we defend our business franchise. So when you need that history -- to the second question, how do you balance that? I wouldn't even call it a balancing act. We strongly adhere to -- of course, we have to adhere to rules and regulations. But it is not rules and regulations that Sing -- that keeping us from not doing business. Rules and regulation is there. And if there is no rules and regulations, how do people conduct business. So that's the fundamental. So adhering to rules and regulations, there's no negotiation, yes. And then it is about how do you use your people, use your technology to identify what is not suitable. So KYC is a very important thing. And it doesn't mean that if you do KYC, you cannot put clients on. But KYC is the way for us to keep away not suitable clients, right, those -- and so I don't think it's a balancing act. It is we need to continue to invest in how we conduct our KYC. The world has become a lot more complicated. That's why AI comes in handy. Using AI information, it can summarize much better than you put in a lot of manual hours to do it, right? But I want to recap that this is not a balancing act. You just have to do it, but that doesn't stop us from able to put in more customers and offer our service to them. Ching Ching Koh: Maybe Thomas... Unknown Analyst: So I have a question for them because you just mentioned that digital infrastructure is growing sector, but a significant portion of investment obviously [Technical Difficulty] so do you foresee any possible [indiscernible] or overheating? And how do you monitor? Teck Long Tan: I think the demand will be sustained. The digital infrastructure is needed because of the trends of companies adopting digitization in their processes. It also has to do with consumer behaviors, individual behaviors, serving the net using video services as opposed to just searching on Google for information. So all these are data intensive and this fuel the growth of AI and therefore -- sorry, fuel the growth of digital infrastructure. Now AI is even more demanding for data center. So this is the beginning of the AI wave, and I think the trend will sustain. Ching Ching Koh: Sorry, maybe I go to [indiscernible] . Unknown Analyst: I have one question on the net new money inflows. So it's SGD 12 billion, and it's about the run rate of about SGD 4 billion to SGD 5 billion in the past 2 quarters. So I was wondering what changed. And in terms of the geographies, where are they coming from? Pik Kuen Wong: It's a good number, of course, and it is also a result of some of the early work we have done, the hiring of the new RMs are beginning to bear fruit, right, because we did say that we accelerated the hiring a bit more for the last 2 years. With that sometimes people say, is this the new normal? I think you cannot see it as like what you call a new normal because a lot depends on the market conditions as well. And when the interest rate coming lower also help because customers maybe actually be more active. And if you have good products and then, of course, they said, I give money -- put money into OCBC Group because you can offer me good products and give me good investment plans. Generally, fourth quarter is a bit more quiet as we always see. So don't take it that SGD 12 billion will repeat in the fourth quarter necessarily, okay? But as to the spread, it's quite well spread among our three segments that we report, meaning the private banking side and then our premium and also premier private. And it also comes from various places. It's not limited to -- I'm not to say that it's particular one country contribute the most. Ching Ching Koh: [indiscernible]. Unknown Analyst: I have two questions. The first one is what's the basis of the assumptions for the new guidance on NIM of 1.9% as the basis of assumption? And the second question is how confident are you with the asset quality amid all this macro uncertainty? And do you see any -- foresee any like specific sector stress, for instance, like Hong Kong, CRE and... Pik Kuen Wong: Yes. I think NIM, we provide guidance because we have been providing a guidance on NIM in the past. In an interest rate cycle as now interest rate going lower, NIM will continue -- I mean NIM will have pressure, yes. So what we have been focusing this year, which we described in the past is very much protecting our NII, yes. So NIM becomes like a pointer. It's not really like a target. It is a pointer to help us to look at how -- in particular, look at how we manage our funding costs. And how we defend, of course, our loan margin as well. So I think the reason why we do want to show this is because we have been showing NIM before, and we don't want to misguide because we do see NIM dropping in the last quarter, which would mean that the whole year -- I mean the last quarter and also the coming quarter because interest rates coming down. So that's why we want to provide an updated NIM. But it is -- it doesn't serve as a target. We say we need to protect that NIM because I said before, interest rate cycle -- I mean we cannot control how interest rate turn, but we can control and we can invest what we can do to bring in more volume to counter that loss and more volume also pointing to more volume on noninterest income as well. So that is it. The second question is on the quality of our portfolio. We are quite uncomfortable. It has been stayed -- the NPL ratio has been staying at 0.9%. Our coverage, I think, is quite comfortable as well. We do not see any systemic risk. There are sectors that we watch much more closer. It doesn't mean that we foresee something very bad coming up. But of course, nobody can look too far beyond. Everything is about -- I think Teck Long just talked about it. We always know that there is geopolitical tension, there is trade tariff situation, doesn't mean that it's entirely gone. And so -- but what we can -- what we are more comfortable is we feel that the area we are in still offer a lot of resilience in the economic situation. Next year, maybe the global growth may be slower. But if we are in more resilient regions, we hope that through the opportunities we have identified, through the work and investment we have put in, we'll be able to continue to grow our franchise and to grow our business. Unknown Analyst: Just a couple of questions. I think you mentioned that there will be some focus on asset growth. Will this be loans? And if so, what sectors? And will it also be on your book, your securities book? And if so, what currencies are these likely to be? That's one question. The second one is, of course, Great Eastern. You said that there were higher margin products. Just wondering -- and we're wondering what sort of products these were that give higher margins versus what they had been, I think, last year because less powerful last year. And then the -- there's one question which I'll ask to you later. It's about the strategy over your regulatory loss allowance reserves. You have it, but one of your peers doesn't. And I don't understand the reason for it because you can't use it, right? You can't -- it's not like an overlay which you can draw on if you want to boost your [indiscernible]. Pik Kuen Wong: I will answer that -- you want me now? Unknown Analyst: No, no, answer that to me -- so basically, asset growth and [indiscernible]. Pik Kuen Wong: I think I start with asset growth, but I want Teck Long to comment on it. It's both our loan book because we have onboarded more customers, especially the corporate customers as well. Mortgages, we mentioned, we have gained a bit more market share. And of course, we want to serve customers across geographies and which we have done quite well. And when we onboard big customers, we are able to serve them indeed in different countries. And of course, we do have funding growth, which we will put into high-quality securities asset. That would be quite a bit in U.S. dollars, but also in, of course, in Sing dollars, which is our home base currency as well. So I pass to Teck Long to talk a bit about the loan growth. Teck Long Tan: [indiscernible] one of our banking franchise, and we will continue to focus on that. I think the question also has to do with the overall economy, the overall uncertainty in the economic environment at the moment. As you can see that uncertainty has been there for quite a while, whether you look at it from duration day or caused by the spike of interest rate a couple of years ago. So we have navigated quite well. We see growth potential in the corporate sectors where the demand is certain, like domestically driven industries like construction or even renewable energy, where usually there's involvement of the government or major energy corporates in offtaking the generation of the power. So we look at it from an industry-led aspect to manage the risk. So we are industry specialists who will look at this valuation closely and navigate that environment. So we expect continued growth in the corporate loan book. On the other aspect is really the individuals and to some extent, the corporates as well. It relates to real estate in Singapore. So real estate in Singapore, the price is holding up and the demand for real estate continues to be there. So we will also get our market share in this part of the loan book. Unknown Analyst: Can I ask you how confident are you about the U.S. dollar? Because you mentioned that you will raise some of the U.S. dollar, you will increase -- you will buy U.S. dollar treasuries based on the asset for the securities book. So how confident are you of the U.S. dollar remaining [indiscernible]. Teck Long Tan: Okay. I think it's a new question. I didn't say anything about U.S. dollar. I think Helen made a comment. Yes, I can start answering this, right? U.S. dollar is still a major currency. So its use is still very prevalent. So although people may talk about the basement trades, that's largely focused in gold, so which also from our perspective is really U.S. dollar is still very dominant at the moment. And gold is while growing in prominence, it's not used for trade or day-to-day use. So in that sense, from a reserve viewpoint, maybe gold has grown a little bit more in prominence because of the volume as well as the price of the gold. But generally, U.S. dollar is still the dominant currency. Unknown Analyst: You are comfortable with only U.S. dollar treasuries. Teck Long Tan: Yes. Unknown Analyst: [Technical Difficulty] insurance products at... Pik Kuen Wong: Yes. I don't think we should speak on behalf of Chin Yee. They have that results session. But I think it's quite normal that you stay focused in doing a business, balancing volume and margin, right? So -- but I don't think we can speak on behalf of them. I think Chin Yee will take the RLAR question. Chin Yee Goh: Okay, RLAR, that is regulatory loss allowances reserve. When you look at our NPA coverage, we do have that as part of the total allowances. How RLAR came about was in the past, whereby there's a requirement to meet -- regulatory requirements to meet the regulatory allowance -- sort of allowances for -- allowances reserved at a minimum level from a regulatory sort of requirement. Now we have already met all that. But given the uncertainty in the environment, we decided not to release that but instead to just keep that. We can actually release that. We -- in terms of the regulatory -- meeting the minimum regulatory requirements anymore. Ching Ching Koh: [indiscernible]. Unknown Analyst: Question is from the -- I think Q1, you mentioned about some cost optimizations that the bank was looking at? [indiscernible] give an update. [indiscernible] about 3% operating cost. Is that sort of within expectations [indiscernible]? Pik Kuen Wong: I think this is part of it, meaning when we talk about cost discipline, we have -- in a way we have grown volume without need to hire a lot more people. I think that is one thing. Synergy, we also save some money on synergy because, for example, Bank of Singapore, a lot of the support functions is -- we have one -- actually one support function to serve both -- it's a separate legal entity, but they're also served by the same support functions. GE, we've discussed a lot more. And I think in the future, that's another opportunity. But very much it's also because of technology investments as well that, as we said, you do things faster. So you can generate more without investing or putting more money. Ching Ching Koh: Okay. It looks like everyone is happy. Unknown Analyst: At least a lot more information this quarter in your presentation really [indiscernible]. Ching Ching Koh: Yes, maybe Helen wants to... Pik Kuen Wong: Yes, I just want to say something. It's -- as Ching Ching said at the beginning, this will be my last results communications with the media. It's been a very fruitful and wonderful 6 years stay in Singapore with a bank that I actually started with. To me, it's always discreet feeling, a bank that I started with and I ended my career with. Retirement is just another phase of life. It doesn't mean that I forget about OCBC and all the wonderful people I have met and worked with, including you guys. So thank you all for the support all these years. You always come up with a very good question and sometimes make me think, a, are we missing something? You are interested in something that must be a reason. So help us to improve ourselves along the way as well. So I want to thank you all the while to -- of supporting the OCBC Group and supporting me very much. I hope that you will continue to provide the support to Teck Long. I'm very sure -- Teck Long has been with us for more than 3.5 years now. So he's part of the leadership team, and I'm very happy we have Teck Long to lead the group going forward. And I'm very sure that he will bring OCBC to the next stage. So a lot of things have happened over the last 6 years. But as again, I have nothing but gratitude and really feel honored to have been the Group CEO for OCBC. So thank you very much.
Operator: Good afternoon, and welcome to the Q3 2025 results presentation for Caledonia Mining. Today, we're joined by Mark Learmonth, who's the CEO, and he's going to introduce the webinar and start his presentation. Mark, over to you. Mark Learmonth: Thank you. Thank you very much, Julie. Should we open the slide deck? [Indiscernible]. Move on to the forward-looking statement and disclaimer page. Next page, there you go. And then the presenting team. So yes, I'm Mark Learmonth, Caledonia's Chief Executive; joined by Ross Jerrard, the CFO, who will run us through the financial numbers. James Mufara, the Chief Operating Officer, will talk to us about operations. Victor will say a few words about Bilboes and Craig will -- Craig Harvey will talk to us about the -- some of our exploration initiatives. Can we just move to the next page? Okay. The first thing I'll point out is that, as you probably noticed, we no longer publish the standard sort of management discussion and analysis and the detailed financial statements. So quarters 1 and quarter 3 will produce what we've done this morning, which is like a truncated version, but I think that's more than adequate for conveying the substance of what we're doing. But as we get into the presentation, first, we must recognize that we had a fatality during the quarter, and we extend our condolences to the family and the colleagues of the man who tragically lost his life. James will talk to us more about what we've done in the aftermath of that to comprehensively review our safety procedures and safety practices, and what we're doing to strengthen our risk management and workforce protection. So James will go into that in some more detail. It was a solid performance operationally. Production at Blanket was just over 19,000 ounces, and we sold just over 20,000 ounces. And that was clearly -- we've clearly been helped by the rising gold price. So the gold price is up 40% quarter-on-quarter, comparable quarter to this quarter to just over $3,400 an ounce, which drove a strong improvement in revenue and also profitability. So revenue up 52% to $71 million and EBITDA up 162% to $33 million. Ross will clearly provide more information on the financials. With respect to Bilboes, as we say in the RNS, we expect to give an update as to where we are and where we're going with that imminently. So Victor is on hand to say something. But frankly, until we've imminently said something, there's not a great deal we can say at this stage. And then Craig will run us through the exploration programs at Blanket and Motapa, which we're advancing and which is showing very, very encouraging results. And then finally, I'll just remind you all that in addition to these results, we've this morning declared another quarterly dividend of $0.14 a share. So with that, can I hand over to James to run us through the operating results? James, over to you. James Mufara: Thank you very much, Mark. Good day to you all. It is very sad that -- I mean, in this quarter, we actually have to report a loss of life incident that occurred at our Blanket mine. In this very quarter, one of the things that why it's -- this tragic is we have seen quite a serious improvement in terms of our health and safety parameters, and that's in terms of lost time injuries, in terms of environmental conditions underground, ventilation conditions underground, we have seen an all-round improvement and accident-free days, we've seen quite a serious improvement. However, we still suffered this loss of life in which the gang leader who was conducting -- in the process of conducting secondary blasting actually had a premature detonation and he lost his life. Secondary blasting operation is an operation where we break some of the bigger rocks that could have been generated during the time of primary blasting, so that you can send them through into our ore buses and be in a position to take them out to surface. Immediately after this accident, we embarked on an investigation, thorough investigation and extensive investigation to determine the root causes of this accident. We had also reported -- we reported also this to the government who also actually conducted a thorough, extensive investigation on their own to determine this root cause and possible areas where we can see improvements. The investigation is complete now and action plans that we found out are currently being implemented to avoid any possible recurrence of these significant unwanted events. So one of the key issues that we still need to deal with is the issue of our employees and higher risk appetite that we see within the operations. If you can just go to the next slide, please. And the next one. In terms of the slides that are now showing, I mean, you will see that and this depicts a consistent delivery that we are now witnessing at Blanket mine from the third quarter of 2024 to now, you can see that the delivery has almost reached a steady state. I mean almost delivering at the same level. This is the recipe to good production and actually consistency, that's what a plant wants, the plant wants consistent delivery, and this is what we're beginning to see. This has been brought about mainly by 3 issues, but there is obviously a lot more other issues behind this. And the first one is the introduction of the short interval control system that we see on the mining and the metallurgical side, where production is managed on the short interval control basis. The second reason is that we have seen is that there's been a consistent tonnage throughput, because now the plant we can feed from the stockpile, and we are in a position to see consistent throughputs due to feeding from the stockpile. The third reason for this consistent performance that we see with the tonnage and steady-state performance is because with the improvement in development that we embarked on starting the end of last year and even carrying on with this year, we are seeing an improvement with regards to flexibility as we are opening up better and more areas for production underground. However, on the center of graph, you will see that there is an unfavorable drop in the orange line, which is the grade line. The reason for the drop in the grade line is linked to the loss of life accident that we had on the 22nd of September, where we stopped our high-grade areas for up to 20 days while investigations were actually going on. You will see that this year also a negative impact in terms of our recovery, which is on the graph below on the line -- on the graph below where the graph shows that the recovery also took a negative dip, because of the grade that actually went down. The good news, however, is that the recovery for the year-to-date is still on plan, and we still expect to finish the year high with regards to our recovery. If you may just turn to the next graph, the next -- the table shows how our mining metrices were above plan for the quarter, which is actually showing a healthy production throughput throughout the whole quarter in terms of our tonnes broken, trimmed, hoisted. And most importantly, in terms of our development to generate new areas where we will mine from. You will see that we were green in these areas, and it's very important to be healthy in all these areas. This is consistent production all around. Achieving development will also help us to make sure that our flexibility going forward is going to be better, and this will actually positively impact in terms of employee productivity. The only color which is not green is the grade color, which we have already explained that some of the higher grade areas, we had to stop them after the loss of life accident that we unfortunately suffered on the 22nd. And because of that, we actually see that the grade was at 3.4 grams per tonne. However, if you can just carry on to the next table, we see that, at Blanket, we are on course to meet the increased guidance. On this presentation, you will see that the tonnes milled are still about 7% ahead of our desired run rate for the year-to-date. Also important, however, also is the issue with regards to the tail grade, which remains at 0.2 grams per tonne, I mean, which is our plan consistently very, very low, which is showing that our recovery within the plant has remained consistently very, very high. The ounces for the year to date is still, even in the end of the quarter, still 3,000 ounces ahead, clearly showing that Blanket is on course to meeting the increased production guidance as given out to the market. If we can just go to the next graph, which shows that we are still securing the future. This production has not just been to meet today's need, but it's also securing the needs of tomorrow. You can see that in terms of our reserve generation, which was positive for the quarter. We have met today's production, but without destroying our ability to meet production targets within the future. So although our set out goal at the beginning was simply not to deplete reserves, we because of better production, better development actually added reserve ounces as well in the quarter due to better production. This is a healthy state to be in. If you can just go to the last one, which talks about our focus on productivity. You will see that Blanket being a mine that has been in operation from 1904, some of the areas are further and further from the shaft barrel and deeper as well. There is a need for us to improve productivity and introduce technology within our mining space. We have seen that ourselves is mining. I mean we are price takers and the only area in which we can actually improve our competitiveness is if we can improve productivity. We have thus embarked on implementing technology in the mine, so that we can better position ourselves to be more productive going forward. In this example, I've just given 3 of the areas that we have chosen to embark on, which is engineering areas, and one of them being introducing men carriages or men riding. This is but the improved impact in terms of phase time, so that people are on the phase in good time and also so that people have got energy when they arrive on the phase. So we have started to implement this within our working areas as a way of increasing productivity, and dealing with increased cost that invariably come with an aging operation. And most importantly is the technology that we are improving. We are doing a lot of the work in-house, as a result, it's costing us less to actually implement this technology. We intend to continue to increase and implement this technology to both increase productivity, and also increase the health and safety of our employees. I'll hand over to Ross for the financial section. Thank you. Mark Learmonth: Thank you, James. So Ross, do you want to run us through the finance, please? Ross Ian Jerrard: Thank you, Mark, and thank you, James. My pleasure. Good afternoon, everybody. It's my pleasure to run through the financial results. And as what James described, it's been a challenging quarter, but certainly well delivered. So if we can turn to the next slide, a quick overview of our financial results and a summary. You'll see gold sold is up 9% to 20,000 ounces against gold produced of just over 19,000 ounces, solid quarter there. I will highlight that those gold produced ounces are the Blanket ounces. There were some 437 ounces that was generated from Bilboes, that we don't account on this table just in order to calculate our on mine costs, et cetera. So a very solid set of numbers in terms of ounces produced and sold. Just dropping down below that first line, you'll see the on-mine costs, which were up 27% quarter-on-quarter. That's driven by our sort of traditional elements of electricity, labor, and consumables. That increase was incurred this quarter, as James has indicated, there were additional volumes that were having to be processed and moved to compensate for some of those lower grades. And importantly, the teams had to be shifted around because of the unfortunate incidents. So when we're comparing against those areas that were planned to be or scheduled to be worked, there were a number of moving parts that obviously resulted in additional costs. But also additional volumes having to be moved, offset by that lower grade, which obviously came at a cost, and that has driven our on-mine costs. Dropping down to our all-in sustaining costs for the quarter, you will see that they have equally moved up some 40%, and that's predominantly due to those on-mine costs that I've just mentioned, but also the higher gold prices impacted our royalties, and that's dropped down into the impact of our all-in sustaining. Overall, a really good result driven by that gold price that Mark had mentioned at $3,434 an ounce, which was a really pleasing result, and has really benefited the operations and the results that we will talk to. So moving to the next slide, and we'll talk a little bit about the profit and loss. Happy to report another sort of quarterly revenue number of $71 million, which is back on those good ounces produced and all-time gold prices. You'll see that royalty number has similarly increased in line with those revenues. And those production costs were up, as I mentioned, in terms of additional volumes moved at a lower grade. Depreciation has largely been in line for the quarter. And I'm very pleased to report on those net foreign exchange losses where we've continued to benefit from access to the willing buyer, willing seller market, and being able to deploy our [ ZIG ] component. And if you look in the 9 months column, you'll see that we're just under $3 million compared to $10 million number for the same time last year. So we're really pleased with that result in terms of delivery in the income statement. Our corporate line items have increased, and that's due to a higher equity share-based payment valuation that was driven by the share price. But also a number of one-off expenses that you'll see in that year-to-date number in terms of some of the corporate team reshuffle. And then lower down below the line, that tax expense is higher, and that's due to the good operational performance and the benefit of the gold price. But you must remember the gold -- the solar sale that's been included in that number. And importantly, from a cash flow perspective, includes the capital gain on that solar plant sale. So if we quickly move on to the next slide and talk about cash flows. The net cash inflow from operating activities was a very solid number at just a shade under $14 million for the quarter, impacted by some large negative working capital movements of around $8 million. Those are timing in terms of some investments in terms of consumables and then the traditional working capital movements in terms of ounces, gold sales receivables and the like. Tax payments, as I've mentioned, included that $2 million in terms of cash outflows. And -- but then lower down in terms of capital expenditure, we're largely on track for the year. We're not readjusting our forecast spend, and we've continued to invest and deploy money into our fixed term deposits. So you'll see we've got $18.5 million now sitting on fixed deposits, and they all sit offshore here in Jersey. So a really pleasing result year-to-date. You'll then see the $14.7 million worth of dividends that have been made year-to-date, split in terms of $6.6 million for our NCIs and $8.1 million for Caledonia shareholders and comprising of 3 quarterly dividends that have been paid in the 9 months. And as Mark mentioned, we've declared our customary quarterly dividend of $0.14 per share earlier today. Importantly, we closed the period with $7.3 million of cash and cash equivalents at the end of the quarter. And if we want to move to the next slide, we'll see where those funds are held, and also importantly, from a liquidity position, where we sit. So in terms of having cash on hand of $15.6 million. We've got those fixed term deposits that I mentioned of $18.5 million. And then we've got some bullion on hand and gold sales receivables at the end of the quarter. But overall, including our bank facilities, we have a total liquidity of just over $44 million, which places us in a very healthy position and have the ability to deploy funds against some meaningful projects, which is very exciting. I know James has spoken about around cost initiatives, but I just wanted to turn to the next slide, and I guess, take a minute to look at our cost profile, which has been an ongoing team exercise. And I just wanted to highlight or take a minute to really look at our cost base against others. And we've been benchmarking our cost profile against our similar African peers. Admittedly, they're in South Africa versus us in Zim. But looking at mines that we compare to in terms of operating under conventional mining methods, and also those mines operating underground mines and at depth, we're not out of line and actually quite -- compare quite favorably against similar mines. You can see those metrics in terms of depth, tonnes milled per annum and also the human element, I guess, the number of people that operate those mines. And our mines, as James had indicated, really, it's around where we're operating now. Blanket is a very different mine from 5 years ago, where 60% of its ore was really extracted from a depth of approximately 750 meters or 760 meters. And now we've got a big component of our ore coming up from a depth of over a kilometer. And so in terms of tonnes and tonne meters hoisted and all the metrics that we're looking at, this all comes at a cost. So those key components of both productivity, but also our electricity costs and our tonnes of meters and additional loads that we're having to put on that electricity or the power requirement when operating at depth has a significant impact on our cost base when producing an ounce profile of around that 80,000 ounces per annum. And there are a number of initiatives that we've got on the go, as James has indicated, and we'll be hopeful that we'll be able to bring those to account and have a meaningful impact on our cost base going forward, but it's unlikely that we will return to historical levels in terms of the cost profile when operating in a very much closer to the surface and lower volumes being used. So on that basis, you would have seen in the announcement this morning that we have updated our cost guidance for 2025. So if you move to the next slide, please. Whilst the gold production and the previously guided gold ranges in terms of ounces and capital expenditure were maintained, we have looked at our cost base and looked at the volume movements and what it's meant for how we exit the year in preparing our outlook for next year. And we've increased our guidance ranges, both on-mine costs by increasing it to just over 10% to a range of $1,150 ounce to $1,250 per ounce. And equally, on our all-in sustaining costs, we've increased it for -- at 9.5% to a range of $1,850 to $1,950. And we believe that that is very reasonable and considered outlook in terms of as we exit this year and conclude on the final quarter. So we're really excited. It is mining, and there has been some challenges, and I think the team has dealt with that very well. But as we sit today and as we look for our outlook for 2025, we're really excited in terms of being able to deliver a really solid 2025. So with that, I'll hand it back to Mark, and I think it's going to Craig to talk a bit about exploration. Mark Learmonth: Yes. Thank you, Ross. So Craig, can you just talk us through the exploration at Motapa and at Blanket please? Craig Harvey: Thanks, Mark. Well, I can do that for you. So I'll just -- if we can go on to the next slide. So just very quickly, what we're doing at Motapa, the budget for the year is about -- just over 27,000 meters of drilling. At the end of Q3, we had done just under 20,000 meters. It's about 71%, 72% complete. We expecting to complete the drilling campaign during Q4. I did mention, I think, in the last quarterly that there were some issues with the laboratories in Zimbabwe. That seems to have been sorted. We have caught up quite a number of assays. So I am expecting to have a maiden resource declaration for Motapa, specifically Motapa North during H1 of 2026. If we could go on to the next slide then. So this is -- this is just -- when I talk Motapa North, I mean, obviously, it's those nice pretty colored zones that you see on that map there. But that blue line that represents the Bilboes, which is our current project that everybody knows about and the Motapa area. So from Motapa to the Bilboes boundary is literally 200 meters, and it's another 250 meters to the Isabella South pit. So quite clearly, what we're doing at Motapa and Motapa North should in all aspects have an impact on the Bilboes project going further. So currently, with all the drilling that we've done, we drilled and we've defined some mineralized zones over a strike length of approximately 2,500 meters. It remains open to the Northeast, still have some gaps between the historic old pits that we've got to do. Motapa North, its main thrust is oxide, sorry, not oxide, sulfide mineral resources below the current pits down to a depth of about 200 meters. So all of this, once the drilling campaign is complete during this year, we'll take 1 month or 2 months to get the assays in, and we'll have a maiden resource declaration for Motapa North early next year. If we go on to the next slide, some of the other drilling that we're doing. So this is about 500 meters south of Motapa North. It's the area to call Mpudzi. We're finishing up our drilling campaign here. So we've sort of drilled about 1,000 meters on strike. It remains open probably for at least another 1,000 meters to the Northeast. It's an area that hasn't been open-pitted in the past. So this program is slightly different where we are focusing on the potential for oxides, clearly, drilling some deeper holes to get an understanding of what the sulfide mineralization looks like. But this program will carry on in 2026, and we'll report drilling results as and when they will come in. If we could go on to the next slide, and I'll take us through Blanket quickly. So Blanket, we've got the underground, as we all know, and we've also got the surface. So with the underground exploration drilling, it's all of the long-haul drilling that we're doing, typically holes 250 meters to 450 meters deep. If we can go on to the next slide, I can then show you where the areas are that we're drilling. So to the south or to the right of the slide that you see, so we've got ARS, which is AR South, we've got the Blanket Quartz Reef, which is BQR, and then all of the Blanket orebodies, and we've got 7 of them. So you can see there 34 levels, you can see the little blue traces that are running there. So we currently drilling below 34 level. And a lot of our intersections are now on kind of the 36 level mark. On the Blanket orebody side, half yearly drilling results. So probably at the end of this year, we will publish a set of drilling results for Blanket. On the northern side, on the left-hand side, you can see some long-haul traces there. So that is Lima, where we are now filling in the drilling below 22 and 34 level. We've drilled the one next to it, Eroica, extensively. And we've got 30 and 34 level that can quite easily develop north towards Lima and pick up that orebody and then carry on mining like that as well. If you could go to the next slide. So in the past quarter and the previous quarter, Blanket started a surface exploration program. So if all the geologists out there, if there are any on the call, a very simplified geological map showing kind of the host rocks that we're looking at. All the blue vertical lines are the trenches that we have done. So that was a start of the exploration activities. That's over a strike length of 600 meters, the trenches are approximately 200 meters long. And out of this, we have identified an area that's approximately, yes, it's approximately 50,000 square meters surface exploration area that has got nominal gold values. If you look carefully, you can see some colored bars that are next to the trench lines. I can't put values on this yet. We haven't released anything to the market, but it gives you an indication of mineralization in those trenches. So during Q3, we have instituted a Reverse Circulation Drilling program, spaced 25 by 25 meters apart, drilling to a depth of about 45 meters. And the intention of this is quite clearly, if we have sources of ore that are probably amenable to heap leaching, Blanket mine will have access to, hopefully, an additional source of low-cost surface ounces that also do not require to take up capacity in our current plant environment and capacity that we have. And so my last closing remark on Blanket exploration on surface is if you look at an aerial map of, for instance, Bilboes, that's covered with historical open pits. If you look at an aerial map of Blanket, there are no open pits. And it's just really a function of the age of the mine when Blanket first started, it went underground very, very quickly. But quite clearly, along our lease area, this should be the first of a couple that we would see like this. This program is expected to finish up late December, so kind of early Q1 of 2026, we should have a full exploration report on this as well. With that, I'd like to hand back to Mark. All done. Mark Learmonth: Thank you, Craig. At the outset, I had indicated that Victor would talk about Bilboes. But the fact of the matter is that, as I also said, we're about to provide a very detailed update on Bilboes imminently. And so at this stage, there's nothing really Victor can say other than just repeat the word imminently. So apologies for getting that slightly wrong. So in terms of outlook, we remain on track to achieve the increased production guidance for 2025. So we're about, sort of notwithstanding a few headwinds in Q3, we're about 3,000 ounces ahead of where we expected to be at the beginning of the year, which is good. Craig has given you a good sense of the very encouraging drilling taking place at Blanket, both at depth and at the surface. Motapa, we're looking to convert the drilling into a maiden resource early next -- first half of next year, which should validate the acquisition of that asset some time ago. As I said, Bilboes' feasibility study, news on that is imminent. And we continue to look closely at cost management to see to what extent we can try and get those costs down somewhat, but acknowledging that Blanket is now a fundamentally different mine to what it was 5 years ago, and we're not going to go back to the days of enjoying the days of producing gold at $850 an ounce. So with that, we can open it up to questions. Operator: [Operator Instructions] And our first question comes from Nic Dinham. Nic Dinham: I have several questions, tidy up some details here. On the mining side, there's a lot more broken ore registering than actually hoisted. Could we have an explanation for that? And also from you, James, I think what are your immediately available ore reserves at the moment? I think you've got a sort of South African standard when you talk about that? Mark Learmonth: James, do you want to deal with those questions? James Mufara: Yes. So obviously, in this particular quarter, we broke more, but we had -- I mean, if you look at the year, for instance, we are within the normal standard of plus or minus 2%, the difference between what we broke and what we hoisted. But in this particular quarter, we had -- we broke slightly more, and this is simply because of our hoisting constraints, the stoppages that we had with the loss of life in some of the areas, and we let, but you will see that that will correct out this quarter. Then in terms of the immediately available sort of phase length, we are still very -- I mean we're still quite low. We're looking at maybe at the moment 2 months to 3 months. We need to move that up with a little bit more development that we need to do that with the flexibility. We are happy that we are already over 5% above for the year. And we are seeing -- we are actually mining -- we're actually putting back into our reserves. So we should see a big correction within the next year. And I think within the next 3 years to 4 years, we should be in a position to be maybe 3 months to 6 months or better, so that we can have better flexibility. Nic Dinham: And here's a question which I always run off you, Ross. What are you expecting from dividends from Blanket this year? And will that bring that horizon for the end of the facilitation loans any closer than quarter 1, which you spoke about last time. Obviously, things have materially improved. Ross Ian Jerrard: Hello, Nic. Yes, absolutely. So those loans basically will be paid off by the end of the year or January at the latest. So certainly earlier than originally talked about in terms of end of -- sort of Q1 next year. And then, yes, in terms of planning for the remainder of the year, we're originally targeting -- well if I deal with in cash, we were targeting a $50 million sort of cash balance to have been distributed and be sitting in Jersey by the end of the year. I think that's more likely to be between $40 million and $42 million, that type of level in terms of distributions that come through the chain. So we've had $45 million that have been distributed up from Blanket, both during the quarter and post in terms of dividends, and we continue to look to build our offshore bank account up closer to that $40 million mark. Nic Dinham: Sorry, Ross, if you can just explain again what is the quantum of dividends that Blanket will distribute over this year, given where things are at the moment? What will the total look like? Is that the number you mentioned? Ross Ian Jerrard: Yes. So those are the numbers that we've already done sort of $45 million. And depending on performance and the like, we're probably going to get between sort of $15 million to $20 million additional distributions that happen within this remainder of the year. That's obviously impacted by timings in terms of when those dividends actually get declared and the distributions get distributed up the chain. So we've done $45 million, it will probably be $60 million to $70 million in terms of actual distributions that come up from Blanket. Operator: Our next question comes from [ Joseph Tarsh ]. Unknown Analyst: My question is mainly for Mark. So you've talked in the past about how your goal is to avoid further common shareholder dilution as you fund the growth of the business. And with the favorable gold prices in 2025, Blanket, you're really starting to harvest some of the fruit of Blanket and the previous investments there. So my question is, how much do you intend to retain cash to fund the future development projects and potentially other acquisitions in Zimbabwe, as opposed to increase the dividend? And effectively, if a common shares needed to be issued, again, raise your cost of capital and doing so, as I think in hindsight, has been the case following the dividend increases with Blanket? Mark Learmonth: Okay. I'm not sure I heard all of that correctly. The upshot is that we -- there were several questions embedded in that. We're not looking at any further acquisitions in Zimbabwe. I think our plate is full. That's the first thing to say. Secondly, we do have a very substantial capital investment program in the Bilboes project, and that will become clearer imminently. And in that context, it would not be appropriate to increase the dividend. Having said that, our planning going forward is to maintain the dividend. Now clearly, we're not going to promise to maintain the dividend. But we don't see the dividend increasing, and we will do our level best to avoid reducing the dividend. I think that's all -- I think those are the answers to the questions you raised. Is there anything I've not answered? It's quite a complex question. Is there anything I've not answered? Unknown Analyst: I think that gets to the meat of it. Maybe just as a follow-up, if you were to have a general idea of when dividend increases would occur again, would it be after the current projects with Bilboes and Motapa are substantially completed? Mark Learmonth: Well, it would be after Bilboes is completed. And let's be very clear. We're doing Bilboes not for fun. We're doing Bilboes to increase cash generation and thereby increase our ability to pay dividends. That's entirely what we're about. I mean we've been paying dividends now for about 12 years or so. And if you look at the returns that we've generated for shareholders over the course of the last 10 years or so, I think it's a 1,000% return compared to gold going up threefold and the GDXJ going up fourfold. So we substantially outperformed both gold and the GDXJ. And a major contribution to that has actually been the effect of those continuous dividend payments over the last 10 years to 12 years. So paying a dividend is deeply embedded in our DNA. And I would hope that our past actions in terms of maintaining and then increasing the dividend should give shareholders a high degree of comfort that we're going into Bilboes and other projects with a view to increasing the dividend. It's very important. Operator: Our next question comes from Tate Sullivan. Tate Sullivan: I think [indiscernible], sorry for background noise. Is any of the work that you have done on Motapa going to factor into the feasibility study for Bilboes? Mark Learmonth: No, it's far too, that would -- it's far too early. It will take a maiden resource at Motapa early next year is just a staging post. To complete that work at Motapa will take -- Craig, what, 3 years, 3 years or 4 years? Craig Harvey: Yes, I'd say a timeline of 3 years or 3 years to 5 years. Mark Learmonth: Yes. So that -- if we were to -- if we're hoping to fold Motapa into Bilboes at the get-go, that would introduce a delay of many years into the project, which I'm not sure on this as we stand. So look, it is all -- if you think about the Bilboes project, the first 6 years will be mining in the Isabella-McCays area. And then the latter 4 years will be mining Bubi, which is more remote. In the intervening period, that gives us plenty of time to finish the geological work at Motapa and then in due course to fold Matapa into Bilboes as the Isabella-McCays material runs out. But at this stage, there'll be no benefit to shareholders in deferring the project. Tate Sullivan: And then for Blanket, you mentioned in the press release a plan of scheduled engineering work on winders and shafts. I'm sure that -- and then storing and then accumulating the ore for uninterrupted milling. Is this all planning for 2026 engineering work? Mark Learmonth: Your line is very poor. Could you kind of repeat the question because I couldn't pick up all of it. Tate Sullivan: Yes. You mentioned some scheduled engineering work on winders and shafts for Blanket. Is that all planning for 2026? Mark Learmonth: James, correct me if I'm wrong, but I think it's that sort of a relatively quiet period over the December, January '26, '27. James, is that correct? James Mufara: Yes, it is correct, Mark. Yes. So '26, '27, we're going to have the AC-DC conversion, yes. Mark Learmonth: Yes. And let's be clear, the whole point is to have a stockpile so that we can see our way through that hiatus without interrupting production. Operator: There are no other raised hands. So follow-up, which is from Nic Dinham. Nic Dinham: Yes. So I missed a question for Craig here. When, Craig, do you think you'll be in a position to do a reserve upgrade at Bilboes -- at Blanket? And when would that result in a technical report summary? Craig Harvey: So we are currently busy with one. So during Q1, late Q1, we will have a new technical report out. We'll have a revised capital, and we'll have revised resources. And obviously, with the life of mine, we'll have a revised reserve estimate as well. Operator: We've got another question from [ Yuvan Lowe ]. Unknown Analyst: Congratulations on the strong financial results. I've got a couple of questions. Perhaps first for James. So in relation to the development that has been done, could you just talk specifically to Eroica and BQR? Mark Learmonth: James? James Mufara: Yes. So I mean we obviously now, at the moment, I mean, in terms of the development, nothing has really changed in terms of Eroica and BQR, I mean we are developing reserves in that area. We still have got crews also that are busy mining in that area. I wouldn't say off the top of my head, it could be around, Craig, maybe 15% of our production is coming from there. These are still high-grade areas. We're still seeing good values in Eroica and the BQR area. But we also -- that we also had the loss of life was also in BQR, for instance. But we are confident that with the development that we're doing at the moment, we should be in a position to open good reserves in the next 2 years, 3 years, like we say, and we are accelerating development there. Unknown Analyst: On a related note, but this time directed to Craig. So the discoveries at Sheet or in the position of Sheet are very interesting. I know you're focusing on the oxide for heap leach right now. But have you done any deeper holes? Does there appear to be an extension at depth to Sheet? Is it disseminated sulfides or is it [ quartz ]? Craig Harvey: Yes. So that surface exploration that I showed there sits, as I say, it's 250 meters to the east of Sheet. When we extrapolated underground because, obviously, we've got the whole claim of our underground workings, it appears as though this area hasn't been mined. So there is a potential for a previously unknown or unmined orebody to be sitting in the footfall of Sheet 250 meters to the east. So we're going to tackle the surface. And in the meantime, we have -- we are in the process of procuring slightly stronger, better electrohydraulic rigs that we can drill from 9 level on from Sheet drives that we have there to actually have a look if this does carry on down. Mark Learmonth: Sorry, Yuvan, does that finish you? You done? Unknown Analyst: Yes. Thank you very much. Mark Learmonth: I can see we've got a typed question, which I think falls -- I mean, Ross, can you pick it up at the bottom? It seems to really fall into your bailiwick. Can you see them? Ross Ian Jerrard: Sorry Mark. I didn't seen enough, reading through. Mark Learmonth: Yes. I mean, the first question is what's effectively the downside gold price scenario, which -- below which we couldn't sustain the dividend? So I think that's the first question. Are you able to answer that? Ross Ian Jerrard: Yes. So on that one, that would be sort of $1,850 would be the low price that -- or downside scenario in the short term and that we've modeled on that side. Mark Learmonth: Okay. And the second one refers to lease liabilities. I don't quite understand what the question is about lease liability. Cash used for payments of lease liabilities has been increasing year-on-year. What's the long-term capital allocation strategy for managing these increased lease debt? I don't quite know what lease liabilities were referring to? Ross Ian Jerrard: Yes, not sure either in terms of the leases. Mark Learmonth: We're conspicuously ungeared. I mean we do have some loan notes, which initially were issued by the solar company. And then when we sold the solar company, we Caledonia deliberately took those loan notes over, because we're interested in helping to further develop the emergence of a debt capital market in Zimbabwe. And so we're keen as a company to continue to build those relationships with high-quality Zimbabwean institutions. So we have those liabilities. Then the other liabilities are really the nature of very short-term overdraft facilities. And as you can see, we've pretty much repaid to the latter half of those to go during this quarter. So I'm not quite sure what the lease liabilities are. Ross Ian Jerrard: It's probably related to some of the property leases and the new buildings and some of the signing of those leases. But again, not material in the total scheme of the proceeding here. Mark Learmonth: Okay. Two further questions. First, what's the percentage tonnage being hoisted by #4 in Central Shaft? So currently, the percentage -- I think for the whole of this year, the target is for about 62% to come up Central Shaft and the balance to come up #4 Shaft. And so I think the point that Ross was making is if you look at that in terms of tonne meters, in 2020, we hoisted 630,000 tonnes from a depth of 760 meters. So that's about 450 million tonne meters. If you take -- if we're going to hoist -- this year, we're going to host about 830,000 tonnes. If 62% of that is coming from 100 meters, that effectively increases the tonne meters to about nearly 900 million. So we're using pretty much twice as much power to hoist, which is, I think, the point that Ross was trying to make. And the second question is, was the pressure on production cost broad-based or unique too? The pressure on production costs has been across the board. So we're continuing to see increased labor costs, and that's a combination of overtime, and I'm going to say bonus payments based on production exceeding targets. In terms of trying to manage overtime, one of the things we're doing is we've introduced a clocking time attendance system, which is allowing us now to get a better handle as to how and why overtime is being incurred. And one of the things we want to do going forwards is to try to improve the roster and improve the way we use labor, so that the workers get to and from their places of work much more quickly. And therefore, they're less tired, and they also do less overtime. So I think that's the initiative on labor. On consumables, we've looked over the last 5 years. I mean, on our consumables, about 1/3 is what we call variable consumables, which is cyanide, drill steels, explosives, and that sort of stuff. Over the course of the last 5 years, we've actually become more efficient across the board in terms of our usage of cyanide, explosives, drill steels, kilos per tonne milled. But in every case, we're finding that the unit cost is going up, particularly in the case of, say, rods, where the average increase per annum over the last 5 years has been about 12%, I think. So we are seeing costs generally going up. And then the third one would be -- yes, it's not just labor, that's electricity and that's consumables. Within consumables, the conspicuous offender, I guess, at this stage would be the cost of running the TMMs both in terms of overtime and consumables. And that reflects the fact that some of these TMMs, the underground trackless equipment is getting old, and we need to seriously now consider whether it's economic keeping and repairing old and reliable stuff, or buying new stuff, which is more reliable and less prone to breaking down. So I hope that -- and then on top of -- sorry, also on top of the final point to that question, within the quarter, we did incur some additional costs relating to repairing a ball mill, one of the big ball mills found. And whilst we could work around it in terms of maintaining tonnage throughput, it meant that we did incur some extra costs to fix that ball mill. But primarily, the increase in costs, I guess, is structural, not specific. I hope that answers the question. Any further questions? Operator: No further raise hands. So over to you for any closing remarks. Mark Learmonth: Let me just make sure there's no one. Okay. Look, thank you very much for joining us. It was a -- I characterize the quarter as being a solid quarter. It creates a good foundation. And as we say, the real news flow is going to be the imminent news flow relating to Bilboes. So thank you all for joining us. Thank you very much.
Jan Pahl: Gentlemen, my name is Jan Pahl, and welcome to the Hypoport SE Q&A results Q1 to Q3 2025. I'm here together with this lovely gentlemen, Ronald Slabke, our CEO, here. And together, we would like to organize this Q&A session. Jan Pahl: [Operator Instructions] And we are very happy to wait until the first question on our Q3 results [indiscernible]. And in the meantime, we have decided to start with a question, which I got just a few minutes ago via e-mail. So maybe this is a good -- even it's a little bit complicated one, it's a good idea to start with. It is regarding our JV. So at least the question to Mr. Slabke is, could you please explain if Europace has maybe lost market share because of Deutsche Bank issues. So the German mortgage market volume seems to increase more than the Europace volume this year. If Deutsche Bank is priced themselves out of the market while the German mortgage market volume continues to increase, who is taking over these Deutsche Bank market shares at least. So -- and I'm sorry, I forget to start the record. Should I summarize it again. Okay, sorry for that. Now we are live on now record has started. We are already live. So once again, our first question here on our Q&A result is if maybe Europace has lost market share because of Deutsche Bank because it looks like the German mortgage market is increasing a little bit faster than the Europace volume, and this is because Deutsche Bank is pricing them out of the market, out of the Europace market. Who is taking over these shares from Deutsche Bank? Ronald Slabke: Okay. A good question. Let's start with this that -- in general, we see a healthy market environment right now. So the recovery of the German mortgage market from the crisis in 2022, second half of the year and 2023 is over and the market is, let's say, coming back. So the speed of this recovery looks slightly different in different areas of the market when you think about what the mortgage is used for, regional differences between metropolis and rural areas, but as well the different market participants perform slightly different in this market. So what we see from the reporting and as well from our numbers and activities, regional banks are pretty successful right now, especially in a year-on-year comparison because they had a weak start in 2024 still. And so they come from a lower base level when you look on the 9-month numbers. So cooperative banks and savings banks are taking market share right now. In a certain level, it may be even -- or in a small level, it may be linked to the rollout of Europace in both of their groups and the rollout of a lot of features that we provided to them, which improves their competitiveness, their efficiency in the market and as well the conversion rates of their advisers there. So they're performing well. And as you saw already in our results, we're performing well with them as well. So a next group where there are no clear statistics, but where we see that on a, let's say, daily basis that they operate well in the current market environment are mortgage brokers. A group which heavily is using Europace is depending on Europace. And with only one large German mortgage broker outside of Europace, Interhyp Group as another market participant in this area. For consumers, the interest rate is very important again right now because it has risen from a much lower level in the last 10 years. And on a higher interest rate level, comparing interest rates is something very German and very efficient and creates a huge benefit for the consumer who is comparing. And brokers, thanks to Europace or in case of Interhyp, thanks to their own system are comparing hundreds of banks and offers with them and enabling consumers a great deal at the end. And so let's say, compared to bank branches, they are usually independent structures. So freelancers working on -- for their own profit, their own benefit. They are much more agile and aggressive and using Europace better in interacting with the clients than the typical bank branch in Germany right now, which is not using Europace. So this [indiscernible] takes market share, and they are all supporting that Europace is growing. And in none of these 3 sectors, we lost a single relevant participant of the market. We just gained structures all the time. So what is certain, and this is the analysis of the one who made the questions right, the private banking sector lost market share in this environment in the last, you can say, 2 years. And this is -- Deutsche Bank plays a role there. They have a strategic goal to reduce their mortgage exposure and reduce their new mortgage volume because of their return on investment requirements. So equity is expensive for Deutsche Bank. It wants it wants to optimize its return on equity and this leads to a lower new mortgage volume and the decline in balance sheet for them in this business. So Yes, all Deutsche Bank business goes for Europace. So we see the lower numbers as well, less contribution to our overall numbers. And if you want to just look on the volume, you can say we lost thanks to Deutsche Bank a certain volume in the market. We don't treat this as a market share loss. We know that Deutsche Bank will come back and that the volume in the other markets is something where we are super successful in getting forward in all other banking groups. So longer answer to this simple question. Jan Pahl: Fair enough. Great because I think it's important. So I appreciate the detail. I got -- received a couple of questions. Let's for a moment, stay with real estate and mortgage platforms segment. There's a special, but maybe it fits because you mentioned the saving bank Sparkassen. So the question is, could you please tell us a little bit more about Project [indiscernible], which is with the Sparkassen banks? And how is that impacting FINMAS' market share with internal loan applications? Should we think about Finanz Informatik core banking software as a competitor to FINMAS? Or is it a partner? And maybe you can explain a little bit [indiscernible] because it's an acronym and maybe not everyone is aware of. So as a kickoff, maybe to start there. Ronald Slabke: Yes. As well, a good question. So we, for 10 years now cooperate with the savings bank sector. And for the last 5 years, our cooperating partner is Finanz Informatik, which is the central IT service provider for the savings bank industry. [indiscernible] a project started roughly 2 years ago is or decided to be started roughly 2 years ago, better say, and we are working on this now for 2 years is a project where we integrate the property as an asset in the mobile app environment of Finanz Informatik so that every of the 30 million users of savings banks in Germany, not just see the balance sheet of the current account and the savings products, but as well the worth of his properties and the mortgage loan linked to this. Every day when he opens the app, he's going to see this, thanks to [indiscernible]. And behind this, the consumer gets different services around the property and the mortgage provided in the app, things like renewing the mortgage are possible or if the mortgage comes from a third party, refinancing this mortgage with a savings bank mortgage. And this is in a rollout process right now. This [indiscernible] project slightly delayed, should be available -- or let's say, it's in the process with some -- a focus group already, but the full rollout should happen now in the first half of next year. So this puts Europace and the FINMAS features and actually as well the Value AG proposition and the automated value model of Value AG in a center position in the savings banks industry, which is a great progress. In addition, we work together with Finanz Informatik right now in -- on the deep integration of the Europace offers and comparisons and product presentation in the Finanz Informatik system. So should we think of Finanz Informatik as a competitor or a partner, by sure, partner. So we integrate both systems with each other more and more. We replace features out of the or we add features, we enhance the user experience of the internal system of Finanz Informatik with Europace features step by step and with this bring more volume to the Europace marketplace. So this is -- it's a strong partnership, which is driven by making savings banks more competitive and enhancing the user experience if a user is using -- is using saving bank as a mortgage adviser. And this is very successful for all 3 involved parties for now. Jan Pahl: Great. Thanks. So for now, let's stay with real estate and mortgage platforms. A short one is what EBIT we expect for this year, next year and medium term, I think it's 3 to 5 years roughly for value. So Value AG appraisal service. Ronald Slabke: Yes. Okay. So Value AG is an heavy investment from our side in valuation as a major part of the mortgage process. And to fully automate this and integrate this with the mortgage process, it was necessary to innovate it by ourselves. And this is a long journey for us by now and linked with huge investments, relevant losses that we had in the last years because of this. So on the loss side, we reduced again this year the investments that we have there and expect for next year that during the year, we will turn profitable. So first half of the year, still some losses, second half of the year, a positive contribution from the side. Why we expect this? We see a very positive traction in the adoption of digital products of Value AG. I mentioned, as an example, cooperative banking sector where we just rolled out an integration solution. We just explained here in the Q&A, [indiscernible] and the role of as well Value AG there in value adding the properties of the consumers in a digital way. So we are progressing in all sectors with this, and this gives us a clear path to profitability already. Plus we see that the efficiency of the whole structure and Value AG, thanks to a stable market environment now is turning profitable. And we see that we can get a fair pricing from our partners, thanks to the integrated solution that we are offering. So this -- the automation that we bring to the value market is -- valuation market is huge. So looking forward, it will never be a high-margin business valuation, let's say never -- not in the next 5 years, this is the horizon, but it's something which together with our offering in our UPS offering as an automated process for advice and transacting mortgages is a win-win situation for both products. So that midterm, we expect the growth from -- on both sides, thanks to the integration, and we expect double-digit growth from Value AG for the upcoming years after turning profitable. Jan Pahl: Great. Thanks. So the next 2 questions are related to Europace and a little bit more detailed. So it seems investors are pretty good informed about. Our start of Europace One, which we started in Q2, could you please tell us how it is developing so far? Ronald Slabke: Yes. So first, what is Europace One? Europace was a free-to-use SaaS solution for now for advisers. We only deal with sales organizations, which then provided this to their intermediaries. And as well for the sales organization, if they were willing to underwrite a certain level of volume, it was free of charge. But we saw that with the heavy investments we do in enhancing the user experience, integrating AI features, we need a different value stream to get a fair share out of the business which we enable and the efficiency and the conversation gains that we create with our investments. So we decided to bundle new features, which we introduced during the first half of this year to a Europace One offering where as an adviser, you book this as an additional monthly subscription offering from us to enhance your experience. You compare this with the freemium model, which is pretty popular in the mobile world, where the general use of an application of an app is for free. But if you want to use special features, you need to sign up and pay extra. So we have to establish for this a way to charge advisers. We have to establish a legal framework for this and we have to -- let's say, we had to build the features and we have to integrate the features in the bundle. So there was a lot of work that had to be done in the first half of this year. And since this summer, we offer to advisers directly, and we have a 3-digit number of advisers that signed up by now. We are still in talk with a lot of large organizations, which doesn't allow their senior advisers to make this choice. So -- and that's often about integration with their systems. We are partially replacing as well third-party solutions with the features that are part of the bundle. So these are slightly longer projects to agree on the usage of Europace OneE. But let's say, with all major partners, we are well on track on getting them signed up as well. So for next year, it will be interesting how the dynamic looks like. In the upcoming years, it will contribute with a 7-digit number to our revenue and profit. But for now, the signing up speed still needs to be improved from our side. But there is a learning path for us because we are pretty new to this way of doing business with individuals. Jan Pahl: Right. So the next question is regarding one click. So it's also once again, Europace, but Europace OneClick. The question is, is there a regulatory hurdle here? And if so, how we plan to overcome it? Ronald Slabke: Yes. So -- only good questions by now, I would say. So one thing is the offering on the credit decision side and to the lenders of mortgages, where we enable them to have a fully automated mortgage underwriting process. We introduced this in the beginning of 2022 when speed was still very important for consumers. Thanks to the massive changes in the market, the attractiveness of the product was recently less high, you can say. But with the recovery of the market now, the whole offering gets more attractive again as well for the banks, not just to speed up the process, but as well to save on the cost of labor and to provide the consumer a digital checkout process equal to this what he knows in other industries. So we have a number of banks which are productive with it and created the regulatory framework necessary to operate with OneClick under German regulation. But it's a hurdle to take, to be clear, it's a hurdle. We provid it as an entry level to this product, a solution where you can automatically score a consumer without a manual input of data just by using access to the account of the consumer to gather the data. We call this entry, Europace entry as an entry product to OneClick. So the process on the side of the property is not automated, but the process of the side of the checking the consumer credit worthiness is fully automated. And there the sign-up is significantly higher. So there's a double digit of banks experimenting with entry and using this already and allowing this and something which we as well heavily promote on the platform because it reduces the work for the adviser, streamlines the process and creates a value proposition for everyone. So the transition is ongoing, and we are constantly optimizing the approach to the market to digitalize this mortgage process even in smaller steps if necessary. And this is as well, we are talking about high single-digit percentage of the mortgage volume already generated via entry or OneClick, but there is still a huge potential going forward, as you can imagine. Jan Pahl: Great. Thanks. It seems there are right now, no more questions on real estate and mortgage platforms, but we received a couple of other questions to the other segments. So we switch now to financing platform. And here's a question, same like for Value AG. So which EBIT we expect for this year, '26 and for the midterm 3 to 5 years? Ronald Slabke: Yes. Okay. Let's say, this year, at the end of Q3 and so at the beginning or before the final quarter, which is very relevant for the success of this segment, it's, let's say, difficult to give an exact prognosis. So last quarter is seasonally typically the strongest one. So if it's this year as well, then we will be above last year. So as we are on the 9 months right now, but it's going to be decided just in the days around Christmas as every year. Going forward, as I said when I introduced this segment in the first video, we see that there's a huge potential in all 3 parts of this segment. So housing associations, we are on a great track of signing up housing associations to our ERP system linked to all the services around a strong proposition in the mortgage market there. So this under distressed market has a huge potential to grow significant. And part of this recovery would just be to the precrisis level when it comes to especially revenues from mortgage brokerage. But overall, we are on track for a great success in this industry. Personal loan business and German Mittelstand, both distressed right now. I explained this already. I would say, looking forward, these are both markets where we expect a normalization. Germany can't stay in a recessive environment much longer than it did already. Otherwise, we will have disruptive political changes here and nobody wants this. So my sense of urgency right now is high, and I have the feeling that [indiscernible] our government got the message after the summer as well. So they see that they need to act to change the trajectory in the market. And with this, we will see a very strong performance of both of these product segments in the upcoming years. So where it can end up, it's linked to the recovery of the German economy in general, you could say, the better it goes, the more success we can deliver there. Jan Pahl: Right. So there are no more questions for financing platforms right now, but there are 2 or 1 or 2 for insurance. So a little bit more on a high level. If you compare SMART INSUR with Europace, what is the penetration of suppliers so far, maybe in percent of the market that provides their policies through our platform through SMID and where are the challenges and progress to grow that platform? And what is surprising? It's the same like Europace, the 11 basis points we charge in average? Or how does it look like? Ronald Slabke: Okay. This is -- I make a short and I would say, deep dive with Jan later or in the upcoming days. So in general, SMART INSUR is the platform for standardized policies usually for consumers here in Germany. And the core value proposition is managing the whole information flow along the existence of an insurance contract that being the insurance broker on one side, the distribution side and the insurance company on the other side. It's not a transaction focused platform. It's whole lifetime of an insurance because this is a core problem in the insurance market that the information flow over the lifetime is very expensive for all parties because of their dysfunctionality and the way how information are transacted via e-mail from one side to the other. So the pricing model is volume-based. So the more volume you manage as a distribution within the platform, the more you pay. So it's a percentage of the premium the consumer pays, and this is your fee for the handling of the whole information flow, as I said, from the beginning of the contract to the end of lifetime of every contract there. So the challenge is the necessary adjustments of -- for the IT system on the distribution side. On the insurer side, for the insurance companies, we have established business relation with all of them. But for now, just some of them are paying if they receive the information and are integrated via interfaces. So this is the -- we report this as the validation process. So when there is a link between the information in the platform and the insurance company, then there is a financial link for us. But still, most of the volume in the platform is not linked to the insurance company. So the insurance company is not paying. Even when you are able to manage this kind of insurances as well as the distribution as a distributor within our system. More details, I would say, Jan in the deep dive. Jan Pahl: Sure. The next question, I'm not sure if I got it right, but I mixed it a little bit up. And if I'm wrong, don't hesitate to circle back and correct me. But I get this question right, it is during Q2 or maybe Q3, we signed some brokers for Corify, and it took longer than planned or expected. What were the headwinds? And are we in talk with additional brokers to launch right now? Ronald Slabke: Okay. Yes. So Corify is our platform offering for the industrial insurance business, where not a defined tariff and policy is underwritten by thousands of consumers. But in industry insures effectively or a fleet of class or whatever. So there are only individualized auctioned or tendered insurance policies closed between corporates and insurance companies. So we introduced this marketplace so the better version in the beginning of last year and see a huge interest in the industry. Industry was part of the development process over the last years and is now steadily signing up, and we got additional signatures for the first modules of this marketplace from the industry. There is a long line of -- in the sales funnel of brokers and insurance companies, which wants to use this for their interaction with their clients. So the pipeline is well filled looking forward. We just need to see that the contribution is not just intellectually and let's say, mutual, it needs to be as well financially beneficial for us so that our part of the investment incrementally goes down and the monetization kicks in and our partners after signing up as well are paying the transaction fees linked or usage fees linked. And when we talk about signatures, then we talk about this last step, the monetization that partners start paying for the benefits which they have using the system. And yes, we saw the progress now finally as well in Q3. And looking forward, we are optimistic that we get Corify up and flying and creating a marketplace effect in the upcoming years as well in this part of the industry. Jan Pahl: Great. We have 3 more questions in line. So once again, if you have any questions, feel free to type it in. The next one is on insurance platform as well, now on private insurance once again. So the question is, how does your distribution, distribute of insurance policy work together, compete with price comparison websites. So is this a competitor? Or is it a coop for us? How we look like? Ronald Slabke: Okay. These are different positions in the value chain. So the typical price comparison side for insurance is a perfect client for Smart InsurTech to handle completely -- the complete back-end process over the whole lifetime of the insurance contract for the comparison side. So we -- here on the distribution, you have the insurer app. So pure online insurance brokers use Smart InsurTech as their back end. And we are a great opportunity for them to focus on the consumer front-end side and the competition there and not spend IT resources in integrating 200-plus insurance companies and the lifetime of the variety of insurance contracts in their system. Jan Pahl: Great. Okay. There are 2 more questions, one a little bit detailed and the next one a little bit high level on strategic. Let's start with the detailed one, and now it is real estate and mortgage platforms again. We are here with BAUFINEX. So the question is, how has growth for the number of BAUFINEX Genoberater consultants trended so far this year? Are you having success signing up more salespeople at the cooperative banks? Ronald Slabke: Yes. Sorry -- let's say, we are active in the cooperative banking sector with 2 brands. So Genopace as a platform. BAUFINEX is a joint venture with Bausparkasse Schwäbisch Hall for the pooling activities and for the third-party distribution in this market. So the question was specific to BAUFINEX. BAUFINEX is very successful using the huge network of cooperative banks across Germany and digitalizing their external relations to local mortgage brokers, real estate developers and so on to provide cooperative mortgages, you can say, to this third-party distribution. And BAUFINEX, I would say, is right now the largest mortgage pooling offering in the market. So they surpassed Starpool and as well the competitor from Interhyp Group Prohyp and are #1 right now. So they are succeeding very well. So together with the success of the cooperative banking sector, BAUFINEX is very successful on digitalizing their third-party relations. Jan Pahl: Great. So one question left. And as a reminder, once again, don't be shy. If you have any, you can type it in. But the next one is a little bit high level on strategic and maybe on our -- also historical shift in our strategic. So could you explain the main synergies and potential scale in the interplay of our segments, real estate and mortgage platforms, financing platforms and insurance platforms? Or would you say that these are unconnected segments that have their special B2B platform for the customers? Ronald Slabke: Okay. I would say the second part answered already something, but I would give you, let's say, a better perspective on this. So up until 2 years ago, we developed the Hypoport network, a group of companies and offering in all these 3 industries independent and created synergies usually between 2 or 3 of these companies in the group. We restructured to these 3 segments, the network 2 years ago. So we formed the real estate and mortgage platform just 2 years ago after seeing where are the strongest connections, where are the highest synergies between daughter companies, which needs to be more facilitated and with more management attention and focus on to develop a joint strategy in this market. And with this the segments were created. In certain areas, we had to even split companies. For instance, the personal loan business, which is now part of the financing platform was until recently part of the Europace AG development where as well the mortgage solution was developed, and we have a significant overlap in partner structures there. So even when they are now in different segments and we -- from the legal entities, split them, they are using the same technologies and offering to the same partner. So there are interlinks between the segments, even when this is not, let's say, naturally when you would start the segments independent. So we created synergies in the past between offerings and just because we regrouped this and focus now on these areas of synergies where we see the highest benefit for the network doesn't mean that there are not other synergies. So between each of these 3 segments, there stays certain levels of synergies alive, but the focus happens within the segment. So the truth is they are less integrated between each other than within each of them, but they are not -- it's not that there are no synergies between them. Jan Pahl: Great. Thanks for this. And here's another one. Ronald Slabke: Great English Q&A today, I would say. It is good that we have a full hour. Jan Pahl: Yes. So the next question is why did the error in revenue recognition [indiscernible] happen because of -- so it is regarding Starpool last year, which you had to adjust the numbers. And yes, how it is going to be look like forward? Ronald Slabke: Yes. Okay, I would say a detailed answer in the 2024 annual report. Quick answer. The structure of the business of Starpool changed over the last year because of the strategic change on our joint venture partner, Deutsche Bank. And because of this, third-party mortgages got more important. And with this, we had to recognize all revenues generated by Starpool, including the commissions which Starpool receives from Deutsche Bank and pass through to Deutsche Bank linked mortgage brokers. So this pass-through of Deutsche Bank commission business let's say was not under our control under -- in the last years, let's say, or during the buildup of the joint venture, but lately because of the shift in the priorities and the shift to mortgage brokerage of other lenders, the situation changed, and we had to start to recognize this pass-through commissions as group revenue and group cost of revenue so that it inflated first in 2024, our revenue number and our cost of revenue number, just starting at the gross profit, it didn't have an impact anymore. Jan Pahl: Great. The next one, it's an interesting question because it seems to me that there are 2 ways to answer. So I look forward, which is your one. So the question is, where do you see cost reduction potential for the application of AI? And what would your best estimate for the amount? Ronald Slabke: Yes. So AI is a big topic publicly right now and for us in the last 10 years, where we are able to enhance our products using AI. So the question focuses on cost reduction. And when I hear cost reduction in an organization like us, it's about efficiency gains in, let's say, repetitive processes where we look across the group, especially in the centers where we have processes where we expect that AI can replace them already right now. This is linked to migration costs, to systems which provides this because in this area of HR or accounting for ourselves, we will not implement our own algorithms. Another way of cost reduction, I would say more efficiency gain is using AI in the whole software development process. This is an ongoing process now for the last 2, 3 years where our people get more efficient using AI. To be honest, I don't expect that we reduce our costs for software development. What I expect is that we increase the output in volume, in future volume and in quality. We are willing to invest this money. And we focus our people right now in getting better in using AI and getting better in shipping software fast to our platforms. So there is not a focus on cost reduction in this area, it's the focus on efficiency. Jan Pahl: Great. And actually, these are the 2 answers I expect. So at the moment, there's no more -- it looks like there are no more questions. But once again, here's a chance, we've received already couple of, actually 13, which is good, I think, 45 minutes. And if there are no more questions, maybe I hand over to you, Ronald, for last wording. Ronald Slabke: Yes. Thank you. Great Q&A today. We will talk again in March next year. We will chase our 2021 record year, and we'll want to outperform in all top and bottom line numbers next year. So I'm looking forward to this race, and you get an update when we are there in March next year. Thank you. Jan Pahl: Thanks. Goodbye.
Operator: Good afternoon, ladies and gentlemen. And welcome to the Capricor Therapeutics Third Quarter 2025 Conference Call. At this time, all participants are in a listen-only mode. If at any time during this call, you require immediate assistance, please press 0 for the operator. This call is being recorded on Monday, November 10, 2025. I would now like to turn the conference over to our CFO, Anthony J. Bergmann, for the forward-looking statement. Please go ahead. Anthony J. Bergmann: Thank you very much, and good afternoon, everyone. Before we start, I would like to state that we will be making certain forward-looking statements during today's presentation. These statements may include statements regarding, among other things, the efficacy, safety, and intended utilization of our product candidate, our future R&D plans, including our anticipated conduct and timing of preclinical and clinical studies, our enrollment of patients in our clinical studies, plans to present or report additional data, plans regarding regulatory filing, potential regulatory developments involving our product candidate, potential regulatory inspections, revenue and reimbursement estimates, projected terms of definitive agreements, manufacturing capabilities, potential milestone payments, our financial position, and our possible uses of existing cash and investment resources. These forward-looking statements are based on current information, assumptions, and expectations that are subject to change and involve a number of risks and uncertainties that may cause our actual results to differ materially from those contained in the forward-looking statements. These and other risks are described in our periodic filings made with the SEC, including our quarterly and annual reports. You are cautioned not to place undue reliance on these forward-looking statements, and we disclaim any obligation to update such statements. With that, I'll turn the call over to Linda Marbán, CEO. Linda Marbán: Good afternoon, and thank you for joining us on Capricor Therapeutics' Third Quarter 2025 Conference Call. This has been a very busy time for Capricor, as we are just weeks away from a major milestone: the top-line readout from our HOPE-3 Phase 3 clinical study of Daramycin, our investigational cell therapy for the treatment of Duchenne muscular dystrophy. This pivotal study represents the culmination of nearly a decade of scientific development, all aimed at helping boys and young men living with this devastating disease. Importantly, HOPE-3 focuses primarily on non-ambulant individuals, a patient population that has historically had limited clinical research dedicated to it. HOPE-3 was conducted across 20 leading academic and clinical centers in the United States. The trial enrolled 105 participants and is one of the largest double-blind, placebo-controlled studies ever conducted in the Duchenne population. The study was designed with a one-to-one randomization and is statistically powered to detect changes in both upper limb function, as measured by the performance of the upper limb version 2.0, and cardiac function, as measured by left ventricular ejection fraction measured by cardiac MRI, as well as several secondary and exploratory endpoints. These 105 patients enrolled in HOPE-3 represent two cohorts: Cohort A, which received Daramycin manufactured from our Los Angeles clinical facility, and Cohort B, which received products manufactured at our commercial GMP facility in San Diego. As a reminder, the FDA required the addition of Cohort B to evaluate the efficacy of the commercial-scale product. While we have demonstrated non-clinical comparability, Cohort B provides the opportunity to generate direct evidence of efficacy for the commercial material. The San Diego facility was built to meet commercial manufacturing standards, operating under elevated quality and compliance requirements to support commercial Daramycin production. Because the San Diego-manufactured product is intended for commercialization, the statistical analysis plan for HOPE-3 includes analyses designed to evaluate efficacy both across the combined cohorts and independently within Cohort B. We believe, in alignment with our biostatisticians and clinicians who designed our statistical analysis plan with us, that while the aggregated data are informative, demonstrating efficacy of the commercial-scale product represents the most direct regulatory path to potential approval. From the standpoint of safety, which of course is the most important aspect of the clinical study, safety data from the trial have been regularly reported to the FDA, and no new or emerging safety signals have been observed. Across our entire program, we have now administered more than 800 infusions for approximately 150 boys and young men with Duchenne, with Daramycin continuing to demonstrate a strong and consistent safety profile. At Capricor, our mission remains clear: to bring forward the first therapy that directly addresses Duchenne muscular dystrophy-associated cardiomyopathy. Nearly every patient with Duchenne develops cardiomyopathy, which remains the leading cause of death in these boys and young men. Daramycin has been shown to help preserve both cardiac and skeletal muscle function, and our goal will be to emphasize to the FDA the life-limiting cardiovascular impact of this disease. Should Daramycin be approved, it would represent a first-in-class therapeutic option for this critical unmet medical need. We are now in the final stages of data preparation. Our statistical analysis plan has been submitted to the FDA, and the comment period passed without additional feedback. We plan to unblind the study once all data management processes are finalized, which, as noted, will occur within the next several weeks. The process has required review of more than 300 MRIs by independent external readers who are fully blinded both to treatment allocation and sequence, a process that requires additional time to collect and analyze the dataset. To remind you, after our pre-BLA meeting with the FDA in 2024, we submitted a BLA based on existing data from our HOPE-2 and the HOPE-2 open-label extension trials compared to an external control comparator from the cardiac consortium. At that time, the purpose of HOPE-3 was to support potential ex-US expansion as well as label expansion. However, following receipt of the CRL in July, the role of HOPE-3 shifted. The CRL primarily cited the need for additional substantial evidence of effectiveness and certain CMC clarifications. Importantly, most of the CMC issues had already been addressed in prior information request responses, and the remainder were resolved shortly after the receipt of the CRL. While the CRL was unexpected, we were well-positioned with HOPE-3 to provide the additional safety and efficacy data requested by the FDA. During our Type A meeting in August, the FDA indicated that the HOPE-3 results could be submitted to address the issues raised in the CRL. A key element of that meeting was our request to keep the current BLA open and maintain the indication for DMD-associated cardiomyopathy. To advance that path, we proposed designating left ventricular ejection fraction (LVEF) as the primary efficacy endpoint. While the FDA did not allow this formal change, they agreed to exercise regulatory flexibility in reviewing the HOPE-3 data. Accordingly, we plan to submit the HOPE-3 results as a formal complete response to the CRL with the goal of receiving a rapid review by the FDA and a new PDUFA date. As of now, the FDA has classified the resubmission as Type 2, which means the review period can be up to six months. But there is precedent for faster review times. We will make every effort to advance Daramycin toward approval as efficiently as possible in 2026. To remind you, we are eligible to receive a priority review voucher if approved, if approval is obtained prior to September 30, 2026. And PRVs may become increasingly valuable as the program approaches its statutory sunset. While we cannot predict the exact timing of approval, we remain highly motivated to achieve approval as early as possible in 2026, well ahead of that deadline. This consistency demonstrated across multiple clinical studies underscores Daramycin's potential to stabilize disease progression and preserve both muscle and heart function. We now look forward to seeing whether the data from HOPE-3 confirms these benefits in a larger, rigorously controlled pivotal trial. As we approach our quiet period, I will remind you that we expect to report top-line data within the next few weeks, and we will do everything we can to keep both the market and the DMD community informed of our further plans with respect to this program and the release of the data. We also recently published a peer-reviewed paper in Biomedicines, detailing new mechanistic insights into Daramycin's mechanism of action. The study described in the paper demonstrated that cardiosphere-derived cells, the active component of Daramycin, release exosomes and soluble factors that suppress fibroblast gene expression, collagen 1, and collagen 3 in human fibroblasts. These findings were consistent across more than 100 manufacturing lots, validating Daramycin's anti-fibrotic and immunomodulatory properties and further supporting its mechanism of action. To complement this publication, we also released a scientific video illustrating Daramycin's mechanism of action, which is available on our website, reinforcing the biologic rationale and consistency that underline our entire development program for Daramycin. Now, focusing for a moment on the CMC front, following acceptance by the FDA of all findings from our Prelicense Inspection (PLI), our San Diego commercial facility is fully operational and preparing for GMP production activities. Our manufacturing and quality systems are fully implemented, and all CMC-related items cited in the CRL have been addressed. This achievement reflects the strength of our operations and represents a critical milestone in ensuring readiness for commercialization and long-term product consistency. In parallel, we continue to prepare for launch with advancing initiatives in physician education, patient services, market access, and reimbursement. We are engaging both neurology and cardiology specialists to ensure an integrated approach to patient care should Daramycin receive approval. While our immediate focus remains on US approval, we are also laying the groundwork for potential global expansion and will share updates as appropriate. We are closely monitoring evolving US and pricing policies, including the current administration's stance on most favored nation frameworks, and will adapt our global strategy accordingly. So I'd like to spend the next few minutes talking about our exosome platform. We continue to advance our StealthX program under Project NextGen, a US government-funded initiative led by HHS and the National Institutes of Allergy and Infectious Disease to develop next-generation vaccines for COVID-19 and other potential infectious threats. The NIAID-sponsored Phase 1 clinical trial remains ongoing and is evaluating multiple dose levels of the monovalent vaccine targeting the spike or S antigen, with an additional planned arm that will utilize an additional vaccine construct targeting spike S and the nucleocapsid N antigens, pending separate FDA clearance. We expect initial data in 2026, subject to completion of the trial by NIAID. The goal is to validate StealthX as a versatile non-mRNA, adjuvant-free platform capable of delivering native proteins safely and efficiently, a model that could potentially extend to infectious and rare diseases alike. While vaccines are not our core business, this program serves as a critical proof of concept for the StealthX platform. Positive results could open the door to strategic collaborations and highlight the platform's potential for targeted therapeutic delivery well beyond vaccinology. With that, I will now turn the call over to Anthony J. Bergmann to run through the financials. AJ? Anthony J. Bergmann: Thanks, Linda. This afternoon's press release provided a summary of our third quarter 2025 financials on a GAAP basis, and you may also refer to our quarterly report on Form 10-Q, which we expect to become available shortly and will be accessible on the SEC website, as well as the financial section of our website. Let me start with our cash position. As noted, as of September 30, 2025, our cash, cash equivalents, and marketable securities totaled approximately $98.6 million. We believe that based on our current operating plan and financial resources, our available cash, cash equivalents, and marketable securities will be sufficient to cover anticipated expenses and capital requirements into 2026. Turning briefly to the financials, revenue for 2025 was zero compared to approximately $2.3 million for 2024. Additionally, revenue for 2025 was zero compared to approximately $11.1 million for 2024. I would like to point out that the source of revenue in 2024 was the ratable recognition of the $40 million we received under our US distribution agreement with Nippon Shinyaku, which had been fully recognized as of December 31, 2024. Turning to our operating expenses for 2025, excluding stock-based compensation, our research and development expenses were approximately $18.1 million compared to approximately $11 million in Q3 2024. And for 2025, excluding stock-based compensation, our research and development expenses were approximately $54.4 million compared to approximately $32.8 million in 2024. Again, excluding stock-based compensation, our G&A expenses were approximately $4.1 million in Q3 2025, compared to approximately $2.2 million in Q3 2024. For 2025, excluding stock-based compensation, our general and administrative expenses were approximately $11.1 million compared to approximately $5.7 million for 2024. Net loss for 2025 was approximately $24.6 million compared to a net loss of approximately $12.6 million for 2024. Net loss for 2025 was approximately $74.9 million compared to a net loss of approximately $33.4 million for 2024. With that, I'll turn the call back over to Linda. Linda Marbán: Thanks, AJ. As AJ just mentioned, we ended the quarter with approximately $100 million in cash, providing a solid foundation to continue executing on our near-term objectives and advancing our key programs. And let me just remind you that if Daramycin is approved, we remain eligible to receive an $80 million milestone payment from NS Pharma and a priority review voucher, which represents significant non-dilutive capital opportunities that would strengthen our balance sheet and extend our runway well into 2027 and beyond. We will now open the line for questions. Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number two. If you're using a speakerphone, please lift the handset before pressing any keys. First question comes from the line of Ted Tenthoff from Piper Sandler. Your line is now open. Ted Tenthoff: Great. Thank you very much. Excited for the upcoming HOPE-3 data. I just want to get a sense of what we should expect from that in terms of what will be actually released in the initial data reporting in the top-line data. Thanks so much. Linda Marbán: Hey, Ted. Always great to hear your voice. Yeah. So top-line data will be primary and key secondary endpoints. We will release those as soon as we have them, and we'll host a conference call to explain them and help the markets as well as the key opinion leaders help explain the ramifications of that data. Ted Tenthoff: And just one quick follow-up, if I may. With the consideration of left ventricular ejection fraction as a key secondary, are there any statistical changes in this study because of sort of elevating LVEF things? Linda Marbán: No, Ted. So thanks for that. So the great thing is the study was always powered with the idea that we were well overpowered to measure ejection fraction. We had such strong results from HOPE-2 and HOPE-2 open-label extension that it really wasn't an issue. We have tremendous power in projection fraction with power for pull, but the overarching power is quite strong for the cardiac as well. Ted Tenthoff: Great. Well, good luck, and break a leg. Linda Marbán: Thanks. We need it. Operator: Your next question comes from the line of Leland Gershell from Oppenheimer. Your line is now open. Leland Gershell: Great. Thank you for this update and taking our questions. To ask just a bit further on HOPE-3 and the SAP, you know, we're in this sort of unique circumstance of having a BLA that's for the cardiomyopathy, but the primary endpoint of the trial is the PUL, you know, 2.0. So wondering how the SAP designates treatment of the LVEF as a secondary endpoint in the situation in which you miss significance on the primary. Linda Marbán: Thanks. Yeah, Leland, thanks so much. So, this has obviously been an issue that we've spent a lot of time thinking about, working with the FDA, and we've brought in several very well-respected statistical consultants to help us build an SAP that allows for both of those parameters. Right? So you know, the Food and Drug Administration said we want the primary to remain the performance of the upper limb. We left it as a performance of the upper limb. The way that the primary is being analyzed is, as I mentioned in my remarks, we'll look at the combined cohorts A and B. But we're gonna focus then also on looking specifically at Cohort B because that's going to provide strength in the manufacturing facility that we have built and passed PLI with. The alpha is going to be used in the primary endpoint as would be in any other situation, and should we achieve the statistical significance and that alpha passes through to the secondaries and continues along until you miss a secondary. The key secondary of ejection fraction, we did not reserve any specific alpha for. But we know from our Type A meeting that the FDA was interested in looking at all of the data in its totality. So the SAP is a pretty traditional one and actually fairly simple, with which we think we have a lot of great opportunity to utilize the performance of the upper limb and then also ejection fraction. Now just to add a little bit of, you know, color to what you asked, because our open BLA is for cardiomyopathy, we are not going to ask, at least in the first iteration, to expand the indication to skeletal muscle until we are assured that we're going to get the indication and label of cardiomyopathy. Once we have achieved that with the agency, we will then, assuming that we have statistical significance in the primary, we'll then ask to expand to skeletal muscle as well. Leland Gershell: Okay. Thank you. And also just a question with respect to the cardiac MRI review procedure. Could you just run us through that? Are all of these reviewed by an external reviewer? Is there an adjudication process? If you would mind just summarizing that. Thank you. Linda Marbán: Yeah. So that's obviously very important and something that we have a charter in place that was signed off on, which is multifaceted. So first, an outside CRO reviews every single MRI. Their first quality controls. So everybody looks at them at the CRO to make sure that the image meets the standard of being able to be reviewed and analyzed. Once that happens, then they're read by a primary reader, a secondary reader, and then anywhere the primary reader and the secondary reader disagree by a certain number, which is of relevance that could not possibly change that much over a certain time period, there's a third reader that comes in for adjudication. And then the three of them look at it together to decide which in fact would be the appropriate read. So there's a tri-level measurement procedure, and they are independent to time point; they don't know which time point it is and also to patient ID and obviously the treatment group. Leland Gershell: That's helpful. Thanks very much. Linda Marbán: Absolutely, Leland. Great to hear your voice. Operator: Your next question comes from the line of Joseph Pantginis from H.C. Wainwright. Your line is now open. Joseph Pantginis: Hey, Linda and AJ. Thanks for taking the questions. Linda, I just wanted to clarify something quickly before my question. So, depending on the primary endpoint, you said you're gonna continue to look for cardiomyopathy and then if statistically significant, expand to skeletal, if I heard you correctly. Would that be in the form of an SBLA? Linda Marbán: Yep. So interesting to draft that. We don't really know exactly how we're gonna go about that yet. It's going to involve conversations with the agency. So right now, we have a CRL. The CRL said we wanna see more data. We're going to give them more data as a response to the CRL. We're going to provide all the data, which includes the primary and the key secondary endpoints, which we've also agreed that we would provide publicly, so you'll get to see them too. And then in conversations, we'll decide how we're going to do the label expansion, the skeletal should that be appropriate. Joseph Pantginis: Understood. Okay. And I just wanted to make sure because it looks like, with regard to the analyses, you're gonna be looking at the two manufacturing cohorts of A and B versus B alone. Does that include any alpha spend at all, or how should we view those, in general, impacting the SAP or not? Linda Marbán: Yeah, so the way that the analysis is built is that statistical analysis that's very commonly used called the Hawk analysis, which basically does not utilize alpha spend if you prespecify which group you are going to be directing your alpha towards. So if you are, for instance, gonna say A or B and will take either one, that's an alpha spend so that you would then have a point 0.025 going into your secondary. But if you actually direct it prespecified, you save all your alpha, and therefore, you have it to use in your secondary. Joseph Pantginis: Understood. Okay. And maybe a question for AJ, and if you'd like to fill in, that'd be great. I wanted to get a sense now with regard to your burn going forward. You have a couple of things coming down, a few things potentially going up. You'll have HOPE-3 wrapping up and the clinical trials expenses around that. Wanted to see about, you know, discussing manufacturing expenses that might be increased personnel, and then maybe a gradual increase in exosomes. Maybe some views on how the expenses might be going forward. Anthony J. Bergmann: Yeah. Thanks, Joe. I mean, obviously, our expenses in the third quarter were higher than they had been, but we were moving towards pretty much a PDUFA date as we moved got our received our CRL in July. A lot of the expenses you just said correctly have gone into the, the ex of the HOPE-3 trial, which is winding down. So we'll see those expenses hopefully continue to wind down. But they're going into the manufacturing and the development of the commercial product as we prepare and continue to prepare for a commercial launch. So we're maintaining and cautiously watching our burn in every area we can. We're building out our team in areas that are absolutely necessary. And then obviously following the results of the data and our next steps with FDA, we'll continue to put the dollars to work where they need to go. So we feel very comfortable with where we're at, and we're putting, putting diligently investing in where we hope to drive value. Exosomes, you know, same type of answer. You know, just to point out, NIAID is obviously funding that study. We've said that many times. We've already made the doses necessary for that. So that's well off our balance sheet, which hopefully will be a nice value driver and catalyst for us in the early part of 2026. Joseph Pantginis: Got it. Thank you. Anthony J. Bergmann: Thanks, Joe. Operator: Your next question comes from the line of Kristen Brianne Kluska from Cantor. Your line is now open. Kristen Brianne Kluska: Hi. Good afternoon, and I'm sending you all my best in the next few weeks ahead for the company. So on the statistical analysis plan, my understanding was when you originally designed the Phase 3 study, you powered it based off of Cohort A in terms of patient size number. And now that you will be using Cohort B, it's essentially the same size anyways. Is my understanding correct here? Linda Marbán: Yeah. Pretty close, Kristen. That's exactly right. So we combine them. You know, it's been a long journey. Right? So we started with Cohort A, then we were told by FDA we needed to add Cohort B for efficacy. Then when we were filing the BLA on the existing data, we combined A and B into sort of one clinical trial because they agreed to nonclinical comparability between the sites. But now, especially with some of the things that's going on with the administration, the fact that our manufacturing plant in San Diego has passed PLI, we've answered their CMC issues. We feel that it was important to be able to highlight the potential efficacy of Cohort B. And, yeah, the powering is pretty much the same. Cohort B is a little smaller with an 80% powering. Cohort A was a 90% powering. We still feel that we're well within the range of ability to achieve efficacy. Kristen Brianne Kluska: Okay. Appreciate that. And I know in the past, you've shared with us a little bit of the baseline characteristics amongst these patients, including the percent that had cardiomyopathy. As we now divide it between A and B, would you say that that statement is still true, or is there one cohort where the baseline is skewing a little bit differently? Linda Marbán: Yeah, so the baseline characteristics are pretty much identical across the cohorts. We didn't change inclusion-exclusion criteria for either one, and really it didn't, you know, work out in any specific way that it heavily weighted one way or the other. We have seen, and obviously, I don't know the data from HOPE-3, but we've seen from HOPE-2 open-label extension from John Soslow's natural history study that those patients that get treatment with ejection fraction over 45% seem to do specifically well compared to those that are worse off. So we're definitely trying to get to these guys as early in the pathogenesis of the cardiomyopathy as possible. I think when we did the analysis of Cohort A and B together in preparation for the CRL response, we had over 70 that would have had diagnosed cardiomyopathy. One thing that's really nice about Cohort B is we're also measuring scar as measured by late gadolinium enhancement. So we'll also be able to do correlation between the amount of damage that looks visible in the heart as well as ejection fraction and/or volume, which is gonna be very important for the field moving forward to understand sort of what the tipping points are in terms of scar aggregation and function. Kristen Brianne Kluska: Okay. Great. Thank you so much. Again, wishing you all the best. Linda Marbán: Thank you. Thank you. Thank you. Operator: Your next question comes from the line of Catherine Clare Novack from Jones Trading. Your line is now open. Catherine Clare Novack: Hi. Good afternoon. Thanks for taking my question. I just have a question on, you know, when you mentioned FDA intended to exercise regulatory flexibility, at what point would you do you intend to ask them to exercise this kind of flexibility? There's a possibility that, you know, you don't see significance on PUL, but there is some kind of apparent benefit on LVEF. You know, is this a situation in which you would want the FDA to try to look at the totality of the data going forward? Linda Marbán: Yeah. So you hit it exactly. You know, we are obviously anxiously awaiting the data. The easiest story will be if we hit PUL and we hit ejection fraction. If for some reason we miss on PUL, and I think there's a lot of information that's being discussed both, you know, in the Cognizante arenas in terms of the performance of the upper limb, what its utility is, how good of a measure it is, the reliability of it, that kind of thing. If for some reason we miss on PUL, but we hit hard on cardiac, that would be where we would ask for that regulatory flexibility. And we're hopeful that based on what we have in the Type A minutes, what we have educated the FDA about with the performance of the upper limb, and the key opinion leaders that we would still be able to succeed in getting the label for cardiomyopathy. Catherine Clare Novack: Understood. And then if there's anything you can share specifically about what FDA did say when it comes to regulatory flexibility. We've obviously seen them be more stringent when it comes to statistics in recent decision-making. If there's anything you can, you know, give us to any more specific detail you can give us about what FDA has said about what it means to exercise regulatory flexibility? Linda Marbán: Yeah, I think when we put out our press release on our Type A meeting, we actually provided a quote in there that came directly from the minutes, which basically said, we want you to submit all of your data from HOPE-3. We're not willing to change the primary to ejection fraction, but we will regard all of the data and make decisions based on pretty much the preponderance of all the data. They did not give us specifics. We did have a hallway conversation in which one of the reviewers assured the mother, Mindy Leffler, that came with us to our Type A meeting that they would be very sure to look at the cardiac data very carefully as they recognize that this was the unmet medical need with no approved therapeutics for that patient population. Catherine Clare Novack: Okay. That makes sense. Well, you know, looking forward to the top-line results. Thank you so much. Linda Marbán: Thank you so much for your time. Operator: Your next question comes from the line of Madison El-Saadi from B. Riley Securities. Your line is now open. Madison El-Saadi: Hey, guys. Thanks for taking our question. A couple from us. Do you have a sense that from the FDA's position, how did they view Cohort B? Is it, I guess, more important than the aggregate pool? And then secondly, maybe what is the bar to achieve a more rapid review time that you alluded to? And has that been a request that isn't made, or is that something that you would, I guess, request alongside the submission of the HOPE-3 data? Linda Marbán: Yeah, yeah, all really good questions. So, the reason that we're focusing a little bit more on Cohort B, which we might not have done had the original plan of the existing data been accepted and we had approval already for the cardiomyopathy, is because we knew that there was some question regarding the comparability of the product from San Diego, that it was a shift from a clinical facility to a commercial facility, and we passed the PLI. So we've seen frankly, a lot of CRLs being issued in the last few months around CMC-related concerns, and so we wanted to obviate that by targeting our efficacy data to our approved facility. We thought would be the safest way to go about it. And since the powering was basically the same, thought that would be one of the best ways to assure the fastest path to approval. In terms of timelines and speeding it up, that again is going to be based on what we see in the data, where we can convince the agency to move a little bit quicker. We have seen them do it. They did it with Calvista. They did it with Stealth. They are typically falling back on as long a review period as possible. And part of that, I think, is just because they are so understaffed and going through so many changes themselves that speed is hard for them. But we certainly will work with them and try and get this to produce as quickly as we possibly can. Madison El-Saadi: Understood. And then if I may ask one more to clarify. I think you answered this a couple of questions back. But could you clarify if the LGE stratification if that was balanced across both cohorts, or is that a Cohort B specific stratification that was reached? Linda Marbán: Yeah. So we didn't measure LGE in HOPE-2 or Cohort A, and that was largely because there was a little bit of a haze at the time that LGE might cause, you know, aggregation of the brain, that there might be some bad side effects, and so we didn't really wanna jump into, you know, that pool of messiness. But several things happened along the way. One, those substantiations were not proven to be true; LGE is safe. And two, our cardiology leaders convinced us that since we know that the pathogenesis of the cardiomyopathy associated with DMD is very different than what would be considered an adult dilated cardiomyopathy, it'd be really interesting to be able to correlate scar, how much, where, when, and then how it potentially correlates with ejection fraction. So it's an exploratory endpoint, but one, as a cardiac physiologist, I'm very excited to see. Because, you know, it could provide some very important answers in developing treatment paradigms for Duchenne muscular dystrophy. Madison El-Saadi: Got it. That makes a lot of sense. And, yeah, good luck on everything upcoming. Thanks. Linda Marbán: Madison. Talk soon. Operator: As a reminder, if you wish to ask a question, please press next question comes from the line of Gubalan Pachayapan from Roth Capital Partners. Your line is now open. Gubalan Pachayapan: Hi. Good afternoon, and thanks for taking my questions. So I just have a couple starting from the type two classification. I think this is the first time you're articulating that a type two is likely. And, obviously, this is going to garner a review period of six months. So I wonder if there were any recent developments between you and the FDA that made you believe a class one resubmission is impossible. I just wanted to know when this decision on class type two was sort of, like, you know, set in stone. Linda Marbán: Yeah. Yeah. Yeah. So thanks for your question. I think I pretty much, yeah, answered it when Madison asked a similar question a moment ago. So we know that most people are getting class two resubmissions. That's what we're expecting. That's what we've been told we should expect. In terms of being able to speed it up, I think that's gonna be incumbent upon the strength of the data. Our conversations with the agency, and sort of, you know, other imponderable factors that I cannot answer until I've not only seen the data, but also met with the agency. But we'll go as fast as we can. We obviously are looking for a quick PDUFA as well. Gubalan Pachayapan: And then secondly, can you discuss whether the potency assay adequately fulfilled the FDA's guidance for potency test for cellular products expectations. Thank you. Linda Marbán: Yeah. So we're very proud of the way that we have developed the potency assay profile for Daramycin. One of our goals was always to make Daramycin a drug product and not sort of a hand-waving cell therapy. It works, but we really don't know how it works. And so our science team did a methodical multiyear program in which they looked at the data from HOPE-2. They then were able to identify the master cell bank that we use in order to treat the patients in HOPE-2, so we know it works. And then they took those specific cell banks and they put it through some pretty rigorous and RNA Seq assays looking at 166 genes. And all of this, by the way, is in a very nice didactic few-minute overview on our website. Looking at those 166 genes, then use bioinformatics to basically quantify those that identified CDCs as a completely unique cell type and then identify which ones were up and which ones were down. Once we have identified which ones are CDCs by their genome, we then put them through an anti-fibrosis assay, one of the stated mechanisms of action, looking at the production of collagen 1 and collagen 3, or in this case, the knockdown of collagen 1, collagen 3, the main product of fibrosis. And each and every lot has to pass that by a certain quantification in order to be considered effective Daramycin. So we feel very confident on our potency assay profile. It's now been published. And again, if you're interested in more details, Dr. Christy Elliott, our Chief Science and Operating Officer, does a nice job explaining it in more detail on our website. Gubalan Pachayapan: Alright. Thank you very much. Linda Marbán: Thank you. Operator: Your next question comes from the line of Matthew J. Venezia from AG Alliance Global Partners. Your line is now open. Matthew J. Venezia: Hi, Linda. Hi, AJ. Thank you for taking my questions. Just one quick one on the potential label expansion. Is there any chance at first launch if an approval were to be granted that you could get as a cardiac and skeletal label, or are you mostly looking at label expansion further down the line? Linda Marbán: No. I think we'll obviously enter into those conversations during our labeling discussions with the agency. Of course, it's all incumbent upon what the data shows, but certainly if we achieve statistical significance in skeletal and cardiac in our labeling discussions, we will ask for the label to have both parameters. Matthew J. Venezia: Got it. Okay. And then just to switch gears a little bit to the exosomes platform, for the COVID vaccine program, we've seen Vaxart recently sell their vaccine program to Dynavaccine. What are the partnership opportunities that you potentially see? Has there been any inbound? Is there anything you could share on that front for the exosomes platform? Linda Marbán: Yeah. So we're all waiting with bated breaths for the data to come through from the NIAID study. Obviously, the government shutdown has not helped that. We are looking forward to getting that data. I think once we have that data, we'll be on a more direct shopping expedition for the appropriate partner. This vaccine is fantastic. It's a native protein vaccine. We use no adjuvants. The lipid that encompasses it is an exosome, which is a natural product, so you don't have to worry about gumming up the liver or the spleen. And if the antibody response and T cell response is anything similar to what we saw preclinically, it should have really tremendous value. Plus, because of the little bit of protein that we need to evoke a strong immune response, we can do multivalent vaccines not only with, you know, multivalents for COVID, for instance, but we could do a COVID plus flu plus RSV, and all of those are in the planning stages. So we're pretty excited to see that data. We'll provide updates as the data becomes available. Matthew J. Venezia: Great. Thank you for taking our questions. Linda Marbán: Yeah. More than welcome. Operator: Your next question comes from the line of Joseph Pantginis from H.C. Wainwright. Your line is now open. Joseph Pantginis: Hi. Thanks for taking the follow-up. Linda, I wanna make sure I'm absolutely sure on this, so forgive me if there's any repetition here. And this goes to the SAP around HOPE-3, and I'm getting questions on this as well. So, obviously, you need the primary to hit to be able to trigger LVEF, if I heard that correctly, number one. Linda Marbán: Is that a question, or did you miss talking to me, Joe? Joseph Pantginis: No. Is that the like, I just wanna make sure that's correct. You have to hit the primary in order to trigger the analysis of LVEF. And, if you don't hit the primary, you know, how would LVEF be analyzed, and what would you say would be the hurdle for success there? Linda Marbán: Yeah. Yeah. Yeah. So, you know, this is where the colloquialism of regulatory flexibility becomes the open-ended question. It depends on how far we miss on the PUL, let's say, we did, and then what the p-value independently of ejection fraction would be. I think we would go in there and fight really hard if we missed the PUL by a little and achieved really nice p-values on ejection fraction. It depends on how dogmatic the agency is going to wanna be on statistical, you know, analyses, which typically use up your alpha and your primary. But in this situation, because they have said they would be flexible, that they would look through to the cardiac data, that they know that the applications for cardiac and the BLA, were looking for more cardiac data, there may be a lot more windows of opportunity than just sort of strict statistical dogma. Joseph Pantginis: Got it. Thanks for the clarification. Linda Marbán: Absolutely. Operator: There are no further questions at this time. I will now turn the call back to Capricor management for their closing remarks. Please go ahead. Linda Marbán: Thank you so much for all of your questions and also for participating today. Obviously, the coming weeks will be transformative for Capricor as we prepare to announce the HOPE-3 top-line results. These data will define the next chapter for Daramycin and for our company as we advance toward our goal of delivering a life-changing therapy to patients and families affected by Duchenne muscular dystrophy. We remain steadfast in our mission and continue to execute with discipline, scientific rigor, and readiness across every area of our business. For the DMD community, your courage and partnership continue to inspire everything we do. We look forward to sharing the important next step with you soon. Thank you so much for joining us today. And we will be in touch soon. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Welcome to ON24's Third Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to Lauren Sloane of Investor Relations. Thank you and you may begin. Lauren Sloane: Thank you. Hello and good afternoon everyone. Welcome to ON24's third quarter 2025 earnings conference call. On the call with me today are Sharat Sharan, Co-Founder and CEO of ON24, and Steve Vattuone, Chief Financial Officer of ON24. Before we begin, I would like to remind everyone that some information provided during this call will include forward-looking statements regarding future events and financial performance, including guidance for the fourth quarter and fiscal year 2025 as well as certain fourth quarter and full year non-GAAP projections. These forward-looking statements are subject to known and unknown risks and uncertainties that could adversely affect ON24's future results and cause these forward-looking statements to be inaccurate, including our ability to grow revenue, attract new customers, and expand sales to existing customers, the success of our new products and capabilities, and our ability to achieve our business strategies, growth, our process for evaluating indications of interest, or other future events or conditions such as the impact of adverse economic conditions and macroeconomic deterioration. ON24 cautions that these statements are not guarantees of future performance. All forward-looking statements made today reflect our current expectations only, and we undertake no obligation to update any statement to reflect the events that occur after this call. Please refer to the company's periodic SEC filings and today's financial press release for factors that could cause our actual results to differ materially from any forward-looking statements. We would also like to point out that on today's call, we will report GAAP and non-GAAP results. We use these non-GAAP financial measures to evaluate our ongoing performance and for internal planning and forecasting purposes. Non-GAAP financial measures are presented in addition to, and not as a substitute for, financial measures calculated in accordance with GAAP. To see a reconciliation of these non-GAAP financial measures, please refer to today's financial press release. I will now turn the call over to Sharat. Please go ahead. Sharat Sharan: Thank you and welcome everyone to the ON24 Third Quarter 2025 Earnings Call. I appreciate you joining us today. With me is Steve Vattuone, our Chief Financial Officer. First, let me touch on Q3 results. From a P&L perspective, I am happy to share that we delivered a strong Q3, with revenue and profitability above the high end of our guidance and had a strong performance on gross margins and free cash flow. We ended Q3 with $124.5 million in total ARR. While we expected Q3 to be seasonally soft, we did see some unexpected impact to growth ARR in Q3 from slower new growth bookings, including in the life sciences vertical. In Q3, we did see some deal slippage, many of which have already closed in Q4. Importantly, we expect significantly better ARR performance in Q4 compared to Q3, which will set us up well for a stronger 2026. There are a few commercial highlights that I would like to share. First, we recently signed a major new partnership with LinkedIn, which I will discuss shortly. Second, we continue to see strong performance from our AI offerings. Close to one in five of our customers is paying for our AI offer, and we expect this number to increase into Q4 and future quarters, especially with the launch of two new packages, AI Translate and AI Propel Plus. And third, win backs from boomerang customers, especially in regulated industries, continue. While our Q3 ARR performance was below expectation, we are excited that our customer base continues to adopt more of our products, and we continue to see an increase in customers using two or more products, with that metric also hitting an all-time high. In addition, at the end of Q3, we are seeing customers commit more and more to our platform, with the average core ARR per customer reaching over $80,000 at the end of Q3, and the percentage of our ARR in multiyear contracts was the highest ever. Next, at the end of Q3, I will discuss the exciting announcement we recently made with LinkedIn to drive the next generation of event marketing. This partnership brings together ON24, the premier B2B intelligent engagement platform, and LinkedIn, the world's largest professional network. This integration is a game changer for our customers that will enable them not only to multiply event promotion on LinkedIn but also drive additional audiences to their ON24 events. Ultimately, our collaboration will completely transform digital events by providing customers with seamless workflows that push ON24 events directly into LinkedIn events, frictionless registration that syncs event registration data directly from LinkedIn registration forms directly to ON24, and expanded audience reach, promoting ON24 events with high-quality audiences on LinkedIn. The integration will be rolled out in several phases, and ultimately, this partnership will turn digital events into powerful connected campaigns that will drive business forward for both our customers and new prospects alike. Now I will discuss our product innovation that is centered around AI. We continue to make significant enhancements with our AI-enabled offerings. Recently announced, ON24 AI Propel Plus, a brand new modern, intuitive, AI-forward solution that can easily turn every webinar or digital event into an omnichannel multi-touch campaign or engagement. At the core of AI Propel Plus is our AI-powered analytics and content engine, which, as a reminder, enables our customers to repurpose webinars and other digital events into derivative content, including short video clips, blog posts, and nurture assets, which enable a multiplier campaign effect. AI Propel Plus is powered by ON24's first-party engagement data, all of which can be synced into CRM and marketing automation systems for use in retargeting and lookalike audience match. And for those enterprise customers driving global engagement, customers can pair our AI product capabilities with ON24 Translate, our multilingual translation offering, which allows customers to localize every piece of content so they can seamlessly launch their campaign in over 60 countries. Imagine taking a single webinar or virtual event and converting all elements of that, including registration pages, lobby pages, webinars, and all derivative content, in over 60 languages. As an example, one of the largest global technology companies expanded its use of ON24 to localize and scale its digital event program across multiple markets. The team needed a faster, more efficient way to translate and publish localized content for regional audiences without relying on external vendors. With ON24's built-in translation and automation capabilities, the company can now localize over 4,500 events annually in 12 languages, ensuring consistent branding, faster campaign timelines, and deeper engagement in key international markets. Next, I will share a couple of new AI-powered technology solutions that we will be launching soon. First, one-click social publishing, a capability that will help marketers repurpose and refine their content across social media channels. This AI-powered solution will further support our customers' ability to create and post short-form video clips across major social media channels like YouTube, LinkedIn, Facebook, and ads with one click of a button. Second, is our focus on AI agents. These ON24 AI agents will help customers automatically set up events with the right registration and lobby pages to ensure the experience is tailored to the right target audience. And for our global customers, we are going to support agentic AI video translation that will convert videos into multiple languages while maintaining the speaker's voice, tone, and delivery, even synchronized lips to speech to provide a global footprint for presentations. Another area is the Genetic AI video clip optimization, which will allow our customers to identify and develop different types of video clips using an iterative chat interface to refine the video output of video clips and determine the clip's relevance for different use cases. These video clips will also support dynamic layouts, such as vertical as well as horizontal or landscape orientations, and we design social media sharing to magnify program reach and engagement. Finally, and most importantly, we are focused on AI and LLM search discoverability. As LLMs take a bigger role as default search engines, ON24 will use AI to help our clients create a deep reservoir of fresh LLM search-optimized and discoverable content. Our AI discoverability solutions will help customers optimize content for LLM indexing and readability, enhancing landing pages, and summarizing content using the right HTML and JavaScript markup and information architecture. Sales and marketing go-to-market is being transformed, and ON24 is in the driver's seat, becoming the AI-enabled engagement platform that empowers business users to do more with less and achieve measurable results. I am proud that in its latest report, G2, the world's largest and trusted marketplace for software, based on user reviews, ranked ON24 as the number one leader in the enterprise grid for webinar platforms as measured by market presence and customer satisfaction. We see this recognition by G2 as proof that our AI-driven engagement engine is delivering ROI to customers at scale. Next, I want to discuss our continued momentum and customer win backs from boomerang customers, especially in the regulated industry verticals. Here are a couple of examples. A leading provider of retirement and investment management solutions selected ON24 to enhance and scale its retirement plan education programs. Previously managing a large number of recurring sessions through a legacy provider, the team faced challenges with manual workflows and limited personalization. On ON24, they can now automate post-event engagement, integrate insights into their CRM, and deliver personalized participant experiences at scale. Another example of a win back was from the big pharma space. A global biopharmaceutical leader will join ON24 to elevate its digital HCP engagement strategy and move beyond basic web conferencing tools. The team needed a compliant, interactive, data-rich platform that could support live education and integrate directly with its CRM and Viva systems. With ON24, they now deliver immersive, fully branded experiences with interactive features, all while capturing first-party engagement data that drives more informed follow-up. Finally, let's turn to how we are using AI to drive efficiencies in our own organization. We generated positive free cash flow for the seventh consecutive quarter and expect to drive further progress on profitability in 2026. Specifically, we are leveraging AI to increase efficiency in operations. Moving forward, we are actively focused on deploying AI tools within the company to improve productivity, especially in sales and marketing, and to drive higher profit margins. We are targeting a double-digit improvement in sales and marketing expenses as a percentage of revenue in the next two years. Currently, sales and marketing as a percentage of revenue is in the low forties, and we expect to reduce this to the mid-thirties in twelve months and to the low thirties in two years. With the benefits of AI, we believe we can better align our overall expense structure without compromising our innovation roadmap and go-to-market success. To sum up, we believe we are well-positioned to capture the growth opportunity in our market by bringing AI innovation to our industry. We are making ON24 the AI-enabled engagement platform that empowers business users to do more with less and achieve measurable results. We continue to see impressive win backs as boomerang clients recognize the power of the ON24 platform to automate post-event engagement, integrate insights into their CRM, and deliver personalized participant experiences at scale. We are excited about the enhanced solutions we can deliver to our customers through our partnership with LinkedIn and the expansion of our AI solutions, including Agentic AI. We look forward to driving the company to profitable ARR growth in 2026. Before I turn it over to Steve, I wanted to provide an update. The company has received indications of interest for a potential acquisition of the company. The board is evaluating the indications of interest with Goldman Sachs as its financial adviser. There can be no assurances as to the outcome of this process. The purpose of our call today is our third quarter results, and we ask that you keep your questions focused on this topic. Now I will turn it over to Steve. Steve Vattuone: Thank you, Sharat, and good afternoon, everyone. I am going to start with our third quarter 2025 results and will then discuss our outlook for the fourth quarter 2025 and full year 2025. Total revenue for the third quarter, which includes revenue from our virtual conference product, was $34.6 million. Total subscription and other platform revenue was $32 million. Total professional services revenue was $2 million, representing approximately 8% of total revenue. Revenue from our core platform, including services in 2025, was $34 million. Moving on to ARR. ARR represents the annualized value of all subscription contracts at the end of the period and excludes professional services and overages. Total ARR at the end of Q3 was $124.5 million, and ARR related to our core platform was $122.4 million. As Sharat discussed earlier, while we did see some softness and deal slippage in our growth business during a seasonally softer summer quarter, including in the Life Sciences vertical, we see many positive signs in our business, and we expect to improve ARR performance in Q4, which I will cover in our guidance discussion. Now let me cover some of our customer metrics. Our continued focus on larger enterprise customers resulted in improvements in a number of our customer metrics. Our continued focus on enterprise customers resulted in our average core ARR per customer reaching its highest level ever at over $80,000 per customer. Our strategy of moving customers to longer-term commitments has resulted in the percentage of our ARR in multiyear agreements hitting another all-time high at the end of Q3. This number was 51% at the end of 2024 and increased sequentially each quarter in 2025. Our emphasis on increasing the deployment of our product set, including our new AI-enabled products within our customer base, has shown results. In Q3, the percentage of our customers using two or more products hit an all-time high, having increased sequentially every quarter in 2025. As Sharat discussed, almost one in five of our customers are now using and paying for our AI solutions, a number which has continued to grow sequentially each quarter of the past seven quarters since the beginning of 2024. In Q3, the $100,000 and above customer cohort represented approximately two-thirds of our total ARR, consistent with last quarter, with 294 customers in this cohort. The total customer count at the end of Q3 was 1,521. Before turning to expense items and profitability, I would like to point out that I will be discussing non-GAAP results going forward. Our non-GAAP results exclude stock-based compensation, restructuring charges, impairment charges for real estate, amortization of acquired intangibles, shareholder activism-related costs, certain legal costs related to litigation regarding the 2021 IPO, as well as certain other items. Our GAAP financial results, along with a reconciliation between GAAP and non-GAAP results, can be found within our earnings release. Our gross margin in Q3 was 76%. Our year-to-date gross margin through Q3 was 77%, which is consistent with our gross margin for the 2025 fiscal year. Now moving on to operating expenses. Sales and marketing expense decreased in Q3 to $14.4 million compared to $15.9 million in Q3 last year. This represents 42% of total revenue, compared to 44% in the same period last year and 43% last quarter. Our sales and marketing expenses have decreased in absolute dollars and as a percentage of revenue both year over year and from last quarter as we continue deploying AI tools to increase efficiency. R&D expense in Q3 was $6.6 million compared to $6.7 million in Q3 last year. This represents 19% of total revenue compared to 18% in the same period last year and 19% last quarter. We have continued to invest in product innovation for our platform, including AI-enabled features that utilize our first-party data advantage. G&A expense in Q3 was $5.8 million compared to $6.2 million in Q3 last year. This represents 17% of total revenue compared to 17% in the same period last year and last quarter. We have taken actions to reduce our G&A spending, and as a result, our G&A expenses in absolute dollars have decreased as compared to the same period last year and last quarter as we have continued to streamline our G&A functions. Moving on to our bottom line performance and cash flow metrics. Operating loss for Q3 was $400,000 or a negative 1% operating margin compared to an operating loss of $800,000 and a negative 2% operating margin in the same period last year. Net income in Q3 was $1.2 million or $0.03 per share based on approximately 45.1 million diluted shares outstanding. This compares to net income of $1.1 million or $0.02 per share in Q3 last year using approximately 45.6 million diluted shares outstanding. We delivered positive adjusted EBITDA in Q3 and delivered our seventh consecutive quarter of positive free cash flow. Our free cash flow in Q3 was positive $2.7 million, excluding cash outflows related to our restructuring efforts, shareholder activism fees, and certain other legal costs, which collectively totaled $500,000 in Q3 2025. Our free cash flow in Q3, including all of these items, was positive $2.2 million compared to positive $100,000 in Q3 of last year. Cash provided by operations in Q3 was $2.5 million compared to cash provided by operations of $300,000 in Q3 last year. I would like to provide an update on the $50 million capital return program we announced in May. In Q3, we utilized approximately $7 million for share repurchases under this program and a further $2.4 million thus far in Q4 under this program. Since we launched this program in May, we have utilized a total of approximately $13.8 million under this program. This share repurchase program followed the completion of three earlier capital return programs. Our three earlier capital return programs collectively returned $191 million to shareholders. Our balance sheet remains strong with approximately $175 million of cash and investments at the end of Q3. Now turning to our guidance. Regarding Q4 guidance, we expect Q4 total revenue, which includes our virtual conference product, in the range of $33.9 million to $34.5 million and core platform revenue, including services, in the range of $33.3 million to $33.9 million. Professional services is expected to represent approximately 8% of total revenue. We expect our gross margin to be 76% to 77% in Q4. We expect a non-GAAP operating loss in the range of $800,000 to $200,000 and non-GAAP net income per share of $0.01 per share to $0.02 per share using approximately 44.8 million diluted shares outstanding. In Q4, we also expect to be adjusted EBITDA positive. We expect a restructuring charge of $500,000 to $800,000 in Q4 related to our ongoing cost reduction efforts, which is excluded from the non-GAAP amounts provided above. Amortization of acquired intangibles, shareholder activism costs, certain other legal costs, and certain other items are excluded from the Q4 non-GAAP amounts provided above. Now I would like to provide our outlook for ARR. We expect to see a meaningful improvement in ARR performance in Q4 as compared to Q3. We expect to end the year with the strongest gross retention in 2025 and expect our growth bookings to deliver a strong performance. That being said, it is early in the quarter, and Q4 tends to be a back-end loaded quarter, so we are providing a wider range for Q4 core ARR performance. In Q4, we expect core ARR to increase by 1% to an increase of $500,000 as compared to Q3 levels. For our Virtual Conference product, we expect the ARR to be $2 million at the end of 2025. Now turning to our annual guidance for 2025. For the full year, we expect total revenue to be in the range of $138.6 million to $139.2 million. Professional services is expected to represent 7.5% to 8% of total revenue. We expect core platform revenue, including services, to be in the range of $136 million to $136.6 million. We expect a non-GAAP operating loss in the range of $4.2 million to $3.6 million and non-GAAP net income per share of $0.05 per share to $0.06 per share using approximately 45 million diluted shares outstanding. We expect gross margins for the year to be 76% to 77%. We expect to be adjusted EBITDA positive in Q4 and 2025. Excluding any incremental non-GAAP expenses, we expect to deliver positive free cash flow in 2025, our second consecutive year of positive free cash flow. Restructuring charges, amortization of acquired intangibles, shareholder activism costs, certain other legal costs, and certain other items are excluded from the full-year non-GAAP amounts provided above. As Sharat discussed, we are making progress in improving our go-to-market strategy, which has allowed us to lower our sales and marketing spending as we exit 2025 and head into 2026. We are actively deploying AI tools at ON24 to improve efficiency and streamline our operations, including in the go-to-market functions. We are very focused on improving our profitability and expect to lower our sales and marketing expenses as a percentage of revenue by mid-single digits by the end of next year and by double digits in the next two years. This should bring our sales and marketing expenses as a percentage of revenue down to the mid-30s in twelve months and low-30s in two years. We expect these cost reductions will flow to the bottom line and increase our profitability in 2026 and beyond. In summary, in Q3, we made significant progress on our strategic roadmap while delivering P&L results above guidance. We expect to deliver better ARR performance in Q4 driven by improved gross retention performance, increased AI penetration in our customer base, new business performance from regulated industries, and our exciting new partnership with LinkedIn. We expect to deliver positive adjusted EBITDA in Q4 and 2025. With a focus on lowering our sales and marketing spending over the next two years and actively deploying AI within our organization to lower costs and streamline operations, we expect to deliver improved profitability in 2026 and beyond. Our goal is to return to ARR growth next year with a more profitable operating model. With that, Sharat and I will open the call for questions. We will now be conducting a question and answer session. Our first question comes from Rob Oliver with Baird. You may proceed with your question. Rob Oliver: Great. Thanks, operator. Good afternoon. The first question for me is around Sharat, I think you called out nearly 20% of customers paying for your AI solutions. That is a really impressive number. Was hoping to get a sense from you guys of what sort of potential uptick you are seeing from that, recognizing it's still early, but that's a pretty sizable chunk. And so I just wanted to get a sense of how that's impacting contracts, whether that's contributing to that continuously improving ACV number at enterprise. Any color there would be helpful. I just had a quick follow-up for Steve as well. Sharat Sharan: Yeah. Rob, as you said, we now have one in five customers that are paying for AI solutions. And this number as a percentage of revenues continues to increase every quarter. We expect it to continue to increase in Q4 and in future quarters. And this also provides a significant white space as we move forward. And now we have recently announced our AI Translate and AI Propel Plus offerings. AI Translate allows the customers to take a webinar and convert that into 30 different languages and campaigns. And AI Propel Plus is a brand new modern intuitive AI-powered solution that can easily turn every webinar or digital event into an omnichannel, multi-touch campaign or engagement. So these two offerings, in addition to AI, will continue to provide increased momentum and grow penetration with our AI offerings. You asked a question about, you know, already our AI solutions are, if you look at our expansion agenda, after our content marketing solutions, they are number two in terms of where they fall in. And my open expectation is sometime next year, they will cross to become the largest driver of expansion for ON24. We expect our ASP on that number to increase with the additional products. We also expect the penetration on the number of customers to increase. Now the other thing is this is also helping us both from a retention point of view. It is helping us from an expansion point of view. And also, close to 40 to 50% of our new deals are including AI too. So that is an important thing as we move forward. Now as we move yeah. I've talked about AI Propel Plus. I talked about AI Translate. As we move forward, we continue to focus on our agentic AI and AI search discoverability agenda also. And so all this that we are doing, Rob, is building on our strengths and first-party data. We have over a billion engagement minutes annually in our platform. We have hundreds of thousands of webinar experiences on our platform. And in the age of AI, both content and first-party data will win. The last thing I want to also mention, which I we will also mention on the call, that we are not only doing this for our customers, but we are also leveraging agents and others internally in the business, and that's what gives us confidence in some of the stuff that we talked about on sales and marketing. Hope that helps. Rob Oliver: Yeah. That does help. And that actually was gonna be part of my second question for Steve was around, you know, clearly, it sounds, Steve, like you guys are, you know, some of that really nice improvement on the sales and marketing and efficiency is coming from AI. Wondered if you could give us a little bit more color around how much is that tech innovation, how much of it is that low-hanging fruit internally, how much of it is potentially headcount? And then you guys have made some nice progress not just stabilizing the business, but also growing at the higher ARR accounts at the enterprise level. So I guess two-part question. One, some more color around the component of those that go-to-market efficiency. And secondly, how do you do that in a way where you make sure you do not disrupt kind of the improvements that you guys have been showing at the upper end of the client range? Thanks very much. Steve Vattuone: Sure. Let me go ahead and answer both of those questions for you. So first off, we have streamlined our go-to-market over the past few years, and we've reduced our sales and marketing quarterly spending from about $25 million in mid-2022 to less than $15 million a quarter in Q3. That's a reduction of about $10 million per quarter or $40 million annually. Now in terms of how we'll lower the expense going forward, we have been deploying AI within our organization to increase efficiency, and we'll continue to do that. That includes using our own products to be more efficient. We're also looking at reallocating resources within our go-to-market organization to focus on the areas with the highest growth potential, which are currently in the regulated industries, particularly in financial services and professional services. Life sciences, while currently under some macro pressure, is also an area where we have historically been strong, and we will continue to invest there. And lastly, we'll continue to look at ways to be more efficient and do more with less, which has allowed us to lower our sales and marketing spending over the past number of years, and we'll continue to do that. We can do all this while maintaining the right number of go-to-market resources. And that'll allow us to return to ARR growth in 2026. Rob Oliver: Great. Thanks very much. Steve Vattuone: Our next question comes from Michael Rackers with Needham. You may proceed with your question. Michael Rackers: Hi. This is actually Scott Berg. I guess lots of questions here. Sharat, I wanted to start with the deal slippage you mentioned from Q3 to Q4. Sounds like you closed a number of those transactions already in the quarter, which is obviously good. But wanted to see was there any commonalities with some of these deals that slipped out of Q3 and into Q4? Or was it more, I guess, random in nature? Sharat Sharan: I think, Scott, where we saw a little challenge in Q3, if you look at the pipeline, this is especially on the new business side. We saw a little less urgency in closing a deal from proposal plus to closure. I think, you know, Q3 tends to be a seasonally summer quarter, seasonally softer. We saw deals move from discovery to proposal plus. With proposal plus, closure. We saw them, you know, we saw $6.7 million worth of deals that slipped into Q4. And like I said, about 60-65% of those deals have already closed in Q4, which gives us a good sense. And so that's what we saw predominantly on the new business side. Our installed base business was fine. We did expect it to be a seasonally soft quarter, so that's what happened. We also did see some pressure in the pharma business. Now that has been a great business for us. In the last six to nine months, we've seen some short-term pressure in the pharma business. That being said, as we talked about it, our average core ARR per customer reached its highest level ever at over $80,000 per customer. The percent of ARR in multiyear agreements hit an all-time high. And the percentage of customers using two or more products also hit an all-time high. So now as I look at let me just also give you a color on Q4 ARR. And Steve talked about it. Q4, you know, it's hard to kind of provide guidance on ARR in itself. And Q4 is even harder because it's such a back-end loaded quarter. We've given a wider range of 0.5% to minus 1%, but we believe we are within striking distance of getting to positive ARR. We expect this to be one of the best gross retention quarters in Q4 in the last four to five years. We expect continued momentum from our AI offerings both from new and expansion business. And we also expect that the LinkedIn partnership will also start helping us drive improved new business and customer retention. And we will continue to see momentum in win backs and continuing traction in regulated industries. So yes, we have some work to do, but we've made some significant progress and enhancements in our business. Scott Berg: Sure. Very helpful there. Thank you. And then on the LinkedIn partnership, just wanted to connect on that, I guess. When you look at that, is that, I mean, we kind of described it as sounding like a channel something for your customers to be able to tap into from a distribution perspective. But is there any monetization opportunity with that? Or is it really just more about enhancing the platform to improve customer kind of retention stickiness and make it even more attractive? Sharat Sharan: Thank you. Yeah. I think there are stages to that. So let me just explain this. And it's bigger than you may be thinking right now as we launch the various stages. But, you know, this will literally drive the next generation of event marketing. We are the only webinar platform, maybe this engagement platform that LinkedIn has done this collaboration with. And I believe this is gonna be a game changer for our customers, and this partnership will ultimately transform digital events. So what this allows you to do is if you are publishing an event in ON24, you can literally seamlessly drive audiences from LinkedIn to come into that event. You can publish events directly on LinkedIn in just a few clicks and then quickly promote and capture registrants to drive seamless registration. And this is just the first phase of our integration. As we move forward, what you will see so in the first phase, yes, it is gonna be more about retention. It's gonna be more about new customers. But just imagine now customers can get through LinkedIn ads automatically for the event that they're doing. They can drive ten, twenty, fifty, 100 registrants right from the LinkedIn channels. Seamlessly. But in subsequent phases, what we'll be able to do here, Scott, we'll be able to leverage our first-party engagement data. And with LinkedIn, we'll be able to allow with that, they will allow lookalike audiences from LinkedIn. So we provide them some data, say, these are the people that we want. They'll provide lookalike audience data. And that will be able to provide those very specific audiences into the events of our customers. Now that will be monetized. We'll have a monetizable SKU on that that would impact our top line. We are very excited about the potential of this partnership and its impact on our growth in 2026 and beyond. Scott Berg: Very helpful. Thanks for taking my questions. Steve Vattuone: Our next question comes from D. J. Hynes with Canaccord Genuity. You may proceed with your question. Luke: Hey, guys. This is Luke on for DJ. Thanks for taking the question. So maybe to start, could you just tell us a little bit more about this AI search discoverability agenda you laid out? You know, the vision there, what those products will entail, what they look like, and what you think you can achieve there. Sharat Sharan: Yeah. So some of this is an early look, and I don't want to disclose everything. But let me share some of this information just at a high level. When our customers do events, they have registration pages, they have lobby pages, they do the webinar, and now they get the derivative content. They get the blogs, takeaways, all AI transcripts. They get all the video key moments and those and all that kind of information. Right? Now as you know, what the LLMs do, they basically scour places, like the search, and they develop a foundation. What we are gonna be able to do, if you are doing, like, 100, 200, 300, 400 webinars, we'll provide you things like transcripts, but all other things. As you structure your content on the ON24 platform, we make it, you know, and once it is done, we'll make it available to you whether it's in on-demand and others. So all that content can be indexed by the LLMs. Okay? So it's discoverable by the LLMs and indexed by the LLMs. Remember, you are no longer talking about a live event. That is done on an event basis. You're talking about really continuous engagement. All the other content, you'll be able to take all your video content, publish it to YouTube and other stuff. So be an ability to take all that content, index that into the LLM so that they become part of the search. Okay? Hopefully, that makes sense. And so there is a lot more work that we are doing in that regard. Again, with all the content, 130,000 experiences that we have on the platform, and all the other derivative content. Imagine with especially with translations. We have 130,000 experiences on the platform. And each experience converts into 15 more derivative contents or different languages and other stuff. Imagine you've got over 2 million pieces of content across the platform. And now how do you make it so that it is indexable by the LLM? How do you make it very easy so that it's searchable by the LLMs? That's an area that we are very focused on. Luke: Excellent. Very helpful. And maybe just a quick follow-up. As we think about this LinkedIn partnership, you know, you've described it as a multiphase approach. Just how should we be thinking about the timeline in the various phases and when that will be complete? Sharat Sharan: I think you should be thinking in terms of the first phase is this year. Phase two will launch approximately by the end of the year, which is gonna be much more what I think of as the partnership. And by Q1, you will start to see elements that will be monetizable in the platform. You should assume by February, we'll be able to launch things like the lookalike audiences that will be monetizable by ON24 for our customers. So that's where we believe that is going to move forward. And by the end of Q1, I expect the integration to be extremely tight now between ON24 and LinkedIn to really provide meaningful capability to our customers and start to provide an inflection on our top line. Luke: Excellent. Thank you. Steve Vattuone: Our next question comes from Linda Lee with William Blair. You may proceed with your question. Linda Lee: Thank you for taking my question here. Just a quick one to start off. Since changing, updating the go-to-market motion into more of an enterprise focus, how has the new go-to-market motion performed compared to your expectations so far? Sharat Sharan: Yeah. So, Linda, when we talk about the go-to-market motion, there are multiple parts to that. Again, it's more enterprise-focused. It's also we deliberately made a thing about being focused more on regulatory industries like financial services, life sciences, and professional services. I'll just provide you some information. Our regulated industries business is about 50% of our business now. Four, five years back, that was about 33-34% of our business. Now I know we are having some short-term headwinds in the life sciences business. But if you look at our financial services business, which is about 20%, and if you add our professional services business, which also has national and state regulations, so it's part of the regulated industries. Those two businesses with the 35% are growing mid-single digits year over year. They're also very high gross retention businesses close to 90%. So essentially, I think that execution and really tightening up our focus on financial services and life sciences and health. Also tightening up our focus on the go-to-market as we are focused on our strategic accounts and the next tier accounts, both from a customer success, marketing, and sales point of view, has helped us significantly. And we expect to continue to basically do that. As we move forward, you will see us continue to emphasize our AI-based offerings. You will see us continue to focus a lot more on the regulated industries. And this is also being seen in cases of the win backs. We are seeing whether it's in the regulated industries or otherwise, I'll give you an example of a customer win back. A leading provider of retirement and investment management solutions left us to go to one of the collaboration tools, and they came back to us because when they went there, they do a lot of recurring sessions, and they could not do those through a legacy provider. The team faced challenges with manual workflows and limited personalization. With ON24, they can now automate post-event engagement, integrate insights into their CRM, and deliver personalized participant experiences at scale. So as we move forward, and I think we've talked about the sales and marketing efficiency, you will see us double down even more in that category. Linda Lee: Well, and another question here, with the new CMO joining early in the year here, how has the transition been in terms of the onboarding of the new CMO, David Lee? And also, what are the strategies here in terms of as you guys are focusing more on the AI products and features and capabilities to your customers, in your conversations with sales teams, if you could give more color on that? Sharat Sharan: Yeah. I think David has joined, and it's been some time since he joined now. In our business, that's kind of a lifetime. So he's very well ramped up. And when we look at our team's go-to-market teams, Linda, David has a head of demand generation. Now we also got to change that position. And there's a really good VP of demand generation that he brought on. Also brought on a VP of corporate marketing that's really driving a lot of our agenda on LinkedIn and other stuff. And he's got other people like VP of product marketing. Now the corporate marketing and demand generation leaders are very closely tied with the sales teams and the customer success team. So that's become a very important part of our agenda. So the focus on LinkedIn, the focus on they're doing campaigns for financial services and regulated industries. So they're doing full campaigns on the expansion team. And for AI-based offerings. So, again, I think the go-to-market team is working very, very closely. David and his team are quite ramped up. And that gives us confidence that we can, as we move forward, be more efficient in the sales and marketing spend and also continue to deliver our growth numbers. Linda Lee: Awesome. That's helpful. Thank you. Operator: Ladies and gentlemen, this concludes our question and answer session. And does conclude today's teleconference as well. Thank you for your participation. Please disconnect your lines and have a wonderful day.
Emmanuel: We'll begin momentarily. Hello, everyone, and welcome. We will begin momentarily. Hello, everyone, and welcome to PubMatic, Inc.'s third quarter 2025 earnings call. My name is Emmanuel, and I will be your Zoom operator today. Thank you for your attendance today. As a reminder, this webinar is being recorded. I will now turn the call over to Stacie Clements with the Blueshirt Group. Stacie Clements: Good afternoon, everyone, and welcome to PubMatic, Inc.'s earnings call for 2025. This is Stacie Clements with The Blueshirt Group, and I will be your operator today. Joining me on the call are Rajeev K. Goel, Co-Founder and CEO, and Steven Pantelick, CFO. Before we get started, I have a few housekeeping items. Today's prepared remarks have been recorded, after which Rajeev and Steve will host a live Q&A. If you plan to ask a question, ensure you set your Zoom name to display your full name and firm and use the raise hand function located at the bottom of your screen. A copy of our press release can be found on the website at investors.pubmatic.com. I would like to remind participants that during this call, management will make forward-looking statements including, without limitation, statements regarding our future performance, market opportunity, growth strategy, and financial outlook. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy, and future conditions. These forward-looking statements are subject to inherent risks, uncertainties, and changes in circumstances that are difficult to predict. You can find more information about these risks, uncertainties, and other factors in our reports filed from time to time with the Securities and Exchange Commission, and are available at investors.pubmatic.com, including our most recent Form 10-Ks and any subsequent filings on Form 10-Q or 8-Ks. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you, therefore, against relying on any of these forward-looking statements. All information discussed today is as of 11/10/2025, and we do not intend and undertake no obligation to update any forward-looking statement, whether as a result of new information, developments, or otherwise, except as may be required by law. In addition, today's discussion will include references to certain non-GAAP financial measures, including adjusted EBITDA, non-GAAP net income, cash flow from operations, and free cash flow. These non-GAAP measures are presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measures is available in our press release. And now I will turn the call over to Rajeev. Rajeev K. Goel: Thank you, Stacie, and welcome, everyone. We delivered a stronger than expected quarter with revenue and adjusted EBITDA ahead of guidance as well as strong cash flow, demonstrating the power of our platform, continued diversification of our business, and our accelerated pace of innovation. CTV significantly outpaced the market rate of growth and grew over 50% year over year, excluding political, driven by increased premium supply, continued scaling of agency marketplaces, traction in our live sports marketplace, and growth of small and mid-market advertisers. Emerging revenues grew over 80% year over year as sell-side targeting and newly AI solutions quickly ramped. We also strengthened our end-to-end platform with cutting-edge AI innovations that are deepening our competitive moat and unlocking measurable incremental revenue opportunities. The industry is rapidly redefining itself, and we are actively shaping its future. The impending Google AdTech remedies verdict will very likely shift market share. The prioritization of data targeting and performance is shifting value creation in the ecosystem to the sell side. Over the past few months, we've seen a groundswell of AI-driven innovation reshaping the entire ecosystem. AI is now at the center of every strategic conversation, whether the objective is advertising performance, transparency, or automation. As an early adopter of AI, our leadership is a defining advantage for us and will grow over time. We continue to innovate with an AI strategy centered around three distinct layers of programmatic advertising: the infrastructure layer, the application layer, and the transaction layer. For the infrastructure layer, we own and operate our full technology stack, giving us the efficiencies, control, and independence that many of our peers don't have, evidenced by multiple recent public cloud outages. Through our technical collaboration with NVIDIA, we are deploying next-generation AI models on the world's most advanced GPU architecture. Five years in the making, this collaboration required three ingredients: physical infrastructure capable of deploying GPUs at scale, massive transaction volume to test and optimize across the full open internet, and technical sophistication to be an early adopter. Today, our infrastructure is a clear differentiator we believe years ahead of peers. The business impacts are tangible: 5x faster bid responses and 85% fewer auction timeouts, all recovering millions in ad spend. These results close the infrastructure advantage of walled gardens and directly translate into advertiser performance with higher publisher yield. Looking ahead, as autonomous AI agents begin planning and negotiating ad campaigns, industry compute requirements are expected to grow dramatically. These early investments only widen our infrastructure advantage as legacy players are constrained by cloud and computing limits. This is the monumental shift for open Internet digital advertising that PubMatic, Inc. has been building for. Next, at the application layer, we're deploying some of the most exciting and innovative capabilities we've ever launched, embedding AI directly into our products to power intelligent workflows and decision automation. We launched AI-powered buyer and publisher platforms that now handle more complexity with significantly less manual effort. Our solutions cut campaign setup time by 87% and speed up issue resolution by 70%, translating directly into faster activations, higher productivity, and better outcomes for our customers. Independent agency Butler Till has been using our AI-powered PubMatic for buyers platform. Scott Ensign, their chief strategy officer, said, and I quote, "Historically, systems don't talk to each other. Data sets are disparate. Walled garden data is hard to connect. AI allows us to scale human reasoning and run campaigns that truly look across all channels and optimize across them. Working with PubMatic for buyers helps make that possible." End quote. This same enthusiasm is building on the publisher side. Our newly launched publisher suite already includes 17 operational AI agents guiding yield, diagnostics, and creative setup. Customer feedback has been exceptional. One of our largest omnichannel partners, Overwolf, told us that the PubMatic Assistant AI chatbot is unique with respect to the accuracy and speed of execution. And finally, at the transaction layer, we're preparing for the next major step: agentic AI, where advertisers' and publishers' AI agents will be able to transact directly through our infrastructure. We are a co-founder of the newly established AdContext Protocol or ADCP, alongside partners like Yahoo, LG Ad Solutions, and Raptive, and the first to publish a model context protocol specification for agent-to-agent communication in the programmatic industry. Establishing the protocols, safety mechanisms, and interoperability standards will enable AI agents across the entire ecosystem to transact efficiently and securely. With this three-layer strategy—infrastructure, application, and transaction—we are building the complete system for agentic AI to drive on and the traffic laws to govern it all. While still in early days, we are already seeing material benefits. First, AI is driving increased platform usage. As we roll out new generative AI and agentic AI features across our platform, customers are able to launch campaigns and resolve issues faster and improve performance. Validating our leadership in AI, customers have repeatedly said they are not seeing this level of innovation from other companies in the industry. Second, AI solutions are generating new revenue streams. One example is our new AI-based yield optimization solution for publishers, which uses adaptive learning models to automate pricing and improve auction efficiency. This AI solution is driving growth for our publishers, increasing their revenue on average by 10%. Launched just a few months ago, it has already unlocked tens of millions of dollars in incremental revenue for our publishers, and in turn is generating new PubMatic, Inc. revenue as part of our emerging revenue category. And third, AI is improving our operational efficiency and profitability. In the last two months, we deployed a dozen AI agents internally to automate operational workflows, accelerate development, and reduce overhead. Our goal is to deploy substantially more agents in the coming quarters to give us measurable margin leverage while we continue to invest and strengthen our long-term moat. Looking ahead, despite the significant progress we have made, we believe we're just scratching the surface. AI will continue to drive higher usage across our platform, generate incremental revenue streams, and improve operational leverage. And because we're investing across all three layers, PubMatic, Inc. is poised to lead the next era of agentic AI advertising. While AI is a powerful driver of our long-term growth strategy, it's equally important that we execute across the four other strategic priorities I outlined last quarter. I'm pleased to report that we're making significant progress in each of those areas. First, we're broadening our demand-side ecosystem and accelerating our pipeline. We expanded a top-three DSP partnership, introducing programmatic guaranteed deals that streamline execution for advertisers across premium streaming content. This integration reduces friction in deal setup, accelerates time to market for campaigns, and unlocks incremental budgets. A great example of how our relationships with global DSP partners are becoming more strategic as we diversify beyond the legacy DSPs. We also launched a new partnership with Bliss, an omnichannel DSP that brings high-value demand from leading global brands across automotive, retail, and financial services. Bliss combines T-Mobile's app engagement data with real-world movement patterns and transaction signals to drive performance-focused campaigns with measurable outcomes, from brand awareness to store visits and sales. This partnership expands our reach into premium brand advertisers who prioritize full-funnel measurement and offline attribution. These mid-market-focused DSPs like Bliss represent one of the fastest-growing advertising segments. In Q3, ad spend from this segment grew 25% plus year over year, reflecting meaningful progress in our diversification strategy. Second, we're accelerating our investment on the buy side. We're extending our reach with independent agencies and direct advertisers, expanding our focus from the top 20 agencies to the top 150, and from the top 500 advertisers to approximately 1,500. Supply path optimization remains a key growth driver, with the majority of this addressable market as a greenfield opportunity. SPO represented over 55% of activity on our platform in Q3. As a pioneer in SPO, we are the leading incumbent offering scale and a rich history of performance and efficiency gains. Building on this momentum, we are onboarding more buyers onto Activate, our direct-to-supply buying platform. Over the first nine months of the year, the number of active campaigns grew more than 4x over last year, with a 35% increase in customers. Activate is a key solution that enables the ecosystem-wide push for increased transparency and efficiency of programmatic advertising. And this is only the beginning. We've begun integrating AI-powered agent-to-agent workflows into Activate to boost performance and reduce friction, making advertiser adoption even easier. We believe that this new technology could have a massive impact on Activate adoption over the medium term as we accelerate investment in mid-tail buyers. Finally, we continue to deepen our integration with DSPs to create value beyond real-time bidding transactions. We are the first SSP to integrate the Trade Desk's price discovery and provisioning API, which allows publishers and advertisers to share deal metadata between our platforms and better identify and resolve issues with underperforming deals in real time. Today, over 50% of programmatic deals sit dormant because this information was previously only available offline. We anticipate this innovation will accelerate our share of PMP and PG deals as we drive adoption together with The Trade Desk. Third, our momentum in Activate is also fueling our growth in CTV. Excluding political advertising, CTV revenue grew more than 50% year over year. The format remains a primary growth engine for our business. Live sports is an especially exciting category. Buying activity rose more than 150% sequentially from Q2 to Q3 as we scaled our AI-powered live sports marketplace and launched new programmatic guaranteed deals around tentpole events like the US Open for Tennis and Monday Night Football. We also continue to expand our CTV publisher footprint. New deals and expanded partnerships with a number of free, ad-supported streaming services, including Tubi, Future Today, and Local Now, added to a strong roster with over 90% of the top 30 global streamers now on PubMatic, Inc. We offer these premium content streamers incremental ad demand that other platforms can't offer because of the scale of our SPO, Activate, Curation, and Commerce businesses. For example, Fremantle, one of the world's largest entertainment content creators behind franchises like American Idol, America's Got Talent, and The X Factor, generated a 78% increase in incremental programmatic demand across their expanding fast channel portfolio by partnering with PubMatic, Inc. This is a remarkable outcome and highlights the significant incremental ad revenue our platform generates for our partners. Additionally, we are expanding ad formats on our platform. In collaboration with Dentsu, we recently launched PozAds for CTV through Activate. Advertisers can now serve dynamic, contextually relevant ads when viewers pause content, representing a premium brand-safe moment that boosts engagement and yields incremental revenue for publishers. What's more, with $155 billion of ad dollars still in linear television, we believe our CTV business has a long runway for growth given the scale, performance, and ad formats now available for buyers on PubMatic, Inc. And fourth, we're making significant progress in scaling our emerging revenue streams, which grew over 80% year over year in the third quarter. Commerce media continues to gain momentum. We continue onboarding and scaling with some of the world's leading retailers and enterprise businesses as they seek to activate and monetize their first-party audience intelligence. These partnerships are expanding our reach beyond the traditional impression model, generating platform fees and database monetization that accelerate revenue growth. Sell-side curation is another fast-growing emerging revenue stream. We expanded partnerships with leading data providers around the world. Nielsen, for example, tapped PubMatic, Inc. as their exclusive sell-side partner to bring their more than 10,000 audience segments to Australian advertisers and agencies. Together with the previously mentioned AI yield solution for publishers, these initiatives drive incremental high-margin revenue that is scaling quickly. In closing, our results demonstrate the power of our differentiated business model. We continue to innovate, diversify our business, and operate with discipline. We are leading from a position of strength. We're confident that the investments we're making today, particularly across the three layers of our AI strategy, are expanding our competitive advantage while creating sustainable profitable growth over the mid to long term. All of this is happening alongside a once-in-a-generation shift in digital advertising that will likely result in the competitive landscape being reshaped, where even a modest share shift could unlock substantial incremental high-margin revenue for us. Given our owned and operated infrastructure, PubMatic, Inc. is not only positioned to adapt, we are helping define what comes next. We have the technology, the talent, and the financial foundation to build a more intelligent, efficient, and enduring business that creates lasting value for our customers, partners, and shareholders. Let me now turn the call over to Steve. Steven Pantelick: Thank you, Rajeev, and welcome, everyone. We exceeded expectations on both revenue and adjusted EBITDA. This outperformance was driven by CTV combined with stronger than expected year-over-year growth for online video and mobile app. We managed expenses, leveraged AI, and delivered improved margins and strong free cash flow. Stepping back, it is important to call out that our efforts to transform our business started several years ago as we anticipated the value of the ecosystem shifting to the sell side. We built an end-to-end solution that prioritizes control, performance, and transparency while recognizing the need to diversify our business and unlock new paths to monetization. Today, over 40% of our revenue is derived from CTV, mobile app, and emerging revenue streams, which represent long-term value for our business, up from less than 30% two years ago. Further, these efforts directly benefit our profitability and enable continued innovation and investment in the business. Turning to the quarterly results, starting with the revenue breakdown. To provide apples-to-apples comparability, year-over-year growth rates for video are adjusted to exclude political ad spend. On that basis, total omnichannel video revenues grew 21%, underscoring the strength of our premium video portfolio and growing adoption of AI-powered optimization across formats. Within this category, CTV once again grew over 50% year over year, driven by the success of our live sports marketplace and growth in programmatic guaranteed deals across expanding buyer relationships. We monetize CTV inventory from over 90% of the top 30 global streamers. Omnichannel video contributed approximately 38% of total revenue in Q3 2025. Emerging revenue streams continued their high growth trajectory, growing over 80% year over year, scaling to 10% of total revenue in the third quarter. This growth represents incremental durable revenue streams beyond our core sell-side platform capabilities. Most notably, year-over-year revenue from Activate grew over 100%, and our Curation and Databases Connect grew over 40%. Based on the results we are seeing, we will continue to invest for incremental growth opportunities that diversify our revenue, like the new AI-driven product capabilities for publishers that are already showing meaningful traction. The growth across these key secular areas helped offset the impact from lower spend by a large DSP we identified last quarter. Following our optimizations and integration adjustments by SPO partners, spend stabilized from this DSP in August and September, resulting in a lower but steady run rate. As anticipated, display revenue was down minus 5% year over year and was the format most affected by the DSP impact. Excluding this DSP, display grew in the low single-digit percentages. With respect to Q3, ad spend across the top 10 verticals, in aggregate, grew in the single-digit percentages year over year. Health and fitness, personal finance, and technology each increased over 15%. We saw softer trends in business and automotive, which declined in single-digit percentages in the quarter. Ad spend from our mid-tier DSP partners grew over 25% year over year in Q3. Importantly, our AI-driven buyer platform is resonating well with performance-focused buyers across CTV, mobile app, and e-commerce verticals, and we believe lays the foundation for sustainable growth in the quarters ahead. We anticipate that new buyer relationships like Bliss and Mountain will bring incremental ad demand across our wide portfolio of verticals. Regionally, APAC and EMEA revenues grew plus 12% and plus 7%, respectively, offsetting a minus 14% decline in The Americas, which was primarily due to spend declines from a large DSP buyer. Moving on to our operating priorities. We continue to invest and reallocate resources to the highest return areas of the business. As Rajeev noted, we're seeing strong growth across our DSP mix and within Activate as customers increase usage and new products drive incremental revenue. Our focus on generative AI is also improving operational agility, streamlining internal workflows, and allowing us to redirect resources towards growth initiatives without adding structural cost. This efficiency has allowed us to expand our sales team, focus on buyers, grow spend from existing partners, and onboard new partners. We are making great progress integrating with the fast-growing mid to long-tail segment, and so far in 2025, we've added over 25 new DSP partners. All of these efforts help us counter the near-term headwinds from legacy DSPs and further diversify beyond the top five as I described last quarter. Core to our long-term strategy is being nimble in identifying opportunities and then executing rapidly to capitalize on them. We have achieved this while managing our costs and consistently delivering profits in many different environments. The foundation of this approach is expanding our capacity and driving down our unit costs. We processed approximately 87 trillion gross impressions in Q3, a 24% increase over last year, and a 12% sequential gain versus Q2. Nearly 60% of total impressions were from CTV and mobile app inventory, highlighting our increasing focus on high-engagement channels. Further, the increase in impressions is highly leveraged over a fixed cost base. Over a trailing twelve-month basis, unit cost in the third quarter declined 19% over the comparable prior year period. In terms of operating expenses, our investments in AI to drive operational efficiency are yielding measurable results. Year to date, every quarter, we have successfully kept our total operating expenses roughly flat at $51 million while realigning investments to the areas that deliver the strongest ROI. This allows us to scale profitably even as we invest ahead of growth. For example, we increased our buyer-focused sales team by 19% in Q3 compared to the prior year, while the overall total headcount was flat. This disciplined approach enables us to deliver our thirty-eighth straight quarter of adjusted EBITDA profitability. This is a track record few companies in our sector can match. Q3 adjusted EBITDA was $11.2 million or 16% margin, which included foreign exchange costs of approximately $1 million due to the weakening US dollar over the quarter. U.S. GAAP net loss was minus $6.5 million or minus $0.14 per diluted share. Moving to cash and our capital allocation. Our balance sheet remains a core strategic advantage. In the third quarter, we generated $32.4 million in net operating cash flows and free cash flow of $22.8 million. In addition to efficient working capital management, there were two other factors that improved our cash flow for this period. A DSP that had made changes in mid-2024 returned to growth in Q3, which favorably improved our DSOs. There was also a reduction in cash tax paid because of the new federal tax bill that went into effect earlier this year. To underscore our long-term ability to generate cash, since the beginning of 2021 through Q3, we have generated over $390 million in net cash from operations, and more than $215 million in free cash flow. We ended the quarter with $136.5 million in cash and zero debt. Given the strength, we continue to deploy our capital to shareholder value. Since the inception of our repurchase program in February 2023 through Q3, we have bought back $12.4 million Class A common shares for $180.6 million. We have $94.4 million remaining in our repurchase program authorized through 2026. This program, combined with our ongoing investments in AI innovation, reflects a balanced approach to capital allocation and a commitment to long-term shareholder value. Turning to our Q4 outlook, we anticipate strong growth in secular areas of the business, including double-digit growth for CTV when excluding political advertising, and 30% plus growth for emerging revenues. As a reminder, Q4 2024 political advertising represented about 12% of revenue, nearly 80% of which was via CTV. In terms of the latest trends in October, the typical holiday seasonal uptick thus far has been relatively muted for some consumer discretionary ad verticals, such as food and drink and arts and entertainment. Accordingly, we are taking a prudent approach to guidance based on the latest trends. We expect Q4 revenue to be in the range of $73 million to $77 million. As it relates to the large DSP that declined in July, we are assuming its associated revenue to be flat in Q4 relative to Q3. We anticipate Q4 operating expenses to be similar to Q3's level as AI-driven efficiencies continue to offset selective investments in our sales team. Q4 adjusted EBITDA is projected to be in the range of $19 million to $21 million, which also factors in continued weakness of the US dollar. For the full year, we expect revenue to be in the range of $276 million to $280 million and adjusted EBITDA to be in the range of $53 million to $55 million, inclusive of more than $5 million of estimated negative FX impact. We are maintaining our full-year CapEx projection at $15 million, which is a year-over-year reduction made possible by AI-driven optimization efforts. In closing, our Q3 results highlighted the durability of our financial model and validate the progress we are making behind our business transformation. Looking ahead, we are confident in our robust multifaceted strategy. Our AI-first end-to-end platform is driving measurable results. We're adding new revenue streams, expanding our SPO relationships, and rapidly diversifying our DSPs in line with future growth opportunities in commerce, performance CTV, and mobile app. With respect to potential remedies in the Google AdTech antitrust trial, we continue to believe that any remedies that level the competitive playing field, whether structural, behavioral, or both, benefit the open Internet and PubMatic, Inc. In 2026 and beyond, as revenue growth reaccelerates, we anticipate margin expansion in both the gross and adjusted EBITDA levels because of our efficient and leveraged business. Our decade-plus experience owning and operating our global private cloud infrastructure has given us several advantages. First, it has enabled us to expand capacity while at the same time progressively reduce our rate of CapEx and drive down unit costs through optimization initiatives. Second, it's allowed us to invest early on in next-generation technology with NVIDIA. Today, our infrastructure is a clear differentiator with investments well ahead of our peers that will continue to drive efficiencies and business impact. We're also continuing to leverage AI to drive efficiency and increase our team's productivity. We anticipate total headcount will remain relatively flat in 2026, while investments supporting our fastest-growing areas of our business will continue to increase through internal reallocations. And finally, we're also laser-focused on free cash flow generation and aim to increase cash flow next year supported by further working capital improvements and incremental AI-driven efficiencies. Collectively, we believe our efforts will lead to a return to double-digit revenue growth in the future. With that, I'll turn the call over to Stacie for questions. Stacie Clements: As a reminder, you can ask a question by raising your hand located on the dashboard, or if you're on your phone, please press 9. In the interest of time, we ask that you please limit your question to one and one follow-up. With that, the first question comes from Andrew Boone at Raymond James. Please go ahead, Andrew. Andrew Boone: Hi. Can you hear me now? Rajeev K. Goel: Yes. We can. Andrew Boone: Okay. Thanks. Rajeev, if you can maybe expand a bit on the topic of SPO and some of the recent moves companies like The Trade Desk have made, kind of leaning into OpenPath, launching open ads, and declaring all SSPs as resellers. But then on the other hand, the two of you are collaborating on that data ID management API. So I guess since we last spoke last quarter, how would you characterize the state of play there? And then I have a follow-up for Steve. Rajeev K. Goel: Sure. Yeah. Thanks, Andrew, for the question. So, yeah, let me first just address the reseller kind of noise that's out there. So the industry standard definition, which has been in the industry for over a decade, is that a reseller is the term for when inventory flows from a publisher to an intermediary and then to an SSP. An intermediary can be another exchange or some sort of aggregator of inventory. In contrast, direct is when inventory flows from the publisher directly to the SSP. PubMatic, Inc. is a platform for direct inventory monetization. Reselling is not our business. We are a direct connection to publishers, and that's how we're able to provide significant incremental value to publishers and to buyers. And I think it's pretty clear we provide value in ways that DSPs do not. Yield optimization is a key example of that. So Trade Desk, in particular, has been very clear that they are not in the yield optimization business. And so a publisher needs to have a yield function in place in order to maximize their revenue, which is core to what we do. At the same time, we're also providing value to Trade Desk and others, right, who, as you noted, Andrew, are relying on us to improve deals, you know, with our price discovery and provisioning API integration announcement. So I think, you know, what you can see here is that the ecosystem is multifaceted, certainly complex. Our focus is really on taking those direct integrations with publishers that we have, all of that inventory flowing through our platform, the data, the audiences, and really creating value for buyers in such a way that they're able to generate increased return on ad spend, increased ROI, which causes them to then spend more on our platform. Then, that in turn generates higher yield for our publishers. And so that's really the core and the focus that we have. What we're finding with Activate and other capabilities on our platform, a lot of the focus on AI that we talked about in the prepared remarks is that we have a lot of opportunity coming at it from the sell side of the ecosystem based on the auctions and the data and our close integrations with publishers to be able to add value to both the buyers and the publishers. Andrew Boone: Great. Thank you for that. And then, maybe, Steve, if I could, on the COGS point, can you just expand a little bit on the ability to drive that unit cost leverage there and how we should think about that line either on an absolute dollar or a percentage of revenue going forward? Thank you. Steven Pantelick: Sure. Well, good to reconnect, Andrew. So, you know, from our perspective, you know, we for many years have been focused on owning and operating our own infrastructure and have done it very successfully, as you noted, you know, driving down unit costs. We've consistently done that for a decade, you know, often double-digit unit growth reductions. And so, from our perspective, you know, '26 is no different, other than that, you know, we continue to leverage AI more and more, you know, to drive optimizations. As you saw in our prepared comments, you know, we increased the number of gross impressions processed by over 20% in the quarter. We didn't do that by just throwing a lot of CapEx at it. We did it through software and AI. So that basic process is going to continue, but we have more tools and more ability to do that. So I would expect, in the future, as our revenue reaccelerates, we're going to increase our gross margin. It's going to be a function of revenue and, you know, managing our costs. Stacie Clements: Thanks, Steve. Our next question comes from Matthew John Swanson at RBC. Please go ahead, Matt. Matthew John Swanson: Great. Thank you guys for taking my question. Obviously, super strong quarter for CTV growth, excluding political. And you called out a lot of the drivers there, right, the great growth in the live sports, maybe some of that expansion of mid-market DSPs in the 90% coverage now of top 30 streamers. Could you just give us kind of a little more color maybe over the past year, just what sort of evolution you've seen in the CTV environment? And kind of how you're investing to grow or continue to grow next year? Rajeev K. Goel: Sure. Yeah. Thank you, Matt, for the question. So, you know, CTV has been obviously a very strong growth area for us. And we've seen tremendous, you know, scale really building from zero organically several years ago to where we are today. And I think, you know, there's a couple of trends that are happening. First of all, we are working with more and more premium publishers. Right? So this quarter, we shared over 90% of the top 30 globally. We added some new fast streamers, Tubi, Future Today, and Local Now. This builds on our base of premium inventory from existing publishers like Roku and Paramount and NBC. At the same time, there's huge growth in the advertiser mix in CTV. So whereas traditional TV, you know, has a couple hundred, maybe 500 advertisers in aggregate that are the lion's share of ad budgets, with streaming TV, what we see is that there's tens of thousands, reaching now into the hundreds of thousands, and that number is growing very quickly. And as we have focused on going after mid-market focused DSPs, many of them are focused on small and medium businesses, like Mountain or TV Scientific, or they're focused on performance advertising. Again, some of those same folks. There's a lot more dollars that we're able to bring onto the platform. And so that's creating another layer of growth. Then third is, you know, we've really leaned into AI, as you could tell from the past calls and also the prepared remarks today. You know, all three layers of the technology stack. I think that's really unlocking incremental budgets as well. So live sports is just one example of that. Actually, one of our first generative AI creative tools we launched last year was focused on helping publishers bring in more political ad spend by scanning political ad creatives. And so we're continuing to apply that technology for other use cases. So there's a lot of other verticals like pharma, for instance, health, you know, health and wellness where there's sensitive categories, but we're able to generate the unlock of spend through AI. So we think it's a really, obviously, exciting area for us. We're going to continue to focus and invest globally in this area. And as we bring more buyers onto our platform via Activate, via our curation capabilities, and now with the ADCP launch, we think there's a long runway of growth ahead of us for CTV. Matthew John Swanson: Yeah. That's super helpful. Maybe following up on your commentary on generative AI and some of the agentic AI. Obviously, we've been hearing a lot from a lot of players in the space around these two themes. Can you just talk a little bit about the kind of the right to win and how you help, you know, your stakeholders understand the value creation versus the noise around these themes? Maybe as you said with the ads. Rajeev K. Goel: A couple of things. First of all, it's owning all of our own infrastructure. So what that means is that we're in a unique position to be able to deploy additional infrastructure, you know, like the partnership that we announced with NVIDIA. And that came as a result of multiple years of collaboration. So it's not just, you know, something you can wake up and do all of a sudden. But to be able to do that, you know, you have to really own and control and be in a position to manage all of that infrastructure. So I think that's the first right to win is our long-term capability set there and expertise. Second is you gotta have the transactions and the data flowing on your platform. So an AI algorithm, you know, is only useful to your customers and only relevant to them if you have the scale and ability to transact. Of course, we have that, you know, with a trillion or so daily ad impressions going through our platform, almost 2,000 publishers, depth in CTV and mobile app and, you know, in display and so on and so forth. So I think that's the second key for the right to win. Then I think the third is, you know, a demonstrated ability to innovate and to really build solutions, not just talk about them. I think what you've seen from us over the last is that we are significantly ahead of our competition. You know, we have launched 17 agents in our publisher platform already using AI. I think one of our competitors shared that they're planning to build their first agent. Right? So you can see that's a, you know, one to two-year advantage that we have in terms of track record of execution. What that means is that, you know, when we're launching things like ADCP, the ad context protocol, which is, you know, managing workflow via AI, we are in a position to be able to go talk to both publishers and buyers about here's how you get started. Here are the first use cases to implement. These things are available on our platform today. I think that's a key part of creating value within the ecosystem is being able to participate in those early transactions, being on the frontier, benefiting from, you know, the groundswell of growth that we see in front of us. Stacie Clements: Thank you. Our next question comes from Shweta R. Khajuria at Wolfe. Go ahead, Shweta. Shweta R. Khajuria: Thanks, Stacie. Thanks for taking my question. I have a follow-up on the first question on OpenPath, not specifically just OpenPath, but are you seeing, Rajeev, any trends that would suggest that perhaps, you know, Trade Desk is increasingly going direct and you are getting impacted by not only just as a reseller, but in terms of the impressions volume? Are you seeing any impact to your business in general? And is it related to them actually launching that Kokai platform? I would think not, but there is this concern in the industry. So if you could please, perhaps comment on that to correct that, that would be great. Thank you. Rajeev K. Goel: Sure. Yeah. Absolutely. So, you know, first of all, good news is we are a platform for direct inventory. So regardless of what label anybody wants to put on anything, we know that we are working directly with premium publishers. There is not a more efficient way for buyers to access the inventory than what is, you know, coming through our platform. So I think, underlying your question, you know, the new Trade Desk platform, Kokai, does evaluate and buy media differently from what we have seen. And so we took two important steps over the course of Q3 resulting in spend from them stabilizing in August and September, as Steve mentioned. The first is that we revised our machine learning algorithms to ensure we're sending an optimal mix of inventory to them. That work is largely behind us, so, you know, we're always doing some level of continuous optimization to drive more spend. And then second, we worked with our SPO, supply path optimization partners, to help them configure their seat in the DSP to ensure that they're getting the benefit of their SPO relationship with us. And that work is largely completed as well. We have, you know, agency marketplaces set up with pretty much every major holdco in different parts of the world, in many different parts of the world. And so these agencies had to make changes, you know, over the last couple of months, to ensure that their marketplaces stay intact and that they continue to get the performance and efficiency that they're seeking. And, of course, these marketplaces are critical to the agency's media buying offerings that they provide to their advertiser clients. So we've, you know, talked publicly, for instance, about how we power WPP's premium marketplace. And so that's built on top of our SSP. And so making sure that they're receiving their SPO data workflow efficiency benefits is key to their being able to continue to offer that in market. Similarly, you know, given we're a leader, market leader in curation, we work with our curation partners to ensure that their campaigns continue to run via our SSP and that they get the ROI, the transparency, and the control that caused them to choose to work with us in the first place. So I think Trade Desk shared that, I believe, 85% of their clients are now up and live on Kokai. So yeah, we think probably the bulk of this movement is behind us. But that's a key part of why we're also very rapidly diversifying our DSP mix. As the market evolves to a more fragmented DSP landscape, we're finding, you know, significant success with 25% plus year-over-year growth with mid-market DSPs on our platform in Q3. Stacie Clements: Our next question comes from Matthew Dorrian Condon at JMP. Please go ahead, Matt. Matthew Dorrian Condon: Thank you so much for taking my questions. My first one is just on there's been a lot of talk about the impact across the open web on publisher traffic, just given these AI platforms that are taking increased share. Can you just talk about what you're seeing across your publisher base as far as your traffic? Rajeev K. Goel: Yeah. Absolutely. So we've seen, I would say, a fairly limited impact, and I would say just stepping back, you know, we believe the overall impact in our business is limited to a single-digit percentage of revenue if there was zero search traffic going to our publishers and we took no steps to mitigate it. So that's probably a high-end, you know, kind of watermark of potential impact. So, you know, we shared in our comments today that roughly 60% of the impressions that we are processing are for CTV and mobile app. So, of course, those are unaffected by AI search. Of the remaining business, which is browser-based, where search is relevant, industry data indicates that search referral traffic is roughly 15%, with the rest of publishers' traffic coming from either social or direct navigation. And given that we work in the head of the market with the top publishers, rather than the long tail, I would expect, you know, that 15% number to actually be even a little bit lower. And so if you, you know, take 40% of the impressions, 15% impact, at the high end, to a mid-single-digit percentage potential impact. Again, if we had no mitigating steps that we took. But, actually, you know, there's a lot that we can do in terms of bringing continuing to bring onboard, you know, more CTV, more mobile app, more commerce impressions, and the like. I think the other thing that we're seeing is the offensive opportunity, which is that there's a growing number of AI search experiences that consumers are spending more and more time on. So for instance, you know, Connect launched a solution where users on their properties can, you know, search the archives of Connect articles and, you know, get hands of inventory of opportunity for us to questions. And so that, I think, is actually a growing canvas as consumers get, you know, more and more used to that AI search, you know, kind of consumption behavior, then they're looking for that from many of their traditional content partners where they consume content. And so we think that's a new tailwind that is emerging in the business. Matthew Dorrian Condon: That's very helpful. And then my second one is just on your own infrastructure and just the differentiation there and partnership that you announced with NVIDIA. Just the 5x speed improvements in bid response times. Just can you just talk about the structural difference that's allowing? And is it allowing, like, just win rates and options to be higher? And just talk about the differentiation there and how that can drive sustainable growth in 2026. Rajeev K. Goel: Yeah. Absolutely. So, actually, the good news is that there's multiple ways that having, you know, this kind of infrastructure cooperation collaboration with NVIDIA, you know, can benefit our business. And it really is a collaboration, not just in hardware, but also in software. I think NVIDIA themselves, you know, says that I think it's over half, maybe over 60% of their revenue comes from software solutions. Right? So, obviously, they're well known for hardware, but it's really a combination of hardware and software. I'll give you kind of three specific examples. So we use NVIDIA GPUs to power real-time ad decisioning in very low latency environments. So think about things like connected TV or live sports, where if we can process ad transactions faster, if we can cut latency, that leads to fewer timeouts, more bids in the auction on our platform, and then more opportunities for us to win with the publisher. And so that, you know, boosts outcomes, ROI for both advertisers and publishers, also boosts our revenue. The second example is using NVIDIA Triton inference servers, where we use a specific hardware or software with them for traffic shaping. Traffic shaping is a very important and critical role that anybody on the sell side plays, which is to figure out which of the roughly trillion ad impressions we have per day we should send to each particular DSP. Some DSPs, you know, we might send tens of billions. Some might be single-digit billions. Some might be hundreds of billions of ad impressions. It's really important that we pick, you know, the right ones. And for every DSP, there's gotta be a different decision set based on the types of advertisers and campaigns that are in their platform. Of course, these decisions have to be made, you know, within milliseconds of the publisher requesting a bid from us. And then third is in the reporting area. So we're using an NVIDIA software accelerator for Apache Spark, which allows us to streamline and improve the speed at which we're able to process data, and that in turn allows for smarter optimization across a wide range of different use cases. So those are, I think, hopefully, three tangible examples of how our NVIDIA partnership is really leading to the leadership that we talked about in the prepared remarks, in particular, at the infrastructure layer. Then allows us to derive benefit in the application and transaction layers of the AI stack. Stacie Clements: Next one comes from Robert Coolbrith of Evercore. Please go ahead. Robert Coolbrith: Great. Thank you very much. Rajeev, I wanted to go back to this 5x faster bid response for you to unlocking optimization strategies previously impossible to their programmatic rates. Can you unpack that? And assuming you have a very lead in accelerated computing in the space, are there counterparties on the demand side who can take advantage of that, or do you think you need to take on a bigger role either in, you know, optimizing demands, you know, demand or hosting demand-side logic and optimization to sort of fully take advantage of those capabilities, akin to what the walled gardens do maybe in terms of their, you know, highly vertically integrated supply chains? And then, Steve, just wanted to, you know, maybe get a finer point on this Trade Desk issue. Just given current trends, do you see the potential to maybe see growth alongside their growth in '26? Thank you. Rajeev K. Goel: Yeah. Thanks, Rob. So, yeah, let me start with your first question, then I'll hand it over to Steve. So we absolutely do see opportunity to better leverage our infrastructure through vertical integration, and I'll give you two examples of that. So one is, you know, as we work more and more with mid-market focused DSPs who themselves, you know, tend to be smaller, what we find is that there's a lot of opportunity for us to use our platform to help them compete more effectively. So what I mean by that is, you know, we have huge amounts of data on our platform, you know, from this trillion daily ad impressions. A typical mid-market DSP, they may see 5 to 10% of the traffic that a very large DSP like a Google DV360 would see. So these mid-market DSPs, because they're smaller in nature, they don't have access to all of that same data. At the same time, they also don't have access to all of the performance aspects of the auction that we're running on behalf of the publisher. And so there's opportunities for us, which we are working very hard on, to use our platform to help those DSPs, you know, derive better performance, better targeting, and ultimately better ROI. And that, you know, plays very closely with the infrastructure that we've deployed. So that's one example, Rob, of where I think vertical integration where we can do more than we have done traditionally for a legacy DSP. I think these mid-market DSPs, because they're growing quickly, they're very hungry for that kind of collaboration and our ability to help them solve problems. And then the second is with our Activate solution, where buyers are buying directly in our SSP. So here, you know, that faster processing of bids, better inferencing, all of these things, they help make Activate a very effective solution. Seeing that play out in terms of the growth, you know, up 4x year over year. Campaign numbers are, you know, growing on a similar basis in terms of the number of campaigns run. So we think there's a lot of benefit from vertical integration. And, you know, as you said, Rob, that is somewhat akin to what the walled gardens do. And, of course, it's no secret that they're very good at driving performance, and we think that vertical integration is a key part of that. I'll turn it over to Steve now. Steven Pantelick: Sure, Rob. Just correct me if I don't have the right question, in terms of our growth opportunities in '26. So obviously, we're going to come back shortly with the next earnings talk about 2026. But there's a lot of things that we've focused on to put us in a very strong position to reaccelerate growth. You know, you've heard some of the stats from the third quarter, strong CTV growth, mobile as well as our emerging revenues. So, you know, once we work through the current transition that, you know, we've identified in the second half of this year, we are very confident that we're going to be growing on a number of different fronts. Now just as a reminder, we've been investing in secular growth areas. This has been a long-term strategy. We're seeing the results of that. We are expanding, diversifying our DSP base. You know, we're growing very strongly with commerce DSPs. You know, specialized DSPs are on pharma. And so the couple, you know, are focused on secular growth, expanding our buyer base, and then innovation around AI. You know, not just in the infrastructure, but certainly, you know, in terms of capabilities, functionality. We launched this past quarter, you know, AI-driven publisher products, and that will continue to be, you know, sources of growth. So we're very positive about the growth in the second half of '26, you know, as we look at, you know, the plethora of opportunities ahead of us. Stacie Clements: Our next question comes from Jacob Armstrong at KeyBanc. Please go ahead, Jacob. Jacob Armstrong: Thanks for taking my questions. This is Jacob on for Justin. Can you discuss how you believe the role of SSP needs to evolve in coming years as agentic AI expands? And what are the key investments needed to ensure PubMatic, Inc. is best positioned to capitalize off this transition over the next few years? Rajeev K. Goel: Sure. Yeah. So, you know, I think the role of the SSP is going to expand significantly from transaction automation to a much bigger role in workflow automation, around audience and inventory discovery, planning, and measurement. If we think about, you know, where programmatic technologies have been applied so far, maybe for the last, you know, fifteen or so years, I would say it's been heavily applied at the transaction level. So meaning, we have an ad impression. We want to get a number of advertiser bids on it. And then we're helping out DSPs, you know, bid on that individual ad impression. So there's been a lot of, you know, maturation and innovation and focus on that, like, single atomic impression. But we still have, you know, RFPs that advertisers send or agencies send out to publishers via email. Fill out the spreadsheet, you know, or launching this ad campaign. We you might have available. understand what audiences or what Some human at the publisher fills that out. Then they email that back, to the agency. The agency collects those, and then they decide you know, where where they're gonna, you know, set up and and allocate budget. So that's still a a largely, manual process. Some things have have improved, but still a lot of, manual approaches. I think there's a huge opportunity, you know, to think outside of the pure atomic impression or transaction. Around the discovery and planning and then after the transaction to the measurement. To use AI where, you know, an advertiser's agent or an agency's agent can say, hey. I'm launching this product or or service Please tell me what you can do for me as a publisher media owner from an audience and an inventory perspective. Take a structured response, you know, aggregate that up across, you know, many of the publishers that we're working with. And then deliver, you know, a preconstructed campaign brief to the agency. Agency can begin to buy that, you know, using our transaction pipes. And then we can have a feedback loop around, you know, measurement with that. And then the agency can, you know, revise their their campaign. So I think there's a lot that can be done outside of that, single transaction. Element, and that's really where we are focused with the transaction layer of the stack that I mentioned earlier, you know, with ad context protocol, we're working out, you know, what exactly should those structure requests and responses look like. And then how, you know, how do they how do they get set up, who owns what data. And then how do they get optimized. So I think there's a a long runway, Jacob, ahead, in that area. Stacie Clements: Thank you. This question comes from Ed Alter at Jefferies. Please go ahead. Ed Alter: Hi, thanks for the question. I wanted to talk about the investments you're making to meet the demand from the mid-market DSPs like Mountain. Where exactly are those going to show up? Is that more headcount, tech investments? Just be great to talk about the color on that. Steven Pantelick: Sure. So, you know, we've been very focused throughout this year and really leading into this year. It's to be as efficient as possible, you know, in terms of where we deploy our teams. We made a very conscious decision in the last eighteen months to move more and more resources towards the fastest-growing areas, segment growth areas, of which, of course, you know, critical DSPs are a part of that. And so we've been increasing investment in the team that goes directly and calls on these DSPs. This year, we increased, thus far, about 19% in terms of headcount. And we've done that by reallocating members, you know, around the organization. You can see from our results. Our overall headcount is roughly flat. And so, we've done a very, you know, careful analysis of, you know, how we're going to keep on, you know, leveraging our existing resources. And, of course, all of this is supported by, you know, the progress we made in AI, in terms of becoming more efficient just in our daily activities. And so when I look ahead to '26, we're going to keep increasing the resources against those areas that, you know, are driving the greatest results. And, you know, we're on a great mission to do that, and it's not just on the OpEx side. You know, we are looking at our CapEx, and we don't anticipate, you know, increasing our CapEx in '26. Based upon sort of all the optimization, the work with NVIDIA, you know, a lot of other things that, you know, are in the pipeline around efficiency and optimizations. And so from our perspective, we're very confident that we are able to move dollars against the right opportunities without burning the P&L. So, feeling good about the progress and, you know, our ability to increase our margins as revenue reaccelerates. Stacie Clements: Unfortunately, we are just about out of time. So I'm going to turn the call back over to Rajeev for closing remarks, and we'll talk to you all in your calls very shortly. Rajeev K. Goel: Thank you, Stacie, and thank you all for joining us today. Our results demonstrate the power of our differentiated business model. We continue to innovate, diversify our business, and operate with discipline. AI innovation is leading the industry with measurable outcomes driving momentum across the ecosystem. Looking to 2026 and beyond, as revenue growth reaccelerates, we anticipate margin expansion at both the gross and adjusted EBITDA levels because of our efficient and leveraged business. We look forward to seeing many of you at upcoming conferences, including the UBS Technology and AI Conference on December 2, the Wolfe Virtual SMIDCAP Conference on December 3, and the Raymond James TMT Conference on December 9. Thank you, everyone, for joining us today. Have a great afternoon.
Operator: Good afternoon, and welcome to iHeartMedia, Inc.'s Third Quarter 2025 Earnings Call. All participants are in a listen-only mode. After the speakers' remarks, we will have a question and answer session. As a reminder, this conference call is being recorded. I would now like to turn the call over to Michael B. McGuinness, Head of Investor Relations. Please go ahead. Michael B. McGuinness: Good afternoon, everyone, and thank you for taking the time to join us for our third quarter 2025 earnings call. Joining me for today's discussion are Robert W. Pittman, our Chairman and CEO, and Richard J. Bressler, our President, COO, and CFO. At the conclusion of our prepared remarks, management will take your questions. In addition to our press release, we have an earnings presentation available on our website that you can use to follow along with our remarks. Please note that this call may include forward-looking statements regarding our performance and operating results. These statements are based on management's current expectations, and actual results could differ from what is stated as a result of certain factors identified on today's call and in the company's SEC filings, including our recent 8-K filing. Additionally, during this call, we will refer to certain non-GAAP financial measures. Reconciliations between GAAP and non-GAAP financial measures are included in our earnings release, earnings presentation, and our SEC filings, which are available in the Investor Relations section of our website. And now, I'll turn the call over to Bob. Robert W. Pittman: Thanks, Mike, and good afternoon, everyone. In the third quarter, even though 2025 is a non-political year, we generated adjusted EBITDA of $205 million, slightly above the midpoint of our previously provided guidance range of $180 million to $220 million and flat to the prior year. Our consolidated revenue for the quarter was at the high end of our guidance of down low single digits and was down 1.1% compared to the prior year quarter. Excluding the impact of political, our consolidated revenue was up 2.8%. Turning to our individual operating segments, the Digital Audio Group generated third quarter revenue of $342 million, up 13.5% versus prior year, above our previously provided guidance of high single digits. The Digital Audio Group generated third quarter adjusted EBITDA of $130 million, up 30.3% versus prior year, and the Digital Audio Group's adjusted EBITDA margins were 38.1% compared to 33.2% in the prior year. We are making continued progress toward our stated goal of achieving full-year adjusted EBITDA margins in the mid-30s. Within the Digital Audio Group, our podcast revenue was in line with our guidance of up low 20s; it grew 22.5% compared to prior year as we continue to feel the flywheel effect of our number one audience position in podcast publishing according to PodTrak. We believe we have the most profitable podcasting business in the United States, and importantly, our podcasting EBITDA margins remain accretive to our total company EBITDA margins. In Q3, approximately 50% of podcasting revenue was generated by our local sales force, up from about 11% in 2020, demonstrating the unique advantage of having what we believe is the largest local sales force in media, a presence across 160 markets in addition to our strong national sales force. In the third quarter, our non-podcast digital revenue grew 8% compared to prior year. Earlier today, we announced an exciting new partnership with TikTok that will bring TikTok creators into iHeart's ecosystem. This partnership will include a slate of podcasts from TikTok creators, a dedicated broadcast radio station available across the country, and expanded access to our live events starting with the 2025 Jingle Ball Tour, which will deepen creator engagement across audio and video platforms, open new monetization opportunities through integrated sponsorships and cross-platform distribution, and reinforce iHeart's unique position at the intersection of culture, content, and scale. Turning now to the Multiplatform Group, which includes our broadcast radio networks and events businesses. In the third quarter, revenue was $591 million, down 4.6% versus prior year and in line with our previously provided guidance range of down mid-single digits. Excluding the impact of political advertising, Multiplatform Group revenue was down 2.5%, and the Multiplatform Group's adjusted EBITDA was $119 million, down 8.3% versus prior year. As we mentioned last quarter, historically, we've seen that the largest advertisers and advertising agency groups are a good indicator of what's to come, and we continue to see growth in the performance of the top 50 advertisers and the four largest advertising agency groups for both the Multiplatform Group and the total company. These results give us confidence that our plan to return the Multiplatform Group to revenue growth is on the right track. What gives us further confidence in our ability to get the Multiplatform Group back into growth mode is that it all starts with audience. We have more broadcast radio listeners today than we had ten years ago and even twenty years ago. Our challenge is one of monetization. A key component in meeting that challenge is to make our broadcast inventory transact like digital, unlocking a significant monetization opportunity for the company, which will greatly benefit our broadcast revenues. On last quarter's call, we announced the hiring of Lisa Coffey as our Chief Business Officer, and I'm happy to report she's already making real progress, including last week's announcement of our programmatic audio partnership with Amazon, which provides advertising using Amazon DSP access to iHeart's vast audio portfolio. Our non-podcast digital inventory will be available immediately, and our podcast and broadcast radio inventory will follow in 2026. One of the essential components of our programmatic capability is the digital iHeart audience database, which includes the radio simulcast listening on our digital services. This enables our targeting, measurement, and attribution tools to bridge between broadcast impressions and digital identity, enabling broadcast inventory to transact in DSPs alongside streaming video and display. In essence, making our broadcast radio inventory look like digital inventory. It's important that we continue to grow and improve the proprietary audience database, and part of our investment in this initiative includes partnering with third parties through non-cash marketing plans aimed at increasing our digital audience and engagement. In turn, we provide meaningful marketing for those partners as part of this relationship. Looking at our cost structure, we're still on track to generate $150 million net savings in 2025. Rich will get into more detail, but I want to take the opportunity to announce that we have taken actions that will generate an additional $50 million of incremental annual savings beginning in 2026. As a reminder, we run the company with a relentless focus on maximizing the efficiency of our operating structure, including using new technologies like AI-powered tools and services. Now let me share with you what we're currently seeing in the ad market. We're feeling similar momentum to what some of the other ad-supported companies have discussed. Right now, spending is holding up, and discussions with advertisers are positive. At the same time, the government shutdown does add a level of uncertainty. This year continues to be an important one for iHeartMedia, Inc. The company continues to make significant progress in the growth of our digital business. We're seeing important signs of improvement in our broadcast business, specifically in the strength of our HoldCo and our biggest national advertising partners. We're making progress in our sales monetization efforts, which we expect to have wide-ranging implications for iHeartMedia, Inc., and we remain committed to our culture of innovation and efficiency. And now I'll turn it over to Rich. Richard J. Bressler: Thank you, Bob, and good afternoon, everyone. Our Q3 2025 consolidated revenue was at the high end of our guidance of down low single digits and was down 1.1% compared to the prior year quarter. Excluding the impact of political, our consolidated revenue was up 2.8%. Let me provide you with some additional detail on our advertising revenue performance this quarter. As Bob mentioned, the continued strong performance of our largest clients and advertising agency partners is encouraging. And as a reminder, we have diversified advertising revenue. There is no advertising category greater than about 5% of our total advertising revenue and no individual advertiser that is more than about 2% of our total advertising revenue. As you can see on Slide 11, in the third quarter, the largest category gainers in terms of absolute dollars were healthcare, telecom, professional services, and retail. The four categories that declined the most in terms of absolute dollars were political, financial services, food and beverage, and entertainment. In the third quarter, our five largest advertising categories in terms of absolute dollars were healthcare, homebuilding and improvement, financial services, auto, and entertainment. Our consolidated direct operating expenses decreased 2.6% for the quarter. This decrease was primarily driven by a decrease in employee compensation costs in connection with our modernization initiatives taken in 2024, partially offset by higher variable content costs associated with the revenue growth of our digital businesses. Consolidated SG&A expenses decreased 1.1% for the quarter, driven primarily by our modernization initiatives, including decreased employee compensation costs, partially offset by increased employee health and benefit expenses. We generated a third quarter GAAP operating loss of $116 million, which includes the impact of a $29 million impairment charge directly related to the value of FCC licenses, compared to an operating income of $77 million in the prior year quarter. We generated adjusted EBITDA of $205 million, slightly above the midpoint of our previously provided guidance range of $180 million to $220 million and flat to the prior year. As a reminder, 2024 benefited from political spend related to the presidential election cycle. Before I turn to our segment performances, I also want to reiterate Bob's statement on our cost management work. We remain on track to generate $150 million of net savings in 2025. As a reminder, our Q3 results included the benefit of $40 million of net savings. In addition, this quarter, we took new actions that will generate $50 million of additional annual savings beginning in 2026, and the majority of these savings will benefit the Multiplatform Group. We have again included slides in our investor presentation, Slide 5 and 6, that provide more details on our cost savings. Turning now to the performance of our operating segments. As a reminder, there are slides in the earnings presentation on our segment performances. In the third quarter, the Digital Audio Group's revenue was $342 million, up 13.5% year over year and above our guidance of up high single digits. The Digital Audio Group's adjusted EBITDA was $130 million, up 30.3% year over year, and our Q3 adjusted EBITDA margins were 38.1%, up from 33.2% in the prior year. Within the Digital Audio Group, our podcasting revenue was $140 million, which grew 22.5% year over year in line with our guidance we provided of up low 20s. Our third quarter non-podcasting digital revenue grew 8% year over year to $202 million. Turning now to the Multiplatform Group. Revenue was $591 million, down 4.6% compared to the prior year and in line with our previously provided guidance range. Excluding the impact of political revenue, Multiplatform Group revenue was down 2.5%. Adjusted EBITDA was $119 million, down 8.3% from $130 million in the prior year quarter. The Multiplatform Group's adjusted EBITDA margins were 20.2% compared to 21% in the prior year quarter. Turning to the Audio and Media Services Group. Revenue was $67 million, down 26% year over year. As a reminder, Q3 of the prior year benefited materially from political advertising. Excluding the impact of political revenue, the Audio and Media Services Group revenue was down 3.4%. Adjusted EBITDA was $23 million, down 49.1% compared to the prior year, again, due almost entirely to the impact of political advertising in the prior year quarter. As Bob mentioned in his remarks, investment in our proprietary audience database is a key component of our sales modernization efforts. Some of that investment takes the form of marketing partnerships to drive engagement with the iHeartRadio digital services. In Q3, those relationships drove an increase in our non-cash marketing revenues, and due to the timing of our marketing campaigns, some of the corresponding expenses relating to those agreements will be recognized in subsequent periods. While we may continue to experience some quarterly mismatching of these non-cash partnership marketing campaigns in both directions, we believe that obtaining these critical marketing resources for our sales modernization initiative on a non-cash basis is a prudent way to preserve capital. In the third quarter, our free cash flow was a negative $33 million compared to $73 million in the prior year quarter. This year-over-year variance has three main drivers. Q3 of last year benefited from approximately $40 million in political revenue, which is the only advertising category that is paid in advance of the airing of the advertisement. Second, as I mentioned earlier, we generated revenue from new marketing partnerships on a non-cash basis as part of our sales modernization initiatives. Third, we were negatively impacted by the timing of working capital items that will positively impact Q4. We expect to generate meaningful free cash flow in Q4. At quarter-end, our net debt was approximately $4.7 billion. Our total liquidity was $510 million, and our cash balance was $192 million, which includes $100 million borrowed under the ABL facility, which we intend to pay back by year-end. Our quarter-ending net debt to adjusted EBITDA ratio was 6.6 times. Let me now turn to our fourth quarter guidance. We expect to generate fourth quarter adjusted EBITDA in the range of $200 million to $240 million compared to $246 million in the prior year quarter. As a reminder, the fourth quarter financial results of last year benefited from the presidential election cycle, which generated $83 million of political revenue for us. We expect our consolidated Q4 2025 revenue to be down low single digits compared to the prior year and up mid-single digits excluding the impact of political revenue. We are still closing the books for October, but we expect October revenue to be down mid-teens and approximately flat excluding the impact of political revenue from Q4 2024. Turning to the individual segments for Q4. We expect the Digital Audio Group's revenue to be up high single digits with podcasting revenue expected to grow in the mid-teens. That would mean for the full year, we expect our podcasting revenue to grow in the low 20s. We expect the Multiplatform Group's revenue to be down low single digits and up low single digits excluding the impact of political revenue. We expect the Audio and Media Services Group revenue to be down approximately 20% and up approximately 15% excluding the impact of political revenue. Now we will turn it over to the operator to take your questions. Thank you. Operator: Thank you. Our first question comes from Aaron Watts from Deutsche Bank. Please go ahead. Your line is open. Aaron Watts: Hi, thanks for having me on. I've got a few questions if I can sneak them in here. Rich, if I heard you correctly, on the free cash flow, there were some timing items in there that skewed this year compared to last year. Fourth quarter is going to you're going to see that reverse. As cash flows in, after you repay the ABL, how do you think about or using your excess cash towards, whether it's front-end maturities, perhaps attacking some of the some of your debts that's trading at a larger discount in the market? Richard J. Bressler: Aaron, thanks. Thanks for the question. So just a couple of things, Jess. I think you captured correctly the point in terms of negative free cash flow for Q3 and the fact that we expect to generate meaningful cash flow and also to reiterate our plan on paying back the ABL in Q4 of this year. In terms of maturities, look, I think we've always done a pretty good job historically. The company with looking to reduce the overall cost of our capital structure. And we're gonna be opportunistic, and continue to have that one goal in mind. To create a more efficient capital structure for all of our stakeholders. Aaron Watts: Okay. And in your MPG group, I believe your third quarter revenues excluding came in a little bit light relative to your expectations. That looks like it's trending better in 4Q overall, though I imagine CrowdOut is helping there. Can you just talk a little bit more about the underlying ad environment? What's balancing the large the momentum you're seeing with your large clients? And then maybe relatedly, as you turn the corner into 26, how we should be thinking about political and the upside you see there perhaps versus past cycles for you? Richard J. Bressler: Well, maybe I'll just start on a couple of points. Actually, I think in terms of the Multiplatform Group, the trend and everything, you know, that came in pretty much as we expected. Into Q3 out there. So and obviously, Bob talked about in terms of our future, we'll talk about more. About our confidence and continued strengthening of that group. Just to take your last question second, on political we're not going to talk anything about specifics on political going into the 2026 election cycle. The two the only couple of things I would say is we expect it to be a strong revenue cycle for us on a political front without giving any details on any numbers. Again, when you look at our capabilities, including the build-out of our audio tech stack and all of our recent announcements on things like with Amazon and broadcast and in the DSP. We're just going to continue to be better and better equipped, to take more dollars. As we go forward as a company. Out there. But I think overall, it should be a good election year based on everything we know today. You guys will, seeing the same things on the phone that we know. Maybe Bob comment on the advertising environment. Robert W. Pittman: Yeah. Look. I think the advertising environment is pretty good. We've looked at the looked at our big advertisers, our largest advertisers and our biggest advertising agencies, the big holdcoes. And the trends are very good. I mean, sort of no one knows what the impact of government shutdown is. But right now, we're not feeling anything on it. Continue to feel good about it. Aaron Watts: Okay. That's helpful. And if I can just sneak one last one in. Sure. You mentioned, and we've seen a couple of announcements this past week around advancing your programmatic initiatives, including with Amazon, StackAdapt, I thought the inclusion of broadcast radio inventory was particularly you remind us where you stand with the other major DSPs now? Should these agreements be incremental to the current revenue base? And what's the timeline for this to be a material mover for the P and L? Robert W. Pittman: I think as we look at the DSPs, we are and we have agreements with all the major DSPs, at least part of our inventory. And in the case of Amazon, we announced we'll be adding a broadcast inventory next year. In the case of DV360, we do have a broadcast inventory in there, Yahoo! As well. And we're looking at the major DSPs. We have the relationships in place. It's really building out. And as we think about programmatic in very rough terms, Rich and I think about it as really we're building another podcast business that we think it probably has that kind of flow through. And if you remember, I think it was a 2020, we did about $50 million in podcast revenue. And you see how it's grown. So our expectation is that programmatic also grows. It's roughly sort of that same trajectory. And we think it's got the same kind of potential for us in terms of developing new incremental revenue sources for the company. And so for us, we think it's very big positive for us and it's the reason we've invested so much in building out that programmatic platform. Richard J. Bressler: Aaron, the one thing I just might add in terms of what Bob built upon, and you mentioned about Amazon. And and Bob, mentioned it, you know, in his opening remarks and the announcement that we made this morning with TikTok. The way I I and Bob gave the a a the analysis with respect to podcasting, you know, the way we think about it is we've got, as Pat commented on, our unparalleled audience. The value of that unparalleled audience. And we've got all of our platforms. And what we are constantly focused on and continue to the monetization of our existing platforms is how do we continue to look at looking at other potential new revenue streams. Off of those platforms that are on the revenue streams. You know, podcasting, is an interesting one point. Bob pointed out what the numbers were. We just I just mentioned TikTok. We talked about programmatic for broadcasting. So I think you should think about it as our constant focus to take the unique engaged audience we have and how do we continue. Get new revenue from that audience. Revenue streams. Aaron Watts: Okay. Great. Appreciate all the detail. Thanks, guys. Operator: Next question comes from Sebastiano Petti from JPMorgan. Please go ahead. Your line is open. Sebastiano Petti: Hi. Thanks for taking the question, guys. Maybe just starting with podcasting for a minute there. Both Bob and Rich. You know, third quarter numbers kinda came in a little bit better than expected. I feel like, you know, this has been a common theme with you guys. I mean, anything to think about why the growth rate in podcasting might slow to the mid-teens level? It seems like you you have a relatively easier comp as you look at the prior year's growth rate relative to you know, the, you know, 2024. And also if you kinda look at it on, like, you know, two-year stack basis, seems to be, seems to be a little conservative there. So anything that maybe particular call out? And then relatedly, obviously Netflix deal, you know, also announced TikTok. Any way to perhaps unpack not necessarily looking forward guidance related to those deals, just maybe the phasing and the cadence on how long as that kinda comes on, how we should be thinking about that phasing into the P&L over time and, you know, what that could mean. Richard J. Bressler: Yeah. Thanks for the question, Sebastiano. Look. No surprise. We're not gonna comment in terms of phasing of anything. Going forward, in terms of that and just back to the question I just answered before, with Aaron. I just you know, I think the whole bucket of, things does come under that bucket. Of, the focus of generating new revenue streams. From our unique audience that's out there. If you look at podcasting, just for a second, if you look at the first three quarters, the guys Q4, again, we look at it everything in a couple of different ways. That gives you about a 23% growth rate on revenue. From podcasting. But also, it's a little misleading because you get numbers and percentages sometimes could be misleading. If you kind of take the guidance we've given for Q4, and compare it to the actual number we just reported on for Q3, the absolute dollars in podcast revenue growth is bigger in Q4 than Q3. And again, I think, you know, it could be a middle three if you just do percentages because you're obviously, it's math. You're dealing on a bigger base and the numbers are getting bigger. But if you look at the dollars that are there, I think Q3 were up about $25 million in podcasting revenue sequentially. If you kind of do the kind of the range or know the range, we'd be up about $30 million in terms of Q4 out there for podcasting. So again, what counts is follow the money, the money, the money, not the percentages. And so it show any signs slowing down. Robert W. Pittman: And by the way, to just add, last year, it was a lower percentage in Q4 than earlier in the year. But it was just like this year a higher number in terms of absolute dollars added in Q4. In terms of just the way we see podcasting and the way we see opportunities growing, we do think let's talk about video podcasting. I don't think there's any evidence that it's a transformation of audio to video. But what it is, is an opportunity to add video podcasting on top of the audio podcasting we have today. So again, our constant quest to find new revenue streams for our existing products. And so and if sort of look at where's that big pool of money everybody is shooting for these days, it's YouTube's got a lot on their video. And so I think it's if you look at the industry, there's a lot of discussion about that. And and we sort of see it that way not as a threat to audio but as an adjunct. Sebastiano Petti: Rich, if I could follow-up with a phasing question you might be willing to answer. On the $50 million cost-cutting program that's going to be more hitting the numbers in 2026. How should any way to perhaps think about the phasing of that in terms of when we kind of hit full run rate? Is that a full run rate out the gate since you guys are kind of announcing it a couple of in advance here? Any just maybe way to think about that $50 million as it pertains to MPG Group's financials next year? Richard J. Bressler: I would it's a good question. I would think about it exactly in terms of the rhythm of coming into let me go back. Yes, it is a full run rate at the beginning of the year. Very similar to where we had our $150 million program we did last year. If you look at the slides in the deck where we broke down this year's numbers on the cost program, I would look at taking the new program of $50 million and both think about it phasing in. The same way in terms of Q a little smaller in Q1. And more evenly Q2, Q3, and Q4. And I would look at it when you look at the percentages I think there's actually a slide on Page six in there. It actually kind of breaks out for you in the investor debt which shows about 61% to MPG. And I don't have to read through it, but it goes through all the different ones. It's right behind the slide on the $150 million net program. Operator: Our next question comes from Stephen Laszczyk from Goldman Sachs. Please go ahead. Your line is open. Stephen Laszczyk: Hey guys, great. Thanks for taking the questions. Maybe just a follow-up on podcasting a little bit longer term, but just curious as you look out into 2026, '27, if you think these levels of growth that we're seeing in the podcast business north of 20% is sustainable based on the pipeline of new content or visibility you might have into certain renewals that could potentially be up for grabs in terms of bringing new content on or the monetization levers you think could come into focus as some of these digital capabilities and inventory scale, I'd be curious on your thoughts on the sustainability of either high teens or 20 plus percent revenue growth in that side of the business. Robert W. Pittman: Well, look, I don't want to do any projections for the future. But I will say that if you look at the trends, what you're finding is more people are listening to podcasts today than ever. And the people who are listening are listening to more episodes than ever. So we got two vectors of growth there. And of course, we're bringing more and more advertisers to podcasting as well. It's probably the hottest category in media right now. And so you're seeing the net impact of that too. Richard J. Bressler: Yeah. And Stephen, one point I think to build upon paused advertising because the one point you didn't say, just to hit that head on, is there is the demand out there. And I would use the word the effectiveness of the advertising. There's a reason you're seeing the growth in podcasting revenue out there in terms of the consumer use. And by the way, the stickiness of it, I think it's something like approximately, I don't know, 75%, 80% of all podcasts are listened all the way through, and you can fast forward and you can do everything else. You can do it online video. Out there. And just as a reminder, it's only been a relatively small number of years that big advertisers, to Bob's point, have really come to podcasting. Prior to that, I mean, play advertising, but it was much more of a Doctor direct response medium. The reason why big advertisers come to podcasting is so important is because it brings big dollars. And then the last point, just to close off, that we started to talk about last quarter in Q2 and now Q3, now about 50% of our podcasting advertising revenue is originated locally. And if you go back, you know, I know, three, four years ago, about 10% of our podcasting revenue was originated locally. So I just think you look at all those data points. And from our standpoint, and you look at projections by all these third parties, that talk about the growth whether it goes to $4 billion, $5 billion, $3 billion, whatever, over a period of time significant growth in projected revenue for U.S.-based advertising podcasting revenue no surprise because of the effectiveness of it. You look at us continuing to take market share because of the position we have in podcasting. So I think it sets up very well. I want to just add one other thing. Robert W. Pittman: We talked about our ad tech platform and we talked about programmatic. And we sort of focus on how that's going to help broadcast radio. But remember, it's also a vector of growth for podcasting as well to get podcasting in the programmatic DSPs as well. Stephen Laszczyk: That's helpful. And then maybe just one on the broadcast side if I can. I'm curious, Bob, as you look at the competitive environment for advertising more holistically, there's been a lot made about AVOD inventory coming on over the last year or two. I would just be curious if you could speak to the visibility you have into competitive intensity, where we are and really that playing out. If you think that impairs maybe some of the monetization points you would make on Trash Trail Radio, you're recovering from a monetization perspective over next year. So how much of a headwind that is? Robert W. Pittman: I don't think it's a headwind at all. As a matter of fact, I think if you talk to people in the advertising business, radio has sort of got a little bit of a renaissance here. People are talking about all the studies coming out. One just came out from WPP, major study which if you're not at it's probably worth looking at. Which makes the point that adding radio early in a campaign preconditions the consumer and the best way to get more money is to add radio to campaign. That's WPP saying that. From their study. And we've got a number of other studies which are showing the same thing. Showing that if you add radio, to a social campaign, the response rate I think is up like 83%. As you think about if you're an advertiser, you say, okay, need more need more business. Well, I can either spend more money on the increasing my social spend or I can spend money on radio to get more response rate out of my existing social spend. And I think they're finding that that ladder is a much more economic choice. And also at the same time they get the added benefit of getting brand building as well on top of their performance marketing. So actually we're quite encouraged about what's going on. I think sort of the final frontier for us is that you've got people who are planning and buying advertising. Almost all of it is on this one platform and on this one screen of digital. And then radio is over to the side and it's a lot of extra work to buy it. We think and we indeed talking to the experts all are encouraged by it. That as you move that to the same screen so they can easily buy radio and buy on the same criteria they're buying their other digital I think breaks down the biggest hurdle because you say when you've got the big reach you've got the impact, Almost every study shows radio has better engagement than almost any other medium. The results are great. You got more radio listeners today than you had ten or twenty years ago. Why isn't it performing as it should? And we think it's structural issue, and we've invested heavily in fixing that structural issue. Richard J. Bressler: Yes. And can I just mention very quickly, just going back Stephen, because of your question, of your question then Bob's point, and then I'm just going to go back and repeat what we said a couple of times in this call? And here you have all within the last couple of days Amazon the Amazon announcement you saw and talking about getting our broadcast inventory into the DSP. And the TikTok announcement that was made this morning with ourselves and TikTok in addition to other aspects of the announcement and podcasting and everything else, you'll see that this also goes into broadcast radio with the rollout of a TikTok radio. Which will be a new iHeartRadio station. That will be done with TikTok. So to me, all the data points from an iHeart standpoint talk about the potential upside the future and the recognition of the capabilities of broadcast radio to deliver results. Robert W. Pittman: And to be clear, one of our major goals is to get our Multiplatform Group back to revenue growth. Stephen Laszczyk: That's helpful. Thank you both. Richard J. Bressler: Thank you. Operator: Our next question comes from Patrick William Sholl from Barrington Research. Please go ahead. Your line is open. Patrick William Sholl: Hi. Thanks for taking the question. Just another question on podcasting. I was kind of curious on how you view the longer-term opportunity within podcasting to bring in political dollars? Like, how do you think that's currently being monetized versus where you think it can go longer term with the increased ad sales from local at that helps maybe buy a set higher. Robert W. Pittman: It's a really good question. And if you look at all the chatter from last year's political spend, it's clear that people said wow, one of the real variables was podcasting. And so we think it is a very positive for political advertising moving to podcasting as well. Patrick William Sholl: Okay. And then just in the ad market, is any sort of variance across some of the local markets and how that is trending? Any local headwinds? Or is it more broad-based? Robert W. Pittman: Yeah. I don't think we've seen any big Nothing unusual. No changes there. Operator: Okay. Thank you. Our last question comes from Ken Silver from Stifel. Please go ahead. Your line is open. Ken Silver: Bob and Rich. Thanks for the time. A lot of my questions were answered. Let me just ask you two. I guess the first one is on the sponsorship and events revenue line. I know it's a small line. But it was down almost 10% in the third quarter and it's down almost 6% year to date. How like can you maybe help us understand that a little better? And like, what's the outlook for '26? Like, is that gonna sort of revert back to sort of stable or up? Or is there sort of something that's going on that's sort of going to continue to put pressure on this line item? Richard J. Bressler: Yes. Look, I would just it's very it's really small numbers. In terms of some ups and downs. And remember, we've got all the large events that you guys all know about. We do 20,000 events in total as a company. So I think the small is just some not real, but small time issues. And as you think about it going forward, on your question again, we're not going to talk about anything specific going forward. But I think you can continue to expect the events business to be play the same role it has with iHeart. Both from an absolute dollar and from a promotional standpoint and very importantly, one of our key multi platforms. And again, I think if you again, another endorsement looking at our announcement this morning with TikTok, and the connection that we're going to bring and step up even more between artist creators, our community with the power of storytelling this is going to be another really great ability to continue to demonstrate to artists and to the advertising community and our listeners what we can do. Robert W. Pittman: Yes. Let me just add on the events too. Is if you look at the brand attributes of anybody doing music or audio or anything, the one area where iHeart goes bonkers in terms of consumer is they identify us as the brand that has the big events. It has been tremendous for us in building the iHeartRadio brand. And now you think about not only we're building the iHeartRadio brand, but we're making a profit on it. And the second issue which is probably not fully captured in the numbers, is that when we do the big events we'll bring advertisers into them and we use it as a marketing opportunity for us and we often package together the events with other advertising as well which show up on other lines. Ken Silver: Okay. That's helpful. So just to be clear, like, you haven't lost any significant partner sponsors for your event. Richard J. Bressler: No. Okay. No. And that's implicit in the question. Zero. No. Yep. Okay. You. And then the follow the other one I wanted to ask you was, this quarter and I think last quarter, you started showing, the incrementals on, you know, margins on the digital and the decremental margins on the terrestrial, you know, the Multiplatform Group. And I think you're showing 90% decremental margin for Multiplatform. I'm just trying to get a sense of, is there a way to, like, meaningfully improve that? Richard J. Bressler: We again, with the member of Cinemulti platform group, exact specifically, your question would say two things. If you look back from a trending standpoint, we've continued to make improvement on that. And I I think in terms of the the flow of the improvement on that for lack a better term, negative flow through or the flow through. If if you track that, we're happy to take you through that. And then the second, piece and and most important is continue to show the progress we're making on the revenue side. Remember, multi platform has got a fixed element more than our other platforms in it. And the incremental flow through is 75%, 80%, EBITDA margin flow through dollars even 85%. I highlighted political for last year, which is our highest flow through business. So it's a combination of continuing to get back to making improvement on revenue then positive revenue growth. And as we just announced today, with our $50 million in terms of monetization program and taking more cost out, continue to make sure we're taking advantage of all technologies, AI, all the other investments to bring more down to the bottom line. Robert W. Pittman: Yeah. I mean, in summary, revenue growth is great because we've got high operating leverage on the Multiplatform Group. And then add that to cost reductions. And we think it's the responsible way to impact that line. Ken Silver: Okay. Alright. Appreciate it. Happy holidays. Richard J. Bressler: Thank you. You too. Thanks very much, Ken. With that, I'd like to thank everybody on the call. I all of our shareholders and stakeholders for taking the time listening to the call. And Bob, myself, Mike and the rest of the IR team are available anytime to answer any questions. Thank you. Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good afternoon, and welcome to the Mobile Infrastructure Corporation Third Quarter 2025 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone. You will then hear an automated message advising your hand has been raised. To withdraw your question, please press 11 again. Please be advised that today's conference is being recorded. I will now turn the call over to Casey Kotary, Investor Relations Representative. Please go ahead. Casey Kotary: Thank you, operator. Good afternoon, everyone, and thank you for joining us to review Mobile Infrastructure Corporation's third quarter 2025 performance. With us today from Mobile Infrastructure Corporation are Stephanie L. Hogue, CEO, Paul M. Gohr, CFO, and Manuel Chavez, Executive Chairman. In a moment, we will hear management statements about the company's results of operations as of 2025. Before we begin, we would like to remind everyone that today's discussion includes forward-looking statements, including projections and estimates of future events, business or industry trends, or business or financial results. Actual results may vary significantly from those statements and may be affected by risks Mobile Infrastructure Corporation has identified in today's press release and those identified in its filings with the SEC, including Mobile Infrastructure Corporation's most recent annual report on Form 10-K and its most recent quarterly report on Form 10-Q. Mobile Infrastructure Corporation assumes no obligation and does not intend to update or comment on forward-looking statements made on this call. Today's discussion also contains references to non-GAAP financial measures that Mobile Infrastructure Corporation believes provide useful information to its investors. These non-GAAP measures should not be considered in isolation from or as a substitute for GAAP results. Mobile Infrastructure Corporation's earnings release and the most recent quarterly report on Form 10-Q provide a reconciliation of those measures to the most directly comparable GAAP measures and a list of the reasons why Mobile Infrastructure Corporation uses these measures. I will now turn the call over to Mobile Infrastructure Corporation CEO, Stephanie L. Hogue, to discuss third quarter 2025 performance. Stephanie L. Hogue: Thank you, Casey. Our third quarter results were comparable to the second quarter, representing resilient performance against a challenging backdrop. Portfolio-level utilization in the quarter was comparable to last year's levels, although revenue and NOI were lighter than expected. As ongoing construction and longer redevelopment timelines continue to have a short-term impact on key assets. Our focus continues to be on controlling what we can control, capturing as many monthly consumers as possible, and ensuring the portfolio is in a position to capture the growth and activity around our assets from central business district redevelopment efforts in many of our markets. In the third quarter, contract parking volumes continued to trend higher, increasing 1.4% sequentially and growing 8% year to date. While pricing remained competitive, higher utilization typically leads to long-term pricing power, and we expect to see the benefits of these volume gains as business conditions strengthen. Transient volumes, while up sequentially, were down approximately 5% year over year, largely driven by softness in hotel and event traffic. Several of our core downtown markets continue to experience temporary defined headwinds, including long construction cycles, event cancellations, and lower hotel occupancy, all of which pressured near-term results. While construction is affecting assets in a handful of our most important micro markets in the short term, we remain optimistic about the opportunities for long-term value creation at these locations as these projects reach completion and traffic increases. Our internal data indicates that hotels in several of our markets saw a decline in occupancy this quarter, including Houston, Denver, Cincinnati, and Nashville, among others. In addition, event activity was lighter across our portfolio, influenced by both consumer uncertainty and construction in Fort Worth, Nashville, Cincinnati, and Detroit. Four markets that together represent approximately one-third of our stalls and a slightly higher share of the portfolio's transient demand base. During the quarter, transient rates expanded modestly, though not enough to offset the decline in transient traffic. Monthly parking remained a buyer's market, with rates modestly down year over year, but there are encouraging signs of continued demand as residential activity strengthens around our assets. In today's fluid work environment, Mobile Infrastructure Corporation has benefited from a strategic emphasis on residential parking, capitalizing on multiple demand drivers continues to be one of the strongest indicators of the portfolio's long-term health. And we believe that there is a long runway to continue driving residential mix within garages that were historically reliant on monthly employee parking. While the leasing pace at recently converted downtown rental properties is ramping slowly, we are capturing an increased share of current demand, and the unit economics on these parkers is desirable. Our residential monthly contracts have increased approximately 75% year over year and are up nearly 60% since year-end. Residential and commercial monthly parking now represent approximately 35% of trailing twelve months management agreement revenue, providing a stable base of recurring income and giving us greater optionality to experiment with the pricing lever over time. As we noted in today's earnings release, we are pleased with the improved performance of several of our assets. We've seen particularly positive trends in Cleveland. Transient growth of 8% in the quarter over 2024's third quarter has been complementary with strong growth in residential and commercial monthly contracts, up over 50% year over year. Importantly, because assets in Cleveland are approaching stabilized utilization, we've seen an average of 5% rate expansion in monthly contract users, allowing us to hold transient rates stable in a somewhat uncertain environment. Downtown Oklahoma City continues to thrive as well. The city's successful metropolitan area projects have committed over $1 billion to six projects through 2028. These projects include new sporting arenas, a new entertainment district, and a dense mixed-use urban environment. As the twentieth largest market in the United States, its ability to host marquee events has driven hotel, event, and transient traffic. Staying ahead of market events has allowed us to drive volumes to stabilized levels of performance. The team has continued to focus on creating the best possible customer experience at this garage by engaging with our parking operators on ways to offer a seamless in-and-out experience. These examples continue to reinforce our broader point. Transient traffic will ebb and flow, but our focus on recurring contract-based parking creates the foundation for durable performance. In Cincinnati, a market in which we have three core assets, transient traffic continues to be significantly impacted by the temporary closure of the convention center. Despite the disruptions, our assets have performed remarkably well. Contract volume is up 15% year over year, supported by residential demand, and we anticipate a step change in performance beginning in 2026 when the convention center is scheduled to reopen. Of course, while we expect a material step change in that district's activities, we note that construction projects near many of our assets simply have taken longer than original schedules dictated. In Detroit, as we've previously discussed, monthly parkers have been leaving faster than expected ahead of the Renaissance Center's multiyear redevelopment, which is scheduled to begin in early 2026. During the construction period, we expect this asset to operate as a transient-heavy garage serving both visitors and the construction workforce. Over the longer term, we remain confident that this asset will benefit significantly once the redevelopment is complete. To this point, a recent appraisal on this asset supports our belief that the value of rents and garage could increase by more than 50% when the project is completed. Earlier this year, we shared Mobile Infrastructure Corporation's strategy to unlock substantial value by segmenting the portfolio into core and noncore assets. From a balance sheet perspective, this strategy had a nuanced hurdle because several of the noncore assets in our legacy portfolio were captured in CMBS debt, which restricted our ability to rotate assets out and add more accretive assets to the portfolio. We announced last week that we completed an ABS transaction, which Paul will discuss more fully. This transaction provides the needed flexibility for our plan to optimize our portfolio. Consistent with the asset rotation, we closed on the sale of a small noncore lot last week. I am pleased to report that we expect to have sold or be in contract to sell approximately $30 million in noncore assets by the end of the year, consistent with the capital plan we announced earlier this year. With a robust acquisition pipeline, we will strategically balance acquiring new assets with optimizing the balance sheet through debt paydowns where appropriate. And finally, as we think about diversification of revenue streams, we are seeing a growing recognition that EV charging is no longer simply an amenity to be offered to tenants. Historically, this appealed to consumers but generated no return on investment for owners, as parkers would simply park and stay rather than move their vehicles, a dynamic that limits profitability in EV charging because it relies upon vehicle turnover. Our best EV partners are helping us manage the retraining of the consumer in this space. We continue to make measured investments in this area, focusing on locations where utilization and pricing support longer-term profitability. This will continue to evolve as the industry shifts from viewing EV charging as a cost center to viewing it as a contributor to net operating income. With that, I'll turn it over to Paul M. Gohr for a financial review. Paul M. Gohr: Good afternoon, everyone. I am pleased to discuss the financial details of our third quarter 2025 results. Revenue was $9.1 million in the third quarter, compared with $9.8 million in 2024. The lower year-over-year revenue was primarily due to lower transient volumes reflecting lower nearby hotel occupancy, a reduced number of special events, and lower associated attendance, as well as continued construction-related impacts at several of our locations. As we have discussed in the past, the decline in transient volume was partially offset by increased transient rates, which speaks to the value of our locations and will be helpful as demand increases. Revenue per available stall, or RevPAS, a key metric we use to manage our portfolio, was $212 in 2025, consistent with our second quarter, but down 7.1% from $228 in 2024, resulting from the factors I just mentioned. Adjusting for our Detroit location, which is one of the largest assets in the Mobile Infrastructure Corporation portfolio, RevPAS increased modestly sequentially but was down 4.8% year over year. As we've discussed before, at our Detroit location, redevelopment is actively underway, so while it has some near-term challenges, longer-term, the asset is extremely well-positioned. We see RevPAS as a valuable tool to track our assets, particularly as we convert more assets to management contracts, and a larger portion of our portfolio is included in the calculation. Property taxes remained consistent with the prior year at $1.8 million. Property operating expenses were also flat at $1.8 million in 2025, benefiting from our disciplined cost management. Net operating income, or NOI, was $5.5 million, up modestly sequentially but down from the $6.1 million in last year's third quarter. The decrease was a function of the lower transient volumes year over year. General and administrative expenses of $1.3 million were in line with the prior year third quarter. This excluded non-cash compensation of $800,000 in the current year quarter, compared with $1.3 million non-cash compensation in the prior year quarter. We continue to be well-positioned to enjoy operating leverage as we scale the business. Adjusted EBITDA was $3.9 million, up modestly sequentially but down about 10% from the $4.4 million in the prior year. And adjusted EBITDA margin was 42.6%. Turning to our balance sheet, at the end of the quarter, we had $12.1 million of cash and restricted cash on hand. We ended the quarter with total debt outstanding of $213 million, stable with both the second quarter and 2024. Importantly, as Stephanie mentioned, at the end of the third quarter, we successfully completed a $100 million refinancing via an asset-backed securitization of 19 of our facilities. The notes received an investment-grade rating of triple B and a private letter from a big three rating agency. With the proceeds, we refinanced $84.4 million of near-term debt, extending our maturities to 2030 while increasing our capital flexibility to pursue our portfolio optimization strategy. The refinancing allows us to sell noncore assets, consistent with our strategy, and we see this as an important long-term value driver for our asset base. As a reminder, our published net asset value, or NAV, is $7.25 per share, and this does not credit our assets for their meaningful replacement value. Considering the material discount in Mobile Infrastructure Corporation's stock price relative to NAV, we intend to continue taking potential dilution off the table by settling preferred redemptions with cash and using our repurchase plan to buy back our stock in the open market. To date, we have repurchased over 1 million shares at an average price of $3.36 per share. Given the current share price and evaluation relative to our NAV, our shares continue to be an extremely compelling investment. As such, repurchases are a key focus area for capital deployment. With that, I will turn back the call to Stephanie for closing remarks. Stephanie L. Hogue: Thanks, Paul. While our year-to-date results came in below our expectations, we believe we have demonstrated resilient performance in light of the operating environment and the specific challenges that we have faced in certain markets. That said, several of the headwinds we are managing are beginning to position us to capitalize on the emerging opportunities in the year ahead. In Cincinnati, the reopening of the convention center early next year will drive both event and hotel traffic with seven events booked in the first quarter, historically our slowest quarter in parking, and a strong pipeline of events developing through 2026. In Denver, the 16th Street Mall redevelopment is seeing the start of a recovery. It officially opened on October 4 with foot traffic approaching 30,000 people. In Nashville, which was impacted by construction from the Christmas Day bomb in 2020, our garage will benefit from the 2nd Avenue Corridor project, which is expected to be completed by December 2025, restoring easy drive-in and out access into our garage. Meanwhile, our Fort Worth and Detroit assets, though affected by near-term disruptions, are positioned to benefit from long-term urban revitalization and the eventual completion of surrounding projects. In summary, the factors impacting our results are understood, time-bound, and fixed with diversification, and most importantly, to projects that we believe will enhance long-term asset value. Our conviction in the long-term fundamentals of Mobile Infrastructure Corporation has not changed. The secular tailwinds supporting our markets continued urban revival, increased residential conversion, increasing return to office trends, and the modernization of mobility infrastructure remain in place. We continue to believe that the company's portfolio is materially undervalued as compared to its underlying NAV, and as the temporary disruptions around our assets subside, we expect that value to be increasingly recognized. Our employees and operating partners are navigating a challenging environment with professionalism and creativity, giving us confidence as we move into 2025 and look ahead into 2026. Operator, please open the call to questions. Operator: Certainly. As a reminder, to ask a question, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. One moment, please. First question comes from the line of John Massocca with B. Riley Securities. John Massocca: Good afternoon. Maybe if we think about kind of top-line performance heading into 4Q 2025, is there any reason to think maybe the level of disruption from either some of the event demand drivers not being there or some of the ongoing construction near some of your assets phased in that quarter? Or should we kind of think about the year-over-year impact being relatively similar to what you saw in 3Q 2025? Stephanie L. Hogue: I think it's gonna be a little bit mixed. You know, in Denver, specifically, in the fourth quarter, we think that that will start to ease. You had the 16th Street Mall officially open in October, and it drew 30,000 plus people on foot. In Nashville, 2nd Street closure will open in December. So we should start to see some of that ease in Q4. But towards the '4. And, you know, really, we're looking into 2026 where we start to see some real year-over-year pickup and how those markets perform. John Massocca: You know, I guess maybe as we think about the $30 million of potential sales that you talked about on the call, where do you think the use of proceeds from that go? Is it buying back the stock? Is it capital recycling? Is it maybe paying down the line of credit? Just kind of curious, you know, where how much kind of money net you think you get out of those deals and where the proceeds go? Stephanie L. Hogue: Yep. Great question. You know, obviously, we're always evaluating the best possible place to place capital. So looking at that capital allocation. I think right now, you know, we have a long pipeline, but I think in the near term, we'll focus on repaying the line of credit. But certainly, considering as the acquisition pipeline shifts, and that's more accretive to shareholders, we're evaluating with our broader board every month. But near term, we'll focus on line of credit. John Massocca: Okay. And then, yeah, maybe you can detail the front. What was the impairment in the quarter? Paul M. Gohr: The impairment of $2.5 million was just related to our normal testing that we do every quarter and evaluating, you know, fair value of the properties, and it just coincided with our asset rotation strategy and the evaluation that went along with that. John Massocca: Okay. So it's coming primarily out of the bucket of properties you're looking to sell here by year-end? Paul M. Gohr: Yes. John Massocca: Okay. And then last one for me on the ABS front. You know, what kind of made that transaction attractive? Is that more about pricing or is there a level like a flexibility you get with that deal on the side that wasn't there with some of your kind of nickel or the debt financing that was in place on those assets prior to the ABS transaction? Stephanie L. Hogue: Yeah. It's a great question. So really, we talked about it in the script. The ability to sell assets, the noncore assets, as we've lined those up, so many of them sat in the CMBS, which is why we were able to execute on one within a week of closing on the ABS. So really, this is starting to set the balance sheet up for what we've talked about and using it as a tool for continued accretion to shareholders with more accretive properties. John Massocca: Okay. I'll hop back in the queue. Thank you very much for the answers. Stephanie L. Hogue: Thanks, John. John Massocca: Thank you. Operator: And our next question comes from the line of Kevin Steinke with Barrington Research. Kevin Steinke: Great. Thank you. Just wanted to dig into the outlook a little bit more. You know, sounds like headwinds in transient are, you know, kind of the main contributor there. I think you talked about maybe a couple of markets I hadn't heard before with some disruption, like Fort Worth and Houston. So is there anything incremental you know, you've seen with disruption or softer transient trends relative to, you know, what you were seeing on your last call? Stephanie L. Hogue: Yeah. A lot of the transient in those two in particular is around either construction that is new in the quarter or just taking longer. Fort Worth, for example, the convention center is having some upgrades. So we anticipate, like with most things, the construction over the longer term will be positive for the portfolio. It just, you know, sort of hits in the short term and either prevents access or just decreased demand around transient specifically. Kevin Steinke: Okay. Thanks. You talked about, you know, some of the improved performance at a couple of your assets, Cleveland and Oklahoma City. And then you also mentioned that actions are underway to improve retention and utilization at other assets that you expect will begin driving improved performance in 2026. So can you just maybe dig a little bit into the actions that you're taking and how you think that's going to drive the improved performance next year? Stephanie L. Hogue: Yeah. The single biggest item that we focus on is utilization. And so as we've talked about on prior earnings calls, it's really arming and partnering with our operators on monthly contracts, making sure that we're driving both residential and to the extent there's a return to office in the market, commercial, which gives us a really stable base. So we will continue to focus on that. That was a heavy focus in the fourth quarter last year in Cleveland, which is where we're starting to see that pickup. That will continue to be a focus, and we talked about that in Cincinnati as well. So that's really the focus area. And then beyond that, you know, once you get to a stabilized level of utilization, then you really start to have the lever around pricing. Know, whether that is specific to event or just across the board, but utilization has to be the first step. Kevin Steinke: Okay. Got it. And so it like some good trends in the residential monthly contract growth. Did anything meaningfully change there with contract additions kind of either positive or negative relative to, you know, what you were seeing, you know, several months ago? Stephanie L. Hogue: I think the only thing that's really changed or has not been as expected, it's just taking longer for the lease-ups of the apartments themselves. You know, once they're leased, we're in pretty good position. We're well-priced. We have sort of nested areas for parkers that are near elevators. So there's premium pricing and premium product. It's really down to leasing and the time it's taking for our assets to lease, which is slower than we thought. Kevin Steinke: Okay. Got it. And then with, you know, the new ABS refinancing, does that now kind of free up all the noncore assets that you were hoping to sell or, you know, that had the CMBS debt or are there others that you still need to address? Stephanie L. Hogue: Nope. That was it. So that was really why it was such a critical piece of the balance sheet for this quarter. Kevin Steinke: Okay. Got it. And so, I guess, lastly, it sounds like the Cincinnati Convention Center is on track with where you expected it before in terms of reopening. Just wanted to confirm that haven't seen any delays there or, you know, that might impact your performance different than what you expected previously. Stephanie L. Hogue: Yeah. No. We're really, really excited about it. Its event schedule is filling out well. So we have seven confirmed events for the first quarter, which, as you know, is typically our slowest quarter. And that will positively impact all three garages as early as mid-January. So we're really excited about it. We're positive. It's a positive trend for this particular micro market in Cincinnati, and no changes that we're aware of at this point. Kevin Steinke: Okay. Thanks. Appreciate you taking questions. Stephanie L. Hogue: Yeah. Thank you. Operator: Thank you. And just as a reminder, to ask a question, please. Our next question comes from the line of Marc Riddick with Sidoti. Marc Riddick: Hey, good evening. Stephanie L. Hogue: Hey, Marc. Marc Riddick: So I wanted to touch a little bit on some of the drivers that you mentioned in your prepared remarks. So I was thinking about around the hotel and event activity. You touched on some of the conference activity that you see picking up in the next quarter or so. Maybe you could talk a little bit about maybe is this sort of a, it seemed as if I remember correctly, it's kind of a difficult comparison on some of the consumer-driven events and maybe hotel drivers. Maybe you could touch a little bit on what you're seeing there and if that's just sort of a general macro situation. Stephanie L. Hogue: Sure. Yeah, I think it's more micro, it's more market-specific than a generalization across. You know, each market has its own kind of impacts. Detroit, for example, you know, that has turned into a transient garage much more quickly than we expected because of the Renaissance Center redevelopment, but we think that's really positive. Where Chicago just had hotel down. So it's really specific to market across the board. Marc Riddick: Okay. And then you made mention on utilization on a couple of remarks. I think the commentary was that on a portfolio level, it was basically flat sequentially. Was there much of a difference between the, I guess, maybe the core and noncore assets as far as utilization levels and how much room do we have, run do we bandwidth, I guess, that we have to sort of get to, you know, not necessarily peak, but, you know, the utilization levels you'd like to see. Stephanie L. Hogue: Yeah. I mean, I think, you know, first and foremost, I think the fact that the utilization for the portfolio is flat is really an achievement given that transient is softer this year than we expected. You know, that really speaks to our focus on monthly contracts, both on residential and commercial and capturing the market that's there. So as the more transient side of the business picks up, we will see that incremental change in utilization just naturally happen. You know, core and noncore, we look at them comparably. Certainly, focus is driving NOIs, we're focused on the same things across various markets. Driving utilization, driving monthly contracts, and driving rate once we have a stabilized utilization. So there's not a ton of not a lot of difference between the two. Marc Riddick: And it seems as though some of the things that you mentioned for, you know, improving conditions going into next year would sort of be a natural beneficiary to RevPAS. Is it a reasonable, is there sort of a reasonable RevPAS growth level that we might be looking at potentially for, you know, going into next year, or is it early for that? Stephanie L. Hogue: It's probably a little too early for that. I think we're anticipating giving guidance with our year-end results in March, so we'll dive in specifically then. Marc Riddick: Okay. Great. And then I guess maybe last one for me. Is there much in the way of room for on management on, I'm sure you've already been doing that, but I'm sort of curious as to maybe what you're seeing there and some of the efforts there as far as, you know, managing the expenses and the markets that were sort of impacted by things that are sort of beyond your control. Stephanie L. Hogue: We absolutely always focus on expense, and it's really why transitioning the business to management agreements was so critical because we now have that insight. You know, to the extent we have an opportunity to pull back on expenses, whether it's payroll or, you know, technology fees, we are always looking at ways to optimize. But as we've talked about in the past, you know, this is a largely fixed-cost business. So once you get to that stabilized base, it's pretty fixed. Marc Riddick: Thank you very much. Stephanie L. Hogue: Yep. Thanks, Marc. Operator: Thank you. We have a follow-up from John Massocca with B. Riley Securities. John Massocca: Just a quick one for me. What are you expecting roughly the NOI impact to be from the $30 million of sales, either kind of a cap rate on the way the average cap rate on those transactions or just kind of what the drag on NOI could be from selling those assets? Stephanie L. Hogue: Yeah. It's fairly nominal. It's under a million dollars from an NOI perspective. And sub-three cap for cap rate. John Massocca: Appreciate that detail. That's it for me. Thanks. Paul M. Gohr: Thank you. Operator: Ladies and gentlemen, thank you for participating. This does conclude today's program, and you may now disconnect.