加载中...
共找到 25,013 条相关资讯
Operator: Good day, and welcome to the Rocket Lab USA, Inc. Third Quarter Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Murielle Baker. Director of Corporate and Launch Communications. Please go ahead. Murielle Baker: Thank you. Hello, and welcome to today's conference call to discuss Rocket Lab USA, Inc.'s Third Quarter 2025 Financial Results, Business Highlights, and Other Updates. Before we begin the call, I'd like to remind you that our remarks may contain forward-looking statements that relate to the future performance of the company. These statements are intended to qualify for the safe harbor protection from liability established by the Private Securities Litigation Reform Act. Any such statements are not guarantees of future performance, and factors that could influence our results are highlighted in today's press release. Others are contained in our filings with the Securities and Exchange Commission. Such statements are based upon information available to the company as of the date hereof and are subject to change for future developments. Except as required by law, the company does not undertake any obligation to update these statements. Our remarks and press release today also contain non-GAAP financial measures within the meaning of Regulation G enacted by the SEC. Included in such release and our supplemental materials are reconciliations of these historical non-GAAP financial measures to the comparable financial measures calculated in accordance with GAAP. This call is also being webcast with a supporting presentation, and a replay and copy of the presentation will be available on our website. Our speakers today are Rocket Lab USA, Inc. founder and chief executive officer, Peter Beck, as well as chief financial officer, Adam Spice. They will be discussing key business highlights, including updates on our launch and space systems programs. We will discuss financial highlights and outlook before we finish by taking questions. So with that, let me turn the call over to Peter Beck. Peter Beck: Thanks, Murielle, and thanks, everybody, for joining us today. It was another record-breaking quarter for Rocket Lab USA, Inc. We're up 48% year on year with $155 million in revenue and strong gross margins as well. This is the second time in a row we've delivered record-breaking growth quarter by quarter, once again demonstrating our relentless execution. Electron demand is accelerating faster than ever before, and the momentum continues to build with the largest launch contract backlog yet with 49 launches on contract. We've just launched our sixteenth mission this year, equaling last year's launch record, and we've got another launch scheduled in the coming days that'll take us to 17, with more to come and a new precedent set for Electron annual launch cadence. We see this precedent continue in 2026 as well. Amazing performance is also the theme across our space systems groups. A twin spacecraft for NASA Mars mission are integrated onto its launch vehicle and are ready for liftoff in Canaveral in the coming days. And for Neutron, we've got a full update to share on our progress to the pad following the official opening of the Launch Complex 3 in August, ticking off a critical milestone in the program. We'll share more detail about that in the upcoming slides. So before we get into it, I want to zoom out and talk about our performance over the last five years, given this is sort of a little bit of a wrap-up for the year in some respects. Execution and reliability are critical in this space industry, but even more so in the public markets. Our ability to consistently deliver results for our customers, expand our capabilities, and grow our revenue and gross margins really sets us apart in the sector as we set new benchmarks for operational and financial success. From $35 million in revenue just five years ago, to an implied full-year guidance of roughly $600 million at the midpoint, and approximately 1600% increase over that time period. Our gross margins are looking great, too, from negative 34% GAAP gross margin in 2020 to the midpoint of our implied full-year guidance of slightly over 34% positive in 2025. Looking great to exit '25 with an even higher 37 to 39% in the fourth quarter. Our position as a leading end-to-end space company has never been stronger. We're a trusted disruptor of the industry, and we're proving that we can move quickly to scale our products and our services across both launch and space systems. That focus is translating into the double-digit growth results you're seeing on the page here. Right, on to Electron. As the title says, it's been a record-breaking quarter for launch contracts. 17 dedicated launches were signed in just three months, but all but two of them were signed with international customers from Japan, Korea, and Europe. Those new missions plus the ones already on the books for international space agencies like ESA and JAXA prove Electron is not just a leading launch vehicle in The United States. But it's becoming the preferred small launch vehicle globally. Electron's business model is one of schedule flexibility for our customers, and you can see from these new bookings demand is stronger and growing for Electron. For Haste, our Hypersonic Test Vehicle continues to redefine the way technology is being developed and tested in the United States. In Q3, we launched back-to-back missions from launch complex two in Virginia with 100% mission success, enabling technology to be tested in real-life hypersonic environments, which is a critical capability for the next generation defense programs like Golden Dome. By leveraging our commercial speed, our vertical integration, and our execution history with Electron, Haste delivers the proven agility and responsiveness that these programs demand. Speaking of momentum, we're on track to fly our seventeenth launch of the year in the next few days, which will officially surpass our previous annual launch record set in 2024. This pace is only possible because we are very intentional about designing Electron for scale. This extends beyond the vehicle itself to all the supporting infrastructure like manufacturing, processing, and operating a high-volume launch range infrastructure as well. It's an important approach that we're deploying for Neutron too, ensuring that we're thinking well beyond first flight. As of right now, there are only three American commercial launch providers who have launched to orbit more than once this year: SpaceX, ULA, and, of course, us. Which really does highlight just how rare Electron's capabilities are. Now let's turn to space systems. Starting off with a little bit of an update for M&A for the quarter. We closed the Geos deal to create a new payload business unit, strengthening our offering as a prime contractor for national security programs like Golden Dome, and for the Space Development Agency. Our history and expertise in buying and expanding smaller shops, to meet industry demand, we're turning our attention now to scaling a new electro-optical and infrared sensors for lucrative future contracts. Also closer to acquiring laser communications company Manaruk. They have completed their financial restructure under German law in August, which was a pivotal moment in the acquisition process and one that brings us nearer to closing out this deal. Rocket Lab USA, Inc. has been a force in the U.S. Space industry, and we're ready to bring that same energy to the European space sector with our first European foothold and expansion into Germany. As for what's next, we've built up our dry powder future M&A with more than $1 billion in liquidity following the market offering program implemented in September. It was a very strategic move to lock in capital that will allow us to act quickly on some of the exciting opportunities in the pipeline. We're not ready to reveal the details of these strategic players just yet, but I can assure you that the pipeline is active. We've always taken a disciplined approach to acquisitions, and our successful track record speaks for itself. We've got a bit of a knack for identifying, acquiring, and then integrating businesses that enhance our end-to-end capabilities and make us a stronger competitor for large-scale programs. That's made us the consolidator of choice for many companies in the space sector. We're often the ones being approached first by companies wanting to join Rocket Lab USA, Inc. now because they see the value we create for growth and innovation. Onto our upcoming space systems missions. We're a few days away from two of our spacecraft launching for the escapade mission. The initial launch attempt was unfortunately scrubbed by a launch provider yesterday, but by this time Wednesday, they're scheduled to be launched from Cape Canaveral, and they'll be on their way to Mars. What makes this mission truly groundbreaking is that we're tackling these interplanetary challenges with spacecraft built from an order of magnitude less than the usual cost developed in about one-third of the time. We're proving an entirely new, more accessible model for sending satellites to other planets. In short, this mission is a tough one both in flight and in the design, but, you know, of course, we love a challenge. Another program with a big green tick this quarter is our Transport Layer Constellation for the Space Development Agency, which has cleared critical design review to be able to move it into spacecraft production now. While existing and fully funded contracts like a half-billion-dollar program can continue under the government shutdown, the situation does continue to have an impact on the timing of new awards for the SDA tranche three constellation. Neutron. Alright. Moving on from space systems. Let me give you a bit of an update for Neutron for the quarter. Now I've spent a lot of my time in the recent weeks elbow to elbow with the teams at the various sites for Neutron testing. I have to say I'm extremely happy with the progress, but more than that, the thoroughness of the team during this critical qualification and acceptance testing phase. We're into the big meaty bits and the meaty tests where we have whole systems integrated together and large subassemblies. This is the time when you find out on the ground what you got right and what you got wrong, and, of course, rather than finding out during the first launch. Now at Rocket Lab USA, Inc., we have a proven process for delivering and developing complex spaceflight hardware. I think that process speaks for itself with respect to our hardware always looking and, more importantly, always working beautifully. Our process is meticulous, but it works. Electron, for example. It's the world's most frequently launched small launch vehicle, as we all know. We scaled the production and launch of it faster than any other commercial launch vehicle in history. Which is great. But if we think about how many others have tried to develop a launcher, the results have been extremely poor. Those who have failed to deliver are numerous. Basically, every new space company except Rocket Lab USA, Inc. and SpaceX has failed to build an orbital rocket that has scaled to any kind of launch cadence and is reliable. This is the Rocket Lab USA, Inc. process in action, and I've been resolute about sticking to this approach. With all the hardware in front of us now and significant testing programs underway across all parts of the vehicle, we can see we need a little bit more time to retire the risk and stick to the Rocket Lab USA, Inc. process. Yep. It might mean things will take a little bit longer, but I want to give some context here. I mean, the labor cost for the program is about $15 million a quarter, which we make back four times over a single launch anyway. So it makes zero sense to change what we know and what is proven to work. So we're aiming to get Neutron to the pad in Q1 next year, if all goes well, with the first launch thereafter. Once again, though, that's provided that myself and the team are confident we have completed Neutron's qual testing and acceptance testing program to the Rocket Lab USA, Inc. standard. As always, this is a Rocket program, so that's been completed at a pace and a cost that nobody has achieved before. The financial and long-term impacts are insignificant to take a little bit more time to get it right. Now we've set high expectations for Neutron's first flight. Our aim is to make it to orbit on the first try. You won't see us minimizing some qualifier about us just clearing the pad and claiming success and whatnot. That means that we don't want to learn something during Neutron's first flight that could be learned on the ground during the testing phase. Excuse me. At the end of the day, Neutron will fly when we're very confident it's ready. We're not going to break the mold of the Rocket Lab USA, Inc. magic. Now over the next few slides, I want to take you through some of the testing campaigns we've been running to paint a bit of a picture of what it takes to deliver a reliable rocket to the launch pad. As you've seen for some time, we're very hardware-rich across the entire vehicle. Now it's all in sort of assembly and qualification and acceptance testing before it's all brought together under the East Coast sites. Okay. So these pictures are just a snapshot of many of those activities. We're deep diving into the qualification test and acceptance of every major assembly, subassembly, and system before we get into launch operations. In fact, I'd say we're putting Neutron through an even more extensive barrage of testings than we did Electron. Because it's not your kind of conventional rocket that we're developing. We have a couple of novel things being the world-first architecture like hungry hippo fairing, suspended second stage, and the vehicle itself is, let's not forget, the world's largest flying carbon composite structure ever built. We're making tremendous progress in these structures, testing across all levels of the vehicle. Every one of Neutron's major structures is tested on the ground to the levels that exceed what the rocket may see in flight. Includes testing of our primary structures like propellant tanks, thrust structures, the end stage, pushing them all to their limits to ensure they meet the demands of launch and reusability. Before we can call these qualified, we go through a full run of load cases axial lateral torsional transient and combined loads. The main and primary structures must withstand a liftoff of 1,500,000 pounds of thrust from the Archimedes engines, worst cases of aerodynamic loading on the way up as the vehicle through MAX Q, and all the separation loads. And then for the structures that come back on stage one, they have to survive all the thermal and aerodynamic loads too. Now we test secondary and auxiliary systems to the same level of scrutiny as well. This involves pulling and pushing across the same load cases even down to the smallest fixtures and the smallest bracket that holds every device in Neutron's primary structure. Across both stage one and two structures have yielded a wealth of valuable data, by anchoring and validating our engineering models through these tests, we're able to uncover and retire technical risks on the ground well before we fly. With Neutron's reusable fixed fairing design and our suspended second stage that passes through it, we're working with the unique architecture never been seen on a rocket before. We've been taking it through its paces to rid the entire system for its first flight. This has included testing the hungry hippo's aerodynamic control surfaces, as well as turning the electromechanical actuators and the control systems in all the entire mechanisms. The Hungry Hippo's open and closed systems have passed performance testing, and so is the staging system systems pneumatic locks and pushes and guides and all of the stuff that's inside of second stage that passes through the hungry hippo's mouth. While it's been one thing to build these huge assemblies for flight one, the team has also set up the infrastructure for this testing that allows us to get as close as to a flight test as we possibly can on the ground. This is important because it also lays the foundations not just for the first launch, but flights two and beyond. You can see some of the giant towers in these staging tests on the right-hand side of the slide there. In fact, some people thought we were building a launch site. It was so big. In the Neutron flight software and GNC team, we've been flying to orbit virtually almost now for two years. Leveraging a proven approach from the Electron program with our own flight software and hardware in the loop testing that integrates physical components with simulated flight environments to validate system-level functionality and performance. In preparation for Neutron's first flight, our operators and engineers have been running virtual test and launch operations week in, week out. We've been exercising our operations team on console going through static fire operations and launch day operations that we can hit the ground running when the vehicle arrives at Launch Complex 3. Our world-class simulation tools built in-house allow us to exercise our avionics, GNC, and software tools well in advance of conducting these operations with a fully integrated vehicle. This not only allows us to reduce risk, but also serves as a training platform for operations team. Combine that with a full suite of vehicle avionics in the loop, and we bring tests like you fly to a whole new level. It's all part of the smart, rigorous approach that we apply to every program and mission. On to Archimedes. Since the last engine update, the propulsion team has continued to validate its performance across the entire run box. The upstage engine is on the test stand too, and we continue to work for all the qualification testings on these engines and test as you fly configurations as you well as you know. The test cell is operating at a 27 rate. Meaning twenty hours a day, seven days a week. The only way you can get through years of qualification know, always expected for an engine program, is to squeeze years of hours into months. So as you can imagine, no weekends or evenings are left on the table at the Stennis test facility. Now onto our ocean recovery for Neutron. While return on investment barge won't be used for the first flight, the recovery team is making great progress on having it ready for flight two. The three main propulsion generating sets for the 400-foot length barge recently passed factory acceptance testing and have been cleared to be sent to the shipyard in Louisiana. Each of return on investment three diesel electric gensets capable of more than three megawatts of electrical power. Combined, that's more than 2.5 times the total electricity capacity for all of launch three. So these things are big. All in all, return on investment is looking good to enter service next year for the launch. Okay. Finally, wrap up our progress it was a great moment to be able to cut the ribbon at the launch site last quarter. Neutron will bring the largest lift capacity to the Mid Atlantic Regional Space Port has ever seen. So opening it was an important milestone not only the path of first launch, but for the assured access to space that the nation needs as a launch as launch congestion continues to build up across the country. The team is running through the final activation as they prepare to receive neutron on the launch mount, otherwise all ready to go. Most recent tests have included flowing cryogens through the propellant systems, and tests continue to run smoothly. We've designed the site to be able to turn missions within twenty-four hours. That was the design requirement. Now that's important for response to space and the launch cadence we expect for the vehicle. But equally so, we can get Neutron straight into back and back back to back testing during the launch and readiness. Campaigns as well. You can see there's been lots of Neutron activity this quarter. The team has made significant progress towards Neutron's first launch. While continuing to prioritize our very rigorous testing and qualification processes over rushing to the pad. We've seen what happens when others rush to the pad with an unproven product, and we just refuse to do that. Methodical and deep approach to qualification is what's driven reputation for success and reliability in the industry. It's been a cornerstone of our success with Electron. And it's the same philosophy that we'll be applying to Neutron. Okay. Here's Adam with the financial highlights for the quarter and outlook ahead for Q4. Great. Thanks, Pete. Third quarter 2025 revenue was a record $155 million coming in at the high end of our prior guidance range and representing an impressive year-over-year growth of 48%. This strong performance was driven by significant contributions from both our business segments. Adam Spice: Sequentially, revenue increased by 7.3% underscoring the continued momentum across the business. Our Space Systems segment delivered $114.2 million in revenue in the quarter, reflecting a sequential increase of 16.7%. This growth was primarily driven by increased contribution from our satellite manufacturing business, which continues to perform exceptionally well and provides comforting diversification alongside our robust, but at times lumpy launch business. Meanwhile, our launch services segment generated $40.9 million in revenue, representing a 12.3% quarter-over-quarter decline due to fewer launches during the period, driven primarily by customer spacecraft delivery delays. We have a busy Q4 manifest and as a result, expect a strong return sequential revenue growth in our launch business in the fourth quarter. Now turning to gross margin. GAAP gross margin for the third quarter was 37%, at the high end of our prior guidance range of 35% to 37%. Non-GAAP gross margin for the third quarter was 41.9% which was above our prior guidance range of 39% to 41%. The sequential improvement in gross margins was primarily driven by a onetime benefit from the transition to overtime revenue recognition for certain HACE divisions. Paired with revenue recognition of an electron emission cancellation due to a customer's internal program cancellation which was recognized at a 100% margin. We ended Q3 with production related headcount of 1,190 up 48 from the prior quarter. Turning to backlog. We ended Q3 2025 with $1.1 billion in total backlog. With launch backlog accounting for approximately 47% and space systems representing 53%. During the quarter, launch backlog contributed to gain share, supported by strong underlying trends as we convert a robust pipeline of opportunities across electron minhase. This includes the 17 Electron bookings signed within the quarter that Pete mentioned earlier. While space systems bookings remain inherently lumpy due to timing of increasingly larger and high impact program opportunities, Space systems backlog continues to hold at healthy levels to despite the step up in revenue run rate recognized over the last few quarters. We're actively cultivating a strong pipeline that includes multi-launch agreements, large satellite manufacturing contracts across government and commercial programs. As noted earlier, these larger needle moving opportunities can there's lumpiness in backlog growth. But they are critical drivers of long-term value and scale for the business. Looking ahead, we expect approximately 57% of our current backlog converted revenue within the next twelve months. Additionally, we continue to benefit from relatively quick turns business, across launch and space systems components businesses that drive incremental top line contribution beyond the current twelve month backlog conversion. Turning to operating expenses. GAAP operating expenses for the 2025 $116.3 million above our guidance range of $104 million to $109 million Non-GAAP operating expenses for the third quarter were $98.1 million which was also above our guidance range of $86 million to $91 million The sequential increases in both GAAP and non-GAAP operating expenses were primarily driven by continued growth in prototype and headcount related spending to support our Neutron development program. Specifically, investments ramped up in propulsion as we continue to qualify our committees, as well as in test and integration of mechanical composite structures our facility in Middle River, Maryland. In RV specifically, gap expenses increased $4.6 million quarter over quarter, while non-GAAP expenses rose $4.8 million These increases were driven by the ramp up of Archimedes production along with higher expenditures related mechanical systems deposits as just mentioned. Q3 R and D headcount was ten nineteen, representing an increase of 84 from the prior quarter. In SG and A, GAAP expenses increased $57 million quarter over quarter. While non-GAAP expenses rose $6.4 million quarter over quarter. These increases were primarily due to the acquisition of GEOS during the quarter. Paired with higher legal expenditures, insurance renewals, and fees associated with our annual proxy statement and related filings. Q3 ending SG and A headcount was 385. Representing an increase of 42 from the prior quarter majority of those coming from the closing of the Geos acquisition. In summary, total headcount at the top at the end of the third quarter was 2,602. Up 174 heads from the prior quarter. Turning to cash. Murielle Baker: Purchase of property Adam Spice: equipment, and capitalized software licenses were $45.9 million for the 2025. An increase of $13.9 million from the $32 million the second quarter. This increase reflects ongoing investments in Neutron development we continue testing and integrating large structures at our facility in Middle River expanding cap capabilities at the engine test stand in Synagis, Mississippi, and scaling additive manufacturing at our engine development center in Long Beach. As we progress towards Neutron's first flight, expect capital expenditures to remain elevated. As we invest in testing, production scaling, infrastructure expansion. GAAP EPS for the third quarter was a loss of $3 per share, compared to a loss of $0.13 per share in the second quarter. The sequential improvement to GAAP EPS is mostly attributable to the $41 million tax benefit we recorded during the third quarter. Which is due to the partial release of the valuation allowance against corporate deferred tax assets. Murielle Baker: As a result of acquiring an equal amount of deferred tax liabilities, Adam Spice: emanating from the Geos acquisitions purchase price accounting. GAAP operating cash flows was a use of $23.5 million in the 2025. Compared to $23.2 million in the second quarter. Similar to the capital expenditure dynamics mentioned earlier, cash consumption will remain elevated due to Nutra development longer lead production for SDA, investments in subsequent neutron tail production, and infrastructure expansion to scale the business beyond the initial test flight. Overall, non-GAAP free cash flow, defined as GAAP operating cash flow, less purchases of property, equipment, and capital software, in the 2025 was a use of $69.4 million compared to a use of $55.3 million in the second quarter. The ending balance of cash, cash equivalents restricted cash, marketable securities was just over $1 billion at the end of the third quarter. The sequential increase in liquidity was driven by proceeds from the sale of our common stock under our aftermarket equity offering program which generated $468.8 million in the quarter. These funds are intended to support acquisitions, such as the announced Menarc acquisition, as well as other targets in our robust M and A pipeline, alongside general corporate expenditures and working capital. We exit Q3 in a strong position to execute on both organic and inorganic growth initiatives and to further further vertically integrate our supply chain, expand strategic capabilities, and grow addressable market. Consistent with what we have done successfully in the past. Adjusted EBITDA loss for the 2025 $26.3 million which was below our guidance range of $21 million to $23 million loss. The sequential increase of $1.3 million in adjusted EBITDA loss driven by higher revenue and improved gross margin, which was more than offset by increased operating expenses. Related to new term development. With that, let's turn to our guidance for the 2025. We expect revenue in the fourth quarter to range between $171,180,000,000 dollars representing 12.8 quarter on quarter revenue growth at the midpoint. We anticipate further improvement in both GAAP and non-GAAP gross margins in the fourth quarter. With GAAP gross margins to range between 37% to 39% and non-GAAP gross margin to range between 43 to 45%. These forecasted GAAP and non-GAAP gross margins are benefited by a higher mix of launch contribution in the quarter, as well as underlying improvements in launch ASPs and greater launch overhead absorption due to higher forecasted launch cadence in quarter. We expect fourth quarter GAAP operating expenses to range between $122 million and $128 million and non-GAAP operating expenses to range between $107 million and $103 million The quarter over quarter increases are primarily driven by ongoing Neutron development spending related to flight one. Including staff costs, prototyping, and materials. However, we expect to see a shift in spending from r and d to flight to inventory. Which is an encouraging sign of progress as we move closer to Neutron's first flight. I'm optimistic that with the impressive strides we've made towards this milestone, we're approaching peak Neutron R and D spending, and are on the path towards meaningful operating leverage and positive cash flow in the future. We expect fourth quarter GAAP and non-GAAP net income to be $3.5 million which is a function of higher cash balances as well as the conversion of approximately $192 million of convertible notes since September 30. We expect fourth quarter adjusted EBITDA loss range between $23 million and $29 million and basic weighted average common shares outstanding to be approximately 571 million shares, which includes convertible preferred shares of approximately 46 million, and reflects the conversion of approximately 37 million shares of convertible notes thus far in Q4. Lastly, consistent with prior quarters, we expect negative nine GAAP free cash flow in the fourth quarter to remain at elevated levels. Driven by ongoing investments in Neutron development and scaling production. This excludes any potential offsetting effects from financing under our ETF facility. Murielle Baker: And with that, we'll hand the call over to the operator for questions. Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question today comes from Ryan Koontz with Needham and Co. Please go ahead. Ryan Koontz: Great. Thank you. Really nice to see the strong bookings and backlog jump there for launch. Really impressive. Sounds like a lot of that was international. Any particular color you can share on, you know, the use cases, versus government, anything you can share as far as what's really driving that pickup in backlog and how you feel about it, you know, going forward over the next few quarters? Peter Beck: Yes. Hi, Thanks very much. Yeah. So it's a bit of both. So strong commercial bookings, but also, you know, for the first time, we see, you know, space agencies who typically, you know, use their own sovereign capabilities, but you know, Electron is really the only vehicle of its kind in operation in the world right now. So it was very, very promising to see space agencies now, you know, kind of standardizing on the Electron as a platform. Ryan Koontz: For sure. That's great. And how are you feeling about supply chain relative to meeting that kind of demand for Electron at this point? Peter Beck: Electron's like 90% plus built in-house. So, you know, we don't see too many challenges there. You know, the factory that we built here was ultimately designed to build 52 rockets a year. And so, you know, I think we'll be fine. Ryan Koontz: That's great. Maybe one last one just to wrap up just to clarify what Adam said about launch gross margins. There were a couple of onetime events there. Any color you can share with us on that, Adam? Adam Spice: Yeah. You know, as Electron continues to kind of as a business, you know, we've got a deep pipeline and backlog, and, you know, you're gonna have customers that have changing priorities, you know, programs get canceled. Fortunately, you know, we have very strong contract terms, which allow us to make sure that we're protected in the event that people programs get canceled or change their priorities. You know, I think on the Haste change, that was really kind of, again, a pivot on some of the Haste emissions where the contractual terms are such where really more appropriate under ASC 606 to recognize revenue over time and use EAC accounting to measure the cost that you're incurring and you recognize revenue and margin importantly. So we now have a nice in that business where you have point in time and over time, and it really just a function of contract terms. And Haste is evolving into an important and meaningful part of our business, of good things come from that. The fact that you've got typically higher, ASPs, you've got, you know, I would say along with that now, you've got a little bit more stability, I would say, or predictability to revenue contribution from that given the fact that some are gonna be point in time, but some are gonna be overtime, and that overtime allows a little bit more of a I would say, like, a little bit more predictability and I think it's a healthy place to be. Ryan Koontz: That's great. Appreciate the questions. Thank you. Operator: The next question comes from Andres Sheppard with Cantor Fitzgerald. Please go ahead. Andres Sheppard: Hey, everyone. Good afternoon, and thanks for taking our questions. Pete, it's really great to hear all the great progress over the last few years to see everything up until this point. Two quick questions for us, on space systems and one on launch business. On the space systems, maybe for Adam, can you remind us the revenue recognition associated with the FDA tranche two award. I think in the past you had targeted 40% revenue recognition, in 2026. Just wondering if that's on track or unchanged? And then also on the FDA tranche three award, now obviously the government shutdown has maybe delayed the decision there slightly, but we still feel confident in that award and in that decision? If awarded, that would be the largest contract, I think, awarded in company history. So curious on your thoughts there. Thank you. Adam Spice: Yeah. I'll take the first piece of rev rec. I'll give you my thoughts on t three and then I'll head back over to Pete. On the rev rec, yeah, we were still very much in that path to recognize the revenue over that pattern where it was you know, kind of think about these larger long-lived government programs as kinda 10% in the first year after you achieve award, and then it's 40, 40, 10. So think about that as the shape of the curve. And FDA has got a tranche to transport layer shaping up to be similar to that. Yeah, everything is consistent there. As you know, similar to the other overtime rev rec, you basically estimate your cost to complete the mission as you incur costs proportionately. You recognize revenue at the program margin. So, yeah, it's been so far, we've had that program has been going very well. As Pete mentioned, that part of the business is performing very, very well. On t three, you know, yes, that would be the largest contract company would have won to date. And you're right. The timing has been a little bit delayed due to the government shutdown. I think we've all seen recently that there's signs that perhaps we could be coming to an end of that shutdown, which I think would be great to get that momentum back in the awarding of those types of contracts. But I'll turn over to Pete in regards to confidence in that win. Peter Beck: I think you've said it well, Adam. I mean, I think, you know, we've put ourselves in a really strong position as a prime contractor on those awards especially with some of our acquisitions. So we're feeling good, and you know, we just need the government to come back and finish off that last little piece. But, no, I think we're feeling good, Andres. Andres Sheppard: Wonderful. That's great to hear. And maybe just as quick follow-up on, Neutron. With the first launch now, targeted for early next year, should we still be assuming kind of three launches for next year, five the following year and seven? Or is there perhaps a change to that cadence as well? Thank you. Peter Beck: Yeah. The way we think about that cadence is it's you know, the clock starts for the next one from the first one. So depending on the, you know, the first flight, think of it as like a twelve-month kind of rate from there. But maybe, Adam, if you yeah, any different views. Adam Spice: Yeah. No. I think that's right. I think, you know, I just remind folks that, the first launch is a test launch. It's an r and b launch. We've been expensing that vehicle. Over its manufacturing period. So the communicated cadence was, you know, one test launch, which is still the case, and then we expect to be in revenue for the flights thereafter. So I would say that you know, depending how early we get the test launch off in 2026 will dictate whether or not we get as Pete said, we kinda complete the next three missions in a twelve-month window. That would fall within that Andres Sheppard: Wonderful. Very helpful, and, congrats again. I'll pass it on. Operator: The next question comes from Edison Yu from Deutsche Bank. Please go ahead. Edison Yu: Hey, good afternoon. Wanted to ask about the future constellation. I know it's quite a long-term question. But there's been a lot of activity in some operators around Spectrum. And I'm curious what's your thinking about the value of Spectrum in your kind of calculus for any type of future constellation? Peter Beck: Well, I mean, that would be making an assumption that you I guess you're settling on a comms application as well. But clearly, spectrum is an important element to any kind of scaled comms business, although we have been seeing some interesting approaches where that becomes less so. But I think you're just seeing some kind of natural consolidation in the industry right now around some of those spectrum assets. And, you know, I suspect that will continue. But, you know, look, Rocket Lab USA, Inc. is not gonna go out and buy billions of dollars' worth of spectrum speculatively. That's for sure. Adam Spice: This is Adam. Sorry. I got dropped. Some unfortunate conference call dropped me. So don't know if did I did I answer your question fully? Andres, on the launch cadence? Edison Yu: Eight was actually Edison on now. Peter Beck: Yeah. We just Edison Yu: Okay. Thank you. Peter Beck: Nice to see that you got dropped out in this time and not me. Adam Spice: It's not just me today, for sure. Yep. Edison Yu: So totally separate topic. Wanted to ask about. I'm sure everyone has seen you know, NASA. We got Isaac Mann, you know, seemingly back. Do you see increased opportunities in this type of changeover around whether it's moon, Mars, space, and what do you think those incremental opportunities could potentially come from? Peter Beck: Short answer is yes. I think if you know, if Jared is cemented as the NASA administrator, I think if you look at Jared's approach to how he believes NASA should be run and the role that commercial entities like Rocket Lab USA, Inc. will play, I think that bodes very well for the way that we operate and the value that we can bring the agency. So I would view that as a very positive very positive thing for Rocket Lab USA, Inc. Great. Thank you. Operator: The next question comes from Gautam Khanna with TD Cowen. Please go ahead. Gautam Khanna: Yeah. Thanks. Good afternoon, guys. I was wondering if you could elaborate on how soon after Neutron arrives at the complex realistically it can launch? Does it is there a minimum interval of time and then, you know, what sort of explains that whatever that range might be? Peter Beck: Hey, guys. It's a little bit difficult to answer because it really depends on what you find. If we put the vehicle on the pad and we go through all of that fueling and detanking all the operational tests and static hot fires and all of that sort of stuff, and it all flies through, then it's a fairly straightforward path. But if we go there and we find some stuff that we don't like, then we're gonna fix it. And I think as I tried to explain during the call, there's the way that we develop these kinds of things is you know, I'm suspicious if everything just flies through. Because, you know, that in some cases causes more time to be spent than less because you know, generally, you expect to see you expect to see something because the whole vehicle is built on a safety factor of 1.1. Or 1.2. So you expect to see some things And depending on the magnitude of those things, we won't just blindly walk past them You know, we'll go out and not only fix them but really, really deeply understand how they occurred and then also go one step further and feed that back into all of our engineering models to make sure that next time around, we're doing a similar thing that the I guess, the ability to predict and the you know, the fineness of that becomes better and better and better. So look, we know a lot more when we have a vehicle on the pad. We know even more when we hot fire it. After hot fire if that's a successful campaign and we're happy with what we see, then the turnaround to launch after that point's pretty quick. Gautam Khanna: Okay. And I was curious also maybe I missed it, but the cumulative catch-up adjustment or the onetime, how large was it? Gautam Khanna: In the quarter? Adam Spice: Sorry, Gautam. What what you're talking about the are you referring to the the the haste? I'm not sure if you can maybe sorry. I got dropped again from the call from my provider, but here's my question. I yeah, I think you mentioned in the remarks that there was a well, I know in the Q, it says there's a revenue adjustment of net $10 million favorable in the quarter. Wanted to know I think you described the EBITDA margins were lifted by a contract closeout of some sort. I was just curious if you could quantify how large that was? Adam Spice: Yeah. So there was one contract close-up that was about I think this is a little under $5 million. That was the value that we received when that cancellation occurred. And, yeah, then there were some other things moving around with regards to the we recognized revenue with higher gross margin associated because well, there was a benefit to the gross margins as well because in Q3, when we made the change in Q2, we end up actually taking a margin hit because we recognized revenue without having associate basically, zero margin. Because at that time, we didn't have the ability to estimate with cost were gonna be to complete the mission as we did this transition. So the path was essentially revenue in Q2 at no margin, Q3, we got again, normal amount of revenue from that overtime contract, but that was at now at margin. Right? So I think those are really kind of the two prior things. But when you look forward to into Q4, given our, the guidance that we've provided, you know, even with those things not recurring, in Q4, you still see our gross margins improving. So you can just see that, you know, yes, that was kind of a unique dynamic in the transition from q to Q2 to Q3, but from Q3 to Q4 without those unique events, we still show gross margin strength and growth sequentially. Gautam Khanna: Thanks very much, guys. Appreciate it. Operator: The next question comes from Erik Rasmussen with Stifel. Please go ahead. Erik Rasmussen: Yeah. Thanks for taking the questions. I wanted to just on Neutron, I totally understand. Peter, and the team, you guys operate. You're not looking at an iterative process and having things blow up. So that's great. And that's you you always operate it that way, but I wanted to see, though, with this latest push out, you know, what does that do from a timing perspective for things like the NSSL and other things that you might have been looking at that Neutron would obviously be is geared towards. Peter Beck: Yeah. No. Hi, Erik. Great question. So, look, the NSSL team worked shoulder to shoulder with us. They're on every review in the program. And, you know, obviously, I can't speak for them, but I think they take at least the feedback we've had from us. They very much appreciate our approach. Of both transparency but also the diligence of the way we build vehicles. So the awards for the initial sale contracts have not been made yet and there's some time away for them to be made. We need to have a flight under our belt, a successful flight under our belt before they'll make those awards anyway. So, you know, largely speaking, it's pretty irrelevant. And, you know, we've been very careful, and I think there's been a lot of conversation previously about you know, booking Neutron and making sure that we can deliver for our customers So, you know, long story short, we're not letting anybody down here, Erik. We're in a good spot. Erik Rasmussen: Great. And maybe just my follow-up question here. You know, you closed the Geos acquisition. Mine Eric is soon to soon to soon to close, I would presume. But with Geos, are you seeing you know, traction in expanding the footprint in national security and defense? I mean, that was part of the reason. But what are you seeing? Now that you've closed the deal? Peter Beck: Yeah. It's look. It's just it's night and day to before. So, you know, obviously, we had a good relationship with SDA, and, to the intelligence community, obviously, for launch and things like that. But I would just say we're in a totally different league now and working with totally different folks. And you know, there's long, long relationships that have been built with the Geos team. And now that they have the support of Rocket Lab USA, Inc., we're really able to expand and supercharge those And also, you know, those relationships expose them to the larger offering of Rocket Lab USA, Inc. because it always surprises me, you know, sometimes you know, people just think we're just this little launch company and don't have all this other capability. So no, it's been incredibly important. And also just now being a payload provider, is you know, it brings you up to a whole another level because you're having really detailed mission discussions. Rather than just talking about how you can provide a bus or a component or something. We're really in mission formulation territory. Erik Rasmussen: Great. Thanks, and good luck with the Neutron development. Operator: The next question comes from Michael Leshock with KeyBanc Capital Markets. Please go ahead. Michael Leshock: Hey, good afternoon, everyone. I wanted to ask on Archimedes side I know you're constantly testing and iterating the engine. But how close are you to having a finalized design that meets all the performance requirements and ready for first flight And then secondly, given your production cadence, I think you previously said a new engine was coming off the line every eleven days or so. How quickly can you ramp production of the engine to have nine Archimedes for the first stage of Neutron's debut launch? Peter Beck: Yeah. So thanks, Michael. The engine design is pretty stable at this point, and, you know, we've met all the performance criteria. What we're doing is know, obviously, with Ascent, there's one set of environments, and with Ascent, there's an entirely new set of environments. And much more challenging environments because your propellants are warm and lower pressures, and you've had algae mixing and all kinds of stuff. So, you know, going through all of those things is has been really important. And, you know, I think the team I gotta, you know, check on the exact number, but, I mean, the vast, vast majority of all of the components for flight one engines are either complete or in some kind of some kind of form of build. So, you know, we're iterating on the engine for sure, but you know, the production machine has stood up and ready to support. But you know, with the end with Archimedes, we wanna make sure we're you know, as we are sending on first flight, nobody is worried about an engine. And, obviously, it's the most complicated, you know, part of the vehicle. So know, there's just no substitute for putting, you know, hours and hours and hours on test articles, and hence, the reasons why we have two cells running now at Stennis, not just the one, as we think we talked about that last earnings. And it's just kept switching between engine and engine. And some of the more interesting tests, you know, just extra long durations to try and promote some fatigue in the engine because, obviously, we wanna reuse this engine over and over again. Just doing really extended burns to try and promote fatigue and items is, you know, some of those kind of things. They just take time. Like, there's just no substitute for just burning. Michael Leshock: Okay. Great. And then sticking with Neutron, is that original budget for Neutron of $250 million to $300 million is that still intact given the updating timing of Neutron's first launch? And you'd said you're near peak Neutron spending just any way to frame how much you've spent so far or what's left to go? Thanks. Adam Spice: Yeah. I could take a swag at that. So yeah, I mean, the program, as Pete mentioned, I mean, we've continued to make a lot of progress. The $250 million to $300 million kind of original estimate I mean, we kind of that got a little bit I would say, behind us with the with the kind of with the push from launching '25, the '25. And so now as we get into kind of a 2026 scenario, right now, I'd say that, you know, we're estimating that we will have spent approximately $360 million exiting in q cumulative across r and d and CapEx. Through the 2025 So, you know, we're above that. And as Pete mentioned, you know, it's about a $15 million impact on the human capital side of things per quarter. Just by extending. Obviously, prototyping, you're gonna spend, we're gonna spend. It's really not impacted by the time frame. It when the program kinda delays, you end up, obviously incurring an extension of that. The staffing related expenses after the program. So right now, again, we're looking at around $360 million exiting 2025. So, again, as I mentioned, do think we're approaching peak If hopefully, Q4 is the peak, and it all depends on kinda when the timing of that first launch occurs. And this, of course, it'll a bit. Launch as well. Michael Leshock: Yep. Thank you. I appreciate it. Operator: The next question comes from Suji Desilva with ROTH Capital. Please go ahead. Suji Desilva: Hi, Pete. Hi, Adam. Congrats on the strong backlog build here. On the Electron launches, you gave some sense of pricing, but any noticing on the trend in the size of the number of launches, maybe if not now into 26 or if you're trying to extend those or is that fairly stable? Peter Beck: Hey, CJ. I don't know if Adam, if you if you got that one, but I struggle to see you on that one. Yeah. Suji broke up. Suji Desilva: Oh, sorry. I mean, I'll repeat it. Just any observations on the Lectron launches, the deals in terms of number of length of the launches? Are people trying to extend the visibility there? In the next few quarters? Or is it pretty stable? Peter Beck: You know, I think when we talk to customers, as you can see in the last quarter, it's generally not sort of one launch You know, we see folks locking in their launch capacity and buying lots of launches in one hit. We're we never try and let a customer down or leave a customer on the pad, so we map production with launch demand very well. But, you know, and that that isn't been a problem to date. But, no, we just continue to see just growth in the demand for the product. Adam Spice: Yeah. And I would add to that that, Suji. So we've seen these larger bulk buys over long periods of time occur more on the commercial side. As we talked about in the past, you know, it's kind of hard to differentiate sometimes commercial versus government because a lot of our commercial customers actually end up fulfilling customer government demand. So it's a quasi commercial government. But, also, we've been growing our Haste business pretty significantly over the last couple of years. And those have come, I would say, more like Electron originally did, where kinda, know, the onesie twosie kind of size contracts. And I think that's hopefully the next kind of shoe to drop for us is the ability to start lying and start signing larger paced deals that cover a long period of time and a greater number of launches because that would give an even more, you know, certainty to the to the to the revenue ramp in that part of the business. I think that's you know, again, that's something that we're looking forward to. So I think, you know, that would be a very helpful indicator that the longevity of that Haste business and the and the ultimate scaling of it. Suji Desilva: Okay. Helpful, Adam. And my other question's on the, m and a environment. And with targets. Is there a sense that maybe among the targets that consolidation and being part of larger companies increasingly important maybe more willingness to come to the table. Are you seeing any of that trend? Now, among m and a discussions? Peter Beck: Yeah. I think you're seeing it in a few different places both on the larger scale, but also I think we're seeing it also on some of the smaller scale stuff as well is I think it's a difficult environment to scale in, and there hasn't really been too many great companies that other companies want to join And as I think I mentioned on the call, we're becoming the de facto go-to guys if you want to, you know, really scale your products and the opportunities that you have in front of Suji Desilva: Okay. You do Thanks, Pete. Adam Spice: No worries. Thanks, Sujit. Operator: The next question comes from Andre Madrid with BTIG. Please go ahead. Andre Madrid: Hey, everyone. Good afternoon. Thanks for the questions. Know, I think earlier today, it was announced that the s c FDA was moving some some funding earmarked for some of their programs over to true payments. This was at more of a a DOW level. But seeing that, and then you called it out, you know, decreased cash receipts in the slide deck too related to SDASAT work. I mean, if things don't get resolved this evening, which hopefully they do, I mean, when does the shutdown pose a significant risk to your internal '26 outlook and beyond? Adam Spice: What? I can okay. Go ahead, Pete. Peter Beck: Oh, you go ahead, No. I was gonna say, think that there's, you know, so far, the government shutdown, I wouldn't say, has really dramatically affected us. Yes. There have been slightly slower cash receipts, but for example, we got a very large cash payment on Friday, from SDA. So I would say that, you know, this ticket has not been shut off. I think it's just kind of just been a little bit slower and flowing. So that to me, that's very helpful. That even before the line of sight to the ending of government shutdown, you know, we were still getting and we received a very large payment. The end of last week. So right now, it doesn't really I think there's gonna be any obviously, we factored in everything we believe is to be the most likely case in our Q4 guide that we described earlier. So it's hard, you know, no one's got a crystal ball for kind of what happens know, with this they bring the government back and kind of where they reprioritize their dollars. But yeah, I think we've been very fortunate so far that we've really not felt any significant impact from the shutdown to date. Andre Madrid: Got it. Got it. That's helpful. And oh, go ahead. Sorry. I didn't mean to cut you off. Peter Beck: The only sorry, sir, Joe. The only thing I'd add is, like, the requirement for what is the STA is doing is not diminishing. It's expanding. So, you know, it's an important program. So as far as, like, the need for the program, it's that's not getting smaller. Andre Madrid: Got it. Got it. That's fair. I'll leave it for one. Thanks, guys. Peter Beck: Thanks, Andre. Operator: The next question comes from Jeffrey Van Rhee with Craig Hallum. Please go ahead. Jeffrey Van Rhee: Great. Thanks for sneaking in here. The Andy, on the on the margin, gross margins for Q4 and the guide, it looks like maybe a couple of 100 basis points of sequential improvement. Is that just kind of break it down maybe a little more? Which side of the business you're expecting that sequential increase? And then any sort of even inklings as to maybe revisions on what you think target gross margins might be for either of those two segments? Peter Beck: Yeah. So, you know, Adam Spice: the gross margin trend, you know, in the proven sequentially Q3, Q4, again, is driven really by a mix where as we get more scale into our Electron business, we've always talked cadence being super important for the margin profile for that business because there's so much fixed cost related to it. So as you scale cadence, and Pete kinda, you know, mentioned earlier in his comments that we're expecting you know, hitting a new record for launches in the year. So, that's all good for overhead absorption. So think of it as there's a lot of good underlying dynamics going on within the launch business as far as, you know, size of the backlog, the ASP increasing within that backlog. We're getting greater overhead absorption benefits. So that's really kind of what's driving the strength in the launch business. And as it becomes a bigger piece of the mix in Q4, that's really the biggest fact. I would say that within our space systems business, the trend of margins actually has been quite solid in that as well. You know, we talked in prior calls about how we've made very, very significant improvements in our gross margins from our Solero solar business. You know, we've kinda talked about a long-term target there of you know, we get to 30 points of gross margin. That was kind of an aspirational target, and I think we're very comfortable that we're, you know, we're very close to that. I think we're at we think about revisiting that one upward a bit, I think. But overall, you know, we stay we still believe that we that our launch business on Electron First, you know, has the potential to be a 45 to 50 non-GAAP gross margin business. We think long-term Neutron has the ability to be at least as good as that. Helped by the reusability nature of that vehicle. And then on the space system side, you know, it's really two different elements that kind of have different margin characteristics. On the space systems components or subsystems business, that has a wide range with solar kinda being at the low the lowest end of that, and, again, around 30 points. Hopefully, we can push that a little bit higher. And then for some of our other components business, where we have margins that are, you know, well north of 60 in some cases, 70 points margin. And I think overall, that brings the gross mow market profile for that subsystems business around, call it, low to mid-forties. The satellite manufacturing business, because of the nature of those programs, you know, we're able to take what for many people is either high single digit or low double-digit gross margins and have those more in, I'll call it, the I'd say, 25 to 35 points depending on the programs because of the level of vertical integration that we bring because those same components that we sell into the merchant market at very high margins we basically obviously design into our platforms. So I think longer term, I think we still see again, again, a gross margin business from launch that is in the probably, if you wanna call it, the 50% range and for space systems. You know, probably in the I'd say, the 40, maybe low forties percent gross margin range. So puts in a nice spot overall. But I think it's also helpful to note that, you know, in space systems, it's not as r and d intensive. As the launch businesses when you're getting a new vehicle established. So the operating margins or contribution margins for the space systems businesses, even the ones that aren't kind of in those high gross margin ranges is still quite healthy. And then I think on again, I think the margins for launch speak for themselves. Got it. Got it. Very helpful. Last one then on space systems. Jeffrey Van Rhee: The can you talk about the pipeline? Obviously, tranche two, tranche three are big needle movers. But what's the next layer beneath that like? Like, how many, you know, 8 figure, 9 figure deals? Just some semblance of what the distribution of deal sizes that are later stage in the pipeline would be helpful. Thanks. Peter Beck: Yeah. So there's you know, we're always chasing a variety of stuff. So I think the, you know, the intelligence community and the DOD is obviously big opportunities for us. And, you know, things like Geos really provide us new new kind of access and visibility to some things that aren't very visible at all. So on that side of the equation, I think there's really good opportunities for us there. But I would say also like, if we think about the, you know, the bids that we've got in play, there's also some extremely meaty commercial bids as well. So say it's fairly well distributed across the opportunity is fairly well distributed across both commercial and defense. But there's always the big meaty programs. But, I mean, you know, all of the business units, we kind of run the business units like little start-up companies as well. And, you know, they're expected to grow really healthily every year. And, you know, you see new products coming on all the time because know, as they as they reach saturation with their customers, these business units have to develop new products to continue that growth. So this year alone, I think it's been a really, really great year. There's we set we set goals for those units. And then there's kind of the Pete stretch goal. And, you know, they've all all met or exceeded the, you know, the Pete stretch goal this year. So you know, it's not it's not just about I guess what I'm saying is not just about these big big projects. You know, they're obviously important needle moving, but just the underlying business and just continuing to drive that growth in all the business units. And the underlying business is equally as important. Jeffrey Van Rhee: Got it. Got it. Congrats on the great performance. Thanks. Operator: The next question comes from Anthony Valentini with Goldman Sachs. Please go ahead. Anthony Valentini: Hey, guys. Thanks for getting me on. Just a quick clarification question on the backlog and Neutron Is there anything in the backlog today for Neutron? Or is it zero? Adam Spice: Anthony. We do have, we have launches in backlog for Neutron. There are two fully priced missions in the backlog right now for Neutron. There's a third contracted mission, which is right now anticipated to be a rideshare. But we don't have that in backlog because we don't do that until we've actually added the payloads into the manifest. And, again, we've got a primary customer, but not on that third cusp on that third launch, we've not put any in the backlog yet. Anthony Valentini: Okay. That's helpful. Is there a way to think through, you know, how that backlog Neutron specifically ramps up? Like does that happen once you guys do that first R and D launch? Or is it a certain number of successful launches? Just historically, and, like, what you guys know about the industry, like, how does that start to flow through? Peter Beck: Yeah. It's a good question, Anthony. Mean and I think we sort of alluded to this in one of the previous questions. It's like we don't want to ever let anybody down. And, you know, when they're looking to buy neutrons, aren't typically looking for one. Looking for many. So, know, there you know, a number of customers are looking to see that the vehicle does work and it scales. So and, you know, we work very closely with those customers we go along. And these are both commercial and government customers. So I think the unlocking point is certainly a successful flight. In a number of these contracts. But also you know, that you know, we want to make sure we don't let customers down And the last thing we want to do, and we've talked about this previously, is customers will be happy to book a bunch of neutron at, like, half price. And we're just not gonna do that. Anthony Valentini: Right. Okay. That makes a ton of sense. And then last one for you, Peter. As I'm thinking through the opportunity set, on the Tranche three transport layer and just looking back at the previous tranches, there's competition from the defense prime, and some of these new space tech companies, including yourself. I'm curious how you think through the differentiators for Rocket Lab USA, Inc. and when you guys are presenting to the customer, what you think really separates you from the rest of the group? Peter Beck: Yeah. So I think one the big separators and one of the reasons why we you know, we won a prime spot on our first SDA contract is that you know, we're so vertically integrated that if we look across all of these programs, they're typically plagued by delays. You know, not so much cost overruns because, you know, it's a firm fixed price, but certainly delays. And, you know, when you control so much of your own supply chain, then you know, if there's a delay in a component, you get to choose what resource you swell or push around to solve that problem. So I think that that's a big element is just schedule certainty Obviously, Adam talked about some of the margin and margin stacking, so price is a big element as well. But at the end of the day, all this stuff's gotta work. And this is where, you know, your reputation in this industry is just so critical and why we just never ever deviate from putting ourselves in a position where that can get compromised. You know, when people buy a piece of Rocket Lab USA, Inc. hardware, know, firstly, it turns up and it looks great, and it works. And, you know, in an industry where that seems to be challenging, I think, you know, that's an important element. And also, finally, there's a set of requirements, and then there's how you go about solving those set of requirements. Like, you know, with the technologies that you can bring to bear. We just have such a war chest of technologies that we can bring to bear to provide solutions to meet everybody's requirements and then some. That I think, you know, it puts us in a really strong position. Anthony Valentini: Great. Thank you so much for the, the thoughtful response. Peter Beck: Of course. Operator: The next question comes from Kristine T. Liwag with Morgan Stanley. Please go ahead. Okay. Good evening, everyone. Peter, Adam, from your commentary from our previous question, I mean, it sounds like you're not going to go out there and go buy a spectrum. So first question, is that a fair assessment of your statement earlier? And also second to that, you know, with over a billion dollars in liquidity, and, you know, with the broader and deeper capability set in space systems, What's your priority for m and a? Peter Beck: Yeah. So we look at a number of things, Kristine. So you know, I would say that there's always opportunities for tuck-ins, and you've seen that with things like Manaruk where you know, that gives us a capability that we didn't have. So we'll always do those. But I think the Geost acquisition is a really good example about you know, acquiring a company that just brings us into a totally different customer set and a totally different capability and also puts us at a totally different level know, if you think of the big traditional primes, one thing that sets them apart from lots of little space companies is they own the payload. So, you know, we'll continue to look at for opportunities there where we can own the payload. And really drive the missions. And look, we're always looking at big needle moving stuff as well. And you know, we always look for things that we think, you know, have a step change in either the scale or other elements of the company. So you know, that's the way we look about you know, that's the way we think about it. Kristine T. Liwag: It's been super helpful. And, look, you know, when you look out into the market, you know, it's hard not to see what's SpaceX is doing in terms of their path towards that end to end, you know, space and recent So when you look at your portfolio today, I mean, it looks like you're kinda marching in a similar direction. With your Flatellite product set too, and now you've got, you know, these additional payloads. Where do you see your role in terms of that industry? You know, do you at some point, wanna own your own consolation and be able to sell more of that as a service. How do we think about where you are in this journey And, you know, what does the exit look like? Peter Beck: Yeah. We've just sort of quietly and methodically going about making sure we amass all of the kind of the strategic elements we need to ultimately deploy things at scale. So Neutron is really important element of that. If you look at look at others, you know, access to space and low-cost rapid and reliable access to space is kind of the place you start. Neutron gives us that multi-tonne capability. And then as you point out, you look at the space systems growth then really at this stage, I don't think there's any satellite we can go and build. I mean, we've got two going to Mars here shortly. So if you, you know, wanna talk about complexity of spacecraft. So I think from an engineering perspective and a component perspective, all of those kind of bases are loaded. And we'll be very strategic about how we think about the next step, which would be building our own constellation and whether we're providing services or infrastructure, I think, is yet to be determined. Kristine T. Liwag: Great. Thank you very much. Operator: The next question comes from Peter Arment with Baird. Please go ahead. Peter Arment: Nice results, Pete and Adam. Just a quick one, I guess. On Electron, of the demand environment. I think you've previously talked about the demand for around 30 flights a year. I was wondering if that still kind of holds just given the uplift that we've seen tied to kind of all the national security launches and kind of what's going to be expected with Golden Dome and additional testing if there's upward bias to that and it certainly seems like it. Thanks. Peter Beck: Yeah. Hi, Peter. I mean, look, I think that's fair. If depending on how quickly and what scale Golden Dome grows to, think we're in a very strong position to provide critical services there. And, you know, we see nothing but upward trajectory in both government, taste, and commercial launches for that product. Peter Arment: Appreciate that. And just a quick follow-up. For the comments on the Archimedes, the testing that you've been doing. Could you give us a little context? Is that much different in terms of the rate that you did originally with the retrofits around Electron? Thanks. Peter Beck: Yeah. It is. It is at a much, much higher intensity and rate because for Rutherford, we only had to do half the job, meaning that we only had to go up. For Archimedes, we have to go up and down. So it's like twice the amount of environments, twice the amount of run box. And twice the amount of qualification. Peter Arment: Appreciate the color. Thanks, guys. Operator: This concludes our question and answer session. I would like to turn the conference back over to Peter Beck for any closing remarks. Peter Beck: Great. Thanks very much, and thanks for the thoughtful questions. So before we close out today, I would like to share that Matt Oko is finishing up his time on the Rocket Lab USA, Inc. board of directors. Matt's tenure as a member of the board will end November 30. Matt is a cofounder and managing partner at a deep tech venture capital firm, DCVC, and was one of Rocket Lab USA, Inc.'s earliest investors serving as a member of the board since August 2021. And as a member of the legacy Rocket Lab USA, Inc. board since January 2017. So since then, we've been incredibly grateful for his leadership and his guidance as we grew Rocket Lab USA, Inc. together from a small start-up to a publicly listed company. Now the world's one of the world's leading global space firms. And, look, I just personally also want to thank Matt for backing us from the beginning, and wish him all the best in his continued work in deep tech as he transitions out of Rocket Lab USA, Inc. Otherwise, here are some upcoming events and conferences that the team will be attending. We look forward to sharing more exciting news and updates with you there. And thanks for joining us That wraps up today's call, and we look forward to speaking with you again soon and sharing some more progress at Rocket Lab USA, Inc. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Scott Wisniewski: Good day, and thank you for standing by. Welcome to the AST SpaceMobile third quarter 2025 business update call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, Scott Wisniewski, president of AST SpaceMobile. Please go ahead. Scott Wisniewski: Thank you, and good afternoon, everyone. Today, I'm also joined by Abel Avellan, CEO, and Andy Johnson, CFO and Chief Legal Officer. Let me refer you to Slide two of the presentation, which contains our Safe Harbor disclaimer. During today's call, we may make certain forward-looking statements. These statements are based on current expectations and assumptions and, as a result, are subject to risks and uncertainties. Many factors could cause actual events to differ materially from the forward-looking statements on this call. For more information about these risks and uncertainties, please refer to the Risk Factors section of AST SpaceMobile's annual report on Form 10-K for the year that ended 12/31/2024, Form 10-Q filed with the SEC on 05/12/2025, Form 10-Q filed with the SEC on 08/11/2025, the Form 10-Q filed with the SEC today, as well as other documents filed by AST SpaceMobile from time to time. Also, after our initial remarks, we'll be starting our Q&A section with questions submitted by our shareholders. For those of you who may be new to our company and mission, there are nearly 6 billion mobile phones in use today around the world. But many of us still experience gaps in coverage as we live, work, and travel. Additionally, there are billions of people without cellular broadband and who remain unconnected from the global economy. The markets we are pursuing here are massive, the problem we are solving is important and touches nearly all of us. In this backdrop, AST SpaceMobile is building the first and only global cellular broadband network in space to operate directly with everyday unmodified mobile devices and supported by our extensive IP and patent portfolio. It is now my pleasure to pass the conversation over to Chairman and CEO, Abel Avellan, who will go through our activities since our last public update. Thank you, Scott. Abel Avellan: AST SpaceMobile delivered standout progress in the third quarter and we continued seizing the advantages of our leadership position in the space-based direct-to-device industry. We're executing against all of our key initiatives in this rapidly developing market, especially on deepening our commercial ecosystem with customers and partners over the past few months. We continue to build commercial momentum, most recently highlighted by our definitive agreements with Verizon and Saudi Telecom Group. Scott will discuss our business progress in more detail, but I want to highlight the traction we are achieving with our commercial initiatives. We signed a definitive commercial agreement with Verizon in the United States and STC in Saudi Arabia and other key markets across the Middle East and North Africa. These definitive commercial agreements demonstrate the meaningful progress in our commercial ecosystem, which includes agreements with over 50 MNO partners with nearly 3 billion subscribers globally. These agreements are the product of our trusted long-standing relationship with both partners and their confidence in our ability to deliver space-based cellular broadband connectivity to their subscribers. Our definitive commercial agreement with Verizon is an extension of our transformational partnership which has been cultivated over several years, including the $100 million commitment in May. The agreement also provides us with a formal commercial pathway to provide direct-to-device cellular broadband services to their customers starting in 2026. Our opportunity to bridge the digital divide and target 100% coverage of the Continental United States has never been stronger. Together with partner AT&T, in premium 850 megahertz low band spectrum. Our definitive agreement with STC provides us with a long-term partner in a key region with a large geographical area, significant population growth, and a strong need for broadband connectivity. More broadly, our ten-year long-term agreement is a promising look into how AST SpaceMobile can collaboratively shape the future of direct-to-device mobile connectivity and we continue to grow our mobile network operator partner ecosystem. Our direct-to-device satellite technology enables native cellular broadband capabilities directly to modified mobile devices including voice, text, data, video, and full internet access to native cellular apps. As an example of our native cellular capability, we recently completed a Blue Bird satellite-enabled technology milestone with Verizon, completing direct voice and video calls as well as two-way RCS messaging between standard and modified smartphones. This follows additional milestones with Bell Canada in anticipation of a broader commercial rollout. Specifically, we showcased Canada's first successful space-based direct-to-cell voice over LTE call, video call, and other broadband data and video streaming. We believe Canada will represent another attractive market for our direct-to-device cellular broadband service. Space-based cellular broadband connectivity is an industry that we invented. And a recent technology milestone with Verizon and Bell follows several breakthroughs using our direct-to-device technology, including the first-ever 4G and 5G voice calls, voice over LTE calls, live video calls, streaming full Internet access, and tactical non-terrestrial network connectivity for military and defense from space to modified smartphones. Our direct-to-device cellular broadband network will help our partners deliver on one of their highest priorities, which is extending connectivity for their customers. As part of our effort to deliver on those priorities, we are advancing partners and ecosystem network integration and we progress towards service activation in key partner markets. Specifically, we have already begun activation in fixed network locations and expect to continue scale deployment efforts early next year as we progress activation of an intermittent nationwide service by early 2026 and prepare for continued service later in 2026. Taking a step back, AST SpaceMobile has now built the largest and most diverse commercial partner ecosystem in the industry. Our network includes agreements and understanding with over 50 MNO partners with nearly 3 billion subscribers globally. We have access to some of the most important markets covered and exposure to billions of subscribers as well as long-term valuable spectrum. A key strategy during 2025 has been to deepen this partner ecosystem through definitive commercial agreements. Today, we're happy to disclose for the first time that we have secured over $1 billion in total contracted revenue commitment from our commercial partners. This represents an incredible snapshot into how our business is developing and not only to the commitments of our partners have AST SpaceMobile, but also the way they are starting to think about the financial impact of this massive opportunity. Turning to manufacturing and launch. Our manufacturing efforts are on track with our goal and expectations. Bluebird 8 to 19 are in various stages of production and we are on schedule to complete 40 satellites equivalent of microns by early 2026, bringing us to Blue Bird 46. Leveraging our 95% vertically integrated manufacturing, we continue to accelerate and improve our manufacturing process and expect to exit calendar 2025 at a manufacturing cadence of six satellites per month. A detailed cadence of our 2025 and 2026 deployment plan is shown in the accompanying quarterly presentation found on our IR website. These efforts are supported by our steadily expanding manufacturing footprint soon to be over 500,000 square feet of manufacturing and operations space supported by a global workforce of nearly 1,800 people. We had shipped Blue Bird 6 to its launch site in India with launch expected to occur in December. We also expect to ship Blue Bird 7 to Cape Canaveral later this month with launch anticipated shortly thereafter. Additionally, we continue to expect five Orbital launches by 2026 with launches every one to two months on average to reach our goal of 45 to 60 satellites launched by 2026. Additionally, we anticipate our novel ASIC chip will be integrated into our Block 2 Blue Bird satellite during Q1 2026, enabling peak data transmission speed of up to 120 megabits per second, which is a throughput large enough to achieve the native cellular capability the customer is used to having, even when they are in areas connected by terrestrial networks. On our comprehensive global spectrum strategy, since our last earnings call, we closed our deal to acquire global S Band Spectrum Priority Rights and our deal to acquire long-term access to premium lower mid-band L Band Spectrum in the U.S. that has been approved by the court. AST SpaceMobile owned and shared spectrum profiles including access to 1150 megahertz of low band and mid-band tunable MNO spectrum globally, 45 megahertz of AST SpaceMobile license MSS lower mid-band spectrum, 60 megahertz of AST SpaceMobile license, S band spectrum priority rights, and low band spectrum allocated by our MNO partners. Between our own and mobile network operator partner spectrum, we had the right to access over 80 megahertz of paired and high-quality spectrum in the United States alone, more than any other direct-to-device provider today and in the future. We have developed our comprehensive spectrum strategy by balancing costs and a disciplined capital allocation by making smart and cost-effective investments in spectrum, we are able to preserve the value of our spectrum assets while protecting the long-term viability of our business. This robust portfolio is expected to create a durable competitive advantage for AST SpaceMobile. Spectrum enables us to provide more lanes for direct-to-device cellular broadband services at a faster speed and a greater capacity. And lastly, we strengthened our financial footing significantly in the last few months, reaching over $3.2 billion in cash and liquidity as of quarter end. Pro forma for our recent financial transaction and available liquidity under the ATM facility. We continue to fortify our capital base in a responsible way while being in long-term shareholder value. As a result of our funding effort, we are now funded from cash on hand to enable continued service in worldwide key strategic markets. In summary, our manufacturing and launch activities are on plan, our commercial activities are accelerating. We anticipate an active manufacturing and launch cadence for the remainder of 2025 through 2026 as we progress towards our stated goal of 45 to 60 satellites for continued service coverage in key markets like the United States, Europe, Japan, Saudi Arabia, and other key strategic markets like the U.S. Government. We're advancing our commercial activities on the ground, installing gateways, integrating them into partner networks, and completing key technology demonstrations around the world as we scale our constellation. We have built moats around multiple aspects of our business, including our extensive IP portfolio, approximately 3,800 patent and patent-pending claims, satellite technology partner ecosystem, comprehensive global spectrum strategy, and a strong capital base. I could not be more excited for what's to come as we continue to run commercial activity going into 2026. Let me now turn the call over to Scott to provide more detail on our progress and initiatives. Scott Wisniewski: Thank you, Abel. We have been making rapid and continuous progress against our key business initiatives. Specifically, the third quarter was marked by milestone achievements as we develop our commercial ecosystem, delivering on our previously stated goals of definitive commercial agreements, non-dilutive service prepayments, and long-term revenue commitments. Most significantly, we are thrilled to announce today for the first time that we have now secured over $1 billion in aggregate contracted revenue commitments from our commercial partners. These revenue commitments have always been integral to our comprehensive capital-raising strategy, but also provide a powerful validation of our ecosystem partner strategy, our business model, and the massive size of the direct-to-device market we are creating. For some context, AST SpaceMobile has incredible strategic assets, including our breakthrough technology, vertically integrated manufacturing capabilities, long-term spectrum access, and an ecosystem partner strategy that has set the stage for our commercialization strategy, which is really taking shape. Since our last public update, we signed two additional definitive commercial agreements with Verizon and Saudi Telecom Group. These agreements represent years of relationship building and organizational alignment and are the business and legal frameworks through which future services and revenue will flow. These agreements represent a key step in our commercialization journey as we significantly expand our relationship with two additional incredible operators pulled from our ecosystem of over 50 leading global mobile network operator partners who collectively cover nearly 3 billion subscribers. This adds to previous definitive commercial agreements signed with AT&T and Vodafone. Our strategy is to continue to sign similar agreements with more of our top partners on a rolling basis as we prioritize initial global services on the AST SpaceMobile network. As you know, Verizon is a very important partner as we develop the US market and target full geographic coverage of the Continental United States. This agreement, of course, builds on the strategic partnership with Verizon announced last year with a $100 million commitment. Together with AT&T, we plan to deploy services next year with two of the major US mobile network operators. Moving to Saudi Telecom Group, or STC. This is an innovative leading mobile network operator partner in the Gulf region. Who we first signed an MOU with in early 2023. This agreement signed just last month provides a framework for direct-to-device services across The Middle East and North Africa. Importantly, this agreement also included a prepayment of $175 million to be made by the end of 2025 and a significant long-term commercial revenue commitment. Abel Avellan: Lastly, Scott Wisniewski: we announced our intention to further deepen our ties in Europe through the SATCO joint venture with Vodafone. Announcing a constellation of mid-band satellites dedicated for the EU. These satellites will provide a scalable, European satellite mobile broadband service for use by mobile network operators. And for the benefit of all European citizens, businesses, and public sector organizations. This step represents further accretive organic growth opportunities available to the AST SpaceMobile platform facilitated by our first-mover advantages in space-based cellular broadband, our development of the commercial ecosystem as well as our recent strong capital markets to growth capital. SATCO, based in Luxembourg, continues to scale with key leadership and employee hires accelerating our commercialization efforts in Europe, with MOU signed in 21 of 27 member states to date. Linking our strategies back to third-quarter performance, we grew to double-digit revenue with approximately $15 million of recognized revenue, on the back of milestones in our U.S. Government contracts, and delivery and installation of gateway equipment. Versus approximately $2 million in the prior quarter. This represents continued progress with our U.S. Government work, and the acceleration of gateway deliveries and installations with our mobile network operator customers in the U.S. and globally. With this progress and our expectations going into year-end, we continue to expect second-half 2025 revenue in the range of $50 million to $75 million. We also replenished the pipeline of gateway bookings with approximately $14 million in new gateway equipment sales during Q3, and we continue to believe we will book over $10 million of new gateway equipment sales per quarter on average. For a little more detail on our U.S. Government business, our breakthrough technology continues to garner interest from many U.S. defense and government entities. For both dedicated and dual-use applications. Our differentiated technology and growing list of capabilities across communications use cases fit nicely within the framework of the current administration's space and on-orbit plans. This is the most positive backdrop for US government investment in space since the space race of the 1960s. We see no change to this massive trend over the past few months, despite the government shutdown. In fact, we recently received an award as a prime contractor with the US government. Subject to final contract negotiations when the government reopens. In summary, we continue to ramp our US government efforts as we plan for large contracts going forward. Overall, we are encouraged with our commercialization progress and believe our recent achievements across both commercial and government initiatives serve as important signals of our continued positive momentum. I am now happy to pass the call over to Andy to walk through our financial update. Thanks, Scott, and good afternoon, everyone. The progress on commercial objectives, service activation, Andy Johnson: scaled manufacturing and launch of our Block 2 Blue Bird satellite described by Abel and Scott was complemented by the continued strength and flexibility of our financial position during 2025. This year has been characterized by rapid growth at AST SpaceMobile. The transition from an emerging R&D-focused startup to an operating company on the path to optimizing manufacturing and launch cadence has been hard yet invigorating and gratifying work for our now nearly 1,800-person worldwide workforce. The speed at which we are moving across all operational fronts to manufacture and launch a constellation of 45 to 60 Block 2 Bluebird satellites creates a dynamic financial backdrop that I am pleased to share with you in more detail today. We continue to balance a prudent approach to our spending while moving quickly to protect and capitalize on our first-mover advantage of bringing space-based broadband connectivity direct to unmodified smartphones in the rapidly growing direct-to-device market. This intentional focus on investing in our operational growth led to increased operating expenses in Q3 while capital expenditures decreased from the prior quarter as capital commitments ebb and flow as expected from quarter to quarter. Importantly, this quarter marked the start of our revenue ramp with revenue from commercial hardware sales, services, and contract awards from our U.S. Government milestone achievements. Moving to the operating and capital metrics slide, let's review the key operating metrics for 2025. On the first chart for the third quarter, we incurred non-GAAP adjusted operating expenses of $67.7 million versus $51.7 million in the second quarter. As a reminder, non-GAAP adjusted operating expenses exclude certain non-cash operating costs, including depreciation and amortization and stock-based compensation. This quarter-over-quarter increase of $16 million resulted from a $7.6 million increase in adjusted engineering service costs, a $5.5 million increase in the cost of goods sold, and a $3.8 million increase in adjusted general and administrative costs, which were partially offset by an approximately $900,000 reduction in R&D costs. This variance in adjusted OpEx in Q3 was above the quarterly guidance I provided after the second quarter due in part to the approximately $7.1 million of non-transaction-related expenses including our L band, and S band spectrum transactions, the non-recourse senior secured delayed draw term loan facility and now completed pre-regulatory approval bridge loan in addition to the continued work of standing up our joint venture with Vodafone we launched in the second quarter. The Q3 adjusted operating expenses guidance I gave in our last earnings call did not include any cost of goods sold related to gateway sales. If you compare our Q3 operating expenses on that same basis, by excluding the $5.5 million in cost of goods sold, our run rate operating expense would be $55.1 million which is approximately $5 million more than the run rate guidance for adjusted OpEx previously provided. Turning towards the second chart on this slide, our capital expenditures for 2025 were approximately $259 million versus $323 million for 2025. This figure was made up of approximately $231 million of capitalized direct materials, labor for our Block 2 Bluebird satellites, and payments made in connection with multiple launch contracts with the balance relating to facility, and production equipment expenditures. This amount was just below the midpoint of the quarterly guidance of $225 million to $300 million that I provided during our last earnings call. For 2025, we estimate there are adjusted operating expenses excluding the cost of goods sold will come in at a similar range in the mid $60 million as we continue to design, manufacture, launch, and operate our growing satellite constellation as well as pursue the monetization of our L and S band spectrum usage rights. We expect our capital expenditures to increase slightly in 2025 as compared to the third quarter to a range of $275 million to $325 million primarily driven by the timing of launch payments related to our near-term launches as I've previously explained, do vary from quarter to quarter. We continue to estimate that the average capital costs including direct materials and launch costs for our constellation of over 90 Block 2 Bluebird satellites will fall in the range of $21 to $23 million per satellite. This is the same range of per satellite cost that I've provided since our Q1 2025 earnings. Our cost per satellite estimates are subject to fluctuations based on dynamic geopolitical factors, which could impact our costs. Within our go-forward OpEx profile, we continue to believe that the operation of a constellation of 25 Bluebird satellites will allow us to enable non-continuous space mobile service in selected targeted geographical markets and should enable us to potentially generate cash flows from operating activities from both commercial and U.S. Government opportunities to further support the buildup of the remaining constellation. As a reminder, the timing of the changes in our adjusted operating expenses and capital expenditures, as I have just described, could be delayed or may not be realized due to a variety of factors. Our revenue ramp began in earnest during the third quarter and we expect it to continue to grow in Q4. With respect to revenue generation, we believe we can enable continuous space mobile service across key markets such as the United States, Europe, Japan, and other strategic markets with the launch and operation of approximately 45 to 60 Bluebird satellites and additional strategic worldwide markets with the launch and operation of approximately 90 Bluebird satellites. Further, as we continue to launch and deploy our constellation, we will continue to support U.S. Government applications currently ongoing and accelerating as our constellation grows. In the third quarter, we recognized GAAP revenue of $14.7 million primarily driven by gateway hardware sales and various commercial and US government service milestone achievements. Additionally, in Q3, we completed initial technical trials with an MNO partner which revenue will be accounted for as we provide future services. We are reiterating our belief that we have a revenue opportunity for 2025 in the range of $50 to $75 million and expect revenue in Q4 will continue to be driven by gateway equipment sales, achievement of U.S. Government milestones, and recognition of initial commercial service revenue. The achievement of our revenue plan remains subject to several contingencies including: one, the successful launch and deployment of Block 2 Blue Bird satellite related to US government applications, contractual milestone achievements, two, critical gateway equipment sales to our MNO partners in support of their anticipated commercialization efforts of Space Mobile service, and three, service revenues in connection with the activation of our commercial service provided by our existing and planned deployed and operational satellites. There can be no assurances that we will achieve any or all of these objectives and our actual revenue results will vary based on a multitude of factors. Finally, on the final chart on the slide, a pro forma basis inclusive of cash raised in October, via the convertible notes offering with a 2.00% ten-year coupon and effective strike price of $96.3 per share and the currently available liquidity under the at-the-market or ATM Abel Avellan: facility, Andy Johnson: our cash, cash equivalents, and restricted cash as of 09/30/2025 was approximately $3.2 billion. Primary drivers for this cash increase include execution of two convertible notes offerings in July and October for a total of approximately $1.6 billion of net proceeds, approximately $389 million net proceeds raised from the 2025 ATM facilities during Q3 and through October, and the unwinding of the cap call that we purchased earlier this year in connection with the January 2025 convertible note offering for $74.5 million of proceeds to the company. In addition to the work we did raising additional capital via the recent 2% ten-year convertible notes, we also took action since our last earnings call by further reducing our outstanding debt related to the January 2025 convertible notes due in 2032. Among three equitization transactions, including another $50 million equitized in October, we have now converted $410 million of the outstanding $460 million of the 4.25% convertible notes due in 2032 into 17.3 million Class A shares. We now have just $50 million of outstanding notes related to our January 2025 convertible notes due in 2032. I should also mention that subsequent to Q3 in October, we put in place a bridge facility to manage one-time payments related to the Ligado L Band usage rights transaction ahead of planned funding by the SPV delayed draw term loan upon receiving FCC approval. Given the current strength of our balance sheet that now includes cash, cash equivalents, and restricted cash and available liquidity under the ATM facility of over $3.2 billion on a pro forma basis as of September 30, we are fully funded to manufacture and launch a constellation of over 100 satellites to provide worldwide space mobile service. The combination of increasing commercial and government opportunities, rapidly scaling manufacturing and satellite launch operations, and a fortified balance sheet position AST SpaceMobile for an exciting end to 2025. Through 2025, we remain on target to execute against our plans to bring space mobile service to market in the coming periods as we begin to launch our Block 2 Bluebird satellites beginning in December. And with that, this completes the presentation component of our business update call and I'll pass it back to Scott. Thank you. Scott Wisniewski: Thank you, Andy. Before we go to the queue of analyst questions, we'd like to address a few of the questions submitted by our investors. Operator? Can you please start us off with the first question? Operator: Kevin from Vancouver asked, what is the difference in processing capacity between Block 2 FPGA satellites and Block 2 ASICs? Abel Avellan: Hi, Kevin. That's a great question. Listen, we have been improving on a tenfold steps our processing capacity for all the satellites. We started with Scott Wisniewski: 100 Abel Avellan: megahertz on BlueWalker 3. By the way, it is still working and functioning. Then to upgrade it to one gigahertz which is the current so a tenfold increase with the current satellite that is occurring in orbit in operations. And then the one that we're starting to launch immediately here have another increased factor of 10 GHz going up to 10 GHz from 9 GHz. Another 10-time factor. When you combine the processing capacity that we have on the satellites with AI, with AI engine that we're developing to basically manage very efficiently the spectrum allocation of both power and bandwidth. This is a very this is the way that we do the true broadband connectivity from the space. And for that, we develop our own chip we call it the AST-5000. That had a processing capacity of 10 gigahertz with enhanced features to take the most of that 10 gigahertz using our AI engines. Operator: Alvin from Massachusetts asked, as a forward-looking investor, would like to know if the company is weighing the benefits of AI for its spectrum management. Abel Avellan: Hi, Alvin. We are more than weighing the benefits. We're working on it. We are implementing our AI engine for managing and administrating the spectrum. Each satellite had a capacity of 10 gigahertz processing bandwidth, but we feel that effectively we multiply that by several factors by effectively managing the allocation of spectrum and resources dynamically across the network using AI. And that's something that we've been working on for a while. Thus, the system and the satellite have already been designed to have all the hooks and all the management capability to trade maximum benefits of AI on spectrum management. When you think about that in average terrestrial rest of the operators have, you know, per market in countries like the United States, maybe 250 megahertz to deploy spectrum between our own spectrum and provided by the operators. Just in the United States alone, we have access to around 80 megahertz. We will have access to around 80 megahertz of spectrum, 50 to be our own. And then you add our AI engine to basically multiply that spectrum and make it much more efficient, this is a very significant new leg of the telco stack. So, we see a world where you have Wi-Fi, terrestrial, and now with the amount of capacity and spectrum that we can manage with our satellites, and our AI engine to basically effectively use that spectrum, we believe that the usage of satellite becomes more and more relevant as we add satellites and now we add spectrum to the system. Operator: Kevin from Oregon Ave. With the next series of launches starting possibly next month at Cape Canaveral. I have been wondering if or how AST SpaceMobile will structure a future launch event for retail shareholders. Scott Wisniewski: Thanks, Kevin, for the question. As you can tell from the topics on this call, you know, we're very much in a commercial mindset at this point and moving towards service delivery. But nonetheless, the launch campaign is very exciting, and we're very excited as well. We just shipped Bluebird 6. We're getting ready to ship Bluebird 7. And the rest of the Bluebirds are starting to come out of the factory. So we're very excited about the launch campaign. It's going to be a fantastic stretch of launches. And just like with our last launch where we had about a thousand retail investors, we plan to invite as many as we can to the launch and it's in each of the launches. So it's going to be a great campaign. We're super thrilled. And know, five launches, before 2026, and our 45 to 60 satellites during 2026. There's going to be a lot of opportunities for retail to come see, and we hope everybody comes along to participate on this journey with us. Operator: Gruber from Zurich asked, despite confirming fully funded for a full constellation through balance sheet cash and future revenue. Why was additional capital raised? Andy Johnson: I'll take that. This is Andy. Thank you for the question. It's clear that 2025 has been a fantastic opportunity for AST to access the capital markets. It's been a great climate for that. And as you point out, we recently completed our third convertible note deal of the year, the first in January, the second in July, and the third one, just recently last month. This is an incredible transaction for us and strengthened the balance sheet. As a reminder, we were able to raise net proceeds of a little over a billion dollars at a 2% coupon with a ten-year term. A convertible note deal that hasn't been done in many, many years. So we're very happy with that result. The opportunity was there. And importantly, you point out, Rupert, that it is true, and we talked about it in the last earnings call, that we were previously fully funded for a constellation of 45 to 60 satellites. What this additional financing does is it provides us the ability to move faster with more flexibility on the balance sheet to go beyond those initial markets of the U.S., Europe, Japan, and others that we talked about at 45 to 60 and to look worldwide in our coverage at a constellation of now being fully funded at 100 plus satellites. So consistent with our STC announcement, we are looking and working hard on commercial opportunities in other strategic markets across the world and our balance sheet is now fortified to provide a runway to manufacture and launch satellites to support that worldwide constellation base. Thank you. Scott Wisniewski: And with that, I'd like to thank our shareholders for submitting those questions. Operator, let's open the call to analyst questions now. Andy Johnson: Thank you. Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Our first question comes from the line of Michael Funk with Bank of America. Please proceed with your question. Andy Johnson: Yes. Hi. Good evening. Thank you for the questions tonight. Congratulations on the funding activity during the quarter and the fully funded status. Michael Funk: So wanted to tie that back to the comments on the prepayments and the $1 billion contract to date. So what is your appetite or thoughts on future pre-deals with customers, other commercial financial benefits to signing these now that you are fully funded? And then maybe part B to the question, if I could, any more broad detail around those prepayment contracts, whether they are for capacity, subscribers? Any details on the broad terms would be helpful. Scott Wisniewski: Michael, it's Scott here. So Oh, hey, Scott. How are you doing? Can you hear me okay? Michael Funk: I can. Thank you. Great. So our strategy for Scott Wisniewski: about two years now has been to pursue our very long funnel of agreements. Right? We have 50 plus agreements with operators globally and we have nearly 3 billion subscribers. So the strategy has been to start with our best partners, our most aligned, build out those relationships, build out those agreements, and bring in prepayments and long-term capital long-term revenue commitments. And so that strategy is unchanged. I think, clearly, we have demonstrated access to the capital markets, but signing up these agreements with prepayments and commitments is still very much our strategy, and we'll balance all those factors appropriately. The way to think about them is relatively simple. You know, prepayments are for commercial services in the near term. And the commitments can be near-term, medium-term, long-term. And we balance each of those on each relationship. And each situation as appropriate. But the strategy is really unchanged. We think it's playing out well, and we're going to continue it. Michael Funk: Great. Thank you guys so much. Operator: Thank you. Our next question comes from the line of Mike Crawford with B. Riley Securities. Please proceed with your question. Michael Funk: Thank you. When do you start manufacturing LBM satellites, do you Mike Crawford: intend to put L band in s band on the same satellites? And also, were you away formal FCC approval before starting to make those Abel Avellan: Hey, Mike. How are you? We plan to have a start well, first of all, when we launch the satellite, they have all the 3GPP frequencies either in the low band or the mid-band including all the MSS band, the L and the S that we had acquired. Our plan is to interleave them between the low band and the mid-band. Now we're fully funded for doing that. And our plan is to start launching mid-band satellites by the end of next year. We want that to be in line with the roadmap that we have for in the U.S., Europe, and Japan, and now Saudi Arabia. And we said we want to use this capital to basically deploy more globally. In both operator spectrum and our own spectrum. And be able to combine in the network both in order to facilitate 120 megabits per second basically everywhere. That we deploy both our bands and the operator bands. Mike Crawford: Okay. Thank you, Abel. And just a follow-up to that is your Saudi Telecom agreement you anticipate to launch commercial services in the fourth quarter of 2026. So but I don't think you specified over what spectrum and then the other part to that is if there were if I heard that there's an additional service revenue commitments on top of the 175 million prepaid? Thank you. You. I will ask Scott to explain the Abel Avellan: how the agreement with STC works, but we are always starting with operator spectrum available in every device. So we focus on using a spectrum that is 3GPP that is already on devices. And that's how we're starting with STC and all our partners here in the U.S., in Europe, in Japan, Japan, will be no different in the Middle East region. Led by Saudi Arabia. Scott Wisniewski: And Alrighty. On the commitment, so you know, we put forward this new disclosure Mike, this quarter of over a billion of commitments. And those are not soft commitments. Those are designed to be very valuable to us and very indicative of future expectations and very valuable both in the debt context and also guidance to the equity market. So when we say we have over a billion of revenue commitments, those are very hard commitments. And so we purposely put that out and we're not going to map that with individual customers or individual contracts. But I would point you to the STC press release. We did mention that there was a prepayment and then also a long-term revenue commitment. So we're not going to map that individual contracts going forward, but it is our strategy and we'll provide updates from time to time as appropriate. But very importantly, we're now over a billion in total, which is a good outcome for us in line with our strategy and we think consistent with the customer excitement about us and the customer excitement about this product into their customer hands. Mike Crawford: Great. Thank you very much. Operator: Thank you. Our next question comes from the line of Brian Kraft with Deutsche Bank. Please proceed with your question. Brian Kraft: Hi. I had a few if I could. First, I know that you reiterated your launch timing guidance in terms of the number of launches you're targeting by the end of 1Q and the end of next year. It seems like the launch timeline though has become a bit more compressed with some delays at the front end this summer and into the fall. Just with that in mind, wanted to ask you about your confidence in achieving the five launches by the end of 1Q and the 60 satellites by the end of next year. Is there any more risk now in that timeline from your perspective? And then separately, I wanted to ask you about the EU satellite constellation announcement. Are these satellites incremental to the plan? Or are they part of the existing 60 satellites by the end of next year? And if they are incremental, can you talk about the timing for launching them and what the CapEx and funding implications are? And then lastly, related to that, there's been some talk in the market about AST winning part of the Iris Squared mandate in Europe. Is that something that is happening? Is that real? Or is that just noise in the market? Thanks so much. Abel Avellan: Okay. Brian, will try to decide the question in three parts. Let me start with the launch I want to start with where are we with manufacturing. So by early 2026, Q1 first part of Q2, we will have 40 satellites built. So we are at 19 satellites at the moment. And we are at a pace of six satellites a month starting in December. And that matched very well with the launches that we had already financially committed. We are in the manifest our partners, our launch partners to take them. Starting the one in India mid-December, and then following the launches from the Cape to add up to the five launches by the end of Q1. So we feel very confident in our launch campaign. This is the culmination of our roadmap where we now have the ability to start launching by Q1 also our 10 gigahertz satellites that we would we plan to take the maximum out of them. In the way that we manage that 10 gigahertz processing bandwidth per satellite. So we feel very comfortable there. As it relates to your question in Europe, I mean, we are an American company. That operates globally. And as such, we're that market by market. Our go-to-market is exclusively through the partners and telcos that we operate with. I mean, including European markets. If you see the reception of what we're doing in Europe, jointly with Vodafone, it has been incredible. 21 of the 25 top operators in Europe have basically committed or expected to be part of the network and the constellation. That we are building as part of our constellation, but we certain features for European MNOs. And then that's really that's add up to the 50 plus agreement that we have globally. Reaching us over 3 billion subscribers that we can reach through the agreement that we have globally. Brian Kraft: So, Bill, just to clarify then. So you're saying that the satellites for this constellation are part of the existing plan. They're incremental. Is that correct? Scott Wisniewski: That's correct. Brian Kraft: Okay. And then can you comment at all on the just the talk about Iris Squared and whether ASC might be part of that? It seems like it you could be well positioned for it given this announcement today. Or over the weekend? Yes. We don't want to comment on new Scott Wisniewski: contract awards or anything like that. But given that we are already building a constellation with multiple capabilities, we think we're very well positioned for any country or any customer that's looking to get capability. Right? The incremental ability for us and the marginal economics for us to build out additional capabilities in Orbit is very high given our tech, given our manufacturing, our, you know, existing ecosystem we've created. So I think we're very well positioned for opportunities like that. But, Brian, we're not going to comment on any new contracts right now. Brian Kraft: Certainly understood. Thank you so much. Operator: Thank you. Our next question comes from the line of Colin Canfield with Cantor Fitzgerald. Please proceed with your question. Brian Kraft: Hey, thank you for the question. Appreciate the sensitivity in terms of kind of Ira's commentary, but maybe just talking about kind of your supply chain versus the European supply chain. I think when investors kind of saw the 2030 targets around IRIS and saw the recent headlines in terms of kind of antitrust and mergers? Abel Avellan: Between kind of the Brian Kraft: we'll say, existing supply chain folks for that domain. It's pretty obvious that that's sort of like back and forth is gonna limit their capability. So maybe without mentioning Iris, if you could maybe talk about kind of how you think about your aperture for additional bands and leveraging the economies of scale that you have to do more than just SL and C band. Abel Avellan: Yes. I mean, well, first of all, our platform, it is designed to basically capture over a thousand megahertz of spectrum that can be tuned across all three GPP bands in the low band and the mid-band. So we've actually designed our network where we can take any band in any country as long as 3GPP alone is in the devices, we can tune into it. So our incremental call for that is practically zero because that is all software defined. In thermal, we will manufacture on how who we We are an American company. We manufacture in the United States. We're based in Midland, Texas. And But we operate globally. So we're in the business of partnering with the MNOs, which are local, are in their local jurisdictions. We partner with them. They provide a spectrum Sometimes we bring our own spectrum and complement that. In order to deliver the best experience possible in the future for the end user device that basically no matter what phone they're using they get a 120 megabit per second. From the space. So that's really who we are. That our strategy. We're Americans. We're based here. We announced we had over 1,800 people working on our system. But yes, we obviously were going to look very aggressively all around the globe. To add spectrum that is in local jurisdictions that is managed by local regulators. And partner with local MNOs to offer the best of our service to each of the customers. But I wanted to make it clear where our focus is we're an American company that operates in America. Brian Kraft: Got it. Got it. And as we think about kind of the sizing of the war chest that ASTs Put Together, That Tracks Know, Kind Of Roughly In Terms Of Cash On Hand To Some Of The Legacy Satellite Communications Debt Levels. How Do You Think About Kind Of Going Out And Acquiring Either Future Spectrum Or Even Or Even Something That Might Kind Of Get You Closer To Free Cash Flow Positive Sooner And And How Do You Think About Kind Of That Potential Takeout Versus Investing Organically And Essentially Kind Of Taking Business Away Through Your Own Investment In IP? Yeah. I Mean, At The Core To Power Strategy Is Partnering With The MNOs. The MNOs In United States, had access to around 80 megahertz of spectrum. Abel Avellan: Call it 50 of our own and another 30 in combination of low band and mid-band spectrum available for us. So that's we believe is significant amount, especially when you start applying AI techniques to maximize it and make it more efficient. You take into consideration roughly by market and roughly each market in United States have around 250 megahertz of terrestrial deployed spectrum we had access to around 80 for satellite, you can see that that's a very significant portion. So we feel that we are very equipped to globally compete. So that's why we acquired the 50 megahertz in The United States. We have priority right for another 60 United States. We're partnering with the global MNO ecosystem in Europe for Europe. So our focus is launching satellite building satellites, we are not at a rate that we feel proud and we meet our business needs, which is around six per month. Of the largest satellites ever launched into LEO. We're doing that We're breaking a world record every time that we take a satellite out of the factory. It's the largest ever launch. So we that's our primary focus manufacturing. Second to that is launching them. And third to them is bring this service globally with a combination of local spectrum from the MNO and our own. To basically offer the broadband experience as close as possible to terrestrial by using space. Brian Kraft: Got it. Thank you for the color. Operator: Thank you. Our next question comes from the line of Chris O'Sheault with UBS. Please proceed with your question. Scott Wisniewski: Great. Thank you. I just want to follow-up on the funding progress I recognize that you were saying you're fully funded, believe, 90 satellites in your queue. But will you continue to be opportunistic? And how should we think about additional capital raises as we go 2026? And then thank you for the color on the 4Q OpEx and CapEx. Just given the ramp in Block two production into 2026, should we view 4Q as a good run rate when modeling out next year? Or will the timing of the launch payments cause spending to fluctuate? Thanks. Hey, Chris. I'll take the first part and then Andy can take the second part. So in terms of fun flows, guess, is the best way to think about it. You know, I would look to the model on the commercial side the comments we've made earlier in the call, where we're laser-focused on bringing in commercial repayments, commercial commitments, and ultimately commercial revenue as soon as We've reiterated our expectations on revenue in Q4. And going into 2026, we certainly expect continued growth. So we are very very focused on the commercial side, which is why you saw the big announcements in the last month or so and the and the new disclosure on commitments? For this call. And so that's definitely our focus. We thought the moment was right, to continue to build the cash balance and accelerate the timelines and run towards the growth opportunity. But in terms of our focus and our energy and where we're going to spend our time, it's 100% with customers, and the prepayments and commitment strategy is the right one. Andy Johnson: And on launch. Scott Wisniewski: Yeah. I would just add that, you know, as Scott said, the focus is commercial. I mean, we're always going to be opportunistic and open-minded about good capital markets, of course. But given where we are now, we have the flexibility to perhaps pull launch forward as opportunity allows and we'll be prudent about that, continue to kind of weigh opportunities on the equity side, We also look at attractive things on the debt side. We believe that that market will open up a little bit as we progress. So it's, you know, our priority is the commercial aspects of the business now and we'll continue to give good thought. But I spend my time thinking about how to prudently deploy that capital that we've now raised on the balance sheet. Scott Wisniewski: Great. Thank you. And I can just follow-up. On the 4Q OpEx and CapEx Is that a good run rate? Rate when we start thinking about next year? Or can that be a little volatile? Andy Johnson: It'll be a little volatile. I think on OpEx, it's pretty darn close. Because we've been growing. So dynamically as the years progressed, and we're at a stage now as a bell and I've said it close to 1,800 employees and workforce and so that OpEx feels pretty good, and consistent. On the CapEx side, it's going to ebb and flow. We've been roughly in that, close range the last couple quarters. But as we get closer to launch, and clearly, '26 is closer, to consistent cadence over every thirty, forty-five days, We'll have some spikes and some lulls and when launch payments are due, I think what our plan is on that though is, you know, we've told you how we feel in Q4, and we're halfway through that quarter. So we have good visibility. And then we'll come out after the year and give you an outlook on '26 holistically, both on OpEx and CapEx when we talk again toward February, early March. Scott Wisniewski: Okay, great. Thank you very much. Operator: Thank you. Our next question comes from the line of Louis De Palma with William Blair. Please proceed with your question. Brian Kraft: Bill, Scott, and Andy, Louis De Palma: congrats on the Verizon and Brian Kraft: SDC definitive contracts. Scott Wisniewski: Thanks a lot. Really appreciate it. Louis De Palma: Do you Brian Kraft: do you think that, the number that, Andy cited having Louis De Palma: 25 satellites in orbit is a good estimate for the number to support beta trials in North America in 2026? Scott Wisniewski: Yes. No, that's right Louis, you know each operator thinks about things a little bit differently, but, yeah, we think that that's a fair proxy plus or minus. Louis De Palma: Great. And also, thanks for the color on the $1 billion in contracted revenue commitments. Is that for the three definitive commercial agreements And you able to disclose the average duration of the revenue commitments? I think the FTC deal was for ten years Is it appropriate to assume that the others were of similar duration? Scott Wisniewski: So we're not going to give up, you know, an average duration, but I would say it does vary When you look at the contracts we've signed, they've been as long as five, six, ten years. Right? So each of the contracts is a little different. And the revenue commitment number that we disclosed is primarily with the definitive agreements, but there is some others and other binding agreements as well. So that's how to think about it. It's going to vary, but it's a decent mix of short-term, medium-term, and long-term. And structured well for the company. Louis De Palma: Thanks, Scott. And in the past, you've discussed how your satellite processing tech can like recombine the disparate spectrum holdings from AT&T and Verizon to create a cohesive near nationwide footprint for approximately five megahertz. How is that technology working in trials? Abel Avellan: No. It is working very well. We are planning to be ready for nationwide service early in the year on an intermittent basis. The level of intermittency will reduce drastically as we keep adding satellites. But you are correct. Our satellite has enough flexibility that we were able to take spectrum from AT&T, spectrum from Verizon. Combine it up, and make a nationwide service or near nationwide service. And that will be combined with our 50 megahertz and our technology has the ability to pick and choose the rest of the spectrum combining with satellite spectrum and offer it as a package to the end user. Louis De Palma: Excellent. So your technology can combine the mobile satellite spectrum in addition to the AT&T and Verizon spectrum? Correct. Abel Avellan: Great. Louis De Palma: Abel, and thanks, Scott and Andy. Operator: Thank you. Our next question comes from the line of Greg Pendy with Clear Street. Please proceed with your question. Brian Kraft: Hey, guys. Thanks for taking my question. Just a real quick one. Given the MNO momentum that you Louis De Palma: seen with SDC and Verizon, I guess your 50 MNOs represent roughly 3 billion subs. If I'm not mistaken, market or the TAMs, probably 5,600,000,000 Just can you talk about given your partnership model, about how many large MNO opportunities are left out there in the market? Thanks. Brian Kraft: Sure. Hey Greg. So Scott Wisniewski: So we the interesting thing about how we've approached the market and how we built the company is that we're very favorable to M and O. So we've structured our technology, our network, our go-to-market strategy, even our cap stack. Right? Even the investors. It's very favorable intentionally towards our customer, the operator. So as we've built the ecosystem over the last five to ten years, it's really been around who's most aligned, who can who's most forward-thinking. And as we get closer to service, there's less forward-thinking, and it's more that everybody feels they need this capability. So we have this fascinating dynamic where we're not really constrained by historical relationships or operators that want to work with us. We find pretty much nearly all the operators in the world, if not all, want to work with us and want to learn more and want to participate. So we're going to continue to harvest that base for good contracts for the company for the initial markets that we deploy and then grow that base into the medium tail and the long tail as we grow. So I think in terms of big MNO opportunities, it's we we've chosen not to do business in China or Russia, but and other, you know, smaller restricted countries. But other than that, you know, most operators are good candidates and have some level of dialogue with us and we're going to continue to pursue those opportunities. Brian Kraft: That's very helpful. Thanks. Operator: Thank you. Our next question comes from the line of Chris Quilty with Quilty Space. Please proceed with your question. Brian Kraft: Thanks, guys. Maybe a more nuanced question than Louis about Michael Funk: the $1 billion commitments. Is that all commercial or is that a combination of commercial Brian Kraft: government? Scott Wisniewski: That's all commercial. Michael Funk: Great. And maybe to follow on, I mean, your Brian Kraft: capitalized now for 100 satellites. Again, I'm assuming that Michael Funk: that's all for the commercial side. Obviously, Brian Kraft: Secretary of War, HEGSAS speech Friday indicating that Michael Funk: contractors are gonna have to commit their own capital to getting things done? Or is it fair to assume that most of the programs you're working on will be more in the sort of Star SpaceX Star Brian Kraft: Shield model of Michael Funk: vendor built and operated government owned. Abel Avellan: Yeah. I mean, we have been a big proponent for a long time for the government. For the dual-use concept. Basically, believe that to maintain competitiveness for the United States, the ability to combine commercial usage with government usage is paramount. And so we basically, our phone with the government, is very substantial, It calls for that model. So we don't discard. There will be occasions that we will manufacture certain assets tailor-made to the government, but we're prioritizing the dual-use. In every opportunity that we have. Michael Funk: Great. And final question just on the launch. When will you give us some visibility on specific launch vehicles as we approach the launch dates? Brian Kraft: Obviously, the heavy lift market is extremely constrained and Michael Funk: I watched in the last week both Blue Origin and ULA delay and delay. SpaceX is really the only Brian Kraft: operator out there that's launching on a regular cadence. A tight market at current time. And are you expecting other launch vehicles to become available? Abel Avellan: We're expecting launch vehicles to become available, but our current existing and immediate launch campaign it is using the regular suspects, SpaceX, New Glenn, Israel. And there are new capacities coming up from other operations like NHI that are available to us. But the media launches are around American launches here in The U.S. Michael Funk: Got you. And are you still aiming for the same sort of Brian Kraft: three to four bluebirds per Falcon nine, I think eight per New Glenn And are there things that you're doing or can do in order to increase the number of Michael Funk: satellites per launch vehicle either in mass or dispenser design or other tricks Abel Avellan: Yeah. That no. That is correct. I mean, we basically can go out of the speed in terms of the number of satellites per launch with the New Glenn platform. That we can with the SpaceX platform. But yes, it's at full capacity. Eight in New Glenn, and around three in the Falcon nine. Michael Funk: Very good. Brian Kraft: Well, looking forward to the next one. Operator: Thank you. Our next question comes from the line of Scott Searle with ROTH Capital Partners. Please proceed with your question. Brian Kraft: Hey, good afternoon. Thanks for taking the questions. Maybe just a couple of quick follow-ups and clarifications. Now that you're funded up to 100 satellites, and the initial phase of the constellation of 45 to 60 gets you Scott Searle: commercialization in the key developed markets. Should we expect that you're just going to continue to roll through to build up to the 90 to 100 plus satellites in terms of, I'll call it, Phase two of the constellation as we go into 2027. Or are there some other milestones to be thinking about in terms of customer contracts or otherwise that will be a precursor to that happening? And also as part of that, Brian Kraft: from a spectrum standpoint, you had a very astute buy of the Elgato spectrum in North America. I know you have access in international markets, but there are some other costs that come along with that. Wonder if you could just frame for us kind of how you're conceptually thinking about incremental spectrum costs going forward, particularly in international markets? Thanks. Yeah. I mean, Abel Avellan: the architecture basically designed to basically miss and match our own spectrum with operator spectrum. And tune all across the low band and mid-band spectrum. So basically, the cost of incremental spectrum is marginal. It doesn't cost us more on the platform to activate additional spec. So that will make it very attractive. We can partner with the 700 in certain jurisdictions and in another one we are in the mid-band in combination with their own spectrum. So our incremental call for additional spectrum is marginal to none. As long as 3GPP spectrum, and as long as in devices. And our strategy is always starting Broadband services with spectrum that is available in devices. Scott Searle: Great. And just a clarification in terms of your continued launch cadence, you will, once we get to 60 satellites Are the milestones that you're thinking about or any sort of call you could add in terms of the continued expansion of the global constellation? Thanks. Scott Wisniewski: Sure. So our strategy on satellite deployment hasn't really changed either. Right? You know, our strategy has been as we have capital access and as we see positive NPV growth, we're going to commit to it. And so that was the driver behind how we announced and have thought about the 45 to 60 satellite target. That we put in place a year or so ago. And with further access to capital and frankly, further traction faster and more attractively on the operator side, and potentially the government side as well. We've recalibrated those expectations, and that's part of what's behind, you know, the capital we've raised. So where do we go from here? How do we continue to build those out? We pride ourselves on being very nimble. Remember, we're vertically integrated. We can Abel Avellan: put incremental improvements into our constellation as we go Scott Wisniewski: like, with the ASIC to come in Q1. And so we're going to continue to move that way. We are not making multi-year planning decisions. You know, we're pivoting and moving quickly. And as we see things move and we see opportunities, we're going to pivot quickly. But for us, at this point, we see nothing but opportunity, and we see nothing but growth. So we're racing towards more satellites fast. And so that's how we're thinking about it, Scott, is, you know, there's no real hold-up on us for continuing to build but we're going to evaluate growth opportunities on a rolling basis, and that's what you've seen us do the last couple of years. Scott Searle: Great. Thanks so much. Operator: Thank you. And we have reached the end of the question and answer session. And I'll now turn the call back over to Scott Wisniewski for closing remarks. Scott Wisniewski: Thank you, operator. Want to thank all of our shareholders and the analysts for joining the call. We look forward to providing more updates soon, so please stay tuned. Thank you. Bye. Operator: And ladies and gentlemen, this concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation.
Operator: Thank you for standing by. This is the conference operator. Welcome to the Microvast Holdings, Inc. Third Quarter 2025 Earnings Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. I would now like to turn the conference over to Microvast Holdings, Inc. Investor Relations. Please go ahead. Rodney Worthen: Thank you, operator. Thank you everyone for joining our update today. This is Rodney Worthen, VP of Corporate Strategy and Interim CFO. With me on today's call is Mr. Yang Wu, Founder, Chairman, and CEO. Mr. Wu will start off with a high-level overview of the third quarter results before providing some operational and business updates. I will then discuss our financials in more detail before handing it back to Mr. Wu to wrap up with our outlook for the remainder of the year and closing remarks. Ahead of this call, Microvast Holdings, Inc. issued its third quarter earnings press release which can be found on the Investor Relations section of our website, ir.microvast.com. We have also posted a slide presentation to accompany management's prepared remarks today. As a reminder, please note that this call may include forward-looking statements. These statements are based on current expectations and assumptions and should not be relied upon as representative of views on subsequent dates. We undertake no obligation to revise or release the results of any revision to these forward-looking statements due to new information or future events. Actual results may differ materially from expectations due to a variety of risks and uncertainties. For more information on material risks and other important factors that could affect our financial results, please refer to our filings with the SEC. We may also discuss non-GAAP financial measures during this call. These measures should be considered in addition to and not as a substitute for or in isolation from GAAP results. These non-GAAP measures have been reconciled to their most comparable GAAP metrics in the tables included at the end of our press release and slide presentation. After the conclusion of this call, a webcast replay will be available on the Investor Relations section of Microvast Holdings, Inc.'s website. And now I will turn the call over to Mr. Wu to kick things off. Yang Wu: Hello, everyone, and welcome. Thank you for joining us today. As always, I want to start by reminding you of our core mission. Founded in Texas in 2006, Microvast Holdings, Inc. has grown into a global leader in advanced battery technology. With over 810 patents, granted or pending, and our electrified solutions successfully deployed worldwide, we are proud to be a driving force in global electrification, building a more sustainable future one battery at a time. Innovation is core to our operations and always on display at Microvast Holdings, Inc. Our commitment to innovation has delivered some major milestones. At Microvast Holdings, Inc., we will always strive to push the limits of what is possible. Please turn to slide four, and I will give a brief overview of the quarter. We are thrilled to announce a record third quarter revenue of $123.3 million, which is an excellent 21.6% year-over-year increase. This increase was simultaneous with improving our gross profit margin to 37.6%, a 4.4 percentage point improvement from the same period last year. This demonstrates that we are not only able to grow but also that we can achieve such growth efficiently. Our focus on efficiency and profitability is continuing to pay off. I am pleased to report that we achieved an operating profit in the third quarter of $13 million with an adjusted net profit of $11.9 million and adjusted EBITDA of $21.9 million. This quarter is not just another milestone for Microvast Holdings, Inc.; it's a testament to both the long-term commitment required in this industry and the strength of our business model. This strength is not a one-time event; it's now a trend. Our consecutive revenue growth over the last several years indicates an increase in market demand for our high-performance products. This growth, along with improvement in our gross profit, validates our ability to successfully commercialize our advanced technology and operate efficiently at scale. The rapid growth has given us invaluable experience, enabling us to successfully deploy commercialized products across our portfolio and to refine our manufacturing processes. Moving forward, we intend to maintain our strategy by focusing on three core pillars: innovation, disciplined execution of our strategic growth objectives, and expanding our production capacity to meet growing customer demand. We believe that we are well-positioned for the future. Let's move to slide five, which illustrates the core of our business and strategy. At its core, Microvast Holdings, Inc. is a vertically integrated battery technology powerhouse. Our growth isn't accidental; it's driven by relentless commitment to innovation and is our primary engine for expansion. We are actively diversifying our revenue streams with a broader portfolio of products and services, all purpose-built to accelerate electrification. A cornerstone of our strategy is a determined push to capture greater market share. We are making focused investments to rapidly commercialize both our advanced products available today and our highly anticipated technologies of the future. We are staying disciplined by maintaining product innovation and strategically expanding our global market presence. This clear path is how we intend to grow, optimize our operations, and ultimately achieve our goal of sustained profitability. Let's turn to slide six for an operational update on our Huzhou phase 3.2 line expansion. I am pleased to report that we are in the final stages of installing and commissioning the production equipment, with completion targeted for year-end. This expansion is critically important, as the phase 3.2 is anticipated to add up to two gigawatt-hours of annual production capacity. The strategic timing of this expansion is intended to directly address existing market demand and position us to capture upcoming opportunities. We anticipate this new line's initial production to begin in Q1 2026. This expansion is a major step forward in securing our foundation for continued growth in 2026 and beyond. Moving to slide seven, let's look at the progress in our all-solid-state battery development. Building directly on our Q2 update, our proprietary five-layer cell continues to demonstrate exceptional stability to date. It has now successfully completed over 404 charge-discharge cycles at 1C, maintaining high efficiency and a steady capacity retention throughout the cycling window, as illustrated in figure one on the left. Our high-voltage 12-layer prototype also continues its cycle testing. The voltage capacity profile is the same in figure two on the right and validates its current testing performance. Prototypes indicate that our approach delivers high structural integrity, with minimal losses during charge transfer, a crucial factor for both battery longevity and peak performance. As detailed on slide eight, we are integrating our proprietary separator technology into our all-solid-state battery. This has multiple benefits, such as improved electrode interfacial contact and improved flexibility, which allows for more consistent manufacturing in comparison to more fragile ceramic separators. This technology builds on the polyaramide backbone that maintains structural integrity even under elevated temperatures. The membrane's robust yet flexible architecture enables high-pressure stacking during assembly, improving both mechanical resilience and resistance to lithium dendrite penetration. Equally important are its engineered ionic pathways, which create efficient and continuous channels for lithium-ion transport. In short, this breakthrough material integrates safety, mechanical strength, and ionic efficiency into a single scalable platform, positioning Microvast Holdings, Inc. as a leader in next-generation all-solid-state battery innovation. This is an example of Microvast Holdings, Inc.'s advantage. Now if you will join me on slide nine, I'd like to give an exciting new business development update. We have established a partnership with Skoda Group, a leading European rail and public transport manufacturer. The partnership validates Microvast Holdings, Inc.'s technology in extreme duty use cases and high-safety rail applications. We anticipate the first prototype by 2026. Now I will hand the call over to Rodney Worthen to discuss our financials for the third quarter. Rodney Worthen: Thank you, Mr. Wu. Please join me on slide 11. We are happy to report a record-breaking third quarter with revenue growing at 21.6% year-over-year, to $123.3 million, up from $101.4 million last year. Our year-to-date revenue had a top-line growth of 24.3%, reaching $331 million compared to $266 million in the prior year period. This growth was driven primarily by an increase of approximately 360 megawatt-hours in sales volume year-to-date. Crucially, this growth was at a gross profit for the third quarter of $46.4 million, an impressive 38% improvement over the prior year period. This was achieved through operational execution, higher-margin end markets, increased utilization, and cost controls. As a result, our gross profit margin improved by 4.4 percentage points to 37.6%, up from 33.2% in Q3 2024. Our year-to-date gross profit was $121.2 million, which is a 55% increase compared to the prior year period, and gross margin was 36.6%, a 7.3 percentage point improvement year-over-year. Operating expenses increased to $33.5 million for the quarter, compared to $27.5 million in Q3 2024, a 22% increase year-over-year. The G&A increase was primarily due to $3.7 million of exchange loss attributed to the unfavorable euro RMB rate and $5.6 million in litigation expense, partially offset by $2.9 million of decreased non-cash share-based compensation expenses or SBC. The decrease in R&D expenses was primarily due to $1.5 million of decreased SBC expense and $1 million associated with lower employee headcount. The increase in sales-related expenses for the quarter was primarily due to $1.1 million of service fees from business development, partially offset by a $0.5 million decrease in SBC expense. OpEx decreased for the year-to-date period to $75 million, down from $195 million last year. For the nine-month period, the decrease in G&A expenses was primarily due to $17.7 million of decreased SBC expense and $7.7 million of decreased exchange loss from favorable fluctuation in the euro RMB rate. The decrease in R&D expenses was primarily due to $5.4 million of decreased expense and a $1.9 million reduction associated with a lower employee headcount. Selling and marketing expenses were largely flat for the period. There was also a substantial reduction in impairment loss compared to the prior year period, down to $1.4 million from $88 million. We reported a GAAP net loss of $1.5 million in the quarter. After adjusting for non-cash expenses such as SBC of $0.7 million and fair value changes to our warrant liability and convertible loan of $12.6 million, we achieved an adjusted net profit of $11.9 million. For the nine-month period, GAAP net loss was $45.8 million compared to a net loss of $113.1 million in the prior year period. Non-GAAP adjusted net profit year-to-date was $47.5 million, a major improvement from an adjusted net loss of $84.1 million last year. We are also displaying improved operational results as we report yet another consecutive quarter of positive adjusted EBITDA, reaching $21.9 million. Year-to-date, our positive adjusted EBITDA reached $76.3 million, a substantial improvement compared to a negative adjusted EBITDA of $53.5 million in the prior year period. The financial reconciliations of these non-GAAP metrics can be found in the tables at the end of our earnings press release and the slide presentation. On Slide 12, we show the geographic breakdown of our revenue mix compared to the prior year period. Our EMEA business accounted for 64% of quarterly revenue. This is up year-over-year from 59%. Revenue growth over the nine-month period saw an improvement of 31%, increasing to $176.8 million in the region. The US revenue share increased from 3% to 5% for the quarter when compared to the prior year period. We continue to focus on making inroads with domestic customers, and year-to-date revenue is $17.8 million in the region. Our APAC region also grew year-over-year, up 9% year-to-date, to $136.5 million, while we also successfully target higher-margin opportunities. Please turn to slide 13, and we will review our cash flow for the year-to-date. We are pleased to have generated positive operating cash flow of $59.5 million for the nine-month period. Net loss was primarily offset by a $17.4 million decrease in inventory and non-cash adjustments of $24.7 million in D&A, and $91 million from changes in fair value of warrant liability and convertible loans. This was partially decreased by a $41.2 million increase in net receivables and a $12.3 million decrease in net liabilities and accrued expenses. From investing activities, we had a net outflow of $15.5 million, primarily related to CapEx at our Huzhou facility, including our phase 3.2 production line extension. Financing cash flow resulted in a net outflow of $9.5 million. Overall, after accounting for a negative foreign exchange adjustment of $1.5 million, we had an increase in cash of $33 million. This resulted in total cash, cash equivalents, and restricted cash of $142.6 million at quarter's end. Now I will hand it back over to Mr. Wu to go over our outlook for the final quarter of the year and closing remarks. Yang Wu: Thank you, Rodney. Please turn to Slide 15, which provides a summary of our outlook for the rest of the year. We are pleased to reaffirm our initial annual revenue guidance, which positions our projected revenue in the range of $450 to $475 million. Due to our focus on stronger performing segments and successful margin expansion efforts, we are also raising our full-year gross margin target from 32% to a new range of 32% to 35%. For APAC, our focus remains on the completion of the phase 3.2 expansion at our Huzhou facility. We anticipate completing the production line by year-end and beginning initial production operations in Q1 2026. As previously stated, this critical addition of up to two gigawatt-hours annually is intended to address the robust customer demand for our cutting-edge solutions and position us to capture upcoming opportunities. We expect strong sales growth for the year, and our development teams are making significant progress on the next wave of advanced products. Our EMEA business is expected to maintain momentum. We are constantly pursuing new strategic partnerships, such as the Skoda partnership discussed earlier, to support both current and upcoming product lines in the region. In The Americas, we anticipate further revenue growth year-over-year as we continue to proactively pursue customer acquisitions while simultaneously assessing our financing needs to support additional strategic objectives. Our sights remain on achieving three primary financial objectives for the final quarter: securing sustained positive cash flow, maintaining gross margins, and expanding our market reach powered by our R&D innovation engine. We remain confident that we can continue to bolster our business by capitalizing on global electrification trends, with the ultimate goal to deliver long-term value to our shareholders. Thank you very much, everyone, for joining us today to review another historical quarter for Microvast Holdings, Inc. We look forward to updating you again with our full-year 2025 results and additional news in the coming months. This concludes today's conference call. Thank you for participating, and you may now disconnect.
Operator: Good afternoon, and welcome to the CVD Equipment Corporation Third Quarter 2025 Earnings Conference Call. As a reminder, today's call is being recorded. We will begin with prepared remarks followed by a question and answer session. Presenting on today's call are Emmanuel N. Lakios, President and Chief Executive Officer, and Richard A. Catalano, Executive Vice President and Chief Financial Officer. Our earnings press release and call replay information are available in the Relations section of our website at www.cvdequipment.com. Before we begin, please note that comments made during this call may include forward-looking statements, including those related to our future financial performance, market growth, demand for our products, and overall business outlook. These statements are based on current expectations and are subject to risks and uncertainties that could cause actual results to differ materially. For a detailed discussion of these risks, please refer to our filings with the SEC, including the risk factors section of our Form 10-K for the year ended 12/31/2024. We assume no obligation to update any forward-looking statements except as required by law. With that, I'll now turn the call over to Emmanuel Lakios, President and CEO. Emmanuel N. Lakios: Thank you, Paul. And good afternoon, everyone. We appreciate you joining us today to review our third quarter 2025 financial results and provide an update on our business and strategic initiatives. After our prepared remarks, we look forward to taking your questions. For the third quarter 2025, revenue was $7.4 million, a 9.6% decrease from the prior year quarter, but a 44.9% increase compared to the second quarter of this year. Revenue to date was $20.8 million, which was 7.1% higher than the same period in 2024. Orders for the third quarter totaled $2.2 million, primarily driven by continued demand in our SDC segment for gas delivery systems. For the nine months of 2025, total orders were $9.5 million compared to $21 million in the same period last year. As of 09/30/2025, backlog stood at $8 million compared to $13.2 million at 06/30/2025, as we converted backlog to revenue in the quarter. Our third quarter and year-to-date bookings were influenced by several external factors, including uncertainties related to tariffs, reduced US government funding for university research, US government shutdowns, and timing in the product adoption within our growth markets. In response to the ongoing fluctuations in our order rate and the recent decline in bookings within the CVD Equipment division, our board of directors has approved a comprehensive transformation strategy aimed at significantly reducing fixed operating costs and creating a more agile organization. Key elements of this plan include transitioning the CVD Equipment business from vertically integrated fabrication to outsourced fabrication of certain components, enabling us to reduce our fixed costs and improve scalability. A workforce reduction in the CVD Equipment division, to be completed by year-end 2025, is expected to reduce the annual operating cost by approximately $2 million beginning in 2026. To note, the SDC division will not be impacted by these actions. Revising our sales approach by leveraging distributors and external representatives to complement our internal sales force and broadening our market reach. Exploring strategic alternatives for certain businesses and product lines, which could include asset sales and divestitures. Together, these initiatives will allow us to focus on our core strengths, which are engineering design, assembly, test installation, and customer service, all while driving greater efficiency and long-term profitability. We remain encouraged by the opportunities ahead in our target markets, aerospace and defense, industrial applications, which include silicon carbide and graphite, silicon carbide high power electronics, and electric vehicle battery materials. As an update on opportunities in the silicon carbide bull market, in October 2025, we announced a new order from Stony Brook University for two PVT-150 physical vapor transport systems to support their center established by Onsemi Silicon Carbide Crystal Growth Center. We are proud to play a role in advancing semiconductor materials research and supporting critical technologies in artificial intelligence and electric vehicles. We are continuing the development of our 200-millimeter silicon carbide crystal growth process using our PBT-200 system, targeted at the high power electronics market. The same platform is being evaluated for other wide bandgap materials such as aluminum nitride. Our reactive design and control architecture deliver the precision and repeatability needed for next-generation material production. CVD remains well-positioned across multiple growth markets. We believe that our transformation initiatives will strengthen our foundation and will better support our goal of achieving profitability and positive cash flow. With that, I'll now turn over the call to our CFO, Richard Catalano, to review our financial results in more detail. Richard A. Catalano: Thank you, Manny, and good afternoon, everyone. Third quarter 2025 revenue was $7.4 million compared to $8.2 million in 2024. The quarter-over-quarter decrease was primarily due to the absence of revenue from our MesoScribe segment, which ceased operation in 2024. Revenue from our CVD Equipment segment was driven by three key customers, representing approximately 55% of total revenue for the quarter. A contract modification during the third quarter allowed us to recognize revenue in Q3, contributing approximately $1 million. This was a change only in the timing of the revenue record. Our SDC segment reported $1.7 million in revenue, down slightly from $1.9 million in Q3 2024 due to fewer contracts in progress, but they continue to have a strong backlog. The company gross profit for the quarter was $2.4 million with a gross margin of 32.7%, compared to $1.8 million or 21.5% in the prior year quarter. This improvement was primarily due to a more profitable contract mix in our CVD Equipment segment, offset by the loss of MesoScribe's contribution, and we also had a $100,000 charge for a one-time certification cost within the SDC segment. Operating income was $308,000 as compared to operating income of $77,000 in Q3 2024. After other income, primarily interest, net income was $384,000 or 6¢ per diluted share, versus $203,000 or 3¢ per diluted share in the prior year quarter. As for our balance sheet, at 09/30/2025, we held $8.4 million in cash and cash equivalents as compared to $12.6 million at 12/31/2024. Net cash used in operating activities for the first nine months of 2025 was $4.1 million, largely due to changes in working capital as well as contract timing. Our working capital improved to $14.6 million as compared to $13.8 million at year-end 2024. As part of our transformation plan discussed earlier, we do expect to incur approximately $100,000 in severance-related charges in 2025. In addition, we may recognize non-cash impairment charges in future periods if certain long-lived assets are sold below their book value. Looking ahead, our return to consistent profitability depends on new equipment orders, cost management, successful implementation of our transformation plan, and continued control over capital expenditures. Although order timing can cause quarterly fluctuations, we believe our current cash position and projected operating cash flows will be sufficient to meet working capital and capital expenditure needs for at least the next twelve months. With that, I'll turn the call back to Manny. Emmanuel N. Lakios: Thank you, Rich. Our focus remains clear: serving our customers, supporting our employees, creating value for our shareholders, and achieving a return to sustained profitability. Our goal continues to be enabling tomorrow's technology today. Operator, we're now ready to open the line for questions. Operator: Thank you. We'll now be conducting a question and answer session. One moment please while we poll for questions. Thank you. Our first question is from Paul Chaeka with MSE Resources. Good afternoon, everybody. Paul Chaeka: I'm a long-time buy and hold fan of CVV. Also, I'm a materials engineer that's done a lot of work mainly in CVD coatings for engine high-temperature engines and semiconductor applications. So I've got a lot of hope for the company in those markets, especially. My question's about applications for composite applications for combustion turbines for power generations, meaning stationary turbine engines. For example, GE Vernova is showing a growing backlog for stationary combustion engines. I was wondering if you can speak to orders or applications of the CVV systems for stationary combustion engines. Also, second question about just a little bit of insight on the general locations of the materials outsourcing you'll be doing? Is it quite regional? Is it across the country or abroad? Thank you. Emmanuel N. Lakios: Paul, thank you for being a loyal shareholder. Let me address your two questions. First, the question on the ground-based gas turbine engines. As you're likely aware, many of the listeners are as well, the primary use of ceramic matrix composites is in the hot section of the engine. There are several engines out there that already are utilizing silicon carbide-based composite materials for shrouds and for nozzles. Those, to my knowledge, have not yet been brought into the ground station gas turbine engines, and they don't burn in the hot section turbine. Where we anticipate use in the future for silicon carbide-based composite materials CMCs in the energy field would be more so in replacement of some specific materials for nuclear reactors and for pellet encapsulation. Those are future emerging opportunities. Paul Chaeka: Oh, excellent. Had not thought of those. Thank you. Emmanuel N. Lakios: On your second question, which is more on the supplier base, CVD has historically had a mix of both external and in-house components. We've had a focus on our sheet metal shop and also on the smaller machine components, both turned and milled machined elements. The larger chambers have typically been outsourced. So we've always had a mix of suppliers. Over the last several years, we have combed through those suppliers and we've evaluated our cost structure closely over the last twelve months to a little over a year. And we've determined that the vertical integrated model has really become less efficient, given both our order volumes and also from the sheer fact that when you're vertically integrated, it is very difficult to be best of breed in sheet metal cutting, bending, welding, painting, and those are things that our merchant suppliers do. I would say, as well and in some cases better than we do and are more cost-effective. So the outsourcing was inevitable, and this is the right time to implement that strategy. Now to answer your question, is it regional? It's in the US. Our focus is to outsource our machining to the US. We will extend to North America, specifically Canada in some cases. Paul Chaeka: Okay. That's really great detail. Thank you. Just aside on that, the vertical integration, I think, was hugely valuable to the company fifteen, twenty years ago. I think it allowed you to really refine the quality and the control that you had over your systems. But I totally understand the change in the dynamics of the economies and economies of scale. I assume that your quartz, will that remain interior? Emmanuel N. Lakios: It will be a mix, but we will retain our IP and Black Card in the area of quartz fabrication. We'll also retain certain elements of capability in our machine shop, but the lion's share of the components will be outsourced. Paul Chaeka: I see. Alright. Thank you. Well done, everybody. Emmanuel N. Lakios: Thank you. Operator: There are no further questions at this time. I'd like to hand the floor back over to Emmanuel Lakios for any closing comments. Emmanuel N. Lakios: Thank you, operator, and thanks to everyone for joining us today. We appreciate your continued support and confidence in CVD Equipment Corporation. If you have any additional questions, please feel free to reach out to me directly. This concludes today's call. Thank you. Operator: We thank you again for your participation. You may now disconnect your lines.
Operator: To all locations on hold, we are still checking in participants for today's program. Thank you for your patience and please continue to stand by. Please standby, your program is about to begin. If you need assistance on today's program, welcome to the Health Catalyst Third Quarter 2025 Earnings Conference Call. At this time, all participants have been placed on a listen-only mode. The floor will be open for your questions following the presentation. To get to as many questions as time permits, we kindly ask that you limit yourself to one question. If you have any follow-up, we ask that you pick up your handset for best sound quality. Lastly, if you should require operator assistance, I would now like to turn the call over to Matt Hopper, Senior Vice President of Finance and Head of Investor Relations. Matt Hopper: Good afternoon, and welcome to Health Catalyst's earnings 2025, which ended on 09/30/2025. My name is Matt Hopper, Senior Vice President of Finance and Head of Investor Relations. With me today are Dan Burton, our Chief Executive Officer, Ben Albert, our President and Chief Operating Officer, and Jason Alliger, our Chief Financial Officer. A complete disclosure of our results can be found in our press release issued today as well as in our related Form 8-Ks furnished to the SEC, both of which are available on the Investor Relations section of our website at ir.healthcatalyst.com. As a reminder, today's call is being recorded, and a replay will be available following the conclusion of the call. During today's call, we will make forward-looking statements pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 regarding our future growth and our financial outlook for Q4 and fiscal year 2025. Growth trends, targets, and expectations beyond 2025, our public market value, our CEO transition, our ability to attract new clients and retain and expand our relationships with existing clients, our growth strategies, the impact of macroeconomic challenges including the impact of inflation, tariff and the interest rate environment, changes to government funding and payment programs that have and could further negatively impact our end market and the business of our clients, bookings, our pipeline conversion rates, the demand for deployment and development of our Ignite data and analytics platform and our applications, timing and status of Ignite migrations, acquisition, integration and strategy, the impact of restructuring and the general anticipated performance of our business, including the ability to improve profitability. These forward-looking statements are based on management's current views and expectations as of today and should not be relied upon as representing our views as of any subsequent date. We disclaim any obligation to update any forward-looking statements or outlook. Actual results may materially differ. Please refer to the risk factors in our Form 10-Ks for the full year 2024 filed with the SEC on 02/26/2025, and our Form 10-Q for the third quarter 2025 that will be filed with the SEC. We will also refer to certain non-GAAP financial measures to provide additional information to investors. Non-GAAP financial information is presented for supplemental information purposes only, has limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. A reconciliation of non-GAAP financial measures for the 2025 and 2024 to their most comparable GAAP measures is provided in our press release. With that, I will turn the call over to Dan Burton. Dan? Dan Burton: Thank you, Matt. And thank you to everyone who has joined us this afternoon. We are pleased to share our Q3 2025 financial results, including total revenue of $76.3 million and adjusted EBITDA of $12 million, exceeding our guidance on each metric. Additionally, we are encouraged with the results of our Technology segment, which recorded revenue of $52.1 million, representing 7% year-over-year growth. Adjusted gross margin was 53%, an increase of approximately 50 basis points year-over-year. I will now share some perspectives on our anticipated 2025 bookings levels, which align with what we shared a few months ago. We continue to expect approximately 30 net new platform client additions for 2025. As a reminder, Q4 is often a very active quarter in terms of bookings and contract renewals. We also continue to expect our average booking size for net new platform clients in 2025 to be towards the lower end of the $300,000 to $700,000 range previously provided. Also, as we communicated last quarter, we reaffirm our expectation that dollar-based retention for 2025 will be in the low 90s. We are also reaffirming our previous full-year guidance for revenue of $310 million and for adjusted EBITDA of $41 million. The market continues to be dynamic, but by focusing on solutions with proven ROI and by consistently meeting client needs, we have maintained a strong pipeline. We remain focused and disciplined in our operations and are committed to delivering meaningful results. Next, we'll hear an operational update from Ben Albert, our recently appointed President and Chief Operating Officer. Ben joined Health Catalyst through the acquisition of Upfront Healthcare Services earlier this year. With over 25 years of experience in building and leading healthcare organizations, Ben has consistently delivered compelling value propositions, successfully activating patients while enhancing clinical, financial, and operational outcomes. Since September 10, Ben has provided crucial day-to-day leadership at Health Catalyst, overseeing operations and product engineering, technology delivery and support, growth operations, finance, and corporate strategy. I have partnered closely with Ben over these last few months and have found his experience, insights, operational focus, commitment, and mission-driven leadership to be effective in energizing. I look forward to our continued work together in support of Health Catalyst's mission and strategy. Ben? Ben Albert: Thank you, Dan. I appreciate the opportunity to share updates on several areas that are central to our strategy and operational progress. Over the past quarter, we have continued to strengthen our leadership team to support our long-term vision and improve performance. Recent appointments include Robbie Hughes as Chief Product Officer, Chris Tyne as Chief Engineering Officer, Brian Barry as Chief Client Services Officer, and Shonak Lahiri as SVP of Global Solutions. These changes reflect our commitment to building an agile, high-performing team that is well-positioned to execute on our 2026 strategy and deliver value to our clients and shareholders. Our solutions are delivering measurable results where health systems need the most: cost control and operational efficiency. With ongoing financial and workforce pressures, our solutions help organizations streamline operations, reduce spend, and sustain performance. Temple University Health System used power costing and POP analyzer to achieve $7.5 million in savings through better charge capture, faster collections, and lower medications costs. Entegris Health leveraged our power labor offering to save $30 million in labor by reducing contingent staff, improving cost per discharge, all while maintaining high standards of care. These results highlight how we're directly addressing the market's most urgent needs and delivering real, quantifiable value. We've tailored our solutions to align with today's environment, positioning us as a strong partner for clients navigating this period of change. We're making progress on our Ignite migration initiatives, remaining on track for approximately two-thirds of our DOS clients to migrate by the end of 2025. As Dan mentioned, we're experiencing dollar-based retention pressure in 2025 due to the ongoing migration efforts. We expect to go into 2026 with similar pressure. While we anticipate making meaningful progress in our Ignite migrations by the end of 2026, we have adjusted our timeline and approach to be more client-centric, recognizing that some organizations prefer to remain on DOS for the near and medium term. We are committed to providing more flexibility and meeting clients where they are, and we expect this approach will improve client experience and dollar-based retention. Dan? Dan Burton: Thank you for that update, Ben. I want to take a moment to reflect on our recent experience at the Health Catalyst Analytics Summit, which continues to be a valuable opportunity for us to engage with hundreds of attendees, including our clients, partners, investors, analysts, and thought leaders. The energy and insights from HAS reinforced our commitment to client-focused innovation and measurable improvement as we move forward. Turning to our outlook for 2026, we are currently in the early stages of our annual planning process, and we look forward to sharing more specific details and updated expectations during our next earnings call. Based on current trends, we anticipate revenue performance to be a few points lower in 2026 relative to 2025, driven by factors in 2025 such as dollar-based retention rate in the low 90s, a lower net new client count, Ignite migration headwinds, and exiting a restructuring of a few less profitable TEMS relationships. At the same time, we expect to see improvement in adjusted EBITDA, reflecting our ongoing efforts to strategically focus the organization, manage costs, make targeted investments, and optimize our migrations. We will be balancing growth, revenue mix, and free cash flow progression. We are taking a measured approach to setting expectations, and we will continue to provide updates as we navigate the evolving market landscape. Next, as we continue to focus on disciplined capital allocation, we reiterate our commitment to realizing a strong return on our acquisition investments. We feel confident in our current differentiated applications portfolio, and we do not anticipate pursuing additional acquisitions in the near to medium term. Our priority is driving growth, profitability, and shareholder return from our existing capabilities and recently acquired assets. With that, I'll turn the call over to Jason to provide a detailed review of financial results and guidance. Jason? Jason Alliger: Thank you, Dan. For 2025, we generated $76.3 million in total revenue. This total represents an outperformance relative to our quarterly guidance and represents flat results year over year. Technology revenue for 2025 was $52.1 million, representing a 7% increase year over year. This year-over-year growth was primarily driven by recurring revenue from new and acquired clients. Professional services revenue for Q3 2025 was $24.3 million, a 12% decline compared to Q3 2024, primarily driven by the exit of our less profitable pilot ambulatory operations, PEMS contracts. I'd also note that Q3 2025 Technology and Professional Services revenue did include nonrecurring items that are not anticipated in Q4 2025. For 2025, total adjusted gross margin was 53%, representing an increase of approximately 50 basis points year over year and up approximately 30 basis points compared to Q2 2025. In the Technology segment, our Q3 2025 adjusted Technology gross margin was 68%, an increase of approximately 330 basis points compared to the same period last year and generally in line with previously shared expectations of one to two points of margin improvement quarter over quarter. In the Professional Services segment, our Q3 2025 adjusted Professional gross margin was 19%, representing an increase of approximately 210 basis points year over year and an increase of approximately 70 basis points relative to Q2 2025. This quarterly performance was ahead of previously shared expectations and was mainly driven by a reduction in force that occurred in mid-Q3 2025 as well as some project-based revenue that was recognized in Q3 2025. In Q3 2025, adjusted total operating expenses were $28.1 million. As a percentage of revenue, adjusted total operating expenses were 37% of revenue, which compares favorably to 38% in Q3 2024. Adjusted EBITDA for Q3 2025 was $12 million, exceeding our Q3 guidance of approximately $10.5 million and up 64% compared to Q3 2024. Our adjusted net income per share in Q3 2025 was $0.06. The weighted average number of shares used in calculating adjusted basic net income per share in Q3 was approximately 70.4 million shares. Turning to the balance sheet, we ended Q3 2025 with $92 million of cash, cash equivalents, and short-term investments, compared to $392 million as of year-end 2024. In terms of liabilities, the face value of our term loan is $161 million. As we shared on our May call, on 04/14/2025, we paid off the $230 million convertible notes in full at maturity with cash from the balance sheet. As it relates to our financial guidance, we would highlight that the following outlook is based on current market conditions and expectations. What we know today. For 2025, we expect total revenue of approximately $73.5 million and adjusted EBITDA of approximately $13.4 million. For the full year 2025, we continue to expect total revenue of approximately $310 million, representing 1% year-over-year growth, and adjusted EBITDA of approximately $41 million, representing 57% year-over-year growth. For Q4 2025, technology revenue is projected to slightly decline compared to Q3 2025, driven primarily due to migration-related down-sell and churn, partially offset by application-related growth. Q4 2025 professional services revenue is expected to be down compared to Q3 2025 due to project-based revenue in Q3 and reduced revenue due to our contractual restructuring. Our Q4 2025 revenue mix is expected to shift further toward technology, reflecting the ongoing strength of our applications portfolio. Next, in terms of our adjusted gross margin, we expect positive revenue mix improvements along with our cost restructuring and our renegotiation of contracts to continue to manifest in favorable gross margins compared to 2024. Our overall adjusted gross margin is expected to slightly decline quarter over quarter, with adjusted professional services gross margin holding roughly constant and adjusted technology gross margin slightly declining due primarily to duplicate hosting charges associated with the migration to Ignite and timing of certain vendor charges. We anticipate that our adjusted operating expenses will be down approximately $2 million to $3 million in Q4 2025 relative to Q3 2025, as we continue to see the positive impact of the restructuring initiatives we discussed earlier. Looking ahead to 2026, we are focused on our plan to strategically deploy resources in a way that continues to make progress on operating leverage. The actions we're taking now, such as restructuring our professional services contracts, strategically leveraging our growing India operations, and integrating AI more broadly across our organization, are laying the groundwork for continued margin improvement. As we weigh our allocation of resources under our 2026 budget planning process, we are prioritizing areas that will both sustain momentum in technology gross margin expansion and further enhance the efficiency of our R&D efforts. We expect to realize incremental operating leverage in 2026, which will be primarily driven by our previously announced August restructuring and our ongoing optimization initiatives. We anticipate that this will provide us with greater flexibility to allocate capital towards high-impact opportunities, including further technology development and targeted market expansion for our existing offerings and new internally developed offerings. With that, I will conclude my prepared remarks. Dan? Dan Burton: Thanks, Jason. In conclusion, I would like to recognize and thank our committed and mission-aligned clients and our highly engaged team members for their continued engagement, commitment, and dedication. And with that, I will turn the call back to the operator for questions. Operator: The floor is now open for questions. To one question and that you pick up your handset. Thank you. Our first question is coming from Jared Haas of William Blair. Your line is open. Please go ahead. Jared Haas: Hey, guys. Afternoon. Thanks for taking the questions. Just wanted to ask on the updated commentary around the Ignite migration. I guess I'm curious, number one, just what's driving the longer timeline? Should we think of that as sort of a reflection of maybe some bandwidth issues within the client base? And then I'm also curious why some clients would maybe be okay sticking with the legacy solution just given what seems like a pretty big upgrade in terms of new technology capabilities with Ignite. And then I think you also said some clients may stay on DOS for the medium term. So I'm curious what percentage of clients you're thinking should convert over by 2026? Thanks. Dan Burton: Yes. Thank you, Jared. Great questions. And I would invite Ben to maybe share a few comments and then Jason and I might add some color commentary as well. Ben? Ben Albert: Great. Thanks, Dan. Hi, Jared. As we've assessed and worked with our clients, we really see their desire to standoff in some cases for a little bit longer and for us to meet them where they are and provide them that level of flexibility, giving all the competing priorities and the fact that DOS is providing with tremendous value today. And as we continue to move towards Ignite, we'll be there to support them as they're ready to make that transition, and we continue to enhance what Ignite provides. So as we go forward, we see this as a huge opportunity for our business, and also an opportunity for our clients. Dan Burton: Yes, totally agree. And Jared, to a couple of your specific questions, I think we still anticipate a large majority of our clients to be migrated by 2026. As Ben mentioned in our prepared remarks, there are a number who, as they're facing lots of dynamics, lots of pressures from the big beautiful bill and other dynamics, have come to us. And appreciate Ben's leadership in recognizing the value of meeting clients where they are. And there is a small subset that would prefer to get through some other items and stay on DOS for a period of time. And I think the introduction of more flexibility on our side is really designed to meet clients where they are. More flexibility as it relates to how clients want to migrate and even that timeline for those that do want to migrate just providing them more flexibility. We do believe will lead to some improvement in our dollar-based retention. The response so far from clients has been really positive. Jason Alliger: And the only thing I would add, Jared, is we are still expecting to make progress on gross margin even with this change to our migration approach. We are able to dial down our DOS infrastructure and support footprint as clients do migrate over to Ignite. So we'd only expect to really a slight slowing our progress with this change of approach. Operator: We'll take our next question from Jessica Tassan of Piper Sandler. Please go ahead. Your line is open. Jessica Tassan: Hi, guys. Thanks for taking the question. I appreciate it. So we know that tech revenue was in line with your forecast, but how do we think about just the sequential decline in dollars of tech revenue as representing kind of the combination between your like low 90s dollar-based retention and then extensively the implementation of whatever portion of the new deals that you all booked during 2Q 2025? So I guess just if you could break out like the 3Q tech revenue between the dollar-based retention and then like the implementation of the new clients booked in 2025. Then just any comments on fourth-quarter tech revenue, and expectations for sequential growth in tech revenue as we look to 2026 would be really helpful just as we are trying to refine our models into the end of the year. Thanks so much. Dan Burton: Yes, absolutely. Thanks for the questions, Jess. I'll share a few thoughts and then Jason, please also add. So I think as we have discussed in our last earnings call, within the tech segment, there are a couple of moving parts going in different directions. The platform part of our business is experiencing those DOS to Ignite headwinds that we've discussed previously where Ignite is lower priced than DOS. And as we work through that process, that's a natural consequence. At the same time, at the Apps layer, we're grateful to continue to see growth in that segment. And that manifests itself both as it relates to our existing clients growing their technology revenue in the apps space with those existing clients as well as new client wins in the apps space. In addition to what you referenced to as it relates to adding new platform clients. So there is a mix of a few different moving parts. We're encouraged to see those new client additions adding to the tech revenue. We see the negative impact of some of the headwinds related to the DOS to Ignite migration process with existing clients but then another positive as it relates to app layer growth both with existing and new clients. So there's quite a few moving pieces that all kind of net out to the guidance that Jason provided. Jason Alliger: I think that's well said, Dan. The only thing I would add is, as mentioned in the prepared remarks, we did have a level of nonrecurring revenue in both the technology revenue line and professional services revenue lines. So that's also contributing to that decline that we're expecting in Q4. Operator: Thank you. We'll take our next question from Elizabeth Anderson of Evercore ISI. Line is open. Please go ahead. Elizabeth Anderson: Hi, guys. Thank you so much for the question. Really appreciate it. Can you talk a little bit, maybe just to make sure that we're all level set up, help us understand sort of more specifically the value of the one-timers that you are calling out? And then two, how do we think about like given some of the concerns that some of your end market customers are having as we're going into 2026, how do you kind of see as far as you can tell right now on the pipeline and whatnot when the company sort of returns to positive rather than growth? Are we thinking sort of mid-2026 or you think maybe potentially a little for '27? I just want to kind of get a better sense of that as we move through the opportunities and the challenges that your customers are facing? Thank you. Dan Burton: Yes. Thanks, Elizabeth. Jason, do you want to take that first question then I'll comment on the second question? Jason Alliger: Yes. On that first question, the value of the one-timers, I mean, is becoming more common in our professional services revenue line to have one-time revenue, especially as we see the shift from FTE-based arrangements to more project-based arrangements. Less common on the technology side. In the technology, one-time revenue is roughly in the range of $500,000 to $1 million that we saw in that Q3 technology revenue line that we're not expecting to reoccur in Q4. Dan Burton: Jason. And as it relates to your questions about the pipeline and the reacceleration of our growth, our pipeline remains robust and we're encouraged to see meaningful additions to our pipeline. I think there are some dynamics that we are watching and managing through. One of the dynamics that we've spoken to in recent discussions as well is that the deal sizes are a little bit smaller. I do think that is the result of some pressure from the big beautiful bill and some of the Medicaid cuts that our clients and our end market are absorbing. But that also has some positive impacts in that sometimes smaller deals move a little bit more quickly through the pipeline. At the same time, we've also seen some dynamics where it's harder to predict exactly what the sales cycle might look like in terms of when deals will close just because of some of the uncertainty as folks are working through their budgeting process. But fundamentally, as we think about the strategy of reacceleration of growth, we're definitely focused on our core differentiation which has always been our deep healthcare expertise, and our passion for enabling clients to realize measurable improvement. I think as 2026's strategy and plan is coming into focus, I really like where Ben and the leadership team are focusing. And Ben, maybe you could give some specific examples. Ben Albert: Sure. Happy to. As we look towards next year, there's a big emphasis on our unique capabilities around helping health systems manage their costs through our cost management capabilities and solutions. As well as the need for ambulatory performance solutions as you think about where the market might be heading. And we have proven ROI in those areas. We see growth opportunities in those areas, and we expect to spend more time focused in 2026 on that. What the yield will be, we're still working our way through as we look at 2026, but we have a lot of optimism towards those areas where we're seeing already pipeline indications of interest. Dan Burton: Thanks, Ben. And we expect Elizabeth to be in a position at the next earnings call to share more specifics as it relates to how we see bookings unfolding in 2026. Elizabeth Anderson: Great. Thank you very much. Dan Burton: Thanks, Elizabeth. Our next question is from Richard Close of Canaccord Genuity. Your line is open. Richard Close: Yes. Thanks for the questions. Maybe just a follow-up on Jeff's and Elizabeth's questions. Just with respect to the '26, I guess, I think you said likely a couple of points lower growth than '25. I guess the 1% to 2% you're looking at in '25. So as we think about professional services and tech, is that the 26,000,000 mainly being driven by the tech? And or is there more professional services contracts that you're pruning? And then I have a follow-up. Dan Burton: Yes. Great questions, Richard. So I'll share a few thoughts and then please others. Share as well. I think when we think about the dynamics that it will play into 2026, on the professional services side, we've mentioned and specifically highlighted that we made a decision to exit a couple of pilot ambulatory operations, TEMS contracts, and you're already seeing some of that result in 2025. That will, of course, be a full year of results in 2026. We've also looked at, and we mentioned in our prepared remarks, a few other less profitable TIMs relationships. And we are very focused on profitability. So on the services side, I do expect that we'll see some trimming in some of those specific relationships that will have a slightly negative impact on revenue. Also a positive impact on margins. And that's one of the contributors that led us to positive margins in Q3 that we think will be a general trend line moving forward. On the technology side, we do expect to see those headwinds that we've referenced and pressures as it relates to dollar-based retention as we work through the Ignite migration. Partially offset by continued growth that we've been encouraged to see at the apps layer. And then there's always some other factors that lead to the 2026 kind of growth equation, the building blocks around new clients. We've shared some specific data there that can help hopefully with modeling. We've shared our dollar-based retention expectation for this year. That helps model what next year's revenue might look like. And of course, there's always some in-year revenue growth as well. Jason Alliger: Yes. The only thing I would add, Richard, is we will provide additional related to this as part of JPM and especially in our Q4 earnings call. But as we close out the year, we'll have full visibility on deals that are signed in Q4. It's a busy period for us. But one clarifier is that we did mention in the transcript that we'd be a few points lower in 2026 compared to 2025. Richard Close: Yes. Okay. And then just thinking about the pause or people on the migration and just as we think about it, is I'm curious whether you can comment on any competing priorities maybe for hospitals and sort of relates to the one thing we hear a lot is that hospitals want to go ahead and move forward with AI, but you really need to make sure that your data is good and, you know, the garbage, you know, garbage in garbage out type of thing. So I would think that you know, Health Catalyst would be a high priority since you know, you're so so focused on data. And harmonizing and whatnot. So just thoughts there on competing priorities and maybe where you guys rank in rank in that? Dan Burton: Yes, it's an insightful question, Richard. I think one of the reasons that we as a leadership team have felt to give more clients flexibility, meet them where they are, is that reality that DOS does a good job of making sure that the data is clean and organized. And for many of our clients, that's what they need. And they would prefer in a budget-constrained environment to leverage that existing capability and build some AI capabilities on top of that. Rather than taking investment dollars that would be required to manage a migration right now. And meeting them where they are, giving them that flexibility to decide what is most important for us to achieve in 2026, knowing that they can achieve some meaningful things leveraging DOS, giving them that option I think has been something that has been warmly received. Other clients want all of the capabilities, all of the modern capabilities of Ignite, they fit into more of an early adopter or an early mover as it relates to wanting both the infrastructure and the use case layer to be cutting edge and we want to meet them where they are. And that's where we've seen many of our clients already migrate to Ignite. But we recognize different clients will have different priorities, different budget realities, and so providing them with flexibility, that both DOS and Ignite do a really nice job at that fundamental data cleansing and organization layer. And as such, both can be utilized for AI use cases is one of the reasons why we're providing a little bit more flexibility and more options. Anything you'd add, Ben? Ben Albert: Only that Richard, you bring up a good point and that obviously there's a lot of focus on AI and we have been investing there in some pretty excellent solutions. We've got a couple of things in beta around costing intelligence and ambulatory intelligence off of data that we amassed. And then we've also enabled some of the advanced statistical methods that have been integrated into the core platform as well that are generally available today. So you're right in that there is a tremendous interest there, but it's all about how do you drive the value from the AI. That's where we're leaning in as opposed to just providing data in order for AI use cases to deleverage. Our expertise is differentiated and we have the ability to not only create the data environment but also to deliver the AI that drives value for our clients. Dan Burton: And to Ben's point, Richard, most of the solutions that he just described, those AI-specific use case solutions can be leveraged whether DOS is the infrastructure or Ignite the infrastructure. And so again, we want to meet clients where they are. We want to enable them to prioritize their budget in the way that's most useful for them. Richard Close: Okay. Thank you. Operator: Our next question is from Daniel Grosslight of Citi. Your line is open. Please go ahead. Daniel Grosslight: Hi, guys. Thanks for taking the question. Ben, you mentioned that you guys have a strong pipeline for product wraps that help systems manage costs and inventory performance solutions. I'm curious, does your revenue model need to change at all on the tech side? That is, do you need to build in some specific ROI guarantees where you have some sort of skin in the game if your clients aren't able to realize expected savings or you think the current revenue model on the tech side is just doesn't need to change? Thanks. Ben Albert: Thanks, Daniel. I think that's on the table. We provide ROI and we've got hundreds and hundreds of use cases where we deliver tangible ROI and if that's what the market needs and we can deliver to that assuming the data is there and we have the type of partnership that leads to that shared data and ROI. Then we're absolutely open to those conversations going forward. It's a very astute question as it relates to where the market is going overall. Dan, did you want to add? Dan Burton: Yes, I agree with that. And just to that point, Daniel, I think one of the dynamics that we like longer term as we shift away from DOS and towards Ignite is Ignite isn't as expensive or heavy as DOS was. And as you know, most of the ROI of our solutions exist above the platform layer at the use case layer. And as we have more to offer the apps layer, and clients are able to spend more of their wallet with us at the apps layer, there's just more of an opportunity to demonstrate that tangible ROI. And frankly, more flexibility to do what Ben described where because the AppSlayer is the highest gross margin segment of our business, we can take some risk. We can meet clients where they are and we have a lot of confidence in the ability to drive those measurable improvements. So it is on the table. Daniel Grosslight: Makes sense. Thank you. Operator: We'll take our next question from David of BTIG. Your line is open. Please go ahead. David Larsen: Hi. Can you talk a little bit about the growth rate in Ignite customers versus DOS customers? I mean, at your Summit, what I was hearing from hospital systems was, hey, if they're on DOS, they got to do the conversion before they buy more stuff. So I'm thinking to myself, maybe your Ignite base is perhaps growing a bit faster than DOS? And then just any thoughts on when we're going to get past this TEMS ambulatory services comp? Thanks very much. Dan Burton: Thanks, David. Great questions, and it was good to see you. At HAS as well. Thank you for your attendance. So as it relates to that first question, I think one of the important learnings that we wanted to highlight in this earnings call and a shift in our approach is really addressing that first item that you brought up that I think in the past, had been a little too inflexible as it relates to kind of requiring our client to move from DOS to Ignite. And requiring that to be the next step before we talk about other things. And there are some cases where certain apps are only built to work on top of Ignite. So there are some use cases. That can't be done, but most use cases can be done on DOS. And I think the shift that I hope we're conveying is that recognition that it's really important to meet clients where they are. It's important to give them flexibility. And if they want to stay on DOS for a little bit longer, and that can open up conversations where we can grow with app layer, use case layer opportunities on top of DOS, we should pursue those. And in particular, as it relates to what we were talking about just a few minutes ago, that's where the client gets the greatest ROI. That apps layer. And so we're providing a lot more flexibility and we do expect that that will strengthen our growth within that part of our client base moving forward. And we expect that that should enable all of our clients to pursue growth opportunities, especially the Apps layer with us moving forward. Before we address the Tim's question, anything Ben that you'd add on that migration dynamic? Ben Albert: I would only add that Ignite is, as we've said all along, a more efficient platform. So we anticipate that to continue to be more of a catalyst for us. And as we invest more in the applications that sit on top of that, the value proposition is just getting more and more compelling every day, and we would that's where most of the movement comes in the future. Dan Burton: Yes. And as it relates, David, to your question about what's the timing of some of those TEMS transitions and dynamics, we're through the change as it relates to our decision to exit the couple of ambulatory operations pilot TEMS contracts that occurred that change occurred as of June 30. As we mentioned in the prepared remarks as well as a couple of answers to questions, we're looking across a few other TEMS contracts to make sure that we feel comfortable with the profitability progress and the profitability profile. And where we see some opportunities to trim or change restructure, we are taking those opportunities as our first focus is on improving profitability. And you're starting to see some of the evidence of that as you see our gross profits and our EBITDA margins improving. We want to keep that trend going. So we will continue to be evaluating those through the end of this year. I think as we get into 2026, we should have a portfolio that we feel really good about. And kind of get to the next chapter of growth on the TAMs and the services side as well. Anything, Jason, that you would add? Jason Alliger: Yes, I think you covered it well, Dan. Like Dan mentioned, David, like as we hit June, that's when we will lap. The ambulatory temps exit. And so that's when we will see that difference in growth rate related to those relationships, but we'll continue to monitor any of those less profitable TAMs relationships that make sense for restructure. David Larsen: Great. And just one more quick follow-up. Ben, from your perspective, one year from now, three years from now, five years from now, what would you like to see manifest? I mean, Dan and his team have built a fantastic asset with respect to technology over the past call it, five or ten years. What do you think needs to get done to unleash this value here from your perspective? Thanks, Ben. Ben Albert: Thank you. There is tremendous opportunity for this business as I look, and I want to just echo the sentiment that what has been built here is an excellent foundation. The healthcare expertise that this company has, the technology underpinnings, the applications that are a very diverse set of applications that deliver tangible ROI. I think it's largely about execution, how we bring these things together as efficiently and effectively to meet today's market need. Is a critical element as we head into 2026. Don't see why at some point in the future we can't to growth as an organization and actually go more on offense. As we head in through the strategic part of 2026 and we evaluate what we're going to do next year. We have to overcome some of the dollar-based retention issues that we've talked about understanding and more flexible meet your clients where you are, in the market and then enable ourselves to efficiently drive growth throughout the organization. So I can't see why in the next few years we don't achieve that given all that we have as assets today and how we bring it all together. David Larsen: Thanks very much. Operator: We'll take a question from Stan Berenstain of Wells Fargo. Your line is open. Stan Berenstain: Yes, hi. Thanks for taking my questions. First, a quick clarification regarding the Ignite migration being a bit more drawn out than you expected initially. So for the clients that are staying on DOS, are they also maintaining their contractual agreements? Or are those being renegotiated even though they are staying on the DOS platform? For now? Dan Burton: Yes. In the vast majority of cases, we're just continuing the existing contractual relationship that we have with them and extending giving them the time that they would like to be able to just remain on DOS, continue to utilize DOS really under the same terms. That's the vast majority of cases is what clients are asking for and where we can meet them where they are with what they need. Stan Berenstain: Got it. And then maybe a quick one on margins. So if we think about the puts and takes related to revenue, cost cuts, efficiencies, migration issues, how comfortable are you in the 4Q EBITDA acting as a glide path as we think about 2026? Thanks. Dan Burton: Yes, it's a great question, Stan. I'll share a few thoughts and then Jason, add anything as well. So we are encouraged Stan to see meaningful progress as it relates to our EBITDA growth or adjusted EBITDA growth. We're excited to have reaffirmed our full-year guidance of $41 million of EBITDA for 2025, which represents 57% year-over-year growth. As we shared in the prepared remarks, we do expect further growth in EBITDA. And in some ways, Q4 can be a very useful guide as it relates to what we might be looking like moving into 2026. In other ways, there are always puts and takes as well. So there are some one-time items that contribute to Q4 that are specific to one quarter and there are also some costs that will incur. In 2026. As we move into that process in that calendar year. And we are just in the early stages of the planning process right now. So we'll have a lot more to share at the next earnings call. Jason, what would you add? Jason Alliger: I think Dan covered it well. Stan Berenstain: Great. Thank you. Operator: Our next question is from Jeff Garro of Stephens. Your line is open. Please go ahead. Jeff Garro: Yes, good afternoon. Thanks for taking my question. I want to follow-up on EBITDA growth in 2026 and first, clearly a strong effort to manage costs over the last year. Then you had a call out of some areas of strategic focus and investments. So I wanted to see if there's anything else you want to add there. And in particular, we heard the mention of potential targeted market expansion. So would love some more color on areas where you're considering expanding. Thanks. Dan Burton: Yes, I'll share a thought or two and then Ben and Jason please add as well. So we are early in the planning process for 2026. But as Ben alluded to a couple of minutes ago, we see some specific use case areas where clients really need those solutions. And he mentioned a couple in the cost management space, power costing, power labor, rev cycle space with and some specific ambulatory offerings where we're seeing a lot of client demand and a lot of opportunity to leverage new capabilities, new technologies, AI capabilities to accelerate the ROI that a client can achieve. So we want to make sure as we go through the planning process that we're investing in those areas to maintain that differentiation and really strengthen and accelerate that ROI. At the same time, we continue to see leverage opportunities and Jason mentioned a few of these in his prepared remarks. Where we see meaningful efficiencies coming through the increased adoption inside of Health Catalyst of AI. The increased utilization of our growing India operations, and a few other leverage opportunities that we believe will continue to manifest in 2026 that can allow us to do both. Allow us to make some targeted investments to help us be differentiated and as Ben described that return to growth I think product leadership and differentiation is a core part of that. While also continuing a really positive trajectory as it relates to profitability. We know how important that is. As it relates to providing a shareholder return. Anything Jason or Ben you would add? Jason Alliger: Yes. The only thing I would add is we will provide additional precision related to those areas of investment as part of our Q4 earnings call in early 2026. Operator: Thank you. We'll move next to Sarah James of Cantor Fitzgerald. Your line is open. Gabrielle Alexa Ingoglia: Hi, everyone. This is Gabby on for Sarah. I wanted to double click again on the EBITDA growth for '26. Last quarter, we had a discussion around $60 million being an appropriate run rate and the commentary today is up year over year. Can you talk about what new costs you've baked in to maybe change the tone on commentary? And then also if you could just highlight what apps products are the most sought after in your 4Q conversations, that would be very helpful. Thank you. Dan Burton: Thanks, Gabby. Yes, I'll share a few thoughts and then Jay and Ben please add. As it relates to the way we think about EBITDA growth, one of the updates from last quarter is our Q3 actual EBITDA came in well ahead of what we're projecting. And there were some items that we were able to accelerate into Q3 that we thought might take till Q4 to really realize. And so we did maintain the same guidance that we had shared last quarter as it relates to the full year. But we did outperform in Q3 by $1.5 million. And so there is some rebalancing. Embedded in that Q4 guide that we shared. And I think we are still confident and excited about the EBITDA progression that we believe is doable and possible in 2026. We also recognize we're early in the planning process. This is a dynamic environment. We see some real opportunity to invest and enable a reacceleration in growth. And so we want to go through a robust planning process. And we're still absolutely committed to that meaningful goal of significant EBITDA progress and we're pleased to have been on that journey for some time now really meaningful EBITDA progress every year. For several years. And we think that will continue. We just want the benefit of the planning process to really inform where we should make some targeted investments so that we can see a reacceleration of growth and then where we can realize further leverage and allow that to drop to the bottom line with regards to EBITDA progression. Anything you'd all would add? Ben Albert: Just to add that as you mentioned in terms of the where we see opportunities within applications in the cost-constrained environment, I think as we indicated earlier that we have real ambulatory intelligence solutions. And as organizations are looking for site of care optimization, they're looking to figure out how to best leverage their assets that they have. We can really help them drive that where looking to contain their costs. We have solutions to support cost management. We've got this great Ignite clinical intelligence solution that can drive real reduction in clinical variance. So lots of areas and pockets of value. And back to the earlier question, that's where we just have to focus and prioritize our efforts in 2026, which we'll be excited to come back once we've done that work to explain how we're going to do that next. Operator: We have a follow-up from Richard Close of Canaccord Genuity. Your line is open. Richard Close: Yes. Just two quick ones. The one-timers, the 500k to a million in tech, what specifically was that? And then the second question is, are you guys seeing any business come through the Microsoft relationship for those lower level I guess, $100,000 deals and any success there to point to? Jason Alliger: Great. Jason, you want to take the first one? Jason Alliger: Yes. On those one-timers, Richard, those can be either related to pharma, Dil, where it's a quick delivery or it can occasionally be related to timing of like a renewal being signed where we're providing the service over time, but need the contractual paper to be signed. So there's a bit of a catch-up. In certain situations like that that can impact technology revenue. Regarding the Microsoft related revenue, I'd say we're still early in that relationship. It's something that we continue to monitor how those online sales go. Dan, anything you'd add? Dan Burton: Yes. Just that we're encouraged to have another venue, another opportunity through partnerships like the one with Microsoft. We also have a robust partnership with Databricks that enables us to reach different audiences at a different price point to your point Richard. And Ben had mentioned some of the mid-market opportunities that we're starting to see where we can meet clients where they need to be from a budget perspective. And we can often do that through a partnership with Microsoft or a partnership with Databricks and Microsoft and provide real value to them at a price point that they can afford. And so we're encouraged, but to Jason's point, we're early there. Richard Close: Okay. Thanks. Operator: And there are no further questions at this time. I'd like to turn the call back over to Dan Burton for closing remarks. Dan Burton: Thank you all for your continued interest in Health Catalyst and we look forward to staying in touch. Thank you. Operator: This concludes today's Health Catalyst third quarter 2025 earnings conference call. Please disconnect your line at this time. Have a wonderful day.
Operator: And good afternoon. Thank you for attending Hallador Energy Company's Third Quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. Following our prepared remarks, we will conduct a question and answer session, and instructions will follow at that time. As a reminder, this call will be recorded. I would now like to turn the conference over to Sean Mansouri, the company's NIR. Please go ahead, Sean. Sean Mansouri: Thank you, and good afternoon, everyone. We appreciate you joining us to discuss our third quarter 2025 results. With me today are President and CEO, Brent Bilsland, and CFO, Todd Telesz. This afternoon, we released our third quarter 2025 financial and operating results in a press release that is now on the Hallador Investor Relations website. Today, we will discuss those results as well as our perspective on current market conditions and our outlook. Following prepared remarks, we will open the call to answer your questions. Before we begin, a reminder that some of our remarks today may include forward-looking statements subject to a variety of risks, uncertainties, and assumptions contained in our filings from time to time with the SEC and are also reflected in today's press release. While these forward-looking statements are based on information currently available to us, if one or more of these risks or uncertainties materialize, or if our underlying assumptions prove incorrect, actual results may vary materially from those we projected or expected. In providing these remarks, Hallador has no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, unless required by law to do so. And with the preliminaries out of the way, I'll turn the call over to President and CEO, Brent Bilsland. Brent Bilsland: Thanks, Sean. And thank you, everyone, for joining us this afternoon. We are very pleased with our strong third quarter results, which reflect the continued momentum of our strategy and the operational resilience of our vertically integrated platform. During the quarter, we delivered significant third quarter year-over-year gains across key financial metrics, including revenue, which increased 40%, net income increased 14 times, and adjusted EBITDA, a non-GAAP measure, increased 1.6 times. The current market signals for our product offerings are strong, and we believe that the robust interest in the types of long-term arrangements that we are currently evaluating justifies attempting to increase generation at our Meramec site. In connection with these strong signals, on November 3, we took a meaningful step in our strategy to grow our generation portfolio by submitting an application to the MISO expedited resource addition study, or ERAS program, seeking to add an additional 525 megawatts of gas generation at our Meramec site. While the application is only a first step in our growth process and does not guarantee that we will be able to add the full load or any additional generation as part of ERAS, we're excited to participate in the opportunity and for what it could mean to the future of Hallador. Favorable summer weather patterns, coupled with higher energy demand and elevated natural gas prices, created a supportive energy pricing environment that drove strong revenue, more than a 29% year-over-year increase, for our Hallador Power subsidiary. Following the completion of Unit Two's annual maintenance outage in early July, both units operated very well through the quarter, resulting in higher dispatch levels and improved reliability across the system. These conditions also provided a tailwind for our coal operations, where solid production, up 18%, increased shipments, and consistent operating costs contributed to our strong results, which demonstrated the operating leverage inherent in our coal operation. The favorable power markets led to higher dispatch at both Meramec and our customer plants, which boosted coal shipments and helped reduce fuel inventories at both our power plant and coal mine. During the quarter, we also executed a $20 million prepaid forward power sales contract with delivery scheduled through 2027. As we have stated in the past, these types of sales are a key component of our commercial strategy, providing immediate liquidity while monetizing forward pricing. The prepaid proceeds are being used to support ongoing operations and capital investment across the company. As the quarter progressed, we saw accelerating interest in our capacity and energy offerings from both data center developers and load-serving entities seeking access to the limited inventory of large-scale dispatchable energy available in the coming decade. We are in advanced discussions on multiple fronts and remain encouraged about achieving positive progress towards an agreement by early 2026. Each potential counterparty brings unique value creation opportunities and challenges, but all share a recognition of the importance of securing reliable, accredited capacity. Many of the opportunities that we are evaluating are long-duration, meaning a decade or more in length, and would likely consume the majority of the plant's energy output and accredited capacity at favorable prices. The evolving energy landscape, driven by rapid data center growth, rising demand from load-serving entities, and a more supportive regulatory environment, is creating opportunities that simply did not exist when we began our RFP process last year. Todd Telesz: We recognize that these opportunities are time-sensitive, and our team remains focused on securing an agreement that maximizes value for Hallador and our shareholders. While we continue to view an agreement with a load-serving entity as the more straightforward and faster path to execution, we're also seeing meaningful progress on the data center side, particularly with developers that have proactively secured critical infrastructure such as step-down transformers, switchgear, and other site-level equipment. From a broader market perspective, we continue to see the structural imbalance created by the ongoing retirement of dispatchable generators like coal in favor of intermittent renewables such as wind and solar. This shift has increased the scarcity and value of reliable baseload generation. We believe this environment enhances the long-term value of our Meramec power plant, its leverageable infrastructure, and the critical role that the site plays in supporting grid stability. As a result, in addition to our efforts to participate in the ERAS program, we continue to evaluate strategic opportunities to acquire additional dispatchable generation assets and infrastructure that could help diversify our portfolio, add scale, and enhance our growth trajectory. We also continue to assess the potential to add natural gas co-firing capabilities to our existing generation facilities at Meramec. A dual-fuel configuration could enhance resiliency during periods of limited gas availability while allowing us to continue leveraging the competitive advantage of our own fuel supply through Sunrise Coal. We are proceeding given the regulatory and consumer considerations that will determine the ultimate structure and timing of this type of opportunity. Operationally, Hallador Power delivered 1,600,000 megawatt hours during 2025 at an average sales price of $49.29 per megawatt hour, compared to 1,200,000 megawatt hours at $47.55 per megawatt hour during the same period in 2024. As indicated in our forward sales position, we are transitioning into a period of higher energy and capacity pricing above our historical rates as demand for reliable baseload power continues to grow. On the coal side of our business, operational consistency and increased shipments helped reduce inventories while maintaining adequate fuel supply to support higher potential dispatch levels during the upcoming winter season. As of now, we expect to produce 3,800,000 tons of coal in 2025, having produced 3,100,000 tons through the first nine months from our Oaktown mining complex. We also continue to strategically supplement our internal coal production with low-cost third-party purchases, providing flexibility to respond quickly to shifts in demand and pricing. This balanced approach enables us to optimize fuel costs at Meramec while maintaining optionality to capture upside in coal markets. The transformation of Hallador from a commodity-focused coal producer to a vertically integrated independent power producer is evident in our results. We are leveraging the energy transition to capture the expanding margins of the power markets and the growing demand for reliable electricity. If we are able to successfully navigate the associated challenges with building new generation, we believe that the ERAS program provides an opportunity for meaningful organic growth in a relatively accelerated time frame as compared with traditional builds. With the potential to add roughly 50% of additional generation capacity to the Hallador fleet, we are excited by the unique opportunity this presents. The continued influx of interest from data centers and load-serving entities underscores the value of our platform, and we believe Hallador is well-positioned to take advantage of these opportunities for step-function growth and cash flow generation in the years to come. I will now pass the call over to our Chief Financial Officer, Todd Telesz, to take you through our financial results. Todd? Todd Telesz: Thank you, Brent. Good afternoon, everyone. Jumping right into our third quarter results. On a segment basis, electric sales for the third quarter increased 29% to $93.2 million compared to $72.1 million in the prior year period, while coal sales increased 42% to $68.8 million for the third quarter compared to $48.3 million in the prior year period. Electric sales in Q3 benefited from traditional summer weather patterns, increased energy demand, and higher natural gas prices, which together create a supportive energy pricing environment. The increase in coal sales during the third quarter was driven by increased shipments to customers, supported by favorable power markets that led to higher dispatch levels at both Meramec and our customers' power plants. On a consolidated basis, total operating revenue increased 40% to $146.8 million for the third quarter compared to $105.2 million in the prior year period. Net income for the third quarter increased substantially to $23.9 million compared to $1.6 million in the prior year period. Operating cash flow for the third quarter increased to $23.2 million compared to cash used of $12.9 million in the prior year period, with the increase primarily driven by the aforementioned favorable energy pricing environment, improved coal production efficiencies, and the $20 million prepaid forward power sales contract executed in Q3 2025. Adjusted EBITDA, a non-GAAP measure, which is reconciled in our earnings press release issued earlier today, increased 1.6 times to $24.9 million for the third quarter compared to $9.6 million in the prior year period. We invested $19.6 million in capital expenditures during 2025, compared to $11.6 million in the year-ago period, bringing our total 2025 year-to-date CapEx to $44.3 million. As of 09/30/2025, our forward energy and capacity sales position was $571.7 million, compared to $619.7 million at the end of Q2 and $685.7 million at 12/31/2024. When combined with our third-party forward coal sales of $350 million, as well as intercompany sales to Meramec, our total forward sales book as of 09/30/2025, was approximately $1.3 billion. Our total bank debt remains relatively unchanged and was $44 million at 09/30/2025, compared to $45 million at 06/30/2025 and $44 million at 12/31/2024. Total liquidity at 09/30/2025 was $40.4 million, compared to $42 million at 06/30/2025 and $37.8 million at 12/31/2024. We are currently in discussions with members of our existing bank group and other potential lenders to refinance our credit agreement. Our revolving credit facility matures in August 2026, and our term loan matures in March 2026, with the remaining balances scheduled for repayment in the first quarter of that year using restricted cash. While we have not yet finalized terms, we are making progress towards refinancing on market-based terms and conditions consistent with our existing facility. Of course, as with any financing, there can be no assurance of timing or final terms and conditions, but we remain confident in our ability to secure an arrangement that supports our ongoing liquidity and growth initiatives. This concludes our prepared remarks. We'll now open up for questions from those participating on the call. Operator, back to you. Operator: Thank you. As a reminder, to ask a question, you will need to press 11 on your telephone. To remove yourself from the queue, you may press 11 again. First question comes from the line of Jeff Gramp of Northland Capital Markets. Your line is open, Jeff. Jeff Gramp: Afternoon, guys. Hey. This is Brent on the potential capacity expansion you guys are looking at now. What are the main milestones or key long lead items we should think about to track over the next, I don't know, couple quarters, six to twelve months, to kind of assess the progression there, the potential? Brent Bilsland: Thanks. Yes. So MISO created this expedited process to help generation that meets the requirements, which basically has the potential or likelihood to actually be built, get through the queue process in a timely fashion versus the traditional process. And so we found an application that we feel complies with those timelines. They will come back later this month and tell us if our application is complete in their eyes and give us the time to cure anything that needs further clarification. Then they are at various times of the year announcing which applications they're picking up to review. The ERAS program only allowed for 50 total applications. And I think back in August, they came out and said they were reviewing, like, nine of those applications. I think here in November, they've come out and said they're doing another 15 or so. And so it could be six months or so before they actually pick ours up. So that's something that we'll keep an eye on and certainly update the market at our quarterly filings. And then in the meantime, we're working on securing the equipment that we filed to build. And so that's what we're working on for now. Jeff Gramp: Perfect. That's really helpful. And for my follow-up, you guys obviously had a super strong quarter in Q3. Can you touch on what you've seen in the first forty-ish days of Q4? Just trying to get a sense of if some of these dynamics have continued or how we should think about Q4 expectations as we look to wrap up the year? Brent Bilsland: Yes. No. Q3 was an exceptional quarter for us. A lot of things went right. We had units coming out of outage. We had really warm weather providing strong cooling demand in September. And coal shipments were just quite frankly exceptional. We do not expect that here in Q4. We expect Q4 to look very much like Q4 of 2024. Unless we just see some extreme cold weather show up in December or something like that. We don't see much of a catalyst to really drive a performance like Q3. Jeff Gramp: Got it. That's helpful. I'll hop back in the queue. Thanks. Brent Bilsland: Thank you, Jeff. Operator: Thank you. Our next question comes from the line of Matthew Key of Texas Capital. Please go ahead, Matthew. Matthew Key: Hey. Good afternoon, everyone, and thanks for taking my questions. I was wondering if you could provide any initial color on the economics of the 525 megawatt expansion, just like an initial read on CapEx and any potential impact it could have on operating costs long term. Brent Bilsland: Yeah. So we are still negotiating the equipment for that. And so until we have those economics secure, we're not really releasing any information as far as the overall economics. But you know, we are encouraged by what we see through our long-term negotiations on PPAs about the robustness of volume and pricing and number of bidders. The market is just sending strong signals that it needs more capacity. And so that's ultimately what led us to the decision to file. And so as we progress through this process over the next three years, we'll continue to update all of our investors on what that project's gonna look like. But we're excited about the opportunities. We've told investors it's when you're a smaller company like ourselves as far as being able to grow your production relatively quickly. And we think this project potentially does that with the potential to increase our generation by 50%. Matthew Key: Got it. That's helpful. And just a quick macro question for me. In late September, the Trump administration announced I think it was $625 million in funding directed at coal-fired power in the US. What impact, if any, do you think they'll have on the industry? And could Hallador potentially be a recipient of any of that funding? Brent Bilsland: Yeah. I mean, look. I think anytime the government is handing out money, that's helpful to the industry. And I think that Hallador could have some projects that qualify for grants out of that basket of money. So we'll just have to see. It's, you know, they made an announcement, then we figure the rules out as we go. So we're still trying to navigate that process and see how much of that we can secure for Hallador. Matthew Key: Great. Appreciate the time, and best of luck moving forward. Brent Bilsland: Thank you, Matt. Operator: Thank you. Our next question comes from the line of Jacob G. Sekelsky of AGP. Please go ahead, Jacob. Jacob G. Sekelsky: Hey, guys. Thanks for taking the question. Just on the M&A front, you mentioned you're always looking. I'm just curious if you're seeing, you know, plug-and-play type capacity additions out there. Are you more still looking at assets that have been started with capital and in need of investment? And I guess any color if you have a preference between the two. Brent Bilsland: Well, I think, you know, typically, you're probably gonna find us play in the coal space. That seems to be our niche, our expertise. And traditionally, there's been less competition there. So that's typically where we like to focus our attention. That said, those types of transactions are very bespoke. And so they take more time. And I come back to the Meramec purchase. I mean, that took us NDA to closing. Signing the NDA to closing was thirty-three months. So it wasn't a small amount of work, but that said, it ended up being a tremendous value to the company. So those are the type of circumstances that we're looking for. I don't think we'll find a purchase price that low again, but the revenue to offset that has increased. And so we just have to take the opportunities as they come. But we are encouraged by some of the conversations that we're having. We'll see if they develop. Jacob G. Sekelsky: Got it. Okay. That's helpful. That's all for me. Congrats on the quarter. Brent Bilsland: Thank you, Jacob. Operator: Our next question comes from the line of Nick Giles of B. Riley Securities. Your line is open, Nick. Nick Giles: Hey. Thanks, operator. Good evening, everyone. Guys, congrats on a really nice quarter here. Brent, in your prepared remarks, you noted advanced discussions with multiple parties. Would you look to reenter into exclusivity? Would you really be focused on just announcing a definitive agreement at this point? And then, you know, last quarter, spoke to utilities entering the mix. So curious for any updated commentary around that if a utility might be your preference or if you're still, you know, kinda in the mix with hyperscalers as well. Thanks. Brent Bilsland: Well, we're talking to both parties. What's changed is the utility interest has increased. Quite frankly, everybody's interest has increased. And I think that's due in large part, particularly on the developer side, as their projects start to get through permitting. And, you know, once they can get the land permitted and project zoned for data center build-outs, then they start focusing their attention on the next step, which is energy. And so we're seeing several of those projects kinda make it through those stages and now turn their attentions on Hallador because, again, as we've said before, we think we're one of the few places to get accredited capacity in the state of Indiana or MISO Zone 6 in another way. So that's what's transpired, and so it's definitely piqued the interest here in the last several months. And it's far more than interest. I mean, we are negotiating with several parties, and we're trying to get to a definitive agreement with all of those. And they're on probably more of a time constraint than we are. So, you know, they're trying to get to a project to the point where it can be developed as quickly as possible. So I think we're in a good spot. We're very encouraged by the process and how it's going and what we see, so much so that that led us ultimately to the decision to try to grow our generation by 50% through the ERAS process. Nick Giles: Right. That's helpful. Maybe switching gears. You executed a five-month prepaid forward for $20 million in the quarter. How much more room do you have in your forward book until you feel like you need to preserve the remaining capacity for a long-term agreement? Just curious on that in the course that had. Brent Bilsland: Well, that was energy. Right? Primarily with the market, it is really strong, sending the strongest signal for the credit capacity. You see a lot of articles about the world's running out of energy. I disagree with that. The world has run out of accredited capacity. So and the sale we really made was for the 2027 time frame, which we hadn't done much out there, and it was really for a relatively small volume. Nick Giles: Got it. Maybe just one more if I could. Is it fair to assume that this 525 megawatt expansion could be a part of any long-term agreement, or maybe if not initially, could you see that potential customer having a rover on the capacity? Or where does this ultimately fit in, if at all? Brent Bilsland: Well, it'd be interesting to see. I mean, we just went public about the project an hour ago. So it's not something we've discussed with other parties. I mean, we just made the filing a week ago. So this is all relatively new, and, you know, we want to—that's part of the reason we wanted to publicly announce. But when you make a filing like that, you're never really quite sure when that will become public. So we wanted to tell the market at the same time. And then so I think it will be part of our conversations going forward. And we'll see where that leads. Nick Giles: Got it. Well, Brent and team, appreciate the update, and continue the best of luck. Brent Bilsland: Thank you, Nick. Operator: I would now like to turn the conference back to Brent Bilsland for closing remarks. Sir? Brent Bilsland: Yes. I want to thank everybody for joining us today and your continued interest in Hallador, and just hope that we've been able to articulate and express our high level of excitement as we've had a great quarter, and we're excited about the opportunities that are in front of us. Thank you. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good afternoon, ladies and gentlemen, and welcome to the DocGo Third Quarter Earnings Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. 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 call over to Mr. Mike Cole, Vice President, Investor Relations. Please go ahead. Mike Cole: Thank you, operator. Before turning the call over to management, I would like to make the following remarks concerning forward-looking statements. All statements made in this conference call other than statements of historical fact are forward-looking statements. The words may, will, plan, potential, could, goal, outlook, design, anticipate, aim, believe, estimate, expect, intend, guidance, confidence, target, project, and other similar expressions may be used to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance and we cannot assure you that we will achieve or realize our plans, intentions, outcomes, results, or expectations. Forward-looking statements are inherently subject to substantial risks, uncertainties, and assumptions many of which are beyond our control and which may cause our actual results or outcomes or the timing of results or outcomes to differ materially from those contained in our forward-looking statements. These risks, uncertainties, and assumptions include, but are not limited to those discussed in its risk factors and elsewhere in DocGo's annual report on Form 10-K, quarterly reports on Form 10-Q, our earnings release for this quarter, and other reports and statements filed by DocGo with the SEC to which your attention is directed. Actual outcomes and results or timing of results or outcomes may differ materially from what is expressed or implied by these forward-looking statements. In addition, today's call contains references to non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our earnings release on the current report on Form 8-Ks includes our earnings release, which is posted on our website, docgo.com, as well as filed with the SEC. The information contained in this call is accurate as of only the date discussed. Investors should not assume that statements will remain relevant and operative at a later time. We undertake no obligation to update any information discussed in this call to reflect events or circumstances after the date of this call or to reflect new information or the occurrence of unanticipated events, except as to the extent required by law. At this time, it is now my pleasure to turn the call over to Mr. Lee Bienstock, CEO of DocGo. Lee, please go ahead. Lee Bienstock: Thank you, Mike. Thank you all for joining us today. 2025 has been an important year of transition for DocGo. And I would like to start our call by sharing four key headlines from the quarter before sharing more specifics about our performance. First, we experienced record volumes across all of our base business offerings in the quarter. Our strategy to build a robust evergreen healthcare business is coming to fruition. Second, we continue to have a strong balance sheet with cash we intend to use to fund our growth and capitalize on the opportunities in front of us. Third, we are extremely excited about our acquisition of SteadyMD and how their 50-state virtual care network and over 500 advanced practice providers will allow us to scale more efficiently. And fourth, today we announced 2026 guidance of $280 million to $300 million in revenue and a full year 2026 adjusted EBITDA loss of $15 million to $25 million with the majority of this adjusted EBITDA loss expected to be realized in the first half of the year. Our 2026 revenue guidance represents 12% to 20% year-over-year base business growth. Any potential acquisitions or new contract wins would be incremental to that amount, and we would provide updates on 2026 guidance as needed. At the top end of our revenue guidance range for 2026, we would expect to exit the year on an adjusted EBITDA positive run rate. We have a bold vision building a company that brings the capabilities of a doctor's office into a patient's living room. I am excited about our investment to build these capabilities, which I believe is a small price to pay for the promise of something that has transformational potential both for our company and our industry. Before I cover the individual business verticals, I want to emphasize that each of our service lines, with the exception of our Caregap closure and primary care offerings, is adjusted EBITDA positive on a contribution basis. I think it's important to highlight this because their value can be masked by the impact of corporate overhead costs at our current scale and the investment we are making in the capabilities I just referenced. Now I'll touch on our medical transportation and payer provider mobile health verticals. Our flagship medical transportation business achieved record volumes in Q3, driven by numerous long-term contracts with strong visibility and an enviable roster of customers including Jefferson Health, Mount Sinai, New York City Health and Hospitals, HCA TriStar, the NHS in the UK, and others. We expect this business will generate more than $200 million of revenue in 2025 making this a strong foundational asset. As we add additional scale and ramp staffing in this segment, over the next two to three years, we anticipate that we can further improve the adjusted EBITDA contribution margin to approximately 12%. We continue to see incredibly strong demand for our service with opportunities to grow revenue within our existing customer base. Several of our large health system customers use our total transportation solution, which includes our proprietary software, dedicated ambulances, EMS crews, and staff to manage their transfer center operations. Our EPIC integrated technology platform creates efficiency, transparency, and provides a single source of truth for transportation management across vendors. In this capacity, we often have the ability to select whether to assign a trip to one of our ambulances or select a different transportation vendor if we don't have an available unit staffed to run the trip. We estimate that over the last twelve months, we have assigned over 26,000 trips to other companies, many of which could have been run by our fleet if we had available service level capacity. We have accelerated our talent acquisition efforts and are looking to hire hundreds of additional EMS staff as soon as it is practical to create the capacity and better capitalize on this embedded demand from our current customers. We expect that these targeted additional hires will enable us to capture millions of dollars of additional top-line revenue on our existing contracts in 2026. In summary, our transportation business serves a vital market need, is profitable on a stand-alone basis, and is a valuable foundational asset. Moving on, I would like to cover our payer and provider vertical, which is expected to generate approximately $50 million of revenue in 2025, which includes a contribution of approximately $5 million from the SteadyMD acquisition in mid-October, and is expected to grow to $85 million next year. This vertical includes services such as care gap closure, primary and preventative care, telehealth, remote patient monitoring, mobile phlebotomy, and other payer and provider services. One of our core offerings in this vertical is our remote patient business, which has made considerable progress over the last year. Remote patient monitoring is operating at an annual run rate of approximately $15 million with a greater than 10% adjusted EBITDA contribution, which is expected to continue trending higher in 2026. We've signed 13 new contracts or expansions this year on the back of strong demand, and have eight additional proposals submitted or in contracting. We are excited to keep developing this capability in a space that typically commands high multiples. An area of our payer and provider vertical that is taking longer than anticipated to ramp but still holds great promise for us is our primary care services. We had originally budgeted approximately $5 million to $10 million of revenue from primary care in 2025. We are seeing progress here and just received a substantial list from a major health plan to offer these services to 10,000 members, which will launch in Q4 and ramp early 2026. Also within our payer and provider vertical, our care gap closure and transitions of care business more than quadrupled when we compare Q3 2025 to Q3 2024. While our investment in product development, training, and technology to build our capabilities was substantial in 2025, we expect that rate of investment to decline considerably in 2026, which will help contribute to our goal of achieving profitability. As we work to drive our Caregap and primary care business to profitability as soon as possible, I want to underscore why we are making this strategic investment to build these capabilities. DocGo's ability to leverage a tech-enabled clinical workforce to reach difficult populations with chronic conditions delivers meaningful value to our payer and provider customers. Our solutions help keep people healthier and in their homes and have the potential to significantly lower health systems costs. Considering the convergence of increasing costs, flat reimbursement levels, facility overcrowding, and ongoing operational challenges facing healthcare today, we believe DocGo's offering is positioned to drive substantial value and represents a significant opportunity for our company. While this payer provider business takes considerable time to develop, we have made significant inroads over the last two years and we believe it has high growth potential. As I shared on our last earnings call, we are already working with two of the top 10 national payers and are in active discussions with both of these customers to expand those contracts. Additionally, we are in the process of contracting with two more of the top 10 national payers and have an additional 10 pending proposals in our business development pipeline. I wanted to illustrate the potential of these by highlighting the growth trajectory of one of our major payer customers over time. In 2023, our first year working with a major California health plan, we performed 789 total patient visits. In 2024, that number grew by nearly 65% to 1,293. In 2025, it is expected to grow another 250% and reach 4,500, and in 2026, it's expected to grow another 280% and reach over 17,000 visits based on existing plans. This same customer started with a single transition to care program, added care gap closure, and has recently added longitudinal care services as well. In summary, it takes time for these relationships to ramp, but they can accelerate quickly as our customers appreciate the value we can deliver. As I mentioned, we also considerably expanded our capabilities with our acquisition of virtual care provider SteadyMD last month. We believe we got a very attractive deal for our shareholders with the way we structure this transaction and the value it brings. For those of you who didn't have the opportunity to dial into our webcast last month, which is posted on our Investor Relations website, SteadyMD offers a 50-state virtual clinician workforce, clinical operations, and world-class technology that powers real-time matching between patient needs and clinical expertise. The company provides virtual care for top consumer health and digital wellness brands, including two Fortune 10 customers. SteadyMD maintains a roster of over 500 clinicians, is expected to service over 3 million patients in 2025, and is projected to generate approximately $25 million in revenue this year. SteadyMD's scaled network of virtual providers is expected to enable DocGo to achieve more efficient delivery of patient care by pairing DocGo's mobile health clinicians in the field with SteadyMD's clinical network over time. We are enthusiastic about this acquisition for numerous reasons. First, it provides us with a 50-state virtual care footprint, which significantly expands our clinical capacity and positions us to extend our offering to both payers and providers. Second, we have long believed that pairing our last-mile clinical delivery capabilities with virtual care has the potential to unlock the power and potential of telehealth and creates an optimal end-to-end solution. We look forward to the potential synergies this creates and will look to both amplify our existing offerings and potentially launch new services year. Lastly, we see strong opportunities for cross-pollinization between the two exceptional customer bases that both DocGo and SteadyMD have built, and we look forward to exploring those as well. We continue to believe that DocGo has a unique ability to acquire traditional healthcare assets where we can overlay our technology, mobile health capabilities, and extensive customer base to drive additional value. There are a wide variety of healthcare companies out there that see DocGo's last-mile healthcare delivery capabilities as a missing piece, making us a very attractive partner, and we plan to remain active on the M&A front. In sum, 2025 has been a transitional year as we move beyond emergency response contracts and increasingly focus on executing DocGo's evolution to a provider of long-term, integrated technology-driven healthcare solutions that meet the needs of our customer today and tomorrow. I couldn't be more proud of the progress we are making as we are positioned for strong growth in each of our key verticals. We expect the investments in our early-stage business lines to gradually abate over the course of 2026. We have made a strategic acquisition in SteadyMD that expands our footprint, adds accretive capabilities, and a roster of blue-chip customers that we can continue building upon. Additionally, we continue to grow our pipeline of new business and look for potential acquisition opportunities, both of which can help us gain critical mass, achieve profitability, and create additional shareholder value in the coming years. Our future is bright and valuable. We have the right products and services to address critical needs in our healthcare industry, have built differentiated technology and capabilities, and have business lines such as medical transportation and remote patient monitoring that are already firmly EBITDA positive, and we have the balance sheet to see our vision of bringing the doctor's office to the living room a reality. At this time, I will hand it over to Norm to cover the financials. Norm, please go ahead. Norman Rosenberg: Thank you, Lee, and good afternoon. Total revenue for 2025 was $70.8 million compared to $138.7 million in 2024. The year-over-year revenue decline was entirely due to the sunset of migrant-related projects. Excluding revenue from migrant-related programs, revenue increased by 8% to $62.4 million in 2025 from $58 million in 2024. Medical transportation services revenue increased to $50.1 million in 2025, from $48 million in transport revenues that we recorded in 2024. Revenues were driven higher by gains in nearly all of our U.S. markets, with some of the strongest growth in Texas and Tennessee. Mobile health revenue for 2025 was $20.7 million, down from $90.7 million in the third quarter of last year, driven by the wind-down of migrant services. Included in this year's amount was approximately $8 million in migrant-related revenues. Non-migrant mobile health revenues increased by more than 20% year-over-year, driven by increases in care gap closures, remote patient monitoring, and mobile phlebotomy. Adjusted EBITDA for 2025 was a loss of $7.1 million compared to adjusted EBITDA of $17.9 million in 2024. The adjusted gross margin, which removes the impact of depreciation and amortization, and several one-off items, and is the measure of margins that we track most closely, was 33% in 2025 compared to 36% in 2024. During 2025, adjusted gross margins for the medical transportation segment were 31.7% compared to 30.7% in 2024 and the highest gross margins we've seen in this segment since 2024. During the third quarter, our transportation business ran at the highest utilization rates that we've seen. Given these utilization rates, it will be critical for us to expand our field labor team, which we would expect to lead to higher revenues and improved gross margins for transport in 2026. Mobile Health segment adjusted gross margin was 36.2% versus 38.8% in 2024 but up from adjusted gross margins of 32.5% in 2025. We expect to continue replacing migrant-related revenues with relatively higher margin service lines such as remote patient monitoring and mobile phlebotomy. On both the cost of goods sold and an operating cost basis, we continue to make significant investments in our Caregap closure business. We estimate that the adjusted gross margin for mobile health would have been above 40% in 2025 excluding the Caregap closure business. There were also some non-recurring items that had a large impact on our GAAP results this quarter, so I'd like to briefly review them. Within the cost of goods sold area, we incurred increased insurance costs in the amount of approximately $5.2 million. These largely consisted of additional premium owed for workers' compensation coverage back in 2022 and 2023 driven largely by an increased migrant program-related employee base, and the settlement of a large auto insurance claim for an incident in 2022 in the since-discontinued California transport market. Also, within the operating expense category, we incurred noncash charges due to the write-down of various intangible assets and goodwill. These charges totaled $16.7 million in the quarter. During the third quarter, we made further progress on strengthening our balance sheet by paying off the outstanding amounts under our line of credit, removing $30 million in debt from our balance sheet. We continue to collect our older, larger invoices, which allowed us to generate $1.7 million operating cash flow for the quarter despite our operating losses. Through the first nine months of 2025, we have generated nearly $45 million in cash flow from operations. As of September 30, 2025, our total cash and cash equivalents, including restricted cash and investments, was $95.2 million, down from $170.1 million at the beginning of the year. However, having paid down the entire outstanding balance on our credit line during Q3, our cash position net of debt is well above our net position as of the beginning of this year. Our balance sheet is now debt-free for the first time since late 2023. Our accounts receivable continue to decrease, particularly for migrant-related receivables. At quarter end, we had approximately $37 million in accounts receivable from the various migrant programs, which represented a little more than a third of our total company AR. This compares to $54 million in migrant program-related AR at Q2, $120 million at Q1, and $150 million at the end of 2024, which at the time represented approximately 71% of the company total. We've now collected about 96% of all of our migrant-related receivables from the inception of those programs until today, and we remain confident that we will collect all remaining outstanding amounts. Now that we've improved our cash balance and paid off our credit line debt, we are well-positioned to carry the company through this ongoing transitionary period. Over these final seven weeks or so of 2025, we will focus intently on collecting the remainder of the migrant-related receivables. Assuming that these amounts are collected during the fourth quarter, we would expect our cash balances at year-end to be higher than they were at the end of Q3 after adjusting for the SteadyMD acquisition. We expect to exit 2026 at about $65 million of cash, which we expect will be the low point subject, of course, to buybacks or any additional acquisitions. Finally, as we head here into the home stretch of 2025, we'd like to discuss our outlook for the full year and offer a preliminary view on 2026. For full year 2025, we now expect revenues in the range of $315 million to $320 million. Of that amount, about $68 million to $70 million relates to migrant projects, so the base revenue should come in at about $250 million. For adjusted EBITDA, we see the full year 2025 loss in the range of $25 million to $28 million. For 2026, we see revenues in the range of $280 million to $300 million, which would represent a 12% to 20% growth over 2025's base revenues. We anticipate a full year adjusted EBITDA loss of somewhere between $15 million and $5 million. However, at the top end of this revenue guidance range for 2026, we would expect to exit the year on an adjusted EBITDA positive run rate. On a sequential basis, looking at 2026, we expect revenues to increase and for the EBITDA performance to improve over each of the four quarters of the year. At this point, I'd like to turn the call back over to the operator for questions and answers. Operator, please proceed. Operator: Thank you. Ladies and gentlemen, we'll now begin the question and answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. And your first question comes from Pito Chickering from Scotiabank. Please go ahead. Pito Chickering: Hey, good afternoon guys and thanks for taking my question. Looking at the implied margins for the fourth quarter, I think it looks like negative 13%. Can you just help bridge us versus margins we saw in the third quarter of down 10%? How much came from the SteadyMD acquisition services core ops just bridging 3Q to 4Q margins. Norman Rosenberg: So there wasn't anything in Q3 on SteadyMD. SteadyMD showed up in October, so you're gonna get most of the quarter of SteadyMD. You know, we think that number should be somewhere around $5 million in a little bit, you know, right a little bit more than $5 million in revenue for the quarter. And I would say slightly EBITDA negative for that period. So it really shouldn't have a material impact. It's gonna have an impact on the margin percentage but otherwise, it's not gonna have much of an impact. We will have lower we will have basically no revenue from or very small revenue number from the migrant-related revenue. So that's also gonna have an impact on the margin a little bit. Pito Chickering: Okay. And then for 2026 EBITDA guidance, you know, the implied margins there for next year are negative 7% yet reciting quarter at sort of negative 13% margin. Can you just walk us through kind of how that improves throughout the year? And what should we be modeling in the first half of your EBITDA versus the back half of your EBITDA? Norman Rosenberg: Yeah. Sure. So there are a couple of areas where we think we'll do a little bit better in terms of our model. First of the gross margin percentage. So it's interesting to note that the Q3 adjusted gross margin as we walk through, worked out to about 33%. That's higher than what we did in Q1 or Q2 of this year, and we think that it's something of a proxy for where we go in the next few quarters going forward. There are some projects that we have, especially on the transport side, that we think will raise the gross margin a little bit. But realistically, those will probably have more of an impact in the second, third, and fourth quarter of next year than here in 2025. Or 2026. So there's a little bit of room over there as well. And then on the operating expense side, so we continue to work hard at trying to reduce our SG&A. And as we were able to take a couple of million dollars out per quarter in SG&A, that should also have an impact towards the back half of next year. And then there's a scale. So our expectation, Pito, is that whatever we see in terms of revenue in Q1, will be the low point of 2026. It'll go up then. And consequently, the EBITDA loss or profitability, the way we model it out into Q2, into Q3, into Q4, will improve every quarter as we go, Q1, two, three, and four. So we think that that's gonna have the impact. So going to your second question as far as the breakdown, I would say the bulk of the expectation for a negative EBITDA number is going to come in that in the first half of the year. It's clearly going to be skewed towards the first half of the year in terms of those losses. And then you get a much smaller loss in the third quarter and, you know, maybe even perhaps we think, positive number in the fourth quarter. Pito Chickering: Okay. And then last question for me. Looking at for 2026 revenue guidance, how much do you assume, from migrants, for next year? How should we be modeling, transport versus mobile health? Next year? Thanks. Lee Bienstock: Absolutely, Pito. This is Lee. So in terms of migrant-related revenues for 2026, we don't expect any migrant-related revenues for 2026. So that number will be zero for next year. In terms of the breakdown for the guide, it's important to note that the guide really is a current guidance is based on the baseline of the business as we see it today. Any new contract wins, or M&A would be in addition to the number we're sharing tonight. The breakdown is about two-thirds transport, one-third mobile health. That's essentially the way to look at it. Pito Chickering: Great. Thanks so much. Lee Bienstock: Of course. Operator: Thank you. And your next question comes from Sarah James from Cantor. Please go ahead. Sarah James: Thank you. Wanted to dig a little bit more into the payer provider revenue growth. So you guys obviously have a very strong pipeline there. Sounds like when you step up from $50 million in '25 to $85 million in '26, am I right in annualizing the SteadyMD impact to be $15 million of that, and then you'd have $20 million from organic growth? Then what kind of deal closure assumptions does that for the pipeline that you talked about with possibly expanding your existing two national payers or adding in two others? Lee Bienstock: Absolutely, Sarah. Thanks for the question. So first off, the $85 million per payer and provider for next year includes about $25 million from the SteadyMD acquisition. That's the run rate the business is on. Of course, we announced that acquisition a few weeks ago, so we're in the process of integrating it. So we have a $25 million of the $85 million as a SteadyMD contribution for next year, and the remaining would be the $60 million from our current payer and provider baseline business. To answer your question, specifically, I'm glad you asked it, it does not include any deal closures or additional M&A or contribution from our pipeline. We're looking at the contracts we currently have today. We're looking at the geographies we currently operate in today, the list of patients that have been provided to us so far, and our current customer set, and basing our guidance for next year off of that. Both for payer and provider and the transportation portions of the business. Sarah James: Great. And can you help us understand what does it look like when you expand the payer provider contract going from transition of care to care gap closure to longitudinal, what are the orders of magnitude of revenue that that could impact or the way it could change your margin profile for that segment? Lee Bienstock: Absolutely. So as you mentioned, Sarah, mostly our payer and provider contracts typically start with either care gap closure services where the payers provide us with a list of patients that have open care gaps. They have been seen. This could be diabetic retinal exams, bone density scans, annual wellness visits, vaccinations. And then we go engage those patients. We meet them where they are. And we help close out those care gaps. And these are chronically ill patients. They're typically patients that are costing the health plans a lot of money. And so the health plans are heavily incentivized to make sure that they're reaching these patients. And if they don't, their quality scores for their plan are negatively impacted, and then, of course, patients end up landing in the hospital. That costs the payers lots of money. So they're providing us with lists of patients. These are the patients that have open gaps in care. And we're going to see them. So they either start with care gap closure or transitional management. And so as a patient is being discharged from the hospital, they've already been hospitalized or they visited the emergency room, they're leaving the hospital we work with them to make sure that their transition of care to the next setting could be their home, could be another facility, we make sure that their discharge plan is well taken care of and that we're redressing the incision site, titrating meds, making sure we're checking their vitals so that their transition of care is well taken care of. And they don't end up back in the hospital. That's where our services typically start with the payers. What we're also finding is a lot of these patients need primary care services and preventative care. And so as I mentioned, we're in the process of expanding the relationships we have into primary care and preventative care, more longitudinal care. So instead of going to serve a care gap closure visit or transitional care, we're providing the long-term care and the preventative care and the primary care for that patient. And that's typically step two in that process. And then you can see scenarios where we enroll those patients in remote patient monitoring, as I mentioned. So really enveloping the patient in the care they need, meeting them where they are, closing care gaps to start, and then making sure they have the proper primary and preventative care. That's how the progression of those contracts typically takes. And then the lists get larger, the patient needs get bigger, and more varied, and then we're there to sort of expand into those payers as they see, really the impact of our work and how better off their patients are with our services. I know we shared one more piece here, which is with a lot of the health plans we work with, one example we gave, which we gave in the prepared remarks, we've helped reduce their ED readmission rate by over 50% for the patients in that transitional care management program. So the payers are seeing real benefit and they're continuing to give us more and more work. And so that's what we're basing our guidance on is these contracts we currently have. And the ability to expand with our current customer set. Any new additions from the pipeline or M&A or any significant contract wins would be in addition to the guidance we're giving tonight. Sarah James: Thank you very much. Lee Bienstock: Absolutely. Operator: Thank you. And your next question comes from Ryan McDonald from Needham. Please go ahead. Ryan McDonald: Hi. Thanks for taking my questions. Maybe to start on the transportation side. So it's great to hear about the heightened levels of utilization and sort of that being a signal for incremental investment scale the team. But how do you balance sort of supply demand in terms of what you're seeing so that as you continue to scale the team that, you have enough demands to sort of utilize those teams in an optimal way so we're, you know, it's not becoming margin dilutive? Thanks. Lee Bienstock: Absolutely, Ryan. Thanks for the question. So I thought it was important for us to mention how many trips we're currently outsourcing or handing off to other vendors. And so we looked at that number over the last twelve months. It's added up to about 26,000 trips. So that's really the number we're using as sort of the embedded demand we have and the contracts we have. And how much staff and supply we need in order to meet that demand. And that's really the number we're working off of. Of course, new contract wins, we'd have to hire more. But that's the number we're working off of. And we've been able to quantify those trips in all of our markets, and then the corresponding level of staff that we would need in order to satisfy those trips and not outsource them. And so that's where we're basing our entire hiring plan around. If you add those up, those 26,000 trips across all of our markets, it looks like we have to hire about another seven to 800 staff. Now I'll tell you we've made progress on that over the past number of weeks here, but we're continuing to ramp that up pretty intensively right now. We have big work streams going within the company to make sure that we're both retaining the great staff we have, and attracting new team members to join so that we can scale those efforts. But it's really based off of the number of trips that we're already outsourcing from the embedded demand we have from our contracts. Ryan McDonald: Helpful color there. Thanks, Lee. And then maybe as a follow-up, you know, obviously, great to hear about the continued scaling and growth in the remote patient monitoring business. You have 13 contracts this year, eight more proposals. Can you just talk about what some of the core areas and point sort of care areas that you're focused in with remote and really genesis of the question is a bit is, obviously, the recent news about United rolling back, you know, RPM except for any chronic heart failure and hyper during pregnancy. Just kind of curious what you're hearing in the market of does that sort of create a knock-on effect at all for other payers in the market? Lee Bienstock: Yeah. Ryan, I'm so glad you mentioned that. It's actually our core offering on remote patient monitoring is really in the cardiology space. So you mentioned, you know, chronic heart failure and other insurance companies rolling back coverage to address cardiology and heart disease. That actually would bode well for us. We have a deep expertise in cardiology and implantable cardiac devices like loop recorders, pacemakers, and so forth. So that's really our specialty. And that's the area where we're investing in. So that's the focus of our remote patient monitoring efforts is these devices that are transmitting data, particularly for heart failure and other cardiology-related chronic conditions. We have been expanding since from that into other specialties like diabetes and others, but the core focus of our group right now is in cardiology. Ryan McDonald: Awesome. Appreciate all the color, Lee. Lee Bienstock: Of course. Operator: Thank you. Your next question comes from David Larsen from BTIG. Please go ahead. Jenny Shen: Hi. This is Jenny Shen on for David. Thanks for taking my question. First, I just wanted to ask about your current view of the hospital and hospital spending environment as a whole. We've spoken to some hospital executives who've said some of the uncertainty in the market, including around things like ACA and Medicaid have caused them to be more cautious with their budget. And they're expecting there could be pressure on volumes and spending. Have you had or heard any of that sentiment with your customers so far? But it looks like volumes are strong. Just any thoughts on hospital customer sentiment on spending? Thank you. Lee Bienstock: Oh, absolutely, Jenny. It's great to hear from you, and it's a great question. So yeah. Look. I think it's still early to tell what really the impacts will be from any new legislation, but you can certainly see an area where perhaps there's more Americans that are underinsured or uninsured, and they end up in hospitals' emergency rooms, and really straining capacity. And then, of course, perhaps those hospitals won't be able to recoup reimbursement from underinsured or uninsured patients. So it's definitely a concern. We spend a lot of time with hospital executives, and I speak to hospital system CEOs very regularly. And I think our core focus is on how we can save them money and be more efficient. That's really always been our focus. We feel like we can help them manage their patient flow, make sure patients are not staying an extra night in the hospital if they don't need to because they couldn't get the medical transportation coordinated. We help with that. Our platform specifically is designed for that. And so we feel like we've gotten receptivity from hospital systems very recently to that. And then, of course, on the payer and provider side, our whole goal again whether it be with hospital systems or payers, is we want to help lower their costs and their utilization. And so that transitional care management program I described, when a patient is getting discharged, that is a critical moment in patient engagement. They're leaving the hospital. And so we're there bedside often scheduling follow-up appointments, making sure that we're gonna go and see them perhaps in their home to make sure their discharge planning is being taken care of. That is very valuable, and that will help patients stay out of the hospital. And that helps hospitals because hospitals get penalized if patients bounce back within a thirty-day window. And so we're helping keep patients from doing that. And it helps the payers because, again, patients are most costly when they're in the hospital. So again, we really are excited by what we're building here. We think it is very timely. We think it's incredibly strategic to the healthcare ecosystem. And, really, it's all designed on trying to save the system money, the hospital's money, and the payers' money, and that what we think will be successful with that. Norman Rosenberg: Yeah. Jenny, what I would add to that is that I can say anecdotally that in the last six months or a year, we've had conversations with hospital systems that, you know, we've been in the ambulance business for quite some time. But there are some big hospital systems we've spoken to that we had not really spoken to prior to, let's say, the last six or twelve months who are now thinking about precisely that. Outsourcing the management of the flow of patients into and out of their facilities. Something that they had always done on their own. It's always been a pain point to them, and now they really have to think about being more efficient and getting it off their plate. So we're having we have opportunities that I don't think even existed a couple of years ago. Jenny Shen: That sounds great. And then, for a quick follow-up, have you seen any impact from the government shutdown? Has that impacted any municipal decision-making at all? Thank you. Lee Bienstock: Yeah. Absolutely. So we've shared over the past several earnings calls. We've actually emphasized less our work in the population government space. So we've really been focused on the hospital systems, the payers, the providers, you know, SteadyMD's now customer set. It's gonna get more and more of our attention, time, and resources. And so, you know, that's really where our big focus is. And again, I think, honestly, it's very early to tell any impact from some of this legislation or policy changes. We don't see it yet. And frankly, a lot of the policy changes kick in later on down the road, next year, the year after. So we're really heads down. We think our value prop speaks to whatever environment the healthcare system or policy may be. Whatever situation the healthcare system may be in or whatever policy that there may be in effect because again, we're there to help save the system money. Help save hospital systems money, help CMS save money, help our insurance partners save money. And that's really our goal, and we think that'll be germane and relevant no matter what going forward here. Jenny Shen: That's great. Thank you. Operator: Thank you. And your last question comes from Mike Latimore from Northland Capital. Please go ahead. Aditi Dagaonkar: Hi. This is Aditi on behalf of Mike Latimore. Could you give some color on how are the bookings in the third quarter and how much did they grow sequentially? Norman Rosenberg: For which business? Aditi Dagaonkar: Like, overall. Yeah. Norman Rosenberg: Well, I mean, we saw sequential growth in almost all of our businesses. In transport, we would see, let's say, the US, and, you know, we look at it in terms of the number of trips that we carried. So we saw, like, a mid-single-digit sequential growth in trip count which, you know, for a quarter-over-quarter number, that's very, very good. We're happy with that. Obviously, our payer and provider business lines all show some growth during the quarter. I think every one of those business lines showed a higher revenue number for Q3 than for Q4. So in fact, when we look towards 2026, if we would simply take the Q3 results and annualize them, that would already put us in pretty good shape as far as the guidance that we gave. So we definitely saw a pickup in volumes. I think we mentioned in the release or elsewhere that we did see record volumes. Now granted, it wasn't, you know, blowing away our previous records, but we did see higher volumes across all of those business lines in Q3 than we had ever seen. Aditi Dagaonkar: Got it. And how much cash do you expect to have at the end of the year? Norman Rosenberg: So just using the end of Q3 as a baseline, we had $95 million when you take cash and the restricted cash as well. Or $73 million if you just look at the unrestricted cash. We would expect that number to go up net by a few million dollars assuming that as we expect, we will collect on the remainder of the large migrant-related invoices that are out there. That would be enough to cover any kind of operating loss. And we should be able to squeeze out some operating cash flow on that basis. So we would expect that the number will go up a little bit by the end of Q4. As we've shared, we think that that number from there starts to go down at Q1, at Q2 before picking up in the back half of the year. But we feel that we would exit 2026 at a number that's about $65 million or higher. Aditi Dagaonkar: Alright. Got it. Thank you. Norman Rosenberg: Of course. Operator: Thank you. And there are no further questions at this time. I would now like to turn the call back over to Mr. Lee Bienstock. Please continue. Lee Bienstock: Thank you, and thank you all for joining us today. Be well. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you very much for your participation. You may now disconnect. Have a great day.
Operator: Thank you for standing by, and welcome to the OFX Group Limited FY '26 Half Year Results. [Operator Instructions] I would now like to hand the conference over to Mr. Skander Malcolm, CEO and Managing Director. Please go ahead. John Malcolm: Thank you, Kaley, and thank you, everyone, for joining the call. As Kaley mentioned, I'm joined by Selena Verth, our Chief Financial Officer; and Matt Gregorowski from Sodali & Co., who leads our Investor Relations program. Selena and I will take you through the pages, and then there will be time for Q&A. The presentation will cover 6 sections: our mission, performance update, the 2.0 transition, our financials, the strategy execution and our outlook. And then we'll have time for Q&A. So let's move to Slide 4 in the pack. And I want to start the presentation by being focused on our mission, which is simpler financial operations, helping businesses thrive globally. I start here because we must be very clear with our investors, our employees and our clients about what we're trying to do. It may sound obvious, but it matters a great deal as we navigate the transition from a company that did one job very well for both corporate and consumer clients, which was making cross-border payments to becoming a company that does several jobs very well for our corporate clients to make their lives simpler and in turn, help them thrive. We've laid out this strategy before, and I'll revisit it today to ensure we are aligned on what guides our investments, our decisions and our pacing. So why this mission? Moving to Slide 5. This mission is built on a huge opportunity around USD 66 billion of revenue and the fact that we are well prepared to capture it. Firstly, by expanding the number of jobs we can do for clients, we nearly doubled our TAM from USD 34 billion to USD 66 billion. Secondly, we often get questions from investors about competition, but the research we conducted and the evidence we see is that most of the opportunity sits with SMEs who work with banks. Depending on the market, the research suggested between 77% and 80% of clients who need the products and services we provide are trying to get them to banks. Yes, there are non-bank competitors, but the real prize is still largely with the banks who are less nimble and less customer-centric. And we believe we can be sufficiently differentiated from the non-bank competitors to take a reasonable share. Thirdly, the research showed that just over 3 in 4 of these clients are willing to switch away from banks for the right combination of products and services. That hugely encourages us to invest and compete. And finally, if we do our job well and we win these clients, the extra revenue available per client is material, which is over 40% versus our existing model, which makes the return significantly more attractive. So in summary, whilst our mission and strategy have evolved, our target of strong and sustainable growth has not, and we have found a faster and more effective way to deliver it. Turning to Slide 6; we have a very clear path to unlocking this opportunity as well as a very clear goal, which is 15% net operating income growth fiscal year '28 at around 30% underlying EBITDA margins, and we are executing to achieve that. Part of what will drive that NOI growth is non-FX revenue, which we expect to be at least 10% of all fiscal year '28. We know who we're targeting. We know which products and services we can provide to them to make their lives simpler. We have the platform in place in all our major markets and soon in all our markets to make it happen. And we have the infrastructure beneath the platform, our licenses, our banking support and our teams to make this work at scale and globally. We are investing and executing this way based on considerable research, our client experience, our knowledge of the industry and over 25 years of being in this space, and that is what underpins our conviction. Moving to Slide 8, I'll now share the performance of the first half. We delivered NOI of $105 million and underlying EBITDA of $14.5 million. This was a disappointing outcome and certainly below our expectations, and I'll walk through some of the reasons on the next slide. Our NOI margin was 55 basis points, around 4 basis points lower than first half '25, primarily driven by lower margins in North American corporate clients, where we took pricing actions to retain at-risk clients. Our business continues to generate healthy levels of cash with net cash held for on use of $47.1 million, up 2.6% versus the prior corresponding period. Selena will cover cash and cash generation later. We're pleased with the average revenue per client at $4,100 remaining steady through the first half and the non-FX revenue of $0.6 million. Although this was down on PCP, the cause of that a vendor switch was addressed, and we saw revenue grow just under 24% from the first quarter to the second quarter. Moving to Slide 9; we've seen a difficult macro environment affect the confidence of our corporate clients, which has seen them reduce their ATV by 9% from the first quarter to the second quarter, and that largely drove the drop in NOI. Business confidence indicators in all our major markets are below their long-term mean and they are generally not improving. We did see some strength in ATVs in the U.K. and Europe, but this was driven by a few large transactions rather than persistent strength. Encouragingly, our clients remain engaged with us with transactions up 5.7% on prior corresponding period, as you'll see on the next slide, and transactions per active client growing for the third quarter in a row and a healthy CAGR of 11% since the beginning of fiscal year '24. Moving to Slide 10; this is a view of our three main segments: corporate, enterprise and high-value consumer. Corporate revenue was disappointing, down 5.7% versus prior corresponding period, however, up 2.3% versus the second half '25. Within that, the U.K. was the bright spot, growing at 4.6% versus prior corresponding period of some healthy large client wins. Enterprise continues to grow strongly, up 47.7% versus PCP and up 27.5% versus second half '25. The momentum here is largely a function of the excellent support we're providing our clients, the growth in their own businesses and the increasing revenue we're earning from clients we've onboarded in the last three years. In High-Value Consumer, revenue fell 11.3% versus PCP and 8.7% versus second half '25. This is a substantial decline and was driven by unusually quiet market conditions. With volatility, which is typically a key driver of our clients' behavior being very low. In the first half, we only saw 15 days of volatility. And within that, the second quarter, we only saw 1 day where the U.S. dollar AUD moved outside our normal range compared to the 15 to 20 days that we would normally see in a quarter. Later, I will share how we will stabilize and grow this segment. Moving to Slide 11; we've been working very hard to stabilize and grow our corporate active clients. So it's encouraging to see progress. Overall, corporate active clients, including OLS, fell by around 700 in the first half, the lowest rate of decline in several years. We exclude OLS, given we are no longer originating OLS, we actually grew active clients in roughly half the number of weeks in the second quarter. The improvement in corporate, excluding OLS, has been driven mainly by NTCs or New Trading Clients as lapse rates have been slightly higher, but offset by an increase in reactivation. Importantly, of those that have lapsed, more than 2/3 have been low-value corporate clients. As I mentioned earlier, the corporate ARPC was steady in the first half, but the growth in non-FX revenue is encouraging, and this will support growth in ARPC over the medium term. Moving to Slide 13; we're very encouraged by the progress we're making in transitioning to 2.0 and the growth in non-FX revenue we're seeing. We've seen strong client uptake of our new products and services. Card revenue, subscriptions and the Payback card feature all grew in the first half, up 23.8% quarter-on-quarter. Overall revenue was down versus prior corresponding period as we had to switch off the Pay by Card feature during the first quarter, but it rebounded in the second. We're confident this non-FX revenue will continue to grow at a healthy rate as we complete our corporate migration and continue to grow NTCs. This quarterly growth rate has us well on track to achieve our goals of non-FX contributing 10% of NOI in fiscal year '28. As we mentioned in our trading update last month, we migrated just over 39% of our existing corporate clients during the first half. October and early November have been very busy, and we're now just under 60% complete. The migrations have gone well, both technically and from a client experience perspective. Card spend is healthy and cards continue to get issued and activated. Subscriptions are strong and clients are growing balances faster than expected. As at the end of October, we have $138 million in balances, and it continues to grow. And note that the interest from balances is not included in the non-FX revenue. Turning to Slide 14; when we embarked on the transition, a good migration was and is absolutely key to retaining clients and growing our NOI over the short- and medium-term. So it's very encouraging to share some of the key trends that we track. As a first goal, we must retain clients through migration and grow their ARPC post migration. Progress in migrating clients is good with almost 50% of clients from our major markets migrated by the end of the first half, and that figure will be close to 80% by the end of the third quarter. Given we're offering these clients the simplest version of the new platform, i.e., Free with Wallets, it's very encouraging to see them use wallets and do FX transactions as a first step. Wallet balances are growing very well, as I mentioned, and FX transactions are also healthy, but clients activating they are ahead of their pre-migration levels. In terms of ARPC, pre-migration, we were seeing ARPCs of around $4,100. And whilst it's still early for many migrated clients, given that, for example, of the 39% of corporate clients that were migrated, only 7% were migrated to the full first half. And in Canada, migrated clients only had between 1 or 2 months on the platform. But we're already seeing healthy ARPCs across migrated clients in both Australia and Canada. Moving to new product adoption. In Australia, nearly 4% of migrated clients have taken up a second product despite our primary focus being on successful migration and FX usage. Whilst that may seem low, it's largely because we deliberately focused on just wallets and FX for these clients thus far. One cohort of Australian clients who self-identified as wanting to see the additional features and products have been very active with over 50% of them already taking up additional products. In terms of new clients, ARPC is below what we saw in the 1.0 model as we've not been targeting FX in our marketing, but uptake of additional products is very encouraging with just under 16% of all new clients in Australia taking up additional products. We're confident that the ARPC from these clients will grow over time as the experience in cards tend to suggest usage builds gradually. Interestingly, in the U.K., we've already seen some very large FX transactions with new clients and clients are already self-serving with our new digital forwards. So we know we can grow FX and non-FX as well as secure large ATV transactions on 2.0. Turning to Slide 15; our solid progress and results on 2.0 have been underpinned by good execution. Alongside migration, our product and technology teams delivered 80 new products, features or services in the second quarter alone. That is incredibly encouraging for us as a team as we know we can bring better client experiences to life quickly and cost effectively. Put that in perspective, two years ago, we had 8 large teams doing one deployment every two weeks, which was about 26 releases a year. Today, we have 18 small- to medium-sized squads delivering over 200 deployments a week. On the right is our timeline to complete the migration. We expect to have around 80% completion in our major markets by the end of Q3. In terms of new launches, all major markets are now live, including most recently the U.S. So a lot of execution and a very promising future. Now let me hand over to Selena to walk us through the financials. Selena Verth: Thank you, Skander. Moving to Slide 17, our financial results reflect a period of softer trading, coupled with a deliberate increase in investment to accelerate our transition to OFX 2.0. Fee and trading income was down 4.7% to $109.1 million, reflecting the ongoing macroeconomic uncertainty that continues to dampen business confidence. This softness was seen across most regions with APAC down 6.2%, North America down 7.5%, while EMEA saw a modest increase of 1.9%. Our net operating income or NOI was $105 million, which is down 5.6% versus PCP, but represents a 1.2% increase on the second half of fiscal year '25. The NOI margin contracted by 4 basis points, 3 basis points was due to the lower pricing in North America, which Skander mentioned and 1 basis point on the higher value consumer transfers. The NOI margin is up 1 basis point on the second half '25 as we build back up margins in North America. As we invest for growth, underlying operating expenses increased by 10.2% to $90.5 million, which I will detail on the next slide. This planned investment, combined with the soft trading environment resulted in an underlying EBITDA of $14.5 million. Depreciation and amortization continued in line with our ongoing investment in client experience in our platform, leading to an underlying EBT of $1.5 million. We have an effective tax gain as our R&D credits accumulated in the period and can be carried forward for future use in future. Our balance sheet remains solid with net cash held at $75.4 million at the end of the half. Moving to Slide 18, you will see the composition of our increased operating expenses. We are making targeted investments to deliver our 2.0 strategy to accelerate growth while also identifying productivity savings through the organization. Employment expenses, our largest cost category, was up 8.9% versus the prior corresponding period. This was driven by an addition of 19 full-time employees, primarily in product, marketing and frontline roles to execute our growth strategy. Promotional expenses increased by 5.3% as we supported the accelerated launch of our NCP in Canada and EMEA, which helped drive the 11.8% growth in corporate NTCs. We have invested in account-based marketing and our new websites are live for our major regions with the U.S. site going live last week. Bad and doubtful debts were $3.2 million for the half. While this is an increase on prior periods, it relates to a very small number of incidents. We're actively pursuing recoveries and have strengthened our risk settings and controls to manage this closely. We've not seen any material bad debts in the current quarter, and we do not expect the bad debts to repeat at this level in the second half. Longer term, as more clients migrate to NCP, these risk controls will improve further as the platform provides us with better technology and more optionality for setting client specific [indiscernible]. Turning to Slide 19; this investment is creating a path to growth and a better longer-term return. We committed to accelerating investment in fiscal year '26 of between $16 million and $24 million in OpEx and approximately $5 million in CapEx. As you will see, we are about halfway through this investment. Our delivery is executing better than ever. And as a result, we have lowered our full year CapEx guidance to be between $20 million to $21 million. Productivity initiatives are delivering the same road map with less resources. The investment in driving promising returns with an 11.8% growth in our corporate ex-OLS NTCs and our non-FX revenue is building momentum with $600,000 generated in the first half and quarterly growth of 23.8%. This progress gives us confidence that these investments will generate superior returns. We are targeting an underlying return on invested capital of 30% in fiscal year '28. Moving to Slide 20. Our balance sheet remains strong with healthy levels of cash to support our growth ambitions. The business continues to demonstrate excellent cash generation with an operating cash conversion rate of over 100%. Our underlying EBITDA of $14.5 million converted to a net cash flow from operating activities of $16.5 million, supported by the timing of expenses. Our net cash held position is strong at $75.4 million. After deducting our collateral and bank guarantees, the net available cash position is $47.1 million. This is up $1.2 million on last year and down $3.9 million from the March full year '25 results. We have self-funded our accelerated growth. The reduction in net available cash is due to repayment of debt, which now stands at $18.5 million and the buyback of 2.3 million shares for $1.9 million during the half. Our strong balance sheet and cash flow provide the foundation for us to invest in our accelerated growth strategy by continuing to look for productivity wherever possible. I will now hand back to Skander to take you through our strategy, execution and outlook. John Malcolm: Thank you, Selena. Now let's move to Slide 22 to walk through what we're doing to bring the next phase to life. Alongside strong execution, we've been working very hard to bring to life the three elements that will create growth in our model, our value proposition, our go-to-market and our operating model. Firstly, as previously mentioned, our value proposition is now much broader and more compelling. We've evolved from being a focused FX provider to supporting businesses with a wider range of needs, helping them simplify their financial operations. Our marketing and product teams have done a huge job in completely reorienting what success looks like for our clients. And our platform has been configured and launched in every major market to accelerate our transition. Secondly, our new go-to-market model is up and live in every major market. Roles and pipelines have been redefined and new software deployed. We're already seeing great progress with double-digit growth in corporate NTCs. Finally, we also reorganized our corporate structure to more closely resemble the new company that we are becoming. Commercial teams now focus on a single segment with a global leader for B2B and a separate leader for B2C. We also combined product and marketing into one growth organization to drive speed and consistency. And we moved the payments team out of operations and into finance and refocused the remaining operations teams who are all customer-facing into a single customer function. These changes took effect on October 1 and are already working well. For clients, our teams are more focused and provide better products and services. For employees, they get faster decision-making. And for shareholders, it's cost neutral and positions us for faster growth. Moving to Slide 23; during the half, we completed a strategy review of the high-value consumer segment and identified a clear path to stabilize and grow it. Our focus will be on clients and prospects who make larger value consumer transactions, clients we know well and consistently rate us highly. We will acquire them through partnerships, primarily targeting the wealth and professional services use cases. Our competitive differentiation will remain our digital plus human service delivery and partnership referral model, which is unusual in our industry where most consumer firms go direct. We will leverage the new client platform's product and platform capabilities so our clients benefit from the same programs, and we will use the same go-to-market approach to find new partners, and this will drive synergies across the platform. We plan to execute this migration in fiscal year '27 with no incremental CapEx to what we have previously guided. We are already working hard on the value proposition, the launch and the migration plan, and we will provide more detail on that when it is finalized for our fiscal year '27 outlook. Moving to Slide 24; like most companies, we have been busy building and executing our AI capabilities, and we've made good progress. Firstly, we're very excited by AI's potential and know it will be transformational for OFX. We have started with the foundations, good governance, well-organized data, modern architecture and security and much of that is now complete. Concurrently, we've been deploying it across a range of internal use cases, largely to drive productivity so far. Over time, the real value driver will be making AI central to the client experience and the product road map. The team already has a very exciting plan, but they insisted, I do not share it yet. What I can say is our clients are already seeing the benefits of the simple things like AI-driven expense allocation, but what we have planned will be significantly more value accretive. Moving to our outlook on Slide 26; we remain committed to our medium-term outlook, which is to generate at least 15% NOI growth in fiscal year '28 with underlying EBITDA margins of around 30%. In second half of '26, we're targeting NOI growth to be higher than second half '25. We will continue to execute the plan that we shared back in May, which is to invest to accelerate our transition. As we stated in our trading update, we're managing OpEx and expecting it to be between $173.7 million and $181.2 million for fiscal year '26. Because our execution is strong, and as Selena mentioned, CapEx will be in the range of $20 million to $21 million in fiscal year '26, not just under $24 million as we originally forecast. We have not yet completed planning in detail for fiscal year '27, but we can say that the consumer migration and launches will happen [ within our ] incremental CapEx to what we previously guided. And as we previously stated, OpEx and CapEx will be similar to what we are seeing in fiscal year '26. But before I hand back to Kaley, I want to reiterate that both management and the Board are very confident in the strategy. The execution remains good, and we are determined to combine these into a great outcome for investors. Thank you, and I'll now pass back to Kaley to handle Q&A. Operator: [Operator Instructions] Your first question comes from Michael Trott with MST Financial. Michael Trott: Consider that you guys are going hard at the investment over the next 12 to 24 months. But just with the short-term weakness, in NOI also flagged and then also your current underlying EBITDA margin of roughly 13%. Can you just provide some color on when you're expecting a step change in this margin, especially with the, I guess, realization of the FY '28 30% target? John Malcolm: Yeah. So what I'd say, Michael, is in the short-term, we're very, very focused on driving up NOI, and that will be the thing that underpins margin expansion. But at the moment, we're not guiding to that. We are working exceptionally hard to create it. And as we've said in the second half, we're just targeting growth in NOI second half '26 over second half '25. But in the short term, any margin expansion will be driven by top line growth. Operator: Your next question comes from [ Scott Nelson with Nelson Capital ]. We might just move along to the next questioner in the queue, Cameron Halkett with Canaccord Genuity. Cameron Halkett: Just two, please. Around the incremental OpEx guidance you've further reiterated there. Selena, can you just remind us, please? I think there was a bit of confusion back at the last half. Is that swing between the incremental $16 million to $24 million effective in bonuses relative to how the business performed in the second half, please? Selena Verth: Yeah. So the range on OpEx is largely due to the range on what the STI outcomes could be because STI is 60% financial, 40% nonfinancial -- financial metrics do assume growth. So obviously, depending on how the financials play out, that can range on your OpEx. Now that being said, if you look at the first half, the bad debt was higher than we wanted it to be. We've done a lot of changes and controls. We don't expect that to repeat in the second half, and we'll be looking at any productivity savings that we can get to make sure we offset those costs as well. Cameron Halkett: Yeah. I guess just turning to the comments and some of the disclosures just around sort of funds that have been loaded on to the cards and references to cash balances. How is that tracking relative to your initial expectations that sort of get the feeling that that's higher than perhaps what you were expecting? Selena Verth: Look, the cash balances are relatively hard to predict. We really like what we see. Obviously, we're seeing balances in all regions as customers come on board. We do make some interest out of that. You would have seen our interest revenue for the half was flat half-over-half this half versus last half, but that's given also that there's been two rate cuts in the last half. So we're actually outgrowing the rate cuts at the moment, slightly outgrowing the rate cuts at the moment with those building cash balances. So we like what we see. We're seeing in all regions, and we are encouraged by the growth. John Malcolm: And maybe just to add to that, Cam. As we look at the cards themselves, a couple of encouraging statistics or trends relative to our own expectations. First of all, the proportion of cross-border usage is a bit higher than we were expecting, and that's good because generally, they attract higher levels of interchange. And I'd say the second thing is we're also seeing clients using cards for a range of different use cases, which, again, is really helpful. And there is a somewhat kind of symbiotic effect there with the balances that Selena mentioned because typically, for example, here in Australia, people are putting balances on to -- in their wallet because they want to use the cards for domestic transactions as well as international transactions, and that would suggest a more engaged client. So it's certainly encouraging. Selena Verth: Yeah. And just last one. When I look at Slide 13, the sort of composition of sort of what you're seeing there around card, Pay by Card and subscription and other. When you look at the sort of second quarter '26 breakdown, let's just for simplicity call [ it a third ] equal. Any comments you can make around more of an early adopter of the card selection where that mix of revenue composition might be, say, more weighted to card and Pay by Card than subscription, just to help people understand the expected contribution and mix over time? John Malcolm: Yeah. I'd say, Cam, our general view is it's still very early days. What's actually happening is -- if we look at new clients, we're seeing a pretty good uptake of cards. We're seeing a pretty good uptake of subscriptions, particularly, I would say, in Canada relative to our expectations. And so that's pretty good. From an existing client perspective, we've been very, very careful in making sure that the first thing that migrated clients do is reactivate their accounts with FX. So it's still, I would say, quite early to say, okay, we're seeing some pretty clear trends in terms of that non-FX revenue. But at an overall level, the growth rate is encouraging in each of the categories. And what's also coming online really, I would say, scaling in the third quarter and beyond is really our product marketing efforts. To-date, we've been, as Selena mentioned, recruiting for those roles, putting in place some pretty basic product and marketing programs to get ourselves ready for that, and then we will start to increase our efforts in this area, which should then drive more of the non-FX revenue over time. Operator: Your next question comes from David Kingston with K Capital Group. Your next question is from Olivier Coulon with E&P Financial Group. Olivier Coulon: Can you hear me okay? So you mentioned on the intro that you were seeing growth in -- the revenue per transacting client on a same cohort basis. And I think you mentioned that there were 7% that were there for the full half that had migrated. I don't think you actually mentioned a specific growth number. Is it possible to share that on that same cohort basis? John Malcolm: Yeah. We've talked in the past around kind of FX growth for those pre and post at around 5%, and that's kind of what we're seeing. We just wanted to point out that a lot of the migration happened candidly in the second quarter. So if you look at, for example, Canada, I think something like 20-odd-percent had even 60 days on the platform. But they've been migrating across well. It's really mostly Australia, where they've had, as you mentioned, the 7% for the full half and those FX -- that FX growth is around the 5% range. Olivier Coulon: Yeah. And that's absolutely not kind of relative to the rest of the clients because I guess Australia had a pretty tough half, right, in terms of corporate revenue per client. John Malcolm: Yes. Olivier Coulon: Yeah. So is there any reason to think that Australia should -- like that those clients wouldn't have had the same sort of underlying trend maybe during their revenue growth? John Malcolm: I'd say on that one, Olivier, is that what we're seeing is they're picking up the fact that they can use a wallet, and they're using the wallet for cross-border for some smaller value transactions, some larger value transactions. They appear to be feeling like the wallet is a step up relative to the prior value proposition. But again, I would say it's still -- which is very encouraging. Let me make that plain. But I would still say the bigger job to do for that cohort and for the corporate active clients more generally is getting them comfortable also to see the opportunity on non-FX, and that's really where the third quarter and beyond will take us. Olivier Coulon: Yeah, okay. But it's fair to say that, that uplift that you saw from those -- from that small cohort who is kind of directly comparable, that was primarily from actual increased transaction activity. Yeah, as opposed to ATV or anything like that? John Malcolm: That's right. Operator: [Operator Instruction] Your next question comes from [ David Kingston with K Capital Group ]. Unknown Analyst: Anyway, thorough presentation, so thanks for that. Look, I've just got a few macro comments, Skander. Look, sadly, at the moment, OFX has lost the confidence of the stock market. The market capitalization is $130 million, which is an enterprise value of $100 million when you adjust for the net available cash of $47 million and deduct the debt of $18 million. So enterprise value of $100 million. In the past 14 months, OFX has burned 75% of shareholder value, $2.30 down to $0.57, down $400 million. Look, on the positive, OFX still has substantial NOI of $105 million for the first half albeit with the increased OpEx for OFX 2.0. Obviously, the NPAT has been smashed at around about 80%. Look, I'd also note, Skander, that as well as the past 14 months being ugly, OFX floated in 2013 at $2. And it's pretty concerning that 12 years later, when some of the competitors have shot the lights out, OFX is less than 1/3 of the IPO price. So really, I've just got a few macro questions, Skander. Playing Russian Roulette with the substantial increase in OpEx of OFX 2.0 or can you reverse the huge $400 million loss of shareholder value in the past 14 months? Secondly, is OFX too small and is the Board and management to corporate and lacking the corporate savvy to compete with the more dynamic and entrepreneurial Airwallex and Wise? And finally, just be grateful if you could provide some insights into is the Board proactively considering a sale to another corporate with synergies or to private equity? Like I think it's fair to say that at the moment the fair value of OFX should be way, way above the current $100 million enterprise value. But certainly, shareholders at the moment Skander are concerned that the ongoing loss of shareholder value as represented by the share price anyway. John Malcolm: Alright. So I think there were three questions. Look, in terms of the EV and the OpEx -- one analyst said to me once, which I think is absolutely right is the market can't value no growth. And so the EV is really a function of the no growth. If you look at, as you pointed out, underlying NOI, it hasn't changed that much, certainly not as much as the EV has declined. The OpEx has really been invested with a lot of research. I mean, effectively over two years' worth of research, market experience, customer signaling all over the world. So it's not Russian Roulette, which would suggest a random allocation. It's been very, very carefully studied before that investment. And the Board and management are working exceptionally hard on all of the factors within that OpEx, as Selena mentioned, whether it's product, software, commercial people to drive growth because ultimately, that's what the market and investors will rate in OFX, and we're very clear that the best way to generate growth is through the investments that we've made. On your second question, look, I can't comment on some of the private companies. All I can do is to say to public company investors, what you get with this management team and this Board is a very mature risk management and governance framework. You have global experience, which in a somewhat uncertain and risky world, and we've seen a lot of examples in the last few years, which I talked about a lot just in one space, for example, is around the rise of fines, AML fines that investors can rely on in terms of our oversight and management of those. And certainly, if you look at the kind of corporate experience inside the company, there's a blend of certainly some corporate skills, but there's also a group of folks who've done a whole range of entrepreneurial activities as well. And the answer to the third question is no, we're not actively engaged or strategic on a sale of the [indiscernible]. Unknown Analyst: But just one follow-up there, Skander. In the context of in the last 14 months, your 3,000 shareholders, Skander, have lost $400 million of shareholder value. It's got to be telegraphing some flashing yellow or maybe red lights. You're going out here competing with some whales. NOI is declining, margin is collapsing because of the extra expenditure. I hope that you and the Board are properly considering the value of your shareholders who have been absolutely punished in the past 14 months. It's already [indiscernible] to get reports from outside people and to -- as I said, your presentation is very thorough and professional. But at the moment you're losing the battle on behalf of the people that you're representing who are the shareholders who have been punished in the past 14 months. But anyway, I'll leave that as it is. Thanks Skander. Thank you. Operator: There are no further questions at this time. I'll now hand back to Mr. Malcolm for closing remarks. John Malcolm: Well, I'll just wrap it up by saying thank you for joining the call. We are working exceptionally hard to turn the growth in the top line around. And I can assure you that management and Board are very, very busy on every single detail to make sure that we can create a more valuable company. Thank you very much. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Hello, and thank you for standing by. Welcome to FibroGen Third Quarter 2025 Earnings Conference Call. [Operator Instructions]. I would now like to hand the conference over to Gaia Shamis. You may begin. Gaia Vasiliver-Shamis: Thank you, [ Twanda ]. Good afternoon, everyone, and thank you for joining us today to discuss FibroGen's First Quarter 2025 Financial and Business Results. I'm Gaia Shamis from LifeSci Advisors. Joining me on today's call are Thane Wettig, Chief Executive Officer; and David DeLucia, Chief Financial Officer. Following the prepared remarks, we will open the call to your questions. I would like to remind you that remarks made on today's call include forward-looking statements about FibroGen. Such statements may include, but are not limited to, collaborations with AstraZeneca and Astellas, financial guidance, the initiation, enrollment, design, conduct and results of clinical trials, regulatory strategies and potential regulatory results, research and development activities, commercial results and results of operations, risks related to our business and certain other business matters. Each forward-looking statement is subject to risks and uncertainties that could cause actual results and events to differ materially from those projected in that statement. A more complete description of these and other material risks can be found in FibroGen's filings with the SEC, including our most recent Form 10-K and Form 10-Q. FibroGen does not undertake any obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. The press release reporting the company's financial results and business update and a webcast of today's conference call can be found on the Investors section of FibroGen's website at www.fibrogen.com. With that, I would like to turn the call over to CEO, Thane Wettig. The? Thane Wettig: Thank you, Gaia. Good afternoon, everyone, and welcome to our third quarter 2025 earnings call. On today's call, I will provide an update on our ongoing efforts with a focus on our 3 main priorities: the completion of the sale of FibroGen China, the continued progress with our lead asset, FG-3246, a potential first-in-class antibody drug conjugate targeting CD46 and its companion PET imaging agent in metastatic castration-resistant prostate cancer and the path forward for roxadustat as a potential treatment for anemia due to lower-risk myelodysplastic syndromes. Then David DeLucia, our CFO, will review the financials, after which we will open the call for your questions. On Slide 3, I would like to start with the sale of FibroGen China to AstraZeneca that we recently completed for approximately $220 million. This was a truly transformative transaction that provided us with the most efficient means to access the company's cash held in China, extending our cash runway into 2028. Following the transaction, we successfully paid off the term loan facility with Morgan Stanley Tactical value. Second, we continue to progress FG-3246 and FG-3180 in metastatic castration-resistant prostate cancer, or mCRPC, and initiated the Phase II monotherapy trial of FG-3246 and FG-3180 earlier this quarter. Additionally, we expect the top line results from the investigator-sponsored trial of FG-3246 in combination with enzalutamide in mCRPC to be presented at a medical conference in the first quarter of 2026. Third, as we have previously stated, we had a successful Type C meeting with the FDA in July, providing us with a clear regulatory path forward for roxadustat. We remain on track to submit the Phase III trial protocol for roxadustat for the treatment of lower-risk myelodysplastic syndromes in patients with high transfusion burden later this quarter. We are confident that with our mid- and late-stage assets, simplified capital structure and upcoming near-term catalysts across both clinical programs, we are well positioned to advance meaningful therapeutic options for patients and significant value for shareholders. I will now provide a brief overview of our FG-3246 and FG-3180 programs in mCRPC. Slide 5 summarizes the high unmet need in late-stage prostate cancer. Approximately 290,000 men are diagnosed with prostate cancer each year in the U.S. with about 65,000 drug-treatable patients where the cancer has metastasized and become castrate resistant. This group of patients has a grim 5-year survival rate of approximately 30%, underscoring the significant opportunity for new life-extending treatments. We believe that FG-3246 could be this new treatment option and estimate the total addressable market to be well over $5 billion annually. On Slide 6, we highlight the novelty of CD46, a tumor-selective target that has several distinguishing features. First, CD46 is upregulated during tumor genesis and helps tumors evade complement-dependent cytotoxicity. Second, its expression is also upregulated in the progression from localized castration-sensitive prostate cancer to metastatic castration-resistant prostate cancer and further overexpressed following treatment with androgen signaling inhibitors. Notably, CD46 is highly expressed in mCRPC tissues with lower interpatient variability and higher median expression compared with PSMA, making it an attractive therapeutic target. Turning to Slide 7. FG-3246 is our potential first-in-class ADC in development for mCRPC. The ADC combines the YS5 antibody with an MMAE payload to specifically target the tumor selective epitope of CD46. YS5 is a fully human IgG1 monoclonal antibody that was engineered to specifically target the tumor selective epitope of CD46 whose expression is limited in normal tissue. FG-3246 represents an androgen receptor agnostic approach, clinically differentiating it from other prostate cancer treatments currently in development, many of which target PSMA. The companion PET imaging agent, FG-3180, utilizes the same YS5 targeting antibody as FG-3246 and is also under clinical development. We believe that having a patient selection biomarker would not only allow us to better enrich the patient population in a future Phase III trial, it could also enable differentiation of FG-3246 in the prostate cancer treatment paradigm. In addition, FG-3180 could represent an important commercial opportunity as a companion diagnostic to FG-3246, similar to the existing PSMA PET agents. Slide 8 recaps the top line results from the 2 FG-3246 clinical trials to date. On the left side, we highlight the Phase I monotherapy study, where a median radiographic progression-free survival of 8.7 months was observed in patients with mCRPC that were heavily pretreated and were not biomarker selected. PSA reductions of greater than 50% were achieved in 36% of these patients. On the right, we highlight the previously reported preliminary efficacy data from the Phase Ib portion of the investigator-sponsored combination study with enzalutamide which demonstrated a preliminary estimate of 10.2 months of radiographic progression-free survival with PSA declines observed in 71% of evaluable patients. The top line results from the IST are expected to be presented at a medical conference in the first quarter of 2026. Together, these results highlight what we believe is compelling clinical activity with FG-3246 with competitive rPFS results compared to other approved and investigational treatments in both the monotherapy and combination settings. Moving to Slide 9. Based on the Phase I monotherapy results, we initiated the FG-3246 Phase II monotherapy dose optimization trial in September. We plan to enroll 75 patients in the post-ARPI pre-chemo setting across 3 dose levels to determine the optimal dose for Phase III based on efficacy, safety and PK parameters. It is important to note that FG-3180 will be an integral part of the study as we seek to demonstrate the correlation between CD46 expression and response to the ADC in this all-comers population. One other important design element is the use of G-CSF as primary prophylaxis to mitigate grade 3 or greater neutropenia commonly seen with MMAE payloads and also experienced in the Phase I monotherapy trial. The addition of G-CSF is designed to reduce dose interruptions and downward adjustments and may enable a better tolerated and more consistent treatment with the ADC. An interim analysis of the Phase II trial is planned for the second half of 2026 and will include efficacy, safety, PK and exposure response data that will be reported as they become available given the open-label design of the trial. On Slide 10, I'd like to highlight 3 important steps we have taken with the design of the Phase II monotherapy trial with the aim of building on the 8.7 months of rPFS demonstrated in the Phase I monotherapy trial. First, leveraging the preliminary evidence of an exposure response relationship, the Phase II study will use 3 of the highest doses from the Phase I dose escalation and expansion study. Second, primary prophylaxis with G-CSF will be utilized to potentially mitigate neutropenia, which could enable more consistent exposure to the ADC with fewer dose interruptions or adjustments early in the course of treatment. This could consequently extend the duration of therapy and potentially enhance the efficacy of the ADC. Third, enrolling healthier patients in earlier lines of therapy versus the 5 median lines of therapy in the Phase I trial. Together, we believe that these design elements have the potential to improve upon the Phase I results and achieve an rPFS of 10 months or greater, which we believe is the benchmark for commercial competitiveness. Slide 11 shows our long-term development strategy for FG-3246 and FG-3180, which provides us with important optionality in prostate cancer. We have a well-designed Phase II monotherapy trial in the post-ARPI pre-chemo setting in mCRPC to attempt to further build upon the 8.7 months of rPFS demonstrated in the Phase I monotherapy study. In addition, the Phase II study will explore the correlation between CD46 expression and response to the ADC, potentially validating FG-3180 as a predictive patient selection biomarker in future studies. We are confident that our development pathway for FG-3246 unlocks sequential or parallel registrational pathways as FG-3246 will be evaluated in multiple lines of therapy in monotherapy and/or in combination with an ARPI and in an all-comers population or patients with high expression of CD46. Slide 12 highlights the recent and upcoming catalysts for the FG-3246 and the FG-3180 program. Looking ahead, we expect the top line results from the IST of FG-3246 in combination with enzalutamide to be presented at a medical conference in the first quarter of 2026. With the recent initiation of the Phase II monotherapy trial, we expect to report the interim results in the second half of 2026. To summarize, on Slide 13, FG-3246 targets a novel epitope on prostate cancer cells with first-in-class potential, given there are no other CD46 targeted projects in clinical development. Targeting CD46 with FG-3246 has already demonstrated promising early efficacy signals with an acceptable safety profile, both in monotherapy and combination settings. We are excited for the upcoming milestones and look forward to updating you as the program progresses. Turning now to roxadustat. Slide 15 highlights the unmet need and the potential for roxadustat in the approximately 49,000 patients with anemia associated with lower-risk MDS in the U.S. alone. Current treatments are effective in less than 50% of patients. With no oral options currently on the market or in late-stage development, a significant opportunity exists to offer a potential new treatment that is durable with convenient oral administration to patients in the second line and beyond setting. Moving to Slide 16. I would like to briefly highlight the data from a post-hoc analysis in a subgroup of patients with anemia of lower-risk MDS who entered Phase III MATTERHORN study of roxadustat with a high transfusion burden. In this analysis, using the international working group definition for high transfusion burden of 4 or more RBC units in 2 consecutive 8-week periods, roxadustat showed a meaningful treatment effect with 36% of patients achieving transfusion independence for greater than or equal to 8 weeks versus only 7% in the placebo group with a nominal p-value of 0.04. These results are highly similar to the pivotal trial results for the 2 most recently approved therapies for anemia associated with lower-risk MDS. Based on these results, as we turn to Slide 17, our target indication for roxadustat is in patients with lower MDS and high transfusion burden who are refractory to or ineligible for prior ESA treatment, where we believe roxadustat has the potential to elevate the standard of care in the second line and beyond treatment settings. In July, we had a positive Type C meeting with the FDA where we aligned on key design elements and the regulatory path forward for roxadustat. The potential pivotal Phase III trial summarized on Slide 18, will include patients requiring 4 or more RBC units in 2 consecutive 8-week periods prior to randomization -- who, as I alluded to on the previous slide, are refractory to, intolerant to or ineligible for prior ESAs. We also agreed with the FDA on important dosing elements, including the starting dose of 2.5 milligrams per kilogram and on the management of potential thrombotic risk, which could include trial eligibility, dose modification and discontinuation criteria. We are currently evaluating 8-week and 16-week RBC transfusion independence as the primary endpoint for the trial. The team continues to work diligently on finalizing the Phase III protocol, and we remain on course for submission in the fourth quarter of this year. We are currently exploring our clinical development options, which include maintaining roxadustat as a wholly owned asset and running the Phase III trial on our own or partnering the program. We are actively engaged in this process, and we'll ultimately choose the path that we believe is in the best interest of shareholders. To summarize on Slide 19, there is significant opportunity for roxadustat in anemia associated with lower-risk MDS with no other oral treatments currently available or in late-stage development. Furthermore, we believe our target indication would support an orphan drug designation, which, if granted, would provide us with 7 years of data exclusivity in the U.S. This potential exclusivity, combined with an attractive market opportunity and an efficient commercial model represents a substantial economic opportunity for roxadustat in anemia associated with lower-risk MDS. With that, I will now turn the call over to Dave to discuss the company's financials. Dave? David DeLucia: Thank you, Thane. I will first review the updated FibroGen China transaction details and then provide the company's financial performance for the third quarter of 2025. As a reminder, our China operations are reflected as discontinued operations throughout our financials. On Slide 21, we highlight the summary of the key financial terms of the transaction. Upon the close of the transaction in August 2025, FibroGen received an enterprise value of $85 million plus FibroGen net cash held in China at closing of approximately $135 million, with a total consideration of approximately $220 million. This is a $60 million increase from our initial net cash guidance in February. Upon close of the China transaction, we paid off our senior secured term loan with Morgan Stanley Tactical Value, resulting in a cash outflow of approximately $80.9 million. This includes the $75 million principal balance, accrued and unpaid interest and an applicable prepayment penalty. The net cash payable at closing is subject to holdbacks of $10 million, which is comprised of a $6 million holdback to offset final net cash adjustments and a $4 million holdback to satisfy any indemnity claims. I am happy to announce that we have received $6.4 million associated with the first holdback last week. We expect to receive the second holdback of $4 million in the second quarter of 2026. This truly transformative transaction allowed us to pay down our senior term loan facility with MSTV, provided full access to our cash in China and extended the company's runway into 2028 to support U.S. development initiatives. Given the company's current market capitalization of approximately $45 million, we believe these increases in expected net cash received upon the close of the transaction represent a meaningful outcome for shareholders. Now on to the company's financials for the third quarter. For the third quarter of 2025, total revenue was $1.1 million compared to $0.1 million for the same period in 2024. For full year 2025, we reiterate total revenues to be between $6 million and $8 million. Now moving down the income statement. Total operating costs and expenses for the third quarter of 2025 were $6.5 million compared to $47.8 million for the third quarter of 2024, a decrease of $41.3 million or 86% year-over-year. R&D expenses for the third quarter of 2025 were $1.2 million compared to $20 million in the third quarter of 2024, a decrease of $18.8 million or 94% year-over-year. SG&A expenses for the third quarter of 2025 were $5.3 million compared to $9.4 million in the third quarter of 2024, a decrease of $4.1 million or 43% year-over-year. During the third quarter of 2025, we recorded a net loss from continuing operations of $13.1 million or $3.25 net loss per basic and diluted share as compared to a net loss of $48.3 million or $12.01 per basic and diluted share for the third quarter of 2024. For full year 2025, we are updating our guidance for our total operating costs and expenses, including stock-based compensation, to be between $50 million and $60 million. At the midpoint, this represents a 70% reduction from full year 2024. Now shifting towards cash. As of September 30, we reported $121.1 million in cash, cash equivalents, accounts receivable and investments in the U.S. We expect the company to now have cash runway into 2028. In summary, we believe we have taken important steps to reduce our fixed cost infrastructure across both project and FTE spend to maximize our cash runway and enable investment in our U.S. pipeline opportunities. Thank you, and I will now turn the call back over to Thane. Thane Wettig: Thank you, Dave. To conclude today's remarks, -- with a substantially strengthened financial position and an extended cash runway through multiple clinical milestones into 2028, we are well positioned to advance our mid- and late-stage clinical development programs for FG-3246 and roxadustat, respectively. We look forward to reporting the top line results from the investigator-sponsored study of FG-3246 in combination with enzalutamide at a medical conference in the first quarter of 2026. The recently initiated Phase II monotherapy trial of FG-3246 is progressing as planned, and we expect to report the interim results in the second half of 2026. Finally, with the positive feedback received from the FDA, we now have a regulatory path forward to advance roxadustat for the treatment of anemia associated with lower-risk MDS, and we'll submit the pivotal Phase III protocol before the end of this year. We have made substantial progress this year, transforming FibroGen into a lean and laser-focused organization, firmly positioning us to finish this year on a high note with an exciting future ahead. We look forward to providing further updates to our stakeholders over the coming months. I would now like to turn the call over to the operator for Q&A. Operator: [Operator Instructions]. Our first question comes from the line of Andy Hsieh with William Blair. Andy Hsieh: Congratulations on closing that $220 million deal with AstraZeneca, just really transformative for the company. We have 3 questions across the pipeline program. So one is on the roxadustat MDS pivotal trial. You mentioned about the potential thrombotic risk. They're a very prudent thing to incorporate into the trial. But I'm just curious maybe from an epidemiology perspective in that second line or later setting, refractory intolerable to ESAs, what proportion of patients do you think might be screened out because of the thrombotic risk? And maybe related to that, basically, I'm just curious about the cost of running that Phase III trial and whether or how would that impact the 2028 cash guidance that you provided? And I have a quick follow-up. Thane Wettig: Yes. Thanks, Andy. Nice to hear from you, and I appreciate the questions. As it relates to the thrombotic risk and what that can potentially do to the size of the patient population, I think it will be dependent really upon 2 things. One is what is the ultimate kind of exclusion criteria that we align on with the FDA? And then second, ultimately, what does the data report from the Phase III trial. I think it's too early for us to even kind of estimate, is it a really small proportion of the total population of Phase II and beyond patients in lower-risk MDS or is it more of a moderate portion of the population. Our hypothesis is it's a pretty small amount of the patient potential, but we won't know that until we really align on the inclusion and exclusion criteria with the agency, ultimately run the trial, see the data and then figure out exactly what the label says should we have a positive trial and a positive registration. In terms of the cost of the trial, we're estimating it that it will cost in the neighborhood of $50 million to $60 million. And that's assuming about 200 patients, an enrollment period of 18 to 24 months. But I'll let Dave comment on how we're thinking about that in terms of our cash runway and our guidance. Dave? David DeLucia: Yes, sure. Thank you, Thane. So right now, our current guidance reflects a cash runway into 2028, and that does not contemplate taking on the Phase III study on our own. So to your point, Andy, obviously, it would impact our cash guidance. We think that it could bring -- if we decide to take it on our own without raising incremental capital, it could take the cash guidance into the second half of 2027, give or take. But we do expect that we'll be looking to bring on incremental capital to help support the cost of running the Phase III study if we were to take it on our own. Thane Wettig: And Andy, maybe, yes. So one final comment on that, Andy. As we said in our prepared remarks, as we are evaluating the potential to run the trial on our own versus the partnering process, which we have commenced, ultimately, it's going to come down to kind of a combination of what we would call strategic and economic considerations. On the economic front, we would have to bring in additional capital per Dave's point. We've started to have those conversations just to see what the potential or the likelihood for us to be able to do that. And then we'll compare that as we advance the partnering process. We'll be able to compare that kind of side by side and ultimately do what we think is in the best interest of shareholders. Andy Hsieh: I see. Okay. Great. And then maybe kind of a big picture question on prostate cancer landscape. There's a lot of targets out there, PSMA, C1, DLL3, CD46, obviously, and then I guess, most interestingly, [indiscernible] , which has a negative expression correlation profile versus PSMA. So I guess, do we have additional maybe academic work that look at some of the overlapping expression profile that could actually be advanced stages for CD47 to kind of position based on the expression levels? Just kind of curious about your thinking on that front. Thane Wettig: Thanks, Andy. It's a really good question and one that we talk about on a pretty regular basis, and we've got a great group of KOLs who are beginning to help us think through this as well. If we think about expression levels of CD46, we probably can best characterize it as it relates to expression levels of PSMA. And we know that there is a great degree of concordance patients who express the CD46 epitope and those that express PSMA. We do know that as patients are treated with androgen receptor inhibitors and are treated with a taxane or potentially even Pluvicto that we see some resistance to PSMA development. We actually see PSMA expression levels go down. We're going to be able to tell a lot more, we believe, from our Phase II monotherapy trial, where we're going to treat all patients with the CD46 PET imaging agent to be able to characterize the very expression levels. We do think we'll have some data on many of those patients in terms of their previous PSMA expression levels as well. We'll be able to then do a correlation assessment based upon those expression levels in response to the ADC. And then we'll also be able to look at the data, albeit in probably a smaller number of patients of how our ADC performs in patients who were previously on Pluvicto and those that weren't, again, given this kind of the signal that we've seen where it seems that as patients progress and are treated with the taxanes and potentially with Pluvicto that their PSMA levels are altered to some degree. We're not probably going to have much data from our Phase II as it relates to any of the other targets. There is -- as you stated, there is some academic work that's been done that looks at expression levels of STIP1, TROP2, CD46, PSMA, et cetera. And so it's probably premature for us to comment on this point in time as it relates to how CD46 might overlap with the expression of some of those other targets. Andy Hsieh: Look forward to the second half [indiscernible] . Operator: Our next question comes from the line of Matthew Keller with H.C. Wainwright. Matthew Keller: So just one from us. On FG-3246, I was wondering if you could provide a little bit more color on what your thoughts are and what we can expect specifically from the top line data out of the IST study. And really what I'm trying to get at is more specifically, what are you considering a success from this data readout? Thane Wettig: Yes. Thanks, Matt. I'll go ahead and start, and Dave, feel free to add comments afterwards as well. In the preliminary efficacy data from the Ib portion of the combination trial, there was a preliminary efficacy estimate of 10.2 months. So if we would see something consistent with that, I think that, that would be pretty encouraging for us. I think it's going to be important to look at the data on the roughly 44 patients or so and how that data shakes out based upon the number of prior ARPIs that a particular patient has been on. We think that, that will be a part of the disclosure given the IST nature of that particular trial. Clearly, we're hands off on the disclosure and what that disclosure, that information will say. But I think that, that will be also an important part of the learning. We do know that the more -- the higher the number of ARPIs that patients are treated with, obviously, regardless of what comes next, you see a declining rPFS. And so I think that, that will be an important part of the disclosure. Dave, anything to add to that? David DeLucia: No, I think you hit the nail on the head, saying. Thank you. Operator: Our next question comes from the line of Chen Lin with Lin Asset Management. Chen Lin: Many of my questions have been answered. Just curious, there's a line of liability of $63 million on your report. Is that related to the milestone payment for the ADC asset? David DeLucia: I'll take that. So no, that liability is actually related to the royalties associated with our royalty financing with NovaQuest Capital Management, and that is associated with our royalty stream from roxadustat sales in CKD in the European and Japanese territories where we are partnered with Astellas. Chen Lin: Okay. Okay. Great. So that's a royalty stream. And you own royalty, right? So -- and then you sold some royalty, that's for that. Okay. Is there a minimum payment for that royalty? Or what's the liability looks like? Or just -- it will just -- your future revenue will be covered? David DeLucia: Yes. Currently, the way the deal is structured is that we own NovaQuest 22.5% of any of the royalties received in those territories. So FibroGen Inc. owns 77.5% and then the 22.5% are paid out to NovaQuest Capital Management on an annual basis. Chen Lin: Okay. Okay. Great. So it's a line item and not actual the royalty that you own going forward. Great. Thank you. So do you have any other line item for the potential future milestone you need to pay for the ADC going forward in the financial report? Thane Wettig: Yes, Dave, I'll take that one. So China, the only future milestone that we would have in the relatively near term related to the agreement that we struck with Fortis in May of 2023 would be if we decide based upon the Phase II data, if we decide to move the program into Phase III, we would then exercise the option to acquire Fortis Therapeutics for $80 million. We would then run the Phase III trial. And if the data supports then a filing and the product were ultimately to get approved in either the U.S. or Europe, we would then owe them an additional milestone based on approval of $75 million. And then there will be no royalty obligation on net sales to Fortis after that. There would be a very small single-digit royalty obligation to UCSF, but not to Fortis. David DeLucia: And just to add to that, the reason why we don't carry the liability on the balance sheet is because it is fully at our discretion. So as Thane pointed out, if the Phase II trial is successful and we like what we see, we can exercise that option. If we do not like what we see, then we can return the asset back to Fortis Therapeutics. So it is fully in FibroGen's discretion based upon the outcome of the Phase II study of FG-3246. Chen Lin: Okay. Great. That's clarifying a lot. When do you decide to -- expect to decide which path will you go with LRMDS, this new Phase III trial? Or do you need to -- do you want to wait for the Phase II interim results? Or you plan to move it forward before that? Thane Wettig: Yes. Thanks, Chen. Now these are completely independent of one another. And so we're looking at the low-risk MDS opportunity for roxadustat by itself as a stand-alone. I would think that we'd be able to have some clarity on the path forward, whether we do it on our own versus whether we partner it probably in the second quarter of next year, we'll have better clarity on that. Operator: Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to Thane for closing remarks. Thane Wettig: Yes. Thank you, and thanks, everybody, for joining us for today's third quarter earnings call, and we appreciate your continued interest in FibroGen. Have a great rest of your day. Thank you. Operator: Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Thank you for standing by, and welcome to the OFX Group Limited FY '26 Half Year Results. [Operator Instructions] I would now like to hand the conference over to Mr. Skander Malcolm, CEO and Managing Director. Please go ahead. John Malcolm: Thank you, Kaley, and thank you, everyone, for joining the call. As Kaley mentioned, I'm joined by Selena Verth, our Chief Financial Officer; and Matt Gregorowski from Sodali & Co., who leads our Investor Relations program. Selena and I will take you through the pages, and then there will be time for Q&A. The presentation will cover 6 sections: our mission, performance update, the 2.0 transition, our financials, the strategy execution and our outlook. And then we'll have time for Q&A. So let's move to Slide 4 in the pack. And I want to start the presentation by being focused on our mission, which is simpler financial operations, helping businesses thrive globally. I start here because we must be very clear with our investors, our employees and our clients about what we're trying to do. It may sound obvious, but it matters a great deal as we navigate the transition from a company that did one job very well for both corporate and consumer clients, which was making cross-border payments to becoming a company that does several jobs very well for our corporate clients to make their lives simpler and in turn, help them thrive. We've laid out this strategy before, and I'll revisit it today to ensure we are aligned on what guides our investments, our decisions and our pacing. So why this mission? Moving to Slide 5. This mission is built on a huge opportunity around USD 66 billion of revenue and the fact that we are well prepared to capture it. Firstly, by expanding the number of jobs we can do for clients, we nearly doubled our TAM from USD 34 billion to USD 66 billion. Secondly, we often get questions from investors about competition, but the research we conducted and the evidence we see is that most of the opportunity sits with SMEs who work with banks. Depending on the market, the research suggested between 77% and 80% of clients who need the products and services we provide are trying to get them to banks. Yes, there are non-bank competitors, but the real prize is still largely with the banks who are less nimble and less customer-centric. And we believe we can be sufficiently differentiated from the non-bank competitors to take a reasonable share. Thirdly, the research showed that just over 3 in 4 of these clients are willing to switch away from banks for the right combination of products and services. That hugely encourages us to invest and compete. And finally, if we do our job well and we win these clients, the extra revenue available per client is material, which is over 40% versus our existing model, which makes the return significantly more attractive. So in summary, whilst our mission and strategy have evolved, our target of strong and sustainable growth has not, and we have found a faster and more effective way to deliver it. Turning to Slide 6; we have a very clear path to unlocking this opportunity as well as a very clear goal, which is 15% net operating income growth fiscal year '28 at around 30% underlying EBITDA margins, and we are executing to achieve that. Part of what will drive that NOI growth is non-FX revenue, which we expect to be at least 10% of all fiscal year '28. We know who we're targeting. We know which products and services we can provide to them to make their lives simpler. We have the platform in place in all our major markets and soon in all our markets to make it happen. And we have the infrastructure beneath the platform, our licenses, our banking support and our teams to make this work at scale and globally. We are investing and executing this way based on considerable research, our client experience, our knowledge of the industry and over 25 years of being in this space, and that is what underpins our conviction. Moving to Slide 8, I'll now share the performance of the first half. We delivered NOI of $105 million and underlying EBITDA of $14.5 million. This was a disappointing outcome and certainly below our expectations, and I'll walk through some of the reasons on the next slide. Our NOI margin was 55 basis points, around 4 basis points lower than first half '25, primarily driven by lower margins in North American corporate clients, where we took pricing actions to retain at-risk clients. Our business continues to generate healthy levels of cash with net cash held for on use of $47.1 million, up 2.6% versus the prior corresponding period. Selena will cover cash and cash generation later. We're pleased with the average revenue per client at $4,100 remaining steady through the first half and the non-FX revenue of $0.6 million. Although this was down on PCP, the cause of that a vendor switch was addressed, and we saw revenue grow just under 24% from the first quarter to the second quarter. Moving to Slide 9; we've seen a difficult macro environment affect the confidence of our corporate clients, which has seen them reduce their ATV by 9% from the first quarter to the second quarter, and that largely drove the drop in NOI. Business confidence indicators in all our major markets are below their long-term mean and they are generally not improving. We did see some strength in ATVs in the U.K. and Europe, but this was driven by a few large transactions rather than persistent strength. Encouragingly, our clients remain engaged with us with transactions up 5.7% on prior corresponding period, as you'll see on the next slide, and transactions per active client growing for the third quarter in a row and a healthy CAGR of 11% since the beginning of fiscal year '24. Moving to Slide 10; this is a view of our three main segments: corporate, enterprise and high-value consumer. Corporate revenue was disappointing, down 5.7% versus prior corresponding period, however, up 2.3% versus the second half '25. Within that, the U.K. was the bright spot, growing at 4.6% versus prior corresponding period of some healthy large client wins. Enterprise continues to grow strongly, up 47.7% versus PCP and up 27.5% versus second half '25. The momentum here is largely a function of the excellent support we're providing our clients, the growth in their own businesses and the increasing revenue we're earning from clients we've onboarded in the last three years. In High-Value Consumer, revenue fell 11.3% versus PCP and 8.7% versus second half '25. This is a substantial decline and was driven by unusually quiet market conditions. With volatility, which is typically a key driver of our clients' behavior being very low. In the first half, we only saw 15 days of volatility. And within that, the second quarter, we only saw 1 day where the U.S. dollar AUD moved outside our normal range compared to the 15 to 20 days that we would normally see in a quarter. Later, I will share how we will stabilize and grow this segment. Moving to Slide 11; we've been working very hard to stabilize and grow our corporate active clients. So it's encouraging to see progress. Overall, corporate active clients, including OLS, fell by around 700 in the first half, the lowest rate of decline in several years. We exclude OLS, given we are no longer originating OLS, we actually grew active clients in roughly half the number of weeks in the second quarter. The improvement in corporate, excluding OLS, has been driven mainly by NTCs or New Trading Clients as lapse rates have been slightly higher, but offset by an increase in reactivation. Importantly, of those that have lapsed, more than 2/3 have been low-value corporate clients. As I mentioned earlier, the corporate ARPC was steady in the first half, but the growth in non-FX revenue is encouraging, and this will support growth in ARPC over the medium term. Moving to Slide 13; we're very encouraged by the progress we're making in transitioning to 2.0 and the growth in non-FX revenue we're seeing. We've seen strong client uptake of our new products and services. Card revenue, subscriptions and the Payback card feature all grew in the first half, up 23.8% quarter-on-quarter. Overall revenue was down versus prior corresponding period as we had to switch off the Pay by Card feature during the first quarter, but it rebounded in the second. We're confident this non-FX revenue will continue to grow at a healthy rate as we complete our corporate migration and continue to grow NTCs. This quarterly growth rate has us well on track to achieve our goals of non-FX contributing 10% of NOI in fiscal year '28. As we mentioned in our trading update last month, we migrated just over 39% of our existing corporate clients during the first half. October and early November have been very busy, and we're now just under 60% complete. The migrations have gone well, both technically and from a client experience perspective. Card spend is healthy and cards continue to get issued and activated. Subscriptions are strong and clients are growing balances faster than expected. As at the end of October, we have $138 million in balances, and it continues to grow. And note that the interest from balances is not included in the non-FX revenue. Turning to Slide 14; when we embarked on the transition, a good migration was and is absolutely key to retaining clients and growing our NOI over the short- and medium-term. So it's very encouraging to share some of the key trends that we track. As a first goal, we must retain clients through migration and grow their ARPC post migration. Progress in migrating clients is good with almost 50% of clients from our major markets migrated by the end of the first half, and that figure will be close to 80% by the end of the third quarter. Given we're offering these clients the simplest version of the new platform, i.e., Free with Wallets, it's very encouraging to see them use wallets and do FX transactions as a first step. Wallet balances are growing very well, as I mentioned, and FX transactions are also healthy, but clients activating they are ahead of their pre-migration levels. In terms of ARPC, pre-migration, we were seeing ARPCs of around $4,100. And whilst it's still early for many migrated clients, given that, for example, of the 39% of corporate clients that were migrated, only 7% were migrated to the full first half. And in Canada, migrated clients only had between 1 or 2 months on the platform. But we're already seeing healthy ARPCs across migrated clients in both Australia and Canada. Moving to new product adoption. In Australia, nearly 4% of migrated clients have taken up a second product despite our primary focus being on successful migration and FX usage. Whilst that may seem low, it's largely because we deliberately focused on just wallets and FX for these clients thus far. One cohort of Australian clients who self-identified as wanting to see the additional features and products have been very active with over 50% of them already taking up additional products. In terms of new clients, ARPC is below what we saw in the 1.0 model as we've not been targeting FX in our marketing, but uptake of additional products is very encouraging with just under 16% of all new clients in Australia taking up additional products. We're confident that the ARPC from these clients will grow over time as the experience in cards tend to suggest usage builds gradually. Interestingly, in the U.K., we've already seen some very large FX transactions with new clients and clients are already self-serving with our new digital forwards. So we know we can grow FX and non-FX as well as secure large ATV transactions on 2.0. Turning to Slide 15; our solid progress and results on 2.0 have been underpinned by good execution. Alongside migration, our product and technology teams delivered 80 new products, features or services in the second quarter alone. That is incredibly encouraging for us as a team as we know we can bring better client experiences to life quickly and cost effectively. Put that in perspective, two years ago, we had 8 large teams doing one deployment every two weeks, which was about 26 releases a year. Today, we have 18 small- to medium-sized squads delivering over 200 deployments a week. On the right is our timeline to complete the migration. We expect to have around 80% completion in our major markets by the end of Q3. In terms of new launches, all major markets are now live, including most recently the U.S. So a lot of execution and a very promising future. Now let me hand over to Selena to walk us through the financials. Selena Verth: Thank you, Skander. Moving to Slide 17, our financial results reflect a period of softer trading, coupled with a deliberate increase in investment to accelerate our transition to OFX 2.0. Fee and trading income was down 4.7% to $109.1 million, reflecting the ongoing macroeconomic uncertainty that continues to dampen business confidence. This softness was seen across most regions with APAC down 6.2%, North America down 7.5%, while EMEA saw a modest increase of 1.9%. Our net operating income or NOI was $105 million, which is down 5.6% versus PCP, but represents a 1.2% increase on the second half of fiscal year '25. The NOI margin contracted by 4 basis points, 3 basis points was due to the lower pricing in North America, which Skander mentioned and 1 basis point on the higher value consumer transfers. The NOI margin is up 1 basis point on the second half '25 as we build back up margins in North America. As we invest for growth, underlying operating expenses increased by 10.2% to $90.5 million, which I will detail on the next slide. This planned investment, combined with the soft trading environment resulted in an underlying EBITDA of $14.5 million. Depreciation and amortization continued in line with our ongoing investment in client experience in our platform, leading to an underlying EBT of $1.5 million. We have an effective tax gain as our R&D credits accumulated in the period and can be carried forward for future use in future. Our balance sheet remains solid with net cash held at $75.4 million at the end of the half. Moving to Slide 18, you will see the composition of our increased operating expenses. We are making targeted investments to deliver our 2.0 strategy to accelerate growth while also identifying productivity savings through the organization. Employment expenses, our largest cost category, was up 8.9% versus the prior corresponding period. This was driven by an addition of 19 full-time employees, primarily in product, marketing and frontline roles to execute our growth strategy. Promotional expenses increased by 5.3% as we supported the accelerated launch of our NCP in Canada and EMEA, which helped drive the 11.8% growth in corporate NTCs. We have invested in account-based marketing and our new websites are live for our major regions with the U.S. site going live last week. Bad and doubtful debts were $3.2 million for the half. While this is an increase on prior periods, it relates to a very small number of incidents. We're actively pursuing recoveries and have strengthened our risk settings and controls to manage this closely. We've not seen any material bad debts in the current quarter, and we do not expect the bad debts to repeat at this level in the second half. Longer term, as more clients migrate to NCP, these risk controls will improve further as the platform provides us with better technology and more optionality for setting client specific [indiscernible]. Turning to Slide 19; this investment is creating a path to growth and a better longer-term return. We committed to accelerating investment in fiscal year '26 of between $16 million and $24 million in OpEx and approximately $5 million in CapEx. As you will see, we are about halfway through this investment. Our delivery is executing better than ever. And as a result, we have lowered our full year CapEx guidance to be between $20 million to $21 million. Productivity initiatives are delivering the same road map with less resources. The investment in driving promising returns with an 11.8% growth in our corporate ex-OLS NTCs and our non-FX revenue is building momentum with $600,000 generated in the first half and quarterly growth of 23.8%. This progress gives us confidence that these investments will generate superior returns. We are targeting an underlying return on invested capital of 30% in fiscal year '28. Moving to Slide 20. Our balance sheet remains strong with healthy levels of cash to support our growth ambitions. The business continues to demonstrate excellent cash generation with an operating cash conversion rate of over 100%. Our underlying EBITDA of $14.5 million converted to a net cash flow from operating activities of $16.5 million, supported by the timing of expenses. Our net cash held position is strong at $75.4 million. After deducting our collateral and bank guarantees, the net available cash position is $47.1 million. This is up $1.2 million on last year and down $3.9 million from the March full year '25 results. We have self-funded our accelerated growth. The reduction in net available cash is due to repayment of debt, which now stands at $18.5 million and the buyback of 2.3 million shares for $1.9 million during the half. Our strong balance sheet and cash flow provide the foundation for us to invest in our accelerated growth strategy by continuing to look for productivity wherever possible. I will now hand back to Skander to take you through our strategy, execution and outlook. John Malcolm: Thank you, Selena. Now let's move to Slide 22 to walk through what we're doing to bring the next phase to life. Alongside strong execution, we've been working very hard to bring to life the three elements that will create growth in our model, our value proposition, our go-to-market and our operating model. Firstly, as previously mentioned, our value proposition is now much broader and more compelling. We've evolved from being a focused FX provider to supporting businesses with a wider range of needs, helping them simplify their financial operations. Our marketing and product teams have done a huge job in completely reorienting what success looks like for our clients. And our platform has been configured and launched in every major market to accelerate our transition. Secondly, our new go-to-market model is up and live in every major market. Roles and pipelines have been redefined and new software deployed. We're already seeing great progress with double-digit growth in corporate NTCs. Finally, we also reorganized our corporate structure to more closely resemble the new company that we are becoming. Commercial teams now focus on a single segment with a global leader for B2B and a separate leader for B2C. We also combined product and marketing into one growth organization to drive speed and consistency. And we moved the payments team out of operations and into finance and refocused the remaining operations teams who are all customer-facing into a single customer function. These changes took effect on October 1 and are already working well. For clients, our teams are more focused and provide better products and services. For employees, they get faster decision-making. And for shareholders, it's cost neutral and positions us for faster growth. Moving to Slide 23; during the half, we completed a strategy review of the high-value consumer segment and identified a clear path to stabilize and grow it. Our focus will be on clients and prospects who make larger value consumer transactions, clients we know well and consistently rate us highly. We will acquire them through partnerships, primarily targeting the wealth and professional services use cases. Our competitive differentiation will remain our digital plus human service delivery and partnership referral model, which is unusual in our industry where most consumer firms go direct. We will leverage the new client platform's product and platform capabilities so our clients benefit from the same programs, and we will use the same go-to-market approach to find new partners, and this will drive synergies across the platform. We plan to execute this migration in fiscal year '27 with no incremental CapEx to what we have previously guided. We are already working hard on the value proposition, the launch and the migration plan, and we will provide more detail on that when it is finalized for our fiscal year '27 outlook. Moving to Slide 24; like most companies, we have been busy building and executing our AI capabilities, and we've made good progress. Firstly, we're very excited by AI's potential and know it will be transformational for OFX. We have started with the foundations, good governance, well-organized data, modern architecture and security and much of that is now complete. Concurrently, we've been deploying it across a range of internal use cases, largely to drive productivity so far. Over time, the real value driver will be making AI central to the client experience and the product road map. The team already has a very exciting plan, but they insisted, I do not share it yet. What I can say is our clients are already seeing the benefits of the simple things like AI-driven expense allocation, but what we have planned will be significantly more value accretive. Moving to our outlook on Slide 26; we remain committed to our medium-term outlook, which is to generate at least 15% NOI growth in fiscal year '28 with underlying EBITDA margins of around 30%. In second half of '26, we're targeting NOI growth to be higher than second half '25. We will continue to execute the plan that we shared back in May, which is to invest to accelerate our transition. As we stated in our trading update, we're managing OpEx and expecting it to be between $173.7 million and $181.2 million for fiscal year '26. Because our execution is strong, and as Selena mentioned, CapEx will be in the range of $20 million to $21 million in fiscal year '26, not just under $24 million as we originally forecast. We have not yet completed planning in detail for fiscal year '27, but we can say that the consumer migration and launches will happen [ within our ] incremental CapEx to what we previously guided. And as we previously stated, OpEx and CapEx will be similar to what we are seeing in fiscal year '26. But before I hand back to Kaley, I want to reiterate that both management and the Board are very confident in the strategy. The execution remains good, and we are determined to combine these into a great outcome for investors. Thank you, and I'll now pass back to Kaley to handle Q&A. Operator: [Operator Instructions] Your first question comes from Michael Trott with MST Financial. Michael Trott: Consider that you guys are going hard at the investment over the next 12 to 24 months. But just with the short-term weakness, in NOI also flagged and then also your current underlying EBITDA margin of roughly 13%. Can you just provide some color on when you're expecting a step change in this margin, especially with the, I guess, realization of the FY '28 30% target? John Malcolm: Yeah. So what I'd say, Michael, is in the short-term, we're very, very focused on driving up NOI, and that will be the thing that underpins margin expansion. But at the moment, we're not guiding to that. We are working exceptionally hard to create it. And as we've said in the second half, we're just targeting growth in NOI second half '26 over second half '25. But in the short term, any margin expansion will be driven by top line growth. Operator: Your next question comes from [ Scott Nelson with Nelson Capital ]. We might just move along to the next questioner in the queue, Cameron Halkett with Canaccord Genuity. Cameron Halkett: Just two, please. Around the incremental OpEx guidance you've further reiterated there. Selena, can you just remind us, please? I think there was a bit of confusion back at the last half. Is that swing between the incremental $16 million to $24 million effective in bonuses relative to how the business performed in the second half, please? Selena Verth: Yeah. So the range on OpEx is largely due to the range on what the STI outcomes could be because STI is 60% financial, 40% nonfinancial -- financial metrics do assume growth. So obviously, depending on how the financials play out, that can range on your OpEx. Now that being said, if you look at the first half, the bad debt was higher than we wanted it to be. We've done a lot of changes and controls. We don't expect that to repeat in the second half, and we'll be looking at any productivity savings that we can get to make sure we offset those costs as well. Cameron Halkett: Yeah. I guess just turning to the comments and some of the disclosures just around sort of funds that have been loaded on to the cards and references to cash balances. How is that tracking relative to your initial expectations that sort of get the feeling that that's higher than perhaps what you were expecting? Selena Verth: Look, the cash balances are relatively hard to predict. We really like what we see. Obviously, we're seeing balances in all regions as customers come on board. We do make some interest out of that. You would have seen our interest revenue for the half was flat half-over-half this half versus last half, but that's given also that there's been two rate cuts in the last half. So we're actually outgrowing the rate cuts at the moment, slightly outgrowing the rate cuts at the moment with those building cash balances. So we like what we see. We're seeing in all regions, and we are encouraged by the growth. John Malcolm: And maybe just to add to that, Cam. As we look at the cards themselves, a couple of encouraging statistics or trends relative to our own expectations. First of all, the proportion of cross-border usage is a bit higher than we were expecting, and that's good because generally, they attract higher levels of interchange. And I'd say the second thing is we're also seeing clients using cards for a range of different use cases, which, again, is really helpful. And there is a somewhat kind of symbiotic effect there with the balances that Selena mentioned because typically, for example, here in Australia, people are putting balances on to -- in their wallet because they want to use the cards for domestic transactions as well as international transactions, and that would suggest a more engaged client. So it's certainly encouraging. Selena Verth: Yeah. And just last one. When I look at Slide 13, the sort of composition of sort of what you're seeing there around card, Pay by Card and subscription and other. When you look at the sort of second quarter '26 breakdown, let's just for simplicity call [ it a third ] equal. Any comments you can make around more of an early adopter of the card selection where that mix of revenue composition might be, say, more weighted to card and Pay by Card than subscription, just to help people understand the expected contribution and mix over time? John Malcolm: Yeah. I'd say, Cam, our general view is it's still very early days. What's actually happening is -- if we look at new clients, we're seeing a pretty good uptake of cards. We're seeing a pretty good uptake of subscriptions, particularly, I would say, in Canada relative to our expectations. And so that's pretty good. From an existing client perspective, we've been very, very careful in making sure that the first thing that migrated clients do is reactivate their accounts with FX. So it's still, I would say, quite early to say, okay, we're seeing some pretty clear trends in terms of that non-FX revenue. But at an overall level, the growth rate is encouraging in each of the categories. And what's also coming online really, I would say, scaling in the third quarter and beyond is really our product marketing efforts. To-date, we've been, as Selena mentioned, recruiting for those roles, putting in place some pretty basic product and marketing programs to get ourselves ready for that, and then we will start to increase our efforts in this area, which should then drive more of the non-FX revenue over time. Operator: Your next question comes from David Kingston with K Capital Group. Your next question is from Olivier Coulon with E&P Financial Group. Olivier Coulon: Can you hear me okay? So you mentioned on the intro that you were seeing growth in -- the revenue per transacting client on a same cohort basis. And I think you mentioned that there were 7% that were there for the full half that had migrated. I don't think you actually mentioned a specific growth number. Is it possible to share that on that same cohort basis? John Malcolm: Yeah. We've talked in the past around kind of FX growth for those pre and post at around 5%, and that's kind of what we're seeing. We just wanted to point out that a lot of the migration happened candidly in the second quarter. So if you look at, for example, Canada, I think something like 20-odd-percent had even 60 days on the platform. But they've been migrating across well. It's really mostly Australia, where they've had, as you mentioned, the 7% for the full half and those FX -- that FX growth is around the 5% range. Olivier Coulon: Yeah. And that's absolutely not kind of relative to the rest of the clients because I guess Australia had a pretty tough half, right, in terms of corporate revenue per client. John Malcolm: Yes. Olivier Coulon: Yeah. So is there any reason to think that Australia should -- like that those clients wouldn't have had the same sort of underlying trend maybe during their revenue growth? John Malcolm: I'd say on that one, Olivier, is that what we're seeing is they're picking up the fact that they can use a wallet, and they're using the wallet for cross-border for some smaller value transactions, some larger value transactions. They appear to be feeling like the wallet is a step up relative to the prior value proposition. But again, I would say it's still -- which is very encouraging. Let me make that plain. But I would still say the bigger job to do for that cohort and for the corporate active clients more generally is getting them comfortable also to see the opportunity on non-FX, and that's really where the third quarter and beyond will take us. Olivier Coulon: Yeah, okay. But it's fair to say that, that uplift that you saw from those -- from that small cohort who is kind of directly comparable, that was primarily from actual increased transaction activity. Yeah, as opposed to ATV or anything like that? John Malcolm: That's right. Operator: [Operator Instruction] Your next question comes from [ David Kingston with K Capital Group ]. Unknown Analyst: Anyway, thorough presentation, so thanks for that. Look, I've just got a few macro comments, Skander. Look, sadly, at the moment, OFX has lost the confidence of the stock market. The market capitalization is $130 million, which is an enterprise value of $100 million when you adjust for the net available cash of $47 million and deduct the debt of $18 million. So enterprise value of $100 million. In the past 14 months, OFX has burned 75% of shareholder value, $2.30 down to $0.57, down $400 million. Look, on the positive, OFX still has substantial NOI of $105 million for the first half albeit with the increased OpEx for OFX 2.0. Obviously, the NPAT has been smashed at around about 80%. Look, I'd also note, Skander, that as well as the past 14 months being ugly, OFX floated in 2013 at $2. And it's pretty concerning that 12 years later, when some of the competitors have shot the lights out, OFX is less than 1/3 of the IPO price. So really, I've just got a few macro questions, Skander. Playing Russian Roulette with the substantial increase in OpEx of OFX 2.0 or can you reverse the huge $400 million loss of shareholder value in the past 14 months? Secondly, is OFX too small and is the Board and management to corporate and lacking the corporate savvy to compete with the more dynamic and entrepreneurial Airwallex and Wise? And finally, just be grateful if you could provide some insights into is the Board proactively considering a sale to another corporate with synergies or to private equity? Like I think it's fair to say that at the moment the fair value of OFX should be way, way above the current $100 million enterprise value. But certainly, shareholders at the moment Skander are concerned that the ongoing loss of shareholder value as represented by the share price anyway. John Malcolm: Alright. So I think there were three questions. Look, in terms of the EV and the OpEx -- one analyst said to me once, which I think is absolutely right is the market can't value no growth. And so the EV is really a function of the no growth. If you look at, as you pointed out, underlying NOI, it hasn't changed that much, certainly not as much as the EV has declined. The OpEx has really been invested with a lot of research. I mean, effectively over two years' worth of research, market experience, customer signaling all over the world. So it's not Russian Roulette, which would suggest a random allocation. It's been very, very carefully studied before that investment. And the Board and management are working exceptionally hard on all of the factors within that OpEx, as Selena mentioned, whether it's product, software, commercial people to drive growth because ultimately, that's what the market and investors will rate in OFX, and we're very clear that the best way to generate growth is through the investments that we've made. On your second question, look, I can't comment on some of the private companies. All I can do is to say to public company investors, what you get with this management team and this Board is a very mature risk management and governance framework. You have global experience, which in a somewhat uncertain and risky world, and we've seen a lot of examples in the last few years, which I talked about a lot just in one space, for example, is around the rise of fines, AML fines that investors can rely on in terms of our oversight and management of those. And certainly, if you look at the kind of corporate experience inside the company, there's a blend of certainly some corporate skills, but there's also a group of folks who've done a whole range of entrepreneurial activities as well. And the answer to the third question is no, we're not actively engaged or strategic on a sale of the [indiscernible]. Unknown Analyst: But just one follow-up there, Skander. In the context of in the last 14 months, your 3,000 shareholders, Skander, have lost $400 million of shareholder value. It's got to be telegraphing some flashing yellow or maybe red lights. You're going out here competing with some whales. NOI is declining, margin is collapsing because of the extra expenditure. I hope that you and the Board are properly considering the value of your shareholders who have been absolutely punished in the past 14 months. It's already [indiscernible] to get reports from outside people and to -- as I said, your presentation is very thorough and professional. But at the moment you're losing the battle on behalf of the people that you're representing who are the shareholders who have been punished in the past 14 months. But anyway, I'll leave that as it is. Thanks Skander. Thank you. Operator: There are no further questions at this time. I'll now hand back to Mr. Malcolm for closing remarks. John Malcolm: Well, I'll just wrap it up by saying thank you for joining the call. We are working exceptionally hard to turn the growth in the top line around. And I can assure you that management and Board are very, very busy on every single detail to make sure that we can create a more valuable company. Thank you very much. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to Gemini's 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 Kate Freedman, Secretary. Please go ahead. Kate Freedman: Good afternoon, and welcome to Gemini's Third Quarter 2025 Earnings Conference Call. I'm Kate Freedman, Gemini's Secretary. Joining me on the call today are Gemini's founders, Cameron and Tyler Winklevoss; Chief Operating Officer, Marshall Beard; and Chief Financial Officer, Dan Chen. We announced third quarter financial results today after the market closed. Please note that during the course of this call, the Gemini team will make forward-looking statements, including statements relating to the future performance of Gemini, its business outlook and anticipated trends in our industry and their anticipated impact on our business, which are based on management's current expectations, forecasts and assumptions. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations. For identification and discussion of these material assumptions, risks and uncertainties, please refer to our public filings with the SEC as well as the Investor Relations section on our website. We undertake no obligation to update these forward-looking statements unless expressly required to do so by law. In addition, during this call, the Gemini team will be referring to certain non-GAAP financial measures during today's discussion. Important disclosures about this information and a reconciliation of the non-GAAP information to comparable GAAP information is included in our Shareholder Letter and is available on our Investor Relations website. And with that, let me turn the call over to Cameron and Tyler. Cameron Winklevoss: Good afternoon, and thank you all for joining us on our inaugural earnings call as a public company. I'm Cameron Winklevoss, President and Co-Founder of Gemini. Tyler and I are equal parts thrilled and humbled to reach this milestone in Gemini's journey. The end of Q3 marked our first quarter as a publicly traded company. And while that milestone is an important one, it represents only the beginning of our next journey When we founded Gemini over a decade ago, our goal was to build the trusted bridge to the future of money, connecting the world to the crypto frontier and helping grow that frontier into the crypto mainland. Before Tyler and I outline our growth and business strategy, we want to take a moment to applaud the Gemini team. The hard work, creativity and determination of our people have brought us to this point. We are deeply grateful for the passion and grit you bring to our mission every day. This quarter marked a significant step forward in our mission. We scaled our ecosystem, broadened our reach and continue to demonstrate the strength of the model we are building, one grounded in trust, engagement and liquidity. Across the business, we achieved some of our strongest growth milestones in recent years. Trading volumes reached $16.4 billion, a multiyear quarterly high, primarily driven by expanding institutional activity and deeper engagement across the platform. The Gemini Credit Card delivered record performance, surpassing 100,000 open accounts and more than $350 million in quarterly transaction volume, more than doubling quarter-over-quarter. Together, these results reflected our strongest quarter of user acquisition in over 3 years and underscored the growing reach of our ecosystem. We also built momentum for our next stage of growth by launching new Gemini credit card features and introducing the Gemini Wallet, a self-custody smart wallet designed for both crypto users and developers. At the same time, we broadened our global footprint by launching in Australia and securing our MiCA license in Europe, enabling us to offer staking, derivatives and tokenized stocks to customers across the European Union under a regulated framework. We believe this performance reinforces the strength of our model and the foundation that will continue to power Gemini's long-term growth. Tyler Winklevoss: Thanks, Cameron. When we founded Gemini, our goal was to make crypto simple, secure and accessible for everyone. That purpose underpins the trust, engagement and liquidity flywheel that fuels our business. From the very beginning, we chose to take the regulation forward path, asking for permission, not forgiveness. And we built Gemini with the goal of meeting the highest standards of security, licensing and compliance. We believed, and still believe, that long-term value in crypto will flow to the companies that earn it the right way. This focus on trust has allowed us to create a durable model that we believe will compound over time. We believe this foundation of trust and transparency is what draws users of Gemini and what keeps them here. This regulation forward approach has allowed us to build a durable, powerful flywheel built on trust, engagement and liquidity that drives Gemini's business forward. This flywheel starts with our exchange, a regulated crypto-native platform that combines the depth and sophistication institutions expect with the simplicity retail customers need. That foundation of trust and transparency is what draws users to Gemini in the first place and what keeps them here. From there, the Gemini Credit Card expands our reach. It's often the first step for customers who are new to crypto, a no annual fee card that earns Bitcoin or one of the 50-plus tokens available on our platform on everyday purchases. This brings them into the Gemini ecosystem in a simple rewarding way. Over time, that relationship creates opportunities for customers to explore more of what Gemini offers from trading and saving to engaging with on-chain products as comfort and familiarity grow. As overall activity builds, it attracts institutional liquidity, market makers, asset managers and corporate treasuries that value Gemini's regulated framework. Their participation strengthens pricing and execution for everyone, creating a healthier, more efficient marketplace. The final piece and really the backbone of the entire system is regulatory trust. Operating in a sound, compliant and transparent way doesn't just protect our users. It opens doors in new markets and makes Gemini a partner of choice for institutions and regulators alike. Each turn of this flywheel reinforces the next. Trust drives engagement, engagement builds liquidity and liquidity strengthens trust. It is an integrated model that compounds over time, expanding our reach, deepening relationships and strengthening the resilience of our business. That's the power of Gemini's flywheel, and it's why we believe we're positioned to lead as traditional finance and crypto continue to converge. In Q3, we advanced our mission across 5 key areas that demonstrate the strength of this model: one, expanding our regulated global footprint; two, scaling crypto adoption through everyday spending; three, deepening trading activity and diversifying our revenue mix; four, enabling secure onchain access; and five, enhancing capital efficiency and balance sheet strength. Our Chief Operating Officer, Marshall Beard, will discuss each of these areas in more detail. Back over to Cameron. Cameron Winklevoss: As we look ahead, the opportunity before us is enormous. Financial markets are moving on chain, and crypto is reshaping how we transact, store value and interact with money itself. Gemini is purpose-built for this transition, regulated, trusted and focused on building a globally integrated super app that connects traditional finance and crypto in one seamless experience. Our mission has always been global. You should not have to live in any one country to access a stable currency, invest in great companies or participate in a modern financial system that works 24/7, just like the Internet and your e-mail. We pursue this mission by bringing dollars on chain through stablecoins, enabling trading and secure custody of tokenized assets and making it simple to buy Bitcoin and other crypto. Gemini is positioned to help shape this future and ensure that everyone has access to it while maintaining the trust and security standards our customers have come to expect. We are proud of what we've accomplished in our first quarter as a public company and even more excited about what lies ahead. Thank you for joining us on this journey. With that said, I'd like to hand it over to Marshall Beard, our Chief Operating Officer, to discuss Gemini's Q3 operating performance. Marshall Beard: Thanks, Cameron. It's been an exciting first quarter as a public company as we made several improvements to the business to further advance our mission and improve our operations. The results we delivered in Q3 reflect the depth of execution across our teams and the continued momentum of our platform. Let me start with our expanding global footprint, where we made important progress in strengthening Gemini's goal of being a trusted regulated partner around the world. We advanced licensing and registrations in key markets when we received our MiCA license from the Malta Financial Services Authority, enabling us to offer certain secure, reliable crypto services across all 30 European countries and jurisdictions. Following the close of Q3, we launched in Australia after obtaining AUSTRAC registration in August and completed key payments integrations to streamline onboarding in the region. In Singapore, we continue to engage with the Monetary Authority of Singapore to convert the in-principle approval through which we operate to a full MPI license. Together, these milestones expand Gemini's license footprint across major global markets and strengthen our ability to operate under clear regulated frameworks. They also demonstrate how our commitment to compliance continues to open new opportunities for both retail and institutional customers. As we strengthened our global reach, we also continue to scale one of the most important drivers of customer engagement and growth, the Gemini Credit Card. The Gemini Credit Card has quickly become our most powerful engine for customer acquisition and daily engagement. In Q3, we released an XRP edition of the Gemini Credit Card. And in October 2025, we released the Solana edition, introducing auto-staking rewards across all cards and unlocking the power of each network's community to drive growth. These new additions helped us cross more than 100,000 total card accounts with 64,000 new card sign-ups in the third quarter and over $350 million in card transaction volume, up more than 100% quarter-over-quarter. This momentum drove our strongest quarterly card revenue performance to date with card revenue of $8.5 million in the quarter. We believe that the Gemini Credit Card continues to serve as a leading acquisition wedge for Gemini in the United States. More than 55% of newly acquired U.S. transacting users across our products in Q3 first originated through card onboarding and 75% of open card accounts were active at quarter end. This steady flow of engaged transacting customers is helping drive higher lifetime value, deeper engagement and cross-product adoption across the platform. As card adoption accelerates, it continues to deepen engagement across the Gemini platform. Every cardholder also opens a Gemini exchange account as part of the same integrated experience, giving customers a single unified platform to spend, earn and trade. On our exchange, trading momentum accelerated in Q3 as participation broadened across customer segments, reflecting a healthier, more liquid marketplace. Spot volumes reached $16.4 billion, up 45% quarter-over-quarter, including $14.6 billion from institutional customers, up 49% quarter-over-quarter and $1.8 billion from retail, up 20% quarter-over-quarter. Liquidity improved across order types, which we believe highlights the continued strength of our core exchange. Our OTC business also expanded its client base and product range, contributing to greater market depth and scalability. At the same time, our revenue mix became more balanced and durable with services revenue, including credit card, custody and staking, accounting for nearly 40% of total revenue in Q3, up from less than 30% a year prior. Custody and staking assets benefited from both price appreciation and new regional launches with staking balances reaching $741 million at quarter end. These results illustrate how our card-led acquisition strategy and expanding exchange activity reinforce each other, creating a compounding flywheel of engagement, liquidity and trust that can help drive sustainable growth. As liquidity and engagement on our exchange continue to grow, we also expanded access to the broader onchain economy, delivering new products and capabilities that make it easier, safer and more seamless for customers to engage directly with onchain opportunities. We continue to expand our onchain capabilities and invest in our native staking infrastructure during the quarter. In August, we introduced Gemini Wallet, a self-custody smart wallet designed for both crypto users and developers. The wallet allows customers to manage assets seamlessly across onchain applications while maintaining control and security, bridging the gap between embedded and portable onchain experiences. We also launched Solana staking from custody for institutions and our own in-house Solana validator, providing clients with a secure and compliant way to participate in network validation directly through Gemini. In parallel, we expanded multi-network support across both EVM chains and emerging Layer-1 networks, enabling broader access to stablecoins on our platform. Under our MiFID license in Europe, we rolled out tokenized stocks to EU customers, offering EU customers a regulated path to gain exposure to traditional financial assets onchain. We're also continuing to work on new products, including an expected upcoming prediction markets offering, which we expect to share more about in the future. Together, these initiatives strengthen Gemini's role as a trusted bridge to the onchain economy, reinforcing our vision to make crypto accessible to everyone through a single integrated experience. Finally, as we continue to scale our platform and expand our product capabilities, we also strengthened our balance sheet and improved our capital efficiency. Following our IPO, we paid down debt and improved capital efficiency through new funding structures, including establishing a $150 million credit facility to finance credit card receivables. These actions strengthen liquidity, and we believe that it positions Gemini for scalable, sustainable growth. Looking ahead, we remain focused on maintaining balance sheet strength while retaining the flexibility to fund strategic initiatives that drive scale and growth. We also plan to continue to thoughtfully utilize share-based compensation as a tool to align employee incentives with the long-term success of Gemini. Together, these priorities reinforce our commitment to disciplined capital management and the alignment of our people and financial resources around sustainable value creation. Overall, we believe that Q3 demonstrated the breadth and resilience of Gemini's model in action. We executed across every part of our platform, expanding our global footprint, scaling card engagement, deepening trading activity, advancing our onchain strategy and improving capital efficiency. Each of these initiatives strengthens the flywheel of trust, engagement and liquidity that we expect to continue to power our growth. With that, I'll turn the call over to Dan Chen, our Chief Financial Officer, to take you through our financial results for the quarter in more detail. Dan? Daniel Chen: Thank you, Marshall, and good to speak to you all. It's great to be here today to discuss our third quarter results, our first quarter as a public company. I'll start with an overview of our financial performance and then provide a bit of color on trends across revenue and expenses before wrapping with adjusted EBITDA and outlook. Net revenue for the third quarter was $49.8 million, up 52% quarter-over-quarter. This marks another strong step forward for Gemini as we continue to expand both the reach and resilience of our platform. Growth this quarter was broad-based, driven by stronger trading activity, increased user engagement across our credit card product and exchange, including increased traction in staking and custody. Taken together, we believe that these results highlight the expanding utility of the Gemini ecosystem and the growing diversification of our revenue streams. Transaction revenue was $26.3 million, up 26% from last quarter. Spot trading volumes reached $16.4 billion, up 45% quarter-over-quarter, reflecting both higher user engagement and improving market conditions. Retail volumes grew 20% to $1.8 billion, while institutional volumes rose 49% to $14.6 billion. The increase in exchange activity came from both existing customers becoming more active and new clients onboarding to the platform. As a reminder, transaction revenue is earned from fees charged to both retail and institutional users. These fees vary by transaction size, volume and order type with instant orders having the highest fee. This quarter's increase was partially offset by a lower average retail fee rate, reflecting a higher mix of lower fee order types. Overall, the growth in volume more than offset the mix effect, demonstrating the underlying health of our marketplace and the scalability of our exchange. Turning to services revenue. The total for the quarter was $19.9 million, which includes credit card, staking and custody revenue as well as other activities related to the exchange business. Credit card revenue was $8.5 million, up $3.7 million from the prior quarter, driven by continued user growth and higher spend per active cardholder. We saw 64,000 new card sign-ups in Q3 compared to 17,000 in Q2, bringing receivable balances to $150.6 million, up 61% quarter-over-quarter. The Gemini Credit Card continues to be a powerful customer on-ramp, helping new users enter the ecosystem and strengthening engagement among existing ones. Staking revenue also performed well, increasing $3.2 million to $5.9 million. This reflects our first full quarter of Solana staking in the U.S. and was further supported by an increase in staked assets and underlying price appreciation. We also recognized $2.1 million in advisory fee revenue from a onetime warrant arrangement, reflecting the value of our advisory capabilities. We expect services to continue to be a major growth driver going forward, particularly with the continued adoption of the Gemini Card and our staking products expand globally. These are high utility recurring revenue streams that we believe can strengthen the long-term stability of our business model. On to expenses. Total operating expenses for the quarter were $171.4 million, up about $72.7 million sequentially. That step-up was primarily driven by IPO-related stock-based compensation, increased marketing spend and other nonrecurring items rather than a structural change in our cost base and underlying operating system expenses otherwise moved in line with recent quarterly trends. Breaking that down, compensation and headcount expenses were $82.5 million, up $45.7 million from Q2. Roughly $44 million of that increase came from stock-based compensation tied to IPO equity awards, including a $15.1 million bonus accrual recognized and settled in equity at the same time. Compensation and headcount expenses otherwise tracked an increase to employee headcount, which was 677 employees at quarter end. We continue to invest selectively in engineering and compliance while keeping overall hiring disciplined. We expect compensation to normalize at this new post-IPO level as stock-based compensation becomes a recurring part of our expense base. Turning to sales and marketing. Expenses were $32.9 million, up $16.8 million from last quarter. The majority of that increase reflects deliberate investments. About 2/3 of the increase was higher marketing and brand spend, while the remainder came from higher rewards and promotions consistent with elevated card activity. We believe that we've seen a clear payoff from that investment in terms of new account growth and card engagement. That said, we continue to view marketing as a flexible lever. We expect spend levels in upcoming quarters to depend on the performance opportunities we see in the market. Transaction-related costs rose in the third quarter as well, reflecting both higher activity levels and a few isolated losses. Transaction processing expenses were $8.6 million, up $3.4 million from the prior quarter on stronger staking balances, while transaction losses totaled $7.7 million, up about $4 million sequentially. Those losses were generally in line with the continued scaling of the business. The provision for credit losses on the card program, which is included in transaction losses increased by $1.5 million to $2.8 million, consistent with the continued growth in active accounts. We continue to see improvement in credit performance. Technology and infrastructure expenses were $20.3 million, up about $2.5 million, driven by higher software licensing and ongoing security and scalability investments. G&A expenses were $19.3 million, essentially flat, though that figure includes some nonrecurring IPO-related costs. Turning to debt and liquidity. During the third quarter, third-party corporate debt increased by $75 million, reflecting a new borrowing facility. To execute that facility, we entered into a related party loan of 1,275 Bitcoin. At quarter end, that loan totaled $145 million. We also saw an increase in other related party crypto loans, up roughly $13 million, reflecting in part higher Bitcoin and Ethereum prices, partially offset by repayments of 133 Bitcoin and 13,070 Ether. At quarter end, we held 5,824 Bitcoin and 26,629 Ether received through these arrangements. After the quarter closed, we returned $116.5 million of proceeds from the Galaxy loan and received the full Bitcoin and Ethereum collateral back. That loan remains outstanding for the 90-day notice period under the terms of the agreement. Finally, we executed a warehouse financing facility to fund our Gemini Credit Card receivables. At quarter end, we had $49 million of debt outstanding and $68 million of pledged receivables sufficient to support borrowings of $59 million. This is an important step for the business. By financing the card portfolio through a warehouse structure rather than funding it entirely on the balance sheet, we believe that we're making the program more scalable and capital efficient. In our view, this approach mirrors established practices in traditional consumer finance and provides flexibility to grow the card program responsibly while maintaining strong liquidity and risk management discipline. Overall, we believe that our balance sheet remains healthy with ample liquidity and diversified funding to support growth across our key products. Looking ahead, our focus remains on driving disciplined growth, improving capital efficiency and maintaining flexibility to invest behind our highest conviction opportunities. Starting with our medium-term framework, we continue to expect monthly transacting users to grow at a 20% to 25% compound rate over the medium term and that growth to be supported by a mix of new retail customers coming through our credit card on exchange and expanding engagement from existing customers across trading, staking and onchain activity. On the top line, we expect services revenue and interest income, which includes staking, custody and the Gemini Credit Card as well as interest income to reach $60 million to $70 million in fiscal 2025. We expect that growth to reflect continued momentum in our credit card program and increased engagement in non-trading activities, both of which we expect to contribute to deeper and more diversified customer relationships. Turning to expenses. We expect technology and G&A expenses to total between $140 million and $155 million for fiscal 2025. We expect this to reflect ongoing investment in scalability, reliability and compliance infrastructure, balanced by expected efficiency gains across our core operations as we continue to scale the platform. On marketing, we expect a more meaningful step-up for full year 2025 with expenses of $45 million to $60 million. That increase reflects our decision to lean into growth following the IPO and build on momentum. We plan to continue to evaluate performance data closely and direct spend to the channels and products where we expect to see the strongest returns. In other words, this isn't broad-based expansion. It's a targeted acceleration designed to drive durable user growth and strengthen brand equity. As we move forward, stock-based compensation will remain a structural component of our expense base, reflecting our transition to a market-based equity program aligned with long-term shareholder value creation. So while total operating expenses will remain elevated relative to pre-IPO periods, we believe that this reflects our intentional investment in both people and growth. Stepping back, the key takeaway is that we believe that our expense growth is strategic and controlled. We believe that we are investing from a position of strength. We see a clear line of sight to scalable revenue streams, and we expect to continue generating operating leverage as those investments begin to mature. Q3 was another step forward for Gemini. We delivered strong top line growth. We deepened engagement across both retail and institutional users, and we continue to diversify revenue toward higher-quality recurring streams like card and staking. We believe we are operating from a strong foundation, investing in growth, scaling responsibly and maintaining the discipline that underpins our long-term margin expansion goals. We're building a business that is larger, more durable and better balanced than ever before, one that can scale through market cycles and capture the long-term opportunity in onchain finance. With that, we will now open the call for analyst Q&A. Thanks, everyone. Operator: [Operator Instructions] Our first question is from Dan Dolev of Mizuho. Dan Dolev: Really nice results here. Congrats on the first quarter. So 3Q really proves that Gemini is increasingly becoming a global financial super app with we're seeing higher engagement, massive card adoption and products like the Gemini Wallet and then you talk about the future of prediction markets, which makes it very exciting. So maybe for you, Tyler and Cameron, can you maybe shed some light on the new product road map and the super app that you're planning? That would be very helpful. Cameron Winklevoss: Thanks for the question. This is Cameron. So with respect to our product road map, we're really excited about building towards the super app, which we started. We launched our self-custodial smart wallet this summer. And our view is that markets are all going on chain. And so pretty soon, you will be able to hold a tokenized dollar via stablecoins, tokenized equity and digital commodities all within one app. Traditionally, that's been maybe multiple apps or a siloed experience, and we're working to bring that all together within one app, and we're making very good progress there. We launched tokenized equities in Europe. We support many different stablecoins, and we support digital commodities like Bitcoin and the like. The other part of our road map that we're very excited about is the credit card. We had a very exciting quarter, but we feel that it is still very early. When we look at the size of the potential market, we're just really getting started. We're excited to have broken 100,000-plus cards. but it's really just the beginning when you think of the size of the market. And we think that consumers are really understanding the power of earning crypto every time they swipe as opposed to points that expire and it's hard to determine the value. And what we're finding is that people are coming for the credit card and they're staying for everything else. And they're curious and they navigate through the app and go on to take other revenue-generating actions. We also have an upcoming small business card that we plan to launch soon. And we're also planning other co-branded card opportunities with other major projects. And then lastly, we are working on prediction markets. We're very excited about these markets. We think it's very early days. It reminds us a lot of what Bitcoin felt like in 2012 when we first discovered it. And this idea that you can essentially build a market on anything, any kind of event is fascinating and really a boundless opportunity. So we have -- we're working to bring those live globally. We have an application with the CFTC to build a DCM, Designated Contract Market. And once the government opens back up, we hope to continue pursuing that application and hopefully bring these products to market soon thereafter. Operator: Our next question comes from the line of Michael Cyprys with Morgan Stanley. Michael Cyprys: I echo the congratulations on the first quarter out of the gate here. I wanted to dig in on the card business, some very strong growth in terms of accounts you guys are putting up. I was hoping maybe you could unpack what you see is driving some of the strength. I know you also launched in October, the Solana addition of the Gemini card. I was hoping maybe you could help provide a little bit of color on what you're seeing so far as well as the XRP card, how that engagement is continuing here into October and November compared to the 64,000 card sign-ups that you had in the third quarter? Marshall Beard: Yes. This is Marshall Beard, and I can take part of this question, and thank you for that question. It's a great one because credit card is one of the most exciting products that we have right now. We had tremendous growth in Q3. It's been one of the most exciting levers. I mean we're a market leader here. We're continuing to press and acquire new customers. One of the really interesting things is 55% of our U.S. new transacting users are actually coming through the credit card onboarding funnel, and it's one seamless experience, so they become exchange users as well. With the Solana Card launch, there's also like a really great example here of how we're using product in UX to get these card customers to engage in other products and services on the platform. So when we launched the Solana card, we also launched a feature that you can auto stake your rewards if you choose Solana or any other stakable asset as your rewards. So what happens is we've seen a big increase in users that are now staking on Gemini, and these are all folks from the credit card that are auto staking their Solana rewards. So they're learning more about our products and services. They're engaging with other products and services, and it's one of the most exciting levers that we have right now. Daniel Chen: Mike, that's a great question. This is Dan. I really appreciate the thoughtfulness of that. I think Marshall expressed it super well. And I think you heard earlier, Cameron and Tyler mentioned the work around the small business card. And I want to highlight that because the credit card is just this incredible acquisition vector for us, but we're not content to just have the product to be a prime consumer card. like we understand that the opportunity here is to take that vector because we manage the program ourselves, we can expand and land from there and add on other vectors. So small businesses are an underbanked, underappreciated part of this economy that's so important to America thriving, and we really believe that this is part of our opportunity as well. Like we want to take this product, expand it to a group that's underserved and grow from there. Michael Cyprys: Great. If I could just ask a follow-up question on the card losses as you guys are leaning into the growth in terms of accounts. I was hoping maybe you could speak to the outlook for losses as well as on the fraud side. Maybe remind us what leads to those fraud losses? And what are some of the steps you can take to drive that lower over time? Daniel Chen: Sure, Mike. This is Dan. I'm happy to take a first run of those questions. As far as losses go, transparently, losses in this quarter were really low. They showed meaningful improvement versus what we had in prior periods. We do believe that, that is a reflection of 2 things. The first and foremost, we think it's a reflection of the credit discipline we bring in making sure we underwrite the right customers where we provide credit to people who can afford it. The second is there is a denominator effect to be transparent, like as we grow that program, losses will initially be a little bit lower as new customers onboard and use the product. And over time, there's a leveling off of charge-offs. So it's a great level. We believe we'll continue to keep losses strongly mitigated. We have a great team that manages the credit. They are really focused on deploying the best technology available to keep losses, whether it's credit or fraud tightly mitigated. So from our perspective, that's a central hypothesis. Like we can't get third-party financing. We can't scale the business if we extend credit to those who aren't able to afford it. Operator: Our next question comes from the line of Matt Coad with Truist. Matt Coad: I really appreciate all the color on the new business wins that really impressive like you guys talked about. I was hoping that you could touch on some of the guardrails that you have in place, though, just to make sure that your unit economics remain strong while you look to regain and grow market share here. Marshall Beard: Yes. This is Marshall Beard. I can take a stab at that. I mean, this year, and especially Q3 was one of our highest new user acquisition quarters that we've had in many years, as you can see with our lifetime transacting users and our MTU growth. And so we feel very confident in our ability to deploy capital now well below our CAC targets and well within our payback period still. So earlier this summer, we saw massive growth, and we saw great user acquisition tools, things like the XRP credit card brought user cost very low. We're still seeing that right now. We feel very confident in our ability to deploy capital with the plan that we've had all year through at least the end of the year. But as our shareholder letter mentioned, we do view marketing spend as a lever, right? We're going to continue to press into heightened moments where we can capture users at as cheap a cost as we can, and we can pull back as quickly as we want as well. So we feel really good still about our ability to acquire users well within our range, well within our CAC and payback period. So we'll continue to do that as long as the market kind of shows us those numbers, and we feel good about it. Matt Coad: Super helpful there. And then, guys, just one other follow-up on the super app that you're looking to build here. Makes total sense to us. There's a clear market need for this kind of offering. I was just hoping you could touch on how you think about buy versus build versus partner as you look to build out that super app and kind of like round out all of your offerings? Just a little bit of color there would be helpful. Cameron Winklevoss: Sure. This is Cameron speaking. So we are building that super app in that future. It's an onchain feature. We're an onchain company, and this is our wheelhouse. So this is something that we will build as opposed to partner or buy. Operator: Our next question comes from the line of James Yaro with Goldman Sachs. James Yaro: I'd love to touch on the drivers of the medium-term 20% to 25% monthly transacting user guidance. Could you expand a little bit on the key building blocks of this guidance? Daniel Chen: Yes. Sure, James. This is Dan. Great to hear from you. The drivers of that continued growth, I think, are really a continued focus on what we've been doing for the past 90-plus days, right? I think it's a continued motion of acquiring new customers, whether through the exchange directly or via that linkage, that really close linkage to the credit card product. There's also, as you can tell from Marshall's earlier comments about auto staking and the activities we're doing there, like there's also just the increased engagement of customers already on the platform. So when you become a Gemini customer, we're not quite content with necessarily your activities in the exchange just being what you start out with. If you come in as a card customer, our real objective is to make sure that we make staking easier. we help introduce staking to you. We're really focused on building platform capabilities. We're focused on adding products and increasing engagement. So the building blocks remain the same. The building blocks are that we will spend money to acquire customers within that CAC target that we have to make sure that we're acquiring targets in a unit economic way that makes sense. And from there, as we bring them into Gemini, getting them more and more engaged to choose us as their financial super app location of choice. James Yaro: Excellent. Very clear. Just as a quick follow-up, I wanted to touch on something that happened during the IPO that I think was important to the story. But specifically around the Nasdaq partnership, anything that you could lay out for us in terms of the opportunity time frame and perhaps just the broader revenue possibility there? Marshall Beard: Sure. Yes, James, this is Marshall. I can give a brief update. I don't have any material updates to share on that partnership other than the discussions are ongoing. We've been talking to some clients of Nasdaq as well already that they've introduced. We're working around 2 different businesses with a bunch of different clients and new products that we're building for them. So it's very positive. It's moving forward. It's still just very early in that journey. Operator: Our next question comes from the line of Pete Christiansen with Citi. Peter Christiansen: Also, congrats on the IPO, guys. I was wondering if you could talk about or at least some of the attribution in the exchange side, particularly on the institutional volume. Was some of that growth there, which was really interesting there. Was that attributable to like MTU growth or just like deeper engagement with existing clients? Any other trends that you can tease out there would be helpful. Then I have a follow-up. Marshall Beard: Yes. Pete, this is Marshall Beard. I could speak to that. We've put 10 years of work into our infrastructure to support institutions on the Gemini platform. And so with the mix of recent talent that we brought in and all of the capabilities that we have, we've seen an uptick in new trading firms coming on to Gemini, and we've been strategic with our fee rates for these institutions as well. So the majority of what you're seeing in the institutional volume uptick is our sales and business development team is doing great work, engaging with the community and getting firms back on and trading on Gemini and also being very competitive with our fees right now. Peter Christiansen: That's helpful. And should that read-through be the same for retail? I was going to ask that question. I mean you did discuss spreads down sequentially. If you could just attribute that. It sounds like it's really deliberate there in an effort to grab more share. Daniel Chen: Yes. Sorry, this is Dan. Great to hear that question. I mean I think at the end of the day, the retail take rate did not move from our perspective materially from the prior quarter. It's still higher than where it was in the 2 quarters before that as well. So 3 quarters before that as well. So we think that the retail take rate changes were really the result more of the mix shift between active trader and instant trading and not really about any programmatic reduction in fees in order to gain volume. Operator: Our next question comes from the line of John Todaro with Needham. John Todaro: On the quarter. I guess the first one, just as it relates to cards, obviously, a lot of success there, but we are seeing a fair bit of competition now heating up in that segment. fintech I cover is now launching one. Just kind of do you think it starts to get crowded? How do you keep staying innovative there? And then I'll ask my follow-up. Tyler Winklevoss: Thanks for the question. This is Tyler. We think that other people entering into the card space is validating for what we're doing. We're a leader here. We've been here for years. And there's a lot of ways we can continue to expand our offering, both with front when we have with more co-branded cards. as well as, as we mentioned, going into small business and other verticals. And we think that just the sheer size of the market is quite large for credit cards, both for individuals and businesses in America and especially when you have the novelty of earning crypto rewards back and all of the possible different rewards you can earn because of all the cryptos we support on Gemini. So we find the competition to be validating. And in many ways, we feel like we're just getting started with this product. Cameron Winklevoss: And this is Cameron. Just to build on that, our card has no annual fee. So it really is a ramp and an acquisition tool. We're trying to make the barriers as low as possible for people to sign up and start earning crypto. We don't require a subscription fee or any kind of membership. Anyone can apply, no annual fee, and we're just trying to create a very simple intuitive product for anybody to try. John Todaro: Great. And then as my follow-up, and apologies if it was already asked, there's a couple of other ones going on right now. Eve trading volume on the platform looked like it shot up relative to Bitcoin. Just wondering if that was due to staking market dynamics or if there's like a customer profile changing on the platform. Marshall Beard: Yes. This is Marshall Beard. I can answer this one. Nothing really too much to dig into here. No customer profile or anything that would have caused that. I think what you'll see is sometimes basically due to price appreciation or depreciation, you'll see some assets kind of overtake Bitcoin or some of the top trading assets over time. But most of that is just around price appreciation, not about customer segments or anything. Operator: Our next question comes from the line of Chris Brendler with Rosenblatt Securities. Chris Brendler: Congrats on the opening quarter out of the gate here. I wanted to ask about the credit card business a follow-up here. I saw that the 56% of the sort of new users came on the card first this quarter. That was, I think, closer to 40% in the first half of the year. Can you talk about how that should trend from here as you ramp up marketing? Do you still see card being the lead growth engine for the exchange? Or should that start to trend down here? Marshall Beard: Yes, this is Marshall, and I can answer this quickly. I think for the near future, we're going to see similar growth rates for the credit card compared to the exchange. It's one of these products that has really caught on since we started marketing it, and it's found incredible product market fit. I think to an earlier question, the rise of other products that are potentially similar in nature has also brought more eyes to this space. I mean we're not necessarily competing against other crypto rewards, but more of the broader credit card and the points game as a whole. And so even right now, though, we're seeing similar acquisition trends in Q4 around the card. So I think for the near term, we're going to see that. We're going to keep pressing into this product. And we're seeing incredible results so far of all these new cardholders going on to use the exchange products as well. Chris Brendler: Awesome. Great. And then my follow-up question is on pricing. IPO roadshow, there was some discussion of taking some pricing opportunities in both staking and the card business. Has that happened already? Or is that still on the come? Marshall Beard: Yes. We have adjusted our staking take rates. I think we've increased them from 15% to 25%, which is still lower than our competitors, but still near. So that has taken place. I don't think we've made any changes necessarily or material changes to our credit card take rates. Operator: And I'm currently showing no further questions at this time. I'd now like to turn the conference back to Tyler and Cameron Winklevoss for closing remarks. Cameron Winklevoss: Great. Thank you. This is Cameron. We really appreciate the questions and engagement and interest. We're very excited to have this first earnings call. It's a great milestone for our company, our journey and our mission. And we feel like we're just getting started, and we're very excited to continue this journey, and we feel there's a lot of great things to come. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Greetings, and welcome to the TeraWulf 2025 Third Quarter Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the conference over to John Larkin, Senior Vice President, Director of Investor Relations. Thank you, Mr. Larkin. You may begin. John Larkin: Good afternoon, and welcome to TeraWulf's 2025 Third Quarter Earnings Call. Joining me today are Chairman and CEO, Paul Prager; and CFO, Patrick Fleury. Before we get started, please note that our remarks today may include forward-looking statements. These statements are subject to risks and uncertainties, and actual results may differ materially. During this call, we may use words like anticipate, could, enable, estimate, intend, expect, believe, potential, will, should, project and similar expressions, which indicate forward-looking statements. For a more comprehensive discussion of these and other risks, please refer to our filings with the SEC available at sec.gov and in the Investors section of our website at terawulf.com. We will also reference certain non-GAAP financial measures today. Please refer to our 10-K and 10-Q filings on our website for a full reconciliation of these non-GAAP measures to the most comparable GAAP measures. We will start today's call with prepared remarks from Paul and Patrick, followed by a Q&A session. Now I'd like to turn the call over to our CEO, Paul Prager. Paul Prager: Good afternoon, and thank you for joining us today. The third quarter was truly transformational for TeraWulf, both operationally and financially. During the quarter, we executed one of the most significant steps in our company's evolution, signing approximately 360 megawatts of critical IT load with Fluidstack backstopped by Google at our Lake Mariner campus in Upstate New York. This 10-year agreement representing average annual revenue of approximately $670 million and average annual net operating income of more than $565 million before extensions, firmly validates our high-performance computing hosting strategy and establishes TeraWulf as a leader in designing, building and operating low-carbon enterprise scale compute infrastructure. In October, we reinforced that leadership by closing $3.2 billion in senior secured financing backed by the Google credit enhancement to fully fund the Lake Mariner high-power compute build-out. This transaction is a milestone for the broader industry, demonstrating a repeatable end-to-end development model that begins with design and site control, extends through customer contracting and construction and culminates in long-term credit-enhanced lease revenue. The third quarter also marked an operational inflection point for TeraWulf as we recorded our first HPC revenues with lease commencement at WULF Den and CB-1. We remain on track to deliver CB-2 near year-end, subject, of course, to tenant fit-out requests, which will complete our delivery of 60 megawatts of critical IT for Core42. Across our platform, these early deployments are proof points that our strategy is working and our execution is disciplined. At Lake Mariner, our team continues to perform exceptionally well. In terms of executing for Fluidstack in Google, the majority of long lead items have been contracted through CB-5 and construction progress is both visible and measurable. CB-3 is more than 50% directed. The final concrete pour is scheduled within two weeks, and the structure will be fully enclosed before year-end. CB-4 and CB-5 are already well underway with underground work beginning next week, field deliveries arriving in early December and building erection expected to begin before Christmas. The progress our construction and operations teams have achieved and with rigorous quality standards reflects TeraWulf's deep experience in developing and delivering large-scale energy and data infrastructure. We also continue to expand our geographic footprint and customer base. Just two weeks ago, we expanded our partnership with Fluidstack and Google, announcing our joint venture to develop and operate the Abernathy HPC campus in Texas within the Southwest Power Pool market. This project adds 168 megawatts of new HPC capacity with expansion potential up to 600 megawatts and replicates the same credit-enhanced structure proven at Lake Mariner. This joint venture with Fluidstack and Google leverages our collective expertise, incorporates Hypertech as EPC partner and includes two additional options to expand the joint venture, one for future phases at Abernathy and another for a separate site elsewhere in the United States. This partnership represents the next evolution of our growth model, scalable, capital efficient and backed by world-class partners. And while we've made tremendous progress executing the business we have, what's equally important is how we're positioning TeraWulf for the next wave of growth. Our approach remains disciplined, expanding only where we have clear structural advantages in power, permitting and partnership and our opportunity set continues to broaden. In August, we signed an 80-year lease at the Cayuga site in New York, laying the groundwork for large-scale high-power compute deployment beginning in 2027. As just mentioned, the Abernathy joint venture offers meaningful embedded expansion potential, both on campus and across future projects with Fluidstack and Google. Meanwhile, our in-house development pipeline continues to mature with several high-quality opportunities now approaching realization. Together, these initiatives form the very foundation for TeraWulf's next phase of growth, executing today while methodically building the platform for tomorrow, scalable, low carbon and designed to meet the accelerating demand for high-performance compute. Reflecting that confidence, we recently increased our annual target for new HPC signings from 100 to 150 megawatts per year to 250 to 500 megawatts per year. We did not make this decision lightly. It reflects the tangible progress we've made in advancing our development pipeline and the strength of customer demand. Over the past year, we've evaluated over 150 potential sites, narrowing that list to a select group that meets our strict criteria, grid redundancy, minimum power thresholds, attractive geographies for end customers and time to power. To support this next phase, we've expanded our site acquisition and development teams, strengthening what is already the most capable organization in the sector. Our deep understanding of what hyperscale and AI customers need, combined with our access to scalable, low-cost power, positions TeraWulf at the forefront of the infrastructure transformation now underway. We are proud of what our team accomplished this quarter, but we are even more excited about what lies ahead. With that, I'll turn the call over to our CFO, Patrick Fleury, to discuss our financial results in more detail. Patrick Fleury: Thank you, Paul. The 3Q 2025 results reflect a strong contribution from our legacy Bitcoin mining operations and more importantly, the start of HPC Leasing segment revenues. On our 2Q 2025 earnings call, we discussed a series of capital markets initiatives in the second half of 2025. I'm proud to report that with the benefit of our new financial support from Google and help of our partners, including Morgan Stanley and Paul, Weiss, we've executed beyond our expectations, raising over $5.2 billion at incredibly attractive rates, creating durable equity value for our shareholders. Now let me turn to the results. In the third quarter of 2025, GAAP revenues increased 6% quarter-over-quarter to $50.6 million from $47.6 million in 2Q '25. We recognized $7.2 million of HPC lease revenue at WULF Den and CB-1 with intra-quarter lease commencement resulting in 22.5 megawatts of energized hosting capacity. Continuing with our long-term commitment to financial transparency, we've added a page in our investor presentation detailing lease accounting nuances, which we hope you find helpful. We self-mined 377 Bitcoin at Lake Mariner or approximately four Bitcoin per day, a 22% decrease compared to the 485 Bitcoin mined in 2Q '25. Our GAAP cost of revenue, exclusive of depreciation, decreased by 22%, $22.1 million in 2Q '25 to $17.1 million in 3Q '25. Power prices in Upstate New York normalized in 2Q '25 and continued to decline in 3Q '25 to $0.047 per kilowatt hour, in line with historical levels and our previous guidance of $0.05 per kilowatt hour for the second half of 2025. Proceeds from participation in demand response programs, which are recorded as a reduction in cost of revenue during the period in which the underlying program occurs, increased to $7.4 million in 3Q '25 from $3.1 million in 2Q '25. Operating expenses increased 28% quarter-over-quarter to $4.5 million in 3Q '25 from $3.5 million in 2Q '25. This trend higher throughout 2025 is primarily the result of increased staffing levels at Lake Mariner necessary to support our entry into HPC leasing. SG&A expense for 3Q '25 was $16.7 million, a 17% increase from $14.3 million in 2Q '25. After adjusting for stock-based compensation, SG&A increased quarter-over-quarter from $10.6 million in 2Q '25 to $12.3 million in 3Q '25. Depreciation increased quarter-over-quarter from $18.8 million in 2Q '25 to $26.5 million in 3Q '25. The company recorded accelerated depreciation expense of $7.8 million related to a certain minor building and related miners, of which the company shortened its useful life based on expected shutdown of operations for purposes of supporting the HPC operations. Change in fair value of contingent consideration was $8.8 million in 3Q '25 related to fair value remeasurement of contingent consideration liabilities based on milestones achieved during the quarter related to the acquisition of Beowulf E&D. Loss on disposals of property, plant and equipment net was $2 million in 3Q '25, down from $3.8 million in 2Q '25. These losses related to the sale of 8,900 and 2,900 miners, which were sold or otherwise disposed of for proceeds of $6.9 million and $1.9 million in 3Q '25 and 2Q '25, respectively. GAAP interest expense in 3Q '25 was $9.8 million compared to $4.0 million in 2Q '25, and we recognized interest income of $4.1 million in 3Q '25 compared to $1.2 million in 2Q '25. Cash interest paid during 3Q '25 was negligible compared to $7.1 million in 2Q '25 as the 2.75% interest on our $500 million convertible notes is accrued and payable in 2Q and 4Q of each year. Change in fair value of warrant and derivative liabilities in 3Q '25 was a loss of $424.6 million related to the Google warrants and the conversion feature of the 2031 convertible notes, which was originally accounted for separately as a derivative liability. Our GAAP net loss in 3Q '25 was $455 million compared to a net loss of $18.4 million in 2Q '25. Our non-GAAP adjusted EBITDA improved 25% quarter-over-quarter, totaling $18.1 million from $14.5 million in 2Q. As a reminder, these results are inclusive of significant increases in operating expenses and SG&A over the past 12 months as we invested heavily in our HPC business. These incremental costs have been entirely borne by our legacy mining business until now. Turning our attention to the balance sheet. As of September 30, we held $712.8 million in cash and restricted cash with total assets amounting to $2.5 billion and total liabilities of $2.2 billion. In October, we closed over $4.2 billion in capital markets transactions, including $3.2 billion of 7.75% BB-rated senior secured notes due 2030 and $1.025 billion of 0% convertible notes due 2032. As seen on Page 14 of our 3Q '25 investor presentation, with these financings complete and the La Lupa and Akela data center construction projects at Lake Mariner fully funded, our pro forma liquidity totals over $1 billion, which provides cash for three important initiatives: one, TeraWulf's cash equity contribution to the Abernathy JV with Fluidstack; two, the acquisition of key sites in our pipeline that have advanced to the final stages of diligence and negotiation; and three, excess cash to create a fortress balance sheet to weather any storm. With regard to the Abernathy JV, we anticipate coming to market before year-end with a senior secured notes financing similar in all respects to the offering we recently completed at WULF Compute. As a reminder, the Abernathy JV benefits from $1.3 billion of Google credit support over a 10-year period. The second half of 2025 has been nothing less than extraordinary for TeraWulf and its stakeholders. We have secured over $16 billion of HPC lease agreements and executed over $5.2 billion of financings at incredibly attractive rates, added significant liquidity to the balance sheet and shown we have a deep multifaceted pipeline to grow the business at 250 to 500 megawatts annually in the future. With that, I'll turn it back over to the operator, and we look forward to answering your questions. Operator: [Operator Instructions] Our first question comes from Mike Grondahl with Northland Securities. Mike Grondahl: First question for Paul. Paul, it was noted that there's some key sites that you're close to closing on. Can you talk a little bit about those sites? Paul Prager: No. Good question, Mike. There are at least two sites that we're very, very close to sorting out. We're going for some regional diversity where we think our customers are inclined to enter into long-term agreements. We've built out our team on the front end here to focus. We've looked at over 150 opportunities. I would not be surprised if by year-end, we announced at least one, possibly two additional sites. Mike Grondahl: That's great. And then a question for Patrick. Patrick, I noticed in the slides you're breaking out segments now with BTC and HPC. And I also noticed on the HPC side, the margins look like they were about 72%. And I think in the past, you've talked about roughly 85% margins. Can you kind of reconcile that? Patrick Fleury: Yes. Yes, sure. Thanks, Mike. Yes, I think you'll see when we file the Q, full detail on the segments, obviously, which we're really proud of given the start of HPC leasing revenue. But yes, if you -- the actual margin was about 72%. There -- in the operating expenses, there's about $700,000 of expense development expense at Cayuga. So if you back that out, you'll see that gets you to about an 82% margin for the quarter. So obviously, much closer to that 85%. And then the quarter is a little off just because we didn't have full revenue. It was a stub period for CB-1 in particular. So I think you'll see that normalize here very quickly in the fourth quarter to right around that 85% that we've guided to. Mike Grondahl: Great. And congrats guys on all you've accomplished the last 90 days or so. Operator: Our next question comes from Nick Giles with B. Riley Securities. Nick Giles: Congrats on all the progress. Obviously, your agreements to date involve top-tier credits. Just was curious to hear how you're thinking about customer diversity from here. Is there a desire to expand the customer base? Appreciate any comments. Paul Prager: Sure. As you know, we have two/other world-class credits as our customers, Core42 backed by G42 and then the Fluidstack Google deal and those that may be associated in that deal, if you've taken a look at the recognition agreements, you're aware of that. And so I could not be happier with the credit quality of our customers, which is the critical element here and something Patrick pounds the table on because, obviously, we want to be able to get ideal credit terms for our transactions and the result in financing. So the answer is I would expect we'll continue to grow with the customers that we have. And certainly, we're continuing to have dialogue with a couple of others. But again, the key for us is credit quality. And so it's a little bit of a smaller universe as we move forward. But yes, the sites that we have and the sites that we are anticipating bringing home, all would be very compelling to a great quality credit in addition to, of course, the ones that we already currently have on the books. Nick Giles: Thanks, Paul. That's helpful. My next question was just on the JV. Can you just talk about how that opportunity came about? And then just to clarify, should we consider these type of deals as part of your new updated kind of megawatt per annum guidance? And should we think about that on an attributable basis? Just appreciate any clarity there. Paul Prager: I'll start, maybe Naz or Patrick can take it from there. We have built a great working relationship with the Fluidstack Google team. And if you think about it, there's no sort of reference models for what we're building. These are design build opportunities so that the teams -- listen, you're either going to succeed because you work together or it's going to be a disaster. So we like succeeding. So we work hard with the Fluidstack Google teams. They're on site. We meet constantly. I would tell you that they're part of our team now as we look to how we want to consider financing Abernathy. So it is in the course of that dialogue that they indicated that they had the site, they had the credit quality and that they were thinking about using an EPC, but that they recognized given our experience in energy infrastructure and financing energy infrastructure that it would be additive to the endeavor. And so everybody decided this made a lot of sense. Our primary strategy as we move ahead is to continue to do what we've done, which is have great sites and look for the right customer. But certainly, we're delighted to partner again with Fluidstack Google. And like I tell everybody, when Google says, "Hey, we'd like you to come into this project with us, you say, yes. You find a way to say yes, so that it makes sense for them and that it is a rewarding experience as well for your shareholders. That's what we did here in Abernathy. And I -- in the Abernathy deal, there's room to grow at Abernathy itself. But separately, as you are aware, we have a going-forward relationship on the next project of similar credit quality. So yes, that will be a project that we continue to evolve into, but our primary focus is additional sites and additional high-quality credit customers for those sites. I think Naz or Patrick, you may want to respond to how do we think about it from a financial perspective? Patrick Fleury: Yes. Nick, it's Patrick. I don't really have much to add. I think as I said in my prepared remarks, we intend to finance this, be in the market, financing it before year-end, and it's substantially similar to the deal that we just printed at WULF Compute. Nick Giles: Got it. And just to clarify, we should think about this on an attributable basis. If we see another one of these announced and we're trying to pair that against your 250 to 500, it would make sense to look at it that way. Patrick Fleury: Yes, we own 51% of the JV. So, yes. Nick Giles: Again congrats on the transformational quarter. Keep it up. Operator: Our next question comes from Dillon Heslin with ROTH Capital Partners. Dillon Heslin: Just a follow-up on sort of how you're talking about your power strategy. The non-JV sites you're looking at, are you procuring those sort of in absolute for marketing? Or do you already have customers in mind that you could basically go to right away? Paul Prager: So we have an active dialogue with our customer base. And this is a very competitive market. So we sort of -- we're constantly discussing with them what their needs are, what it is they're seeking at the same time that we're trying to complete our diligence and negotiation over some additional sites. If you remember, we've just got one quarter of a century in energy infrastructure development and operation. It's been very helpful in identifying sites that we think will be in the next wave of data center development for these hyperscalers and high-quality credits. I think in the case of Abernathy in the Fluidstack Google relationship, I think as we look at sites with them, we're obligated, obviously, to work with the customer. In the case of TeraWulf identifying and determining that another site makes a lot of sense for us. We're going to want to make sure that it's a competitive process that we end up with a great quality credit, but that we also get rewarded for the unique and wonderful qualities of that site and that we get the most return we can for the shareholders. So it's a little bit of both. Dillon Heslin: Great. And as a follow-up, how are you guys seeing the market in terms of build costs of -- like the sites you've been building so far have been at existing sites where you've had redundant power and then the Fluidstack Abernathy site, you're not building a substation, so the CapEx per megawatt is a little bit cheaper. And then you're talking about you've got long lead items procured for -- through CB-5. But how do you see sort of the market in general maybe beyond Lake Mariner? Paul Prager: Naz? Nazar Khan: Dillon, this is Nazar. Generally, what we try to do is be able to deliver capacity or the bulk of the capacity within 12 months of signing the customer. And so that often requires engaging with folks kind of on the electrical gear and the coolers and chillers in advance of that. And we've developed relationships with a number of different vendors where we have a rolling 12-month projected schedule with them, which gives us positions in queues. And then we can -- depending upon which -- how many megawatts of capacity we sign up, then we take those down. So we've tried to be ahead in being able to procure the equipment, which allows certainty to our customer when we engage with them on discussions. So that's been going well. And given the capacity that we've signed up and procured, we've been good partners for the vendors and vendors have been good partners for us as well on that equipment procurement side. So that's generally how we're approaching things. And as we look forward, I think the forecast and guidance we provided for that $250 million to $500 million, that general procurement strategy covers that capacity as well. Operator: Our next question comes from Chris Brendler with Rosenblatt. Christopher Brendler: Thanks and also congratulations, amazing amount of progress and looking forward to more. I wanted to ask on the -- actually a Bitcoin question. I noticed the operating hash rate was sort of 70%, I guess, of the nameplate hash rate this quarter and expect it to go down even further next quarter. Can you just give us a little color on what's going on there? Patrick Fleury: Yes. Chris, it's Patrick. So we're running our sites for our HPC clients now. And as we get closer to bringing all of Core42's capacity online, there are some things electrically that we have to do at the site. So you noticed in my remarks, I talked about accelerated depreciation on one of our minor buildings of $7.8 million this quarter and sales of miners. So as we sort of reposition the site, particularly for two lines of power and redundancy for the HPC buildings, we're making some changes on the Bitcoin mining side. And that's reflected in those numbers. It's a combination of kind of calling our fleet to be more efficient. And then again, just operating the site really for HPC. So you'll see -- I mean, obviously, site is still very profitable. We had a great quarter from a Bitcoin mining perspective. But I think going forward, that's our approach. Hence, the sales of miners, calling the fleet and then the accelerated depreciation on the minor building. Christopher Brendler: Makes sense. And I guess from that comment, it sounds like that continues in 2026. Patrick Fleury: Yes, I think so. I think like we said we kind of gave you some guidance in the deck for what we thought we'd have here in the fourth quarter. And then, look, I think beyond that depends on market conditions. But yes, I think our intent is to keep mining Bitcoin through certainly the end of 2026 and then dependent upon when the next 250 megawatts that we've requested from the New York ISO comes, I think we could -- you could see us operate beyond there until the next halving. But again, I think that will be a function of additional megawatts at the site as well as just Bitcoin profitability itself. Christopher Brendler: Excellent. Great. Speaking of additional megawatts, I like the slide that broke out how you think about the pipeline on the power side on Slide 8 and some great details there and helpful to think about where that comes together. The gigawatt plus of development pipeline, is that in the Phase 4 or the Phase 2? I wasn't quite clear where that comment on the following page fits relative to Slide 8 on the phases. Patrick Fleury: I think, Chris, that's really just going to Paul's comments, which, again, when you think about our funnel, which is really what Page 8 is meant to kind of show you, just the amount of time and effort that goes into cultivating that pipeline. And again, I think unlike some of our peers, we're not telling you a fictitious pipeline of thousands of megawatts all in the same region. We're telling you about stuff when it's literally imminent and ready to go. So I think as Paul mentioned, we're getting very close on a handful of sites that hit on Page 9, the development pipeline of a gigawatt. Operator: Our next question comes from Stephen Glagola with Jones. Stephen Glagola: On the raised AI capacity growth targets to 250 to 500 megawatts net annually, are there any structural or operational constraints, like whether, I guess, like EPC capacity, financing availability or like internal bandwidth that could just limit the number of projects you can execute simultaneously? Paul Prager: This is Paul. I'll start. The answer is yes. I mean, I think we've always tried to emphasize here a focus on our ability to execute. And I think that we're more than capable of meeting that goal of 250 to 500 megs. But it takes a lot of time to really get to the bottom of these sites. it's a very competitive market. You need to sort of look near and far afield. You have to make determinations on site suitability for the customer, but also what's power like at the node, what are the environmental and regulatory considerations. It's just a lot. So we're very confident we could do what we now say, which is an increase from where we're at. I'm not terribly worried about the EPC side. I feel pretty good about that and procurement capability and supply lines aren't what they were. I feel very good about that. I think that the key is going to be our ability to meet schedule and price. That's what the Street is looking for. That's what our customer wants. That's what we promised to our shareholders. So I'm very comfortable at 250 to 500. And as we grow, listen, we're building, as Patrick used to say, serial model # 6. As we get down to 10 or 11 and we find more efficacious ways to do this and needer ways to scale, then we could grow from there. But I think 250 to 500 is the right way to think about us for the coming year. Stephen Glagola: And if I can just ask one more. Are you seeing any meaningful demand from tenants for the AI capacity with ready for service dates beyond 12 months? And how is that shaping your pipeline site acquisition priorities? Paul Prager: Yes. Yes. Demand is real, and it's a constant. And I think that -- listen, I think there was a site out in Ohio the other day. They got a letter from AEP saying they were in the queue and they were in the queue for '26. And now you should probably not think about that power in '26, but you should think about it for like '29 and '30. And that is a way of saying that you've got to pick your sites really carefully. You have to understand what the grid is capable of. Are you in an area where the whole grid is only X and the demand is 3x that. So it goes to the notion that you've got to have a very good handle where you cite these things. But that then -- when you go back to the customer and you say, hey, how do you want to think about it if you want to be in this region, you're okay moving from '26 to '27. The answer has been yes, universally. The answer from '27 to '28 is yes. I don't think you get the power problem solved by then. You've got hyperscalers now looking at island generation, which means they're going to bring their own power to the table, and that's at least four to five years away. If you look at the deal that was signed with NextEra for bringing back the nuc, they looked at a 30-year transaction, which doesn't come online until '29, and I don't think there's any way that nuc is back online in '29. So the demand, I think, is just increasing. And it took a little while to get here. I think everyone was waiting to see who was going to make that first move. But now that we hear, the demand from the hyperscalers and the cloud companies is very, very significant. Operator: Our next question comes from Justin Pan with Clear Street. Justin Pan: This is Justin on for Brian. Obviously, the increase in incremental HPC guidance underscores a lot of optimism in demand over the next two to three years. You guys have had a great couple of months. Some of your peers have had a great couple of months. But could you dig in a little bit deeper into what gives you the confidence in the heightened demand outlook over the medium term? It seems like a pretty interesting dichotomy in the market at the moment, right? We're seeing some talk over AI valuation frothiness. But at the same time, there's been a ton of material success momentum in your space. So... Paul Prager: I'm happy to start, maybe you could follow up. But as I just said, we're looking -- we've been asked by customers to look at opportunities where we have to bring our own generation to the table. And you have to assume that if you're bringing your own generation to the table, you're at least four years out. And so when you have those kinds of questions coming in from world-class credits, that just speaks to just massive amounts of demand. I think the shortfall in energy is real. It's greater than I think originally forecast and the demand for energy by users like these high load data centers is more significant than was originally forecast. So we we've been getting calls since -- certainly since May, and they haven't abated. Every time we come up with a site, we have at least 5 phone calls that we could go to ask, would this kind of be something that is of interest to you. So I think if you just look at the hyperscalers and two or three of the big leading cloud players, they're being very, very aggressive in how they're looking at further locations and sites. And again, a lot of these sites wouldn't have any availability for electrification for two, three years out. So I don't know what to say other than to tell you the phones ringing, they show massive demand. And -- we don't see that abating anytime in the near future. Operator: Our next question comes from John Todaro with Needham & Co. John Todaro: First one here, as we kind of move from a phase of signing some of these leases to executing on them, can you just give us kind of any color as it relates to penalties if you missed time line of delivery and then just kind of frame up your confidence in hitting delivery dates? And then I have a follow-up question. Patrick Fleury: Yes, this is Patrick. Sorry, Nazar, go ahead? Nazar Khan: No, go ahead, Patrick. Patrick Fleury: Yes. So, John, just with regard to penalties, I'm not going to tell you the specific ones because that's confidential to the lease. But I would tell you, given the accelerated build time lines and all the work we've done with our customers here, there are pretty significant grace periods. So the leases cannot be terminated until we're over 180 days late. Obviously, as Paul said, we're meeting weekly, daily, monthly, like both in person and via teleconference with our customers. So there's no surprises. So folks are well aware of budgets, time lines, et cetera. In general, we have very minimal penalties for the first 30 to 90 days. Generally, there's a penalty for the 30 days, then there's another one for 60, another one for 90, and then the penalties start to accelerate from day 90 to 180. But those are relatively de minimis for us through 90 days and then scaled from 90 to 180. John Todaro: Great. That's super helpful. And then second question, if we do just take a step back, I guess, how are you guys able to add more of the power pipeline? Like some of the stuff was procured pretty quickly like Abernathy. I would just have to think major hyperscalers, Neo cloud, maybe private equity, everyone is competing now. Just, I guess, give us -- frame it up a little bit more for how you guys are able to win that. Paul Prager: Yes. I'm not sure I understand the question. I mean -- Abernathy didn't -- I wouldn't look at that as came on real quickly. I would -- again, we've had a long-term relationship now with Google and Fluidstack. And so we are aware of the strategy here, and they decided that bringing us alongside would be additive to the overall effort. But I'm not sure I understand the balance of your question. John Todaro: I guess just the main crux of it is if we take a step back and there's such a power constrained environment, one of the biggest questions we get from investors is just how these guys are able to continue to procure capacity like that 250 to 500 megawatts you talked about when we are in still a constrained environment, and there's just likely so many bidders for these assets. Paul Prager: Yes. I think the answer is -- so some of them are looking at island generation where they bring their own power. Some of them are looking at high electrification sites that had former industrial uses and they're looking at repositioning them into data centers. And some of them are talking to utilities about figuring out if there's a way that they could work out a deal like the NextEra transaction. I think they're following multiple strategies to get to the answer of they have long-term demand, and it's near term in terms of its immediate urgency, but they're looking at the 25- and 30-year deals. If you take a look at the Abernathy deal, it's 25 years. So I'm -- I can't tell you or opine to what the long-term answer is other than United States needs to build more generation. But I think everyone's figured that one out. The question is, are there sites that one can discover in the right regulatory frame set and from an environmental perspective, not too injurious to a customer that could enable a high-quality credit to come along and be a customer. And I think the answer is yes, but you got to know where to look. I guess I should emphasize TeraWulf where to look, which is why I think prior to year-end, we'll be bringing on at least one, maybe two other sites. Operator: Our next question comes from Tim Horan with Oppenheimer. Timothy Horan: Was there a specific trigger that caused you to kind of basically guide to more than doubling your incremental capacity per year or your customers? I mean it seems like demand is much stronger than maybe you were thinking about we were six, nine months ago. Yes, anything that really drove that? Paul Prager: Is that you Naz? Nazar Khan: Maybe I can start, Paul, you can jump in. Yes, I think there's a few things, right? So one is if you go back a year ago, we hadn't gone through the full cycle, right? As we have laid out in the deck, there's not just the site, there's not the design, there's the engineering, there's a financing and then there's a construction. So we've been through that full cycle now. And so sitting 18 months ago, looking forward, there was pieces of that process that we had not completed. Pending this quarter, through this quarter, we've completed all of those cycles. And so now we have a much better nuanced understanding of what's required for each one of those phases, what we can get done. There was a question earlier on capacity. So all of that is factored into that 250 to 500-megawatt forecast, which, again, 1.5 years ago, we didn't have that visibility. So I think that is a reflection both of our capacity capability to get each of those phases done as well as the size of the demand that's coming from the customers. Paul Prager: Yes. I would just want to add two more things. One is, obviously, after we had 42 online, that enabled us to sort of do show and tell to other customers. So I think the level of credible incomings to us just -- it was multiples of what it was prior to that. Secondly, Patrick, who was the architect of our financing strategy from day one, we didn't want to sort of have an arrangement where our customer was also financing our CapEx. He wanted to go about it in the way which we have, which was to say we would do it, and we would require credit support to enable good financing. In our case, Patrick has been able to get absolutely great financing. So once we went through that, that also opened up the doors to our ability to sort of get the capital we needed to build these things out and also showed customers, hey, this is how we do this. And Patrick led the way. I mean everyone's followed suit since then, but we were the first through that door and it was on the back of Patrick's original vision for that. So, I think, both what Nazar and Patrick sort of were prescient in thinking about once we were able to execute on both those visions, I think that just led to increased demand that we -- you're correct, we hadn't quite anticipated. Timothy Horan: And just two quick questions. Abernathy, do you have a sense how much equity you're going to have to put up to finish that project? And are we talking like $8 million per megawatt for the build-out? And then Lake Mariner, can you talk about what items or item is on the critical path on the construction schedule, please? Patrick Fleury: Yes, I'll answer the first question. So, on Abernathy, we've given you guidance of $8 million to $10 million per critical megawatt. If you do that quick math and again, take the wide end of the range, it's roughly $1.7 billion, and there's a $1.3 billion Google backstop. So, again, you can kind of do that quick math. And I would, again, just say stay tuned. We're kind of sorting out the details with Morgan Stanley and our partners right now, and we'll be in the market as soon as we can be. Timothy Horan: And then the construction item critical path. Patrick Fleury: Nazar, do you want to take that? Nazar Khan: Sure. On the second question on critical path, there are -- from an equipment perspective, we are on schedule or ahead of schedule for all of the long lead time pieces. So those -- mostly on site, CB-4 and CB-5 are on schedule for construction. We are currently ramping up labor at the site. We're going to peak probably sometime in the month of March. And so ramping that labor up is probably the near term, the biggest item that we're focused on. And so that's, again, we've got a number of different things ongoing to accomplish that, but that's the big driver, I think, over the next couple of months is getting that ramp up as CB-4 and CB-5 get through civil and get into kind of full swing on mechanical and electrical. Operator: We have reached the end of our question-and-answer session. I would now like to turn the floor back over to Paul Prager for closing comments. Paul Prager: Listen, everybody. I really appreciate you joining us today. I think if there's one takeaway from the quarter is that TeraWulf is executing. We're methodical, we're consistent, and we're doing this at scale. We are building a differentiated platform at the very intersection of AI, power and infrastructure, supported by long-term contracts, strong partners and a proven ability to deliver. I'm convinced we have the right strategy, the right team and the right assets to continue this momentum well into '26 and beyond. My focus and our focus remains disciplined execution, thoughtful expansion and creating sustainable long-term value for both our shareholders and partners. I want to thank you for your continued support and confidence in TeraWulf. Thank you again. Operator: This concludes today's call. You may now disconnect your lines.
Operator: Thank you for standing by. This is the conference operator. Welcome to the Sangoma Investor Conference Call. [Operator Instructions]. The conference is being recorded. I would now like to turn the conference over to Samantha Reburn, Chief Legal Officer. Please go ahead, Ms. Reburn. Samantha Reburn: Thank you, operator. Hello, everyone, and welcome to Sangoma's First Quarter of Fiscal Year 2026 Investor Call. We are recording the call and we will make it available on our website for anyone who is unable to join us live. I'm here today with Charles Salameh, Sangoma's Chief Executive Officer; Jeremy Wubs, Chief Operating and Marketing Officer; and Larry Stock, Chief Financial Officer. Charles will provide a high-level overview of the quarter. Jeremy and Larry will take you through the operating results for the first quarter of fiscal year 2026, which ended on September 30, 2025. Following their presentation, we will open the floor for Q&A with analysts. We will discuss the press release that was distributed earlier today, together with the company's financial statements and MD&A, which are available on SEDAR+, EDGAR and our website. As a reminder, Sangoma reports under International Financial Reporting Standards, IFRS. And during the call, we may refer to terms such as adjusted EBITDA and free cash flow, which are non-IFRS measures, but defined in our MD&A. Before we start, I'd like to remind you that the statements made during the course of this call that are not purely historical are forward-looking statements regarding the company or management's intentions, estimates, plans, expectations and strategies for the future. Because such statements deal with future events, they are subject to various risks and uncertainties, and actual results may differ materially from those projected in the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements are discussed in the accompanying MD&A, unaudited condensed consolidated interim financial statements, our annual information form and the company's annual audited financial statements posted on SEDAR+, EDGAR and our website. With that, I'll hand the call over to Charles. Charles Salameh: Good afternoon, everyone, and thanks for joining us. I'm pleased to report that fiscal 2026 is off to a strong start. Q1 tracked to plan, exceeding consensus analyst expectations. As outlined last quarter, following the sale of our third-party hardware resale business, Q1 serves as a bridge to our higher-margin recurring revenue model, which now represents 90% plus of our total revenue. With that foundation in place, we are positioned for sequential growth in Q2 and continued improvement to the second half as we convert our growing bookings into revenue. In Q1, we delivered $50.8 million, $8.3 million in adjusted EBITDA with 16% margins and $3.2 million in free cash flow. The margin profile reflects normal seasonality, while free cash flow was temporarily impacted by a $3.2 million negative change in working capital that has since been largely reversed. Larry will provide more detail in his section. This quarter, I want to anchor on a few of the KPIs that guide how we run the business, pipeline, bookings, conversion and churn. Jeremy will provide additional detail and examples of recent bookings that reflect the strategy I've outlined in previous calls. Thanks to the transformation completed in May, including the successful ERP and CRM implementation, we now operate with far greater precision, visibility and speed. This gives us data-driven foundation as we enter our new phase of growth. The overall size of our pipeline remains steady, but new pipeline creation increased 39% quarter-over-quarter. Importantly, we saw a pickup in our higher velocity volumetric business, which now represents 62% of our 90-day forward pipeline compared with 55% in Q4, providing a better balance between short-term visibility and long-term growth. On the booking side, larger strategic opportunities continue to accelerate. MRR bookings grew 2.4% sequentially and 6.4% year-over-year, while deals over $10,000 of MRR increased 39% sequentially and are 72% above our FY '25 quarterly average. We're now seeing the bundled mid-market wins envisioned during our transformation materializing in the field. These deals span multiple verticals, including wholesale, carrier, education, health care and are emblematic of the new Sangoma go-to-market motion actually taking hold. Meanwhile, retention remains excellent with blended churn holding near 1%, highlighting the stability and the quality of our recurring base. Sangoma today is a much stronger, in a much stronger position with tremendous optionality in how we pursue growth. Our balance sheet provides flexibility to both invest and adapt quickly to shifting market dynamics. For example, our Prem business grew over 60% year-over-year, benefiting from capacity created by larger players exiting this segment. At the same time, we continue to generate strong cash even as we strategically reinvest in growth initiatives, expanding our partner ecosystems, launching new reps to market and forming high-value partnerships. One recent example is our wholesale channel, just launched 6 months ago, where we've already signed our first $10,000 MRR deal and have multiple opportunities in the active pipeline. These are solid leading indicators of the growth we expected and expect over the next several quarters. We're also exploring selective AI-driven software acquisitions to strengthen our vertical focus in health care, hospitality, retail and education. These initiatives are generating tangible pipeline, early bookings and a clear momentum. Now beginning this quarter, we are introducing a clearer view of our performance through 2 segments, core and adjacent. A core represents a SaaS-led communications platform services, UCaaS, CCaaS, MSP services and access, the primary growth drivers of the company. Adjacent includes cash-generative technologies such as trunking and open-source platforms that complement our core offerings and strengthen the company's financial foundation. This structure provides greater transparency into where we are investing and how our revenue mix continues to evolve towards recurring software-centric streams. Larry will provide additional color on those numbers shortly. Now with the systems leadership and programs and partners now fully in place, we are confidently scaling our go-to-market engine. We plan to invest approximately $2 million in incremental SG&A over the coming quarters to accelerate customer acquisition and partner enablement, supported now by higher NPS scores and customer satisfaction. On the capital allocation side, our approach remains disciplined. We continue to pay down debt, reduce leverage and return value to our shareholders through our normal course issuer bid. At the same time, we are maintaining flexibility for selective accretive M&A to complement our organic growth. Looking ahead, we remain on track to meet our fiscal FY '26 guidance. We expect sequential growth in Q2 and year-over-year growth in Q3 and Q4 as our bookings convert and new programs scale. While the broader SMB market conditions can influence deal timing, early Q2 activity is encouraging and consistent with our growth expectations. I want to thank the entire Sangoma team for their continued focus and execution. The progress we're making, seeing larger deal sizes, growing recurring revenue and expanding routes to market, gives me great confidence that Sangoma is entering a new phase of sustainable, profitable growth. I'll now turn it over to Jeremy to walk through our operating metrics in more detail, followed by Larry with the financials and the capital allocation update. Jeremy Wubs: Thanks, Charles. I'm excited to provide an update today on our go-to-market progress. As Charles noted earlier, the successful implementation of several of our transformation programs supports our ability to operate with greater precision and speed, and this is critically important to scale our go-to-market. Building on Charles' overview, I want to add that we exited Q1 with a healthy pipeline that remains strong, up 6% in the last 6 weeks. This recent momentum, combined with the 39% quarter-over-quarter increase in new pipeline creation that Charles mentioned, gives us confidence in our Q2 plan and beyond with a healthy balance of our volumetric business and larger strategic deals. To add a bit more color on our pipeline of larger, more strategic deals, we exited Q1 with $14.8 million in new logo TCV. Here, we are leveraging the breadth of our full essential communications capabilities, combined with our deep engineering pedigree to solve the challenges facing our largest prospects. This speaks to our ability to transition from a point solutions provider to a broader essential communications player in the market. The product roadmap and IT systems changes we put in place during our transformation are aligning well with these market opportunities. The pipeline momentum is encouraging, but what's even more important is that we're starting to see the deals moving through the sales cycle start to convert. Our teams are progressing opportunities more efficiently. And as a result, total MRR bookings are up 6% year-over-year. In our Q4 earnings call, I referred to a few of our go-to-market strategies targeting service providers, MSPs, vertical solution providers and more specifically, highlighted a wholesale opportunity in our pipeline with the CLEC of greater than $20,000 MRR with a potential to double over the next 9 months. That deal is now closed and booked, and we have 2 other material deals in our pipeline, each greater than 12,000 MRR using a comparable wholesale solution that we are actively working to close this quarter. Last earnings call, I also noted that our pipeline now includes some of the largest MRR opportunities since Charles and I joined, including some exceeding $100,000. Just in the last week, we closed a solutions bundle to a distributed enterprise of over $150,000 MRR, further demonstrating the momentum in our strategic segments. This trend towards larger, higher-value wins is a direct result of the effectiveness of our bundling and go-to-market initiatives. In fact, average revenue per customer increased 19% year-over-year, underscoring the effectiveness of our bundling and go-to-market initiatives in delivering greater value for both our partners and end customers. Beyond these larger strategic MRR wins, our hardware products, such as our prem UC products, phones, gateways continue to contribute to revenue without an implementation lag as they move through distribution. I am very pleased that our channel, driven by our prem UC programs has now delivered 4 consecutive quarters of sequential revenue growth. With Q2 underway, I'm encouraged by the progress we're making. We have a growing pipeline with a mix of volumetric business and larger strategic opportunities, which support our essential communications value proposition. We are booking these larger deals, and we'll see the revenue impact later quarters, and we're continuing to capture share in the premise UC market, which hits the P&L relatively quickly. I want to extend my sincere thanks and appreciation to the entire Sangoma team for their execution in Q1 and continued focus on driving sustainable, profitable growth. I'll end there and pass things over to Larry. Thank you. Lawrence Stock: Thank you, Jeremy, and welcome, everyone. We appreciate you joining us for today's call. Our first quarter results following our transformation tracked right to plan. We're now operating under a predominantly software and services-led recurring revenue model, and that's setting a strong foundation as we look to drive growth and operating leverage throughout the fiscal year. In the first quarter, we generated $4.9 million in net cash from operating activities, representing a 60% conversion rate from adjusted EBITDA. This included a negative change of $3.2 million in working capital, primarily driven by an increase in trade receivables due to a technical issue in transitioning to a new payment processor as part of our ERP implementation. The onetime issue has been resolved, and trade receivables have since returned to historical levels. Looking ahead, we expect quarterly net cash from operations to convert from adjusted EBITDA in the range of 90% to 100% for the rest of the year, underscoring our high operating efficiency and ability to drive value creation. Free cash flow for the first quarter was $3.2 million or $0.10 per diluted share. We retired an additional $5.2 million in debt during the first quarter, and we ended Q1 at $42.8 million of total debt compared to $69.1 million last year. We continue to execute on our normal course issuer bid. And to date, approximately 710,000 shares have been repurchased for cancellation, representing 2.1% of our shares outstanding and reinforcing our confidence in Sangoma's long-term value. Our capital allocation strategy for fiscal '26 is clear: leverage strong cash generation and our balance sheet to accelerate organic growth and expand profitability. As Charles mentioned, we're investing an incremental $2 million in SG&A, specifically targeting channel and go-to-market initiatives to advance our products and platforms, enhance the customer experience and scale our market reach. At the same time, we'll opportunistically evaluate inorganic growth through M&A while continuing to reduce debt and return capital to shareholders. This balanced approach preserves flexibility and position us to drive long-term value creation. Let's turn to the P&L. Revenue for the first quarter was $50.8 million, representing a decrease of $8.5 million from the fourth quarter, primarily due to the divestiture of Sangoma's third-party hardware resale business, VoIP Supply LLC. Without VoIP Supply, revenue was $1.1 million lower compared to $51.9 million from the fourth quarter. On a year-over-year basis, revenue declined by $1.7 million or 3%, excluding $7.6 million in revenue from VoIP Supply. Core revenue, which accounted for 74% of total revenue, decreased 6% year-over-year, while adjacent revenue increased 6%. Core revenue was in line with our expectations and reflects longer sales cycles on larger MRR deals, the dynamic we discussed during our Q4 earnings call in September. As Charles and Jeremy highlighted in our KPIs, we expect to see more of this booking momentum convert to revenue in subsequent quarters with stronger core performance anticipated as the year progresses. Adjacent revenue was primarily driven by our Trunking as-a-Service offering, which has been reinvigorated through our transformation activities in fiscal '25. We continue to disclose services and product revenue splits in our MD&A with services now accounting for 92% of total revenue. This further reinforces our transformation this year to a predominantly MRR-driven company. Gross profit was $36.8 million in the first quarter. Gross margin was 72% of revenue compared to 67% in the fourth quarter. Without VoIP Supply, gross margin was 76% in the fourth quarter. This change was driven mainly by a higher attachment of product to our recurring revenue offerings driven by competitive displacement opportunities. Adjusted EBITDA for the first quarter was $8.3 million or 16% of revenue and included approximately $0.4 million in expense related to our ERP implementation. Excluding these costs, adjusted EBITDA would have been $8.7 million or 17% of revenue. This was in line with historical seasonal patterns and margin improvement is expected over the course of the year. Operating expenses for Q1 totaled $38.5 million, down $3.6 million or 9% compared to the same period last year. This reduction reflects the efficiency gains we've achieved through our transformation initiatives in fiscal '25. Importantly, we've maintained a steady commitment to innovation. Our investment in R&D remained consistent at $11.3 million for the quarter, in line with Q1 last year. Capitalized development costs were $1.5 million compared to $1.7 million in the prior year, noting that we amortized $1.5 million in R&D expense in Q1, which is included in our adjusted EBITDA calculation. What's evolved over time is our focus on developing new product capabilities. We're increasingly incorporating both in-house and third-party AI innovations across our cloud, hybrid and on-prem platforms. Notably, 90% of our R&D spend is now directed towards new products and capabilities, reflecting our strong emphasis on innovation and long-term growth. With the quarter coming in largely as expected and given the solid bookings activity we've seen in Q1 and into the early weeks of Q2, we are reaffirming our guidance for fiscal '26 of $200 million to $210 million in revenue and adjusted EBITDA margin in the range of 17% to 19%. As we said on our prior earnings call, we expect sequential growth to begin in Q2 and continue through the year with Q1 marking the low point and the bridge to stronger growth ahead. As always, I want to extend my sincere thanks to the talented team at Sangoma. Your dedication and daily contributions continue to drive our success. That concludes our prepared remarks. Operator, let's open up the call for some Q&A. Operator: [Operator Instructions] Our first question is from Gavin Fairweather with Cormark Securities. Gavin Fairweather: I just wanted to start out on the growth investments. I think you referenced $2 million of incremental growth spending here. Maybe you can just update us on the timing of making those investments, what the key buckets are and how you're thinking about the timelines to returns on that spend? Charles Salameh: Well, our initial investments are really going to be in SG&A, the $2 million at least started in Q1 materialize in Q2 and Q3 and Q4, mostly in the buckets of increasing capacity in the field, providing us more coverage to recruit partners who are really now embracing the bundle and also partners who are in the vertical orientation areas of health care, education, retail and hospitality. And then the second area is just investment in marketing. which is brand coverage to get our end customers, some of the verticals that we're focused on and certainly our partners much more aware of the full breadth of the portfolio and the suite that the company has to offer. So that's where most of our investment is going right now. Obviously, on the capital side, we've tried to gain efficiencies in our capital expenditures within our engineering team using our internal tools and technologies that are allowing us to reinvest, recouped capacity from within our engineering core into innovation. We've actually moved the needle quite a bit on that. And obviously, the other investment areas are as per our capital allocation program, which investing in NCIB, investing in potential acquisition opportunities and obviously paying down our debt. Gavin Fairweather: Appreciate that. Very helpful. And you've done a lot of work to cultivate new partner relationships and build out new channels like wholesale. Curious what you're seeing in the pipeline tied to that. Are you finding that these new paths to market are generating significant new pipe for you? Any commentary there would be helpful. Jeremy Wubs: Yes. I mean we highlighted a few of those kinds of metrics earlier, our pipeline is up 6% in the last 6 weeks. I mean new pipeline creation is up 39% and even year-over-year pipeline is up 6%, so we are seeing pretty significant, our bookings are up, sorry, 6%. So, we are seeing the kind of fruits of our labor pay off. We're seeing strength in our pipeline. We're seeing a good balanced mix between kind of the velocity business and some of these larger strategic deals. And of course, now we're starting to see those like some of the examples I gave earlier, convert into bookings. So, the investments are paying off. The $2 million incremental investment will help us to build even bigger, more significant pipeline, close more bookings and drive the growth strategy that we have. Charles Salameh: On your path to the mark-to-market question, Gavin, a couple of really interesting new paths. The most exciting one right now that we're seeing, to be honest, beyond the vertical bundles and the vertical partners that are really starting to grab hold of what we're trying to do within those particular verticals is the wholesale channel. This wholesale channel has become a really interesting opportunity that I don't think we really saw about a year ago, this idea of being able to put together our solutions and then put them in a private model, giving them to a CLEC type company and allowing them to sell that to their end user base at a discounted rate, kind of takes the commission part away from traditional channel routes and really provides a more wholesale pricing model to a particular customer who wants to then take it to an ecosystem of their end users. In this area, that's one of the deals we just closed this quarter. And I think, a really cool new path to market for us that really wasn't part of the original plan. It's something Jeremy has talked a lot about in a white label offering, but we've kind of gotten a fast track from white label into wholesale. And I think this is an exciting area that we're going to keep our eye on. Gavin Fairweather: Appreciate that. And then just lastly for me on services, a bit of a steeper decline in the quarter. You called out sales cycles. Is there any other moving parts that you'd kind of call out this quarter? And maybe just discuss whether you think that the services line is part of the sequential growth that you're expecting to see in Q2? And that's it for me. Charles Salameh: This was a plan. We understood where services were going relative to the transformational programs that really started, as you know, back in early 2024. We knew there was going to be those customers that signed on with us. They're really tiny customers before we got here in 2021 that were on 3-year contracts. They're coming through the system. pretty much coming through now in completion this quarter. That's why this quarter is where it's going to be at and why we think sequential quarter starts in Q2 and Q3 because we've pretty much cut most of those older customers of smaller natures through the pipeline. Don't really expect to see much more in the area of declines in services. In fact, we think churn is going to continue to improve between now and the end of the year for a whole lot of reasons, one of them the one I just mentioned. And we still foresee sequential growth in Q2 and the year-over-year growth beginning in Q3 and Q4 on a pure organic basis, mostly and entirely in the services area. Operator: The next question is from Suthan Sukumar with Stifel. Suthan Sukumar: Congratulations on a nice all-around quarter here. For my first question, I just wanted to, on your successful pivot to larger customers. Can you speak a little bit about how some of the optimizations you guys have implemented around sales cycles and implementation timelines, given that these tend to be relatively longer here for these larger customers versus the smaller customers that Sangoma has targeted in the past? Jeremy Wubs: There's 2 things I'd highlight, Suthan, around our ability to be more efficient in executing on some of these larger, more strategic prospects. One is certainly we, over, during our transformation period, made sure that we look very carefully at the product roadmap and make sure we had the right sort of more advanced feature sets, other things that were required that really fit well with starting to push ourselves upmarket into these more strategic opportunities. So that helps really fill the funnel in the pipeline with more of these larger strategic deals. The second thing is we have a very disciplined weekly cadence around how we pursue large opportunities. The sort of no stone unturned. We're very, very focused on understanding what's required for the client, how do we put the right proposal together. And we have our teams kind of on the ready to support the really professional proposals that get out to those clients, with the quality and speed that allows us to go capture these opportunities quickly. So, when I talked earlier about some of the booking examples, the large wholesale deal, we hunted down 2 other significant ones in the funnel and that large distributed enterprise deal over $150,000 MRR. Those we are able to successfully win as a result of having an integrated proposition, the right features on the road map and having a really strict and well-disciplined deal process to hunt those down. Charles Salameh: Also, Suthan, I'll just tell you, quite frankly, one thing I don't talk a lot about as part of the transformation, we talk about process systems, tools, but one thing that we did, that we should be highlighting a lot more is we improved the pedigree of the entire team as we pivoted ourselves from kind of point solution sellers to bringing in high-caliber sales folks who really understand the propositions that we're trying to put forward, that the company can offer and bring an ecosystem of more sophisticated partners who also are looking for solutions like this. All of that plays on top of what Jeremy said, plays into speeding up the deal cycles and improving the quality of close rates. So that's a big part of it. We don't spend a lot of time talking about it, but we've pretty much rebuilt the entire sales team over the course of the last, I would say, 18 months. Suthan Sukumar: Great. That's helpful color. Maybe a follow-on to that. Do you guys foresee making other organizational changes across the business to further support your go-to-market motion? Charles Salameh: No, the only, the organization right now is very stable from a leadership or structural point of view. The only other changes that could happen to the company, obviously, would be anything that we did in terms of M&A, either being integrated and expanding an existing part of our business or something that might be even more exciting that's in an adjacent market that could create another division of the company. We're just not there yet. We're in the process of looking at M&A. But as far as the way the current company is set up, no, we don't see any real big changes to the company and the structure. Suthan Sukumar: Okay. Great. And just one last one for me is it sounds like the partner ecosystem is starting to gain more momentum, especially if you guys are looking to step up more investments in that area. Could you remind us on some of the heavy lifting that's been done to date in your partner ecosystem? What's left to do? And what are some of the proof points as investors we should be looking out for to gauge ongoing success here? Charles Salameh: Well, look, we took, Jeremy will add a couple of bit more color to this, but we took 4,000 partners when we started this company back in 2024, down to top 1,100 or so, of which of those the top 400 have really generate most of our revenue, 80% of our revenue. We've realigned that partner program to a more sophisticated segmented partner structure called Pinnacle Partners. And then we've aligned our SG&A investments and our resource allocation to partners depending on where they sit in the pyramid, which not only allows us to be much more and deeply entrenched with more strategic partners around exploiting market discontinuities or opportunities within, particularly within verticals, but also to encourage partners who are coming into the system to move upmarket, selling more of our services to incentives that are much more organized, much more thoughtful and much more aligned to the needs of what channel looking for nowadays. It's a very different model, I think, in my mind, the channel has evolved quite a bit in the last 5 years. These guys are much more sophisticated. They want recurring revenue. They want deeply entrenched relationships with their technology vendors, and they want quality service. And so that heavy lifting of trying to discover what they want, understand, organize them in a manner that's scalable for a company of our size and then have an ongoing onboarding, training, awareness program for them, which is most of that work is now behind us, and we're just facilitating these partners and growing with. Jeremy Wubs: Yes. I think, Charles, you summarized it well. I'd say we've gone through the major, call it, horizon of transforming our partner program, getting traction, getting engagement. The second horizon for us is now we do have partners in the ecosystem who grew up selling a single point solution, right? And that's kind of how they've grown up. Now our kind of next horizon is how do we take what we've accomplished with our new channel model, it's hunting, it's driving pipeline. How do we get those partners who grew up selling one thing? How do we get them selling multiple things so they can go on a journey with us. So as that transformation happens, you're talking the longer tail, the smaller partners, but that's a whole additional opportunity to drive growth and pipeline for us. Operator: The next question is from David Kwan with TD Cowen. David Kwan: Maybe tying on the last series of questions as it relates to kind of refining your channel partner strategy and whatnot. You quoted some new numbers here, which appreciate the additional metrics. One of them was on the average revenue per customer and you saw some good growth there. Can you maybe dissect that number though, a little bit more in terms of trying to figure out how much that was kind of maybe culling of kind of smaller customers versus kind of growth in your larger core set of customers? Jeremy Wubs: Yes. I would say, I mean that's all MRR-related growth, David, like MRR type accounts, like some of that's a combination of supersizing deals. So, getting at larger sort of single element deals, but more importantly, actually our bundle strategy executing. So, when you sell these bundle opportunities, network, security, unified communications, et cetera, the deal sizes just get larger, right? So that's really what's occurring, and we're pulling our average deal sizes up. I think I quoted an increase of 19% year-over-year in average revenue per customer, and that's really driven by new logos and our ability to upsell into these larger bundles. Charles Salameh: I'll just quickly, very quickly, David, add that part of the transformation was building an integrated CRM and ERP. If you say that really fast, it sounds like a simple tool. But what CRM really provides is the ability to allow your partners to bundle products together and understand what their commission payouts or recurring revenue will be as a result of that. We launched a program called BV IgniteX, one of our portfolios, one of the sort of flagship portfolios. We put some resources attached to it, and we basically reinvigorated partners who really only sold one of our solutions. But back to those partners haven't talked to them in a long time, gave them an opportunity to understand they can bundle new products with their own products together, and we're starting to see the impact of that on ARPU. And so, we believe mining to account expansion, some of our existing partners through more sophisticated programs that allow us to cross-sell and upsell because we can now because we have the tools and systems to do so, is going to continue to drive ARPU up over the coming quarters. David Kwan: That's great color, guys. And then on the gross margin side, that came in a bit lower than what we were expecting, I think what you guys were guiding for the quarter. And it sounds like it was kind of a revenue mix and more greater mix of higher, product revenue that carries lower margins. I guess just given the timing of when you guys came out with the guidance kind of right towards the end of the quarter, just was there a lot of product sales that came in, in the last week or 2, I guess? Charles Salameh: Yes. So we saw product sales higher than expected. originally. And if we look absent board supply quarter-over-quarter, it's about consistent to what it was prior. So it was in line with really where we thought overall, and we do expect that to increase as we get through the next 3 quarters for sure as we move on through the year, and we see services continue to be such a high percentage for us as well as core. David Kwan: So I guess, could you throw out the 75% number for Q1? Like is that something that you think you can hit in Q2? And how should we be thinking about for the balance of the year? Charles Salameh: Yes, that's exactly right. That's how I am thinking about it for the balance of the year. David Kwan: Okay. That's helpful. And just one last question. I saw there was just over $0.5 million in restructuring costs. What did that relate to? Charles Salameh: It's part of the transformation. It's also part of, as we look at things like ERP and how we're looking at the company moving forward as we've implemented that. That's really all that is some staffing-related items. Operator: The next question is from Mike Latimore with Northland Capital. Mike Latimore: This is Vijay Dewar for Mike Latimore. A couple of questions. One, how much did backlog grow sequentially? Charles Salameh: I'm sorry, I didn't hear that. Can you repeat that? Mike Latimore: How much did backlog grow sequentially? Jeremy Wubs: Backlog was pretty consistent quarter-over-quarter. There wasn't a material growth like Q4 into Q1. I think what you'll see is bigger backlog growth going into the next quarters given some of the bookings and the deals that I highlighted earlier. Mike Latimore: Okay. And how are bookings in the quarter relative to your expectations? Jeremy Wubs: Yes. Our bookings in this quarter were pretty much like almost 100% on expectations, like it was completely in line with our plan. Operator: The next question is from Robert Young with Canaccord Genuity. Robert Young: I'm trying to understand the large deals that you were talking about over $100,000, the MRR opportunities over $100,000. Are these bundled mid-market at the high end? Or are these the wholesale CLEC opportunities that you were talking about early in the call? Jeremy Wubs: Yes. Let me cover it, Rob. There's, I'll put them in 2 buckets. So first, in the kind of wholesale type solutions and bundles, we did close a deal, $25,000 MRR with, and I mentioned about 9 months out, we expect that to expand quite considerably. So that's in the wholesale space. Again, it's an MRR deal. We have 2 other pretty substantial ones I referenced earlier, both over 12,000 that are in our pipeline, not, those aren't closed yet. And then as a solutions bundle, so this networking, some network security, UCaaS, some other combination of solutions we sold to a large, distributed enterprise in the retail space. That deal was $150,000 MRR. So that's completely different than the deals that we sold in the wholesale space. Robert Young: Okay. And then as you look at this wholesale opportunity with the CLEC, is that where the CLEC is effectively operated as a channel? Like is that selling through into their customers, a bundle. Jeremy Wubs: That's right. I mean we're selling basically a wholesale solution to the CLEC. I mean, usually, they're buying at a wholesale price, and they'll go out and sell a combination of that solution with some of their own, say, infrastructure, maybe it's over their fiber or their network, they'll sell the solution out to their end customer. So, the CLEC deals are like that. I would think of it, you've probably seen other companies go after this spaces as well. We see some opportunities in the soft switch space, so replacing some of the soft switch opportunities that the process shops and CISCOS would have gone after with our own hosted wholesale solution offer. Robert Young: Okay. And I mean when you, the CLECs, when they're looking at your product, is there a significant lift here in go to market like training salespeople within the CLECs to resell here? Or is it a situation where this is, I mean, maybe an industry standard that you just weren't able to sell into before because the CRM systems didn't allow you to bundle. Like what is it that's opened this up suddenly? Jeremy Wubs: I think it's a very good question. I would say this is an opportunity, I think both Charles and I saw early when we got and joined Sangoma. It was a channel that Sangoma hadn't been pursuing. The hadn't been going after CLECs MSPs with this type of white label solution. I think, we had some of the building blocks in place, not all of them. We had to make some systems changes and some road map changes in particular to address it. We did that, and now we're hutting this down, and we're pretty excited to see some pretty substantial deals in the pipeline. And as I mentioned before, a pretty substantial one closed already in Q1. Charles Salameh: There's not, and just I want you to be clear, this is not just geared at CLEC, Rob. The idea of wholesale is really to any institutional company that wants to kind of control the networking and technology stack for a bunch of end users. We have a deal we're proposing right now. It's a health care institution that has multiple hospital facilities with hundreds of special care clinics attached to this ecosystem in the United States. They're looking for a white label solution, and they've come to us. And we're pretty far down the road with these guys where you'd never have thought that these guys wanted to actually take a wholesale solution from us as a health care institution and ecosystem. And so there's a ton of opportunity beyond CLEC that we're exploring. The idea that Jeremy and I saw here was wholesale white label, not necessarily wholesale and white label just for the CLEC. It's just one of the channels of many others that are interested in this type of solution, and now we're geared to serve them. Robert Young: Okay. Last question on that would be just around the TAM. Does that materially increase the TAM that Sangoma can address? Charles Salameh: Look, we're a $200 million company. So, any TAM that's a sizable nature, we're going to go after it. It does absolutely open up a whole new channel for us. I think it's come faster than we had anticipated, which is all goodness. And when you're going through these transformations and you understand how the company, all the components the company has and when you start putting things together, coupled with a very rapidly changing dynamic, in the tech space, these opportunities open up. The prem was a great example, another area that just, we had a Mitel exit, we had an Avaya exit. We pounced in, and we have a 60% increase in our pipeline just in a short period of time. So we have lots of really exciting deals that are happening in spaces that we maybe didn't really originally plan for. This is one of them, and I think there's a significant opportunity for TAM. This goes, like I said, beyond CLEC, it goes into these other institutions. It goes into ISPs, it could go into hyperscalers. We could take it into a lot of places. And we're just in the very early innings right now. And within 4 or 5 months, managed to close our first deal and see many more in the pipeline. Robert Young: Okay. And maybe one more question. You made, there was a comment earlier in the call where you said that the size of the pipeline was the same, but the new pipeline creation was up 39% quarter-over-quarter. And I'm trying to understand what you meant by that statement. you just a little bit for me? Jeremy Wubs: I mean, the pipeline is up 6% in the last 6 weeks. The pipeline creation, new pipeline creation is up 39%. So that's relative to last quarter. So the aggregate pipeline is up and the new pipeline creation is up. So it's both. It wouldn't make sense to have one and not the other. Operator: This concludes the question-and-answer session and today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
Operator: Good afternoon. Thank you for attending the Babcock & Wilcox Enterprises Third Quarter 2025 Conference Call. [Operator Instructions] I would now like to turn the conference over to our host, Sharyn Brooks, B&W's Director of Communications. Thank you. You may proceed, Ms. Brooks. Sharyn Brooks: Thank you, Victoria, and thanks to everyone for joining us on Babcock & Wilcox Enterprises Third Quarter 2025 Earnings Conference Call. Joining the call today are Kenny Young, B&W's Chairman and Chief Executive Officer; and Cameron Frymyer, Chief Financial Officer, to discuss our third quarter results. During this call, certain statements we make will be forward-looking. These statements are subject to risks and uncertainties, including those set forth in our safe harbor provision for forward-looking statements that can be found at the end of our earnings press release and also in our Form 10-Q that was filed this afternoon and our Form 10-K that is on file with the SEC and provide further detail about the risks related to our business. Additionally, except as required by law, we undertake no obligation to update any forward-looking statements. We also provide non-GAAP information regarding certain of our historical and targeted results to supplement the results provided in accordance with GAAP. This information should not be considered superior to or as a substitute for the comparable GAAP measures. A reconciliation of historical non-GAAP measures can be found in our third quarter earnings release published last week and in our company overview presentation filed on Form 8-K this afternoon and posted on the Investor Relations section of our website at babcock.com. Kenneth Young: Thanks, Sharyn. Well, good afternoon, everyone, and thanks for joining us today on our call. We continue to execute on our strategy to expand our Global Parts & Services business while also focusing on large opportunities within North America and reducing the majority of our debt obligations. The increasing demand for power in North America drives our growth and aligns well with our strategy to divest certain noncore assets to significantly reduce our debt while positioning B&W to play a pivotal role in supporting AI data center expansion and increased baseload generation needs. We are pleased to report a number of positive developments this quarter at Babcock & Wilcox, both in relation to our quarterly financials as well as our recent projects and partnerships that we have completed. Adjusted EBITDA and operating income significantly outperformed company and consensus expectations this quarter. Adjusted EBITDA was 58% higher compared to third quarter of 2024, while operating income was up 315% when compared to the same period of 2024. Our improved margins directly reflect the record quarter results for our Parts & Services business. During the third quarter, our Global Parts & Services achieved the highest quarterly and year-to-date bookings, revenue and gross profit in recent company history. Our growing backlog continues to benefit from increasing demand across projects, upgrades and construction as power generation needs for industrials and utilities in North America continue to accelerate. In total, we saw our backlog rise 56% quarter-over-quarter to a total of over $393 million. Through a combination of disposition of noncore assets and equity raises, we have paid or will pay down the February 2026 notes by end of the year 2025. We also have the liquidity to pay down the December 2026 bonds, a process that we plan to begin by end of year. Over the course of the past several months and with key equity raises last week, our balance sheet has significantly improved. With this improvement, along with the tailwinds from baseload generation demand in the market, we have positioned B&W for substantial growth in 2026. We are currently projecting a range of $70 million to $85 million in EBITDA from our core business in 2026, which is 80% growth year-over-year from 2025. And this does not include any revenues or margin from our recently announced AI data center projects. We have been in discussions on several opportunities within the AI data center space, and we are seeing Agentic AI as a new catalyst for higher power demand in the U.S. and around the world. We are pleased to announce that we have signed a limited notice to proceed with Applied Digital to begin work for the delivery and installation of natural gas technology that will provide 1 gigawatt of efficient energy for an AI factory and data center project. The total project valued at full notice to proceed will be over $1.5 billion in total once finalized, and we anticipate that full notice to proceed to be released in the next few months. As a part of this deal, B&W plans to design and install 4 300-megawatt natural gas-fired power plants consisting of proven boilers and associated steam turbines to support Applied Digital's AI factory. The plant is targeted to begin operation in 2028. This technology carries equal efficiency as simple cycle turbines and can be operational much faster than combined or simple cycle power plant options. The impact from this deal on B&W is profound adding $3 billion to $5 billion in AI data center opportunities in our pipeline. We are also pursuing other projects and opportunities, which brings our total global pipeline to $10 billion to $12 billion in totality, including ClimateBright and BrightLoop. Taking a look at our BrightLoop technologies, our efforts to progress BrightLoop are moving forward as we further the commercial development of our existing projects and continue working to improve the overall operational effectiveness of these technologies to produce low-cost hydrogen or steam. We're seeing increasing activity for BrightLoop technology, both for steam generation and hydrogen production that can produce energy with lower cost and expenditures. In fact, we're in discussions with a number of oil and gas companies and large utilities about using BrightLoop for specific steam or hydrogen generation projects. From a ClimateBright perspective, we are seeing an increased demand to leverage carbon credits, both in waste to energy and coal to energy as optional offtake revenues for our customers. We also are in discussions on several opportunities and believe we can announce a significant carbon capture project utilizing our SolveBright technology very soon. I'll now turn the call over to Cameron to discuss the financial details for the third quarter of 2025. Cameron? Cameron Frymyer: Yes. Thanks, Kenny. I am pleased to review our third quarter results, further details of which can be found in the 10-Q that is on file with the SEC. Our third quarter consolidated revenues were $149 million, which was roughly in line with the third quarter of 2024. Global Parts & Service remained strong in the third quarter of 2025 with revenues of $68.4 million compared to revenues of $61.7 million in the third quarter of 2024. The improvement is primarily due to the increasing need for electricity from fossil fuels, driven by the demand from artificial intelligence, data centers and expanding economies. Our net operating income in the third quarter of 2025 was $6.5 million compared to operating income of $1.6 million in the third quarter of 2025. Loss from the continuing operations in the third quarter of 2025 was $2.3 million compared to a loss of $7.9 million in the third quarter of 2024, and our adjusted EBITDA was $12.6 million compared to $8 million in the third quarter of 2024, beating Street expectations. As Kenny stated earlier, we have announced our 2026 full year adjusted EBITDA target range of $70 million to $85 million stemming from our core business, which does not take into account any growth related to data centers. I'll now turn to our balance sheet, cash flow and liquidity. Total debt at September 30, 2025, was [ $379.3 million ] (sic) [ $309.3 million ] consisting of $98.4 million of February 2026 bonds, $90.9 million of December 2026 bonds and $121 million of bonds due in 2030, with the remaining debt being related to our letters of credits. As of September 30, we had 0 drawn on our asset-based loan. The company had cash, cash equivalents and restricted cash balance of $201.1 million, giving us a net debt as of September 30, 2025, of $178.2 million. On October 2, B&W paid down $70 million of bonds that were due in February of 2026, and we recently announced the remaining outstanding February 2026 bonds will be paid down fully in December of 2025. Another notable development took place last week when the company was able to raise an additional $65 million of equity, which has further strengthened our balance sheet and shows the ability to pay down the remaining of the 2026 bonds that are due in December of 2026. When factoring in our recent equity raise, this will leave us with a pro forma net debt of $113.2 million, which will be between 0.8 to 1.6x targeted 2026 EBITDA. Lastly, although we said on Friday that we would be pausing sales under the ATM program, we've decided to resume ATM sales and intend to sell shares under the ATM program opportunistically based on market conditions and our share price. I'll now turn the call back over to Kenny. Kenneth Young: Cameron, thanks. Well, in closing, as always, I would just like to recognize the efforts of our dedicated and talented employees that are around the world who focus on working hard every day to meet the challenges and supporting our customers while meeting the energy demands of today. I will now turn the call back over to Victoria, who will -- and I think we have time for about 3 questions. So Victoria, I'll turn it back over to you. Thanks. Operator: [Operator Instructions] Our first question comes from the line of Aaron Spychalla with Craig-Hallum. Aaron Spychalla: Maybe first on the $1.5 billion project. Can you just talk a little bit about next steps that are needed and how you see potential contribution from a timing and margin perspective moving forward? And then just thoughts on the supply chain and kind of working capital needs as that ramps? Kenneth Young: Sure. No. I appreciate that, Aaron. Thanks for jumping on the call today. So first of all, we're actually right now working with Applied, obviously, to finalize the exact location where this will take place and so we can finalize the full notice to proceed, which again, as [ John ] mentioned in the comments, we anticipate being done here in the next couple of months. As part of that, we're also behind the scenes working with a few of the steam turbine generators at this point in time and have secured some verbal commitments that we have the ability to meet these time frames. And so we'll look to finalize those details on that as well as our own manufacturing of these particular boilers. The great news, I think, in this case is that we're using -- I'm going to use the term off-the-shelf. So these are -- these 300-megawatt boilers are designs that we have installed at several locations prior to this event. So this is a proven technology and architecture. And so there's very little, if any, engineering that needs to be performed in order to get these to a manufacturing state. We already have the construction drawings of each of these fabrication diagrams, the layout, the header layout, the tubing, everything associated with this type of a boiler to meet the specs and standards here in the U.S. And so it's an easy method for us to move that right into the manufacturing process. And that's the exciting part here. It's a rare opportunity for us to do and utilize a design that we have implemented in many locations prior. So we're obviously very comfortable with the standards and the performance of the boilers, easy to move into manufacturing and leveraging the fact that we have access to the steam turbines in a much faster go-to-market model than trying to leverage a combined cycle or simple cycle turbine plant today. So that's the benefit here on that. But we're working through all of those in parallel with Applied and again, plan to have the full notice proceed signed here in the next couple of months. And we're working diligently behind the scenes to move the project full forward. As it relates to working capital aspects on it, we'll work with Applied on the timing of that and how we move that forward. That will be part of the full notice to proceed process here over the next couple of months. Typically, for us, we typically keep the working capital on projects like this at a neutral to positive. So down payment requirements that we have with manufacturers or subcontractors are typically collected upfront on these projects and have no reason to believe it would be any different here. So there -- that we're moving forward under that direction and Applied understands that as well. So we think that will help minimize this a little bit overall and any impact to working capital in the company, and we should remain cash flow positive on this as we typically do on projects like this at this point in time. So that's the overall plan. As far as revenue recognition goes and margin recognition, obviously, we're a POC shop under that. It will depend on timing of when we can apply the cost to the project into next year. Some of that will be based on the final notice to proceed and the time frame there. So it's a little bit vague and it won't be terribly much, I would say, in '26. I don't know, I'm just throwing out a number, maybe 10%, 15% of the value would be realized then. The bulk of it would, based on the accounting method would be realized more in the '27 and obviously '28. So we've -- based on the fact that we're still finalizing that NTP and our guidance next year, we have not included this project or any other data center projects in that $70 million to $85 million range. So this would represent complete upside and probably significant upside to any number that we would be putting out right now. Cameron, I don't know if you have anything you want to add to that, but otherwise, I'll turn it back to you. Cameron Frymyer: No, no. I think you hit all the points, Kenny. Aaron Spychalla: That's very helpful. And then maybe just second on the additional pipeline, it sounds like last week, it was $1.5 billion. Today, it sounds like maybe $3 billion to $5 billion. So maybe some growth there. Can you just talk about how mature some of those opportunities are and potential timing of when you could see some of those move forward as well? Kenneth Young: We are obviously in talks with several as it relates to -- and have been -- I want to emphasize that have been prior to this announcement in talks with several on this particular solution in different sizes, right? Meaning and some would be smaller in maybe 0.5 gigawatt range, some are perhaps even a little larger in a 1.5 to 2 gigawatt range. So there's a number of these opportunities where this solution makes the most sense from both a cost standpoint as well as delivery and time frame standpoint. Some of that would be subject to complete availability in the manufacturing and the steam turbine side. And again, the early indications are we've got some real positive capacities there to meet this entire demand. And so it's -- on some of those, that we'll be working with them to move forward, hopefully, on a couple of the opportunities if we can get them to commit I would say those would be in the next year's time frame to announce on that regard. But we're obviously involved with these other opportunities that are out there and fully intend to push those across the goal line. That's on this solution. The other ones that we're heavily working with is related to our Denham partnership, and we are working very closely with Denham Capital right now on a number of locations to convert some coal plants to natural gas, and that's also in the works as well, too. So I think we have -- those opportunities are within that opportunity and pipeline as well as the other natural gas and steam turbine combination that were proposed for Applied would also be in that opportunity as well. So the combination of all that and the sizes of those, we decided to take the pipeline up even a little bit further from last week. Operator: Our next question comes from the line of Rob Brown with Lake Street Capital Markets. Robert Brown: On the ability or your capacity for that pipeline, what is your capacity sort of in this power gen segment? And how do you sort of think about capacity kind of limits there? Kenneth Young: So the main -- so there's 2 main components to that capacity aspect, Rob, and thanks for jumping on, by the way. There's 2 aspects to that. One is the manufacturing of the boiler fabrication of the boiler. For us, that's part for the course, right? That's what we do. And we have been looking and evaluating our own internal capacities that we have today as well as our external partners that we use in various places around the world to manufacture these kind of systems. So all of those companies are on board with this. And quite frankly, it's a volume. Many of these manufacturing and fabrication groups are comfortable and used to dealing with projects of this size. So it's just a matter of how much we can put into each location on that, and we're going through that right now. So within -- I would say, within the pipeline that we have today, again, depending on the exact timing of some of this, we feel pretty comfortable that we can complete the manufacturing and have the capacity to do that on the boiler fabrication and manufacturing. On the steam turbine aspect of this, the good news is there's a lot more steam turbine companies than there are combined cycle and simple cycle companies out there. We're in -- can't give names right now, but we're in discussions with several and are quickly trying to move into a relationship with them that we have this capacity secured. And we believe, just based on a lot of the early conversations that we're having with these particular groups that, that capacity does exist. Maybe across a couple of different manufacturers, and we'll have to -- we'll work through that. But from a steam turbine perspective, we think these opportunities do exist. They're obviously very excited because this is a way for them to get involved in a high-growth area for them as well, too. So, so far, it's been full energy, if you will, across both the manufacturing side and on the steam turbine side as well. Robert Brown: Okay. On the -- just switching to kind of the ClimateBright projects. I think you mentioned the CO2 capture opportunity that's developing. Could you give a little more color there on when that might happen and what the size could be? Kenneth Young: Yes. So there are a few projects that we're in dialogue and discussions on. Some of these are FEED studies that we always talk about FEED studies out there, FEED studies, meaning Front-End Engineering Design studies, and we have several of those going on at this case. So we're in discussions right now to finalize an opportunity and feel like that could happen fairly soon, hopefully, not days, weeks at max on a project that we can put out. And order of magnitude would be in the, I'll just call it, $70 million to $100 million-ish in that category. I'll give it kind of a little bit of a range there as we finalize it. But on the initial project itself, and then there's probably more opportunities and upside on that. But we are seeing in the U.S. from some of these operators and the hyperscalers and other aspects where a few occasions, they would like to have the CDRs or the carbon offtake as -- and the groups that are building out these power plants are looking at how they can capture CDRs or carbon to be able to sell those as additional revenue for the plant owners as it relates to building out the infrastructure to support the hyperscalers. And we've seen that with a few developers, and we've got, I think, a pathway here to hopefully announce a project or 2, but one specifically in the next days, if not weeks. Robert Brown: Congratulations on the progress. Operator: Our next question comes from the line of Brent Thielman with D.A. Davidson. Brent Thielman: Kenny, I want to ask just back on the Applied Digital contract, the $1.5 billion, is that all within B&W's scope? I know this is all getting worked out. But obviously, it's a massive potential uptick to the backlog that you have today. So I just wanted to kind of understand what's all in there. Kenneth Young: Yes. No, this is -- that $1.5 billion would anticipate and represent BW scope as associated with this project, right? B&W would bring all of the aspects and elements of the boiler and the steam capabilities plus the construction aspect, right? We have our own construction company here in the U.S. So it would be blended with construction, the steam turbines and the boiler aspect of it. And then we'll work through some of the other elements to complete the plant on time and on schedule. We'll work with Applied on that. So we put it as over $1.5 billion at that site. The total value could be higher depending on final scope, and we'll just have to work through that. But I wanted to give some idea and indication of what it looks like from a B&W perspective. So we intended that to be our scope. The scope of the project would be a little bit larger under that scenario, but we'll work with them to complete that once we have the NTP finalized. Brent Thielman: Okay. Yes, I appreciate that, Kenny. And then I guess, just as a follow-up, anything you can say in terms of just risk sharing associated with it. Is this all fixed price in terms of execution? And I noticed there's an equity component that Applied Digital gets in BW. Maybe just talk about that and whether that's going to be something that's ongoing as you look to maybe some of these other opportunities out there. Kenneth Young: Hard to say whether that same model would exist elsewhere too early. Not saying it won't, but hard to say right now on it. We viewed it as a very positive thing. We think having those warrants out there, obviously, there's incentives for Applied to get the NTP done sooner and complete, obviously. But also, there's buying, if you will, or support for BW overall, not only as a potential customer and client, but as a shareholder as well, too. And we think all of that is very much positive. And we obviously have seen that throughout some of the data center and other aspects as well, too. So we view that as overall very, very positive. As far as the risk share, we're working through that right now on how that would appear to be. And obviously, with the outside manufacturers and speed turbines companies would share a part of that risk overall as well, too. And we, as we always do, we look to balance it. I think the biggest piece here is that -- and this is what greatly reduces the risk overall to us is that this is -- these are projects and technologies that we have performed on a multitude of other occasions. So there's no new technology being designed or installed here or implemented here. This is well-proven technology that has been installed in tens, if not dozens of locations where B&W has actually constructed these. Obviously, we have the I think, advantage in the U.S. having our construction company and leveraging the boiler makers who are a great welding and fabrication aspect of this on-site. But again, these are all boilers that have been built previously. So we know the performance, we know the complexity that's involved in these, the time frame that's involved in these and as well as we've gone through all of the risk aspect of overseeing the manufacturing processes of these and understand how to manage that manufacturing process effectively. And we've got all the best practices and everything from each of these that we've implemented in prior periods. So this is unlike any other large project that B&W has been in historically. This one, I think, is extremely unique and opportunistic because it is something that has been done many, many times before, and there is absolutely no new technologies being implemented here. So to us, that's a significant reduction in risk in that case. And the terms and conditions all be detailed in the final notice to proceed. Operator: Thank you for your questions. That will conclude our question-and-answer session today. I would now like to pass the call back to Sharyn for any final remarks. Sharyn Brooks: Thank you for joining us. This concludes our conference call. A replay will be available for a limited time on our website later today. Operator: That concludes today's call. Thank you for your participation, and enjoy the rest of your day.
Operator: Good evening, and welcome to the SenesTech Reports Third Quarter Fiscal Year 2025 Financial Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Robert Blum with Lytham Partners. Please go ahead. Robert Blum: All right. Thank you very much, operator. And as you just mentioned, thank you, everyone, for joining us to discuss SenesTech's third quarter 2025 financial results, and this is for the period ended September 30, 2025. With us on the call today is Mr. Joel Fruendt, the company's Chief Executive Officer; Mr. Tom Chesterman, the company's Chief Financial Officer. At the conclusion of today's prepared remarks, we will open the call for a question-and-answer session. [Operator Instructions] Before we begin with prepared remarks, we submit for the record the following statement. Statements made by the management team of SenesTech during the course of this conference call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended, and such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements describe future expectations, plans, results or strategies and are generally preceded by words such as may, future, plan or planned, will or should, expected, anticipates, draft, eventually or projected. Listeners are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause future circumstances, events or results to differ materially from those projected in the forward-looking statements, including the risks that actual results may differ materially from those projected in the forward-looking statements as a result of various factors and other risks identified in the company's filings with the Securities and Exchange Commission. All forward-looking statements contained during this conference call speak only as of the date in which they were made and are based on management's assumptions and estimates as of such date. The company does not undertake any obligation to publicly update any forward-looking statements, whether as a result of the receipt of new information, the occurrence of future events or otherwise. With that said, let me turn the call over to Joel Fruendt, Chief Executive Officer of SenesTech. Joel, please proceed. Joel Fruendt: Thank you, Robert, and good afternoon, everyone. Thank you all for joining us today for our third quarter 2025 conference call. We once again had a very strong quarter with record quarterly revenues driven by the rapid adoption of our Evolve product line, which is showing growth across nearly every one of our key distribution channels and market verticals. E-commerce continues to be our largest channel, representing more than 50% of our revenue, and was up 55% year-over-year. And as many of you saw, we had a very exciting announcement as our products are now available at lowes.com. The intersection of our e-commerce and brick-and-mortar retail sales have the opportunity to be a significant growth driver for us moving forward, and Lowe's fits perfectly into that intersection. But as we have been communicating to you for the past year or so, our objective is clearly not to just grow at any cost. We need to reach profitability and believe we have the pathway to do so in the near term. Yes, high-margin revenue growth will be the easiest pathway there, but efficiently managing our expenses will be an equal part of the equation, and we are doing just that. During the quarter, we had a robust 43% increase in year-over-year sales. Gross margins continued in the 63% range and operating expenses were down 4% compared to last year and down 12% sequentially. And note that we had more than $100,000 of onetime legal expenses during the quarter that if removed, would have shown even further OpEx improvements. Overall, our adjusted EBITDA loss, which closely tracks our cash utilization, was the best in our company's history at $1.2 million. This compares favorably to $1.4 million last year and the most recent sequential quarter. With the continued focus on high-margin revenue growth, operational efficiency and cost discipline, we are poised to achieve our profitability objectives. Given the strong progress we continue to make, we feel very comfortable with the cash position we have, which at the end of September was more than $10 million. We will continue to execute and make incremental progress towards our profitability objectives, and we see a potential path to the future that may not require further equity offerings. So that's the high-level overview of the quarter. Record revenues, strong gross margins, reduction in our operating expenses, all of those resulting in the best adjusted EBITDA in the company's history. And finally, a strong balance sheet, which will bridge us to profitability. Okay. Let's transition to a few key activities that took place since we last spoke in August and some items we are working on, which we'll hopefully develop in the months to come. First off, as I mentioned a moment ago, our e-commerce business continues to show strong growth. Amazon continues to lead the way here with double-digit monthly growth. We continue to focus on being efficient with our advertising spend, ensuring that we don't spend during seasonally slower times for deployment. To that end, we slowed spend during late July and August, and we revamped our ad spend in early September. We had a highly successful Labor Day special that really boosted our sales in the month of September and should set the stage for a strong Q4 from Amazon as well. Beyond Amazon, which represents about 50% of our e-commerce revenue, we also are seeing growth from our existing senestech.com websites as well as walmart.com, homedepot.com and tractorsupply.com. And we had a big announcement about Lowes.com that has started carrying our Evolve Rat product. This expansion represents a major milestone in both consumer accessibility and retail distribution possibilities for the company. Launching on Lowes.com is a key component of our planned expansion through the broader retail channels. As we have talked about in the past, many retailers start new products on their e-commerce platform to assess overall potential and then transition to having them placed in their brick-and-mortar locations. We have a compelling case with Lowe's, Walmart, Home Depot and others that as the e-commerce side of the equation gains traction, we may then expand to in-store offerings in the future. We look forward to this being a large opportunity for us moving forward in the near future. During the quarter, our retail sales were up 254% compared to the year ago period, driven by expanded adoption that more than doubled its coverage with our ACE Hardware customer and follow-on orders from Bradley Caldwell, a wholesaler serving over 8,000 retail locations in the Northeast. Beyond e-commerce and retail, we continue to see adoption of our solutions within the municipal markets as well. During the third quarter, municipal revenue grew 139% year-over-year, driven by expanded deployments in New York City, Chicago and Baltimore, reflecting increased adoption in diverse urban settings. In September, we announced that Evolve Rat Birth Control would be deployed in another of Chicago's special service areas, this time, SSA #48 or the Old Town area. The new initiative led by the Old Town Merchants & Residents Association is focused on improving sanitation and public health in one of Chicago's most historic and vibrant neighborhoods. Planned deployments include strategic alleyways throughout the SSA, which spans key commercial and residential areas. SSA #33 or The Wicker Park Bucktown Special Service area of Chicago has expanded deployments in their area as well. We are working with the other 53 SSAs as they seek to implement an Evolve program. On a recent visit to Wicker Park Bucktown, a customer remarked, we've now seen in a week the rat activity we used to see in a day. It's good to have such simple articulation of Evolve's efficacy. These current programs continue to focus on controlled deployments in high-impact areas, laying the groundwork for potential large-scale expansion. And further, the overall awareness of these municipal deployments continue to have a positive impact on other channels such as retail, e-commerce and pest control distribution. In New York City, our rat contraceptive pilot program is showing exceptional results. Our team has been in New York supporting the deployment, where they continue to note 100% consumption of Evolve. We are working with New York City for reorders to advance the trial. In addition, we are working with local distributors to arrange for long-term supply to the city. While many of the headlines come from e-commerce channels such as Amazon, Home Depot, Walmart, Lowe's, et cetera, or our deployments in hardware retailers like ACE Hardware or municipal deployments in New York City or Chicago, the continued utilization of our solutions from pest management professionals or PMPs continue. Representing nearly 20% of our third quarter revenues, PMP revenue was up 72% sequentially from the second quarter as a wide variety of PMP partners are leveraging the unique attributes of fertility control across a wide range of customer applications, including theme parks. One of these theme parks is internationally known and is now in their third monthly order cycle. Our diverse distribution channel was clearly demonstrated during the quarter with near across-the-board growth from our various market verticals and distribution channels. With multiple shots on goal, each of which has shown stable growth and strong upside characteristics such as a large deployment of a major retailer or a large-scale deployment in municipal area, we feel very good about the future. Before I turn to Tom to review the financials in more detail, with the growth we expect, we have taken important steps to make sure we are structurally ready to meet this growth. Last quarter, we took the important step to increase our production capacity to meet future demand. We have officially completed our move into our new larger facility in the Phoenix area with new automotive capabilities designed to increase efficiency. So with that being said, let me turn the call over to Tom to review the financials in more detail and will then make a few closing comments before we turn it over to your questions. Tom? Thomas Chesterman: Thank you, Joel. Let me take a moment to expand on the numbers in the press release and a few points that Joel mentioned in his earlier remarks. On the revenue line, total revenue for the second (sic) [ third ] quarter was $690,000, which was an increase of 43% from Q3 of last year and up 10% sequentially. Breaking it down further, Evolve revenue increased 77% and accounted for 85% of our third quarter sales. ContraPest decreased approximately 31% and accounted for 15% of our Q3 sales. While down from a year ago period, ContraPest was basically flat from Q2 as there are still a number of loyal ContraPest customers. Looking at it from the vertical break in, e-commerce was clearly our largest contributor coming in at 54% of our overall Q3 sales. Overall, e-commerce was up 55% compared to our Q3 of last year and up 6% sequentially. As Joel mentioned, we dialed down unprofitable ad spend over the summer vacation period and re-ramped it up on Labor Day. We continue to see Amazon growth at double digits monthly. Our second largest vertical is pest management professionals or PMPs, which accounted for 19% of our Q3 sales and was up 29% year-over-year and up 72% sequentially. Municipal sales, while still a relatively small percentage of total sales, saw a 139% increase from the year ago quarter, driven by new deployments in Chicago and New York. Brick-and-mortar sales were up 254% year-over-year, driven by the expansion of ACE Hardware and Bradley Caldwell. Other contributors during Q3 were in the areas of agribusiness, commercial as well as zoos and sanctuaries. One item to point out is that we had very nominal revenue during the quarter from international sales. The groundwork has been set, and we simply need to wait for progress in terms of approvals, et cetera. We have communicated previously that this is a process, and we believe we are making good progress. Turning to gross margins and gross profits as a whole. For the third quarter, gross margins remained strong at 63%. The transition to the new facility will continue to show efficiencies and improvements in gross margins. Looking at it from a gross profit dollar perspective, gross profit was $433,000 compared to $315,000. More broadly speaking, the higher gross margins of Evolve continue to be a key driver to our improved financial performance. On the OpEx line, operating expenses were down 4% compared to last year and down 12% sequentially. As Joel mentioned, we had more than $100,000 of extraordinary expenses during the quarter that if removed, would have showed even further OpEx improvements. We continue to focus on being as efficient as possible within our expense structure, focusing on profitable ad spend and the overall cost structure. The revenue growth, improved gross profit dollars and decreased OpEx resulted in our lowest adjusted EBITDA loss in the company's history as we focus on achieving our goal of profitability. For the quarter, adjusted EBITDA loss was just $1.2 million and excluding the extraordinary items, would have been $1.1 million. Coinciding with the improved bottom line results is a balance sheet cash balance that has the ability to allow us to reach profitability without proactively raising any additional dilutive capital. Clearly, the ramp of revenues is the biggest unknown, but at the current sequential pace of growth in gross margin and OpEx structure, there is clearly a path where we do not need to proactively raise additional dilutive capital. I'll remind everyone that we do have additional capital potential if we need it, including 2.2 million short-term warrants outstanding at $5.25 per share, which, if exercised, would potentially bring in more than $11.4 million, and we have an ATM that is currently dormant. Let me now turn the call back to Joel. Joel? Joel Fruendt: Thanks, Tom. The adoption of our Evolve rodent birth control solution continues to be a game-changing solution, which has significantly opened up the addressable market opportunity for us. We have numerous shots on goal for continued steady sequential growth with outsized opportunities for what I would define as transformational growth that has the ability to quickly catapult us to profitability. We feel very good about our broad approach to expanding adoption of Evolve and the results to date are reaffirming our strategies. With a large addressable global market that has shown regulatory tailwinds in our favor, a first-mover advantage in rodent birth control, a diverse and scalable go-to-market strategy that is producing results and a lean focused growth strategy which balances revenue growth with operational efficiencies, I couldn't be more excited about the position SenesTech is in today. As always, I thank you all for your interest in SenesTech. With that, I'm happy to open up the call to questions. Robert, let me turn the call over to you to see if there are any questions in the webcast portal. Robert Blum: Great. Thank you very much, Joel, for your prepared remarks there. [Operator Instructions] All right. We have a few questions here, gentlemen. The first one is, will we see the company's products in Lowe's brick-and-mortar stores? Joel Fruendt: And I'd say the answer to that is we are in discussions with them. The first step was the e-commerce, and -- but we're also talking to them about doing a test deployment in about 100 stores. So stay tuned. I think the expectations of that would be sometime at the end of Q2. Robert Blum: Okay. Very good. Next question here is, do you have visibility on PMP-driven sales? What kind of growth are you expecting from this channel? Joel Fruendt: Well, PMP is certainly a key growth channel for us and one of our massive market verticals. We've had 20% -- account for 20% of our sales, which was up significantly over the last quarter and the year ago period. So we see that growing at significant levels as we go along, as more of the customers, the pest control operators become aware of that birth control is indeed another part of an integrated pest management program. And we're starting to see that by the reorders that we're getting. Robert Blum: All right. Very good. A couple of questions here on e-commerce. I think you addressed some of this in your prepared remarks, but how much of the revenue of the $690,000 was from e-commerce? Joel Fruendt: Well, it accounted for 54% of our quarterly revenue. That has been consistent with some of the other quarters that we've had in the past. Robert Blum: All right. Expanding on e-commerce here. A question here is Evolve is priced much higher than other rat control products on Amazon. With your big margins, you have lots of room to cut price. Is that part of your sales strategy going forward? Joel Fruendt: Well, what we did is we've positioned Evolve kind of in the middle of the pricing pack with different rodenticides that are out there. We monitor that closely. And we think that when there's -- the time is right, and we may have to discount a little bit in order to gain some large orders, we're willing to do that. But we're really comfortable where our price point is now. And I think our double-digit growth on Amazon monthly is proof of that. Robert Blum: All right. Very good. Next question here. There's actually a number of international questions. I'll try to summarize a few of these. First off here, could you give just sort of basic general details on your progress in the international markets? Joel Fruendt: Yes. Great news from New Zealand. We got the official approval for New Zealand. New Zealand has a program where they want to limit out pests by 2050, rodents and a couple of other pests. We got the approval there. We have our distribution set up there. So we're in the process of working on, okay, what does that order look like that we're shipping to New Zealand. And we have a number of those areas. We have now 18 exclusive distributors who are all working every day to get those country approvals. And it may take a little bit longer than what we would like. Sometimes in countries, it takes a little bit longer than others. But we know that once we get approvals in the countries that the container load orders are going to follow there. And so we're really excited about that. We're being very patient. And at the same time, we're pressing forward. So we expect many more country approvals over the course of the next 3 months. Robert Blum: All right. Very good. I hope that, that addressed most of the questions that were on here internationally. [Operator Instructions] Next question pertains to the legal expense. Any additional color that can be provided on that? Joel Fruendt: Tom, do you want to take that? Okay. It looks like Tom is not on. We have some legal expense. We have -- go ahead. Thomas Chesterman: I'm sorry, I had my mute on, sorry about that. Yes, as we've disclosed in our filings, we are being sued by Liphatech, a rodenticide manufacturer that we did some joint research with a while back. They claim we violated our nondisclosure agreement and infringed on their IP. We can't really comment specifically on the litigation, but I will say this. I mean, their assertions are baseless. It's bordering on ridiculous. And to some extent, I think the SenesTech and rodent birth control in general is beginning to scare the poison companies. They're now realizing that Evolve may hurt their business, and they're doing what they can to stop us. So I suppose that's a positive signal for our future in a strange way. Robert Blum: All right. Very good. Next question here is, could you give an estimate on how much revenue is expected from recent field trials that started in Somerville and Cambridge? Anything you can add on to that? Joel Fruendt: Well, I think it's too early to project revenues. All I can say is this is that those trials are going very well and that they're looking for a long-term solution. And we're very confident that as we have the positive results from these trials, that the orders will follow. It's very similar to the third monthly order in a row from one of the large theme parks. They try it out, they do their own internal work to make sure that it's something they want to use. And then once they realize that this is a way to end infestations, the orders will follow. And we think that there's going to be some really good things coming from both of those areas. Robert Blum: All right. Very good. Well, I am showing no additional questions here or topics. So I guess with that, Joel, I'll go ahead and turn it back over to you for any closing remarks. Joel Fruendt: Well, thanks, everyone, again for being on the SenesTech earnings call. We've been working hard. I think you can see by the results that a lot of our legwork is starting to pay off, and we're expecting even better things going forward. So thank you for your time and look forward to talking to you again after the post of the year. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Conference Operator: Thank you for standing by. This is the conference operator. Welcome to the Beeline Holdings third quarter 2025 earnings conference call. As a reminder, all participants are in a listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star, then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star, then zero. I’ll now like to turn the conference over to Tiffany Milton, Chief Accounting Officer. Please go ahead. Tiffany Milton, Chief Accounting Officer, Beeline Holdings: Thank you. Good evening, everyone, and thank you for joining us today to discuss Beeline Holdings’ financial results for the third quarter of 2025. I’m Tiffany Milton, Beeline Holdings’ Chief Accounting Officer, and joining us on today’s call to discuss these results is Nick Liuzza, our Chief Executive Officer, and Chris Moe, our Chief Financial Officer. Following our remarks, we will open the call to your questions. Now, before we begin with prepared remarks, we submit for the record the following statement: this conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including but not limited to statements regarding Beeline Holdings’ expected future growth, expected future operating results, and financial condition, including projections concerning our ability to be cash flow positive and profitable and achieve other milestones within specified time frames, expected reductions to interest rates and the impact on our business, the anticipated Beeline Equity closings, the future development and potential of our technology offerings, and the introduction of new products and features. Forward-looking statements are typically identified by words such as believe, expect, anticipate, plan, intend, seek, estimate, will, would, could, may, continue, forecast, target, potential, project, undertake, and similar expressions. These statements are based on management’s current assumptions, beliefs, and expectations and are not guarantees of future performance. Actual results may differ materially from those described in forward-looking statements due to various risks and uncertainties. These include, without limitation, the risk factors we provided in our 2024 Form 10-K and prospective supplements. In addition, there is a risk that our new technologies we are developing may not work as expected. We caution investors not to place undue reliance on any forward-looking statements made during this call. All forward-looking statements speak only as of the date of this presentation and are based on information available to Beeline Holdings as of today. We undertake no obligation to publicly update or revise these statements to reflect events or circumstances occurring after today’s date, except as required by law. Now, with that said, I’d like to turn the call over to Nick Liuzza. Nick, please proceed. Nick Liuzza, Co-Founder and CEO, Beeline Holdings: Good afternoon, everyone, and thanks for joining us today. I’m Nick Liuzza, co-founder and CEO of Beeline Holdings. With me is our Chief Financial Officer, Chris Moe. We appreciate you spending time with us on our third quarter 2025 earnings call. Before we jump into our Q3 performance, I would like to start with a key subsequent event. Beeline Loans Incorporated, our lending subsidiary, achieved its first positive cash flow month in October of 2025. Beeline Loans increased monthly closed loan units by 91% since January of 2025, while keeping our production payroll virtually unchanged, underscoring the scalability and efficiency of our digital mortgage platform. This is certainly a key development. When we started 2025, we identified two critical goals related to our financials, with targeted completion by Q1 2026. The first goal was to be debt-free, which we accomplished in September. Our second goal was for the company to be cash flow positive by Q1 2026. Now that Beeline Loans is cash flow positive, we’re very confident about achieving this goal, which will eliminate our need to raise capital in 2026 to support operations. Now, let me turn to some macro points related to interest rates. As of the Federal Reserve’s announcement on October 29, the effective Fed funds rate is now 3.9% versus its peak of 5.3% in September 2024. The market yield on the 10-year Treasury securities hit nearly 5% as of October 19, 2024, and is now eased to 4.1%. Also relevant, the spread between the 30-year fixed mortgage and 10-year Treasuries has tightened from 152 basis points to 127 basis points. All of these are beneficial to the demand for mortgages, as well as the margin Beeline makes on them. The market is expecting the Fed to make further cuts this December or January, and then again probably in Q2 of next year. For Q3 2025, Beeline Loans saw demand for mortgage loans increase substantially. That demand was driven by targeted marketing campaigns implemented by Beeline and declining rates. To illustrate, lending originations expanded from $51.9 million in Q2 to $69.8 million in Q3, reflecting quarterly growth of more than 35%. We closed 242 units in Q3, up more than 29% over Q2 loan closings of 187. We could not have accomplished this growth in mortgage originations without strong support from our warehouse banks. We expanded our warehouse line capacity from one bank with a $5 million limit to three banks with a total of $25 million of capacity. Given that we sell our loans on average in seven business days, that gives Beeline a monthly origination capacity of approximately $75 million. We will certainly continue to increase our warehouse capacity to support future expansion. To restate an earlier point, we kept operational headcount flat during this growth. This is a reflection of the scale that is possible from the technology investments we made at all stages of the customer journey. What is even more exciting is that we can double our October production, which is already up 40% from September, with minimal cost to operational payroll. We are ready for much higher volumes, which is a testament to our strategic commitment in the down years to build scale and diversification. In short, we kept our foot on the gas pedal during the difficult times to ensure we would be ready when the market normalized. I’m proud to say we are ready. During the down years, from late 2021 through 2024, some lenders chose to drive volume by spending heavily on marketing, even with industry unit economics running at a negative during much of that time. Even though we’ve seen 91% growth in volume since January, we were doing so with a measured spend on marketing, which curtailed stronger top-line growth. It did not make sense to further drive our top-line at a loss. Now that unit economics are positive, our appetite to increase our marketing spend is high, which we believe will lead to much faster quarterly growth. Our lending revenue per closed file has grown from a feeble $6,400 per file, driven heavily by market conditions and product mix in January, to a more robust $8,828 per file in October. We expect to see the revenue per file continue to increase and to normalize between $10,000 and $11,000 per file. This will lead to higher marketing spends and additional growth starting in Q4. Our technology edge remains one of the central drivers for our momentum. Our AI sales agent, Bob, continues to deliver outstanding results. As we mentioned on our last call, we’re seeing six times increase in lead conversion and eight times increase in full mortgage applications, all while operating 24/7, 365 at net zero incremental cost with this portion of the business. The lift from Bob will increase as Bob becomes more integrated throughout the entire sales funnel and moves into the early stages of the mortgage production process. We also continue to see strong performance from Hive, our workflow engine, which enables us to close loans in as little as 14-21 days, about twice as fast as traditional lenders. This efficiency allows us to handle growing volume without adding proportional cost, giving us a real structural advantage. This continued growth in innovation and performance is a testament to our Australian product development and digital marketing teams. Turning to our title business, we leveled out for the quarter. Q3 units were 280 versus Q2 units of 294. With that said, October was our strongest month since inception, and we did not spend any marketing dollars driving the title business. In other words, zero CAC. That is going to change. Recently, Beeline Title hired an experienced title sales executive to do third-party marketing, which should grow units substantially. After 20 years in title and a highly successful exit, we’re excited and confident in our ability to grow this vertical in a normalizing mortgage market. In my view, based on our team’s significant experience, title has been a sleeping giant for Beeline that is now just awakening. All the KPIs we monitor indicate that Q4 will comfortably exceed Q3 for both Beeline Loans and Beeline Title. Finally, we have successfully launched our fractional equity sale business and are closing transactions leveraging the blockchain in unison with our partner. Our product is provisionally branded as Beeline Equity. We expect to close approximately 30 of these transactions by year-end and are taking applications on our website for 2026. The average size of a sale of equity transaction is approximately $250,000, and we earn a 3.5% fee plus title fees. Since we are not underwriting the homeowner, the process is seamless with margins at 80% or better. There’s high demand for this product. We are positioned to scale quickly by mid-Q1 as we work through anticipated regulatory considerations and perfect the consumer experience. Beeline may very well be the only mortgage lender with this product, which is not tied to interest rates, providing strong revenue opportunity for Beeline regardless of market conditions. We are a technology-driven mortgage and title provider focused on using AI and automation to reshape the home financing experience from slow and painful to fast and fun for a new generation of homeowners and investors. We’re launching a business to provide near-instant liquidity for homeowners who have significant locked-up equity in their homes but either cannot qualify for a mortgage or are disappointed with the amount. In the coming quarters, we will begin to share key metrics such as ROAS and NPS and other indicators to help you evaluate how our technology is driving Beeline’s brand value, customer retention, and earned media. We expect to show continued improvement in both revenue and our expense structure. My goal as CEO is to continue to lead Beeline towards substantial growth and profitability. The future is bright for Beeline. With that, I’ll turn it over to Chris. Chris Moe, Chief Financial Officer, Beeline Holdings: Thanks, Nick. As a reminder, due to pro forma accounting adjustments and GAAP purchase accounting rules, our income statement and balance sheet reflect the impact of the recent Ford merger transaction, which had its final closing on March 7, 2025, and as such, certain comparative periods are not directly comparable. Additionally, Magic Blocks, our AI product technology company in which we hold a significant minority stake, is not consolidated in our income statement under GAAP. Lastly, our legacy spirits business, Bridgetown Spirits Corporation, was reclassified during Q2 as discontinued operations and was subsequently sold in Q3, resulting in a $718,000 loss on the extinguishment of debt. Let me now walk you through the Q3 2025 financial highlights. Total net revenues were approximately $2.3 million for Q3 and $5.4 million for nine months year-to-date, driven primarily by Beeline’s mortgage activities, which accounted for over 78% of revenue year-to-date, with the remainder from the Beeline Title business and a small amount from other revenues. Our total net revenue growth rate was 27% for Q1 to Q2 and 37% Q2 to Q3. Preliminary results from October and now early November suggest an even stronger growth rate for Q4, spurred in part by declining interest rates. In terms of unit growth of our mortgage business, in January, we closed 43 loans. In September, we closed 82 loans, up 91%. In October, we closed 98 loans, generating just under $863,000 in revenue, representing 44% of our total lending revenue for Q3. In terms of unit growth for our title business, in January, we closed 45 titles. In September, we closed 85 titles, up 89%. October was a record revenue month for title, coming in at $175,000 in revenue, representing 45% of our title Q3 revenue, with 106 title closings. Turning to the expense side of the P&L, operating expenses totaled approximately $5.2 million for Q3 and $16.9 million for nine months year-to-date. For Q3, we incurred $2 million in compensation, commission, and benefits, $871,000 in general and administrative expenses, $831,000 in depreciation and amortization, $682,000 in marketing and advertising, and lastly, $804,000 in other operating expenses. This resulted in a loss from operations of $2.8 million for Q3, a noted improvement over the Q2 loss from operations of nearly $4 million, and much improved from the Q1 loss from operations of $4.7 million. Total other income and expense net was $746,000 for Q3 and $2.8 million year-to-date, which includes the spirits loss of $718,000. We reported a net loss of $4 million for the quarter and $15 million year-to-date. While this loss is significant, it represents an improvement over our Q1 loss of $6.7 million and reflects deliberate investments and one-time capital structure effects. Our core mortgage operations are scaling well, and we are confident these investments will position us for a step change in performance in the quarters ahead. We are also aware of rapid customer and revenue growth from our AI sales agent spinout, Magic Blocks, whose operating results are not reflected in these figures. Turning to the balance sheet, we ended the third quarter with $1.3 million in cash plus restricted cash, up from $872,000 in cash on December 31, 2024. From December 31, 2024 to September 30, 2025, we made debt repayments of $6.5 million. Now, with the exception of our office leases and our warehouse lines of credit, I am pleased to confirm that Beeline is debt-free. We have also reduced our accounts payable over 48% from $1.7 million to $864,000, and with aging and terms notably improved. Total equity at period end was $51.7 million, up 6% from $49 million as of 12/31/2024. Regarding cash flow for the nine-month period, net cash used in operating activities was nearly $11.5 million. Net cash used in investing activities was just over $1 million. Net cash provided by financing activities was nearly $13 million for a net increase in cash of $481,000 for the nine-month period. To summarize the year-to-date financial picture, we have rapidly grown our revenue, while trimming expenses and completely deleveraged the balance sheet. While I can’t provide firm Q4 guidance due largely to the rapid pace of transformation in this business, I am aligned with Nick that Beeline can expect to see continued robust growth from introducing new and unique products, growing existing loan and title revenues, and controlling expenses with the goal of achieving operating profitability and positive operating cash flow by early in Q1 2026. With that, I’ll turn it over to the operator for questions. Conference Operator: We will begin the question and answer session. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you’re using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star one again. We will pause for a moment for callers to join the queue. Your first question comes from a line of Glenn Matson of Leidenberg. Your line is open. Glenn Matson, Analyst, Leidenberg: Hi. Yeah. Thanks for taking my questions. Might I ask, the last call you had was before the Fed started cutting rates? Curious if the market response has matched, exceeded, or fell below your expectations of what demand profile would look like in a rate-cutting environment, number one. Two, now that you’ve added this capacity to the warehouse line, is that enough to meet that demand or just kind of some color on your ability to meet that inflow? Nick Liuzza, Co-Founder and CEO, Beeline Holdings: I’m sorry, what was that in a second? Yeah, okay. Hey, Glenn, good to hear from you. I’ll take the first question, and then Chris Moe will take the second question. In regards to our expectations, I would say that we did expect to see that rate cut in September and then the second one that we just received. I would say that the volume kind of was where we thought it would be. We knew that we felt pretty strongly that the rate cuts were coming. As a result of that, we started negotiating with our warehouse lines to make sure that we had the capacity to close the loans we needed to close. You want to go ahead. Chris Moe, Chief Financial Officer, Beeline Holdings: Yeah, I’ll just add to that. I mean, I think if we’re "suffering success," our existing warehouse lenders, as well as three or four others who are clamoring for our business, will be more than happy to step in and give us the ammunition, so to speak, to fight the war. Not concerned about it. Nick Liuzza, Co-Founder and CEO, Beeline Holdings: Yeah. I mean, the ability for us to raise our lines will not be difficult. But the $75 million capacity that we currently have is probably a little more than what we need until. Chris Moe, Chief Financial Officer, Beeline Holdings: We’ll grow into it. Nick Liuzza, Co-Founder and CEO, Beeline Holdings: Yeah, but we’ll grow into it very quickly, and we have the ability to increase it very quickly as well. Glenn Matson, Analyst, Leidenberg: Okay. Great. Thanks for that. On the cash-out equity business, can you just give a sense, Nick, as we get closer to a full launch or whenever that may be, what you’re learning about the market in terms of the demand and the willingness for end customer to go after this product, which is kind of unique in the market? Yeah. Nick Liuzza, Co-Founder and CEO, Beeline Holdings: Yeah. Listen, I mean, the demand is significant, right? I mean, we’re targeting initially baby boomers that maybe are outgrowing their retirement. In the areas that we’re targeting, there’s about $10 trillion of available equity. We have a product that meets their needs with virtually very little competition. The demand is quite significant. This is leveraging the blockchain and essentially connecting the blockchain with the real estate chain and, in this particular case, the public record. We need to be a bit careful in our first, call it, 50 transactions to make sure they go off correctly. We’re trying to anticipate regulatory matters as well because there’s not a blueprint for what we’re doing. We’re kind of out ahead of this, I think. I mean, I don’t see anyone else doing this except us, honestly. What we want to make sure is that we’re being transparent, we’re being quality-focused, we’re meeting the KPIs and the timelines that we set for the market. I think after we get about 50 transactions under our belt, you’ll see a wider launch, which means more marketing dollars behind it, more product awareness, more scale, and then we’re off to the races. I think I said in my call earlier today, we’ll close about 30 transactions this year and then probably another 20-25 in January, and then we’re off to the races. I’ll just add that it’s very, very important that we do this right. I know I’m saying that again, but not understanding the regulatory blueprint and what that means to our business, we just want to proceed carefully before we launch. Glenn Matson, Analyst, Leidenberg: Right. I guess I’ll just follow up with that. You mentioned you don’t think anyone else is doing this. You’ll have a lead and perhaps be able to build some sort of momentum before you see competition. Is that fair to say? Chris Moe, Chief Financial Officer, Beeline Holdings: Yeah. Let me answer that. I think if by, let’s say, third quarter next year, if we didn’t have any competition, that means we really overestimated the opportunity. We expect to have vigorous competition. I mean, the market is so huge, that’s actually good for everybody. Nick Liuzza, Co-Founder and CEO, Beeline Holdings: Yeah. The opportunity is tremendous. It’s a huge market. Remember, the reason why I say we don’t have a lot of competition is, remember, it’s a true fractional sale of equity, and we are recording a deed, not a deed of trust. A deed of trust is a mortgage or a lien. When you look around the other equity products out there, for the most part, they turn into P&I instruments, and they’re recording a deed of trust. Our product is a pure fractional sale of equity. It’s an equity product. Again, I’m not aware of many people that are doing this, certainly not any of the lenders. There are some other fractional equity sale of equity companies out there, but it’s my understanding that they’re recording a deed of trust and not a deed. Big difference. Glenn Matson, Analyst, Leidenberg: Okay. Yeah. Sure. Thanks for all that, Tyler. I’ll jump back in with you. Thank you. Nick Liuzza, Co-Founder and CEO, Beeline Holdings: Thank you. Thank you, Glenn. Glenn Matson, Analyst, Leidenberg: Thanks. Conference Operator: Once again, if you have a question, please press star one. With no further questions, this concludes the question and answer session. I would like to turn the conference back over to Nick Liuzza for closing remarks. Nick Liuzza, Co-Founder and CEO, Beeline Holdings: Thanks, operator. To wrap up, Q3 2025 marks yet another inflection point for Beeline. We have fully transitioned into a fintech mortgage company, one carefully designed to scale and compete with the largest lenders in the country. We have aimed Beeline to pursue a $2.3 trillion US mortgage market with a different technology-driven strategy focused on younger digitally native borrowers and real estate investors, and now offering a fractional equity product that will provide quick cash to asset-rich homeowners who may not qualify for a traditional mortgage or HELOC. Looking ahead, we have exciting initiatives in the pipeline, including new AI-driven solutions, potential SaaS products, and expanded strategic partnerships. These initiatives reflect our firm desire to reshape borrower behavior across the industry. I want to close by thanking our executive team, our employees, our customers, the investors who buy our loans, our tech partners, and our shareholders. We are grateful for the progress we’ve made and highly motivated by the long-term value we’re building. Thanks to everyone for joining the call. Conference Operator: This brings to a close today’s conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.
Glen Kacher, Light Street Capital founder, joins 'Closing Bell' to discuss if the AI trade is intact, if investors are now scrutinizing megacap tech and much more.
Tom Lee, Fundstrat, joins 'Closing Bell' to discuss the market's moves on Monday, how to feel about the AI trade and much more.
The US market (^DJI, ^GSPC, ^IXIC) gains despite concerns about the economy's health, which may translate to households with more investments feeling more optimistic about the economy than their uninvested or less invested peers. B. Riley Wealth chief market strategist Art Hogan joins Opening Bid to discuss the current dynamics and how they perpetuate the idea of a K-shaped and bifurcated economy.
The Investment Committee debate the reopening rally and how to trade it as the government shutdown nears an end.